The Cabinet endorsed the half year Treasury Management Review. The Cabinet also agreed to a proposed revision to the way Minimum Revenue Provision is calculated, to the Annuity Method, and a proposed revision to the Flexible Use of Capital Receipts to permit the use of £2 million of capital receipts to cover voluntary redundancy costs.

Treasury Management Half Year Review

The Cabinet reviewed the half year performance of the Council's Treasury Management function. They noted that the Council had continued to hold its investment in the CCLA Property Fund and that it had generated a 5.31% return, which the Council has budgeted to receive. The Council’s treasury management advisers, Arlingclose,¹ proposed changing the Council's Minimum Revenue Provision policy to an annuity method of calculation. They argued that:

The annuity method is an acceptable method for making MRP and is explicitly mentioned in the statutory guidance on MRP. The annuity method spreads the total capital financing costs (MRP plus interest) evenly over the asset life, similar to a repayment mortgage.

The change will make relatively small MRP payments in the first few years of an asset's life and larger payments later in its life. Arlingclose advised the Council that the annuity structure for MRP when combined with interest costs leads to a smoother profile of costs and that this is more prudent than using the straight line method.² This would save the Council £13.382 million in 2024/25, but over the lifetime of borrowing would increase costs by £10.553 million. The report proposes using the interest rate on loans from the Public Works Loan Board (PWLB) in the year the asset is acquired when making annuity calculations. Arlingclose also recommended that, for assets purchased through PFI schemes, the Council should make MRP payments over the life of the asset, rather than over the life of the PFI contract. They argue that making MRP over the life of the asset fairly charges council tax-payers over the period that benefits are received from the asset, even if the Council no longer owns the asset. The report notes that the recent changes to MRP legislation will not have a significant impact on the Council.

Flexible Use of Capital Receipts

The Cabinet discussed a report proposing a revision to the Flexible Use of Capital Receipts policy. The original policy, agreed as part of the 2024/25 budget, permitted the use of £2.6 million of capital receipts to fund transformation activity within directorates. This report requested permission to use a further £2 million to cover the costs of a voluntary redundancy programme that has been agreed since the budget was set.