Agenda item

The purpose of this report is to consider the overall financial and operational performance of the Council’s treasury management activity for 2018/19. This report will be considered by Cabinet on 27 June 2019 and Council on 18 July 2019.

Members considered the Treasury Management Annual Review report presented by Mark Saunders.

Mark Saunders confirmed that external assessors monitor the Council’s outstanding loans to calculate whether it is financially viable for the Council to pay these off prior to their end dates. Due to the redemption fees associated with these loans, it is not seen as cost effective to do this. He added that these are monitored regularly.

Member asked questions, made comments and received responses as follows;

1.    Councillor Mrs French asked for the end date of the Council’s outstanding loans. Mark Saunders confirmed that the end dates for the two PWLB loans are 01/02/2029 and 13/03/2032 and the LOBO loan has an end date of 18/03/2054. The loans were taken out in 1994 and 1997 with competitive interest rates at that time however following the Recession in 2008 nobody envisaged that interest rates would fall so low.

2.    Councillor Benney asked what the Council funded using these loans. Mark Saunders explained that in 1994 and 1997, loans were predominantly used to fund the Council’s Capital Programme. He could not recall the specific use of these funds at that time.

3.    Councillor J Clark confirmed that Local Authorities used to borrow money to fund community projects so it is possible that this was the purpose of the loans.

4.    Mark Saunders explained that many years ago loans were used to fund the Council’s Capital Programme to meet the gap between available resources and funding required. Nowadays they are used to fund specific schemes in the Capital Programme which are assessed on an individual basis.

5.    Councillor Benney asked for the interest rate of these loans. Mark Saunders confirmed that this information is contained within the report (page 16 of the agenda pack). He added that interest rates are much more attractive now and the current Capital Programme suggests that the Council may consider borrowing additional funds in the future however the interest rates will be reassessed at that time.

6.    Councillor Booth asked how the Council’s return on investment compares with others. Mark Saunders confirmed that the external assessors carry out these benchmarking comparisons and they meet with the Council regularly throughout the financial year to provide assurance and offer advice. They have suggested previously that the Council could marginally improve returns by investing in higher risk organisations. As the returns are marginal, the Council is not considering this at this time. He reminded members that many other Local Authorities are currently investing in property funds which have a high return short-term.

7.    Councillor Booth explained that following his career in Financial Services, Local Authorities tend to make investment decisions based on organisations Credit Ratings. He highlighted that companies domiciled in the UK tend to have lower credit ratings than International companies however it is often the case, that these UK companies can be a safer investment.

8.    Mark Saunders confirmed that the Council had several Building Societies based on their investment list however most of them only offer short term investment periods. He confirmed that both he and Peter Catchpole review the Council’s investment position throughout the year.

9.    Councillor J Clark highlighted that often a higher return can mean a higher risk and the Council have to consider its risk appetite.

The Corporate Governance Committee noted the Treasury Management Annual Review 2018/19 report.