To receive a report from the Treasury and Investment Manager, PSPS Limited.

Sean Howsam - Treasury and Investment Manager, PSPS Limited was in attendance to provide Members with an update on changes to Statutory Guidance: "Capital Finance: Guidance on Minimum Revenue Provision" and the IFRS9 Statutory Accounting Override for Pooled Investments, pages 51 to 60 of the Agenda refer.

The Treasury and Investment Manager, PSPS Limited advised Members that the report aimed to update the Committee on recent changes to Statutory Guidance which was mainly effective from the 2025/26 financial year, and that Statutory Guidance on Minimum Revenue Provision prescribed how Council’s calculated their annual Minimum Revenue Provision (MRP) charge for all unfinanced capital expenditure which made up its Capital Financing Requirement (CFR).

Members were further advised that the Statutory Accounting Override in relation to Pooled Investments ended on 31 March 2025 and that this report updated Members on the current Government stance which was that they were not minded to extend the override.  Members were advised that the report was being presented to the Audit and Governance for scrutiny prior to its submission to Council on 5 March 2025.

Members were invited to put their comments and questions forward.

·         A Member queried the approach to handling the Council’s MRP.  In response, the Section 151 Officer advised Members that the forthcoming approach proposed to pull the Voluntary Revenue Provision (VRP) back to fund the MRP for future years which would enable the funds to be put back into the Council’s reserves as quickly as possible.   Members were advised that MRP accelerated the process of reversal of VRP, however the VRP could only be reversed to the amount set for the MRP in a specific financial year.

The Section 151 Officer assured Members that in relation to the property funds, the proposed approach was an effective way of managing the situation.

·         A Member queried the understanding of the new MRP Charge of £67,456.77 for 2025/26 from the perspective of a layperson, page 56 of the Agenda refers.  In response, the Section 151 officer explained to Members that the figure was a cost to the revenue account which could be offset by the VRP from previous years.

Members were further advised on the types of MRP and their constraints and that the 2025/26 financial year would require careful management.

·         In reference to Paragraph 2.6 - Unfinanced Equity Investments (e.g. Property Fund Investments), a Member queried whether a professional opinion that confirmed the acceptability of the approach of using a 50 year life expectancy for property assets had been received.  In response, the Section 151 Officer advised Members that a view had been taken on the suitability of a 50-year life expectancy and that a valuer’s opinion would be obtained to agree the approach.  Members were further assured that there were no concerns with conclusion of the property valuations and that discussions had taken place with a national expert from KPMG.

·         A Member queried when a report would be forthcoming to reflect the changes in regulations in relation to capital and revenue investments in property funds.  In response, the Section 151 Officer advised Members that it was pleasing to see that the funds were starting to recover their capital value and that the new Section 151 Officer would meet with the Committee and be briefed on key matters with efforts to move a report forward.  

• The Chairman highlighted that the property funds had been held for a number of years and queried the ways in which funds already held were being accounted for in terms of the MRP.

In response, the Treasury and Investment Manager, PSPS Limited explained to Members that the distributions received on a monthly or quarterly basis went into the revenue account and that at the end of each financial year the net asset value was assessed.  Members were further advised that a £1 Minimum Revenue Provision charge in accordance with statutory guidance had been used in the past and that the remaining difference was by way of a Voluntary Revenue Provision charge based on the actual change.

In conclusion, the Treasury and Investment Manager, PSPS Limited advised Members that the change required an annual MRP charge to be made irrespective of whether the valuations of the property funds had increased or decreased.

There were no further questions or comments.

Following which it was,

RESOLVED

That the report be noted.