Agenda item

The Head of Treasury Management introduced a report which provided an update on the Council’s treasury management activities and performance in the year to 31^st March 2018, in accordance with the CIPFA Treasury Management Code of Practice.

In discussion of the report, the following points were noted:

a.    In reference to local authorities being able to “opt up” to professional client status under MIFID II, officers advised the Section 151 Officer would be a key officer in terms of possessing the requisite professional experience to make investment decisions.

b.    In response to a question around the Council’s borrowing strategy, officers advised that an increase in interest rates would not necessarily have an immediate impact on the amount of money available, as most of the borrowing that the Council undertook was done on a fixed rate basis. Officers also emphasised that the borrowing costs were linked to gilt yields rather than the Bank of England base rate, so an increase in the base rate would not necessarily result in a commensurate increase in the Council’s borrowing rates. Gilt yields were largely determined by market sentiment and confidence.

c.    In response to a question about the potential costs involved with restructuring the LOBO loans, officers advised that the lenders involved would have to agree to repayment terms and that this would involve some cost to the Council. Officers elaborated that there were 6 separate LOBO loans from 3 different lenders and that 3 of these loans had review terms of 6 months, and the others were between 2 and 5 years. The review term periods were fixed intervals at which the lender could agree to increase the interest rates or the Council could repay the loan in full. There may be circumstances where changes in interest rates made repaying the loan and seeking alternative borrowing arrangements financially advantageous to the Council.

d.    In response to a query around what the Council’s useable reserves were, officers advised that there was £188m in total useable reserves however this was a misleading figure as in included the HRA and schools.

e.    In response to a query, officers advised that there were significant slippages in the capital programme from year to year and that this was a primary reason in explaining the reported level of borrowing headroom.

f.     In response to a question about the difference between borrowing limits and current borrowing levels, officers advised that the headroom was around £116m for the Council as a whole and £78m for the HRA as at 31/3/18. Officers cautioned that the Council needed to demonstrate prudential borrowing and value for money when determining its investment activities.

The Committee agreed that it would like to receive a special training/induction session around treasury management for September. The Head of Treasury Management agreed to arrange this. (Action: Thomas Skeen).

RESOLVED

     I.        That Members noted the Treasury Management activity undertaken during the year to 31^st March 2018 and the performance achieved.

    II.        That Members noted that all treasury activities were undertaken in line with the approved Treasury Management Strategy; in particular, the prudential indicators with fixed limits shown in appendix 1 of the report.