Issue - meetings

(A report by Russell Stone, Director of Finance (S151 Officer))

(A report by Russell Stone, Director of Finance (S151 Officer))

The Committee received the Mid-Term Treasury Management Report for 2025/26, presented by the Treasury and Investment Manager, PSPSL. The report provided an update on treasury performance for the first half of the financial year and confirmed compliance with the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice and the Council’s approved Treasury Management Strategy. The 2025/26 Mid-Term Treasury Report was attached as Appendix 1 within the report.

Key highlights included:

·         Borrowing Position: The Council continued to operate with low external borrowing, maintaining a strong liquidity position. External borrowing stood at £1m, with £17.3m internally borrowed against a capital financing requirement of £18.3m.

·         Repayment of LOBO Loan: The historic LOBO loan with State Street, carrying an interest rate of 11.125%, had been repaid following a one-off offer from the lender. This was replaced with a £1m Public Works Loan Board (PWLB) loan at 4.81% for five years, generating projected savings of approximately £660,000 over the remaining term.

·         Investments: Investment balances as at 30^th September were £31m, achieving an average return of 4.95% on treasury investments and 3.12% on property funds. Compliance with all prudential indicators was confirmed.

·         Property Funds: Valuations had decreased by £2m compared to purchase cost, reflecting market conditions, although overall returns remained positive when income was considered.

The report assured Members that no difficulties were anticipated for the remainder of the year and that the Council remained within approved treasury and prudential indicators.

Members commended the clarity of the report and raised several points for further explanation:

·         A Member queried whether future PWLB borrowing could include a repayment structure to reduce principal over time rather than a maturity loan. Officers confirmed that annuity options were available and would be considered at renewal to manage long-term debt prudently.

·         Members asked whether similar yields could be achieved on maturing investments. Officers advised that current market rates are lower, with one-year deposits around 4.4%, and noted that returns were expected to decline as interest rates fall.

·         Questions were raised about the impact of property fund performance and whether alternative investment strategies were being considered. Officers confirmed that property funds were under review and that options for exit would be explored when market conditions improve, balancing liquidity needs and long-term returns.

·         Members sought clarification on changes to Section 106 financing and the timing of receipts from the M&G property fund liquidation. Officers undertook to provide a written update.

·         Members noted the importance of monitoring treasury risks, particularly in light of market volatility and interest rate movements. Officers confirmed that risk appetite remained unchanged and that treasury activity would continue to prioritise security and liquidity over yield.

The Committee acknowledged the proactive approach taken to secure savings through the LOBO loan repayment and commended the Treasury team for achieving a favourable outcome.

The recommendation was moved by Councillor David Scoot and seconded by Councillor Neil Drayton.

Resolved:

That the Mid-Term Treasury Report for 2025/26 be noted and comments recorded for consideration by Council.