Agenda item

Report of the Director for Finance and Corporate Services.

The Group were asked to consider the Council’s Capital and Investment Strategy Outturn report, which summarised the transactions undertaken during 2020/21 financial year. The report also provided information on the Council’s commercial investments and highlighted issues linked to the legacy of Covid-19, which impacted the Council’s year end investment position and overall budget in 2020/21.

The Finance Business Partner presented the Council’s Treasury Management and the approved capital programme provision for 2020/21 at £16.130m. The actual expenditure against the approved programme was £9.306m (58%) giving rise to a variance of £6.824m. The Group noted a carry forward of £6.682m approved by Cabinet in the Final Outturn Report and the increase in the investments balance between years reflecting a slippage in the Capital Programme and additional S106 deposits.

The Finance Business Partner advised the Group that in 2019/20 the Council decided to set its Minimum Revenue Provision (MRP) at £1m. This comprises of £0.250m MRP to finance the Arena based on £10m borrowing over a 40 year life. A further £0.750m was provided by way of Voluntary Revenue Provision (VRP) to meet the Council’s commitment to repay the borrowing early. The Group noted that the Council’s Capital Financing Requirement (CFR) for 2020/21 represents a key prudential indicator and in a table provided this showed that no additional borrowing was needed in 2020/21.

The Finance Business Partner advised the Group of the Council’s debt and investment position to ensure adequate liquidity for revenue and capital activities, security for investments and to manage risks. The Group were provided with details of the Counterparties that the Council had placed investments with at the end of the financial year 2020/21. The Group noted that in March 2020, the Bank of England decreased the base rate from 0.25% to 0.10% which continues to have a significant impact on investment income. However, Covid-19 grants from the Government, additional S106 monies and underspends on the capital programme resulted in an increase in the amounts available to invest resulting in an increase on the Council’s net return.

The Finance Business Partner explained that overall the Council had successfully achieved its objectives given the constraints placed upon the Council, adding that the risks associated with Covid-19 continue to be closely monitored as the economy enters its recovery phase.

The report advised the Group that the Council’s investment policy is governed by the annual Capital and Investment Strategy approved by Council at its meeting on 5 March 2020 and prior to this approved by the Governance Scrutiny Group on 6 February 2020.

The Service Manager - Finance presented the Council’s Asset and Investment Strategy and reminded the Group that the Council had allocated £20m to the Asset Investment Strategy within the Capital Programme to support commercial investment and advised the Group that the balance at the start of 2020/21 was £8.382m.

The Service Manager - Finance explained that 2020/21 had been a very uncertain year with both Brexit negotiations and Covid-19 affecting the economy and the changing risk meant that some investments were not pursued and a balance of £3.828m of the asset investment fund was removed from the programme. A table was provided to show how the Asset Investment Strategy funds have been allocated and their returns, showing differing rates of return and risk and providing a balanced and proportionate approach to investments.

The Service Manager - Finance reminded the Group of the additional assets acquired this year at Edwalton Business Units, which were reported in the 6 monthly update report to Governance Scrutiny Group. In addition, Cabinet at its meeting in February 2021 approved the MTFS, which included the Capital Programme and the return of the unallocated balance on the Asset Investment strategy (AIS).

In concluding, the Services Manager - Finance advised that all Council investments, whether treasury or commercial remain fluid. Adding that risks remain in both the treasury and property markets, and also in the Council’s Capital Programme and the legacy of Covid-19 is still to be determined and failure to deliver additional income streams will increase the requirement to identify further efficiencies in the short to medium term.

Members asked specific questions in relation to the spread of investment funds and in particular how long they had been there, who decides where to invest,   and whether there was any financial risk to these investments. In addition, members wanted the assurance that the Council were investing in financial markets from an ethical point of view and requested a more detailed approach to reporting this information. The Service Manager - Finance explained, the Council’s investment decisions are supported by external treasury advisors and in making investment decisions the Treasury team operate within the Council’s Treasury Strategy boundaries. The Service Manager – Finance also reminded members that the main priority in making investment decisions is the security of the funds followed by liquidity then yield (SLY). Whilst the Strategy includes a commitment for the Council to not knowingly invest in certain markets, the Council must consider security as a priority and ‘Green Investments’, as they are still relatively new to the market, do not always have sufficient performance data.

Cllr Stockwood expressed that the Council has an excellent Treasury Management record and thanked officers for a positive report in light of the challenges the Council has faced. Members were also reminded that a Treasury Management training session is scheduled for 22 November 2021, which may provide the Group with some answers to their concerns.

The Chairman thanked officers for the overall performance reported and agreed with members that more transparency on where investments are being made would be helpful.

Members requested that more detail be provided when reporting in future and requested more consideration for greener investments.

It was RESOLVED that the Group agree the Capital and Investment Strategy Outturn 2020/21 report.