Agenda item

This report gives details of performance against the Council’s Treasury Management Strategy for the first three months of the 2023/24 financial year.

Cllr Mark Elliot introduced the report, moved the officer recommendation and made the following statement:

“In line with the Chartered Institute of Public Finance Accountancy (CIPFA) Code of Practice, this report sets out the council’s Treasury Management performance for the first quarter of the financial year. So, it’s a report about how the council’s financial investments are performing and our borrowing levels.

Given the news headlines about the very, very difficult financial environment that all local authorities find themselves operating within at the moment, and the consequences of that for some of them, I guess there might be a little more public interest in these financial reports over the coming months than is sometimes the case. I’m pleased to say that the report in front of us today sets out the very prudent and responsible approach B&NES council takes to managing its investments and borrowing. 

The council's investments at 30th June 2023 totalled £52.85 million. There are no high risk or complicated investment vehicles and I'm delighted we're maintaining our £5m investment in Environmental Social and Governance funds. The average rate of interest earned over the period was 4.30% and the average return has continued to increase during the first quarter as the Bank of England interest rate rises fed through to our investments, with the rate on investment returns always lagging a little behind the base rate increases.

The Bank of England's interest rate action continues to be robust in line with their remit for tackling inflation. The Base Rate has increased from 4.25% to 5% during the first quarter. This trend has continued with rates now 5.25% following a further increase in August.  I commend to you the report from the Economic and Market Review set out by the council's investment advisors, Arlingclose, in Appendix 5.  It doesn't make for very pretty reading in its assessment of the general economic environment.  The public will know from their own pockets about our Conservative government's mismanagement of the national economy and inability to tackle inflation, and this affects the council along with everyone else. Given that high inflation means high interest rates Arlingclose currently predict that rates will top out at 5.5% but acknowledges that there is a risk of the base rate reaching 6% before it peaks.  Whilst that will be good news for our investments, as a net borrowing authority, that means we have to manage our borrowings very carefully. Borrowing at the end of the quarter was £219m an increase of £9m from the start of the year mainly reflecting a short-term loan taken out in April in line with cashflow requirements.  And whilst it's not the subject of this report, the persistently high underlying inflation level is having a very significant effect on the council's revenue budget.

The sound management of our borrowing and investments can help alleviate some of that, however, and an overall underspend of £710k is currently forecast in respect of Capital Financing costs due to the higher than budgeted investment income and delays in the council's need to borrow. This was reported in the Quarter One revenue & capital budget monitoring report as part of the July Cabinet meeting.

The report includes figures showing performance against all the indicators set out in the Treasury Management Strategy and confirms that these are all within approved limits.

I would like to commend the work of the officers in managing our treasury function so carefully and competently, and for the production of this report, and I move the recommendations set out in 2.1 and 2.2.”

Cllr Sarah Warren seconded the motion and congratulated officers on their good financial management.

RESOLVED (unanimously):

(1)  To note the Treasury Management Report to 30^th June 2023, prepared in accordance with the CIPFA Treasury Code of Practice.

(2)  To note the Treasury Management Indicators to 30^th June 2023.