Agenda item

To receive and consider the report of the Chief Finance Officer. 

Michael Jackson, Principal Financial Accountant, presented the report which advises on compliance with Prudential and Treasury Indicators in 2018/19.  The return on investments for the year was 0.61%, which exceeded the benchmark of 0.57%.

Details of borrowing and investments as at 31 March and at 30 June 2019 were noted, and Link Asset Services set out interest rate forecasts for 2019/20 and subsequent financial years.

The Council’s underlying need to borrow for capital expenditure is termed the Capital Financing Requirement (CFR).  The CFR is not matched in full by external borrowing, so the Council is said to have under borrowed by using its own cash balances to finance capital expenditure.  There is some loss of interest as a result, but had external loans been taken the interest payable would have been at a higher rate.  Use of the Council’s own cash helps to achieve savings in net interest.

It was highlighted that on 23 July 2019 Council approved a temporary increase in investment limits to allow higher balances to be held in liquid accounts, in order to manage cash flow until the purchase of a site is completed.

Prudential and Treasury Indicators were revised to take account of rephasing of expenditure from 2018/19 and other changes in 2019/20, plus the addition of the site purchase to the 2019/20 capital programme.  The purchase is to be funded by external borrowing, and the Operational Boundary and Authorised Limit in particular needed to be increased before taking the borrowing.  The margin between the Authorised Limit and Operational Boundary has been increased to allow temporary borrowing, probably from another local authority, to cover the payment of Value Added Tax.  When the VAT is reclaimed from HMRC the temporary borrowing will be repaid.

Decision: That the report be noted.