Agenda item

To present the updated Treasury Management Strategy Statement and Prudential

Indicators for 2017/18 – 2019/20 to this Committee for scrutiny before it is presented to

Corporate Committee and then Full Council for final approval. 

Thomas Skeen, Head of Pensions introduced the report as set out. Which presented the updated Treasury Management Strategy Statement for 2017/18-2019/20. Head of Pensions introduced Luke Webster, Chief Investment Officer from the GLA.

 The following arose during the discussion of the report:

a.    A report setting out the new Treasury Management arrangements was presented to OSC in March 2016. OSC were being given an update on the implementation of those arrangements, and an opportunity to provide comments, before they were presented to Corporate Committee  and Full Council for formal adoption.

b.    Current ‘in-house’ arrangements involved a low level of cash reserves and investment in ‘Triple A’ rated money market funds. The new arrangements involved entering into partnership with the GLA for the provision of certain treasury management activities, which included undertaking borrowing on the Council’s behalf which would be set within strict  parameters.

c.    The Committee was advised that the GLA managed investments that totalled around £3 billion, which was around 200 times that of Haringey. The scale of the GLA activities afforded a far greater diversification of risk and they also benefited from a higher yield; creating a small saving for the Council. The risk profile of investments carried out by the GLA was exactly the same as in-house.

d.    In response to a question, the Committee was advised that the savings amounted to around £30k per year but that the primary driver was risk reduction and increased resilience.

e.    Following assurances being sought around the cost of the new arrangements, the Committee was advised that the GLA would charge 2 basis points on the investment performance that the pool achieved. In addition, there would be an annual re-charge to reflect the amount of work done on investments and borrowing; an indicative calculation for last year was a re-charge of around £40k.

f.     In response to concerns raised, the Committee was advised that Haringey would still be responsible for decision making, through its setting of an annual Treasury Management Statement and the setting of borrowing parameters. Officers also advised the Committee that its treasury advisor, Arlingclose, would need to be retained.

g.    In relation to a query around increased borrowing and how the TMSS related, to say the HDV, officers advised that the HDV would be classified as capital expenditure and would be dealt with in the same way as any other capital expenditure plan. The Treasury Management Statement set the parameters for risk and  part of the treasury management process was to look at borrowing rates and asses when the Council should borrow money.

h.    In response to a question around debt levels and to what extent the authority was near its borrowing, the Committee was advised that the Council was significantly below its borrowing limit. It was estimated that the authority’s borrowing was at £250m which was around  60% of its limit.

i.      In response to a question, the Committee was advised that the arrangement with the GLA was for a 12 month contract, which would contain exit provisions if the Council wished to extricate itself from the joint arrangement.

j.      In response to a question around whether the TMSS should give a firm commitment around exiting any LOBO arrangements that the Council had entered in to, the Committee was advised that a blanket commitment was probably not in the Councils interest. The Committee was also advised that early exit of such arrangements would incur significant financial penalties.

k.    The Chair requested that the TMSS make specific reference to the authority’s position on LOBOs. OSC also requested that Corporate Committee continued to regularly review whether the investment in LOBO financial instruments presented value for money. (Action Thomas Skeen).

l.      The Committee also commented that the Treasury Management function should operate separately from political decisions around where the money was invested and that this was something for Corporate Committee to consider.

RESOLVED

That the proposed updated Treasury Management Strategy Statement for 2017/18 to 2019/20 was noted.