Agenda item

This report provides an update on the implementation (six months to 30 September 2024) of the 2024/25 Treasury Management Strategy, approved by full Council on 12 February 2024, and presents the Treasury Management Strategy 2024/25 mid-year review.

Mathew Dawson (Strategic Investment Manager) introduced the Mid-year Treasury Management Review 2024/25, highlighting the following points:

• Between March and September 2024, there was no new borrowing and very small maturity. Cash balance diminished from around £160 million to £115 million.
• Hammersmith & Fulham was under borrowing as a local authority, with an internal borrowing of £239.3 million. There would be a need to borrow before the end of the financial year. The proposed duration was five to ten years at a rate of around 5%.
• About 80% of debt was Housing Revenue Account (HRA)-related.
• As cash balances had diminished, money market funds were kept as topped up as possible.
• The average return achieved on investments managed internally for the first six months was 5.21% compared with the average six-month SONIA rate of 5.25%, which meant the average portfolio duration would have been less than six months.
• Considering the Treasury Limits and Prudential Indicators, there was still room for the Council to borrow.

Councillor Adrian Pascu-Tulbure asked when the realisation for more borrowing came about and what the Council would be borrowing for. James Newman (Assistant Director of Finance) replied that borrowing was needed as cash balances had been reducing due to internal borrowing. There was an informal threshold of about £100 million at which point more borrowing would be done. Local governments could only borrow long-term for capital purposes. Given that the Council was currently under borrowing, it could borrow significantly beyond the current level. As the ratio between General Fund to HRA was around 20:80, the plan was to borrow more HRA money before the end of the financial year at an estimated rate of 4.45%, which was also factored into the HRA business plan in terms of affordability.

Councillor Lisa Homan would like to know how long the Council had been under borrowing. James Newman responded it had been a standard treasury strategy where a local authority had balances, it would internally borrow against those balances to minimise the cost of financing. It was noted that the Council had been in this position for a while.

Councillor Florian Chevoppe-Verdier commended the healthy financial situation of the Council and asked how the new government’s intention to provide multi-year financial settlements would affect the Council’s ability to budget and resource. James Newman replied that it would bolster and strengthen the ability to plan the cost of capital within revenue.

Cllr Chevoppe-Verdier followed up by asking if that would decrease borrowing by the Council. James Newman said the multi-year financial settlement would give more clarity over the Council’s ability to finance and service debts, which would help officers estimate what could be afforded within capital and the borrowing needed.

Cllr Chevoppe-Verdier also enquired about the latest development in engaging with the Ministry of Housing, Communities & Local Government. James Newman noted that next year’s financial settlement could be expected on 19 December. There was some lobbying for more certainty going forward from the sector with the Ministry, such as the Society of London Treasurers, a group of Finance directors in London boroughs.

RESOLVED

That the Committee noted the Treasury Management Strategy 2024/25 mid-year review.