Agenda item

To present the report of the Head of Function (Resources)/Section 151 Officer.

The report of the Head of Function (Resources)/Section 15 Officer incorporating the Treasury Management Review for 2018/19 was presented for the Committee’s consideration.

The Head of Function (Resources)/Section 151 Officer highlighted the following -

•           That in light of the ongoing uncertainty surrounding the economy over Brexit and continuing low interest rates the Treasury Management Strategy has remained to borrow only when required and to invest on the basis of safety and liquidity ensuring that the Council’s invested cash is readily available.

•           The Council’s strategy over a number of years has been to utilise its own cash resources to fund capital expenditure where possible. However, due to low cash balances during the year, it was decided to externalise borrowing taking out two long term loans with the PWLB – £15m in January, 2019 over 50 years at an interest rate of 2.49% (£5m of which was used to repay a maturing loan) and £10m in March 2019 over 46 years at an interest rate of 2.24%.

•           At the beginning of the year, the internal borrowing position was £19.9m. By taking out the loans referred to above, the internal borrowing position at 31 March, 2019 was reduced to £6.2m.

•           During that year, the Council also entered into two short-term borrowings – for £5m in October, 2018 for 3 months with North Yorkshire County Council with an interest rate of 0.85% and for £5m in December, 2018 for 1 month with Tyne and Wear Pension Fund with an interest rate of 0.8%. These borrowings were taken out to cover short-term cash flow difficulties.

•           During 2018/19, the Council complied with its legislative and regulatory requirements. The forecast Capital Financial Requirement (CFR – the Council’s underlying need to borrow) at the time of producing the prudential indicators for 2018/19 was £148.940m.The actual CFR was significantly lower at £138.660m.  Neither were the Authorised Borrowing Limit (£177m) nor the Operational Boundary (£172m) breached during the year, with the amount of external debt peaking at £134.4m only. The performance against the Prudential Indicators set by the Council show that the Council’s Treasury Management activities are being undertaken in a controlled way which ensure the financial security of the Council and do not place the Council at any significant financial risk in term of unaffordable or excessive borrowing.

•           Looking forward the strategy will likely remain low risk, low return investments and a planned approach to borrowing to minimise interest charges.

It was highlighted at this point that as the Committee had now been in session for three hours, under the provisions of paragraph 4.1.10 of the Council’s Constitution, a resolution by the majority of those Members of the Committee present to continue with the meeting was required. It was agreed that the meeting should continue.

In response to points raised by the Committee, the Head of Function (Resources)/Section 151 Officer further clarified -

•           That the underspend on the capital budget relates mostly to schemes that are funded by capital grants. The Council’s approach to borrowing is on the basis of cash flow aims and need rather than on a per project basis i.e. the Council will borrow when it does not have cash available to fund capital expenditure.

•           That the charge to Revenue for the cost of borrowing is made through the Minimum Revenue Provision (MRP). The MRP policy has been amended in order to link borrowing to the life of the asset borrowed for in order that the charge to revenue provides enough at the end of the borrowing term to repay the loan when it becomes due.

It was resolved –

•           To note that the outturn figures in the report will remain provisional until the audit of the 2018/19 Statement of Accounts is completed and signed off; any resulting significant adjustments to the figures included in the report will be reported as appropriate.

•           To note the provisional 2018/19 prudential and treasury indicators in the report.

•           To accept the Treasury Management Annual Review report for 2018/19, and to recommend it to the Executive without comment.