Agenda item

Treasury Management Strategy


Wendy Eldridge (Lead Accountancy Manager) provided a summary of the report and highlighted:


a)    The key objectives of the Treasury Management Strategy were to ensure that the organisation had sufficient funds to meet its short term and long term obligations, minimizing financing costs and maximising return on investment;

b)    Treasury management encompassed a wide range of activities including cash management, funding and investment management, risk management and working capital management;

c)    As part of the budget setting assumptions for 2024/25, the forecast for the average rate of return on investments would be 5%;

d)    The forecast for capital expenditure for 2024/25 was £147 million, but the capital programme was under continual review;

e)    The Council budget assumption for 2024/25 borrowing was 5.5%;

f)     The Bank of England interest rate was 5.25%, and the forecast was that there would be a slow reduction in interests rates, with the rate to be around 3% by early 2026;

g)    Short-term borrowing was favourable while interest rates were high;

h)    Where possible, reviews were being undertaken on long-term fixed rate loans;

i)     The Council had protected itself with its PWLB borrowing across 50 years to secure rates between 1.37% and 2.54%, and a rate swap agreement had protected a further £75 million against the risk with interest rates.



In response to questions, it was further explained:


a)    The rate swap agreement was very likely to not be impacted by the outcome of the outstanding issue of the transaction that was holding up the sign off of the 2019/20 accounts;

b)    With regards to making provision to repay debt, throughout the year, if the Council held higher balances it would be used to repay short-term borrowing in advance of taking out further short term;

c)    The minimum revenue provision that was made each year, circa £20 million, was used to reduce the requirement for borrowing;

d)    Drop in borrowing was as a result of schemes where re=profiling had been done and, significant factor would have been Freeport;

e)    The significant increase in grants and contributions for 2025/26 was due to an assumption that the Manadon Road Network project would secure additional funding;

f)     The significant drop in borrowing was a result of significant re-profiling, and in some cases borrowing would be funded by developments

g)    With interest rates at their highest for a long time, the Council was cautious over new projects, but also took the forecasted drop in interest rates into consideration;

h)    The borrowing was increasing and driven by an ambitious capital programme, and would continue to do so, if no programs were added from 2026/27 then it would decrease, but was being driven by high borrowing to support investment to date;

i)     Borrowing would become ‘too much’ when the revenue budget being set could not support the pay back of the borrowing requirement for the capital programme and an upper boundary was set;

j)     The purpose of the report was to highlight the forecast, but all projects in the capital programme would be subject to the capital governance process;

k)    An overall debt ceiling would be driven by the number of the capital programme and the requirements to support development within the city, it would need to be a wider conversation if one was to be discussed.


The Committee agreed to:


1.    Recommend the Treasury Management Strategy 2024/25, that incorporated the authorised limits, operational boundaries and prudential indicators, to Council for approval.


Supporting documents: