Agenda item

To consider the Half Yearly Treasury Management Report for 2019/20 and make any observations.

Members considered the Half Yearly Treasury Management Report for 2019/20. This progress report updated Members on the performance of the Council’s treasury management activities including the latest investment and borrowing position and updated prudential indicators and policies.

The Portfolio Holder for Finance, Councillor T. Schofield, said the current forecast of the treasury management performance was on track and would be presented to the Executive on 7 November 2019. Performance was better than assumed in the budget as long term borrowing had not been necessary to date. It was anticipated that borrowing of up to £41.5m would be undertaken during the second half of 2019/20 to fund delivery of the approved Capital Programme. As the Capital Programme expenditure plans became more certain, the supporting borrowing and investment forecasts had been refreshed. The treasury forecasts in the report also reflected the £25m that had been delegated to the Commercial Ventures Executive Sub-Committee (CVESC) for commercial investment.

It was noted that the update on expected movements in interest rates in the report, provided by the Council’s advisers, did not anticipate the recent announcement from the Treasury of a 1.0 per cent increase in the Public Works Loan Board (PWLB) loan interest rate.

There were a number of questions in the discussion that followed:

·       Capital Expenditure and Financing (Table 1 in the report) ­­– Members asked for follow-up information about the £1.704m actual spend on capital expenditure.

·       Public sector borrowing ­– Members asked what the impact would be on the Council’s investment plans because of the unexpected rise in the PWLB interest rate rise. It was noted that this added 1.0 per cent to all borrowing interest rates irrespective of the loan term. It was reported that the CVESC and finance teams were looking into the impact on capital expenditure plans and revenue expenditure forecasts. It does not have any impact on the Minimum Revenue Provision charge but, as PWLB interest rates are now 3.0 to 3.5 per cent, it will reduce the forecast return on new commercial investments.

Members asked how the interest rate rise might affect cash flow and how best to mitigate the cost to the Council.

·       Treasury Investments – it was noted that the total treasury investments were £36m at 30 September 2019. Members asked if some of these funds could be used instead of borrowing money. It was identified that the Council was required under treasury rules and regulations to keep minimum balances. If it falls below a certain limit (£10m) then this restricts the types of investment the authority may make with consequent impacts on investment returns. An updated Treasury Management Strategy for 2020/21 would be presented to Members early next year and a key factor will be to confirm the minimum balance required going forward.

·       Brexit – the commentary in the report on the impact of Brexit was noted, along with subsequent recent developments. Updates on the outcome of Brexit on the economy and investments would be reflected in future reports.

·       Investment portfolio – non-Treasury investments – it was confirmed that the £1.1m value reported for the investment in Pathway for Care was still an accurate position.  

Members agreed to ask the Commercial Ventures Executive Sub-Committee (CVESC) to note the increase in the PWLB borrowing rate and to consider the impact on the Council’s commercial investment strategy. They also asked the CVESC to consider the minimum balances that were required on the investment side.

RESOLVED that the Half Yearly Treasury Management Report for 2019/20 and the updated prudential indicators be noted and the observations of the Committee be considered by the Commercial Ventures Executive Sub-Committee at its meeting on 7 November 2019.