Agenda item

The Executive are asked to consider report E/22/28 which reviews the Council’s borrowing and investment activity (Treasury Management) for the period 1 July 2022 to 30 September 2022 and presents performance against the Prudential Indicators. 

The Executive Member for Finance and Resources presented the report which asked Members to endorse the actions of Officers on the Council’s treasury activities for Quarter 2 2022/23 and approve the report.

Members noted that the report reviewed the Council’s borrowing and investment activity (Treasury Management) for the period 1 April 2022 to 30 September 2022 and presented performance against the Prudential Indicators. On average the Council’s investments held in the NYCC Investment pool totalled £85.9m over the quarter at an average rate of 1.37% and earned interest of £296.5k. Total interest earned so far this year stood at £458.2 (£330.5k allocated to the General Fund; £127.7k allocated to the HRA) which was £382.0k above the year-to-date budget. Current performance trends indicated that forecast returns for the year could be in the region of £1,189.3k (£857.9k GF, £331.4k HRA) a total budget surplus of £1,036.8k. 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 £507.9k.

Executive Members acknowledged that return on council investments had performed positively when compared to budgets for the year. This was 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, as well as higher sustained cash balances. Base Rate had accordingly risen from 0.25% at the equivalent point last year when budgets were initially set, to their current level of 2.25%. The forecasted return for the year outlined above took into account the tapering effect of these rises, as older investments at lower rates matured and were replaced by newer investments at higher rates. This position remained fluid as further Base Rate rises, currently anticipated by the market, would serve to further increase potential returns against budget.

Officers explained that in addition to investments held in the pool, the council had £5.34m invested in property funds as at 30 September 2022. Following the latest distribution information, the funds had achieved a 3.08% revenue return and 2.20% capital loss over the course of the year, resulting in revenue income of £84.5k and an ‘unrealised’ capital loss of £120.2k. These funds were long term investments, and changes in capital values were realised when the units in the funds were sold.

In relation to borrowing, Members noted that long-term borrowing totalled £52.833m at 30 September 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, which was a saving of £59k against budget. The Council had no plans for any short-term borrowing for the year.

The Executive understood that the Council’s affordable limits for borrowing were not breached during the period.

In looking ahead to the remainder of 2022/23, Members were informed that investment returns were expected to continue to rise due to the sustained 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 5.00% by March 2023. This position remained highly fluid and was based on the latest expectations by the Council’s Treasury Advisors, Link Group.

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 2 2022/23 and approved the report.

REASON FOR DECISION:

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