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Agenda item

Investment and Borrowing Strategy 2022/23 (C4124)

Purpose: To consolidate the investments and borrowing strategy for the year ahead by detailing how and where the Council will invest and borrow in the forthcoming year, within a particular framework.

The report also has a statutory footing under the Local Government Act 2003.  The Council must have an approved (by Full Council) Investment and Borrowing Strategy (or similar) for the forthcoming financial year. The Council is also required to comply with other regulatory requirements as highlighted in this report. The Council must also detail its compliance with the relevant Treasury Management indicators (as highlighted in this report).


Council considered a report (Agenda Item 4) which sought to consolidate the investments and borrowing strategy for the year ahead, and detailed how and where the Council would invest and borrow in the forthcoming year within a particular framework. Council noted that the strategy was monitored throughout the year, with a mid-year report considered at the Government and Ethics Committee and an annual report presented to Members.


MOTION: Proposed by Councillor Ross Mackinnonand seconded by Councillor Howard Woollaston:


That Council agree and adopt the proposed Investment and Borrowing Strategy for 2022/23.


Councillor Mackinnon in introducing the report explained how the Strategy set out the approved institutions for treasury assets, the prudential limits for those investments, the accrued sources of borrowing, the recommended borrowing limits for the next three years, and also provided a long term forecast for the Council’s borrowing requirements. The Strategy authorised the Council to place deposits in UK Government bonds, UK Building Societies and banks with sound credit ratings, other local authorities, and triple rated money markets. The Council was also authorised to lend to registered charities, public sector bodies and Council-owned companies and joint ventures. He highlighted a change this year to the amount of funds the Council could invest with any one institution which had increased from £5m to £8m, noting that the £5m limit had been held over the past 25 years.


Councillor Mackinnon noted that it was not appropriate to change the Strategy to reflect inflationary changes without a significant change in risk. The Council had, in fact, been constrained in the past by putting funds in UK government bonds at very low rates of return. The Strategy proposed an increase in borrowing over the medium term to support the Council’s Capital Strategy, with the borrowing primarily undertaken through the Public Works Loans Board, and he explained how other options will be explored as well.The Strategy also included a subtle shift to hold more borrowing in the short term to take advantage of lower rates. This had already generated significant financial savings in the revenue budget and was forecast to continue to do so. It was a change of emphasis, but not one that would undermine the financial position of the Council.


The report also set out the Council’s commercial property portfolio and the investment returns made to the Council. Councillor Mackinnon highlighted how the portfolio had performed well with a consistent return on investment, and he expected this to continue in the future.               


Councillor Jeff Brooks noted the upwards trajectory of servicing debts, a figure that was due to increase and would end up at around £275 per household per annum. He agreed that borrowing had to be done in order to deliver the capital programme but argued that the Council’s borrowing could be too high in light of the current international situation (which was causing a fluid system for interest rates and increased risks).     


Councillor Steve Masters queried the £8m drop in the property portfolio value and asked what advice had been received from fund managers on overall trends in the capital value of properties, and whether there were concerns moving forward.


Councillor Howard Woollaston suggested that Councillor Brooks’ assessment of borrowing, while correct in some aspects, overlooked the fact that a large proportion was invested in property and other investments that were generating income.


Councillor Mackinnon agreed with the principle that Members had a role to play in monitoring the Council’s borrowing. He highlighted that the Council was not able to borrow money to fund day-to-day spending but was using borrowed funds to invest in assets which benefited West Berkshire residents in the longer term. He argued that it was misleading to talk about the fluctuating capital values over the short term as the commercial property portfolio was a long term investment over many decades.


The Motion was put to the meeting and duly RESOLVED.

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