Agenda item

Report of the Executive Manager – Finance and Corporate Services

The Finance Services Manager presented the Capital and Investment Strategy report for 2021/22 to 2025/2026, focusing on both traditional treasury activity and the Council’s commercial property investments.

In Appendix A, attached to the Officers report the Finance Manager advised the Group of the Capital Prudential Indicators, highlighting the Council’s projected capital expenditure plans and funding, the Council’s borrowing need and the ongoing impact of the capital programme on the investment balance. The Finance Manager referred to the Capital Financing Requirement (CFR) as tabled in the report, which summarised the Council’s overall position with regard to borrowing, which shows an increase in the CFR reflecting the capital commitment in respect of the Crematorium and Bingham Leisure Hub.

The Financial Services Manager continued to advise the Group of the Treasury Management Strategy, explaining the UK’s economic recovery which is likely to be gradual and prolonged in the wake of Covid. The current Bank of England base rate is 0.1% and has remained unchanged and inflation levels are expected to increase to 2% in 2021 and 2.1% in 2022 and 2023. The tables contained within the reports identified that the Council may need to externally borrow and this would result in borrowing costs, these were reflected in the figures provided. In addition, the Financial Services Manager advised that the Public Works Loan Board (PWLB) have published new lending terms stating that if an Authority has assets that have been purchased primarily for yield anywhere in the capital programme they will not be able to access PWLB funding.

The Financial Services Manager explained that in recent years, the Council identified specific sums for its Asset Investment Strategy within the Capital Programme. These include commercial investments in areas such as property and subsidiaries, or loans that support service outcomes. In addition, the Financial Services Manager advised that the Public Works Loan Board (PWLB) have published new lending terms stating that if an Authority has assets that have been purchased primarily for yield anywhere in the capital programme they will not be able to access PWLB funding.

In concluding the Financial Services Manager advised the Group that the Council aims to minimise its exposure to risk by spreading investments across sectors, thus avoiding single large-scale investments. In addition, the Council’s commitment to economic regeneration (not purely financial return) has meant that many of its investments have been in industrial units, which have been very successful.

Members asked a specific question relating to the negative trajectory for interest rates and how will the Council choose to invest should this happen to mitigate any risk. The Financial Services Manager informed that the Council’s Treasury advisors do not expect this to happen. The Executive Manager – Finance and Corporate Services added that in the current climate things can change quickly and that changes are regularly reported to this Group.

Members asked specific questions relating to the table on Capital Financial Requirements, and what the components for the usable reserves are. The Financial Services Manager advised these are balances accumulated over a period of time. A question was also raised in respect of the table for Commercial Income, and whether the running costs of the businesses occupying the properties had been factored into the figures, commenting that the upward trajectory is good but with the knock on effect of Covid is this likely to fall. The Financial Services Manager explained that there is an element of buoyancy, including officer time which is re-charged to the tenants as a service charge; and the Council is liable for business rates whilst Council properties remain empty.

It was RESOLVED that the Governance Scrutiny Group recommend for approval by Council:

a)    The Capital Strategy and Capital Prudential Indicators and limits for 2021/22 to 2015/26 contained within Appendix A

b)    The Minimum Revenue Provision (MRP) Statement which sets out the Council’s policy on MRP contained in Appendix A

c)     The Treasury Management Strategy 2021/22 to 2025/26 and the Treasury Indicators contained in Appendix A

d)    The Commercial Investments Indicators and limits for 2021/22 to 2025/26 contained in Appendix A