Agenda item

Capital Investment and Treasury Strategy 2022/23

The purpose of this report is to bring to Members three recommended strategies covering Capital, Investment and Treasury Management (CIT Strategies) for their consideration and adoption.


Appendix A to this report combines three Strategies together with the Council’s Minimum Revenue Provision (MRP) Statement.  Its format has been developed to meet the requirements of statutory guidance issued under Part 1 of the Local Government Act 2003, with particular reference to CIPFA’s Prudential Code of Practice and Treasury Management Code of Practice.




The Corporate Finance Manager delivered a presentation on the report: 

·                     The document was a comprehensive report and included information on capital strategy, investment strategy, treasury strategy policy statements, minimum revenue provision, prudential and treasury indicators and mechanisms for control of the Council’s finances. The Council were required to produce this report on an annual basis by CIPFA.  

·                     Responsibilities for these strategies and policies were with members, the senior management team and the treasury management team.  

·                     An update was given on some changes which had been made to the report before it would go to the Executive Committee following this Committee.  

·                     The strategy sought to ensure that the Council’s capital investment and everything around that including financing, borrowing and future revenue budgets, were affordable, prudent and sustainable.  

·                     Public Works Loan Board (PWLB) borrowing was restricted in November 2020 for the Council and other local authorities nationally who had undertaken investments in commercial strategies. The Council’s strategy therefore had to work around this.  

·                     The report included details of the Council’s minimum revenue provision (MRP) and this would be reviewed by the auditors who would examine whether the Council was making adequate provision for debt repayment.  

·                     The Council had various investments, of which the commercial properties were the largest. 

·                     The report provided information on the Council’s Treasury Management.  

·                     The report detailed the Council’s net turnover versus expenditure.  

·                     It was raised that there was an error in two figures in the report and the correct figures were provided.  


During the Debate 

·                     It was asked if the financing costs to the authority for interest on loans and the MRP for debt were 1.24% of turnover in 2020/21 but would increase to 4.02% of turnover in 2021/22 and would continue to increase as a percentage in the following years. Officers acknowledged that this was correct.  

·                     It was asked how the Council’s investments and the financing costs associated with them would be kept safe and under control once the new authority was formed. Officers responded that a MRP would still be required and reviewed by the new authority’s auditors. It may be that the new authority would make some voluntary debt repayments which was something that Somerset West and Taunton Council had done to manage the pressure of debts.  

·                     It was raised that the financing costs reduced in 2022/23 but the proportion of turnover increased. Understanding was that the capital on the investment properties would be being paid off so it was asked if the percentage should go down rather than increase. Officers responded that the figures went up based on predictions that interest rates would continue to rise but figures could change based on interest rates. Borrowing strategies were also applied by officers to achieve best value for the Council’s borrowing costs. This was done using a balance on long-term, medium-term and short-term borrowing. For the Housing Revenue Account (HRA) the HRA’s assets long life assets and so would more likely use long-term borrowing. But short-term borrowing was also undertaken to enable the new authority to make different decisions should they wish and to ensure they were not tied down and medium-term borrowing was also being undertaken to ensure best value.  

·                     It was asked if officers could confirm that yield per capital investment was being achieved on the properties the Council had invested on over the last 12 months. Officers responded that £98m had been invested into properties and the return for those properties had been built into budget projections. These returns would be monitored as part of budget management but was not part of the strategy report.  

·                     It was asked if the Council had to borrow money from banks or whether it could borrow from government or other local authorities. Officers responded that banks tended to charge higher interest. Officers looked at local authority to local authority borrowing and had done well at securing that type of borrowing. Borrowing options had had to be considered more carefully since the Council was no longer able to easily access PWLB borrowing. If it transpired that PWLB borrowing was still available to the Council then it would be used. The Council would not take out bank loans, though there may be some historical bank loans that the Council still had.  

·                     It was asked if it was the case that the Council could not borrow from PWLB for a period of three years after taking out borrowing for yield. Officers responded that they would provide a written response. The Director from Grant Thornton responded that there previously were conditions that a local authority seeking to use PWLB borrowing had to provide a three-year capital plan in which the stipulated that the borrowing would not be used for commercial investment, however, things had moved on since then and rules could have changed.  

·                     It was asked if the inability to borrow PWLB money would transfer to the new authority or whether the new authority would be able to access PWLB money. Officers responded that this question had been posed to PWLB but there had not yet been a response. Some authorities in Somerset had not used commercial investment.  


The Audit and Governance Committee resolved to carry the recommendation in the report: 

2.1 Full Council is recommended to approve the CIT Strategies and MRP Statement for adoption with effect from 1 April 2022 


Supporting documents: