Agenda item

This report gives an overview of treasury management activity during 2020/21. 

Discussion:

This report provided an overview of treasury management activity during 2020/21. The report stated that throughout the period the Council had complied with its legislative and regulatory requirements and it outlined the key actual prudential and treasury indicators detailing the impact of capital expenditure activities during the year, with comparators.

The Finance Business Partner – Corporate Services highlighted a number of key factors for Members’ attention. In particular, since the report had been presented to Cabinet on 13 July 2021, officers had received clarification from CIPFA that re-organisation debt owed to Kent County Council should not be taken into account when comparing external debt with the Capital Financing Requirement (CFR) but that repayments did reduce the CFR, therefore, this represented a better position than reported to Cabinet. He provided further information on the position relating to borrowing, highlighting that short term borrowing remained in favour. He also referred to the treasury position stating that of the £45m repayable in the year ending 31 March 2022 some £25m had been repaid by 22 June 2021. He also detailed other borrowing amounts as set out in the report.

He provided a commentary on investment performance highlighting that cash balances were kept low for day-to-day requirements. He also referred to the three property investment funds in-year performance, stating that two out of the three funds had delivered dividend returns which exceeded the capital losses on them.

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

Public Loans Work Board (PWLB) loans – in response to a question whether there were better loans available to the Council for the financing of Capital Programme projects recently approved by Full Council, the Finance Business Partner – Corporate Services stated that rates would vary depending on when loans had been taken out and the duration of those loans. With regards to PWLB loans, he explained how those rates were set at a premium over equivalent gilt yields and he advised the Committee that the Council did receive a discount on the loan rates because they shared the plans for the capital projects with the PWLB. He further advised that PWLB had increased their rates in the last year in an attempt to dissuade borrowing by local authorities for purely investment reasons.

Brexit – in response to a question regarding the impact on Council finances, the Chief Finance Officer stated that there had been no impact on the Council’s treasury function so far, however, inflation could have an impact on the Council’s capital projects, which would have to be managed.

Historic Debt to Kent County Council (KCC) – in response to a question as to what might happen to this debt in a scenario where a new North Kent unitary authority was formed, the Finance Business Partner – Corporate Services advised that when Medway Council was formed it had taken on some of KCC’s assets which included a proportion of the related debt. Any new Council would be likely to be required to take on these assets and debt. The Chief Finance Officer added that the debt portfolio held by Medway and KCC could be disaggregated and novated to the successor authorities.

Investment portfolio – in response to a question as to whether the cumulative performance of the investments could be included in the table at paragraph 5.6 of the report, the Finance Business Partner – Corporate Services advised that he had highlighted the total in-year return on investments in the table, however, he could include another column to show the cumulative performance. He also advised further on short term and long-term borrowings.

Counterparty risk – in response to a question on the level of risk, the Finance Business Partner – Corporate Services advised that there were counterparty limits in place (£20m), as set out in the Treasury Management Strategy.

Debt profile – in response to a question regarding whether there were any proposals to refinance any of the short-term debts, the Finance Business Partner – Corporate Services advised that he expected to refinance these debts. Most of the relevant loans were from other local authorities. If refinancing was not available from other authorities at the relevant time the PWLB would remain a source for refinancing.

Decision:

The Committee approved the treasury management outturn annual report.