Agenda item

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

The report of the Director of Function (Resources)/Section 151 Officer incorporating the Treasury Management Strategy Statement (TMSS) for 2026/27 was presented for the committee’s consideration. The TMSS outlines how the Council will manage borrowing, investments and cashflow in the coming year and it supports the Council Plan, Capital Strategy and Medium Term Financial Plan. Its publication is required under the Local Government Act 2003 and CIPFA Prudential and Treasury Management Codes.

The Director of Function (Resources)/Section 151 provided an overview of the report outlining the economic context, the Council’s current borrowing position and the proposed borrowing and investment strategies. He confirmed that external borrowing will only be undertaken when required and that borrowing in advance of need will continue to be avoided. Debt rescheduling will be considered only where it offers a financial benefit. Internal borrowing will continue to be used where cash balances allow, as this reduces interest costs. However, external borrowing is expected to increase as reserves decline.

He highlighted that the Capital Strategy sets out three scenarios – base, ambitious and ideal each of which increases the Council’s underlying need to borrow. Tables 7a and 7b show the revenue implications for the General Fund and HRA under each scenario. The revenue impact remains manageable under the Base scenario but rises under the Ambitious and Ideal cases.

Regarding investments, the Council’s priorities remain security, liquidity and then yield. The Council will only invest with low risk, highly creditworthy institutions, with daily monitoring of credit ratings. The Council’s risk appetite remains low.

The Prudential and Treasury indicators set out in Appendix 11 to the report ensure that the Council’s treasury management activities and capital investment plans remain affordable and prudent.

The Director of Function (Resources)/Section 151 provided the following clarifications in response to questions from the committee –

·      Early repayment of some existing loans could remove high interest charges and reduce  revenue costs. However, many PWLB loans carry early repayment penalties which can exceed the potential savings from refinancing to a lower interest rate. The position is monitored and kept under review.

·      Quarterly treasury management reports and the mid-year review monitor the Council’s  performance against the prudential and treasury indicators, which set limits on the Council’s borrowing and debt levels.

·      The contract with the Councill’s treasury management advisors ends on 31 March 2026 and will be reviewed, including the specification for member training on treasury management or whether alternatively, the training may be provided in-house.

·      The MRP budget for 2026/27 is based on the previous year’s capital programme and reflects 2025/26 capital expenditure and the level of borrowing held at that time. MRP is only charged when a project is completed. The budget also factors in the expected shift from internal borrowing to external borrowing which affects interest costs. The reduction in cash balances available for investing is also reflected as it will lower investment income.

·      The base case capital expenditure for 2026/27 includes commitments for new HRA housing developments, a new HRA extra care facility, Shared Prosperity fund projects and grant funded business units. Once those commitments have concluded, base case capital expenditure reduces to known ongoing commitments. The strategy operates on a rolling five year basis and is updated as new projects are approved and funding is available.

·      PWLB loans are generally cheaper than commercial borrowing, are easier for councils to access, and provide a secure source of finance. A discounted rate is available for HRA borrowing.

It was resolved to note the Treasury Management Strategy Statement for 2026/2027 and to forward it to the Executive without further comment.