Agenda item

This report updates members on Treasury Management activity and confirms that the Council has complied with its Prudential Indicators for 2022/23.

Amanda Healy, Head of Finance, introduced a report that updated members on Treasury Management activity and provided confirmation that the Council had complied with its Prudential Indicators for 2022/23.

Key issues highlighted were as follows:

·                The Council’s Treasury Management activity was compliant with the CIPFA Code which required authorities to produce annual Prudential Indicators and a Treasury Management Strategy Statement.

·                The economic background in relation to the current outturn position continued to be impacted by global inflation as a result of the war in Ukraine, along with the UK’s current economic outlook and increase in interest rates.

·                In terms of borrowing, at 31^st March 2023, the Council held £781.0m of loans to finance the Council’s capital programme strategy to support new homes and regeneration. Borrowing options continued to be carefully assessed to ensure the Council could achieve the lowest cost funding options to support the commitment to the capital programme.

·                There were concerns that the future of borrowing for the capital programme could become more challenging as borrowing rates had already significantly increased since last year. In respect of the economic environment and rising construction costs, capital programme projects continued to be assessed. If any issues concerning viability were identified, they would be brought to Cabinet.

·                In relation to investment activity, the Council’s investment balances ranged between £72m and £159m due to timing difference between income and expenditure as detailed in Table 4 of the report.

·                In noting the prudential requirements within the CIPFA Code, the Council’s objective in terms of investment had remained to strike an appropriate balance between risk and return in order to minimise the risk of incurring losses from defaults and the risk of receiving unsuitably low investment income.

·                The Council’s non-Treasury Investments were to the Council’s subsidiary companies i4B Holdings Limited, whose primary purpose was to deliver the housing options as defined in the Temporary Accommodation reform plan and First Wave Housing that was set up to manage properties previously owned by Brent Housing Partnership. The collective investments had generated £5.9m of income that covered the borrowing costs of investing in housing through wholly owned subsidiaries.

·                The Committee’s attention was drawn to Appendix 2 of the report that set out the Council’s full prudential indicators for 2022/23.

The Chair then invited the Committee to raise questions on the report, with the responses summarised as follows:

·                The Committee queried if the Council undertaken any borrowing for capital projects that had subsequently not proceeded.  Officers confirmed that the Council did not borrow for specific projects as borrowing was obtained for the overall borrowing needs of the Council, as such there was no funding that had not been utilised effectively.

·                Officer confirmed that the borrowing reported was for the contracts in 2022/23, there had been no new borrowing for 2023/24 as yet.

·                In response to further details sought on the Council’s borrowing, the Committee’s attention was drawn to the Liability Benchmark chart in Appendix 2 that demonstrated the Council’s borrowing need against the Council’s existing cash resources. This highlighted that the Council’s cash resources were utilised first before additional external borrowing was sought.

·                In relation to future capital programme schemes the Committee was advised that due to the volatility in interest rates and inflation, when viability assessments were completed for new schemes, there was a margin for volatility added to the assessment to ensure that any schemes put forward were viable and could withstand the current and potential future market hostility.

·                The Committee noted the concerns highlighted in relation to Central Governments approach towards reform of the funding settlement for local government and need for additional support to assist in meeting requirements such as the delivery of affordable housing to residents.

·                In response to a query regarding the Council’s options to refinance borrowing where it emerged that more favourable rates could be achieved, officers confirmed that all borrowing was closely monitored and reviewed with support of the Council’s Treasury advisor Arlingclose who frequently assessed the economic forecasts to secure the most favourable rates.

·                Following a Committee request in relation to the Council’s estimated interest costs for 2023/24, officers advised that this information would be circulated to the Committee as an action going forward.

The Chair thanked officers for the detailed report and as there were no further issues raised the Committee RESOLVED to:

(1)     Note the 2022/23 Treasury Management Outturn Report and the Minimum Revenue Provision (MRP) Strategies set out in Appendix 4-6 in compliance with CIPFAs Code of Practice on Treasury Management, which was also due to be referred onto Cabinet and Council for consideration.

(2)     Note that for 2022/23 the Council had complied with its Prudential Indicators which were approved by Full Council on 24 February 2022 as part of the Council’s Treasury Management Strategy Statement and Capital Strategy Statement.