Agenda item

This report updates Members on Treasury activity for the first half of the financial year 2022-23.

Amanda Healy, Head of Finance, introduced a report updating Members on treasury activity for the first half of the financial year 2022-23 with a view to the Committee noting the report and the Council’s compliance with the Council’s Treasury Management indicators.

In considering the report the Committee noted:

·                 The economic context under which the Council’s Treasury Management Strategy had been operating including the ongoing impact of the war in Ukraine current rate of inflation and higher interest rates along with the ongoing uncertainty and volatility in relation to financial markets.

·                 The work being undertaken, recognising the increase in borrowing costs, to take advantage of optimal points in the market to access new borrowing opportunities.

·                 The update provided in relation to the Council’s debt management position, as detailed within section 3.18 – 3.32 of the report, Members were advised that new external borrowing had been minimised to meet cash flow requirements, which included borrowing to support the viability and affordability of the Capital Programme during current market volatility.  The estimated borrowing requirement for the remainder of the financial year 2022/23 was noted as being in excess of £50m, which took account of the Council’s ongoing capital financing requirement, usable reserves, planned capital expenditure and minimum revenue provision.

·                 The Council’s main objective when borrowing remained to ensure an appropriate balance between securing low interest costs and achieving cost certainty.  In terms of long-term borrowing options the Public Works Loan Board (PWLB) remained the main source, however, other low cost forward funding options also continued to be explored as opportunities arose

·                 The update provided in relation to the Council’s Treasury Investment Activity, as detailed in sections 3.33 – 3.41 of the report with most of the Council’s funds continuing to be held in Money Market Funds.  The increased return on these funds had resulted in the funds paying favourable rates between 1.8% -2.09%.

·                 The benchmarking of Brent’s portfolio against other Local Authorities that fell within the remit of Arlingclose (Brent’s treasury advisor) provided a good comparison against Brent’s representative peers. The benchmarking evidenced that Brent had a comparatively low risk profile coupled with shorter dated investments that subsequently equated to a lower yield.

The Committee was then invited to raise questions on the report, which are summarised below:

·                 In terms of the benchmarking with other councils the Committee enquired how Brent’s investment portfolio compared specifically against other London boroughs which officers advised could be identified and shared at a future meeting.

·                 The Committee queried whether or not the £60million of borrowing for projects indicated in the report were for projects that would definitely be going ahead or were a means to ensure there would be money available for future use. In response the Committee were advised that much of the borrowing formed part of Council’s ongoing cash requirement to support the capital programme and was not necessarily linked to a specific project. It was noted that the borrowing undertaken was dictated by liability benchmarking and once a project was approved to go ahead, internal borrowing would be utilised initially.

·                 With reference to the viability assessments for schemes on the capital programme being based on a borrowing rate of approx. 4%, the Committee queried if the Council were confident they could achieve this figure on all borrowing or if there would need to be more flexibility, given the levels of borrowing required. In response officers confirmed that the interest rate forecasts suggested that opportunities to secure loans at a rate of around 4% remained achievable, however in light of increased market volatility should this position change then the approach towards viability assessments would need to be reviewed.

·                  In terms of the managing LOBO loans, the Committee were advised that they were regularly reviewed and decisions about when to exit agreements were made if/when the rate was beneficial to the Council.

·                 In view of the update included within the report regarding access to UK Infrastructure Bank (UKIB) Loans in support of schemes related to net zero and the advantageous rates available, further details were requested for a future meeting on the specific arrangements and criteria in being able to access these lending opportunities given the way they also matched the Council’s climate ambitions and pledge to build more new homes.

·                 It was confirmed that the balance sheet resources listed under the Prudential Capital Financing Requirement and Liability Benchmark had remained static as balance sheet resources looked at collective reserves the Council had in line with the challenging economic climate. It was difficult to predict the reserve levels going forward as they contained a mix of grants and reserves for specific purposes along with a number of other factors that fed into the balance. Therefore in terms of modelling it was found to be most helpful to maintain the figures and amend when further information was confirmed.

As no further questions were raised the Chair thanked officers for the report and the Committee RESOLVED to note the 2022-23 Mid-Year Treasury report for reference on to Cabinet and Council including that the Council had been fully compliant with the Council’s Treasury Management indicators.