Agenda item

To consider the report of the Director of Finance (copy enclosed).

The Committee considered the report of the Director of Finance on the Council’s investment activity for the 2025 / 26 financial year in accordance with the Chartered Institute of Public Finance and Accountancy (CIPFA) Treasury Management Code, and the Council’s Treasury Management Policy and Treasury Management Practices.

It was noted that the CIPFA Code of Practice required authorities to report on the performance of the treasury management function at least twice yearly. The report provided detail in respect of the following areas:

·                External Context – Appendix 1 to the report, prepared by the Link Group engaged by the Council to provide treasury management consultancy and advice services, provided an overview of the external economic environment. 

·                Local Context – The Council did not hold any external debt during 2025 / 26, with the exception of a five-year hire purchase agreement relating to the acquisition of two tractors in April 2023. The Council remained under-borrowed by £8.552m, attributable to the cost of waste collection vehicles and investment in the Blackwater Leisure Centre.

·                Investment Activity (April 2025 – March 2026) – Members were advised that the level of investments held by the Council had seen a decrease of £3m during this period and the report highlighted the reasons for this. The Council continued to take a prudent approach to investment, with priority given to security and liquidity over yield. 

·                Performance – Budgeted Income and Outturn – The average income returns on the Authority’s investments were detailed along with the overall investment for the year.

·                Compliance with Prudential Indicators and Treasury Management Strategy - As set out in Appendix 1, it was noted that all Prudential Indicators for 2025 / 26 had been complied with. All treasury management activities undertaken during the second half of the year complied fully with the CIPFA Code of Practice and the Council’s approved Treasury Management Strategy.

·                Outlook for 2026 / 27 (summary of advice from Mitsubishi UFJ Financial Group (MUFG) Corporate Market) - The Committee noted the updated economic outlook from MUFG Corporate Markets, which indicated that inflationary pressures and energy market uncertainty had delayed expectations of interest rate reductions. As a result, the next Bank Rate cut was not forecast until 2027, with gilt yields expected to remain under pressure from inflation and wider fiscal challenges.

The Chairperson put the recommendations set out in the report.

In response to comments raised, the Director Finance advised that:

·                Up-front payment dates had been agreed with Parish Councils, and other organisations, such as Essex Fire and Essex County Council. This ensured that the Council knew when monies needed to be paid out and could meet payment dates. The slight differences between these timings were what enabled the Council to make those investments. The collection rate remained strong at slightly over 98%.

·                Investment decisions were framed within the Treasury Management Strategy, including counterparties, credit ratings and capitalisation levels. Advice was also taken from the Link Group, which provided more technical guidance on the way the Council invested. In simple terms, the Council followed the market rather than seeking particular advantages or disadvantages by scrutinising the accounts of individual companies, a practice known as passive investment.

·                Borrowing from the Council’s reserves had been referred to in the Treasury Management Strategy. In addition, the Link Group had helped the Council navigate the fluctuations in borrowing and consideration of the ‘cost of carry’, being the total expense of holding an investment or asset over time, including interest on borrowed money, storage fees and insurance.

The Chairperson moved the recommendations which were duly agreed.

RESOLVED

(i)             that the 2025 / 26 Treasury Outturn report be noted, including compliance with all treasury management indicators during the course of the year and the positive result from investment income secured;

(ii)            That the alignment between the Treasury Management Outturn, the Budget Outturn for 2025 / 26, and the 2025 / 26 (pre-audit) accounts, which provided confirmation of the overall reported position, be noted.