Issue - meetings

Report of the Director – Finance and Corporate Services

The Finance Business Partner presented the Capital and Investment Strategy update 2024/2025 report which summarised the capital and investment of the Council for the period 1 April to 31 December 2024.

The Finance Business Partner said that the UK economy was experiencing low growth, although Gross Domestic Produce had unexpectedly increased to 0.4% in December 2024. She said that economic growth was expected to reach 1.5% later in 2025 and it was expected that the Bank of England would cut interest rates in May, August and November of 2025.

The Finance Business Partner noted that inflation had risen to 3% in January but was expected to fall again and that unemployment had risen slightly but was expected to remain stable.

The Finance Business Partner referred to investment income and noted that interest receipts were higher than estimated due to larger investment balances and interest rates remaining higher for longer. She said that overall, the Council achieved an average interest rate of 4.69% in quarter 3.

Members of the Group were referred to Appendix A of the report which set out the Council’s investment balances at the end of December 2024. The Finance Business Partner confirmed that the Council held a diversified portfolio to protect itself from interest rate risk and said that the Council continued to consider green investments compliant with its investment strategy.

In relation to diversified funds, the Finance Business Partner said that the current position could be seen in Appendix B, showing a drop in value. She said that funds were volatile and affected by political and economic instability and that there was a statutory override in place until the end of March so that the impact of any loss did not impact on the revenue accounts. It was thought that MHCLG may be minded to end the statutory override thereafter but that the Council had mitigated risk by appropriations to the Treasury Capital Depreciation Reserve.

In relation to Capital, the Finance Business Partner said that the Council was predicting an underspend due to reprofiling and savings for some of its schemes. She referred Members of the Group to Appendix C for Prudential and Treasury Indicators and noted that the liability benchmark showed that the Council did not need to borrow over the medium term.

In relation to ratio of financing costs to net revenue streams, the Finance Business Partner referred Members of the Group to Table 3 and noted that interest receipts exceeded financing costs. In relation to net income from commercial and service investments to net revenue streams, she referred Members of the Group to Table 4.

In conclusion, the Finance Business Partner said the interest rates had remained higher than expected which had had a positive impact on returns but that slower economic growth in the UK and global events impacted negatively on some of the Council’s investments. That the UK was also experiencing inflationary pressures which meant that the Bank of England would be reluctant to drop interest rates significantly which was good  ...  view the full minutes text for item 33