Agenda item

This report presents the Council’s Treasury Management Strategy for the 2023/24 financial year. The Treasury Management Strategy incorporates within it the Treasury Management Policy Statement, Annual Investment Strategy and Minimum Revenue Provision Policy.

This report provided Council’s Treasury Management Strategy for the 2023/24 financial year. The Treasury Management Strategy incorporates within it the Treasury Management Policy Statement, Annual Investment Strategy and Minimum Revenue Provision Policy.

The Finance Business Partner – Technical Accounting highlighted that the aim of the strategy is to keep borrowing as low as possible. This means cash levels have remained low for day-to-day requirements and consequently interest earned on cash has been limited.

The Finance Business Partner – Technical Accounting drew members’ attention to proposed changes in the Strategy, ie  an increase the limit of fixed rate loans from £100m to £125m for Council subsidiary companies to meet the requirements of Medway Development Company (MDC) and to increase the monetary limit for borrowing at variable rates, excluding lender option, borrow option (LOBOs) to £150 million from £100million.

Prudential and Treasury indicators had been reported on a quarterly basis and had continued to operate within the Capital Finance Requirement.

The Liability benchmark at 4.2.2 of the report (page 62 refers) showed the additional loans which the Council would be expected to require in future years.

LOBO – In response to a question from a member whether any providers had made contact regarding the potential for early redemption of loans, the Finance Business Partner - Technical Accounting reported there had been no further contact since the last meeting of the Audit Committee, however interest rates meant there was no significant incentive for such offers.

Capital Spending - A member commented that a significant rise in capital spending was expected in the next few years, however much of the funding would be time limited grants from central government. The member asked whether long term borrowing had been used for short term requirements. The Finance Business Partner - Technical Accounting explained the Council would have undertaken more short-term borrowing however liability benchmarking proved that borrowing had not taken place for longer than necessary.

The Chief Operating Officer added that any borrowing over 12 months was considered long term. The capital programme required a significant level of borrowing for Medway Development Company (MDC) in the short term.

Interest Rates – In response to a question whether the strategy took into account forecasts for significant interest rate rises the Business Finance Partner - Technical Accounting stated that treasury advisors had been consulted and significant interest rises were not expected. In addition, liability benchmarking discouraged borrowing in advance of need.

Loans to Subsidiaries - In response to a question regarding whether repayments from third parties had been received the Business Finance Partner Technical Accounting stated MDC had not yet made any repayments however, receipts meant they had borrowed less from the Council than had been expected.

Return on investment - A member commented that borrowing of £150 million is a significant sum and the Council would be liable should the return on investment be less than expected. The Chief Operating Officer stated when the MDC had been set up it had taken loans from the Council to develop housing, that had been a risk the Council had accepted. However, sales on the first development had progressed well with 75% of units sold. If circumstances changed the Council’s risk could be mitigated through private renting rather than sale of properties.

A member commented that the sale of units had progressed well and asked when the repayments to the Council would be expected to be paid. The Chief Operating Officer stated that the Council could not confirm when monies would be received.

A member commented that deposits would be received when the first residents had moved in which was expected in the next month. Those deposits would offset future borrowing. The first two sales had taken place on the Chatham Wharf development and the private renting sector would be considered if necessary.

The member added that the benefit of the capital project was also part of the regeneration of Chatham and without it, private sector interest in Chatham’s regeneration would not have happened.

Decision:

The Committee noted the Treasury Management Strategy 2023/24 as and recommended its approval to Full Council after consideration by Cabinet.