Agenda item

Treasury Management and Investment and Acquisition Strategy 2023/24 Mid-Year Review


The Cabinet Member for Finance, Growth and Core Services introduced a report on the mid-year review of the Council’s treasury management activities and Investment and Acquisition Strategy (IAS) for 2023/24.


The Cabinet Member highlighted the main factors that had impacted on the Council’s treasury management and IAS position, such as the current economic situation, interest rate rises and the Council’s borrowing position, and advised that the current projection showed a deficit of circa £6m on the overall forecast for 2023/24. Other factors affecting the overall position included lost income from delayed property lettings and performance issues amongst some of the Council’s commercial entities, although the Cabinet Member was confident that the remedial measures being implemented would resolve those issues.


The Cabinet Member commented that successful treasury management and investment and acquisition activities underpinned much of the Borough-wide regeneration aspirations as well as everyday service provision. He stressed, however, that the Council’s diligent and prudent approach to investments had never been more important due to the current economic situation and it may be that projects previously assessed as viable may need to be put on hold or even abandoned, to avoid placing even more pressures on the Council’s finances.


The Assembly resolved to note:


The Assembly is recommended to note:


(i)  The Treasury Management Strategy Statement Mid-Year Review 2023/24;


(ii)  The economic update covering the increase in inflation and the Bank of England Base Rate increases;


(iii)  The pressures currently impacting Treasury and Investment and Acquisition Strategy (IAS) returns, including:


·  Significantly increased interest rates impacting on the Council’s borrowing requirements to support cashflow and capital programme;

·  Delays to renting of Private Rental units and Disposal of Shared Ownership units developed by the Council for Reside Group of companies impacting on revenue income via lease payments;

·  Loss of income from commercial holdings due to delays in renting the assets and further increased borrowing costs due to debt used to deliver the commercial assets being held for longer than projected.

·  Loss of interest income from wholly owned companies including Be First and BDTP as they are unable to meet interest payments; and

·  Reporting and administrative delays from Reside to accurately forecast rental income back to the Council.


(iv) That the value of the treasury investments and cash balances at 30 September 2023 totalled £38.2m at a rate of 4.2%;


(v)  That the value of the residential loans lent by the Council to Reside at 30 September 2023 totalled £190.3m at an average rate of 2.6%;


(vi) That the total value of borrowing incurred for Private Rented Schemes, planned to be transferred to Reside, at 30 September 2023 was £105.7m;


(vii) That the total of other loans which included loans to LEUK, Energy Loans and Working Capital Loans total £50.4m;


(viii)  That IAS borrowing at 30 September 2023 totalled £844.3m, with an additional £295.9m of Housing Revenue Account (HRA) borrowing and a further £135.4m of General Fund (GF) borrowing taking total borrowing position for the Council of £1.275.6bn;


(ix) That HRA interest payable was forecast to be £11.033m against a budget of £10.742m, which represented an overspend of £0.291m;


(x)  That IAS and GF borrowing was forecasting a gross interest payable amount of £21.33m, to be covered by capitalised interest of £10.231m and allocation of commercial rent to pay for interest costs of £6.141m, leaving a net interest payable charge of £5m against a budget of £10.139m which represented a surplus of £5.182m;


(xi) That interest receivable from loans, IAS and treasury activity was forecast to be £10.9m, split into £4.046m (non-IAS Council loans and GF investments) and £6.848m (Reside Loans, treasury investments and IAS treasury investments), against a budget of £6.5m, representing a surplus of £4.4m;


(xii) That IAS operational income was forecast to be £1.057m against a budget of £6.861m, representing a deficit of £5.8m;


(xiii)  That the net surplus from the IAS was £207k and the net surplus from the GF treasury strategy was forecast to be £454k for a combined surplus of £661k, which would be added to the IAS reserve, increasing it to £31.6m by the year-end; and


(xiv)  That in the first half of the 2023/24 financial year, the Council complied with all 2023/24 treasury management indicators.

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