Agenda item

To receive and make comments on the Treasury Management Strategy Statement for 2023/24.

The Committee received the draft Treasury Management Strategy Statement for 2023/24 for comments, before it was presented to Corporate Committee and then Full Council for final approval. The report was introduced by Tim Mpofu, Head of Pensions and Treasury, as set out in the agenda pack at pages 35-60. The following arose during the discussion of this item:

a.    The Committee noted that the Council was due to increase its borrowing year and year and queried the reasons why around half of this borrowing was in the General Fund, and was therefore not related to housebuilding. In response, officers advised that one of the primary drivers were various regeneration schemes that the authority was preparing for as part of its financial framework. It was emphasised that a number of these were self-financing, and that they would only proceed following a final decision by Members. Other areas relevant to increased borrowing the General Fund were noted as: Increased expenditure in the schools budget; maintaining key infrastructure in the borough such as roads, parks and bridges; the development of the civic centre; and digital transformation.

b.    In relation to a follow-up, officers confirmed that the key regeneration projects were Gourlay Place, Wards Corner and the Selby Centre and that these included an element of housing which was in the General Fund at present but would be transferred over to the HRA in future.  

c.    In light of the significant increases in borrowing, the Committee sought assurances about rising interest rates and the risk this posed to the Council. In response, officers advised that the capital programme was a framework to allow the Council to undertake these schemes at a future date and that a future decision would be made on a scheme by scheme basis, which involved individual business cases with up to date borrowing costs in each business case. It was also noted that the Council’s TM strategy was based on advice it had received from Arlingclose. Officers advised that of course interest rates going up was a significant challenge for the Council and was one of the main drivers behind the financial challenges that it faced. The Council needed to be able to profile the debt so that the point at which it reached maturity was spread out.

d.    The Committee questioned whether there was a legal limit on how  much an authority could borrow or whether it was all down to individual business cases. In response, officers advised that there was no formula for determining the maximum a Council could borrow, however the authority had to operate within the parameters of the prudential code. The Treasury Management Strategy set out the local financial consequences of existing and new borrowing, translating into changes in debt provision in future years. The impact of this on the revenue account was set out in terms of the costs to maintain that debt. This was the acid test of whether a particular level of borrowing was deemed to be affordable or not. The business case was a process of subsequent checks to make sure the financial assumptions underlying the scheme were still valid.

e.    The Committee questioned how much debt, for example, would the Council have to refinance within six months. In response, officers advised that they did not have the exact figure to hand but that it was less than 15% of the total debt that was up for repayment within any one year. Officers advised that this was not an area of particular concern and that this information could be shared with the Committee as part of the next Treasury Management update to OSC. (Action: Tim).

f.     The Committee questioned how much the Council held in reserves to offset its debt liabilities. In response, officers set out that this question related to internal borrowing and how this featured in the programme. This was made up of cash on hand and grants held ahead of spend. The other key aspect in this was the delivery of the capital programme and any slippages therein. The working assumption was that 80% of the programme would be delivered as scheduled. The Director Finance advised that the cash available to offset borrowing costs came from a variety of different places, not all of which were useable reserves. As of the 31^st March 2022, the authorities useable reserves for the General Fund for £120M, including the general fund balance and earmarked reserves.

g.    The Committee sought further assurances about whether this was the right time to be increasing borrowing levels, given the external financial risks. In response, the Director Finance commented that this challenge needed to brought to bear at future decision making points. The Committee was advised that much of the spend was time dependent, such as there were roads that needed to be replaced. The authority was also a substantial recipient of grants for housing from the GLA which had a fixed window for implementation.

h.    The Committee sought clarification about the original £2.5m that was earmarked for housing on the Wards Corner site and whether that would be returned to the Bridge Renewal Trust, following the termination of the development agreement with Grainger. The Chair requested a written response from officers on this point (Action: Jon Warlow /David Joyce).

RESOLVED

That the Committee scrutinised and provided comments on the proposed Treasury Management Strategy Statement for 2023/24.