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Sean Plummer, Finance Manager, and Margaret Donaldson, Interim Finance Manager attended the meeting to present the Treasury Management Strategy Report. The report requests that the Committee note the report and recommend to Cabinet that no changes are made to the Council’s Treasury Management Strategy Statement for 2018/19 and associated practises as a result of the review. The report also informed the Committee that further review will be undertaken as part of the preparation of the 2019/20 Treasury Management Strategy Statement.
Sean Plummer provided the Committee with a summary of the Treasury Management Strategy report and highlighted that the midyear report is required as part of the Treasury Management Governance Arrangements. Sean Plummer stated that the report provides a brief update on the economic forecasts, which include a degree of uncertainty and assume that the UK will have an orderly withdrawal from the EU in March 2019.
Sean Plummer stated that the Council has continued to follow the strategy, maintaining an under borrowed position, and has not gone out to raise any new loans. With regard to the capital position and prudential indicators they were produced in January and have since been revised to show an increase in the capital programme. The reasons behind this increase are included in the report. A further review of the Capital Programme will go to the next Scrutiny Panel meeting.
With regard to financing the capital programme, the Council is not forecasting the level of capital receipts that was originally estimated and this shortfall is being met by capital grants. Sean Plummer highlighted that the overall net borrowing is higher than forecast, requiring temporary borrowing requirements. Sean Plummer also stated that the Council’s limits to borrowing activity were proposed to remain unchanged.
Sean Plummer informed the Committee that the Council will consider borrowing in the next few months, with internal borrowing still the cheapest method. Link Asset Services will provide advice on the interest rates, as well as the investments and treasury activities of the Council.
A member of the Committee raised the issue of the UK leaving the EU and noted the difference between the risk identified on the risk register and the financial forecast for an orderly exit from the European Union. Sean Plummer provided clarification that the comment with the report relates to the interest rates forecast for the whole UK economy, which may then have a knock-on impact on government funding and capital costs. The risk register looks at the broader levels of risks for the Council on its activities including areas like housing projects and other major capital projects on which leaving the EU could have an impact. Sean Plummer highlighted that it is difficult to forecast of model what will happen. Councillor King highlighted that it is not possible to know what the impact of leaving the European Union will be and given these uncertainties a higher risk is associated. It would not be feasible for officers within the Council to make a judgement on the potential impact of leaving the EU at this stage.
A further question was asked about the level of internal reserves and whether this finances part of the capital programme as internal borrowing rather than being spent on services. Sean Plummer stated that with regard to borrowing this is only undertaken when there is a specific need for it and that reserves are in place for a reason and are usually earmarked for certain purposes. In addition, some reserves are held for accounting reasons, including when holding grants that have been received. Officers haven’t looked at a link between internal borrowing requirements and reserves, but due to the internal borrowing it does mean that the Council has cash resources that it can use to reduce it’s external borrowing need. This is a temporary measure as there is still a requirement to borrow in the long term.
RESOLVED;
a)
that the Treasury Management Strategy – Midyear review report 2018-19 be noted.
b)
To
RECOMMEND to CABINET that no changes are made to the Council’s Treasury Management Strategy Statement for 2018/19 and associated practices as a result of the review.