Agenda item

2019/20 Annual Treasury Management Report

To consider treasury performance during 2019/20 against the Council’s Treasury Management Strategy.


The Treasury Management Annual Report 2019/20 was presented by Councillor Andrew Jarvis, the Finance and Resources Portfolio Holder.  The report reviewed the treasury activities and the actual prudential and treasury indicators for the 2019/20 financial year, meeting the requirement of the Local Government Act 2003, the CIPFA Code of Practice on Treasury Management and the CIPFA Code for Capital Finance in Local Authorities.


The level of external debt had remained at £12.8m, below the Capital Financing Requirement of £18.5m.  This showed that the Council had not funded revenue activity through borrowing, a key prudential indicator.  This had been a prudent strategy which was constantly under review so as to avoid incurring higher borrowing costs in the future when the Council might not be able to avoid new borrowing.  Interest Receipts from the Council’s Investments had brought in £61,000 more income than budgeted for, as the Council benefited from fluctuations in market rates as a result of changing market expectations on the next move by the Monetary Policy Committee regarding the Bank of England base rate and a stepped maturity profile for deposits.  Interest payable on borrowing had been in line with budget as no new borrowing had been expected or taken in 2019/20 as a result of using internal cash balances to fund capital rather than borrowing.  Looking forward, the COVID-19 outbreak had introduced a large amount of uncertainty into the market.  Officers would keep this under constant review with support from the Council’s external treasury advisors, Link Asset Services.  The current strategy of using internal cash balances to fund prudential borrowing continued to minimise the interest rate gap (where loans cost more than investments earn) and to help reduce counterparty risk.


The report had been considered by the Overview and Scrutiny Committee at its meeting on 22 June 2020.  Cabinet, at its meeting on 24 June 2020, had recommended that Council approve the 2019/20 Treasury Management Annual Report.


Councillor Jarvis thanked officers for their work in this area, pointing out that their careful management of the Council’s borrowing and cash balances was critical to minimise the risk that it faced, while achieving the best possible returns to support the broader work of the Council.


Councillor Jarvis having moved the recommendations contained within the report was seconded by Councillor Doug Rathbone.


Councillor Mark Wilson raised a question which he had submitted to Councillor Jarvis prior to the meeting:-


“With reference to paragraph 3.7, The Future, will the Portfolio Holder and the Authority develop in the next financial year ways in which residents can benefit from using our “under borrowing” capacity?  Organise ways that we can access funds to help develop schemes that meet their and SLDC plans, as outlined in the Carbon Reduction Plan.  In short, borrow more and become a broker in helping residents to borrow and invest in green infrastructure for their houses, solar panels, better insulation, power generation and flood prevention measures.”


Councillor Jarvis responded, emphasising that being underborrowed did not mean that there was a pot of money available.  He pointed out, however, that due to the heavy programme of capital works, borrowing was likely to increase.  In addition, he stressed the need for prudence in light of the current crisis.  He further drew attention to the ongoing review in relation to Public Works Loans Board margins which could results in constraints on the Council’s ability to borrow.  Councillor Jarvis informed Members that the Council was prepared to borrow subject to low rates in order to invest in the community and areas such as housing and green issues and that he would be happy to explore these options with Cabinet.  Councillor Mark Wilson felt heartened by the response which, he believed, suggested that the Council would look at aspects of sustainable housing.  He acknowledged the financial predicament but reiterated the fact that the Council could provide assistance to residents in this regard.  Councillor Jarvis responded, hoping that the predicament did not turn into a financial catastrophe and that the Council would, indeed, be in a position to invest for the good of its communities and residents.


Councillor Jarvis responded to a further query regarding the possibility for community lending and the ability for town and parish councils to borrow.  Although unsure of the rules of borrowing for town and parish councils, he felt that there could be the potential for collaborative work.  In response to a comment regarding Public Works Loans Board margins, Councillor Jarvis understood the desire to distinguish between borrowing to invest in local communities and borrowing to purchase commercial property, and agreed that communities and residents should not be penalised by higher rates.  Councillor Rathbone referred to the Overview and Scrutiny’s discussion and support for the report.  He pointed out that the report demonstrated prudence and manoeuvrability for the future.


The Chairman read out the proposal and asked the meeting if the motion was agreed.  There being no dissent, it was


RESOLVED – That the 2019/20 Treasury Management Annual Report be approved.

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