Agenda item

The Head of Corporate Finance presented a report of the Director of Finance and Transformation, the purpose of which was to:

·        Provide an update on the strategic approach in relation to the Council’s borrowing, investments, and cash-flow for the 2025/26 financial year to meet the requirements of the CIPFA Treasury Management Code of Practice and the Local Government Act 2003.  It was to be read in conjunction with the Treasury Management mid-year review 2024/25, reported to Members on 12 December 2024.

·        Provide the Prudential Indicators approved by Council for the 2025/26 financial year in accordance with the CIPFA Code of Capital Finance, which was best practice in terms of governance in this area.

·        Provide information on the Treasury Management Strategy; the position on Capital Financing and Prudential Indicators, and whether these were contributing to the effective management of the Capital Programme and the resources allocated to pay for these, as part of the revenue budget process.

The report detailed:

·        Capital expenditure and financing for 2025/26.

·        The Council’s overall borrowing requirement.

·        Treasury position at the start of 2025/26.

·        Summary of the Treasury Management Strategy agreed for 2025/26.

A copy of the Prudential Indicators and Annual Treasury Management Strategy 2025/26 were shown at Appendix 1 of the report.

During discussion, the following points were raised:

·        This activity was concerned with building the knowledge and experience of Committee Members in a complex, but important area.  It was key for Members to contribute to the draft set of Prudential Indicators and provide commentary associated with that.

·        In response to a query regarding a training session for Members, it was explained that this would be offered post-AGM in June 2025, at the start of the budget process.

·        A Member referred to the Public Works Loan Board (PWLB) and queried the 85% of total debt that the Council had in respect of this.  In response, it was explained that most Local Authorities borrowed long-term from the PWLB because it was more stable than a bank or building society, and interest rates were generally lower.  There was a period in the early 2000s when banks offered lower interest rates, but this was no longer the case – mainly after the financial crash of 2008.

·        In relation to the cost of capital financing and the 10% threshold, Members were advised that a number of Local Authorities had exceeded that amount.  Some were around 20-25% and there was no restriction placed on it, other than from an affordability perspective.  It was explained that as the authority approached the 10% limit, this was not something that would be surpassed without endorsement from the Chief Finance Officer.  Consideration was given to different example amounts and what this could potentially look like for the authority if the 10% threshold was passed.  The Executive Member for Finance reassured the Committee that, at the present time, there had been no discussion to extend beyond the 10% threshold, but that level was being approached.

·        In response to a query regarding short term borrowing, Members were advised that this would only be pursued if rates were considerably lower than those of longer term borrowing; banks would not be a good credit risk.

·        A Member queried whether the Council borrowed on a short term basis from reserves.  In response, it was explained that this was not the case because the Council invested money into those.  As an overall net borrower, net income needed to be spent at certain time periods.  Reference was made to the CIPFA code and the importance of the security of investments over the interest rate offered.

The Chair thanked the Head of Corporate Finance for the information provided.

NOTED