Council and democracy

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