Agenda item

To consider the overall financial and operational performance of the Council’s treasury management activity for 2021/22.

Members considered the Treasury Management Annual Review 2021/22 report presented by Neil Krajewski, Deputy Chief Accountant.

Neil Krajewski explained that the Audit Risk and Management Committee is responsible for the review and scrutiny of the Council’s treasury management arrangements and the report before members looks back on how those arrangements have worked in practice through the year and provide members with some key information for their understanding and comments. He highlighted that the report will also be presented to Cabinet and Full Council on 11 July 2022 and he explained that the amount of interest that the Council earned on its external investments during the year was just over £52,000 which was in excess of the estimate that officers had predicted when preparing the revised budget by just over £12,000.

Neil Krajewski explained that there are two main factors behind that and one of them is the fact that the Council found itself in a position where it had slightly higher cash balances than would normally be expected and this was largely as a result of Government grants received which would be in excess of what officers would have anticipated or where delays had occurred in spending the money to deliver some of the projects that were ongoing at the end of the financial year. He added that it is important for members to be aware that at previous meetings officers have indicated that the Council was able to invest in property funds and remain compliant with its Treasury Management Policy. Following discussions with external treasury advisors  two property funds had been identified as suitable investments following a robust assessment process. A total of £4,000,000 was invested into two property funds at the end of March 2022.

Neil Krajewski explained that he is now receiving reports from those fund managers and information will be presented to the committee during the 2022 -2023 financial year regarding the performance of those funds. He added that the funds are long term investments for the Council which are intended to achieve an enhanced return on top of what the Council would have been able to achieve, had the money been invested with banks, building societies and other local authorities. He pointed out that there are likely to be periods of volatility associated with these types of investment but the initial signs that officers have received appear to be positive.

Neil Krajewski pointed out that the report contains a lot of detailed information which explains the relationship between the Council’s investments and borrowing needs and he explained that there is currently a focus on the outlook of the economy and various sections of the report are being superseded by updated information all of the time. He drew members attention to the forecasts on Page 14 which provide detail on the Council’s treasury advisors view of the future with regards to interest rates which is constantly being updated and the current forecast interest rates are typically 1 to 1.5% above those  referred to in the forecast included in the report. He explained that this has an impact on the Council in the short term with regards to giving the Council the opportunity to earn higher rates of return on its short term investments than what had been originally forecast but he stressed that as far as the Council’s borrowing needs are concerned it is likely to cost the Council more than has previously been forecast and there is the need for borrowing built into the Council’s capital programme.

Members asked questions, made comments and received responses as follows:

·         Councillor Mrs French asked whether the grant money that had been referred to would need to be repaid? Neil Krajewski explained that no it does not need to be repaid providing that the projects that the authority has committed to are delivered. He added that a lot of the grant money relates to the major regeneration programs such as March Future High Street and a significant amount of money in relation to a project known as Wave One which is being delivered in collaboration with Clarion to improve energy efficiency in homes which is £5 million of grant funding.

·         Councillor Mrs French asked where the £4 million that has been invested came from and Neil Krajewski confirmed that it is money which had been identified that there was not a requirement for it in the medium term and it was available to invest in a longer-term project. Councillor Mrs French asked whether it was part of the Horizon money and Neil Krajewski explained that it is not exclusively Horizon money.

·         Councillor Yeulett asked that, given the volatile situation in the current economic climate, is the Council in a position where it can take emergency action going forward with the investments or debt repayments that it has? Neil Krajewski stated that options available in terms of the debt repayments are quite limited as the rates on early prepayment of debt tend to be prohibitive so the payment that would be required by the Council in order to redeem its debt means it is outside of what would normally be acceptable from a budgetary point of view, however the position is monitored, and advice and guidance received from the Council’s treasury managers. He explained that the Council also receives daily updates if there are any emerging situations that may affect the Council’s Investment Strategy with regards to where the Councils funds are placed as many local authorities have taken into consideration a situation which occurred a few years ago with the Icelandic banks. The Council takes a prudent approach in terms of what counterparties that they work with and also with regards to spreading their risk appropriately. Councillor Yeulett asked whether the authority will be able to be flexible in their action should the pressures arise? Neil Krajewski stated yes that is correct and added that one of the factors that are being monitored currently is with regards to the Council’s borrowing needs and identifying what the appropriate time would be to take out any borrowing.

Members agreed to note the report and agreed that it should be presented to Cabinet on 11 July 2022.