To consider
the report
Decision:
RESOLVED to accept the
report and note its contents.
Minutes:
Submitted, for information, a report highlighting the Council's actual
Treasury Management activity during the current financial year. It was
highlighted that during the six months between 1 April and 30 September 2021,
the Council’s borrowing activity had remained within the limits originally set.
There were no defaults by banks in which the Council had deposited money. It
was reiterated that it was estimated that the Council's investment income
exceeded the expected income in the 2021/22 budget.
Reference was made to the external context that referred to the economic
background, the financial markets and credit review. In the context of
borrowing, it was noted that local authorities could borrow from the Public
Works Loan Board (PWLB) on condition that they were able to confirm that they
did not intend to buy 'investment assets primarily for yield' in the current or
next two financial years, with a confirmation of the purpose of capital
expenditure by the Section 151 Officer. The Authority did not intend to buy any
investment assets primarily for yield within the next three years, and
therefore could fully access the PWLB - borrowing from the PWLB was considered
the best option.
It was explained that £10m of the Council's investments were held in
externally managed strategic pooled property and equity funds where short-term
security and liquidity were lesser considerations. Although the pooled capital value of £9.243m
was less than the initial investment of £10m, the investments were made in the
knowledge that the capital values were unstable at months, quarters and even
years; but with the confidence that the total returns over a three to five year
period would be higher than the interest rates on cash. Consequently, the
objectives would be realised through the stability of mid-term prices.
Reference was made to the use of the Debt Management Office as an
investment vehicle that had modestly higher returns than others and that was
flexible, easy and secure to use. Although the rates were low and the outlook
was weak and unstable, it was reported that the Council was investing as much
as possible in a challenging period;
It was confirmed that all the treasury management activities that were
held during the period fully complied with the CIPFA code of practice as well
as the Council's Treasury Management Strategy Statement, and in the context of
investment training, officers had attended investment training with Arlingclose
and CIPFA during the period that was relevant to their posts. Attention was drawn to amendments to the
CIPFA codes, which included
·
Incorporating ESG issues
as a consideration within TMP 1 Risk Management.
·
Additional focus on
the knowledge and skills of officers and elected members involved in decision
making.
It was highlighted that Arlingclose expected the Bank Rate to increase
in Q2 2022, due as much to the Bank of England's aspiration to move out of
emergency levels as to the fear of inflationary pressures. Investors had
factored in a number of increases in the Bank rate to 1% by 2024 in their
valuations. Although Arlingclose believed that the Bank rate would rise, it
would not be as high as market expectations.
The Head of Finance noted that performance was acceptable despite the
dreadfully low interest rates.
The members expressed their thanks for the report.
During the ensuing discussion, the following observation by a member was
noted:
·
The use of PWLB was
to be welcomed - it should be ensured that the funding was not available for
trading.
In response to a question regarding the Local Authority's ability to
invest in property or local house construction / purchasing, the Head of
Finance noted that the Authority was doing this via the Housing Strategy
(although Welsh Government restricted what was possible). It was added that no
houses had yet been bought, as the 'model' was searching for a specific /
suitable property.
In response to a question about how frequently the restrictions were
monitored, it was noted that this was undertaken annually. In response to a
question regarding not investing further in banks and building societies, it
was noted that there were Bank restrictions on these elements, and that it was
imperative to keep within the restrictions and make the most of what was
available despite the lack of flexibility.
RESOLVED
to accept the report and note its contents.
Supporting documents: