The Head of Financial Services introduced the report.  He said that many impacts of Brexit had not yet played out but that there were some immediate impacts on the Council.  Lower interest rates would hit the Council’s annual treasury income by approximately £400k.  There had also been a drop in property fund appreciation values although these were still well above purchase values and dividend income had remained unaffected.  The Council also had an income target that was measured in Euros, which would be harder to achieve since the value of Sterling had dropped.  On the upside, the cost of borrowing was cheaper and the Council did have a borrowing requirement within its Medium Term Financial Plan, some of which would be met using internal borrowing.  Officers would explore whether it would be advantageous to borrow now at low rates, given that there would be a cost of carrying borrowed money that was not yet needed.

The Panel questioned whether there would be a case for closing and refinancing the Housing Revenue Account debt.  The Panel heard that the Council would look again at whether or not to refinance the first £20m repayment due in 2021.  Officers had looked at whether there was an opportunity to refinance the debt outside of the repayment tranches but this option was found to be too punitive.

The Panel suggested that the Council could face higher procurement costs and potentially difficulties in achieving income from trading following the Brexit decision and any resulting economic downturn.  The Panel noted that it would be helpful for the Council to track the impacts of wider economic changes on things like trading income and procurement costs, as well as income from car parking, commercial rent, investments and planning fees.  The Panel suggested that if and when Figure 11 is updated, expected income from the different streams should be included for 2016/17.  The Panel also asked officers to check the explanation for the dip in car parking income in 2010/11. 

In terms of the wider economy the Panel suggested that Brexit could reduce inward investment and joint funding opportunities, noting that the impact on Business Rates income of one or two major employers relocating away from the City could be high, with the Council liable to lose £500k before safety payments kicked in.  The Panel heard that 19 business premises accounted for 22% of rateable values in the City.  There was also a question mark around whether safety net payments would still apply when Councils were granted 100% Business Rates retention (which would only apply to growth above a baseline not the full Business Rates take).

The Panel considered whether there was a strong case for increasing council borrowing in order to increase investment spending.  The Panel heard that this would be kept under review but that the Council was taking a lead already in many respects compared to benchmarked authorities.  Going even further would depend on the Council’s appetite for borrowing and risk.  The Panel noted that the Council was already investing significantly in new build and its commercial property portfolio but would encourage new borrowing to fund revenue generating opportunities, including potentially renewable energy schemes, where there was a robust business case for doing so.

The Panel concluded by thanking the Head of Financial Services for a very useful report and agreeing to put the following recommendations to the City Executive Board:

1. That the Council looks to partner with local Universities or economic institutions to study the wider impacts of Brexit on the economy of Oxford.

2. That the Council explores whether there are additional opportunities to borrow at historically low interest rates to fund new revenue generating schemes.