CHANGES in interest rates, budget overspends and worsening economic conditions in the UK and abroad are among the risks to East Staffordshire Borough Council’s financial position, an official report has said.
The Conservative-controlled authority outlined the risks it faces in its mid-year treasury report, due to be presented to councillors tonight at a meeting of all 39 elected members.
But the report, compiled by chief accountant Lisa Turner, stated how the council would try to stave off financial catastrophe in the event of a sudden economic deterioration.
One risk to the council’s coffers is an interest rate rise, which would force up the cost of borrowing. The authority said, however, it had no further borrowing planned so this risk was ‘minimal’.
A fall in interest rates from their current historic low of 0.5 per cent would also be a risk, the report said, as income from investments would dwindle.
Overspending in any area of council finance could also cause problems and may force town hall chiefs to agree to unplanned borrowing.
Finally, ‘market and credit risks arising from adverse market conditions’ could strain the council’s balance sheets. But the mid-year treasury report said: “These risks are managed via a robust treasury management and investment strategy and regular reviews of our counter-party (organisations to which financial risk may exist) list.”
The report also talked about council money which is still locked in Icelandic banks that collapsed during the credit crunch.
It said: “The authority has now recovered £2.7 million of the investments held with the failed Icelandic banking institutions, resulting in outstanding sums of £2.3 million. The majority of the remaining sums are expected to be recovered.”
The council’s investments stood at £28.6 million in September last year and current external borrowing is £18.7 million.