Agenda item

This report gives an overview of treasury management activity for 2026/27 quarter 1. The report will also be considered by Cabinet on 22 August 2026.

Discussion:

The Head of Corporate Accounts introduced the report. He highlighted that external borrowing had reduced by £26m in the quarter and investment increased by £7m. At the end of round one, there was a forecast £4.162m pressure on the financing and interest budget, primarily caused by higher than anticipated interest rates.

The following issues were discussed:

Overspend – further information was requested regarding the overspend for the financing and interest budget, the Head of Corporate Accounts stated that projections were based on a number of factors including interest rates, potential refinancing costs, capital spend and management action to address spending across the Council which would affect the amount of borrowing required. The position was reviewed on a regular basis; however, it was known that the Council had around £150m of loans maturing during the year, some of which would need to be refinanced.

The Chief Operating Officer added that when the budget had been set in February it was expected that Interest rates would remain flat, however they had risen. There were a number of significant capital projects underway which would continue, so there was limited scope for improvement in current projections, save mitigation within departments through reduced spending.

Debt – it was asked what affect the current financial position would have on the expected debt for the successor North Kent authority following Local Government Reorganisation. The Chief Operating Officer stated that he now expected the Council would require further Exceptional Financial Support (EFS) in the current year which would add to the Council’s debt. By vesting day, it was likely that the Council’s debt would reach between £800m-£900m, in addition the combined debt held by Dartford and Gravesham Brough Councils stood at around £200m, and debt associated with disaggregation of Kent County Council would also need to be added.

Disposal of assets – in response to a Member question whether the disposal of assets had been used to reduce debt, the Chief Operating Officer stated that Capital Receipts have been used to deliver the transformation programme with £7m to fund preparatory work for Local Government Reorganisation (LGR).

He added that the Council had sought funding to support the additional work created by LGR, however, only £900,000 had been earmarked for each unitary authority and this was focused on specific projects such as elections to the new authority. The Government had suggested capital receipts could be used to fund the preparatory work required and the administration had recognised that additional capacity was required to support LGR. The Chief Operating Officer stated that over the next two years further capital receipts of around £50m-£60m would be realised, which would be used to pay debt related to EFS.

Lender Option, Borrower Option (LOBO) – it was asked whether any outstanding loans may be subject to LOBO. The Head of Corporate Accounts there was potentially £40m in loans which could be called in, however at current interest rates he did not expect a request.

Treasury advisors – in response to a question whether officers were satisfied with new the performance of the Council’s new treasury Advisors, the Head of Corporate Accounts stated that he was very impressed with the proactive service provided by the treasury advisors. It was agreed that treasury advisors would be asked to provide a briefing on treasury management for all Members.

Decision:

a)     The Committee noted the treasury management report 2026/27 quarter 1.

b)     An all-Member briefing to be arranged on Treasury Management, to be led by the Council’s treasury advisors.