The Head of Finance presented a report on the 2023/24 Capital Strategy and Treasury Strategy. Following presentation of the report, Members were invited to ask questions:

·         A Member, noting the fall in capital receipts and possibility of more borrowing, asked if the authority was close to the authorised limit on borrowing.  The Head of Finance responded that the authority is not close to the authorised limit for debt because of the internal borrowing strategy. It will be necessary to monitor borrowing costs against net budget as capital investment plans are developed over the medium term. The authority has been successful in attracting grant funding for the capital programme and hopefully more will follow to allow further capital investment.

·         A Member sought clarification about the projections for assets on the medium term financial plan and referred to the decline in capital investment over 5 years. It was asked if this reflected the existing plan or if the council’s ability to identify new areas for significant capital investment is limited.  The Head of Finance, reflecting on the core programme, noted that prior years were significantly impacted by the investment in the 3-19 School in Abergavenny and the Crick Rd replacement care home. The authority must be mindful of what is an affordable budget based on the revenue budget and the amount of affordable borrowing. The core programme is supported by the settlement from Welsh Government, a small amount of capital receipts and reliance on external grants. The level of borrowing detailed is the amount considered to be affordable and sustainable for the Council.

·         A Member asked if the Capital Strategy and the medium-term financial plan are considered at the same time.  The Head of Finance explained that the medium-term financial strategy is based on the development and approval of the Community and Corporate Plan. The Capital Strategy and medium-term financial strategy will wholly align. The capital and revenue budgets are closely aligned.

·         Regarding commercial assets, a Member asked for a breakdown of investments revenue as the figure provided was consolidated.  It was noted that the format of the strategy is heavily prescribed by the Code.

·         A Member asked how often the value of assets for yield is reviewed and where the outcomes are reported.  The Head of Finance explained that the Investment Committee explores options and the exit strategy at each meeting.  Additionally, the Estates and Finance teams liaise regularly about the positioning of the investments and returns to ensure returns justify risk.  Commercial investments continue to provide a net income stream that would have to be replaced with an alternative if a decision was taken not to continue.  Exit strategies have been explored to consider the consequences of disposal. In response to a question, it was explained that the purpose of the table is to demonstrate that the authority is not overly reliant on commercial investments income as a proportion of the budget.  Net income is reported in monitoring reports.

·         A Member asked about the environmental and social elements of the policies and asked when a framework will be developed. The Head of Finance reported that discussions with the Treasury advisers have taken place and the current position is that the information available is immature and frameworks are developing.  It was agreed that the developing position will be reported quarterly. It was explained that time and resources will be required to monitor this aspect.  The authority has a commitment to the prioritisation of responsible, sustainable, and ethical investments.  In response to a question, it was confirmed that there are regular meetings with the advisers to develop the policy into a framework.

·         The Chair asked about the status of the Investment Committee and was advised by the Deputy Chief Executive that it is planned to bring a report to Governance and Audit Committee, Scrutiny then to Full Council regarding Investment Committee.  A meeting of the Investment Committee will be convened soon to review performance and to receive the report. All usual arrangements regarding overseeing the investments portfolio will continue and an interim update will be provided to Investment Committee Members via e mail and to Governance and Audit Committee at its meeting on 15^th June 2023.

·         A Member asked for a trend analysis of the value of the commercial investments year on year, also for the income received that contributes to services. 

·         Referring to the Solar Farm, a Member asked if the Council is looking to increase capacity at Oak Grove and/or increase sites especially in view of e.g. sustainability and Greener Gwent. The Deputy Chief Executive explained that if either suggestion delivered policy objectives, and generated a return to the Council, it would be a good outcome.  Moreover, there are sites in the replacement Local Development Plan brought forward by the Council and other landowners.

·         A Member referred to the Newport Leisure Park and  the restraints on e.g. Public Works Loan Board borrowing and asked if there is an exit strategy.  It was explained that the exit strategy is reviewed at each meeting of the Investment Committee. It is not considered a good time to sell and there is good interest in the site so the focus is on filling the current voids.  It was confirmed that under the code guidelines, the Council is not limited in its ability to access PWLB loan funding nor its ability to make  improvements to the site.

As per the report recommendations, the Governance & Audit Committee considered the draft Capital strategy for 2023/24 and endorsed it for onward circulation and approval by full Council.

Additionally, the Governance & Audit Committee considered the draft Treasury management strategy for 2023/24 and endorsed it for onward circulation and approval by full Council.  This includes the:

·         2023/24 Minimum Revenue Provision Policy Statement

·         2023/24 Investment & Borrowing Strategies

The Governance & Audit Committee noted the requirement to review the Council’s treasury management activities on behalf of the Council by receiving quarterly treasury management activity updates during 2023/24 as per the requirements of the updated CIPFA Treasury Code of Practice.