Agenda item

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:

1. 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.
2. 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.
3. 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. 
4. 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.
5. 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.  
6. 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).
7. 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.
8. 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.
9. 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. 
10. 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.