Agenda item

The Committee is asked to consider the Treasury Management Annual Report 2023/24.

Gareth Rees, Head of Financial Management presented the report, which detailed the performance for the Council’s investment and borrowing activities for 2023/24 financial year.

It was reported this year had again been volatile, with bank base rate rising from 4.25% at the start of the year to 5.25% by the end of March 2024.  Inflation had fallen back during the year from a high of over 8%, to 3.4% for the final quarter of the year.  As a result, external borrowing had been expensive, but the Council had been able to gain on invested income.   

The Council had continued to hold longer term borrowing internally, meaning that investment balances were lower, by saving on interest charges which had risen substantially during the year. 

It was note that one short term loan of £10m was needed to manage liquidity during the year this was taken at 5.4% for 6 months and was repaid in full in April 2024.   The Committee were also informed that an opportunity arose in June 2023 to repay early £8m of Barclays loans, which were previously LOBO loans, but had the options removed several years ago.  As these were very long dated loans with no flexibility, the opportunity was taken, and they were repaid in full.  This was in addition to £8m of maturing PWLB loans, which were also repaid and not replaced.   

It was reported over the year, the overall borrowing requirement had increased from £466.0m to £478.2m and this increase was as a result of unfunded schemes being included in the approved capital programme.  Actual long term external debt, excluding PFI and lease liabilities, had reduced from £239.8m to £223.8m  

For the surplus cash investment, the Council achieved an income return of £12.2m (4.4%) which was available to support the Council’s Budget.  The Council had continued to ensure that money invested was diversified over a range of counterparties to minimise risk.  In addition, the Council had invested £5m in a secured investment, whereby the deposit was 100% collateralised.   

The Council continued to have a number of more strategic funds whose performance went some way to protect the Council against inflationary losses. However, with the volatility in the markets over recent years, capital values were still below principal values for many of the funds. In total, currently showing a £5m loss on the original value, despite this all the funds continued to pay consistent dividends.   

It was noted where funds had suffered from an element of capital loss, the Council could still offset this loss in its annual accounts due to a statutory override.  The override had been extended until 31st March 2025, but it was uncertain whether it would continue.  In order to manage the risk of the statutory override not being extended, a provision of £6 million was built into the General Reserve that was approved by Council in February 2024.

As the funds were considered longer term investments it was expected that this capital loss would be recovered over the next few years.

Despite these longer-term investments, the Council had maintained liquidity, with the percentage invested for over 12 months being 42.3% as at the end of March.   

Although there continued to be no developed approach for public sector bodies to report on ESG considerations, it was now considered good practice to take these into account. Section 8 of the report detailed the Council’s approach.  The Authority continued to hold a small number of funds with exposure to fossil fuels, and it was noted as capital values recovered, the Authority would look to disinvest from these funds.  The Council complied with all the limits set for borrowing and investment as stated in the prudential indicators shown in Appendix D.   

In response to a question, members were advised that treasury management was ultimately about surplus cash the council held in short term investments and responsible investments were more applicable to longer term strategic investments.  

During the discussion, it was asked if further scrutiny was required regarding the underspend, officers felt this was not necessary, they recognised there were some concerns going forward, in particular changing interest rates, but they continued to be mindful of those risks going forward. 

Members asked if the TM training session could include the capital value of fossil fuels and the impact investment. 

Resolved

That the report be noted.