Agenda item

To consider the report

RESOLVED to accept the report and note its contents.

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.