The Chief Officer – Finance, Performance and Change presented a report, the purpose of which, was to present to Cabinet the Treasury Management Strategy 2023-24 (Appendix A to the report), which included the Treasury Management Indicators, before submitting these to Council for approval.

She explained that the Treasury Management functions of the Council are regulated by the Local Government Act 2003. This provided authorities with the powers to borrow and invest as well as providing controls and limits on this activity.

In accordance with the Chartered Institute of Public Finance’s Prudential Code for Capital Finance the Council must approve a Treasury Management Strategy before the start of each financial year, which sets out both its and the Chief Financial Officer’s responsibilities, delegation and reporting arrangements.

The proposed Strategy for the coming financial year was attached at Appendix A to the report. The Council undertook its treasury management activities in accordance with the Chartered Institute of Public Finance’s prudential code, which has been updated to reflect changes in an increasingly complex environment and to complement changes to regulations. The code required that formal and comprehensive objectives, policies and practices, strategies and reporting arrangements are in place for the effective management and control of treasury management activities and that the effective management and control of ‘risk’ are the prime objectives of these activities.

The Chief Officer – Finance, Performance and Change added that, the Council has an integrated Treasury Management Strategy where borrowing and investments are managed in accordance with best professional practise. The Council will look to borrow money if needed to either meet short term cash flow needs, or to fund capital schemes approved within the capital programme. Therefore, any actual loans taken were not generally associated with particular items of expenditure or assets.

The Council was exposed to financial risks including the potential loss of invested funds and the revenue effect of changing interest rates. The successful identification, monitoring and control of risk, is therefore central to our Treasury Management Strategy. Should anything change significantly, a revised Strategy would be presented to Council for approval.

The ongoing impact on the UK of the war in Ukraine, together with higher inflation, higher interest rates, uncertain government policy and a deteriorating economic outlook, will be major influences on the Council's Treasury Management Strategy for 2023-2024.

As at the 31st of December 2022, the Council held £99.8 million of borrowing and £94.05 million of investments. The external debt and investment position was shown in Table 1 within the Treasury Management Strategy.

The Strategy highlighted that it is anticipated that the Council may need to borrow during the next three years. However, this position can change should capital schemes not progress as anticipated, or conversely further schemes are added to the Capital Programme that are not fully funded by grant or revenue contributions, or new schemes added which require additional debt financing.

The requirement to borrow will need to be monitored on an ongoing basis and any new borrowing will be considered alongside any changes in the Capital Programme that may affect the level of borrowing required. When borrowing money, the Council's primary objective is to strike an appropriately low risk balance between securing low interest costs and achieving certainty of those costs over the period for which funds are required. The Strategy outlined that the major objectives for the Council with regards to borrowing in 2023-24 will include:

•           To minimise the revenue costs of debt;

•           To manage the council's debt maturity profile;

•           To reschedule debt if appropriate;

•           To optimise the use of all capital resources including borrowing, usable capital receipts, revenue contributions to capital and grants and contributions

The Chief Officer – Finance, Performance and Change reminded Cabinet that in November 2020, the treasury issued revised lending terms for public works loan board borrowing by local authorities. The public works loan board would be the major source of any borrowing that the Council undertakes. Under these new requirements, the Section 151 Officer would be required to confirm the capital expenditure plans do not include an intention by the authority to borrow to invest primarily for financial return. The Chief Officer – Finance, Performance and Change (as Section 151 Officer) confirmed that the Council does not intend to invest in this way.

As outlined earlier, at the end of December 2022 the Council had £94.05m  of investments. The Council's main objective when investing money was to strike an appropriate balance between risk and return, to minimise the risk of incurring losses from defaults and the risk of receiving unsuitably low investment income. The Council may invest its surplus funds with approved counterparties and these were detailed at Table six of the Treasury Management Strategy. The table also detailed the time limits and upper financial limits that will apply to each of those counterparties.

The Chief Officer – Finance, Performance and Change concluded by confirming that during 2023-24, Council receive reports as required in line with the requirements of the code of practice. These include an annual Treasury Management Strategy which Members have had today, a mid-year monitoring report and an annual treasury outturn report.

The Cabinet Member – Resources commended the report.

The Cabinet Member – Regeneration noted that interest rates were unpredictable at the moment though rising. She asked what impact this was having on the Council’s finances.

The Chief Officer – Finance, Performance and Change confirmed that interest rates impact in two ways, in that if the Council invests money elsewhere then with interest rates presently rising, this meant more in the way of returns for the local authority. However conversely, when borrowing the cost of the debt would increase for the Council in a similar manner.

The Leader stated that there were significant changes in terms of limits of investments for balances as reflected in the report. He asked if there were any other changes such as, for example, the Governance and Audit Committee now having a crucial role in monitoring periodically the Council’s Treasury Management function.

The Chief Officer – Finance, Performance and Change, stated that the above Committee receives Treasury Management update reports on a regular basis and where Members of that body consider it to be appropriate, they give feedback on these reports. She added also that recently, Treasury Management training was arranged for all Members to attend 10 days or so ago, and Governance and Audit Committee lay members were in attendance at this session, in order for all to have a better understanding of this area of financial control.

RESOLVED:                                      That Cabinet considered the report and recommended that the Treasury Management Strategy at Appendix A be presented to Council for approval.