Agenda item

Members of the Committee heard from the Financial Services Manager, who introduced the report and explained that the Draft Treasury Management Strategy had been written against the backdrop of economic uncertainty, with factors including the new US President; the continuing war in Ukraine; sluggish economic growth in the UK; as well as government bond yields at high levels. Reduced levels of inflation alongside falling interest rates were highlighted, which, it was explained, had impacted the authority’s treasury position. The Manager continued, explaining that the amount the authority received on invested funds had increased, whilst the cost of holding debt was higher when it was refinanced. Additionally, it was explained, the decisions of when to invest and when to borrow were key to maximising returns and limiting interest costs. It was noted that the Council’s treasury advisors had predicted interest rates would continue to fall in 2025 and settle to a more stable position in 2026/27; this meant if borrowing was required then it should be taken on a short-term basis, which could then be refinanced when lower rates were available.

The Manager then explained that the strategy incorporated requirements of the 2021 Chartered Institute of Public Finance and Accountancy (CIPFA) Prudential Code. It was emphasised that the report had brought together several strategies and policies, firstly, the borrowing strategy, ensuring consideration was given to affordability and sustainability for the repayment of debt. Secondly, the annual investment strategy, intended to provide security of the investment, consider liquidity and cash flow requirements; finally, yield, all of which were considered in the context of the authority’s risk appetite. It was explained that the medium-term revenue provision provided a policy which detailed how the authority would repay prudential borrowing on an annual basis; the Committee was also requested to consider the Capital Investment Strategy, which was the framework by which capital investment and financing decisions would be made. The Manager continued, adding that draft prudential and treasury indicators had been calculated in December 2024, therefore they would be updated based on the final capital programme and medium-term financial analysis for the final version of the report, which would be brought before Council in March 2025. The Financial Services Manager stated that the Minimum Revenue Provision Policy was fully compliant with current regulations.

Regarding investments, it was explained, the counterparty lists within the strategy were the latest information supplied by Mitsubishi UFJ Financial Group, Inc (MUFG), formerly known as Link Treasury Services, and would be updated as the information became available, or ratings changed.

The Manager continued the presentation, explaining that the treasury function was carried out in line with the Treasury Management Code of Practice and the Prudential Code. It was highlighted that the treasury management function was last audited in 2021, and was given a high assurance rating in relation to its procedures and risk management. The Treasury Management training that Members had received prior to the Committee meeting was noted, and the presentation concluded with a summary of the report recommendations.

The Chairman thanked the Financial Services Manager and welcomed questions from the Committee.

With reference to the Treasury Management training, a Member of the Committee recalled that the training provider had used key figures from the report. Comments were made on the merits of the Council’s plan with reference to borrowing and investment.

In response to a query from the Chairman regarding the differences in Capital Expenditure by Cluster figures, the Manager explained that phase two of the Home Upgrade Grant in the ‘Our People’ segment was a significant project being delivered in the current financial year; it was stated that one-off funding for the project comprised of multiple sources. The Manager added that in the ‘Our Place’ segment, the Levelling Up schemes would be completed in 2025 as part of the Capital Programme; therefore, after the completion of the projects, the Capital Expenditure should return to business as usual in the coming years. The Corporate Policy and Resources Committee examined the Capital Investment Programme and the projected outturn as part of the quarterly monitoring report, with the next report due to be brought to Committee in February 2025. In response to a comment from the Chairman, the Manager confirmed that the aforementioned projects accounted for the significant increase in external grant financing for 2024/25. The Chairman then sought clarification over whether the earmarked reserves for the financing of capital expenditure in 2024/25 had come from unspent government grants. This was confirmed by the Financial Services Manager, who added that the scheme at RAF Scampton was also included, which would be partly funded from the growth reserves.

A Member of the Committee thanked those involved in producing the report and commended the accessibility of the document. The Chairman reiterated the comments and praised the Statement of Accounts and Treasury Management Training for their discussion-driven approach.

It was noted that voting eligibility depended on Members’ attendance of the Treasury Management training. It was stated that the following Members of the Committee were eligible to vote: Cllr J Barrett, Cllr S Bunney, Cllr D Dobbie, and Cllr Mrs A Lawrence.

With no further comments or questions, and having been moved, seconded and voted upon, it was unanimously

RESOLVED that

a)    having reviewed, commented on and scrutinised the Treasury Management Strategy, Prudential Indicators and Minimum Revenue Provision (MRP) Policy 2023/24, it be RECOMMENDED to Council for approval; and

b)    the Capital Investment Strategy in conjunction with the Treasury Management Strategy be reviewed, commented on and scrutinised; and

c)    the Capital Investment Strategy in conjunction with the Treasury Management Strategy had been reviewed, commented on and scrutinised; and

d)    approval of any changes to the Capital Strategy and Minimum Revenue Provision (MRP) Policy and Prudential Indicators be delegated to the Section 151 Officer in consultation with the Chair of the Governance and Audit Committee, prior to the final strategy being presented to Council in March 2025.