Agenda item

Treasury Management Update Report

The Committee is asked to note the report. 


Gareth Rees, Head of Financial Management presented the report which informed members of the Treasury Management activities up to the 31st August 2023.  The report also included a summary of the current economic climate, an update on the borrowing strategy, a review of current investments and compliance with prudential indicators.


It was noted under the Treasury Management Code there was a requirement that members were presented with at least three reports during the year, and therefore this report, together with the strategy and annual report, ensured that the Council met the requirement. 


The report set out some of the economic background, including CPI rates and Bank of England rate. It was noted that since writing the report, there had been a further update on CPI, which was 6.7% in the 12 months to August. Also, the Monetary Policy Committee voted at its meeting on 20 September to hold the Bank Rate at 5.25%.


The Head of Financial Management provided an update on the Council’s borrowing strategy. In particular, it is worth noted the borrowing strategy continued to be to hold any borrowing requirement internally and ensure that all long-term debt due to mature in the financial year was repaid. Members were advised that two loans would mature before the end of the current financial year, totalling £8m and they would both be repaid in full.


The committee noted that due to the rapid increase in interest rates the Authority was presented with an opportunity to repay its market loans with Barclays, and although these loans were at an average rate of 5%, they were very long dated with no option to restructure or mature. 


The latest position in respect of the Investment Strategy, and Investment Returns, was set out within the report.  Members attention was drawn to paragraph 27, where the current year forecast investment returns of £3.4m additional interest income was forecast, in excess of the budgeted £7.5m target for the year.


It was reported the investment balances remained healthy, although lower than previous years due to the capital borrowing held internally, with a current balance as at 31st August of £282m. 


The Council’s treasury management advisors, Arlingclose, maintained a proactive approach to monitoring credit worthiness of all financial institutions. As such the Council was able to minimise its exposure to risk, through frequent review of credit ratings and deposit period limits, as well as dispersing investments across a number of organisations.


It was explained that Environmental, Social and Governance (ESG) issues were increasingly important, and counterparty policies had been considered in light of ESG information.  The Authority invested in an ethical bond fund, a diversified income fund with significant exposure to renewable energy, a responsible income fund, and a social housing Real Estate Investment Trust.    


Members were advised that all the banks the Authority held investment balances with were signed up to the UN Principles for Responsible Banking, and all of our strategic pooled funds were signed up to the UN Principles for Responsible Investment, the UK Stewardship Code 2020, and the Net-Zero Asset Managers Initiative.


It was noted that none of the Prudential Indicators had been breached, and in accordance with new reporting requirements the quarter 1 position was presented to Cabinet. A prudent approach continued to be taken in relation to investment activity with priority being given to security and liquidity over yield.


In response to a question regarding the unsecured debt and what work was being undertaken to ensure that lending's were financially secure.  It was explained that the detail of other council's security the information was available and could be shared with members after the meeting.  It was noted that the Authority continued to work closely with its Arlingclose, Treasury Management Advisors and monitored the risks.



IN relation to ESG criteria are there other investments that don't fit that criteria, and are they all named? Members were advised that there were some strategic funds that would involve fossil fuel investments but due to the cash value it was not appropriate to disinvest from them.  The funds were considering more ESG but it was a long term issue in terms of investments.


The request was made for future reports to include carbon intensity of the overall portfolio; it was agreed this information could be obtained for future reporting. 


A member asked about the expectation of future interest rate levels, officers explained that this was hard to predict if they had plateaued. 


In response to a question regarding social affordable housing, it was explained that social housing terms of treasury management related to supported living accommodation for vulnerable adults and not children's care homes.  Officers offered to circulate more information regarding social housing. 


The committee discussed loans to other councils, the Director of Finance advised that those type of loans were secured by Government.  It was noted that LOBO loans often involved high interest rates over a long term and if the opportunity arose to repay a LOBO loan early, officers would explore the option if financially viable. 




That the report be noted.

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