Issue - items at meetings - Financial Resilience Report - September 2021

Issue - meetings

Financial Resilience Report - September 2021

Meeting: 07/12/2021 - Cabinet (Item 309)

309 Recommendations of the Performance and Audit Scrutiny Committee: 18 November 2021 - Treasury Management Report (September 2021) pdf icon PDF 130 KB

Report number:     CAB/WS/21/057

Portfolio holder: Councillor Sarah Broughton

Chair of the Committee: Councillor Ian Houlder

Lead officer: Rachael Mann

Decision:

Recommended to Council:

(14 December 2021)

 

That the Treasury Management Report (September 2021), as contained in Report number: FRS/WS/21/005, be approved.

 

Resolved:

 

That the externalisation of our underlying need to borrow in order to manage the Council’s interest rate risk exposure, be agreed.

Minutes:

(Report number CAB/WS/21/057)

 

The Cabinet considered this report, which was recommending to Council, approval of the Treasury Management Report for the first half of the 2021 financial year. An additional recommendation from the Performance and Audit Scrutiny Committee (PASC) was also presented to Cabinet for consideration, which related to consideration of the Council’s position regarding external borrowing.

 

Councillor Sarah Broughton, Portfolio Holder for Resources and Property, drew relevant issues to the attention of Cabinet, including that the total amount invested at 30 September 2021 was £52 million. Interest achieved in the first half of the financial year amounted to £34,122 against a budget for the period of £22,500.

 

The 2021 to 2022 Annual Treasury Management and Investment Strategy set out the Council’s projections for the current financial year. The budget for investment income in 2021 to 2022 was £45,000 which was based on a 0.25 per cent target average interest rate of return on investments.

 

Members also noted from the report, a summary of the capital borrowing budget 2020 to 2021; borrowing and income – proportionality; borrowing and asset yields; borrowing and temporary loans and other market considerations.

 

External borrowing as of 30 September 2021 remained at £4 million with the Council’s level of internal borrowing increasing slightly to £48,039,000 as at 30 September 2021.  Overall borrowing, both external and internal was expected to increase over the full financial year, but not by as much as was originally budgeted for.  Borrowing costs (interest payable and Minimum Revenue Provision (MRP)) for the year were forecast to be £965,804 against an approved budget of £3,135,850, although this could change if more external borrowing was undertaken than was currently forecast.

 

Together with other matters, Report number: FRS/WS/21/005 had also included a summary of the borrowing activity during the period; borrowing strategy and sources of borrowing; borrowing and capital costs – affordability; borrowing and income – proportionality; and borrowing and asset yields. This had led to a discussion by PASC on external borrowing and what the Council’s trigger point was in borrowing externally, as inflation was on the rise and interest rates remained historically low.  The Committee had suggested the Council needed to achieve interest rate certainty as soon as practicable and should be looking to lock in the low borrowing rates, externalising the Council’s underlying need to borrow.

 

This approach was supported by the Cabinet, with members recognising the benefits of greater certainty, removing exposure to the level of risk internal borrowing created, and enabling the budget for appropriate projects to be set with actual costs.

 

 

 

Recommended to Council (14 December 2021):

 

That the Treasury Management Report (September 2021), as contained in Report number: FRS/WS/21/005, be approved.

 

Resolved:

 

That the externalisation of our underlying need to borrow in order to manage the Council’s interest rate risk exposure, be agreed.

 

 

(Councillor Stephen Frost left the meeting at the conclusion of this item.)


 

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