Agenda item

Report by Director of Finance

The Chartered Institute of Public Finance and Accountancy’s (CIPFA’s) ‘Code of Practice on Treasury Management 2021’ requires that the Council and Audit & Governance Committee receives a report on Treasury Management activities at least four times per year.  This report is the final report for the financial year 2022/23 and sets out the position at 31 March 2023.

Audit & Governance Committee is RECOMMENDED to note the report, and to RECOMMEND Council to note the council’s treasury management activity and outcomes in 2022/23.

The Committee received a report from the Treasury Manager, Tim Chapple. It was reported that the Council’s outstanding debt totalled £306m and the average rate of interest paid on long term debt during the year was 4.43%. The Treasury Manager reported that £7m of maturing Public Works Loan Board had been repaid during the year and there had been no new external borrowing in 2022/23. The original budget included new external borrowing by £46m and after reviewing the medium-term balances at the end of borrowing rates, the decision was made to the delay by a couple of years to give payable budget of £600,000.

In terms of investment, and given the volatility of the market, security liquidity was prioritised the other considerations. Cash balances were also slightly higher than forecast. When this was coupled with an in-house return of 1.38% for the year, on cash balances of £447.943m, producing a gross interest receivable of £6.845m for the year. Approximately £4m of that overachievement was allocated to capital balances.

In relation to external funds, the position was maintained. Income from the funds for the year was £4.4m, which was above the budgeted figure of £3.8m. The value of the funds dropped by £10.2m as a result of the global volatility in the financial markets.

The following points were raised by the Committee:

·       the long-term deposits were coming to maturity date, not very different from the short-term deposits and this was because currently a limit on long-term lending which had been reached. The limit had been set by Full Council at the beginning of the financial year. The medium-term balances were constantly reviewed. It was noted that all the lending was to other local authorities as OCC was the biggest lenders to local authorities and the reason for this was the security was at its highest.

·       Currently, £55m was in money market funds which were across lots of different asset classes and sometimes money was deposited with banks on very short-term basis. The external funds took more risk which was why they were a long-term view. The current financial year would be on par.

·       the £4m being spent on indexing Section 106 monies were those collected by the Council and held to be spent on infrastructure. The monies that the Council got from developers that was then applied to the capital schemes. There was a local policy that applied inflation to monies received for Section 106. The money then went into the capital program. The money was indexed on it as it could be held for some time before being used. It had been many years since inflation had been applied to Section 106 monies. It meant that more money was applied to the capital program and less to the revenue account.

·       It was clarified that the name of Somerset West and Taunton Council had changed, and it was confirmed that the new Council would take on the responsibility for repaying the loan that was made to the former.

·       The Director of Finance explained that every authority had to take decision on what were considered reasonable, prudent, and affordable. When the Section 25 Statement had been completed on the proposed budget for 2023/24, that had been approved, reference had been made to the external borrowing at 5.4% of the net revenue budget, which was quite low in comparison to other local authorities. It depended on the needs that the local authority had. The Council was in a good position that it didn’t need to borrow to undertake basic need which other local authorities had to, to meet their statutory need.

·       All the Councils portfolios had no reference to what interest was being received on the individual loans and there was no interest rate on the fixed interest rate exposure. The interest rate values were commercially sensitive for the individual loans, this could be shared with the Committee.

·       If local authorities went bankrupt, for any precepting authority, the precepts could be increased but that wouldn’t happen as any new authority that was established, would take over all the assets and liabilities of the previous authority.

ACTION: The Treasury Manager to circulate the interest rate values for the individual loans.

Resolved: that the Committee noted the report and recommended Council to note the council’s treasury management activity and outcomes in 2022/23.