Agenda item

Report of the Chief Finance Officer (enclosed)

The Chief Finance Officer submitted a report the Governance Committee that indicated the Treasury Management performance and compliance with Prudential Treasury Indicators for the financial year ended 31 March 2017. The return on investments for the year was 0.29%, which exceeded the benchmark of 0.24%. The report also detailed the Council’s borrowing and investments as at 31 March 2017.

Revised Prudential and Treasury Indicators for 2016/17 were included in the report “Treasury Strategies and Prudential Indicators 2017/18 to 2019/20”, presented to Special Council on 28 February 2017. Where relevant, comparisons with 2016/17 indicators in the report were to those approved most recently. In order to ensure that local authorities borrow only for capital purposes, the Prudential Code requires that borrowing net of investments should not exceed the Capital Finance Requirement (CFR) for the preceding year plus any anticipated increase in the current and next two years.

The Council’s 2016/17 Capital Programme had been reported to Executive Cabinet and Council at intervals throughout the year and an analysis of capital expenditure for 2016/17 was due to be presented to the Executive Cabinet meeting of 22 June 2017. Members were informed that the capital expenditure for 2016/17 (including Revenue Expenditure Funded from Capital under Statute, and land acquired by exchange) was £11.037m, compared to the estimate of £14.563m when the prudential indicator for the year was revised. The revised Capital Financing Requirement (CFR) estimated for 2016/17 was £39.544m; therefore the actual CFR of £39.287m was £0.257m less than estimated.

Total borrowing at 31 March 2017 was £18.537m (excluding accrued interest), £11.537m of which was from the Public Works Loan Board (PWLB), and £7.000m was temporary borrowing from other local authorities. Cash balances (net of bank overdraft) invested at year-end were £0.955m (excluding accrued interest receivable), which meant that borrowing net of investments was £17.582m. This was lower than the estimated net figure of £24.115m because additional PWLB loans to finance new capital investment or to replace internal borrowing were not taken. The new borrowing figure was £21.705m less than the revised CFR figure; this figure represented the use of the Council’s own cash to finance capital expenditure rather than taking additional external loans.

In practice, the likelihood of an immediate increase in rates diminished during 2016/17, and use of internal cash balances rather than new external loans continued. On 31 March 2017 the 25-year PWLB rate was 2.67% and there was no immediate prospect of a sharp increase. Members were advised that due to the Council’s capital investment plans, additional long-term borrowing would be required during 2017/18 as reflected in the current Treasury Strategy.

Following discussion, Members were reassured that the required additional long term borrowing was likely to meet the CFR limit but due to the balance of accounts would never exceed this limit. It was reported that significant savings had been made through internal cash balances, which had ultimately reduced external borrowing. The Committee were reassured that these rates would continue to be monitored.

RESOLVED – That the report be noted.