Councillor B A Mickelburgh, Executive Councillor for Finance and Resources to present the treasury performance for the period between 1 April 2023 to 31 March 2024.
(The report was considered by the Overview and Scrutiny Panel (Performance and Growth and the Cabinet at their meetings in June 2024).
Contact:10 Minutes.
Minutes:
Consideration was given to a report by the Council’s Chief Finance Officer (a copy of which is appended in the Minute Book) presented by Councillor B A Mickelburgh, Executive Councillor for Finance and Resources. The report provided an update on treasury management activity for the period 1 April to 31 March 2024, including investment and borrowing activity and treasury performance.
By way of introduction, the Executive Councillor for Finance and Resources proceeded to talk in detail through the following areas: economic review, the performance of Council funds, treasury risk management, non-treasury investments, compliance and treasury management indicators.
Having received a detailed explanation of the economic circumstances in which the UK Economy found itself during the 2023/24 financial year, Council’s attention was drawn to the performance of Council funds. Attention was drawn to the Council’s Capital Funding Requirement, which measures the Councils underlying need to borrow for capital purposes together with the Council’s borrowing levels which were set out in tables 3 -6 of Appendix A. As at 31 March 2024, the Council held £34.27M of loans, however the Executive Councillor for Finance and Resources assured Members that this was behind the Council’s Commercial Property Investment estimated value of around £40M. There had been no additional borrowing undertaken within the reporting period. It was also reported that a large proportion of Council investments were made in the Government’s Debt Management Office (DMO). Funds that were placed into the DMO are used to reduce the need for the government to borrow, therefore investing here helps to reduce costs for the public sector overall and stops external money market funds from making gains at the taxpayer’s expense.
Members were also reminded that a review of the Council’s Commercial Investment Strategy had previously been planned for June 2024. However, this had been delayed pending the arrival of the Council’s new Section 151 Officer in the Autumn and it was envisaged that there may be new opportunities in place following the election of a new national Government.
In terms of Non-Treasury Investments, the Council were advised that the Council currently holds £70.8M of such investments in directly owned property (£70.7M) and shareholding in subsidiaries £0.1M). These investments generated £3.92m (2022/23 £5.36m) of investment income for the Authority for 2023/24, a decrease of 37% on 2022/23, as a result of reduced rents at Fareham, Stonehill and Rowley Arts Centre. Having received a brief update on the reasons for this, Members were advised that a further update would be submitted to the Overview and Scrutiny Panel (Performance and Growth) in September 2024 in private session.
With regards to compliance, the Executive Councillor was pleased to report that the Council’s Chief Finance Officer had reported that all treasury management activity undertaken during the financial year had complied fully with the CIPFA Code of Practice and the Council’s approved Treasury Management Strategy. He also took the opportunity to draw attention to the Government’s decision to extend the mandatory statutory override for local authorities to reverse out all unrealised fair value movements resulting from pooled investment funds to 31 March 2025. In the Council’s case this would include funds invested within the CCLA property fund.
Finally in terms of treasury management indicators, the Executive Councillor reminded Members that the Council continues to measure and manage its exposure to treasury management risk using the indicators of security, liquidity, exposure to interest rate risk, structure of borrowing, maturing timing and long-term investments. In response to a comment which had been raised at Overview and Scrutiny regarding the Loan to Value ratio shown in Table 17 regarding Commercial Investment properties, the Executive Councillor indicated that they did not currently offer any cause for concern given there were no currently no plans to sell the properties.
In response to a question from Councillor P Hodgson-Jones, the Executive Councillor confirmed that revised data from the Office of National Statistics had confirmed that the United Kingdom had entered a technical recession in the final 6 months of the last year. He also suggested that the forthcoming work on the development of a new Commercial Investment Strategy would enable the Authority to give consideration to different levels of risk and risk profiles and encourage those that were interested to get involved within the development of that Strategy in the Autumn.
Whereupon it was
RESOLVED
that the Treasury Management Performance for 2023/24 be noted.
Supporting documents: