The Committee considered the Treasury Management Strategy and associated Annual Investment Strategy and the Minimum Revenue Provision Policy for 2021/22 along with the Capital Strategy for 2021/22.

The Principal Accountant (HRA & Exchequer) advised that in relation to Treasury Management Reporting, the Full Council was required to receive reports and approve, as a minimum, three main reports each year, which incorporated a variety of policies, estimates and actuals: 

• Prudential and treasury indicators and treasury strategy
• A mid-year treasury management report
• An annual treasury report

The Principal Accountant (HRA & Exchequer) drew members attention to the key points contained within the Treasury Management Strategy.

In response to Members questions, the Principal Accountant (HRA & Exchequer) and the Director (Corporate Services) explained that:

• The majority of the Council’s additional borrowing related to the financing of the Charter development and the New Homes Building Scheme; the Principal Accountant (HRA & Exchequer) agreed to provide a complete list of the projects that were being financed through the additional borrowing to Members
• The authorised limit for the Councils external debt was driven by the Councils borrowing activity; one of the reasons that the limit had increased from around £133 million in 2018/19 to £297 million in 2021/22 was originally due to the Council increasing the amount of borrowing to finance the Greenwich Transaction however, as referenced in the recent Full Council agenda, the Council had decided to withdraw from that deal. The limit being asked to be recommended by the Committee had remained the same as the Charter had taken the place of the Greenwich Transaction. The Charter developments figures weren’t previously in the report as the deal was only agreed this year so in effect the two schemes swapped places, but the borrowing line was still being followed
• The Council is able to purchase properties outside of the Borough but purchases such as those could impact on other projects the Council were trying to deliver through PWLB funding. The Charter and the New Homes Building Scheme would not be able to be funded through PWLB funding should the Council buy what was considered to be investment assets outside of the Borough and the Council would have to rely on money from external markets. Borrowing from the PWLB was preferred as the funds were easier to obtain and the interest rates were preferential to other lenders. Due to those reasons, the Council were only looking at securing properties within the Borough so that other schemes would not be negatively impacted
• The Council currently held no investments outside of the UK but there was provision within the Treasury Strategy to invest in counterparties in external countries that met the correct criteria. However, there were very few opportunities available currently inside or outside the UK that would offer a high yield of return. The Multi Asset Fund Managers that Gravesham dealt with were able to place money in external countries as part of their investment strategy
• In response to a question concerning the CIPFA Financial Resilience Index classing Gravesham’s external debt as the highest risk indicator, it was explained that the indicator only considered debt and did not taking into account any revenue income stream associated with the borrowing. If the Council only borrowed money to conduct maintenance work or for existing projects which did not generate an income stream, then that would be considered a high risk by the Council. Attention was drawn to the table at paragraph 14.2 of the report which set out the trend in the cost of capital against the net revenue stream to 2023/24
• With regard to the CIPFA Financial Resilience Index, one of the main reasons for the high indicator level was due to it including the HRA borrowing amount when the Council had to buy back the housing stock from central Government for £106 million in 2012. Another factor was in relation to the St Georges Centre lease agreement that was in place.  CIPFA produce the Index using figures taken from the Council’s annual year end financial reporting to Government.  Central Government had recognised that Councils resources had been redirected over the past year and therefore applied leniency in the submission of such returns for 2019/20. Consequentially, the Index for 2019/20 had been delayed and was expected to be released by the end of the month.  The Director (Corporate Services) advised that once the Finance Team had analysed the findings it could be brought to the Committee

Moving on, the Principal Accountant (HRA & Exchequer) drew members attention to the key points contained within the Capital Strategy 2021-22.

In response to Members questions, the Principal Accountant (HRA & Exchequer) and the Director (Corporate Services) explained that:

• As part of the Corporate Service projects, £37K would be invested in an MOT lane for Brookvale as the Council had wanted to be able to conduct MOT’s on its own vehicle fleet. Once the workshop was set up with the MOT lane, this service could also be offered as part of Rosherville’s trading activities to the public which would be expected to provide efficiencies and benefits for both the Council and Rosherville
• In response to a question regarding value for money with the New Build and Acquisition Programme (page 81), it was explained that, in many cases, developments took place on small parcels of land which may have other considerations to resolve, such as access or gradient issues.  For example, the house built at Barr Road required a roadway to access the property to be built which increased the overall project cost. The land developed on Barr Road had been previously affected by anti-social behaviour; it was expected that the development would therefore provide other benefits for the area.
• The Principal Accountant (HRA & Exchequer) agreed to glean more information regarding the new build and acquisition projects from the Housing Strategy Manager and circulate the information to the Committee

Resolved that the Finance & Audit Committee recommended to the Full Council that:

1)    The Treasury Management Strategy for 2021/22 as set out in Appendix 2 be agreed

2)    The Minimum Revenue Provision (MRP) calculation on all new capital expenditure asset out in Section 5 of the Treasury Management Strategy Statement be approved for2021/22 and beyond in accordance with the Authority’s Capital Programme

3)    The Annual Investment Strategy for 2021/22 as set out in Section 14 of the Treasury Management Strategy Statement be agreed

4)    The Capital Strategy for 2021/22 as set out in Appendix 3 be agreed

5)    Delegated authority be given to the Director (Corporate Services), in consultation with the Chair of the Finance and Audit Committee, to amend the prudential and treasury indicators as necessary as a result of the budget approved by Full Council on23 February 2021

6)    Delegated authority be given to the Director (Corporate Services), in consultation with the Chair of the Finance and Audit Committee, to amend the Treasury Management Strategy for 2021/22 and the Capital Strategy for 2021/22 following successful completion of the 2019/20 final accounts process.