Issue - meetings

Purpose: to scrutinise the treasury management strategy and policy and if required make recommendations for amendment to Cabinet

The committee considered the report of the Head of Finance that asked the committee to scrutinise the treasury management strategy and policy and if required to make recommendations for change to Cabinet.

Mr B Watson, Accountancy Manager (Technical) reported that there was no major changein this strategy from that present last year.  He also stated that over the medium-term, although interest rates were expected to increase the council’s cash balances were expected to diminish and consequently forecasted investment income earned would reduce. 

Appendix A showed investment and borrowing limits that Cabinet and Council would be asked to approve in February.  He referred to the statement in the strategy that confirmed that the council would not borrow more than, or in advance of, its needs in order to profit from the investment of the extra sums borrowed.  As at 31 December the council's budgeted investment return of £1.9 million was now expected to be £2.1 million.

Mr Watson explained that counterparty limits existed because the different institutions (counterparties) that the council invested with had different risk ratings depending on a variety of factors (e.g. their asset base or government support) so limits for investment amount and duration would be set for each institution or type of institution depending upon these factors. 

Whilst the rate of unemployment had recently dropped thus indicating a possible rise in interest rates as originally mooted by the Bank of England, Mr Watson did not think it was necessary to indicate an increase in interest rates in this strategy as the council's advisors had not indicated the need to and the Governor of the Bank of England continued to emphasise only the possibility of an interest rate increase.

In response to questions, S Bishop, Strategic Director, and Mr Watson confirmed the following:

The loan to SOHA would take place on 1 March 2014 but was not part of the treasury function.  However, the treasury management strategy did refer to possible loans to housing associations: these could be capital or treasury.  The loan to SOHA was designed to stimulate social housing in the district.  Ultimately the loan was made at a sub-market rate because rates changed over the duration of the negotiations with the benefit of an improved housing objective.  Whilst sub-market, the rate was still in excess of the current average rate on treasury investments.

In response to a question, Mr W Jacobs, Head of Finance, advised that average level of investment income would decrease as capital projects were realised and the level of capital receipts diminished.

In hearing concern expressed about the increasing reliance on Capita for services e.g. Capita Asset Services as referred to in the strategy, Mr Watson advised that they provided information and guidance on this and other accounting matters but the ultimate decision to invest remained with the council.

RESOLVED: not to make any recommendations to Cabinet to amend the strategy.