Issue - meetings

To provide Members with an update on Treasury Management performance and activity to ensure best practice is maintained (report of the Director of Finance (S151 Officer) enclosed).

Consideration was given to the report of the Director of Finance (Section 151 Officer) which provided members with an update on Treasury Management performance and activity to ensure best practice was maintained.

The Portfolio Holder for Finance introduced the report and advised that the Council was required to review Treasury Management activities and provide an update on Prudential and Treasury indicators for the year. The report, at Appendix 1, had previously been considered by the Governance and Audit Committee on 13 November 2025, in addition to quarterly updates throughout the financial year. The following main points were highlighted:

• The latest revised budget for capital expenditure was £35 million, with actual expenditure at the end of September recorded at £6.7 million;
• The Council’s underlying need to borrow for capital expenditure as at 30 September 2025 had increased to £84.5 million. Investments totalled £43 million, and external borrowing remained at £67.5 million. In addition, the Council had issued loans of £6.5 million to Welland Homes;
• The bank base rate started the year at 4.5% and had reduced to 4% by the end of September 2025. The overall rate of return on investments during the first half of the financial year was 4.67%;
• The Council had budgeted to borrow £10 million from the Public Works Loan Board for HRA capital expenditure, however, following the receipt of £15 million in grant payments during the first half of the year, this borrowing was not expected to be required in the current financial year;
• At Quarter 2, borrowing costs less investment income totalled £231,000 compared to the original budget of £661,000, representing a favourable variance of £430,000; and
• The forecast outcome for the year was predicted to be £440,000 against a budget of £1.493 million, representing a favourable variance of just over £1 million.

Members considered the report and made the following comments:

• Members expressed appreciation for the clarity and detail of the Treasury reports and thanked officers for their work.

• A member asked whether councils affected by a former Government decision to place significant debt on council tenants had sought to have this reversed by the current Government.
  • The Portfolio Holder for Finance acknowledged this remained a legacy issue for the authority, and while the Council had taken on the debt, it continued to maintain a substantial and high-quality housing stock. A potential impact on this matter resulting from Local Government Reorganisation was noted as an area for future monitoring.

DECISION:

That the contents of the report at Appendix 1 be received.

To provide Members with an update on Treasury Management performance and activity to ensure best practice is maintained (report of the Director of Finance (Section 151 Officer) enclosed).

Consideration was given to the report of the Director of Finance (Section 151 Officer) which provided members with an update on Treasury Management performance and activity to ensure that best practice was maintained.

The Interim Treasury Manager (PSPS) introduced the 2025/26 Mid-Term Treasury Report to members at Appendix 1, and the following main points were highlighted:  

• The Council continued to operate a balanced revenue budget, ensuring cash flow was adequately planned and surplus funds invested with low-risk counterparties;
• The report was compliant with the CIPFA Code and outlined the primary requirements, including quarterly reporting and the mid-year update;
• Since publication of the report, updated Gross Domestic Product (GDP) figures had been announced, showing a slight reduction due to the impact of a cyber-attack on manufacturing;
• Current interest rate forecasts indicated that the Bank of England base rate would remain at 4%, with potential for a further cut in December;
• Capital expenditure was forecasted at £31.2m against an approved budget of £35.2m, with a borrowing requirement of £8.36m;
• The Council’s overall Capital Financing Requirement was £92.7m, with external borrowing at £67.5m. Internal borrowing continued to be used where cost-effective;
• The Council had budgeted for £10m of additional HRA borrowing from September 2025, but this had not been required due to receipt of £14.9m in grant funding, which increased cash balances and delayed external borrowing;
• Borrowing costs were forecasted to be £2.3m against a budget of £2.6m, delivering a saving of approximately £200k;
• Investment balances at the end of Quarter 2 were £43m, compared to £23.6m at Quarter 1, reflecting the additional grant funding;
• Average investment return was 4.75%, with loans to Welland Homes achieving 4.29%;
• The net treasury position showed a favourable variance of £430k at Quarter 2, with a forecast outturn variance of £1.15m; and
• No changes had been made to the Council’s risk appetite during the period.

Members considered the report and made the following comments:

• Members welcomed the positive financial position and noted the impact of delayed borrowing on cost savings.

• Members queried whether the Council’s risk appetite might change in light of falling interest rates.
  • The Interim Treasury Manager (PSPS) confirmed that the current approach remained appropriate and would be reviewed as part of the annual Treasury Management Strategy.

• Members queried the Handelsbanken account balance shown in the investment list at point 9 of Appendix 1.
  • The Interim Treasury Manager (PSPS)  explained that the account remained open despite low balances to avoid delays if competitive rates were offered in future.

• Members commended the strong investment performance and noted the importance of maintaining flexibility in treasury operations.

Agreed:

That the report and treasury activity detailed in Appendix 1 be noted.