Agenda item

To endorse the strategy to be included in the final budget report.

Members considered the Treasury Management Strategy Statement, Capital Strategy, Minimum Revenue Provision Policy Statement and Annual Investment Strategy 2022/23 presented by Mark Saunders:

• Mark Saunders informed the Committee that the base bank rate had increased after the report had been published and that they were predicting further increases of between 1 and 1.25 percent in 2022.

Members made comments, asked questions, and received responses as follows:

• Councillor Wicks asked for clarification regarding the temporary investments. He noted that several of them were coming up to their maturity date and presumed that they would be renegotiated for better interest rates. Mark Saunders explained that when the temporary investments mature, they attempt to reinvest them for better interest rates. He noted that the amount of time they are invested for was dependent on the cash flow and that some recent reinvestments had been kept short due to the substantial amount of cash being paid out by the authority in the next month or so. He mentioned that the interest rates had risen slightly but that it was a matter of how quickly they increase.
• Councillor Benney noted that the Council had some long-term loans that could not be paid back earlier and asked how long was left on those loans. Mark Saunders informed the committee that the Council had two loans with the Public Works Loan Board. One was for £2 million which was currently running at running six and seven eights interest and was taken out on the 3^rd February 1994 with a maturity date of 1^st February 2029. The other loan was for £2.5 million with a current interest of seven and five eights percent which was taken out on 13^th March 1997 and matures on 13^th March 2032. He also noted that the Council had a loan with Barclays of £3.3 million which was taken out on the 18^th March 2004 and matures on the 18 March 2054 which was running at 4.7 percent interest. He explained that these were good interest rates when they were fixed and that nobody would have thought that the interest rates would drop as low as they currently are with 50-year loans at only 2.2 percent interest rates currently. Councillor Benney accepted that the rates were good when the loans were taken out.
• Councillor Benney noted that inflation was currently above five percent and that bank rates should be matching this. He also noted that he had recently read that there was a possibility of inflation hitting seven percent. He remarked that this made the current figures on the loans look rather small comparatively. Councillor Benney questioned whether some of the figures were on the optimistic side as they were predicted to remain where they were in the report. Mark Saunders agreed that the inflation forecast was a concern. He noted that it would take a while for inflation to work its way out of the system. He explained that the base rates had been worked into the figures but that over the last 20 years every forecast had been wrong and that he did not think that these would be fully correct either. He noted that the Council must be careful with where the investments were going and frugal about the level of returns received from these. With regard to the property funds, he noted that the returns would be determined by where they are invested but that the firms they had invested in were good firms and that they were confident that they would provide good returns.
• Councillor Benney noted that with the last bank rate rise they had wanted it to be raised by more than it was and noted that the figures in the report were pessimistic as to where they could go. Mark Saunders noted that there would be a different table in the Council report as the current table outlined their view in December 2021 and explained that this had since been updated and would show an increase in the bank base rates. He explained that no one could be certain on the outcome but that indications pointed towards an increase.

Members AGREED to endorse the strategy detailed in the report to be included in the final budget report for 2022/23.