Agenda item

To receive and make comments on the Treasury Management Strategy Statement 2026/27.

Report to follow.

The Panel received a copy of the draft Treasury Management Strategy Statement (TMSS) 2026/27. The Council has adopted the Chartered Institute of Public Finance and Accountancy’s Treasury Management in the Public Services: Code of Practice (CIPFA Code) which requires the Council to approve a Treasury Management Strategy before the start of each financial year. The draft TMSS was presented to OSC for scrutiny. Any comments made OSC would be taken into account by Audit Committee and, where appropriate, reflected in the final TMSS presented to Council on 2 March 2026.  The TMSS and covering report were introduced by Sam Masters, Head of Treasury & Banking, as set out in the addendum report pack at pages 17-58. The Corporate Director of Finance and Resources, the Director of Finance and the Cabinet Member for Finance and Corporate Resources were all present for this agenda item. The following arose as part of the discussion on this item:

1. The Chair queried the extent to which the level of proposed borrowing was sustainable. It was acknowledged that Housing Revenue Account (HRA) borrowing and borrowing in the General Fund (GF) were separate, and that a significant portion of the borrowing in the GF related to Exceptional Financial Support (EFS). The Chair sought assurances around the extent to which Table 1 and Table 8 in the report gave conflicting information, with Table 8 appearing to indicate that the ratio of increased borrowing costs were broadly flat in relation to net revenue. In response, officers advised that in real terms, as revenue increased, that by 2031 20% of the £400m revenue budget would equate to £80m. It was acknowledged that this was a huge amount of money that would be spent on servicing debt, rather than on providing services. Officers acknowledged that the information presented in the table could be misleading
2. The Corporate Director of Finance commented that this was the first year that the report had separated out the financing costs within the HRA, GF and EFS. It was acknowledged that as a totality the level of debt was unsustainable and was higher than most neighbouring boroughs. The Corporate Director commented that it was important to understand that the three areas of debt were all slightly different. It was commented that the level of debt was increasing faster on the HRA than the GF, particularly as a lot of work had been done in looking at the viability of capital projects in the General Fund. Whilst the HRA had higher levels of spend, this also generated additional revenue through additional rental income. It was commented that reliance on EFS was the only option at present, but that the Council had to do everything it could to reduce reliance on EFS over the next two to three years. It was set out that ultimately £500m of EFS over five years was not sustainable, but that it was important to understand that this was a working assumption at this point.
3. The Chair commented that Table 9 showed that the ratio of financing costs to rental income doubled over the five year period of the MTFS. It was queried whether this suggested that the current housebuilding programme was unsustainable or that there was a point at which the additional revenue generated offset the debt costs. In response, the Corporate Director advised that it was important to look at the ten-year position of the HRA, which showed that from years 6-10 the additional income from new builds and the investment in existing stock would reduce the borrowing costs. It was commented that sustainability in the HRA was measured through its ability to generate a surplus, the target for which was £8m. The Chair of the Housing Panel commented that the ratio changed as the current housebuilding programme was completed, but that this assessment did make a number of assumptions, such as the programme finishing in 2030. In addition, it was important to note that debt management in the HRA was different to the GF, as it was based on servicing the debt, rather than paying back the capital.
4. The Panel sought clarification about whether the Corporate Director, felt that the level of debt was too high in the HRA, despite the fact that  a number of the ratios and indicators seemingly presenting a positive picture. In response, the Committee was advised that the level of debt was high, and that reflected a choice made by the Council to invest in building new homes and to refurbish its existing stock. It was commented that legally there was no requirement to pay down the principal in the HRA, just the debt. The Corporate Director suggested that this was something that the authority might want to look at in the next two to three years, perhaps when interest rates were lower.
5. In response to a follow up question, the Corporate Director of Finance commented that the way the authority treated the HRA in relation to only servicing the debt, was not unusual, in fact most authorities did the same. The Corporate Director set out that the authority needed to look at all of the different indicators on affordability each year in order to assure ourselves that it was affordable.
6. The Panel commented that many of the indicators were effectively self-imposed. The Panel recommended that future reports provided greater clarity on how the HRA and GF were different, the differing accountancy rules, and further clarity on what the markers were for each fund. (Action: Philip).
7. The Panel noted that Table 3 of the report seemingly showed that the Council was seeking to increase borrowing by £489m by 2026/27, and that there were also huge increases in debt servicing costs across the MTFS period. The Panel sought clarification about how so much money was being spent in a relatively short space of time. In response, the Cabinet Member set out that nobody at either an officer level or at the Cabinet level thought that the reliance on EFS was sustainable. The Cabinet Member set out that the Section 151 Officer had to give her best projection based on the actual figures, she was unable to include things that hadn’t happened yet. It was suggested that the only way to get to a sustainable position was to keep looking at the capital programme and its affordability. In conjunction with this, the Council needed to look at how it delivered services and look to implement transformation programmes. Help from the government was also necessary as Haringey was not alone in the difficulties it faced. The government had already agreed to cover SEND spend, as an example. The Corporate Director reiterated the importance of looking at the different challenges faced by each of the three sources of debt i.e. GF, HRA and EFS separately.   
8. The Panel queried whether the relevant governance arrangements had been put in place to support a C. £500m increase in borrowing by the end of 2026/27. In response, officers advised that a lot of this would be accrued costs that hadn’t been paid yet. The Corporate Director commented that in terms of EFS, there wasn’t really anything to scrutinise, but the key question was whether the Council could deliver a capital programme of this size, and taking account of historical non-delivery of parts of the capital programme. The Committee was advised that the governance arrangements were in place. All new schemes were subject to a new robust capital governance process including the need for a business case and a series of gateway controls. A similar process for existing schemes was also being implemented, but this was more difficult to do. The Corporate Director advised that it was important that the Council got the spend profile correct in relation to how quickly the money could be spent. The Committee would be able to monitor the delivery of the capital programme through quarterly budget monitoring reports.
9. The Panel questioned whether, in light of the fact that two-thirds of the capital programme currently sat in the HRA, the Council was looking at reducing the size and scope of the housebuilding programme. In response the Cabinet Member advised that no, this was not the case. It was commented that the HRA capital programme was slightly different as the Council was investing in assets, which generated additional revenue. Individual schemes had to demonstrate that they could wash their own face in order to proceed. It was suggested that interest rates played a big role in this. Rather than pull back on the Council’s commitment to build 300k new homes, it was necessary to look at individual schemes to make sure they were affordable. It was reiterated that the Housebuilding Programme would save the Council money in a number of ways in the long term.
10. A Panel Member contended that even if the HRA capital programme was scaled right back, this wouldn’t affect the accrual of £500m plus of EFS, and that it was arguable that it would make the amount of EFS required more, rather than less, as you would not be tackling some of the underlying cost pressures. Clarification was sought on how borrowing under the HRA, GF and EFS were linked. In response, officers clarified that EFS only applied to the GF, and that at present there was very little risk of the HRA requiring EFS. New builds, acquisitions and providing people with permanent homes all came under the HRA, however Temporary Accommodation was a cost pressure in the GF, therefore the more that could be done to reduce cost pressures in this area the more the need for EFS would be reduced.
11. The Committee noted that when reading the report, it was difficult to understand where the key areas of risk were, and which part of the report provided assurances that the risk level was manageable. In response, officers clarified that this was not the purpose of the report. Instead, the report was about how the Council could manage the process of borrowing enough money to met its capital programme. It was set out that looking at the TMSS in isolation was not enough, instead Members should view the budget report, TMSS, HRA Business Plan and the Capital strategy as a suite of reports that provided the context as a whole.
12. In relation to investments, the Committee requested an update on progress made in implementing the divestment policy. In response, officers advised that the investment portal used by the Council allowed officers to scrutinise funds that were invested in down to a counter-party level. Officers advised that they had done the due diligence and they were satisfied that none of the direct counterparties were involved in investing in arms manufacture or businesses in the Occupied Territories. It was commented that it was more difficult to scrutinise this when it came to financial institutions and the things they had invested due to their general opacity in these matters. Officers set out that they were satisfied with that none of the Council’s directly invested funds were invested in such a way that would be counter to the divestments policy.

RESOLVED

That Overview and Scrutiny Committee scrutinised and provided comments on the proposed updated Treasury Management Strategy Statement for 2026/27 prior to its presentation to Audit Committee on 29^th January, Cabinet on 10 February 2026 and then full Council on 2^nd March 2026 for approval.