Agenda item

For Committee members to consider the 2021/22 Mid-Year Treasury Management Stewardship Report

The Service Director – Finance Services began by explaining that the Finance and Performance Scrutiny Committee had responsibility for scrutinising the Treasury Management activity, as set out in the Committee’s terms of reference, and the report provided Members with opportunity to scrutinise information that was presented to Council on the 24^th November 2021. The Service Director added that the Council report was attached at Appendix 1 and this detailed the Council’s treasury management activity during the first 6 months of the current financial year, 2021-22.

The Service Director provided an overview of Section 4 of the report, General Economic Background, and set out that the economic recovery from the pandemic dominated the first half of the financial year alongside easing of restrictions, the on-going roll-out of the vaccination programme and the continuation of Government initiatives to support the economy such as a Coronavirus Job Retention Scheme (Furlough) that remained in place until 30^th September 2021. The Service Director also indicated that the Bank Base Rate is one of the main determinants of the rate of interest the Council receives on its short-term investments and for the first half of the year the rate was 0.1% and noted that this was increased to 0.25% on the 16^th December 2021.

The Service Director went on to provide an overview of specific information included in other sections of the report. For Section 5, Borrowing Activity and Results, the Committee were informed that the 2021/22 estimated borrowing requirement was £19.3M at March 2021 and based on the Capital Programme at that time, and indicated that this had increased slightly to £21.0M as at September 2021 due to revised delivery timescales for particular projects. It was also confirmed that no external borrowing had taken place during the first half of the financial year and there was no budget variance being reported for net capital charges, which had a budget for 2021/22 of £19.95M.

For Sections 7 to 9, that set out Prudential Indicators, the Service Director confirmed that for the period April to September 2021, the Council operated within the prudential limits approved by Council in March 2021.

For Section 11, Investment Strategy, Activity and Results, the Service Director fed back that the return on investments was 0.01% for the first six months of the year, this reflective of the Council’s low risk strategy, and indicated that this compares favourably with the benchmark return of -0.08%.

For Section 12, Treasury Management Advisors, the Service Director fed back that the initial period of the contract the Council has in place with Arlingclose to provide Treasury Management Advisory Services expires in March 2022 and work is currently underway to assess whether or not to extend for up to a further 2 years.

For Section 13, Training, the Service Director provided a brief overview of the webinars Council officers have attended that had been hosted by Arlingclose and also a virtual on-line strategy meeting between Arlingclose and Council officers and also the training session provided by Arlingclose for elected Members in September 2021.

Following the update, Members were provided with the opportunity to ask questions.

Mr Fish, the Parent/Governor Representative fed back that the information included in the report was helpful and noted that within the context of market volatility, how would this impact on the level of return the Council receives from investing surplus cash, for example, were the interest rates fixed or variable and subject to market volatility? Mr Fish also requested clarity on the arrangements the Council has in place to protect itself from PWLB lending rate volatility.

The Service Director – Finance Services fed back that with regard to the level of return from investing surplus cash, the Council’s agreed approach is to maximise internal borrowing to fund the Capital Programme rather than take external borrowing and in doing so run-down cash balances and forego interest earned at historically low rates. The Service Director indicated that the Council therefore has low risk exposure to interest rate volatility on investments and added that this agreed approach also minimises the risk of investments becoming irrecoverable.

With regard to the arrangements the Council has in place to protect itself from PWLB lending rate volatility, Service Director explained that PWLB interest rate updates are received on a weekly basis and information is also provided by the Council’s Treasury Management Advisors, Arlingclose, on PWLB interest rate forecasts. The Service Director added that the current forecasts are for PWLB interest rates to remain low and there being no requirement at present for the Council to borrow for the longer term, and noted that this will be kept under on-going review.

Councillor Bradwick thanked the Service Director and the Finance Team for the excellent report.

The Chair asked what was the current debt level for Rhondda Cynon Taf Council. The Service Director – Finance Services referred to paragraph 7.2.4 of the report and confirmed that the debt as at 30^th September 2021 was £310M.

The Chair also requested confirmation of the interest rate level and the amounts paid in re-payments on interest and principal over the last 9 months.

The Service Director – Finance Services confirmed that the £310M was made up of a number of different loans that had varying interest rates and indicated that the average rate would be provided separately to the Committee following the meeting along with the amount of interest and principal repayments for the period April 2021 to December 2021 by type of loan.

Following discussion, Members RESOLVED to accept the content of the report.