Issue - meetings

This item was considered at the first part of the meeting on 16 November 2021.

The Head of Pensions and Treasury introduced the report which provided an update on the council’s treasury management activities and performance in the first half of the financial year to 30 September 2021 in accordance with the Chartered Institute of Public Finance and Accountancy (CIPFA) Treasury Management Code of Practice. It was explained that the report was for the Committee to note and that it would be presented to Full Council as required by the Code of Practice.

It was highlighted that there had been additional borrowing of £41 million, £11 million of long term borrowing and £30 million of short term borrowing, which aimed to incorporate the council’s strategy to strike a balance between securing low financing costs and achieving long term cost certainty. It was anticipated that there would be additional long term borrowing later in the year. It was also noted that all activity had been in line with the approved Treasury Management Strategy so far this year.

The Committee noted that the council had held some Lender’s Option Borrower’s Option (LOBO) loans for a number of years and enquired about the process for repaying these loans. The Head of Pensions and Treasury explained that LOBO loans provided the lender with the option to propose an increase in the interest rate payable on a loan at pre-specified dates. It was stated that, if a lender proposed to raise its interest rate, the council could decide to repay the loan rather than accept a new, higher rate. It was noted that the likelihood of a lender deciding to exercise this option remained low. The Head of Pensions and Treasury stated that the council periodically reviewed opportunities to repay LOBOs with the treasury advisor but that these opportunities had not yet materialised.

Some Committee members suggested that interest rates were expected to rise and suggested that this would necessitate a review of how the council refinanced ongoing borrowing. The Head of Pensions and Treasury explained that restructuring a LOBO loan typically involved the council paying a premium to the lender which would most likely be expensive, given the length of time before the loans reached maturity. It was noted that officers were conscious that interest rates were likely to increase and were seeking to secure longer term interest rates for the Housing Revenue Account and the General Fund by taking out long term Public Works Loan Board (PWLB) borrowing. It was stated that, if any good opportunities to exit LOBO loans were identified, they would be investigated.

RESOLVED

1.    To note the Treasury Management activity undertaken during the first half of the financial year to 30 September 2021and the performance achieved which is attached as Appendix 1 to this report.

2.    To note that all treasury activities were undertaken in line with the approved Treasury Management Strategy.