Agenda item

This report gives an overview of treasury management activity since 1 April 2025 and presents a review of the Treasury Strategy approved by Council on 27 February 2025.

Discussion:

The Finance Business Partner introduced the report and provided an overview of Treasury activity for the year. Key indicators showed that borrowing remained below the capital finance requirement.

Interest Rates and gilts remained higher than expected, so the Council continued to pursue a short-term borrowing, with £221m remained owed in short term borrowing and £106m repayable this financial year. As interest rates fall, the Council would take opportunities to smooth the debt maturity.

Investment performance continued as expected, in terms of property investment, the Patriza Hannover Property Unit Trust performance was being carefully monitored, and the Council would consider its options.

The following issues were discussed:

Risk – in response to a question whether higher than expected interest rates there was additional risk to Council investments, the Finance Business Partner - technical accounts stated that the Council received updates from treasury advisors on a daily basis, and would act on their advice.

Capital Programme – it was asked whether the higher cost of borrowing would trigger a review of the Capital programme. The Chief Operating Officer stated that he would discuss the programme with the administration when borrowing was required to fund the programme, however, there was no formal trigger which would necessitate a review. Treasury Advisors provided regular advice and had a clear understanding of the Council goals.

Interest and Finance Budget – further information was requested regarding the interest and finance budget position. The Chief Operating Officer stated that interest rates had not fallen as expected and as such an increase in costs and consequently pressure on the budget was likely to be reflected in quarter three monitoring reports.

It was asked if the authority could manage a debt repayment of £10m a month, the Business Finance Partner stated that a little over £10m repayment was being paid. The Chief Operating Officer explained that he had concerns about the level of short term debt being carried, however, it was a result of the economic environment and outside the control of the authority.

Capital Receipts – it was asked whether the Council was meeting expectations in disposal of assets to realise capital receipts. The Chief Operating Officer stated the Council expected to achieve £7m of Capital receipts in 2025 and £25m in 2026 which would represent a good performance. The disposal of property was based on whether the asset was, or could delivering value to the Council. Properties which did not deliver value would be subject to disposal.

A Member expressed concern at the level of borrowing, the Chief Operating Officer stated that unlike some other authorities, borrowing had been to fund a number of significant projects and was held against a number of assets. In addition, projects such as purchasing homes for Temporary Accommodation would ease pressure on ongoing revenue budgets and some investments such as Cozenton Park were performing better than expected.

The Chief Operating Officer acknowledged an ongoing concern regarding the level of working capital available with more monies owed to the Council by third parties than expected.

Patriza Hannover Property Unit Trust Investment – further information was requested regarding the Patriza Hannover Property Unit Trust Investment, the Chief Operating officer stated that the fund was a victim of its success, having made a significant profit, a number of investors had sought to realise the profit, and this had caused a run on the investment. If the Council removed its investment now it would still, make a profit of around £300,000 and it had received dividends over the last four years.

Banking – a Member commented that there was some concern in the banking industry regarding future economic performance and asked whether the Council had any exposure to risk. The Chief Operating Officer stated that the biggest area of risk was the pension fund, however, colleagues in Kent had presented a positive position and there was a possibility that employer contributions would fall next financial year, so pension fund managers did not see a significant risk.

Decision:

The Committee noted the report and noted that the report will also be referred to Cabinet and Full Council.