Agenda item

This report summarises the Council’s treasury management activity during the first half of 2024/25, as required to ensure compliance with CIPFA’s Code of Practice for Treasury Management.

Speakers:

Joe Stockwell, Strategic Capital Accountant

Nicola O’Connor, Strategic Finance Business Partner

Key points raised in the discussion:

1.    The Strategic Capital Accountant noted that the report outlined the Council's performance against the debt and investment limits as agreed in the Treasury Management Strategy. The Council remained compliant with all the indicators. The Council continued with its strategy of internal and short-term borrowing, and no new long-term borrowing had been undertaken over the period, to avoid locking in high interest rates. Gross borrowing position increased by £169 million to £911 million. Interest rates are expected to decrease over the year, although not a sharply as originally anticipated. The Council meets with Arlingclose to regularly to review the borrowing position. The Council holds short-term investments in overnight money market funds and the return rates broadly mirror the Bank Rate. There is a small over recovery of interest receivable forecast due to these investments.

2.    A Committee member commented that inflation had risen and the Bank of England was unlikely to lower rates as reported in the press. The Strategic Finance Business Partner noted that the Council’s assumptions for treasury and budgeting purposes, was that the Bank of England base rate would reduce over the next year and a half, although slower than previously forecast. The Council meets with Arlingclose after the meetings of the Monetary Policy Committee.

3.    A Committee member sought more detail on the increase in short-term borrowing of £169 million. The Strategic Finance Business Partner explained that a proportion of the Council’s capital investment was funded from borrowing. The Council had not undertaken any long-term borrowing, the current increase was in short-term borrowing from other local authorities, most were under six months, on the assumption that interest rates were starting to decrease. Short-term borrowing rates from other local authorities were similar to Public Works Loan Board (PWLB) rates, which had not been the case historically, the balance between long-term and short-term was around fifty-fifty and so that was being reviewed. Having more long-term borrowing was preferred as it was a fixed predictable interest rate and reduced exposure to interest rate fluctuations, but this needs to be managed against locking in rates when they were anticipated to fall.

4.    A Committee member queried the Council’s reduction in exposure by £3 million in the PWLB. The Strategic Finance Business Partner noted that most of the Council’s debt with PWLB was maturity debt, so repayment was not due until maturity, however there were a small number of loans with annuity repayments and this reduction reflected those payments made during the period, reducing the outstanding loan.

5.    The Chairman was surprised that local authorities have got quite a high borrowing rate. The Strategic Finance Business Partner noted that PWLB borrowing had not been taken out in the last two years, that average rate reflected historic rates of borrowing. The local authority market tended to broadly track the Bank of England base rate. Local authorities had the same pattern of cash balances with more cash at the beginning of the financial year than at the end of the financial year, with dips in December and March and rates therefore often reflected demand.

RESOLVED:

Noted the content of the Treasury Management Mid-Year Report for 2024/25.

Actions/further information to be provided:

None.