The Head of Finance and ICT provided Members with the Half – Year Treasury Management report.  He advised members that the Council was required to operate the overall treasury function with regard to the Code and that it was formally adopted by the Council in February 2012.  This included a requirement for the Council to approve a Treasury Management Strategy (TMS) before the start of each financial year which set out the Councils and Chief Financial Officer’s responsibilities, delegation and reporting arrangements.  He added that Council approved the TMS 2015-16 on 25 February 2015.

The Head of Finance and ICT referred to the table detailed in paragraph 4 of the report and stated that the £19.25 million was due to mature in 2054 and related to the Lender’s Option Borrowers Option (LOBO) loans which may be rescheduled in advance of the maturity date.  The LOBO rate and term may vary in the future depending upon the prevailing market rates, the lender exercising their option to increase rates at one of the bi-annual trigger points and therefore, the Council being given the option to accept the increase or to repay the loan without incurring a penalty.  The current average interest rate for these LOBO’s was 4.65% compared to the PWLB Loans average interest rate of 4.70%

The Head of Finance and ICT stated that the long term liabilities figure of £23.62 million at 30 September 2015 included £19.04 million for the Council’s Private Finance Initiative (PFI) arrangement (for the provision of a Secondary School in Maesteg) and a new Long Term Liability of £2.40 million relating to a loan from the WG Central Capital Retained Fund for regeneration works within the Llynfi Valley. 

The Head of Finance and ICT informed Council that the Bank Rate started the financial year at 0.50% and it had remained at that level from 1 April to 30 September 2015.  He added that it was expected to remain at that level for the 2015-16 financial year. 

The Head of Finance and ICT stated that 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.  As a result of the review it was not deemed necessary to make any changes to the main parts of the Treasury Management Strategy 2015-16, however, it the review stated it would be beneficial for the Council to make some minor revisions to the Investment Strategy included within the Statement to enable increased flexibility and increase the investment opportunities available to the Council whilst still maintaining security.  Following consultation with Alingclose the proposed main changes were:

·         Reduce the UK Local Authorities individual counterparty limit from £15 million to £12 million

·         Increase the unsecured investments with Building Societies group limit from £5 million to £6 million

·         Add additional wording to clarify to the counterparty limits

A Member referred to para 4.4.3 of the report and asked where the favourable cash flows came from and how they compared to previous years.  The member also stated that it may be useful in future years to have a pre-Council briefing on the report so members fully understand its content.  The Head of Finance and ICT advised that at the same period for the last financial year there was a similar increase in cash flow and this was income received from residents that choose to pay their Council tax up front in the first half of the year. He also advised that training sessions for the Audit Committee on the Treasury Management could be opened up to members if they felt it would be of benefit to them.

RESOLVED: That Council –

1.    Approved the changes to the Investment Strategy within the Treasury Management Strategy 2015-16 as highlighted in the report

2.    Noted the treasury management activities for the first half of 2015-16

3.    Noted the projected Treasury Management and Prudential Indicators for 2015-16