Agenda item

The purpose of this report is to present the Treasury Management Strategy Statement (TMSS) and Annual Investment Strategy (AIS) for 2025/2026 and to enable the Audit and Governance Committee to scrutinise the report prior to taking it to Full Council on 19 March 2025.

[20 Minutes]

[Councillor Stanley re-declared his Personal Interest at the start of this Item]

          Upon the invitation of the Chair, the Senior Business Partner presented the Treasury Management Strategy & Annual Investment Strategy 2025/26 report, which also contained updated information for quarter 3 to 30 December 2024. She explained that Treasury Management was the management of borrowing, investments, cash flow, banking and money market transactions. She highlighted paragraph 4.3.4 on page 174, which updated that Close Brothers, one of the UK's largest providers of motor finance products, were under investigation due to issues in the disclosure of commission payments to customers. This had caused a ratings downgrade, and currently the Fitch rating did not meet the minimum criteria in category 3. They were therefore suspended from further investments for the Council until such times as the position improved.

The Prudential Indicators summary could be found in Appendix 2, and the details were within Appendix 1.

There were two external borrowing limits (page 166). The 2024/25 operational boundary limits were set at £78m and authorised borrowing limits were £83m. It was being requested that the 2025/26 limits be increased to £85m and £90m respectively, which was due to an increased capital investment and therefore capital financing requirement for 2025/26.

Appendix 11 stated that further consultation regarding IFRS 9 had closed on 15 January 2025, and it was decided that there would be no continuance of the override after 31 March 2025. The Senior Business Partner updated that the Department for Levelling Up, Housing, and Communities (MHCLG) had notified the Council earlier that day that they had decided to implement transitionary arrangements for investments already in place at the end of the financial year on 01 April 2024. The override, therefore, would continue to apply for these investments until the 1 April 2029. Any new investments taken out after the 1 April 2024 would be subject to IFRS 9 compliance and would require fair value movements to be accounted for.

          The Group Head of Finance and Section 151 Officer explained to Committee that the recent news regarding IFRS 9 was very good news. They had built up a reserve to mitigate the risk, and despite the risk being moved back four years, they would likely keep the reserve where it was. It was very good news they currently did not have to charge the loss of capital value against the revenue account, and it may be that the capital value increased over the next four years. He clarified the reason for the downgrading of Close Brothers was not because it was thought there was a risk of them collapsing, but was due to reputational reasons. The Treasury Management experts, LINK, had confirmed the risk of investments held with Close Brothers was no greater than any other normal investment risk.

          The Chair invited questions and debate and the following points were raised:

• It was asked whether the Council would be removing investments with Close Brothers. The Group Head of Finance and Section 151 Officer explained the investments matured in November and they would remain until then, however unless the situation had changed the Council would not be re-investing in Close Brothers.
• It was asked whether ADC’s investment in other councils would cause any issues with devolution. The Group Head of Finance and Section 151 Officer explained this would not cause issues as where relevant, investments would carry to the new unitary authorities.
• It was asked whether ADC would be reinvesting with the Overseas Chinese Banking Corporation, as there were concerns around their humanitarian record, and they did not have the highest rates of return. The Group Head of Finance and Section 151 Officer explained that the investments needed to be primarily based around Security, Liquidity and Yield. It would be very difficult to look at exactly where other counterparties invested money, and these may also not be desirable. The Senior Business Partner explained Overseas Chinese Banking Corporation were in the highest category, and the Council invested in a range of investments in that category, not just the top return rate, in order to spread the risk.

The recommendations were proposed by Councillor Wallsgrove and seconded by Councillor May.

The  Committee

RECOMMEND TO FULL COUNCIL that

1.       The Treasury Management Strategy Statement for 2025/26 be approved and adopted.

2.       The Annual Investment Strategy for 2025/26 be approved and adopted.

3.       The Prudential Indicators within the TMSS and AIS for 2025/26, be approved.

4.       An operational boundary borrowing limit of £85M for 2025/26 as shown in Appendix 2, be approved.

5.       An Authorised Borrowing Limit of £90M for 2025/26 as shown in Appendix 2, be approved.