3.0 TREASURY MANAGEMENT
Overview
3.1 This section of the report presents details of the Council’s Treasury Management Activity during Q3 2025/26, changes to the Approved Lending List and other current policy issues and considerations.
3.2 Treasury Management in Local Government is governed by the CIPFA Code of Practice on Treasury Management in the Public Services and in this context is the management of the Council’s borrowing, cash flows, its banking and capital market transactions, the effective control of the risks associated with those activities and the pursuit of optimum performance consistent with those risks. The Council has adopted the Code and complies with its requirements.
3.3 The CIPFA Code of Practice for Treasury Management recommends that Members should be informed of Treasury Management activities at least twice a year but preferably quarterly. This report ensures, therefore, that the Council is adopting Best Practice in accordance with CIPFA’s Code of Practice.
Economic Update
3.4 The Council’s treasury advisors, MUFG Corporate Markets (formally Link Group), summarised the key points associated with economic activity in Q3 2025/26 up to 31 December 2025:
• A -0.1% m/m change in real GDP in October, leaving the economy no bigger than at the start of April;
• The 3myy rate of average earnings growth excluding bonuses fall to 4.6% in October, having been as high as 5.5% earlier in the financial year;
• CPI inflation fall sharply from 3.6% to 3.2% in November, with core CPI inflation easing to 3.2%;
• The Bank of England cut interest rates from 4.00% to 3.75% in December, after holding in November;
• The 10-year gilt yield fluctuated between 4.4% and 4.7%, ending the half year at 4.5%
A more detailed economic commentary on developments during Q3 2025/26 is included in Appendix E.
Interest Rate Forecasts
3.5 The current interest rate forecasts (22 December 2025) of MUFG Corporate Markets are as follows
* PWLB Rates are shown net of certainty rate 0.2% discount
• Money market yield forecasts are based on expected average earnings by local authorities for 3 to 12 months.
• The MUFG Corporate Markets forecast for average earnings are averages i.e., rates offered by individual banks may differ significantly from these averages, reflecting their different needs for borrowing short-term cash at any one point in time.
The forecast has proved robust over the period since December, setting out a central view that short and long-dated interest rates will start to fall once it is evident that the Bank of England has been successful in squeezing excess inflation out of the economy, despite a backdrop of stubborn inflationary factors. Nonetheless, the longer dated part of the forecast also reflects the increased level of Government borrowing over the term of the current Parliament and the weakness in the public finances.
Annual Investment Strategy
3.6 The Treasury Management Strategy Statement (TMSS) for 2025/26, which includes the Annual Investment Strategy, was approved by the Council on 14 February 2025. It sets out the Council’s investment priorities as being:
• Security of capital;
• Liquidity; and
• Yield.
3.7 The Council will aim to achieve the optimum return (yield) on its investments commensurate with proper levels of security and liquidity. In the current economic climate it is considered appropriate to keep investments short term to cover cash flow needs, but also to seek out value available in periods up to 12 months with high credit rated financial institutions, using our suggested creditworthiness approach, including a minimum sovereign credit rating and Credit Default Swap (CDS) overlay information.
3.8 The investment activity up to Q3 2025/26 was as follows:
• Balance invested at 31 December 2025: £675.51m
• Average Daily Balance 2025/26 up to 31 December 2025: £748.42m
• Average Interest Rate Achieved up to 31 December 2025: 4.28%
3.9 These funds were available on a temporary basis and the level of funds available was mainly dependent on the timing of revenue receipts, receipt of grant and progress on the capital programme.
3.10 The average return to Q3 2025/26 compares with the backward looking SONIA rates as follows:
• 4.10% 7 day
• 4.07% 1 month
• 4.01% 3 months
• 3.93% 6 months
• 3.80% 12 months
3.11 It is also a key requirement of the CIPFA Code of Practice that annual Treasury Management Strategies should be kept under constant review throughout the year and reported to Members as appropriate. Although there continues to be uncertainty in the financial and banking market, both globally and in the UK, it is considered that the Strategy approved in February 2025 is still fit for purpose in the current economic climate.
Approved Lending List
3.12 The Approved Lending List as at 31 December 2025 is attached as Appendix B.
Debt and borrowing
3.13 The Council’s external debt outstanding at 31 December 2025 and forecast position for 2025/26 is as follows:-
|
Detail |
PWLB |
Money Market Loans |
Total |
||
|
£m |
% |
£m % |
£m |
% |
|
|
At 31 March 2025 |
352.1 |
3.74 |
15.0 4.03 |
367.1 |
3.75 |
|
Loan Repayments |
5.9 |
|
5.0 |
10.9 |
|
|
New Loans Taken |
0.0 |
|
0.0 |
0.0 |
|
|
= Loans Outstanding at 31 December 2025
|
346.2 |
3.73 |
10.0 4.15 |
356.2 |
3.74 |
|
Further Scheduled In Year Repayments |
5.7 |
|
0.0 |
5.7 |
|
|
Forecast Additional Loans to be Taken |
0.0 |
|
0.0 |
0.0 |
|
|
= Estimated Loans Outstanding at 31 March 2026 |
340.5 3.73 |
10.0 4.15 |
350.5 3.74 |
||
3.14 Any change to the forecast debt outstanding by the end of 2025/26 will be largely determined by whether the borrowing requirement for 2025/26 is ultimately financed by external borrowing or internal borrowing.
3.15 Based on the Q3 Capital Plan update the total external borrowing requirement for 2025/26 is currently forecast to be:-
|
Detail |
£m |
|
|
|
|
2025/26 Borrowing Requirement Borrowing |
|
|
Capital Plan Borrowing Requirement
Adjustment for Company Loans
Revenue Provision for General Fund Debt Repayment (MRP)
Revenue Provision for HRA Debt Repayment (MRP)
External Borrowing Loan Repayments
|
12.1 4.2
-14.7
-1.2
-16.6 |
|
= Total 2025/26 Borrowing Requirement |
-16.2 |
3.16 A value for money assessment would therefore indicate that value could be best obtained by avoiding/delaying new borrowing and continuing to use internal cash balances to finance new capital expenditure or to replace maturing external debt. This would maximise short term revenue savings and produce other benefits, but is not risk free.
3.17 This Internal capital financing option will therefore continue to be actively adopted on an ongoing basis in order to achieve short term revenue savings and mitigate the credit risk incurred by holding investments in the market.
3.18 New external borrowing rates (fixed interest maturity rates from the PWLB reflecting
the 0.2% ‘certainty discounts’) during Q3 2025/26 were as follows:-
Treasury and Prudential Indicators
3.19 It is a statutory duty for the Council to determine and keep under review its Affordable Borrowing Limits.
3.20 During the quarter ended 31 December 2025, the Council has operated within the treasury and prudential indicators set out in the Council’s Treasury Management Strategy Statement for 2025/26. The Corporate Director - Resources reports that no difficulties are envisaged for the current or future years in complying with these indicators.
3.21 The prudential and treasury Indicators are shown in Appendix F.
Impact of Treasury Management Activities on the Revenue Budget
3.22 Based on the Treasury Management activity at Q3 2025/26 and a forecast for the remainder of the year, the revenue impact is as follows:
At the close of Q3, the total Interest and Dividends forecast to be received at the end of the year is £28.6m. This exceeds the budget set by £3.7m. Delayed Bank rate drops have crystallised post Q2, with latest forecasts now expecting Bank Rate to be 0.5% higher in March 2026 than budget expectations, leading to greater returns. Additionally, invested cash balances are higher due to anticipated outflows being delayed, including rephasing within the capital plan
The forecast outturn for interest paid on long term borrowing is £13.4m, comprising of £10.1m General Fund Debt, and £3.3m HRA Debt.
The forecast outturn for the Minimum Revenue Provision (MRP) is £14.7m.
Capital Strategy
3.23 The Capital Strategy was included as part of the Council’s Annual Treasury Management and Investment Strategy 2025/26, approved in February 2025. The Capital Strategy sets out how capital expenditure, capital financing and treasury management contribute to the provision of Corporate and service objectives and properly takes account of stewardship, value for money, prudence, sustainability and affordability. It sets out the long term context in which capital expenditure and investment decisions are made and gives due consideration to both risk and reward and impact on the achievement of priority outcomes.
3.24 Alternative non-treasury investments are considered as part of the Capital Strategy. Given the technical nature of potential alternative investments and strong linkages to the Council’s Treasury Management function, appropriate governance and decision making arrangements are needed to ensure robust due diligence in order to make recommendations for implementation. As a result, all investments are subject to consideration and where necessary recommendations of the Commercial Investment Board.
3.25 The alternative investments considered by the Commercial Investment Board are as follows:
|
Type of Investment |
Invested as at 31/12/2025 £m |
Rate of Return % |
|
Alternative Treasury Instruments |
|
|
|
Money Market Funds |
0.0 |
0.00 |
|
Enhanced Cash Funds |
0.0 |
0.00 |
|
Certificates of Deposit (CDs) |
0.0 |
0.00 |
|
Property Funds |
12.3 |
3.30 |
|
Total Alternative Treasury Instruments |
12.3 |
3.30 |
|
Alternative Investments |
|
|
|
Loans to Council Companies |
|
|
|
- Yorwaste |
3.7 |
7.75 |
|
- Brierley Homes |
25.4 |
9.75 |
|
- Brierley Homes, Second Loan |
1.4 |
3.75 |
|
- First North Law |
0.1 |
7.75 |
|
- NY Highways |
9.0 |
10.25 |
|
- Broadacres Housing Association |
31.6 |
4.27 |
|
- Bracewell Housing Ltd |
0.7 |
9.25 |
|
- Align Property Services |
0.5 |
9.75 |
|
Total Loans to Council Companies |
72.4 |
7.12 |
|
Other Alternative Investments |
|
|
|
Spend to Save |
0.0 |
0.00 |
|
Loans to Housing Associations |
0.0 |
0.00 |
|
Local Economic Growth Projects |
0.0 |
0.00 |
|
Solar Farm (or similar) Projects |
0.0 |
0.00 |
|
Commercial Investments |
26.7 |
5.40 |
|
Total Other Alternative Investments |
26.7 |
5.40 |
|
Total Alternative Investments |
111.4 |
6.36 |
3.26 The position on Property Funds at 31 December is as follows:-
In Year Performance
|
|
|
|
In Year Performance Q3 2025/26 |
|||
|
Fund |
Bwd Investment Valuation |
Valuation as at 31/12/25 |
Capital Gain / (Loss) |
Revenue Return |
||
|
|
£000 |
£000 |
£000 |
% |
£000 |
% |
|
Blackrock |
4,840.3 |
4,866.7 |
26.4 |
0.5 |
113.5 |
2.7 |
|
Threadneedle |
4,737.6 |
4,814.2 |
76.5 |
1.6 |
173.8 |
4.3 |
|
Fidelity |
2,774.4 |
2,621.4 |
-152.9 |
-5.5 |
114.9 |
4.9 |
|
Total |
12,352.3 |
12,302.3 |
-50.0 |
-0.4 |
402.2 |
3.9 |
Total Fund Performance
|
|
|
|
Total Performance |
|||
|
Fund |
Investment £k |
Valuation as at 31/12/2025 |
Capital Gain / (Loss) |
Revenue Return |
||
|
|
£000 |
£000 |
£000 |
% |
£000 |
% |
|
Blackrock |
5,505.5 |
4,866.7 |
-638.8 |
-11.6 |
854.9 |
15.5 |
|
Threadneedle |
5,366.3 |
4,814.2 |
-552.2 |
-10.3 |
1.178.0 |
22.0 |
|
Fidelity |
3,000.0 |
2,621.4 |
-378.6 |
-12.6 |
789.1 |
26.3 |
|
Total |
15,871.8 |
12,302.3 |
-1569.6 |
-9.9 |
2,822.0 |
17.8 |
3.27 While Property Funds continue to provide a revenue return as noted in the table above, the funds have experienced some capital losses.
3.28 Property funds are long term investments and valuations can, therefore, rise as well as fall, over the period they are held. In order to mitigate any potential future loss, funds will be set aside to ensure there is no impact on the General Fund until units in the funds are sold.
3.29 Given the volatility and risk within the market, all property funds will be reviewed in terms of their strategies to mitigate risk within their portfolios, in the context of the longer term nature of these investments. Should any changes to these investments be considered necessary, these will be reported to the Executive and to Council if required.
3.30The position on Commercial Property investments and Alternative Property Investments at 31 December 2025 is as follows:-
|
Commercial Properties |
Performance |
||||
|
Property |
Investment £k |
Valuation as at 31/03/25 |
Total Capital Gain / (Loss) |
Forecasted Return |
|
|
|
£000 |
£000 |
£000 |
% |
% |
|
Bank Unit in Stafford Town Centre |
876.0 |
525.0 |
(351.0)
|
(40.0) |
4.54* |
|
Co-op Store in Somercotes |
1,497.3 |
1,170.0 |
(327.3) |
(22.0) |
6.00 |
|
Total |
2,373.3 |
1,695.0 |
(678.3) |
(29.0) |
5.46 |
*The Forecasted in year revenue return for Stafford Bank does not include the payment received in year for the surrender of the remainder of the lease. This payment amounted to £306k
|
Alternative Property Investments |
Performance |
||||
|
Property |
Investment £k |
Valuation as at 31/03/2025 |
Total Capital Gain / (Loss) |
Forecasted Return |
|
|
|
£000 |
£000 |
£000 |
% |
% |
|
Harrogate Royal Baths |
9,504.0 |
6,300.0 |
(3,204.0) |
(33.7) |
1.59 |
|
Scarborough Travellodge |
14,828.0 |
15,300.0 |
472.0 |
3.18 |
7.84 |
|
Total |
24,332.0 |
21,600.0 |
(2,732.0) |
(11.2) |
5.40 |
3.31 Commercial Property is a long term investment and valuations can, therefore, rise as well as fall, over the period they are held. In order to mitigate any potential future loss funds will be set aside to ensure that there is no impact on the General Fund at the point of any future sale.
3.32 The Council continues to review potential commercial investments, but will now consider any potential investment opportunities alongside the implications for PWLB borrowing going forward, however, the 2025/26 Capital Plan does not include any plans to purchase commercial assets primarily for yield.
Other Loans
3.33 The Council has also provided the following loan facilities:-
|
Lender |
Date Advanced |
Original Loan |
Interest Rate |
Loan Outstanding as at 31/12/2025 |
Revenue Return (as at 31/12/2025) |
|
|
|
|
£000 |
% |
% |
£000 |
% |
|
Settle Pool |
Sep-22 |
135.0 |
6.00 |
79.6 |
1.3 |
6.00 |
3.34 Settle Area Swimming Pool is a charity run swimming pool service for the local Settle area. In December 2023, discussions with the charity operating the pool led to a revision of the payment plan on the Long Term Loan provided by the council to support the operation of the pool. The revised arrangement has been provided at a commercial rate of 6%, and schedules the loan to be fully repaid by 2032/33.
|
RECOMMENDATIONS
3.36 That Executive i. notes the position on the Council’s Treasury Management activities during the third quarter of 2025/26 ii. refers this report to the Audit Committee for their consideration as part of the overall monitoring arrangements for Treasury Management. |
TREASURY MANAGEMENT APPENDICES
|
Appendix A
|
Analysis of investments placed as at 31 December 2025 |
|
Appendix B
|
Approved Lending List with counterparty limits |
|
Appendix C
|
Changes to the Approved Lending List during Q3 2025/26 |
|
Appendix D
|
Treasury Management Monitoring and Reporting Arrangements 2025/26 |
|
Appendix E
|
Detailed Economic Commentary on Developments during Q3 2025/26 |
|
Appendix F |
Treasury and Prudential Indicators
|
|
|
|
Appendix A
Analysis of loans outstanding as at 31 December 2025
|
Actual Loans Outstanding – Summarised by Organisation |
|
£m Local Authority 370.0 Santander 62.0 Goldman Sachs 50.0 National Bank of Canada 15.0 DBS 15.0 Sumitomo Mitsui BCE 65.0 Barclays 8.5 Bank of Scotland 50.0 Total 675.5 |
|
Other Bodies |
|
|
||
|
|
31-Dec-25 |
30-Sep-25 |
||
|
|
£m
|
%
|
£m
|
%
|
|
NY Pension Fund |
9.8 |
1.6 |
9.9 |
1.4 |
|
NY Fire and Rescue Authority |
24.0 |
4.0 |
31.9 |
4.5 |
|
Yorkshire Dales National Park |
6.0 |
1.0 |
6.2 |
0.9 |
|
North York Moors National Park |
7.3 |
1.2 |
8.9 |
1.3 |
|
Peak District National Park |
10.9 |
1.8 |
10.5 |
1.5 |
|
Align Property Services First North Law |
1.2 0.0 |
0.2 0.0 |
1.6 0.1 |
0.2 0.0 |
|
National Parks England |
1.0 |
0.2 |
0.9 |
0.1 |
|
Align Property Partners |
0.7 |
0.1 |
1.5 |
0.2 |
|
Y&NY Combined Authority |
75.3 |
12.5 |
65.3 |
9.2 |
|
Total Other Bodies
Cash Balances held by NYC |
136.2 |
22.6 |
136.7 |
19.2 |
|
539.3 |
77.4 |
574.1 |
80.8 |
|
|
Total Investment |
675.5 |
100.0 |
710.8 |
100.0 |
|
Rates as at 31 December 2025 |
|
|
|
|
|
|
|
% |
|
Bank Rate |
|
|
3.75 |
|
Investment Rates - NYC overnight (on call) |
|
|
3.30 |
|
- 1 month |
|
|
3.75 |
|
- 6 months |
|
|
3.90 |
|
- 1 year |
|
|
3.90 |
|
- Government Debt Management Office Account
|
|
|
3.70
|
