The report of the Executive Director of Resources (Section 151 Officer) is attached.

Contact:  James Walton (01743) 258915

The Committee received the report of the Executive Director of Resources (Section 151 Officer) – copy attached to the signed Minutes – which proposed the Treasury Strategy for 2024/25. It set out the arrangements for how the council would appropriately manage its arrangements for banking, cash flow management, investments, and borrowing, supporting the delivery of the MTFS and The Shropshire Plan.

In response to a query, the Executive Director of Resources (Section 151 Officer) explained that Link Group Advisers was the name of the advisers used by the Council over many years (in common with other local authorities).  They were part of Capita and provided treasury advice, background information around where the economy was and any projections around that and their advice was sought in any treasury decisions undertaken by the Council. They provided daily advice around any organisation on the Council’s lenders list, for example, if they felt it was not an organisation that the Council would want to lend with etc, as well as regular, more long-term information and data analysis for use in managing the Council’s position.

In response to a further query, the Executive Director of Resources (Section 151 Officer) explained that the Council had an agreed lenders list, which set out those organisations that the Council was willing to invest in, and although the list did not change significantly, if any advice provided gave rise to any questions they could go back and ask for that to be investigated.  On the back of that a schedule was then produced which was signed by himself and circulated to those officers who could make those investments, so they did not inadvertently invest in an organisation which the Council had decided it did not wish to invest in.

In response to a query around general reserves and the amount of savings required, the Executive Director of Resources (Section 151 Officer) reported that there was a link between the level of reserves held and the level of cash held, in the same way that there was a link between the level of capital receipts, section 106 monies, debtors and creditors etc which were all cash within the system.  There were examples around the country whereby organisations had issued a section 114 notice although their treasury position had not changed.  So, although not illiquid, the cash held within the organisation was robust but the amount of cash coming in for services and accounted for within a year was less that the amount going out from an accounting point of view. 

The bigger issue for Shropshire was that the amount of cash held by the authority had reduced over a period of time due in part to loans that had matured not being replaced as cash balances were so high.  However, over time, as capital receipts and reserves were being spent and long-term loans paid off, cash balances had reduced to £50m which was still quite a healthy amount.  The Executive Director of Resources (Section 151 Officer) explained that the management of the cash was not entirely separate but was considerably separate to the accounting position in terms of the services provided by the Council and he gave an example.  He explained that the Council’s advisors monitor the cash position/money in/out etc constantly and assess whether the Council was in a liquid state, which, he confirmed, it was.  He also confirmed that although the Council could not borrow internally to finance revenue, it could borrow against an asset.

A brief discussion ensued and the Executive Director of Resources (Section 151 Officer) answered a number of queries from Members.  He confirmed that the Council did not undertake any long-term borrowing to support any revenue deficits however through the year there was always the potential for borrowing cash for eg a day, to fund an unexpected payment, for example.  Following concerns raised by Members, the Executive Director of Resources (Section 151 Officer) stated the reasoning behind investing in local authorities whose cash position was very different to its accounting position, and which could not go bust.  He explained that the Council’s Advisors were constantly looking across the piste at the investability of all the institutions that the Council worked with so if there was a hint that there may be some issues in terms of the return of its money from a particular institution, that would be flagged and would be built into the borrowing list.  It was felt that the return of the Council’s money was more important that its return on that money.

In response to a query, the Executive Director of Resources (Section 151 Officer) explained that the Treasury Strategy limited borrowing from local authorities to 12 months however, as far as he could recall, the Council very rarely invested with local authorities over that sort of period but was happy to take the point back and advise that the Audit Committee were reluctant to invest in local authorities or that more due diligence was required.  The point would be reviewed and a response brought back.

RESOLVED:

To endorse the Treasury Strategy 2024/25.