Agenda item

To consider the report for information

To accept and note the information

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 20121/22 budget.

In the Pension Committee on 25 March 2021, it had been resolved to permit the surplus funds of the Pension Fund to be pooled and co-invested with the Council's overall cash-flow.

The successful vaccine rollout programme had been credit positive for the financial services sector in general, and the subsequent improved economic outlook had meant that some institutions had been able to reduce provisions for bad loans. It was reported that the period had been challenging, but with the lifting of restrictions, there had been more activity in the second quarter of the year. It noted that Arlingclose had extended the maximum period of some investments to 100 days.

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 continuing to do its best to make gains by spreading risk, but was also operating carefully in line with Arlingclose's advice.

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.  

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.

It was reported that £25m of cash in the Pension Fund had been invested in the Wales Pension Partnership Fixed Income Fund in October 2021 that reduced the Fund's cash level. The fund did not wish to retain high levels of cash as the returns were low, and therefore invested any surplus cash with the investment manager when liquidity allowed this.

The Head of Finance noted that the performance was acceptable despite the dreadfully low interest rates.

The members expressed their thanks for the report.

During the ensuing discussion, the following observation was noted:

·         The Wales Pension Partnership was successful – this should be celebrated

·         The Wales Pension Partnership had added value and stability 

·         The Council measured and managed its exposure to treasury management risks by using the relevant indicators.

RESOLVED

To accept and note the information