Treasury Management Mid-Year Review 2020/21
Members were provided with an update report on treasury management activity undertaken during the period April to September 2020. The report set out both the treasury activity and the impact of the capital expenditure for the year up to end of September, set in the context of the current economic background along with a forecast of interest rates which had been provided by the Council’s Treasury Management Consultants, Link.
Members noted that the report was based on the position as at 30 September and therefore did not reflect the fact that England had entered into a second lockdown and the implications this may have, on things such as interest rates, fund valuations and the Authority’s ability to fully spend against the capital programme etc.
As things stood at this moment in time, the capital programme for the Council stands at just under £56m, of which £18.8m could be funded from existing resources. This creates a borrowing requirement for the Authority of some £37m. Of this some £7m internal borrowing will be utilised with £30m external borrowing being sought, most likely to be from the Public Works Loan Board.
The capital financing requirement for the year was forecast to be £235.5m and gross debt £199m. The capital financing requirement was the Council’s combined historic unfunded capital expenditure which because of the Council’s ability to utilise internal borrowing, was above the actual gross debt.
The issue around the St George’s transaction and the delay this had caused in signing off the accounts also has implications on treasury. Both the authorised limit and the operational boundaries, the limits set internally on the amount of debt the Authority could take on, include a provision for the treatment of the St George’s transaction. Until this was finalised, it could not be forecast whether the revised estimate for both the operational boundary and authorised limit was appropriate. The positive was that if anything, those limits were higher than they may need to be, but there was a possibility they may need to be amended. This would have to be a Full Council decision but in the first instance the matter would be discussed with the Chair of the Finance & Audit Committee.
The Principal Accountant (HRA) advised that in relation to investments, as at 30 September, the Council’s investments totalled £40.7m. This was split between internally and externally managed funds. The officer confirmed that as at 30 September 2020, the Council had acted in line with the approved limits in the annual investment strategy and no breaches had occurred.
Members were reminded that the capital values of the Property Funds and the Multi Asset Funds have been hit significantly by Covid-19. Funds have continued to pay dividends, not quite at the same level, but still above the level of return the Council could get on traditional investments. These remained long term investments and therefore no immediate decisions were needed to be made about withdrawing funds. Officers were in contact with the fund managers to see what actions they were taking as a result and would continue to do so over the coming months.
Following a question, the officer clarified that the gross external debt was not changing. However, there was an element of the finance lease in respect of the St George’s Centre that may change accounting requirements. The Council might also have to take in account other long term liabilities, however these were more likely to reduce. The Chair noted that this document would be submitted to Members for consideration before being signed off.
In relation to the Treasury restricting borrowing from the Public Works Loans Board, the Council did respond to the consultation on this matter and a reply was awaited.
(a) the report be noted; and
(b) following consultation with members of the Finance & Audit Committee, authority be delegated to the Chair of the Committee to amend the authorised limit and operational boundary as needed in response to the final accounting treatment agreed in respect of the St George’s Centre transaction and to make any necessary recommendations to Full Council.
- Treasury Management Mid Year Review 2020-21, item 81. PDF 345 KB
- Appendix 2 - Deposit Dashboard as at 30 Sept, item 81. PDF 314 KB
- Appendix 3 - Principal Outstanding as at 30 September, item 81. PDF 341 KB
- Appendix 4 - Cashflow Model 2020-21 10 Year Graph, item 81. PDF 41 KB