Agenda item

Purpose of Report

To consider the annual Treasury Management stewardship report, a requirement of the Council’s reporting procedures under regulations issued under the Local Government Act 2003. The report covered the treasury management activities and the actual prudential and treasury indicators for 2022/23.

The report met the requirements of both the CIPFA Code of Practice on Treasury Management and the CIPFA Prudential Code for Capital Finance in Local Authorities.

Decision

(1)  That the actual prudential indicators, as contained within Appendices A and B to the report, be approved.

(2)  That the annual Treasury Management report for 2022/23 be approved.

Alternative Options Considered and Rejected

None.

Reasons for the Decision

The Chief Finance Officer had confirmed that borrowing had only been undertaken for a capital purpose and that the statutory borrowing limit, (the Authorised Limit) had not been breached. 

Recent changes in the regulatory environment placed a much greater onus on members for the review and scrutiny of treasury management policy and activities. This report was important in that respect, as it provided details of the outturn position for treasury activities and highlighted compliance with the Council’s policies previously approved by members.

The decrease in General Fund Financing costs as a % of net revenue stream in 2022/23, when compared with 2021/22, was due to a change in MRP policy, resulting in a reduction in MRP charges and a reduction in borrowing due to higher interest rates. There had been a minimal increase in HRA ratio of financing costs against rental income resulting from higher levels of depreciation and a decrease in rental income.

The financial year 2022/23 continued the challenging environment of previous years; the effect of the Covid 19 pandemic, the increase in inflation, the cost of living crisis, the challenge of pro-active investment of surplus cash for the first time in over a decade, and continuing counterparty risk were the main features.

Key Issues to Note from Activity during 2022/23:

·      The Council’s total debt (including leases and lease-type arrangements) at 31^st March 2023 was £121.962m (Appendix A section 4.4) compared with the Capital Financing Requirement of £146.103m (Appendix A section 3.5). This represented an under-borrowing position of £24.141m, which was currently being supported by internal resources. Additional long-term borrowing would be taken in future years to bring levels up to the Capital Financing Requirement, subject to liquidity requirements, if preferential interest rates were available.

·      The Council’s Investments at the 31^st March 2023 were £49.85m (Appendix A section 4.3), which was £13.165m lower than at 31^st March 2022. Average investment balances for 2022/23 were £55.6m, which was higher than estimated balances of £30m in the Medium Term Financial Strategy 2022-27 due to high balances being made available through government grants. It should be noted that this referred to the principal amounts of investments held, whereas the investment values included in the balance sheet were based on fair value. In most cases, this would simply be equal to the principal invested, unless the investment had been impaired. 

·      Actual investment interest earned on balances was £1.167m compared to £126k estimated in the Medium Term Financial Strategy 2022-27 (Appendix A section 10.2). 

·      The interest rate achieved on investments was 2.10% (for 2021/22 the average was 0.19%).