Agenda item

This report gives an overview of treasury management activity quarter one 2024-2025.

Discussion:

The Head of Corporate Accounts introduced the report and highlighted treasury performance for quarter one.  The Council’s treasury advisors continued to recommend against long term borrowing as it was anticipated that interest rates would fall over the next two to three years.

Short-term borrowing briefly breached the approved limit of £150m set out in the treasury management strategy during the quarter. This was quickly rectified, and the Council was reviewing opportunities for longer term borrowing. The most recent loans the Council had taken out would mature in 2026/27 and 2027/28 respectively so longer-term borrowing was in place.

During the quarter, one lender had exercised their right to change interest rates and as a consequence the Council repaid the loan at the current rate. This had been funded through new lending.

The Head of Corporate Accounts added that there had been a rise in borrowing in the quarter due to the additional capital spending approved by Council.

Property investment funds continued to provide positive dividends, the Lothbury fund had closed and losses accounted for in the last financial year and monies were being received as the remaining properties were sold.

The following issues were discussed:

Lender Option, Borrower Option (LOBO) - in response to a question whether the new refinanced loan was at a higher rate than had been payable for the previous loan, the Chief Operating Officer confirmed that the repaid loan had been taken out at a rate of 4.32%. The Council had been quoted 5.62% for the revised terms and had refinanced via the PWLB at a similar rate, although over a shorter term.

The Chief Operating Officer added that interest rates were coming down from a high for loans taken out in the last two years, so refinancing loans over the next two years may be a net benefit to the Council.

Capital Programme – it was asked whether the additional cost of the Capital programme on the revenue budget was a risk to the Council in its current financial situation. The Chief Operating Officer stated that the Capital Programme remained under review, some work had been paused and officers were cognisant that when borrowing took place it affected the revenue account.

Medway Development Company (MDC) -  in response to a question whether additional housing supply in response to government targets would affect the returns provided by MDC, the Chief Operating Officer explained that the strategy of moving towards more rental accommodation was a response to the current market situation. When the market improved the position could be reconsidered and this was a positive for the long term profitability of MDC.

Investment – in response to a question whether the returns received from property funds a would be reinvested, the Chief Operating Officer explained the Council had limited investments and the strategy was to focus on lowering debt rather than investing. 

Debt Collection – in response to a question how the Council had performed in collecting monies owed to it, the Chief Operating Officer stated that the Council was performing well and there were indications a surplus may be achieved against budget expectations following the additional investment in the service. Ther Chief Operating Officer added he was aware that there was an ongoing cost of living crisis, and the Council made sufficient provision for those unable to pay debt.

Decision:

The Committee noted the treasury management report.