Your Councillors

Agenda item

Treasury Management Annual Review 2019/20


The Finance Manager presented his report setting out details of the activities of the Treasury Management function for the 2019/20 financial year in accordance with CIPFA’s Code of Practice on Treasury Management in Local Authorities, and in the context of the economic environment over the past 12 months.


It was noted that:


·  The Treasury Management Strategy Statement for 2019/20 was approved by the Council on 27 February 2019.  The key elements of the Strategy were:


Utilise cash balances rather than enter into loan debt to finance the Capital Programme in the short term due to low investment returns and high counterpart risk in the current economic climate; and

Further diversify the Council’s portfolio, as far as is operationally feasible, ensuring that a combination of secured and unsecured investments are considered and investigate greater use of local authority investments for greater security; and

Continue to utilise the Council’s reserves, balances and cash flow as a temporary measure due to investment due to investment returns being low and counterparty risks being relatively high until such time that borrowing is required to fund the Capital Programme.


·  During 2019/20, the Council’s investment balances had ranged between £7.75m and £37.3m.  The average investment balance for the year was £25m.  The Council held investments totalling £11.025m as at 31 March 2020.


·  Investment income for the year totalled £208k which exceeded the budget for 2019/20 of £100k.  This was due to the fact that for most of the year the Council held higher than expected cash balances and short term rates remained at higher than expected levels.  The average rate for investments for the year was 0.82%, but this was unlikely to continue during 2020/21 with the reductions in interest rates in response to the financial impact of the coronavirus outbreak.


·  All of the Council’s investments during the year were short term so that they would be available when funding was required for the Capital Programme and there was greater use of money market funds due to the low risk and higher yield.


·  In November 2019, the Council undertook £7m of short term borrowing to part fund the purchase of the Lockmeadow Leisure Complex (total cost £19m).  The balance was funded from the Council’s own resources.  Short term borrowing was the cheapest option for the Council at that time, but the situation was being monitored.  The Council had borrowed a further £4m by the end of the year resulting in total borrowing of £11m as at 31 March 2020.  The borrowing was short term from local authorities and was needed to fund the Capital Programme at a time when there was pressure on the Council’s cash resources because it had not started to collect Council Tax and Business Rates for the new financial year.


·  Current loans had gone down to £9m but this was anticipated to increase during the year.  Consideration was being given to a mixture of long and short term funding to balance the risks of refinancing and interest rates risks.


·  All Prudential and Treasury Indicators had been complied with throughout the year.


In response to a question about the risks associated with borrowing from other local authorities, the Finance Manager explained that at the moment local authorities seemed to be cash rich due to the receipt of grants.  However, having regard to the situation generally and falling income levels, consideration was being given to other types of funding.




1.  That the review of the financial year 2019/20 undertaken in accordance with CIPFA’s Code of Practice on Treasury Management and the Prudential and Treasury Indicators be noted.


2.  That no amendments to the current treasury management procedures are necessary as a result of the review of activities in 2019/20.


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