(a)

the report provided an update on treasury management activities for 2022/23 and was presented to comply with the CIPFA code of practice and to discharge the Council’s statutory duty;

(b)

key messages from the report included:

o    

the treasury management position - the Council’s borrowing at the end of March 2023 was £565m;

o    

the balance sheet summary as part of table one sets out where the Council’s capital financing requirement offsetting where it’s got its useable reserves;

o    

the Council’s net borrowing of £565m was an increase of 11 million from the previous year;

o    

action taken to mitigate against interest rate risk where additional borrowing was taken out through the Public Works Loan Board – the counter side of that was reducing short term borrowing. This primarily was to address the interest rate risk;

o    

at the start of 2022 the Council could secure short term borrowing (PWLB borrowing) at a lower rate than at the end of the year after numerous Bank of England increases;

o    

the average rate presented for short term borrowing reflected the net impact of the transactions that had been put through with the interest rates swap arrangement; if the Council hadn’t had the interest rate arrangement then the Council’s short term borrowing would have been in excess of 2%;

o    

table 3 set out the various investment activities, there was no significant movement between the long term investments. Short term investments with money held in banks and call accounts had reduced partly reflecting the use of treasury management to fund the treasury cash flow;

o    

the external context affecting the 2022/23 treasury management activities included global inflation and base rates and the impact of that. The base rates at the start of the year was 0.75% whereas at the end of the financial year it increased to 4.25%;

o    

the final part of the report focused upon the prudential indicators; these were set in 2022 and incorporated in the treasury management strategy which was included in the February 2022 suite of documents for budget setting. The indicators were a control and good practice on how the council planned to undertake its borrowing and investment.

o    

the first indicator highlighted that the Council hadn’t complied with the planned spread of borrowing between fixed rate and variable rate borrowing arrangements. The Council took mitigating action in 2022/23 to secure in more borrowing long term through the Public Works Loan Board than was initially planned.

(c)

the way the Council operated its treasury management function was to link borrowing to cash flow; where the Council received grants in advance the Council was able to delay the need to borrow money. The rate swap arrangement was protecting £75m of the Council’s short term borrowing to a favourable rate. The ongoing review of the capital programme particularly where a programme was funded by corporate or service borrowing where programmes could be slipped or re-profiled;

(d)

With regards to minimum revenue provision, the Council worked with its treasury management advisors who had created a template/ working paper that the Council could complete – this was available for audit and sets out all borrowing where the Council made a minimum revenue provision against when the asset became operational. Issues some other Council’s had experienced is where there had been minimum revenue provision adjustments on the rationale that the actual investment asset would increase; it was considered a risky strategy;

(e)

At the moment the rates for LOBO loans was considered favourable; the Council had had any call-ins. Arling Close had provided a tool whereby the Council could assess the probability of organisations calling in LOBO loans; currently the Council’s loans were indicating that there was low probability of them being called in. One was due to finish in seven years which was indicating a higher probability of being called-in. the Council had the option to review and cash in a loan but the Council hadn’t exercised that right as of yet.

(f)

The potential risk to the Council affecting its ability to borrow money would be contained partly the fact that the Council could approach borrowing through the Public Works Loan Board to maintain a cash flow for the capital programme. The Council had taken action to borrow in the current financial year to protect the capital programme allowing for slippage.

(g)

In terms of the disparity between the estimates, the numbers were calculated in advance of the 21/22 outturn and based on the Council’s capital programme and expected borrowing from that programme. In 2021/22 and 22/23 there was significant slippage due to the impact of the capital programme.

1.

to note the Treasury Management Annual Report 2022/23;

2.

to recommend the Treasury Management Annual Report 2022/23 to Full Council for approval (This is to comply with the CIPFA Code of Practice and discharge our statutory requirement.