Minutes:
The Interim Director of Finance
introduced the report and stated that three of the original
intervention directives linked to the Treasury Management Strategy,
and these were: writing a new Strategy; introducing a plan for debt
reduction; and revising the Council’s MRP and debt write-down
strategy. He explained that these directives were included in the
new strategy, which also included cashflow management; funding; the
capital programme; investment strategy; and debt strategy. He
stated that capital programme planned expenditure was listed at
page 36, but no future investments would be undertaken to pay for
these projects. He highlighted page 39 of the report and stated
that the Council retained approximately £1bn of investment,
but the Council would be seeking to divest these as outlined in the
borrowing strategy. He explained that the MRP was linked to the
level of deficit, which made up £74m of the £180mn
budget gap, but the team were working to reset the policy in
relation to investments, particularly the solar and wind farm
investments. He stated that some investments had a 20-year life
span, but these would be written down using the new debt strategy,
which was forward compliant with the Prudential Code. He felt that
this put the Council in a good position, as other Councils had to
grapple with the new Prudential Code, and were not receiving the
level of support that Thurrock were receiving.
The Interim Director of Finance explained that the Council still
had a capital financing borrowing requirement, and this could
present a risk to the Council until it was written down through the
MRP. He explained that if this process had been followed in the
past, it would have provided the Council with more financial
protection. He added that one of the capitalisation directives was
to divest investments, although this would not cover the total cost
of debt, and therefore remained an unresolved problem, which the
Council were working closely with commissioners and central
government on. He highlighted page 62 of the report, which outlined
the borrowing strategy. He explained that the Council were working
to divest investments, but the current borrowing strategy
represented a holding position. He felt hopeful that the Toucan
investment would be divested within the next financial year, and
the speed of divestment would help to stop significant financial
pressures and reduce the MRP charge. He added that the team were
working on borrowing as it matured, for example by replacing
inter-authority borrowing with Public Works Loan Board borrowing,
but this would be impacted by the speed of divestment. He added
that an update on the Treasury Management Strategy would be brought
back to Cabinet mid-year in 2023/24, as this report represented a
holding position based on the assumption of EFS being
granted.
The Leader highlighted page 62 of the report and stated that the
Toucan asset was the largest asset and needed to be divested
quickly within the next financial year to reduce interest payments.
He also sought assurance that this Strategy was compliant with the
Prudential Code, as previously strategies presented to Members had
not been compliant. The Interim Director of Finance assured Members
that the report was compliant with the current Prudential Code and
would be forward compliant with the next Prudential Code iteration.
The Interim Chief Finance Officer added that the strategy had gone
through a rigorous checking process, which had been externally
reviewed for its robustness. He added that it had also received
independent verification and gone through an external comment
process. The ECC Commissioner added that a compliant MRP was one of
the government directives, and CIPFA had reviewed the document for
compliance. She added that further costs may be identified through
the process and further financial issues may arise, for example the
2020/21 accounts remained open, and work was pending on the HRA and
associated companies. She added that no issues had thus far been
found, but work was still ongoing.
The Deputy Leader highlighted pages 41-42 of the report and asked
if Members would receive further training on investments and
liquidity. She also asked for a complete table of all investments
in one document. The Interim Chief Financial Officer replied that
he would provide this document for Members. Councillor Johnson
thanked officers for their assurances regarding the Treasury
Management Strategy compliance, and asked if updates on the
Strategy could be provided at every Cabinet meeting. The Interim
Chief Financial Officer explained that the Treasury Management
Strategy would be presented regularly at the Investment Advisory
Panel, if agreed at Cabinet, and the outcomes from the Investment
Advisory Panel would be presented to Cabinet.
The recommendations were moved by the Leader, and seconded by
Councillor Snell. All Cabinet Members agreed the recommendations as
listed below.
RESOLVED: That Cabinet:
Recommended that Full Council:
1. Approve the Treasury Management Strategy for 2023/24 including
the approval of the Annual Minimum Revenue Position (MPR) statement
for 2023/24.
2. Notes comments from the Corporate Overview and Scrutiny
Committee on the 2023/24 Treasury Management Strategy for
consideration.
3. Considers the current assumptions (as set out on page 3 of the
Strategy) underpinning the Treasury Management Strategy and note
that this will be subject to further updates in 2023/24.
4. Considers the strategy in the context of the directions issued
by the Secretary of State for Levelling Up, Homes and Communities
and specifically the need for a strict debt reduction plan.
5. Notes the increase in the Council’s Capital Financing
Requirement (CFR) in 2022/23 as a result of the expected support
from DLUHC in the form of a capitalisation direction, as set out in
section 3.16.
6. Notes the divestment of investments and the sale of property
assets are required to repay the Exceptional Financial Support from
DLUHC and this is a key assumption supporting the strategy.
7. Notes the Council’s borrowing level will exceed the CFR in
2022/23 but is planned to be managed within this from 2023/24 and
onwards, as set out in section 3.17.
8. Notes the Prudential indicators included within the strategy
that show commercial capital investments are generating net losses
to the Council in the context of the revised MRP charges and
current and projected interest rates, as set out in section
3.6.
9. Notes that the borrowing strategy supporting the commercial
investment portfolio will be reset alongside wider revisions to the
strategy in 2023/24.
Reason for decision: as outlined in the
report
This decision is subject to call-in
Supporting documents: