The Chief Accountant presented a report to update the Committee on the half year position for Treasury Management activities for 2014-15, attached at Appendix A and to highlight compliance with the Council’s treasury management policies and practices.  Also to present the proposed Treasury Management Strategy 2015-16 before it goes to Council in February for approval.

The reported that the main points for treasury management for the half year review 2014-15 were as follows:

·         The Council has complied with its legislative and regulatory requirements by presenting the Half Year report to Council in November 2014, and the first quarter monitoring report had gone to Cabinet;

·         No long or short term borrowing or debt rescheduling was undertaken during the first half of the year 14-15;

·         The Council had investments of £24.40m at the 30^th September with an average interest rate of 0.48%.  The current rate received from Central Government was only 0.25%, therefore the Council’s investments are out-performing the DMO rate;

·         The Investment Strategy was reviewed to enable increased flexibility in the changing financial market to increase potential investment opportunities available, whilst maintaining security;

·         The Council operated within its treasury limits and complied with its Treasury Management Practices.

The Chief Accountant informed members that the Council’s new banking contract with Barclays Bank commenced on the 5^th January 2015.  She then referred to Appendix B and reported the following main points for the proposed Treasury Management Strategy going forward 2015-16:

·         The Strategy would be presented to Council on the 25^th February 2015 for approval, within the Medium Term Financial Strategy;

·         It has been reviewed by Arlingclose, Treasury Management Advisors to the Council;

·         It sets the Economic Context and Interest Rates Forecast which assumes an average bank rate for 2015-16 of around 0.75%

·         The main change within the Strategy was within the Invest Strategy due to the imminent UK legislation which had resulted from two European Union directives.  The combined effect of those changes would leave public authorities and financial organisations as the only senior creditors likely to incur losses in a failing bank after July 2015;

·         Investments were historically placed in short term bank and building society unsecured deposits, and local and Central Government.  However, due to the aforementioned changes, the relative risk of these deposits would increase;

·         Arlingclose are to be invited to provide training before the end of the financial year, to both Members of the Audit Committee as well as the staff in the Finance Department, on the changes and also alternative investment options.

A Member asked whether the imminent changes would place a bigger reliance on the Council’s relationship with Arlingclose.

The Chief Accountant confirmed that it would as there was not the required expertise in-house and the Head of Finance & IT and the Finance Manager had already received training through Arlingclose within the last two months.  She reported that the Council had an active relationship and daily contact with staff at Arlingclose, who constantly updated staff on the credit ratings of banks and building societies.

One Member asked whether there was likely to be greater exposure to risk.

The Chief Accountant advised that there would, as the banks would no longer be able to offer the same protection on investments.

RESOLVED:         That the Committee:

1.      Noted the Annual Treasury Management Half-Year Report which was approved by Council in November 2014.

2.      Gave due consideration to the Treasury Management Strategy 2015-16 before it is presented to Council for approval in February 2015 as part of the Medium Term Financial Strategy.