Agenda item

Members then heard from the Financial Services Manager regarding the mid-year treasury management report, which updated Councillors on progress against the treasury management strategy which was approved by Council in March 2024 for 2024/25. It was explained that the report was required to comply with the CIPFA code of practise on treasury management and also to keep Members updated with the current situation. The report had been written during a time of reducing inflation and reducing interest rates which had followed a period of both higher inflation and relatively high interest rates. It contained commentary on the Council’s treasury position and also included commentary on the economy, provided by the Council’s treasury advisors, Link Asset Services. Members were advised that since the report was written, the UK base rate had reduced to 4.75% from 5%.

Members heard that the report showed interest rates had been reducing, with more reductions forecast in the medium term. The Council was, however, receiving additional investment income as shown in the quarterly monitoring reports. This was because of reduced capital expenditure and higher cash balances than forecast. With interest rates reducing, and forecast to reduce further, it made the decision to borrow somewhat more difficult, as the Council did not want to find itself locked into a high-rate loan when the base rate decreased. For this reason, where borrowing had been required for cashflow purposes, short term loans had been used.

Members were advised of the movements in the Council’s prudential indicators which had changed as a result of two things. The first being the Council closing its accounts for 2023/24 after the original strategy was written; the second being as a result of a revised capital programme for 2024/25 as outlined in the quarter two budget monitoring report which had just been discussed. It was also reported that there had been no breaches of the Council’s prudential indicators in the first half of the year.

Members were directed to section three of the report, showing an economics update which had been supplied by the treasury advisors, Link Asset Services. It was highlighted it was useful to understand the national and international context withing which the Council was operating when undertaking its treasury activities. Appendix B was the latest list of approved countries for investment as at 30 September, however typically, the Council only invested within the UK.

The Chairman thanked the Financial Services Manager and invited Members to speak. In response to a question as to whether the recent budget announcement had had an impact on the forecast interest rates, it was explained that the Bank of England had said they thought the rate would stay higher for longer, and not reduce as quickly as it might have done. This could result in a slightly higher yield for the Council for the following year but would then gradually reduce.

A Member of the Committee, in relation to breaches of the prudential indicators, enquired whether it was possible to have a ‘near-miss’ breach, and whether complacency could creep in, causing the risk of future breaches. It was confirmed that a breach was a clear cut yes or no fact, and there had not been any breaches during the tenure of all three Senior Officers present at the Committee meeting.

The Chairman stated his thanks to those Officers, and the Finance Team, for being safe hands, with Members agreeing and expressing thanks for the Council not being in the precarious financial positions that other councils were experiencing.

Having been moved, seconded, and voted upon, it was unanimously

RESOLVED that it be recommended to Full Council to note the report, the treasury activity and recommend approval of the revised prudential indicators at sections 5.2, 6.1 and 6.2.