Agenda item

The Committee considered a report of the Corporate Director of Finance outlining the Prudential Indicators for 2026/27 to 2029/30, the Treasury Management Strategy for 2026/27, and the Minimum Revenue Provision (MRP) Policy).

The Committee was advised that the framework had been prepared in accordance with the Chartered Institute of Public Finance and Accountancy (CIPFA), Prudential Code and Treasury Management Code, together with requirements of the Local Government Act 2003.

Members heard that responsibility for the implementation and monitoring of treasury management arrangements was delegated to the Corporate Director of Finance, with operational delivery undertaken by the Head of Finance and Investment, in accordance with approved treasury management practices.  The Audit Committee was responsible for ensuring effective scrutiny of treasury management strategy and policies.

The Committee was advised that the Council’s treasury management approach prioritised security and liquidity over yield, with investments undertaken prudently and in line with counterparty criteria.  Credit ratings were monitored on an ongoing basis, with investment decisions informed by treasury advisors and market intelligence.

In respect of investments, Members noted that:

•         Specified investments were limited to high credit quality bodies, short-term in nature and denominated in sterling.

•         A minimum of 90% of total investments must fall within the specified category.

•         The maximum investment with any one counterparty was 15 million (with no limit for the UK Debt Management Office).

•         Non-specified investments were limited to 10% of total investments, with a maximum of £3 million per counterparty and a maximum duration of three years.

The Committee noted that borrowing activity would be undertaken prudently, balancing cost and risk, and that the Council continued to utilise internal borrowing where appropriate.

Members were further advised that the Minimum Revenue Provision (MRP) Policy required the Council to set aside a prudent level of revenue to repay borrowing.  For 2026/27, the Council intended to apply the 2% annuity method for both supported and unsupported borrowing.  It was noted that any changes to the policy would require approval by full Council.

The Committee was advised that the Treasury Management Strategy had been approved by full Council and formed part of the Medium-Term Financial Plan for the forthcoming financial year and the following four years.  It was acknowledged that the framework was complex but a fundamental element of the Council’s financial governance and sustainability.

Members discussed the scale of borrowing and the associated revenue implications, including the cost of servicing debt through interest and principal repayments.  It was noted that borrowing supported delivery of the capital programme over several years and that the level of debt must be considered alongside the Council’s ability to finance it sustainably.

The Committee heard that the treasury management activity relied on maintaining sufficient cashflow and liquidity to meet the Council’s obligations, including payments to suppliers and employees, whilst managing income and borrowing requirements effectively. 

Members discussed the relationship between capital investment and revenue budgets, noting that capital expenditure could not be used to fund day-to-day services and must be affordable within the Prudential Code framework.  It was emphasised that prudential indicators provided assurance on affordability, sustainability and the impact of borrowing on the Council’s finances.

Discussion also took place regarding:

•         The level and the profile of external borrowing over the medium term, including increases in the early years of the capital programme.

•         The use of capital receipts from asset sales to reduce borrowing requirements where possible.

•         The affordability of future borrowing levels and the long-term financial implications.

•         The level of uncertainty in later years of the Medium-Term Financial Plan.

•         The importance of benchmarking against other local authorities.

Members also raised the potential for earlier engagement in the development of the capital programme and treasury strategy, noting that additional scrutiny at an earlier stage could support improved understanding and decision-making.

The Committee discussed the Council’s approach to managing debt, including opportunities to manage debt, including opportunities to repay debt where appropriate, and the importance of maintaining prudent limits within the authorised borrowing limit.

In respect to governance and risk, Members were advised that appropriate arrangements were in place, supported by internal audit, and further work would continue to strengthen risk management and reporting arrangements.

AGREED that:

1.      The Prudential Indicators for 2026/27 to 2029/30 be noted.

2.      The Treasury Management Strategy Statement for 2026/27, including the Annual Investment Strategy, be noted.

3.      The Treasury Management Policy Statement and governance arrangements be noted.

4.      The limits and criteria for specified and non-specified investments be noted.

5.      The Minimum Revenue Provision (MRP) Policy for 2026/27 be noted.

6.      The information provided be accepted as assurance that the Council’s treasury management arrangements were prudent, sustainable and supported effective governance.