Agenda item

Treasury Management Annual Report

Report of the Cabinet Member for Finance and Resources



The Head of Finance presented the 2019/20 Treasury Management Annual Report, which was required by Regulations issued under the Local Government Act 2003. Members were advised that the report, which was presented as part of the agenda pack, met the requirements of both the CIPFA Code of Practice on Treasury Management and the CIPFA Prudential Code for Capital Finance. 


It was noted that during 2019/20 the Committee received three reports relating to treasury management activity. The Committee was also reminded that it had delegated powers from Council to deal with matters relating to the Council’s treasury management activities.


Link Asset Services, the Council’s Treasury Advisers, had provided commentary on the economic outlook, including the range of economic growth, changes to the bank rate and changes to the Public Works Loan Board’s borrowing rates.


The report gave a summary of the treasury position as at 31 March 2020, which set out both the Council’s actual borrowing position and its investment position.


Members were advised that on 30 March 2020, an HRA loan for £25 million matured; this was replaced with a new loan through the Public Works Loan Board for £25 million with an interest rate of 1.63%, which was 1.2% below published rates. This would generate an annual saving of £90,000 on HRA interest payable. The Council repaid £3.2 million on an annual basis against the HRA loan.


As at 31 March 2020, the Council held short and long-term investments of £55.150 million, which was compliant with the Council’s policy to hold not more than 35% of investments as long-term. This included a £1.12 million investment in Gravitas and a £3 million investment in the CCLA property Fund, in respect of which the Council received a quarterly dividend.


The total amount of variable rate investments held by the Council had increased between 31 March 2019 and 31 March 2020 as the interest rates achievable on notice accounts and Money Market Funds were comparable to fixed-rate investments. This decision ensured that the Council was able to cashflow the Capital Programme; it has also meant that the Council has not had any cashflow issues during the Covid-19 response period.


Graphs included within the report gave Members an indication of the Council’s investment counterparties and the duration of investments. Benchmarking data provided by the Council’s treasury advisers indicated that the Council’s treasury performance was favourable. Members’ attention was also drawn to Appendix 1, which set out actual performance against the Council’s treasury indicators.


The report asked the Committee to consider a change to an investment counterparty limit. The limit within the 2020/21 Treasury Management Strategy specified an investment threshold limit of £10m for investments with other local authorities. To ensure greater diversity in the Council’s investment portfolio following a reduction in interest rates as a result of the Covid-19 crisis, it was recommended that the upper investment limit be removed, and instead adding a limit to allow the Council to place up to £5 million with each local authority, increasing the available investment options.


To conclude the presentation of the report, Members were assured that during 2019/20 the Council had complied with its legislative and regulatory requirements. Repayment of principal has been secured from all deposits and investment returns had exceeded budget as investment levels and the rates achieved were higher than originally estimated.


In debating the report, the following points were discussed:


·         The Treasury Adviser made recommendations to the Head of Finance, who, in consultation with the Interim Director of Finance approved where investments should be placed in line with the principles set out in the Council’s Treasury Management Strategy. One Member who spoke indicated that he would have expected the involvement of the Cabinet Member for Finance and Resources in the decision.

·         A question was raised about why the report did not include commentary around ethical lending. It was noted that ethical lending was incorporated in the 2020/21 Treasury Management Strategy, and so commentary would be provided as part of the 2020/21 Annual Report.

·         Local authorities were considered sound investments because they were sovereign by nature. In the event of local government reorganisation, any liabilities would be split between the newly formed council.

·         Any local authority to which the Council was considering lending money would be subject to the same scrutiny processes as any other prospective investment. A lot of authorities had been in the market for short-term borrowing as a result of the Covid-19 pandemic to ease cashflow challenges; this did not affect the robustness of the authority as an investment prospect.

·         All investments were made in line with the Council’s Treasury Strategy, which set out where the Council would invest and the maximum investment that could be made with each institution. Advice was taken from Link to determine those institutions that were considered to be of high credit quality.

·         The Public Works Loan Board was undertaking a consultation exercise on future lending terms, to which the Council would respond.

·         The Council had undertaken some internal borrowing where the Council did not want to commit resources to permanently finance capital spend.


Comments were also made in respect of solar farms and clean technology investments and about whether the Council was also seeking to borrow from other local authorities to fund its leisure centre development programme.


It was proposed, seconded and AGREED that:


·         The Committee approves the annual report on the treasury management activity for 2019/20

·         The Committee approves the amendment to the 2020/21 Treasury Management Strategy with respect to the financial limits for investments with Local Authorities


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