Agenda item

This report gives and overview of treasury management activity since 1 April 2020 and presents a review of the Treasury Strategy approved by Council on 20 February 2020.

Discussion:

This report provided details of an overview of treasury management activity since 1 April 2020 and presented a review of the Treasury Management Strategy approved by Council on 20 February 2020. An addendum report was tabled at the meeting following a request from the Cabinet, which had considered the same report on 22 September 2020 that an expansion in the detail of the Capital Financing Requirement shown in the summary of the report, be provided to the Audit Committee. The addendum report provided this additional information accordingly.

The Finance Business Partner – Corporate Services advised the Committee of the key issues in the report, including an explanation as to the additional information in the addendum report, with particular reference to the capital financing requirement (CFR) which was shown as being £1,899,000 higher than shown in the main report; the table in the addendum report assumed that the recommendations of the Cabinet to Council on 8 October 2020 to fund £1,899,000 of the forecast overspend from borrowing would be approved, increasing the CFR accordingly.

Members then raised a number of questions and comments which included:

Housing Infrastructure Funding (HIF) – in response to a question on whether the HIF funds (£170M) would be included in the Council’s investment portfolio, the Chief Finance Officer confirmed that this funding would not be included in the investment portfolio. He explained that the Council would draw down funding following expenditure by the Council, which, overall would create an overall capitalised interest cost of approximately £400,000. Following discussion on this point, during which some concern was expressed, the Chief Finance Officer confirmed that the HIF Project Team were working to the overall funding taking account of this cost.

In response to a question on the Committee’s request at the last meeting for a report on the process for how the HIF monies would be spent, the Chief Finance Officer undertook to check this and to ensure that a report would be produced accordingly.

Short term borrowing – in response to a question on the continued reliance of short term borrowing, the Finance Business Partner – Corporate Services advised that he hoped that the Government would normalise the Public Loans Work Board (PWLB) borrowing rates by the beginning of the next financial year. This would help to reduce the reliance on short term borrowing.

Counterparty limits – in response to a question on whether there was any benchmarking information on the suspension of counterparty limits and whether Members should be concerned as to the suspension of these limits, the Chief Finance Officer advised that such an exercise had not been undertaken. However, some other Local Authorities may have been in a similar position regarding cash flow given the injection of cash from the Government in the form of Covid-19 grants leading to a cash surplus. He further advised that subsequent funding from the Government to support Local Authorities during the pandemic now required the Council to claim funds back which could lead to a cash deficit.

Investment portfolio – in response to a question about dividend payments on property investments, which had been detailed in previous Committee reports but not detailed in this report, the Finance Business Partner – Corporate Services advised that the Council was still receiving such returns, however, they were much reduced compared to usual payments. He also advised that property values were currently uncertain and that some of the Council’s property investments had been gated recently, the effect of which was to prevent the investors selling such investments in an attempt to maintain property values, although gating was ending on 30 September 2020 in respect of the fund that the Council had invested most.

Capital Financing Requirement – in response to a question as to what the £1.899M figure referenced in the addendum report represented, the Chief Finance Officer advised that this was likely to refer to an overspend on the Strood Riverside Scheme but that he would confirm this to the Committee after the meeting via email.

Interest rates – Interest rates – in response to a question about the effect of interest rates on the Council, particularly in a scenario where there might be negative interest rates, the Finance Business Partner – Corporate Services advised that, given the Council was a net borrower, it was beneficial for the Council that interest rates remained low.

Decision:

The Committee noted the contents of the report.