Agenda item

To consider the report of the Chief Officer Resources.

Consideration was given to the report of the Chief Officer Resources.

The Chief Officer Resources commenced by advising that the report detailed the Treasury Management activities carried out by the Authority during the first half of the 2020/21 financial year.

Due to advantageous interest rates during the first half of the financial year, the Authority entered into long term debt arrangements of £9m with the Public Works Loan Board (PWLB)/ other public authorities. These arrangements were made either to replace maturing loans or to replace finance capital expenditure. 

In summary, despite the financial climate due to the pandemic, the authority had performed well in terms of its Treasury Management activities in comparison to the established benchmark rates. 

-      It was noted that investment returns of £3,000 had been achieved in the period with an average interest rate of 0.07%. This was above the benchmark rate of -0.07% but reflected the impact the pandemic had had on the bank base rate and in turn the market interest rates offered on investments.

-      The annual budgeted investment interest of £43,000, was unlikely to be achieved, however the amount of interest paid had also significantly reduced which counteracted this in its entirety.

-      An average interest rate of 0.67% had been paid on temporary borrowings against a benchmark of 1.00%, amounting to £159,000 for the six-month period.  The budget for interest paid on short term borrowing was £660,000 for a full year - the full year interest payable was likely to be well within this budget.  The interest payable by the Authority had, therefore, been minimised as far as possible and was evidence of good performance.

-      All of the Treasury Limits and Treasury Management Prudential Indicators which had been set for the financial year had been complied with during the year.

-      No institutions in which investments were made during the period had any difficulty in repaying investments and interest in full, so the Authority had not been exposed to any financial loss as a result of the difficult economic climate. 

-      The Debt Management Account Deposit Facility (DMADF) started offering negative interest rates from September 2020 on investments placed with them.  This limited the investment opportunities available to the Authority.  The Authority would continue to monitor other investment opportunities, however proposed an increase in the amount that it was able to hold in the Authority’s bank account from £6 million to £10 million to avoid exceeding the current limit.  This would provide the authority with more flexibility in terms of its cash flow.

Members were advised that the Corporate Overview Scrutiny Committee had considered the report at its December meeting and recommended to Council the proposed change in the investment strategy.

It was unanimously,

RESOLVED that the report be accepted and Option 1 be endorsed, namely that:

-      the activity undertaken during the first half of the 2020/2021 financial year be noted and the record of performance and compliance achieved during the first half of the 2020/2021 financial year be accepted.

FURTHER RESOLVED that the existing Investment Strategy be amended and the amount which was able to be held in the Authority’s bank account be increased from £6 million to £10 million.