The Committee received a cover report
along with the Treasury Management Strategy Statement (TMSS) for
2021/22, before it was presented to
Corporate Committee and then Full Council for final approval. The
report was introduced by Dapo Shonola, Head of Pensions &
Treasury as set out in the agenda pack at pages 143-167. The
following points were raised in discussion of the TMSS:
- The Committee sought clarification around borrowing levels going
forwards. In response officers advised that borrowing for the
current year was £530m against a borrowing limit of
£957m and that in 2024/25 borrowing would rise to £1.8b
against a borrowing limit of £1.89b. Officers advised that
the operational boundary was set as part of the budget framework
and that there was still a projected £90m gap in the
operational headroom for 2024/25.
- In relation to a question, officers advised that the TMSS set
out how the authority was going to borrow money, which was largely
used to fund its capital programme.
- In response to a request for assurances, officers advised that
Treasury Management was audited as part of the final accounts and
that there had been no concerns raised. Furthermore, the authority
had not exceeded and of its Treasury Management indictors in the
current year.
- The AD for Finance elaborated that the annual accounts were
audited every year, and these were signed off by Corporate
Committee, whilst the internal audit of the treasury management
functions was conducted every two years. No concerns had been
raised about any of the transactions within treasury management in
the most recent internal and external audit processes. The external
audit for 2019/20 had not yet been completed so the AD for Finance
advised that he could not say for certain that there were no issues
but he advised that he was not aware of any issues arising during
the work undertaken to date as part of the external
audit.
- In relation to a question around LOBO loans, officers advised
that there had been an objection to the accounts raised in previous
years around LOBOs but this objection was dismissed by the external
auditor. Officers advised that Committee that there were 4 LOBO
loans currently held by the Council and that the average rate of
interest on these loans was 4.73%. In response to a follow-up
question, officers advised that the relative borrowing costs of
these loans was monitored regularly and that to date it had not
been financially beneficial to the Council to restructure these
loans. Officers assured the Committee that the interest rate was
lower than an equivalent long term loan at the time from the Public
Works Loan Board. Officers also gave assurance to Members that
there was no risk of the lenders calling in these loans in the
short-medium term as interest rates would not exceed 4.73% and so
it would not be in their interest to do so.
- In response to a question, officers advised that the authority
held £125m in LOBO loans and although an average interest
rate of 4.73% may seem high, these were historic long term loans
taken out when interest rates were higher and that the interest
rate and resultant borrowing costs were lower than an equivalent
loan from the Treasury’s Debt Management Office (Public Works
Loan Board).
- In relation to concerns around the impact of negative interest
rates, officers advised that the Council was being prudent and
minimising the periods in which the authority kept a cash surplus.
Overall, there was not considered to be significant implications to
the Council’s treasury management if there were negative
interest rates. Instead, the Council would likely make investment
changes to mitigate this.
- Officers set out that most of the Council’s money was
invested with other local authorities rather than commercial banks
and that it adopted a low risk profile in its
investments.
- In response to a request for assurance around whether the
capital programme received sufficient scrutiny, the Head of
Pensions & Treasury advised that he was happy that it received
sufficient scrutiny. The capital programme was part of the budget
scrutiny process and as such was scrutinised by the relevant
scrutiny panels as well as the Overview and Scrutiny Committee. It
was also subject to Cabinet scrutiny as well as officer
scrutiny.
- In response to a question around the capital financing costs of
the HRA, officers advised that the capital financing costs were
accounted for within the budget and that these would be met as part
of the whole package of income vs expenditure within the HRA, hence
the table on page 104 of the agenda pack showed a balanced
budget.
RESOLVED
That the proposed updated Treasury
Management Strategy Statement for
2021/22 was scrutinised and comments made
prior to its presentation to
Corporate Committee and Council for
approval.