Minutes:
The Director of Finance,
Governance and Property outlined the report, and stated that the
Capital Strategy was a new requirement for 2019/20 and incorporated
the Treasury Management Strategy. He stated that the main purpose
was set out on page 27 and provided a high-level overview of
capital expenditure levels, capital financing and treasury
management activity. He highlighted a number of tables to the
committee which set out the summary figures including capital
expenditure, capital financing, the Capital Financing Requirement,
borrowing, and a summary of the overall treasury position. He
described the significant press interest since Cabinet had
considered the six-month position last week, and he addressed some
of the comments that had been published, so the Council’s
position was clear. The Director of Finance, Governance and
Property explained that although Thurrock were quoted as having the
highest level of short-term borrowing, Thurrock were by no means
the highest borrower. He outlined the reasons for short-term
borrowing, which explained that Thurrock had taken the approach
since August 2010. He clarified that the Local Authority and
related Treasury Market had between £20billion and
£30billion of cash available that had to be lent or deposited
somewhere, and estimated that had all of the Council’s
borrowing been through the Public Works Loan Board, Thurrock would
be paying on average additional £15million per annum. He
highlighted that the Local Authorities money markets were not
linked to the bank base rate, and so were not as open to interest
rate fluctuations, and was simply about the amounts of surplus cash
available, and how much others needed.
The Director of Finance, Governance and Property then described
some facts and figures from 2018/19 and described how the Council
had taken out loans from a number of different Local Authorities,
the duration of which were between one month and one year, with
rates ranging from 0.4% to 1.15% depending on the duration. He then
outlined what the Council used the funds for, mainly being capital
expenditure on buildings, infrastructure and IT; and investments
that were made relating to assets that Thurrock had security over
and were repayable, which were mainly bonds on renewable energy
assets that raised additional income that the Council could
reinvest in frontline services. He described how three-quarters of
the Council’s borrowing was repayable on maturity, which was
currently between three and eight years, but the bond issuer had
the right to make early repayments. He stated that based on this,
even if long-term borrowing had attractive rates, it would not be
prudent to borrow for longer terms when the need was for a shorter
period.
The Director of Finance, Governance and Property then drew the
Committee’s attention to Table 1 on page 27 of the agenda
which set out projected capital and investment expenditure, and
clarified that these were not always uniform as opportunities did
not arise in that fashion. He clarified that over two years
investments were forecasted as an average, and the prudential
indicators had been adjusted in the budget report in February 2019.
He then drew the Committee’s attention to Table 7 on page 31
of the agenda, and mentioned that these figures were published
every year and agreed by Members in February and whenever else was
necessary. He clarified that actuals against these were then
reported at least twice a year to Cabinet, and were part of the
Council’s accounts. He stated that the upper limit for
2019/20 was set at £1.453billion and the Council were set to
be within that limit. He summarised and highlighted the table at
2.32 on page 41, which showed that the Council were projecting an
annual surplus in the region of £30million, between interest
payable and interest received that had been invested in frontline
services, namely the environment and social care, as part of the
approach to becoming financially self-sustaining.
The Chair opened debate and sought two areas of assurance, the
first being that the Council were operating within agreed levels of
risk and exposure, and the second being that there was a level of
democratic oversight regarding investments. He asked how much
Members saw of potential investments, and felt that even though
those documents were commercially sensitive, strong levels of
accountability were needed. He felt that an additional
recommendation would be useful to ensure democratic accountability,
and proposed an Investment Review Committee who could oversee the
process. The Director of Finance, Governance and Property replied
that there was a level of risk associated with investments, but the
biggest risk factor was a change in central government policy,
which currently appeared to be minimal. He felt that the majority
of government bodies were concerned with investments in areas such
as shopping centres, where economic fluctuations could affect
income. He stated that Thurrock had not undertaken any investments
such as these, and had invested in the renewable energy sector. He
felt there was no real risk associated with this sector as there
had never been any major disasters in a wind farm or solar park,
and their investments were spread over 40 sites. He clarified that
the Council were signed up to the assets and not the companies;
were insured against loss; and had good maintenance contracts. He
mentioned that the Council only invested when the assets were
already up and running, and had been so for a year or more to
ensure that they were working correctly and to see real yield
figures. The Director of Finance, Governance and Property then
discussed the level of democratic oversight, as it was difficult to
differentiate between everyday levels of treasury management and
bigger investments. He commented that any new venture over
£10million and over one year had to go to the Council
Spending Review, which was made up of Leaders from all groups. He
mentioned that he had done some research into the levels of
democratic accountability across a variety of Local Authorities,
and some provided more freedom, whilst others provided less. He
summarised and stated that he was already considering an informal
Treasury Management Committee, or increased reporting through Key
Performance Indicators.
A debate then ensued regarding the wording of the proposed
additional recommendation and the following was agreed: “the
Corporate Overview and Scrutiny Committee recommend to Cabinet that
it considers the best way to increase democratic oversight of
investment.”
RESOLVED: That:
1. The Committee commented on the 2020/21 Capital Strategy for
consideration by Cabinet at their meeting on 12 February
2020.
2. The Committee recommended to Cabinet that it consider the best
way to increase democratic oversight of investment.
Councillor Churchman left 20.22
Supporting documents: