Agenda item

The Committee received a report of the Corporate Director of Resources which provided information on the treasury management mid-year

position for 2024/25. It provided a summary of the Council’s treasury

position, borrowing activity, investment activity, treasury management

and prudential indicators as at 30 September 2024 and an overview of

activity during the first six months of 2024/25.  The report included a brief update on the implementation of changes in accounting for leases that came into effect from 1 April 2024, which impacts on the level of debt commitments included in the balance sheet.  It set out proposals to amend the Minimum Revenue Provision Policy Statement, to change the way the Council accounts for the repayment of debt.  It was proposed to amend this policy retrospectively from 1 April 2024 to allow for MTFP savings to be delivered in 2025/26 to assist with balancing the Council’s budget next year.   The report also set out proposals to amend the monetary limits for institutions on the Council’s counterparty list, to mitigate the risk of the Council holding a relatively high proportion of its cash balances with one counterparty. The amendment to the monetary limits reflects the reduction in the overall quantum of cash balances being held currently (for copy see file of minutes).

Councillor B Kellett referred to the table at paragraph 19 in the report and asked why the net debt had decreased by £60 million.

The Head of Corporate Finance and Commercial Services explained that the Council had to borrow for the capital programmes which was needed long term to fund the programme.  However, the Council did not need to borrow if they had the cash which could be used to finance debt whilst interest rates were high.   However, this was not a sustainable position and this would be seen during quarter one of next financial year.  There was a set minimum revenue position to work out annuity for charging the repayment of debt and for levels for the bench marking of interest rates.

P Darby clarified that this approach was applied in the council and was factored into the Medium-Term Financial Plan.  The levels of assurance for self-prudent provision would be too complex to explain in full council with 126 members.  If this didn’t happen then we may have to look at service cuts, but the budget statement was positive.  Funding was a higher challenge along with high deprivation and this need to be rectified in recognition of the position beyond 2026 to improve what was forecast to build savings in the next financial year.

Mr I Rudd referred to the table at paragraph 19 compared to the balance sheet figures in March 2024 for the short term position, as this did not have the cash equivalent and he asked if this was difficult to include.

The Head of Corporate Finance and Commercial Services noted that this related to the cash balance held by schools.  Debt was paid over a period with interest rates set.

P Darby stated that when other councils made provision for MRP in the year they built into their budget for the following year via their reserves but  he did not recommend for DCC to take this approach.

Mr C Robinson asked if savings would rise to £3.6 million, then what would the net affect be in the year and if this remained to be the case for a year, then would it cost more to make the long term saving.

The Head of Corporate Finance and Commercial Services stated that the net position over the long term would be nil as this would not affect the underlining debt or the interest payment. Instead it would improve the profile set aside where there would be a reduction in last year and a higher revenue provisional change in later years.  The wider fund sources would inflate council tax and the resourcing level of debt over time and the value of money in later years would be eroded.

P Darby noted that there would be the same amount of savings as revenue provision. 

Mr I Rudd asked what was set aside and how much council tax must be paid in the year to repay the full amount of the loans.

The Head of Corporate Finance and Commercial Services responded by explaining that the council demonstrated through the audit statement the amount set aside, which showed that there was plenty of  revenue in the budget to repay the debt.  The profile would be changed to account for council tax during the financial year.

Resolved:

i)               That scrutiny and challenge be provided to issues set out in the report.

ii)             That the findings and recommendations of the report be endorsed in advance of 11 December 2024 when it would be submitted to Full Council.