Appendix B

The Treasury Management activity during the year 2021/22

1. Investment activity interest rates

1.1 Investments were placed with reference to the core balance and cash flow requirements and the outlook for interest rates. Base interest rates averaged during the period were 0.19%, a low rate environment.

1.2 Following consultation, changes to the strategy were made from 2017/18 to broaden the risk profile by reducing liquidity and to include some suitable, alternative investment products that are held for the medium (2-5 years) to longer term (5 years+). These products can generate better overall returns but there is a higher risk of volatility of performance so a longer term commitment is required.

1.3 The following tablebelow summarises the changes made since 2017/18 no further changes were proposed for 2021/22. The inclusion of an investment product category in the strategy does not automatically result in investments being placed.

Investment options	2017/18	2018/19	2019/20	2020/21	2021/22
Money Market Funds (Including LVNAV)	ü	ü	ü	ü	ü
Bank Notice Accounts	ü	ü	ü	ü	ü
Fixed Term Bank Deposits	ü	ü	ü	ü	ü
UK Local Authorities	ü	ü	ü	ü	ü
Enhanced Money Market Funds (VNAV)	ü	ü	ü	ü	ü
Building Societies	û	ü	ü	ü	ü
Pooled Property Funds	û	ü	ü	ü	ü
Corporate Bond Funds	û	ü	ü	ü	ü
Mixed Asset Funds	û	ü	ü	ü	ü
Equity Funds	û	û	ü	ü	ü

The primary principle governing the Council’s investment criteria is the security of its investments, although the return on the investment is also a key consideration. After this main principle, the Council will ensure that:

• It maintains a policy covering both the categories of investment types it will invest in and the criteria for choosing investment counterparties with adequate security, and monitoring their security;
• It has sufficient liquidity in its investments;
• It receives a yield that is aligned with the level of security and liquidity of its investments;

§ Where possible, it actively seeks to support Environmental, Social and Governance (ESG) investment products and institutions that meet all of the above requirements.

1.4 The total amount received in short term interest for 2021/22 was £1.17m at an average rate of 0.38%. This was above the average of base rates in the same period (0.19%) and against a backdrop of ensuring, as far as possible in the financial climate, the security of principal and the minimisation of risk within a broader boundary.

2. Long term borrowing

2.1       Officers constantly reviewed the need to borrow taking into consideration the potential movements in borrrowing costs, the need to finance new capital expenditure, refinancing maturing debt, and the cost of carry that might incur a revenue loss between borrowing costs and investment returns.

2.2       During 2021/22 £3.6m of PWLB debt matured at a coupon rate of 6.84%. This historic maturing debt was not replaced with additional in year new borrowing.

2.3       The average interest rate of all debt at 31 March 2022 of £232.9m was 4.63%. No beneficial rescheduling of debt has been available, due to a considerable widening of the difference between new borrowing and repayment rates, which has made PWLB debt restructuring much less attractive. Consideration would have to be given to the large premiums (cash payments) which would be incurred by prematurely repaying existing PWLB loans. It is very unlikely that these could be justified on value for money grounds if using replacement PWLB refinancing.

2.4       The range of interest rates payable in all of the loans is illustrated in the graph below:

3.         Short term borrowing

3.1 No borrowing was undertaken during 2021/22 to cover temporary overdraft situations.

4. Treasury Management Advisers

4.1       The Strategy for 2021/22 explained that the Council uses Link Asset Services as its treasury management consultant on a range of services which include:

• Technical support on treasury matters, Capital finance issues and advice on reporting;
• Economic and interest rate analysis;
• Debt services which includes advice on the timing of borrowing;
• Debt rescheduling advice surrounding the existing portfolio;
• Generic investment advice on interest rates, timing and investment instruments;
• Credit ratings from the three main credit rating agencies and other market information; 
• Assistance with training on treasury matters

4.2    Whilst the advisers provide support to the internal treasury function, under current market rules and the CIPFA Code of Practice the final decision on treasury matters remained with the Council. This service remains subject to regular review.

4.3   Link Asset Services is the largest provider of Treasury Management advice services to local authorities in the UK and they claim to be the market leading treasury management service provider to their clients. The advice has been and will continue to be monitored regularly to ensure a continued excellent advisory service.