Agenda item

Report of the Director for Finance and Corporate Services

The Finance Business Partner presented the Council’s Capital and Investment Strategy 2023/24 to 2027/28 (Appendix A), which focuses on both traditional treasury activity and the Council’s commercial property investments in light of CIPFA’s updated Prudential and Treasury Management Codes.

The Group were advised that the Department for Levelling Up, Housing and Communities (DLUHC) regulations have been issued, which will require the Governance Scrutiny Group to consider a Minimum Revenue Provision (MRP) Statement in advance of each year. It was noted that out of the variety of options provided to local authorities, the Council has chosen option 3, the Asset Life Method.

The Group were informed of the CIPFA Treasury Management Code (2021), whereby under the revised Prudential code, investments are separated into categories for Treasury Investment, Service Investment and Commercial Investment, and requires local authorities to produce a treasury Management Strategy Statement on an annual basis. The Strategy Statement includes those indicators that relate to the treasury management functions and ensure that the Council’s investment plans are affordable, prudent and sustainable, whilst providing security and liquidity on investments.

In relation to the Borrowing Strategy 2023/24 to 2027/28 the Finance Business Partner explained that the Council chooses to internally borrow within operational boundaries. This means that no external borrowing costs are incurred, but there is an opportunity cost of using internal borrowing by way of lost interest on cash balances. The Finance Business Partner explained that the Treasury Management Code introduced a new indicator, ‘Liability Benchmark’ which reflects the real need to borrow. It was noted that the Council’s reserves are being used to fund future capital expenditure and working capital and S106 monies are returning to a more realistic level.

In relation to current investments the Group were advised that as part of the budget and financial strategy 2023/24 report being taken to Council on 2 March 2023, it is recommended that a separate reserve is identified to cover mitigation by appropriations to reserves of £1m. The Group were asked to note these funds over the past 3 years have generated £1.35m in interest receipts and the expectation is over time the value will rise as the economy recovers.

In relation to Commercial Investments, the Finance Business Partner explained that whilst the Council is committed to being self-sustainable, it has taken the decision to no longer invest in property for commercial gain and this accords with the current professional ethos of CIPFA.

The Group were reminded that the updated Treasury Management Code requires local authorities to document a comprehensive knowledge and skills schedule for both members and officers responsible for treasury management and that training is kept up to date.

Members who had attended the Treasury Training for members expressed their greater understanding of the Council’s Capital and Investment Strategy.

The Chairman asked if there had been any changes in the Treasury Management Code since the last training in November 2022. The Service Manager – Finance advised that the Council’s Strategy remains the same, however there have been two additional indicators; the Liability Benchmark; and the updated Prudential code in respect of investing in property for commercial gain. The Group were reminded that the Council is in a good position and therefore does not need to borrow externally and that it has made the decision to no longer invest in property for commercial gain and no longer has an Asset Investment Fund.

Members were encouraged by the Council’s financial performance, expressing how it was a credit to management and officers that the Council was in the fortunate position of being debt free.

It was RESOLVED that Governance Scrutiny Group recommend for approval at Full Council:

a)    The Capital Strategy and Capital Prudential Indicators and Limits for 2023/24 to 2027/28 contained within Appendix A (paragraphs 5 to 15)

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

c)     The Treasury Management Strategy 2023/24 to 2027/28 and the Treasury Indicators contained within Appendix A (paragraphs 18 to 66)

d)    The Commercial Investments Indicators and Limits for 2023/24 to 2027/28 contained within Appendix A (paragraphs 67 to 81).