Agenda item

The Executive are asked to consider report E/22/16 which reviews the Council’s borrowing and investment activity (Treasury Management) for the period 1 April 2022 to 30 June 2022, and presents performance against the Prudential Indicators. 

The Lead Executive Member for Finance and Resource presented the report which asked Members to endorse the actions of Officers on the Council’s treasury activities for Quarter 1 2022/23 and approve the report.The report reviewed the Council’s borrowing and investment activity (Treasury Management) for the period 1 April 2022 to 30 June 2022 and presented performance against the Prudential Indicators. 

Members noted that on average the Council’s investments held in the NYCC Investment pool totalled £83.5m over the quarter at an average rate of 0.78% and earned interest of £161.7k (£116.6k allocated to the General Fund; £45.0k allocated to the HRA) which was £123.5k above the year-to-date budget. Current performance trends indicated that forecast returns for the year could be in the region of £871.8k (£628.9k GF, £243.0k HRA) a total budget surplus of £719.4k. For the General Fund, any interest earned above a £350k threshold was to be transferred to the Contingency Reserve. This figure was currently forecast to be £278.9k.

The Executive Member explained that return on council investments had performed positively when compared to budgets for the year, as a result of the regular and sustained rises in Bank of England base rate that had been experienced over the course of the year, in an effort to combat inflationary increases. Base Rate had accordingly risen from 0.25% at the equivalent point last year when budgets were initially set, to their current level of 1.25%. The forecasted return for the year took into account the tapering effect of the rises, as older investments at lower rates matured and were replaced by newer investments at higher rates. The position remained fluid as further Base Rate rises, currently anticipated by the market, would serve to further increase potential returns against budget.

The Executive were aware that in addition to investments held in the pool, the Council had £5.63m invested in property funds as at 30 June 2022. The funds had achieved a 2.93% revenue return and 3.13% capital gain over the course of the quarter. This had resulted in revenue income of £40.5k to the end of Q1 and an ‘unrealised’ capital gain of £170.8k. The funds were long term investments and changes in capital values were realised when the units in the funds were sold.

Officers confirmed that long-term borrowing totalled £52.833m at 30 June 2022, (£1.6m relating to the General Fund; £51.233m relating to the HRA), interest payments of £1.917m were forecast to be paid in 2022/23, a saving of £59k against budget.  The Council had no plans for any short-term borrowing for the year. With regards to prudential indicators the Council’s affordable limits for borrowing were not breached during this period.

The Executive Member went on to inform the meeting that, looking ahead to 2022/23, investment returns were expected to continue to rise due to the recent increases in Bank Base Rate. Base Rate was expected to continue to rise over the course of the year, with latest estimates showing an increase to 2.75% by March 2023.

Members were pleased that the Council’s borrowing rates had been fixed.

The Executive Member for Finance and Resources commended the report.

RESOLVED:

The Executive endorsed the actions of Officers on the Council’s treasury activities for Quarter 1 2022/23 and approved the report.

REASON FOR DECISION:

To comply with the Treasury Management Code of Practice, the Executive are required to receive and review regular treasury management monitoring reports.