Agenda item

Capital Strategy 2020/21


The Director of Finance, Governance and Property outlined the report, and stated that the Capital Strategy was a new requirement for 2019/20 and incorporated the Treasury Management Strategy. He stated that the main purpose was set out on page 27 and provided a high-level overview of capital expenditure levels, capital financing and treasury management activity. He highlighted a number of tables to the committee which set out the summary figures including capital expenditure, capital financing, the Capital Financing Requirement, borrowing, and a summary of the overall treasury position. He described the significant press interest since Cabinet had considered the six-month position last week, and he addressed some of the comments that had been published, so the Council’s position was clear. The Director of Finance, Governance and Property explained that although Thurrock were quoted as having the highest level of short-term borrowing, Thurrock were by no means the highest borrower. He outlined the reasons for short-term borrowing, which explained that Thurrock had taken the approach since August 2010. He clarified that the Local Authority and related Treasury Market had between £20billion and £30billion of cash available that had to be lent or deposited somewhere, and estimated that had all of the Council’s borrowing been through the Public Works Loan Board, Thurrock would be paying on average additional £15million per annum. He highlighted that the Local Authorities money markets were not linked to the bank base rate, and so were not as open to interest rate fluctuations, and was simply about the amounts of surplus cash available, and how much others needed.

The Director of Finance, Governance and Property then described some facts and figures from 2018/19 and described how the Council had taken out loans from a number of different Local Authorities, the duration of which were between one month and one year, with rates ranging from 0.4% to 1.15% depending on the duration. He then outlined what the Council used the funds for, mainly being capital expenditure on buildings, infrastructure and IT; and investments that were made relating to assets that Thurrock had security over and were repayable, which were mainly bonds on renewable energy assets that raised additional income that the Council could reinvest in frontline services. He described how three-quarters of the Council’s borrowing was repayable on maturity, which was currently between three and eight years, but the bond issuer had the right to make early repayments. He stated that based on this, even if long-term borrowing had attractive rates, it would not be prudent to borrow for longer terms when the need was for a shorter period.

The Director of Finance, Governance and Property then drew the Committee’s attention to Table 1 on page 27 of the agenda which set out projected capital and investment expenditure, and clarified that these were not always uniform as opportunities did not arise in that fashion. He clarified that over two years investments were forecasted as an average, and the prudential indicators had been adjusted in the budget report in February 2019. He then drew the Committee’s attention to Table 7 on page 31 of the agenda, and mentioned that these figures were published every year and agreed by Members in February and whenever else was necessary. He clarified that actuals against these were then reported at least twice a year to Cabinet, and were part of the Council’s accounts. He stated that the upper limit for 2019/20 was set at £1.453billion and the Council were set to be within that limit. He summarised and highlighted the table at 2.32 on page 41, which showed that the Council were projecting an annual surplus in the region of £30million, between interest payable and interest received that had been invested in frontline services, namely the environment and social care, as part of the approach to becoming financially self-sustaining.

The Chair opened debate and sought two areas of assurance, the first being that the Council were operating within agreed levels of risk and exposure, and the second being that there was a level of democratic oversight regarding investments. He asked how much Members saw of potential investments, and felt that even though those documents were commercially sensitive, strong levels of accountability were needed. He felt that an additional recommendation would be useful to ensure democratic accountability, and proposed an Investment Review Committee who could oversee the process. The Director of Finance, Governance and Property replied that there was a level of risk associated with investments, but the biggest risk factor was a change in central government policy, which currently appeared to be minimal. He felt that the majority of government bodies were concerned with investments in areas such as shopping centres, where economic fluctuations could affect income. He stated that Thurrock had not undertaken any investments such as these, and had invested in the renewable energy sector. He felt there was no real risk associated with this sector as there had never been any major disasters in a wind farm or solar park, and their investments were spread over 40 sites. He clarified that the Council were signed up to the assets and not the companies; were insured against loss; and had good maintenance contracts. He mentioned that the Council only invested when the assets were already up and running, and had been so for a year or more to ensure that they were working correctly and to see real yield figures. The Director of Finance, Governance and Property then discussed the level of democratic oversight, as it was difficult to differentiate between everyday levels of treasury management and bigger investments. He commented that any new venture over £10million and over one year had to go to the Council Spending Review, which was made up of Leaders from all groups. He mentioned that he had done some research into the levels of democratic accountability across a variety of Local Authorities, and some provided more freedom, whilst others provided less. He summarised and stated that he was already considering an informal Treasury Management Committee, or increased reporting through Key Performance Indicators.

A debate then ensued regarding the wording of the proposed additional recommendation and the following was agreed: “the Corporate Overview and Scrutiny Committee recommend to Cabinet that it considers the best way to increase democratic oversight of investment.”


1. The Committee commented on the 2020/21 Capital Strategy for consideration by Cabinet at their meeting on 12 February 2020.

2. The Committee recommended to Cabinet that it consider the best way to increase democratic oversight of investment.

Councillor Churchman left 20.22

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