Agenda item

The Finance Business Partner presented the report of the Director – Finance and Corporate Services to provide the Group with details of the Capital and Investment Strategy for 20222/23 to 2026/27, focusing on traditional treasury activity and the Council’s commercial property investments in light of CIPFA’s updated Prudential and Treasury Management Codes.

The Finance Business Partner advised the Group that each year the Council produces a Capital Programme to be approved by Council at its meeting on 3 March 2022 as part of the Council’s Budget setting. The Council’s Capital expenditure needs to have regard to:

·       Corporate Priorities (Strategic Plan)

·       Asset Management Planning

·       Value for Money

·       Prudence and Sustainability

·       Affordability

·       Practicability (achievability of the Corporate Strategy)

·       Proportionality (risks associated with investment are proportionate to financial capacity)

·       Environmental, Social and Governance (address environmental sustainability which is consistent with the Council’s corporate policies)

Referring to Appendix A attached to the report, the Finance Business Partner provided details of the Capital Prudential Indicators and highlighted the following:

·       Projected capital expenditure plans and funding

·       The Council’s borrowing need (Capital Financing Requirement CFR)

·       The ongoing impact of the capital programme on the investment balance

·       Bank of England’s interest rate rise to 0.5%

·       The increase in cost of energy commodities

The Finance Business Partner continued, informing the Group of the Council’s underlying need to borrow and its investment position represented by the Capital Financing Requirement (CFR) indicator under the Prudential Code. It was noted that the Council holds usable reserves and working capital which represents the underlying resources available for investment and that the Council’s current strategy is to use these resources, by way of internal borrowing on projects such as the Crematorium and Bingham Leisure Hub, to avoid commitment to external debt. 

The Finance Business Partner informed the Group of an update to the Treasury Management Code which requires Local Authorities to document a formal and comprehensive knowledge and skills schedule to ensure both members and officers dealing with treasury management are trained and kept up to date.

The Service Manager – Finance advised the Group that the Council whilst committed to being self-sustainable has taken the decision to no longer invest in property for commercial gain, and as such the Council no longer has an Asset Investment Fund.  In addition, the Group were reminded that the Council acquired two business units in West Bridgford, leaving a balance (in the Asset Investment Fund) of £3.828m which has since been removed from the Capital Programme. The Service Manager – Finance advised the Group that due to the changes to the Prudential Code Local Authorities will no longer be allowed to borrow to fund non-financial assets solely to generate a profit.

Members commented on the Treasury Management training provided to members in November 2021, which they expressed was very valuable for the purpose of this scrutiny group. However, the Council’s external treasury advisors are only there to steer and guide members and officers, but ultimately decisions are made by officers under this guidance. The Service Manager – Finance advised that officers involved in treasury decisions are provided with extensive training which CIPFA is insisting on with the emphasis on both officer and member training and skills.

The Chairman referred to the table which shows the assumed average interest that the Council expects to receive over the next five years and asked, how does the Council expect that level of investment to be maintained when the amount of investment is going down. The Service Manager – Finance explained that the investment funds are in the higher earning accounts and that the more liquid funds with typically lower interest rates are utilised first leaving higher balances in the higher interest accounts.

It was RESOLVED that the Governance Scrutiny Group forward the following for approval at Full Council on 3 March 2022:

a)    The Capital Strategy and Capital Prudential Indicators and Limits for 2022/23 to 2026/27 contained in Appendix A (paragraph 5 to 15);

b)    The Minimum Revenue Provision (MRP) Statement contained within Appendix A (paragraphs 16 to 17) which sets out the Council’s policy on MRP;

c)     The Treasury Management Strategy 2022/23 to 2026/27 contained within Appendix A (paragraphs 18 to 65);

d)    The Commercial Investments Indicators and limits for 2022/23 to 2026/27 contained within Appendix A (paragraphs 66 to 80):

e)    The Director for Finance and Corporate Services is authorised to amend the Capital and Investment Strategy for any minor changes, for example, as a result of the Final Local Government Finance Settlement, which will be reported at Full Council.