To follow.

The Interim Treasury and Investment Manager, PSPS Limited presented Members with the Quarter 1 Treasury Report (pages 1-25 of the Agenda refer).

Members were informed that the purpose of the report was to provide the Committee with the 2022/23 Quarter 1 update on the Councils Treasury Management Strategy Statement and Annual Investment Strategy.

Reference was made to the Treasury Management Update (Appendix A pages 7-25 refer). The following areas were highlighted to Members under the Economic Update:-

• Further rise in Consumer Price Index (CPI) inflation to a new 40-year high of 9.1% in May.
• Bank Rate rise to 1.25%, taking it to its highest level since the Global Financial Criss.
• The Monetary Policy Committee (MPC) had now increased interest rates (pages 8-9 of the report refers)

(N.B A detailed commentary provided by Link Group was detailed at Appendix A1)

The Interim Treasury and Investment Manager detailed in brief the interest rate forecasts (pages 9-10 of the report refers). Further reference was made to the balance of risks to the UK economy which included downside risks to current forecasts for the UK gilt yields and PWLB rates, (page 11 of the report refers).

Furthermore, reference was made to the Treasury Management Strategy Statement for 2022/23 which included the Annual Investment Strategy approved by Council on 2nd March 2022 and set out the Council’s investment priorities these being security of capital, liquidity, and yield.

Members were referred to the investment performance year to date as of 30 June 2022 and the Councils budget for investment income being £1.3m. It was noted that the outturn for investment income for 2022/23 was expected to overperform due to the prevailing interest rates that were now available.

Reference was made to a table detailing cash investments held by the Council as of 30 June 2022 (Appendix A page 13 of the report refers). In addition, a graph detailing longer term investment rates and a breakdown of Council purchased property fund units was detailed at page 14 of the report.

The performance of property and valuation of these funds was shown at page 16 of the report. Also detailed was an analysis of dividend distributions received since the purchase of the property funds to 30 June 2022. Furthermore, at page 17 a table showed the Councils borrowing position at the quarter end.

Members were invited to put their comments and questions forward.

Comments were made around the growing interest rates and how these would protect the Council from growing costs and what this would look like in the future. Further reference was made to £20m in UK Debt Management Office (DMO), (page 13 of the report refers).

The Treasury Investment Manager explained that the DMO was effectively the UK Government and was part of the Public Works Loan Board the Council could place deposits with them for any duration up to a maximum of 6 months, the intention over the next few months was to try and get some of these deposits out for longer period.

Members were advised that the DMO placing was part of this strategy which enabled the Council to be in a ‘cash short’ position and as rates improved the Council could take advantage of that. In addition, the Council’s finance officers had been placing funds on longer fixes of significantly improved interest rates. Members were further advised that due to the size of the Council’s cash balances there was likely to be a ‘cushioning effect’ due to the interest rate improvement and the Council were currently modelling that.

Further comments were made with regard to: -

• Reference to a significant investment in another Authority - what diligence was used when the Council invested money such as that? Members were assured that finance Officers did consider very carefully where their funds were placed. It was this Committee’s role to scrutinise that strategy.

• Budget setting for next year in terms of pay inflation for staff and what impact this would have on the budget setting process in terms of the uplift?  Members were advised that this was being modelled as part of the budget process.

• Inflationary pressures on wages, fuel and the town fund project would the increase in investment income cover all those challenges?  The s151 commented that t this work is currently underway and we will need to see what the overall position would be for next year, there was a possibility of withdrawing from reserves to smooth out any impacts of short term fluctuations.

In response to a query about individual Council’s finances and reporting processes, Members were assured that ELDC’s finances remained completely sovereign and were not impacted on by the other authorities financial positions.  The only costs that were spread were shared resources within the Memorandum Of Agreement (MOA) such as the shared management arrangements and what was undertaken by PSPS.

• What discussions were taking place within the Corporate Management Team around potential changes in political leaderships and changes in government nationally? This impacted on local government and changed dynamics and strategies. The fact that a lot of the Councils systems were within PSPS and not across all three authorities, meant there would be no huge difficulties if change was to occur.

Following which it was,

RESOLVED

That the Treasury Report Quarter 1 be noted.