Agenda item

The Committee received a Treasury Management update report which provided an update to the Committee on the Council’s treasury management activities and performance in the three months to 30^th June 2019. The report was introduced by Thomas Skeen, Head of Pensions, Treasury  and Chief Accountant as set out in the agenda pack at pages 19-32. The following was noted in discussion of the report:

a.    The Committee noted that over the period, long term borrowing had increased by £40m and short term borrowing had reduced by £23m.

b.    In relation to questions around the Council’s borrowing headroom and capital financing requirement, officers acknowledged that there was still significant existing borrowing head room available but cautioned that any additional borrowing needed to be within the budget framework. Officers set out that the capital financing requirement was £634.8m and the total of external loan amounts used was £388m. The difference in the two was explained by the Council using cash to finance capital programmes.

c.    In response to a question around the nature of internal borrowing, officers advised that this was the done through the use of reserves, flexible capital receipts, debtors or payments in advance. These cash balances were used to finance programmes rather than raising a loan through an external organisation.

d.    The Committee enquired why, in light of circa £300m leeway in borrowing headroom, the Cabinet was not utilising this to offset some of the demand-led pressures in adult social care, for example. In response, the Chair suggested that there were plans in place to increase spending on housing investment and homelessness etcetera, but cautioned that this was ultimately Cabinet’s decision. A member of the Committee suggested that the Council could borrow money to make an investment as long as the repayments and costs of servicing that debt  could be met from revenue budgets. This would require a business case to be developed.

e.    The Committee asked the Chair to speak to the Cabinet Member for Finance to get an explanation as to why the Council were not utilising more of its borrowing headroom through the capital programme to plug the gaps in services. In this context, should the Cabinet re-examine the capital strategy, particularly in light of record low borrowing costs? (Action: Chair).

f.     In response to a question, officers confirmed that the figures did include HRA borrowing but only reflected current in-year levels not all of the scheduled increases to come.

g.    The Committee requested information around PFI. In response, officers advised that the Council held some PFI contracts in relation to schools and that there was around seven to ten years left on these contracts which were part of the Council’s balance sheet. The Committee noted that the Council did not hold any service PFI contracts and that a fixed amount was paid each month. The Council also received a government grant to help pay the PFI costs. The Committee requested a written update on PFI from officers. (Action: Thomas Skeen).

h.    In response to a question around bail-in risk, officers advised that this related to the percentage of investment that was invested through counter parties who would be exposed to bail-in risk (i.e. money market funds). The 22% of Haringey investments open to bail-in risk was around half the rate of the average for local authorities.

i.      The Committee noted with concern that there was significant underspend in the capital programme. In response officers advised that the delivery percentage had improved over the last two years and that the reasons for slippage were usually specific to that individual programme. Officers advised that there was an all-Member briefing session taking place next week on the capital programme.

j.      In response to further discussion of the capital programme, a Committee member suggested that it was more important to ensure that money was being spent well rather than it just being spent. The Committee noted that for some of the areas identified in the capital programme, the Council was just an intermediary and had very little influence over the process. This was the case for compulsory purchase orders, for example. The Committee queried whether future briefings on the capital programme could make the distinction between slippage to programmes that were the responsibility of the Council and then those that were reliant on others. Officers advised that Cabinet received a scheme by scheme breakdown, which it was due to consider at its next meeting.

k.    In response to a question around implications from the recent government spending review on the budget, officers advised that it was not yet clear how this additional funding would be allocated and whether,  for instance, it was just existing funding repackaged. The Council was awaiting clarification on the funding source and had not yet seen a detailed breakdown.

l.      The Chair reiterated that he would request clarification from the Cabinet Member about the capital programme and request assurance that the Council was actively reviewing its capital programme to make sure that any opportunities that existed within the capital budget, that would help with the revenue pressures that the Council was facing, were being utilised. (Action: Chair/Clerk).

RESOLVED

1. That Members note the Treasury Management activity undertaken during the three months to 30th June 2019 and the performance achieved.

2. That Members note that all treasury activities were undertaken in line with the approved Treasury Management Strategy.