Issue - meetings

Treasury Management Annual Report 2016/17 and mid year report 2017/18

Meeting: 12/12/2017 - Cabinet (Item 39)

39 Treasury Management - Stewardship Report 2016/17 pdf icon PDF 545 KB

Report by Chief Operating Officer

Additional documents:


39.1     The Cabinet considered a report by the Chief Operating Officer

39.2     It was RESOLVED to note the Treasury Management performance in 2016/17 incorporating the mid year review for the first half of 2017/18


39.3     This report fulfils the requirement to submit an annual/half yearly report in the form prescribed in the Treasury Management Code of Practice. Short term lending throughout the period covered achieved returns between 0.46% and 0.76%. The key principles of security, liquidity and yield are still relevant in the current financial climate, the authority will be looking at future options to improve return within an acceptable level of risk. Exposure to future risk continues to be minimised through proactive and constant review of the treasury management policy.  The emphasis must continue to be able to pre-empt/react quickly if market conditions worsen.


Meeting: 29/11/2017 - Audit, Best Value and Community Services Scrutiny Committee (Item 34)

34 Treasury Management Annual Report 2016/17 and mid year report 2017/18 pdf icon PDF 545 KB

Report by the Chief Finance Officer.


34.1     The Head of Accounts and Pensions introduced report which reviews the Treasury Management performance for the last financial year and the first six months of the current financial year. During that period investments achieved a 0.62% rate of interest against a Bank of England base rate of 0.25%. The Head of Accounts and Pensions outlined the interest rates that are being paid on the Council’s borrowing, and explained that an option had been exercised on a LOBO (lender option, borrower option) loan to fix the interest rate at 4.25%.


Long Term Borrowing

34.2     The Committee noted that the fixing of the interest rate on the LOBO loan will increase the average interest on the Council’s long term borrowing, and that the loan maturity profile shows a pinch point in payback periods in around ten to twenty years time. It asked whether there was an opportunity to refinance some of the debt and what the limit was on further borrowing.


34.3     The Head of Accounts and Pensions responded that long term borrowing was kept under regular review and the Council will seek to re-finance and repay loans when opportunities arise. However, there was no opportunity to re-finance at moment and early repayment penalties can be high. The Council’s new borrowing is at lower interest rates and some Banks are reviewing their balance sheets, so there may be opportunities in the future to re-finance or repay debt.


34.4     The authorised borrowing limit is £422 million (2016/17) and the Council’s borrowing is currently well under this limit at £275 million. It was clarified that borrowing to invest in property would be classed as is prudential borrowing, and therefore would not be included as part of the borrowing limit calculation.


Investment Strategy


34.5     The Committee observed that with investments totalling around £300 million, compared with £275 million of debt, residents may on the face of it question why the Council does not repay the loans and save the cost of the interest paid on the debt. The Head of Accounts and Pensions explained that there is an ongoing review of investment and debt, but early repayment of debt incurs penalties, so it is not in the Council’s interest to do this at present.


34.6     The Committee discussed whether to review the Treasury Management Strategy to see whether returns on investments for longer term reserves could be improved to generate more income. It also observed that there could be links to property investment as discussed in the Treasury Management briefing session. The Committee asked for a breakdown of investments and longer term reserves to identify where it might be possible to use longer term investments. The Committee also asked for further information on the structure (“laddering”) of short term deposits (under 12 months) and whether there was a policy in place for this.


34.7     The Chief Operating Officer outlined that the Treasury Management performance is in line with the current Strategy. However, it is possible to review the Treasury Management risks and liquidity  ...  view the full minutes text for item 34