The Finance Manager presented his report setting out the draft Treasury Management, Investment and Capital Strategies for 2021/22.  The Finance Manager explained that:

·  The focus next year was on running cash balances down to the point at which further borrowing was required.  Currently, the Council had short-term borrowing of £9m with other local authorities to fund its Capital Programme.  The Council would be looking for a mix of short and long-term borrowing going forward due to interest rates being low and to spread the risk of refinancing debt.

·  The investment balance as at 31 December 2020 was £24.19m.

·  The Council had made third party loans to Kent Savers and the Cobtree Manor Estate Charity.  A loan might also be offered to Maidstone Property Holdings Limited in relation to the refurbishment of rental properties.

The Finance Manager then drew the Committee’s attention to the urgent update which had been circulated earlier that day relating to the Treasury Management counterparty limits.  It was noted that:

·  As part of the report increases were proposed to some of the counterparty limits within the current Treasury Management Strategy.  The rationale behind this was that over the past financial year the Council’s cash balances had, at certain intervals, been significantly higher than anticipated prior to the onset of the COVID-19 pandemic and associated Government interventions.  The key reasons for this were the up-front payments received for Section 31 grants (to compensate for reductions in Business Rates income payable by ratepayers) and COVID-19 Business Grants which, although only held by the Council for a short time before being paid out to businesses, were significant in terms of value.

·  If agreed by the Audit, Governance and Standards Committee and the Council on 24 February, the increased limits would come into effect from 1 April 2021.

·  In advance of the proposed increases in counterparty limits, the Council had unavoidably breached some of the limits within the existing Strategy.  The breach had arisen from receipt at short notice of the latest tranche of COVID-19 Business Grants funding (£12.4m was received from the Government on Friday 15 January).  This would shortly be paid over to businesses, but in the meantime the surplus cash had been allocated to counterparties in accordance with the limits proposed within the new Strategy, and with reference to existing principles on managing credit and counterparty risk.  All investments were held with highly rated institutions and money market funds, with most of the cash being held in instant access accounts. 

·  It was anticipated that cash balances would reduce after payments relating to COVID-19 Business Grants, Housing Benefit and the Kent Business Rates Pool left the Council’s bank account on Monday 18 and Tuesday 19 January.  Balances held with the counterparties would return to within the current limits on Tuesday 19 January, other than one which was subject to 35 days’ notice.

·  There was a possibility that limits might be breached again between 15 and 22 February following receipt of Housing Benefit subsidy and further Section 31 grant  ...  view the full minutes text for item 165