Agenda item

1.     The Deputy Leader, Mr Brian Collins, introduced the report and highlighted the following to Members:

 

        a)     The debt had been lowered by £68.1 million since the new Administration had been in place. It was confirmed that some of the debt had matured, and some was included in one large early repayment.

 

        b)     The £50 million early repayment released financial pressure of £680,000 per annum.

 

2.     In answer to Member questions and comments, the following was said:

 

        a)     Mr Betts clarified that the agenda item covered debt which had been

                incurred as a result of borrowing and not short-term sundry debt. He

                clarified that the main areas of short-term debt for the Council were

                around Adult Social Care and this was being examined. The exact

                debt figures could be made available to Members after the meeting,

                along with information around attempted debt recovery.

 

        b)     Mr Betts clarified that the commentary in the Treasury Update

                Report was provided by KCC’s advisors and had been included to

                provide context. The report set out what the cash holdings were at

                the maximum and minimum between 1 April 2025 and 30 September

                2025. It was explained that the figures were there to provide an

                average and demonstrate to the Committee that the Authority was

                solvent, in the event that further opportunities to repay any debt

                arose.

 

        c)     The Head of Treasury and Pensions, Mr Nick Buckland, indicated to

                Members that the Strategic portfolio which the Council held for a

                number of years was introduced at a time of low interest rate, to

                achieve a level of investment return by holding investments on a

                more long term basis. Due to changes in accounting rules, the

                portfolio is scheduled for review. A plan was currently being

                developed with advisors to establish how to best execute this.

                Consideration would be given to whether the portfolio still served a

                purpose and if so, how much should be invested, and lastly whether

                the portfolio was the right selection.

 

        d)     Mr Buckland confirmed that he was not aware of how the

                investments were selected as this took place around 15 years ago

                however he could confirm that they were designed to be akin to the

                Pension Fund, in that a range of returns would be provided over a

                period of time which generated income.  Mr Buckland confirmed that

                further information relating to stocks could be provided to Members,

                if required.

 

        e)     In relation to the small number of Lend Option Borrower Option

                (LOBO Loans) held, it was confirmed that it was the counterparty’s

                responsibility as to whether they changed the rate or whether KCC

                considered repayment and potentially borrowing from elsewhere. 

 

        f)      It was highlighted that a training session on Treasury Management

                would be arranged for Members of the Committee in 2026 to

                demonstrate how the Treasury Advisors operated and what

                considerations were given to managing investment portfolios and

                loans.

 

        g)     The current interest rate of 4.1% on the LOBO loans was less than

                what the Council would have to pay the PWLB if the debt was

                rescheduled and therefore it was not in KCC’s best interest to push

                for a renegotiation.  Mr Betts confirmed that KCC had been

                successful in managing the LOBOs and that consideration would

                only be given to changing if the lender requested a rate which was

                over and above that which they would normally pay.

 

        h)     At present it was difficult to comment on the extent to which KCC

                could invest locally in Kent; the Treasury Management Strategy was

                centred around liquidity and the security of that cash and it would be

                considered putting an undue risk on those funds if they were

                invested in local businesses where there was no confirmation as to

                whether they would succeed. The Kent and Medway Business Fund

                was set up to invest in local businesses and consequently the risks

                were higher.

 

        i)      Mr Collins confirmed that the Cabinet Member for Coastal

                Regeneration was currently looking at projects with a view to

                investing in Kent, however, he explained that the element of risk

                needed to be balanced.

 

        j)      The short-term Treasury Bills were used as part of a range of

                investment opportunities which were used when cash was being

                managed on a daily basis. It was highlighted to Members that there

                were ranges of exposures and liquidity across the portfolio, which

                was the desired outcome.  It was confirmed that the new Treasury

                Strategy would be brought to Full Council in March 2026.

 

        k)     Mr Betts confirmed that the format of the report would be reviewed

                to see whether comparative figures of previous years or lead

                schedules with subtotals could be included to assist Members with

                their understanding of the details.

 

        l)      It was indicated that the draft Treasury Strategy would return to the

                Governance and Audit Committee to allow Members the opportunity

                to review and comment on it, before it formed part of the Budget

                papers.  It was likely that this would be in January 2026, as the

                Budget Report would go to Full Council in February 2026.

 

3.     RESOLVED that the Committee ENDORSED the Treasury Update Report and RECOMMENDED that it be submitted to the County Council.