Agenda item

A report of the Head of Finance and Property Services.

A report of the Head of Finance and Property Services was submitted providing the Committee with an opportunity to scrutinise the proposed Capital Strategy for 2022/23 and associated recommendations that are being recommended by Cabinet to full Council for approval. (Item 7 on the agenda filed with these minutes).

The Strategic Director for Environmental and Corporate Services attended the meeting to assist the Committee with the consideration of this item. 

The Committee were informed in regard to the Treasury Management Strategy that:

·         The strategy would be largely similar to the existing strategy.

·         There would be a more proactive treasury management approach.  Balances were high, peaking around £60million and would reduce towards the end of the financial year due to how Council tax was collected.

·         Security and liquidity were priorities.

The Committee were informed in regard to the Capital Strategy that:

·         The strategy had been amended to reflect the findings of the External Auditor’s report.

·         The ability to borrow from the Public Works Loan Board to finance commercial properties had been curtailed.  The new prudential code would require that the Section 151 Officer sign that any borrowing for assets for yield.  The Council would not be able to invest in commercial property unless it had significant Capital Reserves. 

·         The Council’s Minimum Revenue Protection (MRP) policy was in line with the previous code and sufficiently prudent.

·         Loans to subsidiaries had been left in the strategy as the Council may wish to do so in the future and it gave flexibility in the strategy, however there were no immediate plans to do this.  If such loans were to be made it would be subject to a report to Cabinet and Council.

The Chair suggested that risks could be re-written in line with the framework.

The Strategic Director for Environmental and Corporate Services clarified that current reports were completed in line with the previous framework and when the new strategy came into place it would have to go through templates.

The Chair raised objection to the use of the phrase ‘assumed’ as it appeared speculative.

The Strategic Director for Environmental and Corporate Services responded that he would consider the wording.

A typographical error was noted on page 11 of the Treasury Management Strategy.  2019/20 should have read 2020/21.

Councillor Snartt asked if there was a time limit on the amounts going forward for availability in future years.

The Strategic Director for Environmental and Corporate Services clarified that £15million had been put into the plan approximately a year ago for the regeneration and funding of the Enterprise Zone as placemarkers for unknown opportunities that may arise.  At the year-end in the Outturn Report, the Council would be asked to put this money into future years.  The Council may reject this, however it was assumed it would happen.  This is money that would be borrowed.  If opportunities did arise then money could be spent against it.  The governance rules of the Council required such an allocation to be in the Capital Plan and Capital Strategy and any major spend would need to be subject to a report to Cabinet and Council.

The Strategic Director for Commercial Development, Assets and Leisure added that any spending would need justification and if anything came into the plan it could be updated through the proper process.

Councillor Parsons suggested that Cabinet may wish to ringfenced with a policy MRP money to prevent it disappearing into the treasury.

The Strategic Director for Environmental and Corporate Services clarified that the MRP restricted the Council’s budget and the money was a balancing figure.  Treasury balances were not hypothecated against the MRP.  The MRP showed as a charge against the Council’s budget.  The MRP could be used if the Council defaulted to ensure that loans could be paid back if due.  There was no link between what was in the MRP provision and the cash balance.  The treasury was managed as a single pool of money.  The MRP provision on the balance sheet was to recognise the issue of repaying loans.  How the treasury was used was not impacted by the MRP.

The Strategic Director for Commercial Development, Assets and Leisure clarified that it was possible to conflate MRP with the Commercial Property Reserve, which mitigated against risk.  He clarified that the MRP was an accumulation of principle to repay debt once it matured.

Councillor Parsons asked as to whether the statement on prudential borrowing was new.

The Strategic Director for Environmental and Corporate Services clarified that it was the same wording as last year, however if prudential borrowing was undertaken, it would be a departure from previous years.  When asked by Councillor Parsons if this was a realistic option, the Strategic Director for Environmental and Corporate Services suggested that if the Council were to need to fund a significant investment then prudential borrowing would probably be required, however, this had not happened within the financial year.

Councillor Parsons drew attention to structural deficit within annual revenue budgeting and asked what could be done with borrowing to ensure that the general fund was dealt with if the Council took on that commitment and what assurance could be taken through prudential borrowing.

The Strategic Director for Environmental and Corporate Services suggested that it would depend on the opportunity and on the decisions of Cabinet and Council.  Where the Council had borrowed recently was in the forward funding of the Enterprise Zone.  There had been a repayment loan covering what would have been an MRP charge.  This was what was usually seen with prudential borrowing.  He added that if money was borrowed for regeneration it would come with an ‘MRP ticket’.  The charge would be relatively low but this would be a decision for Councillors to take.

Councillor Parsons asked if it could be ensured that Cabinet made the risk appetite clear if prudential borrowing occurred in order to avoid damage to the structural deficit.

The Strategic Director for Environmental and Corporate Services noted that the Council had applied the MRP in the finance of the refuse fleet contract extension and the total cost including MRP was lower than the comparable cost that would have been incurred had the contractor had to finance the fleet.

RESOLVED that the Capital Strategy (including the Treasury Management Strategy) for 2022/23 be noted.

Reason

To ensure that the proposed documents are appropriately scrutinised.