Agenda item

Members were presented with the Treasury Management Strategy annual report for 2024/25. The purpose of the report was to inform members of the performance against the treasury management and prudential indicators set in the treasury management strategy approved by Council in February 2024.

The Council operates under the Chartered Institute of Public Finance and Accountancy’s Treasury Management in the Public Services: Code of Practice (the CIPFA Code) which requires the Council to approve a treasury management annual report after the end of each financial year.

This report fulfils the Council’s legal obligation under the Local Government Act 2003 to have regard to the CIPFA code.

Officers discussed the several sections of the report with Members, one section highlighted was the Dedicated Schools Grant (DSG). This was because a statutory override in England (capital finance regulation 30L) that requires local education authorities that incur expenditure on schools’ budget in excess of the DSG received to charge this deficit to an unusable reserve instead of their revenue account. Cash would therefore leave authorities bank accounts for schools’ expenditure without revenue cash coming in to pay for it.

At the end of the 2024/25 financial year the Council had an overall accumulative deficit of £6.7m on its DSG. The Council had to cash flow the deficit and any borrowing requirements and costs associated with borrowing incurred include this deficit. The cost of the borrowing cannot be charged to the DSG under current regulations, so these are charged to the Councils general fund. The cost of this borrowing was up to £300k.

This led Officers onto the borrowing update in the report. Officers began by reminding members that CIPFA’s 2021 Prudential Code was clear that local authorities must not borrow to invest primarily financial return and that is was not prudent for local authorities to make any investment or spending decision that will increase the capital financing requirement and could lead to new borrowing, unless directly and primarily related to the functions of the Authority. PWLB loans were no longer available to local authorities planning to buy investment assets primarily for yield unless these loans were for refinancing purposes. Officers confirmed that the Authority had no new plans to borrow to invest primarily for financial return.

The Authority currently holds £18.322m in commercial investments (2023-24 £17.970m) that were purchased prior to the change in the CIPFA Prudential Code.

The Authority as part of the updated code in the future will need review the options for exiting these investments if there is an economical case to do so.

During the year long term loans decreased by £3.68m. This net position was due to the repayment of two LOBO loans totalling £21m and other long-term debt maturities. This had been offset by a £20m 15-month loan, agreed in February 24 to aid with the authority’s cash flow during the year end period and in preparation of a loan maturing in early April 2025.

Short term loans had increased by £46.07m during the year. As noted in the mid-term treasury management report which came to the Audit Committee in November 2024 the authority repaid two LOBO loans, the loans had an original maturity date of 2077 and to reduce future interest rate risk and cost they were repaid early. The authority funded these by securing short term loans in the local-to-local market. Also, for cash flow purposes and as noted above in preparation for the repayment of other loan maturities, a medium-term loan had been entered into during the last months of the financial year.

Overall total borrowing increased from £108.39m as on 31st March 2024 to £150.78m as of 31st March 2025. Total investments increased during the year rising £17.57m from £21.78m at the end of 2023-24 to £39.35m at the end of 2024-25. Funds secured and held at year end to fund maturities during early April 2025.

Members noted that the borrowing against spending outlined in the report was low when compared to other Authorities in the areas, which shows that all areas are struggling but the Council is managing it better so far.

Members AGREED to note the report.