Agenda item

This report updates Members on Treasury activity for the first half of the financial year 2023-24.

Amanda Healy, Head of Finance introduced the Treasury Management Mid Term Report that updated Members on treasury activity for the first half of the financial year 2023-24, 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 challenging national economic context under which the Council’s Treasury Management Strategy had been operating, including the high inflation rates, weak economic growth in the UK and the Bank of England’s base rate of 5.25% impacting the national financial climate.

·             The update provided in relation to the Council’s external borrowing as detailed within section 3.16-3.36 of the Committee report.

·             Members were advised that the Council’s short term borrowing costs had continued to increase in line with the 5.25% base rate.

·             In the first half of the year, new external long term borrowing had not taken place due to sufficient cash levels and high market rates making forward borrowing unattractive. The Council would continue to monitor borrowing rates with a view to accessing new borrowing at the right time when an appropriate balance could be struck between securing low interest costs and achieving cost certainty.

·             The Council had an increasing Capital Financing Requirement due to elements of the capital programme being funded by borrowing, forecasts had indicated that a further borrowing in excess of £176m would be required in 2023-24.

·             In terms of long term borrowing the Public Works Loan Board (PWLB) remained the most cost effective form of financing and was the most utilised form of long term financing in Brent, despite substantially increased costs in 2023-24.

·             The update provided in relation to the Council’s Treasury Investment Activity, as detailed in sections 3.37-3.46 of the Committee report.

·             Members were advised that the Council’s investment balances ranged between £56.1m and £122m due to timing between income and expenditure. It was noted that most of the Council’s funds continued to be held in Money Market Funds, the return on Money market Funds had increased reflecting the higher interest rate environment, as of 30 September 2023 the funds were paying rates between 5.20% - 5.35%.

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

·             The Committee required further clarity in relation to GLA funding opportunities to borrow at lower rates through the Mayor’s Energy Efficiency Fund (MEEF) and the Mayor’s Green Finance Fund to support the South Kilburn heat network, as opposed to accessing funding from the PWLB or UKIB. In response the Committee was advised that discussions were taking place to consider the best options, however it was felt at this stage that the GLA funding options would provide lower rates and would be a favourable way forward to support the South Kilburn heat network, it was likely that the Council would make an application for this funding in the next round of application scheduled in late 2023.

·             Following a Committee query in relation to how the wider economic uncertainty affected the Council’s long term planning and decision making, the Committee was advised that the Capital Programme was under constant review as changes in the wider economic climate could directly impact the viability of a project.

·             The Committee noted that even if interest rates improved, it was unlikely that they would return to the favourable rates seen pre Covid.

·             The Committee queried why further funding was required for the Capital Programme when Capital Programme work had been paused, in response the Committee was advised that projects were at different phases with some having begun and others due to start when viable, it was also important to secure funding for future projects. The expenditure within the Capital Programme was regularly updated to Cabinet with a quarterly report that provided forecast spending requirements.

·             Following a Committee query in relation to cashflow forecasting, the Committee was advised that this was undertaken through liability benchmarking that captured overall cash demand and key drivers of the Capital Programme.

·             In response to a Committee query in relation to the slippage of capital programme works, the Committee was advised that slippage was not unusual in the delivery of projects, however due to the challenging economic environment it was anticipated that there would be increased slippage this year.

As there were no further questions the Chair thanked Amanda Healy for presenting the report and responding to the Committee queries.

The Committee RESOLVED to note the 2023-24 Mid-Year Treasury report for reference on to Cabinet and Council, along with noting the fact that the Council has been fully compliant with the Treasury Management indicators.