Agenda item

Report number: FRS/WS/21/004 was considered by the Financial Resilience Sub-Committee on 12 July 2021.

The Service Manager (Finance and Performance) will update the Committee verbally on any issues or recommendations arising from the consideration of this report.

The Committee received Report No: FRS/WS/21/004, which had been considered by the Financial Resilience Sub-Committee on 12 July 2021.  The Service Manager (Finance and Performance) provided a verbal update on the Sub-Committee’s consideration of the report, which provided a summary of investment activity for the first three months of the 2021-2022 financial year.

The 2020-2021 Annual Treasury Management and Investment Strategy sets out the Council’s projections for the current financial year.  The budget for investment income for 2021 to 2022 was £45,000, which was based on a 0.25% target interest rate of return on investments.

At the end of June 2021, interest earned during the first quarter of the financial year amounted to £16,517 against a profiled budget for the period of £11,250, a budget surplus of £5,267. 

External borrowing as at 30 June 2021 remained at £4m with the council’s level of internal borrowing increasing slightly to £46,712,000 as at 30 June 2021.  Overall borrowing, both external and internal was expected to increase over the full financial year, but not by as much as was originally budget for. 

Attached at Appendix 1 to the report was Arlingclose economic and interest rate forecast. 

The Service Manager (Finance and Performance) referred the committee to a graph set out in paragraph 5.3 of the report, which showed historic Public Works Loan Board (PWLB) interest rates over the previous two years for different durations based on borrowing using the annuity method.  The PWLB rates fluctuated on a daily basis as they were linked to the UK Gilt rates.  Currently PWLB rates were at 1% above the relevant UK Gilt rate.   

The council, along with Arlingclose, the council’s treasury advisor would continue to explore alternative sources of borrowing to ensure the council would be ready to borrow externally in the most advantageous way when it needed to.   

The Sub-Committee had scrutinised the investment activity for 1 April 2021 to 30 June 2021, and asked questions to which responses were provided.

The Performance and Audit Scrutiny Committee considered the report and asked questions to which responses were provided.  In particular discussions were held on external borrowing and the historically low interest rates and the borrowing strategy for the Western Way Development.

In response to a question raised as to what the external borrowing trigger was for the council, officers explained that Arlingclose had offered a trigger of £70m.  The council was currently holding back on borrowing externally as it had a cash balance of over £30m in the bank.  Whilst interest rates remained low in the short to medium term, and the Council held significant cash balances, Arlingclose’s advice was to continue to use cash reserves and short-term borrowing where necessary.  The council was currently developing a business case on a number of options with Arlingclose on external borrowing for the Cabinet Member (Resources and Performance) consideration, which would provide certainty.  For example, the Western Way Development would have a fixed interest rate to provide certainty when borrowing was necessary for that project. 

Members did not raise any issues at this time to be brought to the attention of Cabinet. 

It was then proposed by Councillor Phil Wittam, seconded by Councillor Andy Neal, and with the vote being unanimous, it was:

          RECOMMENDED:

That subject to the approval of Cabinet and Council the Financial Resilience Report (June 2021), being Report No: FRS/WS/21/004, be approved.