Agenda item

Trafod adroddiad Cyfarwyddwr Cyfadran y Gwasanaethau Corfforaethol a Rheng Flaen.

The Head of Finance provided the Committee with an overview of the Council’s Treasury Management activity during the first six months of the financial year 2018/19 and the prudential and Treasury Indicators for the same period.

Members were asked to consider whether they wish to receive any further detail on matters contained within the report.  

The Head of Finance explained that Treasury Management is the management of a local authority’s cash flows, its borrowing and its investments, the management of the associated risks and the pursuit of the optimum performance or return consistent with those risks.

Members were provided with an overview of the general economic environment and were informed that on the 2^nd August 2018, the Bank of England increased the Bank rate from 0.5% to 0.75%. The Head of Finance advised Members that despite the ongoing uncertainty surrounding the country’s exit from the EU, current projections show UK growth to be modest. The unemployment rate is expected to be stable, currently at 4%, with real growth unlikely to have much effect on the spending power of households.

Members were informed that the borrowing strategy for 2018/19 was approved by Council in March 2018 and that the borrowing requirement was estimated to be £48.9M based on the Capital Programme at that time. In March, it was also reported that the Council would monitor prevailing PWLB rates for any opportunities to reschedule debt to generate savings. debt to generate savings. Members were informed that as at the 30^th of September 2018, the Council has not had a viable option to reschedule debt. Affordability and the cost of carry remained important influences on the Councils borrowing strategy.

The Head of Finance advised the Committee that no variance is currently being projected for net capital charges, which have a budget for 2018/19 of £19.9M. It was emphasised to Members that this is being achieved despite the challenges faced with investment income and maintaining the Council’s low risk strategy.

Members were advised that during the six months to the 30^th September 2018, the Council operated within its prudential limits as set out in the Prudential Code report approved by Council in March 2018.

Members were also reminded that the Council’s borrowing activity is within its Authorised Limit. The Authorised Limit represents the limit beyond which borrowing is prohibited, and needs to be set, monitored and revised by Members. It reflects the maximum level of borrowing to fund existing capital  commitments, which could be afforded in the short term, but is not sustainable.  

Members thanked the Head of Finance for providing the Committee with such a detailed report.

Discussions ensued and Members put their questions forward.

The Elected Parent/ Governor Representative queried whether the Council has put safeguards in place to protect against the uncertainty surrounding Brexit. The Head of Finance advised Members that they are mindful of the volatility surrounding Brexit and its effect on the economy, however, the unemployment rateis expected to be broadly stable

The Elected Parent/ Governor Representative also referred the Committee to paragraph 7.2 of the report, which informs Members that the UK Government announced plans in December 2017 to make available an amount of lending at the Local Infrastructure Rate, whereby Local Authorities are able to access borrowing at 0.4% below published PWLB rates. A corresponding share has been made available to Local Authorities in Wales and Welsh Government has allocated a set amount across all 22 Welsh authorites and RCT Council has been allocated £4.4M. The rate is available for a period of 3 years within which to draw down the allocation.

The Elected Parent/ Governor Representative queried whether this was something that the Council were proposing to take advantage of. The Head of Finance advised Members that the Council has already been able to fix in longer-term borrowing and will continue to take advantage of every opportunity presented.  

A Member raised a further query in relation to the Authorised Limit and questioned who would be monitoring the Council’s borrowing activity. The Head of Finance advised Members that any borrowing must be in line with the Prudential Codes of Practice. The Authorised Limit must also be prudent and reasonable. Members were referred to paragraph 9.3 of the report and the Operational Boundary. The Head of Finance advised Members that the Operational Boundary gives the Authority an early warning signal to ensure that the Authorised Limit is not breached. The Operational Boundary is based on the probable external debt during the course of the year; actual borrowing could vary around this boundary, for short times, during the year. Members were told that the Authority could change the Authorised Limit if it was set too low, however this would need to be approved at full Council.

Following consideration, it was RESOLVED;

Ø  To note the content of the report.

Ø  To receive updated reports in future meetings.