Agenda item

Report of the Group Director of Operations

The Group Director of Operations submitted a report (previously circulated) to inform Members of important information regarding the regulation and management of the Council’s borrowing, investments and cash-flow.  It is a requirement of the Council’s reporting procedures and by regulations issued under the Local Government Act 2003 to produce an annual treasury management review that covers treasury activity for 2023/24.  The report also sought to approve the Prudential Indicators results for 2023/24, in accordance with the Prudential Code.

The submitted report outlined the circumstances with regard to treasury management for 2023/2024, and stated that it was yet another unprecedented year with regard to treasury management. The continuation of the Ukraine conflict, events in the Middle East, the cost of living increases and inflation taking time to recover.

The bank rate continued to rise steadily throughout the early part of the year starting the year at 4.25% before stabilising and finishing at 5.25%.  This has led to borrowing rates increasing and to some significant financial challenges throughout the year.  These challenges are expected to continue into 2024/25 with the cost of borrowing expected to remain high until at least September, possibly even later.  Although the returns for cash investments have also increased due to higher interest rates they still remain below the cost of borrowing and these are declining at a much faster rate than the cost of borrowing.

The submitted report stated that the Council had complied with its legislative and regulatory requirements during 2023/2024, and that the need for borrowing was only increased for capital purposes.

The submitted report stated that at 31st March 2024, the Council’s external debt was £152.878m, which was £14.864m more than the previous year. It was stated that this increase related to the progression of various capital schemes and the rise in the costs of these schemes due to inflationary pressures.

It was reported that the average interest rate for borrowing increased from 2.41% in 2022/23 to 2.61% in 2023/24, and that investments totalled £36.369m at 31st March 2024, in comparison to £40.044m at 31st March 2023, earning interest of 5.09% on short term cash investments, and 0.72% on Property Fund units net of cost.

It was reported that financing costs had been reduced during the year and a saving of £0.735m had been achieved from the original MTFP and transferred to an IFR59 reserve to manage any future fluctuations arising from the capital values of property funds. This was due to reduced interest charges on debt, as well as increased investment income.

RESOLVED - (a) That the outturn 2023/24 Prudential Indicators within the submitted report, and those in Appendix 1 of the submitted report, be noted.

(b) That the Treasury Management Annual Report for 2023/24 be noted.

REASONS - (a) In order to comply with the Prudential Code for Capital Finance in Local Authorities.

(b) To inform members of the Performance of the Treasury Management function.

(c) To comply with the requirements of the Local Government Act 2003.