Agenda item

To consider the report for information

DECISION:

To accept the report, for information

a)    Submitted, for information, a report highlighting the Council's actual Treasury Management activity during the current financial year. At a meeting of the Full Council in March 2022, the Treasury Management Strategy had been approved for 2022/23. It was highlighted that, during the six months between 1 April and 30 September 2022, the Council’s borrowing activity had remained within the limits originally set  and there had been 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 2022/23 budget.

It was explained, in the external context that it had been a challenging time for the markets with political uncertainty and the continuing impact of the conflict in Ukraine. Consequently, inflation had increased at exceptional speed along with the basic interest rate.

Reference was made to a summary of treasury management noting that on 30 September 2022, that the situation was sound with £1-4.8 million in loans, and £110.5 million in investments.  It was highlighted, that despite the possibility of repaying some of the loans with the investments, it was noted that the cost of repaying these loans would be very high as they has historically high interest rates, and with increasing interest rate the situation would be continually assessed in case there would be an advantage to making early repayments.

In terms of borrowing matters, reference was made to the Borrowing Strategy where no additional borrowing has been required during the period. The Council's main objective was to strike an appropriate low risk balance between ensuring low interest costs and ensuring cost assurance over the period the money was required, with flexibility to renegotiate loans should the Council's long-term plans change the secondary objective.  The Council's Borrowing Strategy continued to address the key affordability matter without compromising the stability of long-term debt in the borrowing portfolio.

Should there be a need to borrow any time in the future, it was noted that the Public Works Loans Board borrowing guidelines had been amended and they no longer permitted the Council to borrow to make a profit. It was reiterated that this was not a practice for the Council in any case.

In terms of investment activity, there was reference to the type of investments made, which, as usual, included banks and building societies, local authorities, financial market funds, pooled funds and the Debt Management Office. It was reported that the interest rates on the investments had improved by about 1.5% during the time in question, and it was anticipated that rates would increase further in coming months. This meant that the expected interest level for the financial year would be significantly greater than the budget forecast (the budget was £0.4 million, but an income of £1.8 million was expected).

It was confirmed that treasury management activities held during the period fully complied with the CIPFA Code of Practice as well as the Treasury Management Strategy. It was noted that the only indicator showing a lack of compliance was the 'interest rate risk indicator'. It was explained that this indicator had been set when the interest rate was 0.1% and that it had not possible to anticipate such a significant increase in the interest rate at the time - it was therefore reasonable that the sums would be higher and as the council did not have any variable borrowing, it did not mean a financial risk to the Council, although it could provide an opportunity maybe to attract significantly higher interest income.

b)    The members expressed their thanks for the report.

c)    In response to a question regarding a reduction of £0.6m in the Pooled Funds and that this was intentional given that Pooled Funds were unappealing / other were more secure, it was noted that the original investment had been £10m and that the value had varied over the years. Nevertheless, it was reiterated that this was the only open market investment and that it was not intended to sell it, but continue to invest in mid-term / long-term until the £10m was regained.

DECISION:

To accept the report, for information