Agenda item

Report of the Director – Finance and Corporate Services.

The Finance Business Partner presented the Capital and Investment Strategy Mid-Year report, which summarised the capital and investment activities of the Council for the period 1 April to 30 September 2021.

It was reported that the economy is recovering, UK unemployment fell to 4.6% in the three months to July 2021, the lowest level since June-August 2020. The current Bank of England base rate remains at 0.1% and according the Council’s Treasury Advisors this is unlikely to change until June 2022. The consumer price inflation rate in the UK jumped to 3.2% in August 2021, the highest since March 2021 and above market forecasts of 2.9%. With the furlough scheme ending in September unemployment levels are expected to peak by the end of the year and with the rising cost pressures and the reversal of temporary tax cuts will cause inflation to rise.

The Finance Business Partner provided a summary of the Council’s investment income, advising that interest receipts for the year are higher than estimated due to investing in higher interest earning funds coupled with delays in the capital programme and additional grant funding. It was noted that all investments were made in accordance with the Council’s Capital and Investment Strategy.

It was reported that in order to maintain returns and mitigate risk, the Council continues to diversify its investment mix. Figures were provided to highlight the level of investment activity and the rates obtained in line with Link’s (the Council’s Treasury Advisors) approved counterparty list.

In terms of borrowing, the Finance Business Partner explained that the Council has established a range of Prudential Indicators to monitor both Treasury and Capital and details of the performance was provided at Appendix A of the report. The Finance Business Partner highlighted that the projected outturn is around £25m, resulting in an estimated underspend of £10m primarily due to re-phasing of the Bingham Hub (£2m), the Crematorium (£3m), Leisure Centre Schemes (£1m) and Support for Registered Housing Providers (£0.9m) and advised that this position had been reported to both Cabinet and Corporate Overview Group.

The Service Manager – Finance provided an update on the Council’s commercial investments and advised the Group that the Prudential Code is currently under review and the revised Code is expected to be published in December 2021.

The Service Manager – Finance explained that the Council minimises its exposure to risk by spreading investments across sectors and by avoiding single large-scale investments. Commercial investments are held for longer are held for a longer term, investments or sales decisions will normally be planned as part of the consideration of the 5 year capital strategy to maximise the potential return.

In concluding, the Group were advised that Treasury Management continues to be fraught with difficulty. The UK economy is recovering and interest rates remain low effecting the returns on investments and changes in the accounting codes will restrict what local authorities can do. The Service Manager – Finance assured members that officers would continue to be vigilant and report any significant issues to this Group.

Members complimented officers on the treasury performance, observing that as a local authority Rushcliffe was unusual in that it does not have some of the pressures that other authorities have and has not had the need to borrow.

Although performance is above target Members did observe this was due to the Council having more money to manage and invest and have therefore been able to benefit from higher returns. In respect of S106 funds, members asked whether the Council should be more proactive in getting the S106 money off the developers in a more timely manner so that developments receive the community benefits promised. 

With regards to interest rates and financial return on investments, Mr Dulay from BDO the Council’s internal auditors explained that local authorities were having to face a number of financial pressures including investing in social value and ethical investments, adding that the fund management officers were providing excellent examples in protecting the Council’s investments.

It was RESOLVED that the Group notes the Capital and Investment Strategy up-date position as of 30 September 2021.