Agenda item

NOTE: The pdf conversion process distorted some of the tables in the original report – an updated copy was circulated to members after the meeting and it was republished on the Council’s website.

Phil Triggs, Director for Treasury and Pensions, presented the report which provided an update on the implementation of the 2020/21 Treasury Management Strategy approved by Council on 26 February 2020 and presented the Treasury Management Strategy 2020/21 mid-year review.

Councillor Rowan Ree asked if all of the Council’s borrowing came from the Public Works Loans Board (PWLB). Phil Triggs confirmed it was all from the PWLB.

Councillor Ree asked why there was no lower limit on any of the maturity structure of borrowing table (paragraph 3.4). Phil Triggs said there were two factors – the Council wanted to be able to take advantage of the most advantageous interest rates at any one time and the portfolio maturity spanned a considerable period of time, so it was good to have a diverse range of maturities. Officers wanted to avoid there being a glut of maturities at any one time – the goal is to even out maturities over the next fifty years or so.

Councillor Ree asked why there was such a big disparity between the current average portfolio interest rate and the current rates (3.4 of the report). He also asked how high the early repayment premia were and how often officers assessed them. Phil Triggs said that current interest rates are at an historical low. Premia for loan repayment are checked regularly but the repayment structure implemented by the PWLB meant that the premia was prohibitively expensive by design.

Councillor Ree commented that it was odd that the PWLB were trying to discourage early repayment of loans. He suggested the Council write to them as it could be a way for local authorities to save money. Phil Triggs said the Society of London Treasurers had recently applied some pressure to Government to fund the payment of premia for early repayment of loans – enabling local authorities to take out new loans at vastly reduced interest rates. Councillor Ree asked for a note on the latest steps taken and what else could be done to encourage a change in this area. He also requested the latest analysis of early repayment charges.

ACTION: Phil Triggs

Councillor Alexandra Sanderson asked if officers could explain the relationship between the amount the Council borrowed and the amount invested. Phil Triggs said cash invested was Treasury surplus cash and was invested in cash markets. The total amount borrowed is sourced from the PWLB to finance capital expenditure. If there were advantageous rates available then the Council would undertake borrowing. Currently, an amount of the Council’s reserves is used to temporarily fund capital expenditure, known as internal borrowing.

Councillor Sanderson noted the risk management implications in 8.2 of the report and asked what impact Brexit would have on the Council’s finances. Phil Triggs said the reference in the report was related to future interest rates – the view was that if there was a ‘no deal’ scenario then that could have a major impact on interest rates.

Emily Hill, Director of Finance, said in terms of the wider impacts of Brexit the other key issues for the Council were impacts to price inflation, suppliers and supply chains.

The Chair noted that there had been reports on the impact of Brexit to Audit and Policy and Accountability Committees and Brexit impacts were on the Council’s risk register.

Councillor Sanderson asked if the Council had any dealings with EEA banks. Phil Triggs said no.

Councillor Sanderson asked how often the Council changed investment advisory services and what their measures for success were. Phil Triggs said the Council had a contract with the current provider for three years with option to extend for two more years. Due to the high barriers of entry to the sector there were only two advisors available. Officers met with the current provider, Link Asset Services, on a regular basis and the advice they had provided has been good.

Councillor Sanderson said she was interested in how the Council chose one provider over another. Phil Triggs said he would brief Councillor Sanderson on this after the meeting.

ACTION: Phil Triggs

Councillor Matt Thorley, noted that while the majority of cash was in money market funds there had been discussions about looking at alternative investment classes. He asked if that was still on the horizon. Phil Triggs said next year’s strategy would be looking at some options with enhanced levels of risk for optimum balance of risk and return. A report would come to committee in due course.

Councillor Thorley noted that the Council had lent some money to other local authorities (Appendix 1) and asked if credit checks were performed before lending and if the worst happened, where did the Council rank in the capital structure. Phil Triggs said the Council compiled comprehensive due diligence before lending – including looking at the last set of published accounts, the external audit opinion and certificate, projections of over or underspend, assessments of the level of usable reserves, and a sense check of recent media coverage about the authority.

RESOLVED

The Committee noted the Treasury Management Strategy 2020/21 mid-year review.