Agenda item

[Alison Shannon, Chief Accountant, to present report]

Alison Shannon, Chief Accountant, introduced the report. The Chief Accountant briefed the panel on the requirements on the Council under The Local Government Act 2003 and supporting regulations to ‘have regard to’ the CIPFA Prudential and Treasury indicators. The aim is to ensure that the Council’s capital investment plans are affordable, prudent and sustainable.

The Chief Accountant advised the panel that treasury management includes the following functions, borrowing, investments and cashflow. The Council can only borrow to fund its capital programme. The capital programme plans in the treasury management strategy provide a guide to the borrowing needs of the Council to ensure that it can meet its capital spending obligations.

There is a risk management strategy to support this process which is approved on an annual basis at Annual Council. In addition, details about the performance and updates are reported quarterly to Cabinet and Our Council Scrutiny Panel. The Treasury Management Strategy is approved at Annual Council meeting.

The Chief Accountant detailed the six elements of the Treasury Management and gave a brief description of each.

The Chief Accountant detailed the eight prudential indicators that the service has been reporting against during this financial year.

The Chief Accountant briefed the panel on Public Works Load Board (PWLB) and changes to future lending terms introduced in November 2020 to prevent local authorities from using the loans to support the purchase of investment assets primarily for the purpose of yield. In addition, Local Authorities will also need to include a breakdown of the expenditure under the six listed categories, for example, service spending – activity on areas such as education, highways & transport, social care, public health, cultural and related services, environmental and regulatory services.

Local authorities are now required to submit a high-level description of their capital spending and financing plans including the expected use of PWLB loans. The Section 151 Officer will be required to confirm that there is no intention to use the loan to buy investment assets primarily for yield with the aim of letting it out at market rates or continue to operate on a commercial basis without any additional investment.

The Chief Accountant reassured the panel there were no Council projects with the capital programme that fall within the new restrictions.

The Chief Accountant panel advised the panel a full treasury management strategy update report will be presented to the panel at a future meeting.

The panel were invited to comment on the Treasury Management strategy.

The panel queried the forecast in the presentation detailed in prudential indicators (PL3) authorised limit for external debt and whether it was correct that the current borrowing would be reach about one billion pounds by 2020-2021 and the implications of this for the Council.

The Chief Accountant advised the panel the figure refers to the authorised limit which the Council cannot exceed and that the current borrowing forecast for 2021- 2022 is £733 million.  The indicators are set at the beginning of the year 2020 – 2021 and this figure referred to is updated quarterly and is what was anticipated that the debt could rise too at that time.

The panel queried the impact on the treasury management strategy in a situation where the HRA is under pressure. Claire Nye, Director of Finance, advised the panel that HRA Business Plan was presented to Cabinet at a meeting today. The report showed that the over the medium term the HRA was not under financial pressure and there has been a surplus each year. The surplus on the HRA has allowed the Council to repay some of the debt and increase the financial headroom for the capital HRA programme. If there was pressure on the HRA then this would directly affect the amount of borrowing for investment in new or existing housing and the amount of borrowing available for the capital programme. The prudential forecast indicators in the treasury management strategy would be adjusted in this situation.

The panel queried if the Council has ever been refused a loan from the PWLB. The Chief Accountant advised the panel that the Council has never been refused a loan during her time at the Council.

Resolved:

The panel agreed to note the presentation.