Agenda item

Treasury Management Half Yearly Review 2016/17


The Committee considered the report of the Director of Finance and Business Improvement setting out details of the activities of the Treasury Management function for the first six months of the financial year 2016/17 in accordance with CIPFA’s Code of Practice on Treasury Management in Local Authorities in the context of the current economic environment.  It was noted that:


·  The Bank of England base rate had fallen to 0.25% in August 2016.  This had led to a reduction in investment returns across the board.  The Council had used highly rated institutions to invest its funds and had kept all new investments during the first 6 months of 2016/17 short term (less than one year).  The sum of £11.25m was held within Money Market Funds which were AAA rated funds and could be called upon instantly for meeting the Council’s liabilities and to fund its capital programme.  Total investments as at 30 September 2016 amounted to £25.25m.


·  The average rate of return on Council investments was 0.77%.  However, with rates falling lower, this average would reduce over the year.


·  Investment income for the year as at 30 September 2016 totalled £106k.


·  At 31 March 2016 the Council’s underlying need to borrow for capital purposes as measured by the Capital Financing Requirement (CFR) was (£1.2m) negative, showing that the capital programme was affordable without recourse to borrowing.  However, the Council had a forecasted CFR of £10m due to the expanded capital programme in 2016/17.  As at 30 September 2016 there had been no need for the Council to borrow, due to slippage of capital expenditure into 2017/18.  Furthermore, it did not appear that borrowing would be necessary to fund capital expenditure during the current year.


In response to questions, the Officers explained that:


·  In terms of the Council’s investment profile and rates of return, the investments with Standard Life and Federated Investors (UK) were Money Market Funds where funds were invested over a large portfolio of institutions.  These were AAA rated funds and the investments were for a maximum two year term.  The accounts were instant access which was why the rates of return were so low.


·  The instant access investments were required due to the Council’s role as billing authority in the collection of Business Rates and Council Tax, fluctuations in cash balances from these sources and payments being due to preceptors.  The other investments were fixed term.


·  Investments were benchmarked against the 3 month LIBOR rate plus 20 basis points.  3 month LIBOR was 0.3828% as at 30 September 2016, plus the 20 basis points making the benchmark 0.5828%.  The Council was currently operating at 32 basis points above this rate, but this was unlikely to be sustainable.  When the investment with the Royal Bank of Scotland, with a rate of return of 1.440%, matured in March 2017, the average rate of return would reduce considerably.


·  In the event of borrowing being necessary, the rate would depend on the nature of the loan, but typically the Council would be looking at a longer term loan of between 25 to 50 years+.




1.  That the position with regard to the Treasury Management Strategy as at 30 September 2016 be noted.


2.  That no amendments to the current procedures are necessary as a result of the review which has been undertaken of the activities of the Treasury Management function in 2016/17 to date.


Supporting documents: