Agenda item

Treasury Management Mid-Year Report

To consider the Executive Head of Finance Report No. FIN1836 (copy attached), which sets out the main activities of the Treasury Management Operations during the first half of 2018/19.


The Committee considered the Executive Head of Finance’s Report No. FIN1836, which set out the main activities of the Treasury Management Operations during the first half of 2018/19, provided an update on the current economic conditions affecting Treasury Management decisions and a forward look for the remainder of the financial year.


It was noted that the Council’s full year 2018/19 budgeted investment income interest was estimated to be £835,000, compared to the original budget for the year of £846,000.  Borrowing interest costs for the financial year were estimated to be £262,000 compared to a budget of £296,000 contained in the original budget for 2018/19. 


The Committee was advised that the treasury team continued to concentrate on the security of deposits/investments while keeping a keen regard to the income returns available.  Members were informed that the £5 million investment in Payden & Rygel’s Sterling Reserve Fund had provided a 0.79% income performance.  Due to the low level of income returned an alternative pooled fund option was being considered. 


As a borrowing authority, any bonds that the Council redeemed would offset the need to borrow.  However, interest income would then be lost which had a revenue implication.   The Committee was advised that current short-term borrowing rates were around 1% and there was an option to reinvest a current active bond on redemption with a higher yielding pooled fund, producing a net benefit when taking into account borrowing rates.  To enable a reinvestment of a Covered Bond in pooled funds the investment limit for pooled funds needed to be increased above the current £20 million limit by £5 million.


It was estimated that the Council’s commitment towards capital expenditure in the current year would raise the level of external borrowing at the end of the year.   Further capital expenditure in 2018/19 and future years would require further additional borrowing.   Higher yielding pooled fund investments would be retained for as long as possible, as their redemption in the future to raise cash for capital purposes would cause significant revenue effects in relation to the loss of investment income.  


It was confirmed that all treasury management activities undertaken during the first half of the financial year had fully complied with the CIPFA Code of Practice and the Council’s approved Treasury Management Strategy.  The Council continued to seek to diversify its investments in order to maximise returns and to safeguard the Council’s treasury management position.


During discussion, a question was raised regarding a previous request made for Arlingclose to attend a meeting of the Committee.   It was agreed that this would be followed up.  Members also raised questions regarding how long the Payden & Rygel’s Sterling Reserve Fund had been underperforming and also on short-term investments and these were answered by the Executive Head of Finance.  A question concerning the incremental impact of capital investment decisions would be given a written response by the Executive Head of Finance. 




(i)           the Executive Head of Finance’s Report No. FIN1836 be noted;


(ii)          the low level of investment income returned from Payden & Rygel’s Sterling Reserve pooled fund and the option to replace it with a higher yielding fund be noted; and


(iii)         approval be given to an increase of £5 million in the Collective Investment Schemes (pooled funds) investment limit, as set in the Annual Treasury Management Strategy for 2018/19 and approved by the Council on 22nd February 2018.

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