Agenda item

The Head of Financial Management presented the report and stated that it fulfilled the Authority’s annual requirement under the CIPFA Code of Practice to set the strategy for 2024-25.  The strategy sets high level boundaries but a flexible approach was adopted dependent on the market conditions.  It would be review by Corporate Audit Committee as part of scrutiny, then go to Cabinet and then be approved by full Council.

In respect of the economic background, section 1.21, he stated there were currently high interest rates to tackle inflation and Bank of England forecast inflation would reducing steadily to meet its target rate of 2% in early 2025.  There was pressure on the economy with a forecast of GDP growth stagnating.  In respect of credit outlook, not much had changed in the banking sector.  There was pressure on assets linked to loans due to the weakening economic picture, although net income and profitability were being boosted by higher interest rates.  Short term volatility to gilts and borrowing interest rates continued dues to economic and political uncertainty and events such as the current situation in the Middle East.  He referred to borrowing, section 1.31, at £217 million and investments at £39 million, stating they were highly liquid to manage cashflow.  In respect of capital financing requirement (section 1.32) there was a need to borrow for capital purposes for the capital programme and the benchmarks showed the position.  The strategy at 2.3 showed the current short-term rates which were high but expected to fall in the coming year so the maturity structure of any new borrowing would continue to be assessed against rates.  It was no longer possible to access borrowing from the PWLB for buying investment assets primarily for yield.

The investment strategy highlighted the CIPFA requirements, security then liquidity then yield.  There was a need to be prudent.  For investments the Council used banks that were following the UN principles for responsible banking & investment.  The measures were outlined to manage the Council’s exposure to risk and the Treasury Management Indictors were also highlighted.

After questions from Councillors the following points were clarified:

·  The forecast increase in borrowing from £215 million in 2023-24 to £285 million in 2024-25 was as a result of delaying borrowing in previous years due to cashflow and now the Council was catching up but this was prudent management to use cash balances and reserves.  Borrowing was managed on a net basis and budgeted corporately (Councillor Malcolm Treby);

·  the IFRS changed how the Council accounted when leasing equipment or property to recognise future liability;

·  In respect of changing interest rates on borrowing, some previous loans reflected the lower interest rates available at that time, now the rates were rising;

·  Arlingclose reviewed their interest rate forecasts when the Bank of England made their decisions, which happened every few months (Councillor David Biddleston);

·  the number of schools still operating Council bank accounts was low as the majority had moved to academy status and now operated their own bank accounts;

·  Mifid professional status - to maintain the status quo and access to the required range of investment accounts the authority had opted-up.  Before they were treated as a professional client but after the banking crisis Local Authorities had been automatically downgraded to the same status as a consumer.  However, with qualified and experienced staff, and the size of investment activity, they met the tests to opt back up to professional status.

On a motion from Councillor Sam Ross, seconded by Councillor Lucy Hodge it was

RESOLVED

1)  to recommend the actions proposed within the Treasury Management Strategy Statement (Appendix 1) to Council; and

2)  to note the Treasury Management Indicators detailed in Appendix 1.