Agenda item

Treasury Management - Half Year Report 2020-21


The Interim Chief Officer – Finance, Performance and Change presented a report, the purpose of which, was to:


·          comply with the requirement of the Chartered Institute of Public Finance and Accountancy’s ‘Treasury Management in the Public Services: Code of Practice’ to produce interim Treasury Management Reports.

·          report on the projected Treasury Management Indicators for 2020-21.

·          provide an update on the proposed changes to the Treasury Management Strategy 2020-21 and recommend that they be presented to Council for approval.


The background to the report, reminded Cabinet that Treasury Management is the management of the Council’s cash flows, borrowing and investments, and the associated risks. The Council is exposed to financial risks including the loss of invested funds and the revenue effect of changing interest rates. The successful identification, monitoring and control of financial risk are therefore central to the Council’s prudent financial management.


The Interim Chief Officer – Finance, Performance and Change also reminded Members, that in 2017 CIPFA also published a new version of the Prudential Code for Capital Finance in Local Authorities (the Prudential Code). The updated Prudential Code includes a requirement for Local Authorities to provide a Capital Strategy, which is a summary document approved by full Council covering capital expenditure and financing, treasury management and non-treasury investments. The definition of investments in the revised 2017 CIPFA Code now covers all the financial assets of the Council as well as other non-financial assets which the authority holds primarily for financial return. The Council’s Capital Strategy 2020-21, complying with CIPFA’s requirement includes the Prudential Indicators which in previous years were included in the TMS, along

with details regarding the Council’s non-treasury investments. The Capital

Strategy and TMS should be read in conjunction with each other as they are

interlinked as borrowing and investments are directly impacted upon by capital plans and were approved together by Council on 26 February 2020.


She explained further, that the Council had complied with its legislative and regulatory requirements during the first half of 2020-21. The TMS 2020-21 was reported to Council on 26 February 2020 with the Half Year Outturn scheduled to be reported on 18 November 2020. In addition, a quarterly monitoring report was provided to Cabinet in July 2020.


A summary of the treasury management activities for the first half of 2020-21 was shown in table 1 in Appendix A to the report. The Council had not taken long term borrowing since March 2012 and it is not expected that there will be a requirement for any new long term borrowing in 2020-21. Favourable cash flows have provided surplus funds for investment and the balance on investments at 30 September 2020 was £64.29 million with an average rate of interest of 0.24%. This was a significant reduction from the same time last year when the average rate was 0.85%, and showed the impact of the reductions in interest rates during March 2020.


Table 4 in section 4 of Appendix A, detailed the movement of the investments by counterparty types and shows the average balances, interest received, original duration and interest rates for the first half of 2020-21.


The TM Code required the Council to set and report on a number of Treasury Management Indicators. The indicators either summarised the expected activity or introduced limits upon the activity. Details of the estimates for 2020-21 set out in the Council’s TMS, against current projections, were shown in Appendix A and these reflected that the Council is operating in line with the approved limits.


The Council defines high credit quality as organisations and securities having a credit rating of A- or higher and Appendix B to the report, showed the equivalence table for credit ratings for Fitch, Moody’s and Standard & Poor’s and explains the different investment grades.


CIPFA’s Code of Practice for Treasury Management required all local authorities to conduct a mid-year review of its treasury management policies, practices and activities. The outcome of this review is that there are changes required to investment limits, as were reflected in bullet point format in paragraph 4.7 of the report.


The proposed revised TMS was included at Appendix C to the report and the proposed amendments highlighted in red. Both these amendments had been discussed with the BCBC Treasury Management Advisors, Arlingclose.


The Deputy Leader stated that whilst low interest rates were very good for borrowers at the moment, they weren’t so good for savers and investments.


He asked for some assurance that the proposals within the report, would not reduce in any way reduce the Authority’s threshold of its present security and risks.


The Interim Chief Officer – Finance, Performance and Change, assured that the Council’s financial priority was based very much on security, liquidity and yield as a final financial objective. She added that the local authority lending was extremely secure and it followed closely to this end, the directives from its Treasury Management advisors.


The Leader also sought assurance that the Council were depositing its funds in other institutions that were extremely safe, for example through the use of other local authorities, etc.


The Interim Chief Officer – Finance, Performance and Change confirmed that this was the case and that she could not remember a time when another local authority went bust. The Council were also very careful about the duration of time when placing funds in other institutions (in terms of looking to limit any ‘risk’). BCBC she added, also used market monetary funds and should the need arise, the Authority could invest in certain registered providers which would give some flexibility when pursuing with some of its proposed future schemes.


RESOLVED:                            That Cabinet:


  • noted the Council’s treasury management activities for 2020-21 for the period 1 April 2020 to 30 September 2020 and the projected Treasury Management Indicators for 2020-21.
  • recommended that the proposed changes to the Treasury Management Strategy 2020-21 be presented to Council for approval on 18 November 2020.


Supporting documents: