Issue - meetings

The Committee considered the report of the Finance Manager setting out details of the activities of the Treasury Management function for the 2016/17 financial year in accordance with CIPFA’s Code of Practice on Treasury Management in Local Authorities.  The Finance Manager explained that:

Economic Overview for 2016/17

·  Following the EU referendum decision, sharp falls in Sterling exchange rates and rising fuel prices increased inflation to 2.3% in March 2017.  The Bank of England cut the bank rate to 0.25% in August 2016 and increased quantitative easing to help stimulate growth in the economy, resulting in lower investment and borrowing rates.  Rating agencies had downgraded the UK’s sovereign rating to AA due to the uncertainty associated with the referendum decision.  None of the banks on the Council’s lending lists failed the stress tests conducted by the European Banking Authority in July and by the Bank of England in November.

Investment/Borrowing Activity

·  During 2016/17, the Council’s investment balances had ranged between £14.2m and £40.2m.  The average investment balance for the year was £29.2m.  The Council held investments totalling £15.86m as at 31 March 2017. Investment income for the year totalled £186k with an average rate of 0.58% against the benchmarked rate of 0.54%.

·  All investments during 2016/17 had been short term due to rates not being sufficient to justify the risk of investing funds for longer periods.  Funds had also been kept liquid being required to fund the Capital Programme and the daily liabilities of the Council throughout the year.

·  The Council had not needed to borrow during 2016/17 except on two occasions for short term cash flow purposes.  The total cost of the borrowing was £82.20.

·  The Council’s Treasury Management activities in 2016/17 had complied with CIPFA’s Code of Practice on Treasury Management in Local Authorities and the Council’s Treasury Management Strategy.

In response to questions, the Finance Manager explained that:

·  The use of property funds had been looked at when they were doing extremely well in terms of capital appreciation and rental income, but it was now considered that, given the fall in returns and the length of time that the funds would be tied up, the Council’s funds would be better invested in local infrastructure to achieve a rental income stream.

·  Whilst it had been believed that there would be a prudential borrowing requirement of £11.95m in 2016/17, the only borrowing requirements had been for short term cash flow purposes due to slippage in the Capital Programme.

The Committee thanked the Finance Manager for a clear and comprehensive report.

RESOLVED:

1.  That the review of the financial year 2016/17 which has been compiled in accordance with CIPFA’s Code of Practice on Treasury Management in Local Authorities be noted.

2.  That no amendments to the current Treasury Management procedures are necessary as a result of the review of activities in 2016/17.