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Agenda item

Treasury Management and Capital Strategies 2023/24


The Finance Manager introduced his report setting out the draft Treasury Management and Capital Strategies for 2023/24. It was noted that:


·  CIPFA published the updated Treasury Management and Prudential Codes on 20 December 2021.  CIPFA had stated that Local Authorities were expected to fully implement the required reporting changes within their Treasury Management Strategy Statements from 2023/24.  The reason for the changes was to tighten up the regulations around local authorities financing capital expenditure on investments in commercial projects for yield where access to PWLB borrowing had been closed on such schemes.


·  The fundamentals of the Treasury Management Strategy Statement 2023/24, which had not changed significantly from the previous year, were to:


Utilise cash balances rather than loan debt to finance the Capital Programme in the short term due to increasing interest rates;

Further diversify the Council’s portfolio as far as is operationally feasible, ensuring that a combination of secured and unsecured investments is considered; and

Keep investments short term to meet the demands of liabilities when due.


·  The Council’s investments as at 31 December 2022 totalled £28.13m.  It was expected that investment balances would start to fall throughout 2023/24 and it might be necessary for the Council to take on short-term borrowing to cover the liabilities of the Capital Programme and day-to-day cashflow.


·  The Council had long-term borrowing of £5m through the PWLB and, at the beginning of 2022/23, had entered into an agreement with Aviva Life and Pensions UK Ltd to forward borrow £80m due to increasing interest rates. The first tranche of £40m would be received in 2024 with £20m in 2025 and £20m in 2026.


·  The Capital Programme was expected to total £365m over the next ten years and a prudential borrowing figure of £298m would be required so further borrowing would be procured from a combination of the PWLB, corporate markets or other local authorities.  The capital financing requirement was expected to reach £354m.  Statutory guidance was that debt should remain below the capital financing requirement, except in the short-term, and the Council expected to comply with this.


·  CIPFA had introduced a new Prudential Indicator, the Liability Benchmark, as a means of managing debt risks, and this was included within the Treasury Management Strategy Statement.


In response to questions by Members, the Officers explained that:


·  In terms of funding the Capital Programme, it would be necessary to borrow more than the £80m which would be drawn down between 2024 and 2026.  The Officers would monitor the markets and the Council would borrow when the opportunity arose.  All capital expenditure had to be financed either from external sources, the Council’s own resources or debt.  The schemes included in the proposed Capital Programme together with the planned funding arrangements represented a realistic plan for delivery.


·  In terms of the ratio of financing costs to the net revenue stream and associated risks, one of the purposes of the Prudential Indicators was to make sure the amount of interest paid was proportionate to net revenue expenditure.  It was a requirement to report this on a regular basis to assist Members’ overview and confirm capital expenditure plans.  There were no hard and fast rules about the level of debt that a Council could take on.  However, the general rule was that it should be sustainable meaning that the Council should have plans to service and repay any debt taken on.  With any investment, it was necessary to ensure that it returned at least the interest paid and the provision was made for its repayment.  This was looked at in terms of individual schemes and programme wide.


·  One of the key features of the revised Prudential Code was additional reporting of the Treasury Management requirements of the Treasury and Prudential Indicators to Members on a quarterly basis to give greater oversight and ensure a prudent position.


·  In terms of restructuring debt profiles, it was quite expensive to pay back PWLB borrowing early.  It was a legal requirement to safeguard the Council’s position by making provision in the accounts for a minimum revenue payment every year against eventual repayment of loan debt.  It was unlikely that the Council would have to take emergency measures to restructure debt profiles at any point.  Generally speaking, the longer the term of the debt, the lower the cost, so given the type of assets being acquired, it was appropriate to borrow for the long term.


·  It was not part of the role of the Committee to approve the Capital Programme.  This Committee was concerned with how it was financed.




1.   That the Treasury Management Strategy for 2023/24, attached as Appendix A to the report of the Finance Manager, be agreed and recommended to the Council for adoption subject to any amendments arising from consideration of the Capital Programme by the Executive at its meeting on 25 January 2023.


2.  That the Capital Strategy for 2023/24, attached as Appendix B to the report of the Finance Manager, be agreed and recommended to the Council for adoption.



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