Agenda item

Cabinet Member: Cabinet Member for Croydon Renewal, Councillor Stuart King

Cabinet Member for Resources & Financial Governance, Councillor Callton Young

Officer: Interim Director of Finance, Investment & Risk, Chris Buss

Key decision: No

The Leader of the Council delegated authority to the Cabinet to make the following decisions:

RESOLVED: To recommend to Full Council

1.            The Treasury Management Strategy Statement 2021/2022 as set out in this report including the recommendations:

1.1.That the Council takes up borrowing requirements as set out in paragraph 4.12 of the report.

1.2.That for the reasons detailed in paragraph 4.17 of the report, opportunities for debt rescheduling are reviewed throughout the year by the Director of Finance, Investment and Risk (S151 Officer) and that they be given delegated authority, in consultation with the Cabinet Member for Resources & Financial Governance and Deputy Leader (Statutory) and Cabinet Member for Croydon Renewal in conjunction with the Council’s independent treasury advisers, to undertake such rescheduling only if revenue savings or additional cost avoidance can be achieved at minimal risk in line with organisational considerations and with regard to the Housing Revenue Account (HRA) as set out in the Council’s Medium Term Financial Strategy 2020/2024.

1.3.That delegated authority be given to the Director of Finance, Investment and Risk (S151 Officer), in consultation with the Cabinet Member for Finance and Resources, to make any necessary decisions to protect the Council’s financial position in light of market changes or investment risk exposure.

2.            That the Council adopts the Annual Investment Strategy as set out in paragraphs 4.19 and 4.20 of the report.

3.            That the Authorised Limit (required by Section 3 of the Local Government Act 2003) as set out in paragraph 4.13 of the report and as detailed in  Appendix C of the report be as follows:

  2021/2022              2022/2023                 2023/2024

£2,037.804m          £2,090.958m            £2,134.928m

4.            That the Council approve the Prudential Indicators as set out in Appendix C of the report.

5.            That the Annual Minimum Revenue Provision Policy Statement (required by the Local Authorities (Capital Financing and Accounting) (England) (Amendment) Regulations 2008SI 2008/414) as set out in Appendix D of the report be approved.

6.            That the Council’s authorised counterparty lending list as at 31^st December 2020 as set out in Appendix E of the report and the rating criteria set for inclusion onto this list be approved.

7.            That the Council adopts the Capital Strategy Statement set out below in section 3 of the report.

8.            That in the event of the Council receiving a Capitalisation direction that requires amendments to any part of the statements, strategies or policies contained in this report that the statutory Chief finance officer (Section 151 officer) be authorised to implement those changes and to report them to the next meeting of the Cabinet and council.

The Cabinet Member for Croydon Renewal (Councillor Stuart King) noted that the report set out the council’s treasury management objectives for the forthcoming year and highlighted that the indicative net borrowing requirement of £95.78 million was considerably lower than the equivalent figure considered the previous year. This, it was noted, was as a result of significant changes to the capital programme which would be considered at the following Cabinet meeting as part of the budget report. It was felt by the Cabinet Member that the reduction in borrowing reflected the Administration’s determination to put affordability at the centre of its approach to borrowing.

It was noted by the Cabinet Member that the report reflected the actions which had been taken in response to the recommendations contained within the Report in the Public Interest in relation to the treasury management strategy and the minimum revenue provision statements.

The Shadow Cabinet Member for Finances & Resources (Councillor Jason Cummings) stated that this report was consistent with reports from previous years with continuous increases in council borrowing. The Shadow Cabinet Member stated that there was once again increases in authorised borrowing limit and queried how much longer the council could continue to carry more debt when its ability to finance the debt was decreasing. In response, the Cabinet Member for Resources & Financial Governance (Councillor Callton Young) stated that when the Labour Administration came into power in 2014 the council’s debt levels were at £720 million and the increase in debt levels were due to the council’s social values. It was stressed that it was understood how the levels had increased, but that what was important was that the Cabinet was committed to control the council’s debt and finances overall.

The Cabinet Member for Croydon Renewal further highlighted that the authorised borrowing limit was a limit and not a target. Further reviews of the capital programme was prudent in managing the council’s finances. It was noted that the report did not include potential capital receipts which had not yet been received; including from the asset disposal programme, repayment of Brick by Brick loans and the sale of Brick by Brick sites.

It was stressed by the Cabinet Member that the Administration recognised the need to ensure borrowing was affordable and that there was a desire to ensure it was central to the council’s financial management going forward.

The Interim Director of Finance, Investment & Risk (Chris Buss) advised Members that cash flow and future borrowing did include the full cost of borrowing in terms of the capitalisation direction, but that the strategy did not include any provision for capital receipts. Members were advised that should anticipated capital receipts be taken into consideration then the value should meet the costs of the capitalisation direction.

Consideration of the overall affordability of any future capital spend would need to be taken into consideration by the council. The Interim Director advised that the budget report due to be considered by Cabinet at the following meeting would include an additional recommendation in relation to capital spend and ensuring it was affordable in terms of revenue. Every scheme on the capital programme, Members were advised, would be reviewed to ensure it was affordable.

Councillor Millson queried the provisions which had been made within the budget for potential risks that had been identified such as the end of furlough and the eviction ban as it was suggested that should savings not be met then additional borrowing may be required which may impact the Treasury Management Strategy.

In response, the Interim Director of Finance, Investment & Risk advised Members that the risks raised were one of the reason why there was a proposed increase to the council’s reserves to meet those risks. It was hoped the reserve levels would be close to £30 million by the start of 2021/22 which would go some way to meet the impact of such risks, should they arise. Furthermore, the Interim Director advised Members that most cash flow impacts were in relation to capital expenditure.

The Shadow Cabinet Member for Clean Green Croydon (Councillor Helen Redfern) stated that despite many expenses being predictable or avoidable with better financial management. However, she noted that the government’s finances had also been impacted by the challenging economic environment and queried what provisions were in place to mitigate against potential variations to Public Works Loan Board interest rates. In response, the Interim Director stated the council were not yet aware of any conditions the government may place on the organisation should the capitalisation direction be approved. Should interest rates increase, the Interim Director advised that the council may need to consider whether there was an alternative option on the market but that it was hoped that the council would not undertake a lot more borrowing should it receive all of the anticipated capital receipts which should fund the capitalisation direction.

Councillor Robert Ward queried how the profile of the minimum revenue provision (MRP) was being allowed for. The Head of Pensions & Treasury (Nigel Cook) advised Members that the minimum revenue provision was charged. It was stated that there were two forms of expenditure, that attracted MRP and that did not. For expenditure which attracted MRP, the MRP was charged in the year following the completion of the asset. As such, the Head of Pensions & Treasury stated that for 2019/20 accounts, the MRP charge was a reflection of 2018/19 assets. Members were advised that the figures at table three of the report were officer’s best estimate of the previous year and reflected the phasing of completion of capital sales.

The Leader of the Council delegated authority to the Cabinet to make the following decisions:

RESOLVED: To recommend to Full Council

1.               The Treasury Management Strategy Statement 2021/2022 as set out in this report including the recommendations:

1.1.That the Council takes up borrowing requirements as set out in paragraph 4.12 of the report.

1.2.That for the reasons detailed in paragraph 4.17 of the report, opportunities for debt rescheduling are reviewed throughout the year by the Director of Finance, Investment and Risk (S151 Officer) and that they be given delegated authority, in consultation with the Cabinet Member for Resources & Financial Governance and Deputy Leader (Statutory) and Cabinet Member for Croydon Renewal in conjunction with the Council’s independent treasury advisers, to undertake such rescheduling only if revenue savings or additional cost avoidance can be achieved at minimal risk in line with organisational considerations and with regard to the Housing Revenue Account (HRA) as set out in the Council’s Medium Term Financial Strategy 2020/2024.

1.3.That delegated authority be given to the Director of Finance, Investment and Risk (S151 Officer), in consultation with the Cabinet Member for Finance and Resources, to make any necessary decisions to protect the Council’s financial position in light of market changes or investment risk exposure.

2.              That the Council adopts the Annual Investment Strategy as set out in paragraphs 4.19 and 4.20 of the report.

3.              That the Authorised Limit (required by Section 3 of the Local Government Act 2003) as set out in paragraph 4.13 of the report and as detailed in  Appendix C of the report be as follows:

  2021/2022            2022/2023              2023/2024

£2,037.804m        £2,090.958m          £2,134.928m

4.              That the Council approve the Prudential Indicators as set out in Appendix C of the report.

5.              That the Annual Minimum Revenue Provision Policy Statement (required by the Local Authorities (Capital Financing and Accounting) (England) (Amendment) Regulations 2008SI 2008/414) as set out in Appendix D of the report be approved.

6.              That the Council’s authorised counterparty lending list as at 31^st December 2020 as set out in Appendix E of the report and the rating criteria set for inclusion onto this list be approved.

7.              That the Council adopts the Capital Strategy Statement set out below in section 3 of the report.

8.              That in the event of the Council receiving a Capitalisation direction that requires amendments to any part of the statements, strategies or policies contained in this report that the statutory Chief finance officer (Section 151 officer) be authorised to implement those changes and to report them to the next meeting of the Cabinet and council.