The Interim Chief Officer Finance, Performance and Change reported in compliance with the requirement of the Chartered Institute of Public Finance

and Accountancy’s ‘Treasury Management in the Public Services: Code of Practice’ to produce interim Treasury Management Reports and the Treasury Management Indicators for 2021-22.   

The Interim Chief Officer Finance, Performance and Change explained that Treasury management is the management of the Council’s cash flows, borrowing and investments, and the associated risks.  Treasury risk management at the Council is conducted within the framework of the Chartered Institute of Public Finance and Accountancy’ (CIPFA) Treasury Management in the Public Services: Code of Practice 2017 Edition (the CIPFA Code) which requires the Council to approve a Treasury Management Strategy (TMS) before the start of each financial year. The CIPFA Code also requires the Council to set a number of Treasury Management Indicators, which are forward looking parameters and enable the Council to measure and manage its exposure to treasury management risks, and these are included throughout this report.  In addition, the Welsh Government (WG) issued revised Guidance on Local Authority Investments in November 2019 that requires the Council to approve an Investment Strategy before the start of each financial year.  The Council’s Capital Strategy 2021-22, complying with CIPFA’s requirement includes the

Prudential Indicators which in previous years were included in the TMS, along with details regarding the Council’s non-treasury investments. The Capital Strategy and TMS should be read in conjunction with each other as they are interlinked as borrowing and investments are directly impacted upon by capital plans and were approved together by Council on 24 February 2021.  The Council’s treasury management advisors are Arlingclose. 

The Interim Chief Officer Finance, Performance and Change reported that the Council has complied with its legislative and regulatory requirements during the first half of 2021-22, with the TMS for 2021-22 approved by  Council on 24 February 2021, with the Half Year report being reported to Council on 20 October 2021.  She presented a summary of the treasury management activities for the first half of 2021-22 and informed the Cabinet the Council has had surplus funds for investment.  The balance of investments at 30 September 2021 was £79.84m with an average rate of interest of 0.06%, which is a significant reduction from the same time last year when the average rate was 0.24%, which showed the impact of the reductions in interest rates as a result of the pandemic. 

The Interim Chief Officer Finance, Performance and Change informed Cabinet that the Council had not taken long term borrowing since March 2012.  It was anticipated that hat the Council would need to borrow £30.37m during the year, on the assumption that the Council would have £43m held in usable reserves that it could use in the short term to finance expenditure. She stated that as at 31 March 2021 the Council’s usable reserves stood at £114m, an increase from £83 million as at 31 March 2020, which was not foreseen when the TMS was approved.  The Council received £20.6 million from the Welsh Government Hardship Fund, which was more than had been anticipated during the year, as well as further additional grants from Welsh Government in the final quarter of 2020-21 of £8.9 million and capital receipts during the year of £2.9 million, as reported to Council in the Revenue Budget Outturn 2020-21 report on 23 June 2021.  She informed Cabinet that it was important to note that while the use of usable reserves in lieu of new borrowing is prudent, it was a short-term position and as the reserves are used for specific projects it would become necessary to borrow in the future to finance Capital expenditure.  It was expected that there will not be a requirement for new long-term borrowing in 2021-22.

The Interim Chief Officer Finance, Performance and Change informed Cabinet that the primary objective for the management of its debt is to ensure its long term affordability.  She stated that following an increase in the numbers of local authorities taking out PWLB loans to buy commercial properties for yield, and following a UK government consultation, HM Treasury has issued revised lending terms for PWLB borrowing by local authorities in November 2020.  As a condition of accessing the PWLB, local authorities will be asked to confirm that there is no intention to buy investment assets primarily for yield in the current or next two financial years.  She stated that she will be required as Section 151 Officer to certify that capital expenditure plans are current and that the plans are within acceptable use of the PWLB.  This in itself did not preclude the Council from investing in commercial activities, investing in assets for yield would preclude the Council from accessing PWLB borrowing.  She stated that given the investment and borrowing requirement to support the Capital Programme, the Council is unlikely to consider any investments in commercial assets primarily for yield.  The Interim Chief Officer Finance, Performance and Change informed Cabinet that the CIPFA Code and the WG Guidance require the Council to invest its funds prudently and to have regard to the security and liquidity of its investments before seeking the highest rate of return, or yield.  She stated that the Council’s objective when investing money is to strike an appropriate balance between risk and return, balancing the risk of incurring losses from defaults against receiving unsuitably low investment income.  The major objectives during 2021-22 were to maintain security; to maintain liquidity and to achieve the yield on investments commensurate with the proper levels of security and liquidity.

RESOLVED:           That Cabinet noted the Council’s treasury management activities for 2021-22 for the period 1 April 2021 to 30 September 2021 and the projected Treasury Management Indicators for 2021-22.