Agenda item

Treasury Mid-Year Review

This report reviews the Council’s treasury management activities for the first six months of the financial year 2018/2019.


The Head of Treasury and Pensions introduced the item. It was highlighted that some commercial debt had been restructured which provided immediate cost savings in this financial year as well as going forward over the remaining life of the loans. It was noted that borrowing and investing was offering small marginal benefits; there were limited opportunities to make money.  Whilst the costs of borrowing were at historic lows, only small returns were being made on investments.


In response to Member questions, officers provided the following clarification:

·       The Council was avoiding doing anything significant in late February and March 2019 in order to limit exposure to any circumstances that would result from Brexit. Investments were only to be made in the short term and no new borrowings were to be made due to the risk of rate fluctuations as far as that could be possible;

·       Funding from the European Investment Bank had been for school improvements and was established as a contract with a fixed interest rate. Contact was regular and it was not possible for the contract to be broken. However, it was noted that further rounds were less likely as the UK would no longer be a partner county;

·       Borrowing had been restructured to get more reasonable rates whilst accounting procedures had allowed the premium charged to do this to be written off over 40 years which was the term of the loan. This is referenced above.  However, other commercial debt providers were not so keen to take  the same opportunities;

·       The gap between actual debt outstanding and affordable/authorised debt represented loans to be taken to support future capital investment.  The gap between the affordable limit and the authorised limit was to allow for contingency. For example, if there was an operational issue such as a problem with the banking services. The limits reflected the Council’s budget restrictions. Noted that public debt was being offered at historically low rate levels; and

·       Borrowing increased in year because this was phased based on need; borrowing only taken on when actually needed.

In response to Member questions, Cllr Hall, the Cabinet Member for Finance and Resources, provided the following clarification:

·       The allocation of £100m for the acquisition of commercial investment properties and the approach to be taken for acquiring investment assets was set out in the Medium Term Financial Strategy as part of the Council’s overall borrowings and expenditure. This was approved by Council at its meeting in October 2018. To mitigate risk, the approach taken to investments was characterised by diversity and longevity. The potential of the asset and income stream were considerations and important for risk management;

·       Long term borrowing was being used to fund operational assets needed by the Council to achieve savings. These savings compensated for the interest being paid;

·       An assessment of the Council’s appetite for borrowing was undertaken as part of the budgeting process each year. There would be concern where the actual and approved/authorised borrowing limits were getting close. However, noted that these were still 20% apart. Also highlighted that it was the statutory role of the Section 151 Officer to ensure regulation and monitoring of borrowing which is why this came to the Committee twice a year as well as being included in the budget papers; and

·       Agreed that it was possible to review the actual level of borrowing more frequently through inclusion in quarterly financial monitoring to Cabinet.

RESOLVED: the Committed resolved to note the content of the report and to endorse the continued implementation of the Council’s Treasury Strategy Statement, Annual Minimum Revenue Provision Policy Statement and Annual Investment Strategy 2018/2019 by the Executive Director of Resources (Section 151 Officer).


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