Agenda item

Report of the Director of Finance, People & Estates (RC/22/16) attached.

NB.  Adam Burleton, representing Link Asset Services - the Authority’s treasury management adviser – was present for this item of business.

The Committee received for information a report of the Director of Finance, People & Estates (Treasurer) (RC/22/16) that set out the Authority’s performance relating to the second quarter of 2022-23 (to September 2022) in accordance with the Treasury Management in Public Service Code of Practice (published by the Chartered Institute of Public Finance and Accountancy {CIPFA}) and the CIPFA Prudential Code.  The report set out how this Authority was demonstrating best practice in accordance with these Codes.

During consideration of this item, the following points were noted:

·       There had been a further rise in inflation since quarter 1 of 2022-23 which was squeezing economic growth.  Inflation was at 11.1% currently and would have been higher but for the action taken by the Government to limit the impact of the rise in energy costs;

·       The UK bank base rate rose by over 100 basic points in quarter 2 to 2.25%, rising again on 2 November 2022 to 3%.  Further interest rate rises were forecast in December 2022 (3.5%), January 2023 (4%) and expected to peak now at around 4.5% in June 2023 due to the monetary policy instigated.  All of the world economies were tightening interest rates in a bid to control spending;

·       The situation in China with Covid was impacting supply chains

·       The squeeze on income as a result of the high level of inflation was slowing the economy into recession in 2023 which was likely to last for four quarters;

·       Unemployment had fallen from 3.8% in June 2022 to a 48 year low of 3.6% in quarter 2 of 2022-23 with the number of vacancies levelling off from recent record highs. There was little sign of a slowing in the upward trend in wage growth, however, which had risen to 5.5% in July 2022;

·       the annual treasury management strategy had continued on a prudent approach, underpinned by investment priorities based on security of capital, liquidity and yield. 

·       Investment income had improved due to the interest rate rises with an increase to £0.086m (2.35%) generated in quarter 2 of 2022-23, outperforming the new 3 month SONIA (Sterling Overnight Index) benchmark of 1.50% by 0.85bph.  SONIA had replaced LIBID at the end of December 2022 and tended to trade at a higher average so it was anticipated that investment returns would outperform the investment target at the year-end;

·       None of the Prudential Indicators (affordability limits) had been breached in quarter 1 with external borrowing at 30 September 2022 being £24.711m, forecast to reduce to £24.264m by the end of the financial year with no new borrowing undertaken.

It was noted that the Treasurer had looked at opportunities to review the Authority’s early repayment of external borrowing with the Public Works Loans Board (PWLB), however, the early repayment rates and new rates meant there was no financial benefit to be achieved currently.  The Service was looking closely at its investments in future and would be bringing forward a strategy to the Committee which may have a more ethical outlook for consideration in due course.