Agenda item

Treasury Management Outturn 2020/2021 and Update 2021/22


The Finance Manager presented the outcome of the Treasury Management activity during 2021 and the updated position for 2021/22 for the end of May. At year end there was a net indebtedness of £260.4m due to the covid 19 pandemic which had dominated 2020/2021.  The bank rate had been cut to 0.1% in 2020 and that rate has continued to date but with the relaxation of the lockdown restrictions, growth was expected to recover later in the year.  The borrowing strategy for 2020/21 was to take out temporary borrowing to take advantage of the low interest rates but reviewing opportunities for new longer term borrowing where appropriate.  The temporary borrowing strategy had contributed to surplus treasury management returns of more than £26m since 2015/16 which had reduced the impact of cuts and help protect services.  The 2021/22 strategy remained consistent and no long term investments were undertaken in order to reduce counterparty risks and long term borrowing costs.  Regular advice was sought from Arlingclose and PWLB borrowing was in line with the programme.


The Group Accountant provided some background with regards to the regulations and the CIPFA codes to which the Council had fully complied.  The 2020/21 outturn set out the portfolio with a comparator of a net increase on indebtedness due to increased borrowing and a reduction in investments which was a reflection of a position in time and cash flow dependent.  Some additional investment had taken place into NuPlace.  The economic climate focussed on the markets and credit review, the impact of the covid 19 pandemic and the brexit trade del which came into force at the end of December 2020.  Borrowing remained constant and assumptions for the budget and the interest rate of 0.75% which was in line with the requirements.  With the impact of covid the bank rate fell in March 2020 and remained there for a year.  No PWLB loans had matured during the year.  The borrowing strategy remained constant with prior years with all short term borrowing managed in house and predominantly focussed on the impacts of the financial market.  Shropshire Council debt repayments had an overall surplus of £5.7m and were in a good position.  The treasury limits were compliant against the indicators.  Two consultations have taken places in relation to CIPFA code and the prudential indicators and there will be changes that have come out of the consultation.  Accounting standards for leases had been deferred until 2022/23.


During the debate some Members asked why Shropshire Council rates were at such a high level and how long was left to pay off the debt.


The Finance Manager explained that the rate formed part of the Unitary agreement and at that time the rate was low and it was up to Shropshire Council how they managed their strategy.  Information would be circulated to Audit Committee Members.


The Director: Finance & Human Resources confirmed that the debt was a reducing balance and that the conditions were drawn up at the time of the agreement.  With PWLB loans there was significant premium to pay this loan off early and it was more cost effective to pay a reducing amount each year.


Upon being put to the vote it was, unanimously:-


RESOLVED – that the contents of the report and the performance against the Prudential indicators were noted.

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