To consider the Treasury and Capital Strategy for 2021/22 – 2025/26.
The Finance and Resources Portfolio Holder presented a report setting out the Council’s Treasury Management Strategy for 2021/22 to 2025/26 and the Capital Strategy for 2021/22 to 2033/34, which were expected to be approved by Council on 23 February 2021. The report had been updated to reflect the 2021/22 Budget and Capital Programme. The Portfolio Holder referred to the substantial changes to the economic situation, which included the impact of the COVID-19 pandemic on the UK economy and GDP levels, the current Bank of England interest rate of 0.1%, significant increases in public borrowing and the uncertainty and risk surrounding Brexit. The Portfolio Holder discussed two temporary modifications to the Council’s investment strategy. Namely, the first allowed very large sums received from Government for the COVID-19 grants to be lodged with the Council’s principle banker. The second, the counter party limit for Money Market funds were increased from £5m to £10m and proposed that both of the changes were made permanent. The Portfolio Holder stated the Council had just today received £30 million on the day of this Committee meeting into its bank account. This cash sitting in the bank account could be injected into capital investment.
Section 5 of the report outlined the Council’s commercial strategy and highlighted various commercial investments. The Finance and Resources Portfolio Holder added that it was proposed that a new local prudential indicator for internal borrowing be introduced. He noted that the capital strategy remained relatively unchanged from last year with the long-term view of possible capital expenditure being taken which had helped the Council improve the quality of decision-making and prioritisation of certain expenditures.
The Chairman thanked the Finance and Resources Portfolio for another valuable report.
One Member questioned the increase in the Capital Financing Requirement (CFR) figures; they queried if these figures would be reduced after 4 or 5 years and suggested if this was something to assuage any potential fears for residents, and indeed, Members of the committee. The Finance and Resources Portfolio Holder explained that over time there would be significant levels of investment by the Council. This required funding, and there were risks around this. Overall, he was happy with the shape and investments made by the Council, but noted the this should be closely monitored at all times.
The Finance Lead Specialist and Section 151 Officer provided further clarification on this point. The CFR was very much related to how much the Council spends, and what resources were left to fund that spending, and whether or not the Council needed to borrow. The Council would still need to do more borrowing, but for an organisation of this size, the Council had a very low amount of borrowing due to its circumstances. Yet, the Section 151 emphasised that she would not like to guarantee that the total amount would go up or down over time. The other element was that the Council would consider affordability very carefully and were very prudent to set aside money to repay any monies borrowed. The Council should generate that income as it was funding projects that were able to create returns and re-pay any borrowing. The Section 151 Officer assured Members that the Council does not put pressure on Council Tax Payers and would continue to protect them.
RESOLVED – That the Overview and Scrutiny Committee;
1) Note and recommend to Cabinet and Council the Treasury Management Strategy, Capital Strategies, the authorised limit and operational borrowing limits within the report;
2) Note and recommend to Cabinet and Council the permanent increase to £10m of the limit for investing with individual Money Market Funds and the disregarding of Government COVID-19 funds when applying the counterparty limit to the Council’s Bankers NatWest; and
3) Note and recommend to Cabinet and Council the introduction of a new local prudential indicator for internal borrowing.