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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.