Agenda item

Report of the Director for Finance and Corporate Services

The Finance Business Partner presented the Capital and Investment Strategy, Quarter 3 report, which summarised the capital and investment activities of the council for the period 1 April to 31 December 2022.

The Finance Business Partner referred to the supporting information within the report.

In relation to the Economic Forecast the Group were advised that the Bank of England had warned that inflation may reach 12% in the coming months, as the price of fuel, energy and food put pressure on household budgets. In reaction to this the Bank of England increased the base rate to 3.5% with further increases anticipated.

The Council’s treasury advisors, Link Group have revised its interest rate forecasting, reporting that interest rates will peak at 4.5% in June before starting to tail off from December 2023.

In relation to Investment Income the Group were presented the Council’s current investments and respective counterparties at Appendix D of the report. It was reported that interest receipts are higher than had been estimated due to ongoing increases in interest rates and larger investment balances, due to the re-profiling of the Capital Programme and additional S106 monies. It was noted that all investments have been made in accordance with the Council’s Capital and Investment Strategy.

In light of the cash balances, the Group were advised that the Council continues to internally borrow to fund the capital expenditure, whilst ensuring investments are secure and liquidity is achieved.

The Group noted the Council’s diversified funds at Appendix A of the report. The Finance Business Partner explained that funds are currently showing a £1.4m deficit from the downward trend experienced by the political turmoil last year. In addition, there is also a statutory override preventing any accounting loss impacting on the revenue accounts, which was due to end 31 March 2023. However, DLUHC have decided to extend this for a further 2 years.

In relation to Borrowing the Council has established a range of Prudential Indicators as detailed in Appendix B of the report. The Finance Business Partner highlighted the Liability Benchmark which would reflect the need to borrow. However, a credit balance confirmed the Council has no need to borrow in the medium term.

In relation to Commercial Investments, it was noted that the Council’s target should not exceed 30% with the current actual just under 20%.

In conclusion the Group were advised that Treasury Management continues to be fraught with difficulty, Officers will continue to monitor the environment and report any significant issues to the Governance Scrutiny Group.

Members felt the report was positive in light of the inflationary pressures and rising interest rates and were encouraged to see that the Council was in a good position.

Members asked specific questions in relation to the Council’s investments provided in Appendix A, and asked whether these were ethical investments, adding that officers should be mindful of the risk if not investing ethically. The Service Manager – Finance explained that the Council will not knowingly invest in non-ethical businesses and are guided by Link the Council’s Treasury Advisors. Members acknowledged good steps were being made but that ‘not knowingly’ does not go far enough.

The Chairman advised that this had been raised at a previous meeting of Governance Scrutiny Group and requested that further information to support the Council’s investments would be helpful to the Group in defining the Council’s Corporate responsibility in relation to ethical investments.

It was RESOLVED that the Group noted the Capital and Investment Strategy update position as of 31 December 2022.