The Interim Deputy Head of Finance presented a report, the purpose of

which was to comply with the requirement of the Chartered Institute of Public Finance and Accountancy (CIPFA) Treasury Management in the Public Services: Code of Practice (the Code), to report an overview of treasury activities for the preceding financial year and to report on the actual Treasury Management Indicators for 2019-20. 

The Interim Deputy Head of Finance reported that treasury management at the Council is conducted within the framework of the

Chartered Institute of Public Finance and Accountancy’s (CIPFA) Treasury Management in the Public Services: Code of Practice 2017 Edition (the CIPFA Code) which requires the Council to approve a Treasury Management Strategy (TMS) before the start of each financial year.  Advice to the Council on treasury management is provided by Arlingclose and following a recent tender process, they had been re-appointed for a period of 4 years, until August 2024. 

The Interim Deputy Head of Finance reported that the UK’s exit from the European Union and future trading arrangements remained one of the major influences on the UK economy during 2019-20.  The Bank of England, which had held interest rates steady at 0.75% through most of 2019-20, moved in March 2020 to cut rates from 0.75% to 0.25% and then swiftly thereafter brought them down further to the record low of 0.1%.  The Interim Deputy Head of Finance informed Council that towards the end of the financial year, the Covid-19 pandemic swiftly changed everything causing uncertainty in financial markets. 

The Interim Deputy Head of Finance reported on the Treasury Management Outturn for 2019-20 and informed Council that it has complied with its legislative and regulatory requirements during 2019-20.  She summarised the external debt and investment position for 1 April 2019 to 31 March 2020, no long-term borrowing was taken out in 2019-20 and no debt rescheduling was undertaken as there were no significant savings to be made, however, the loan portfolio would be reviewed during 2020-21.  The Interim Deputy Head of Finance informed Council that favourable cash flows had provided

surplus funds for investment and the balance on investments at 31 March 2020 was £30 million, with an average interest rate of 0.82%. This was an increase in investments outstanding from the start of the financial year where investments were £27.4 million at an average interest rate 0.94%.  The interim Deputy Head of Finance summarised the investment strategy and outturn in that the main objectives during 2019-20 were to maintain security of cash; ensure liquidity, so funds are available when needed and only then to seek yield on investments.  She informed Council that the majority of investments had been held as short-term investments with UK local authorities and banks of high credit quality. 

A member of Council commented that it was standard practice for local authorities to borrow and lend to other local authorities.  The Deputy Leader informed Council that the Treasury Management Strategy is approved by Council and officers implement that strategy.  He stated that lending to other local authorities is a secure way for the Council to invest.   The Interim Deputy Head of Finance informed Members that the Council makes short-term investments with UK local authorities and are always repaid, very often the same money is reinvested.  Advice on investing is always taken from the Council’s Treasury Management advisors.

A member of Council questioned whether the Council could re-negotiate its LOBO borrowing given the lower interest rates currently.  The Interim Deputy Head of Finance informed Council that the lender has the option to propose a new interest rate and the Council has the option as the borrower whether to accept that rate.  She stated that with interest rates being low, lenders were unlikely to reduce their rates.  She also informed Council that the Council would face penalties if it repaid early.

A member of Council asked whether officers could explore the opportunity of cheaper borrowing due to interest rates being low for inclusion in the next report on Treasury Management to Council.  The Interim Deputy Head of Finance agreed to look at this.

RESOLVED:           That Council:

• Approved the annual treasury management activities for 2019-20;

Approved the actual Treasury Management indicators for 2019-20 against the ones approved in the Treasury Management Strategy 2019-20.