Agenda item

To scrutinise the Draft Treasury Management Strategy Statement prior to adoption by Full Council in accordance with the Council’s Constitution (Part 4, Section 1).

The Committee received the report as set out.  Nicola Webb and Kevin Bartle provided an overview of the process and a brief outline of the main points.

NOTED

·          The Treasury Management Strategy Statement (TMSS) outlined what the Council did with their cash.  It sets out the rules, regulations and parameters on how to invest and how to borrow.  Members are involved in these decisions.

·          The TMSS was presented at three different meetings of the Council – the Corporate Committee formulated the strategy, OSC scrutinised, and full Council would then agree the strategy.

·          Members requested that a training session be arranged, so that Members would be better equipped to scrutinise the TMSS.

Nicola Webb and Kevin Bartle took questions from the Committee:

·          Following the events with the Icelandic Bank, all boroughs follow the CIPFA code of practice in formulating a Treasury Management Strategy.

·          The Council used its’ revenues, for example Council Tax, as security against borrowing as opposed to using assets, which was not allowed for local government.

·          The strategy of internal borrowing has saved a significant amount of money as money is not being lent by the PWLB (Public Works Loan Board) where the interest paid on the money was high compared to the interest gained on the money once it had been borrowed and was sitting in the Council’s account.

·          Legacy debts were still being paid; these debts have high interest rates attached to them and the Council was unable to get out of these without paying hefty premiums.  Should the private bank attempt to raise the interest rate on the loan then the council would be able to get out of the loan.

·          In the current climate, the Council was lucky to gain 0.5% interest on investments, where previously this had been 6/7%.  At the same time, there was currently not much available to invest.

·          The list of parties which the Council could lend to, based on a criteria, was listed in Annex 5 of the report.  There was only one change from last years list – Santander, as whilst it is a British bank, it has a Spanish parent and this was therefore considered a greater risk.

·          The criteria for investing Council funds was proposed to continue to be A-, which must be achieved across the credit reference agencies outlined in the report.  A- was still considered to be a good credit rating.

·          Central government gave money to Haringey to pay off Private Finance Initiatives (PFI), which was essentially a grant and therefore cost neutral to the Council.

·          The team responsible for the Council’s finances on a day to day basis checks the Council’s account each morning.  If a grant had been received then they consider investing the money with consideration of the cash balance sheet, which includes aspects such as payroll.  Market movement, treasury advisor views, share prices, business news and various other sources are also considered when making these decisions.  This also includes looking at insurance premiums, for example, if they increase then further investigation is carried out to ascertain why.

·          Overnight investments do occur and are called Money Market Funds.  These are fund manager controlled and the Council was able to get the money back within 24hours, along with an interest accrued during this time.

·          A- rated banks were considered to be a good investment, and BBB+ banks could also be invested in.  Any ratings below this were not considered to be a good investment.  There are no AAA rated banks since the economic crisis.

·          It was important to note that at the time of the Icelandic investment, the bank had a good rating, higher than those the Council invest in today, and was compliant with the TMSS.  The Icelandic bank collapse was not even foreseen by the credit agencies until it was too late and the money had already been invested.  A vast amount of the money had now been returned.

·          There were better rated banks in Australia and Canada but these were ruled out in favour of European banks, with British banks being used first and foremost.

·          It was important to note that investments could not be guaranteed.  Decisions were taken on the level of risk the Council was willing to take.

The Chair of the Committee noted that he did not feel completely comfortable with not making any recommendations prior to its approval by Full Council given the complexity of the strategy.

It was felt that some additional training would be beneficial for the Overview and Scrutiny Committee prior to a further look at the TMSS.

It was noted that the OSC can look at the TMSS at a later date, after approval by Full Council, and any recommendations they wish to make can then be considered by Corporate Committee and amendments made as appropriate.

The OSC had no specific comments at this stage but would revisit the strategy following a training session with the independent advisors, Arling Close.

ACTIONS:

A training session to be arranged for OSC and run by Arleen Close (Independent Advisors for TMSS).

ACTION: Kevin Bartle / Melanie Ponomarenko

A glossary of key terms relating to the TMSS would be circulated to OSC prior to the TMSS Training session.

ACTION: Kevin Bartle / Nicola Webb

OSC to re-look at the TMSS following this training session.

ACTION: Councillor Rice / Melanie Ponomarenko