Agenda item

To provide an update of the treasury management position of the Council as at 30th September 2022 (report of the Interim Treasury and Investments Manager (PSPSL) enclosed.)

Consideration was given to the report of the Interim Treasury and Investments Manager (PSPSL) which provided an update of the treasury management position of the Council as at 30 September 2022.

The Interim Treasury and Investments Manager (PSPSL) introduced the report which had been prepared in compliance with the Chartered Institute of Public Finance and Accountancy (CIPFA) code of practice on Treasury Management.

The requirement of the code was the production of:

• a Treasury Management Policy Statement;
• Treasury Management Practices;
• a Treasury Management Strategy Statement which included the Annual Investment Strategy and Minimum Revenue Provision Policy;
• a Mid-Year report which was being presented at the current meeting, and an annual report at the end of the financial year.

Appendix A included an update on the following areas:

• Capital Strategy and Treasury Management background information;
• An introduction to the Mid Term report;
• Economics and Interest Rates – key points from the commentary provided by Link Asset Services on 7 October 2022 stated that:
  • higher energy prices were predicted to have a persistent downward effect on the economy;
  • there had been double digit inflation;
  • interest rates had increased seven times – the Bank of England base rate had risen to 3% with an expectation that rates would peak at 5%.  Since the report was written Link Asset Services had forecasted a reduced peak of 4.5%.
• Treasury Management Strategy Statement and Annual Investment Strategy Update;
• The Council’s Capital position (Prudential Indicators); Appendix A1 detailed a full breakdown of the latest approved capital expenditure programme and actual expenditure to date;
• Borrowing;
• Debt Rescheduling;
• Compliance with Treasury and Prudential Indicators;
• Annual Investment Strategy; and
• Changes in Risk Appetite, which had remained unchanged.

Members considered the report and made the following comments:

• Members referred to Housing Revenue Account self-financing settlement and called for central government to cancel the debt.

• Members queried the speed at which deposits could be withdrawn should a financial institution collapse.
  • The Interim Treasury and Investment Manager (PSPSL) responded that:
    • all investments were timed deposits which varied from instant access through to a fixed 12-month term;
    • the longer-term deposits could possibly be withdrawn early with agreement of the borrower but penalties may be incurred;
    • the Treasury Strategy, agreed by members at Council, outlined the agreed investment criteria;
    • investment advice was taken from external treasury advisors who monitored rates and credit ratings: and
    • a cautionary approach was taken with deposits restricted to AA and AAA rated companies.

• Members noted that capital expenditure and forecasted outturn reflected a dramatic change to the original approved programme.  Concern was expressed if the Capital Programme expenditure was exceeded.

• Members acknowledged the lack of opportunities for the rescheduling of debt and asked whether this area was regularly reviewed.
  • The Assistant Director – Finance responded that this area was regularly discussed with the Interim Treasury and Investments Manager (PSPSL) and any rescheduling decisions would involve the consideration of prevailing interest rates and financial modelling.

• Members asked why the Street Cleansing forecast outturn had increased from a budget of £35,000 to £109,000.
  • The Assistant Director – Finance confirmed that £109,000 had related to the purchase of four 7.5 tonne trucks. Only one vehicle should have been coded to the Street Cleansing budget however there had been an error which had subsequently been corrected. Of the remaining three trucks, one was attributed to Environmental Services Operational and two to South Holland Maintenance.

AGREED:

a)    That following consideration by the Governance and Audit Committee of the report and the treasury activity as detailed in Appendix A, the Mid Term Treasury Management update be noted; and

b)      That the comments of the Governance and Audit Committee be noted for consideration by Council at their meeting on 18 January 2023.