Calvin Orr, Head of Finance and Business Services attended
the Committee and presented the 2018/19
Mid-Year Review Report and the Treasury Management Report for
2019/20 and explained that:
The report was brought
annually to the Governance and Audit Committee (G&A) and filled
Mid-Year Review outlined the Treasury Management activities for the
first 9 months of 2018/19 to Dec 2018.
updated Members on the Council’s investment position and
provided commentary on the economic indicators. It outlined the current position, looked at the
economic impact of the last couple of months and how the
Council’s decisions had been affected.
current economic conditions were difficult to predict with so much
uncertainty as a result of BREXIT and wider changes in the wider
economic world. This may result in central banks across the world
taking no further action in terms of interest rates until this
- Total investments were at about £10million.
- Investment funds were triple A rated.
- Largely, the investments were one day maturity which meant the
investment could be readily accessed.
fund was a 2 day maturity. This was a
T+1 account which offered a higher rate of return. About £4-5million was in this account to
provide a higher yield.
The current Council debt was
- It was pointed out
that the Council used to be debt-free and managed a large
investment portfolio, but was now borrowing to reflect the
infrastructure investment in last 4 to 5 years.
- Short-term borrowing was maintained in the region of 3 to 6
months to meet the Council’s immediate cash flow.
- Longer term capital investment was funded from PWLB loans that
went out to 40 years at low rates.
The second element of the
report was the Treasury Management Report for next year (2019/20)
which outlined the Treasury Strategy, investment criteria and the
Minimum Revenue Provision (MRP) policy.
- Very little had
- The investment
criteria had not changed in the last 4 to 5 years.
- The Council had only
invested in money market funds, all of which were triple A
The Minimum Revenue Provision
policy was explained, in particular, the timings needed
- Normally the Treasury
Management strategy would go to the Executive in December for
review and endorsement to Council. This year,
the Council’s Treasury advisors had provided further advice
regarding the MRP policy adopted by the Council.
- In relation to the
Council’s policy on commercial property investment, guidance
last year from CIPFA asked to consider the risk with this
investment policy and the Council decided to set aside 10% on the
element of the risk on those commercial properties.
- It was considered
however that it would be better to set it aside as Voluntary
Revenue Provision (VRP) rather than MRP which could be brought back
into the accounts if needed and provided the Council with
- The change was being
made before the Executive had seen it.
- The Committee was not
seeing what the Executive saw in December 2018 and was being asked
to endorse a strategy not yet seen by the Executive.
In response to questions from
Members, Calvin Orr, Head of Finance and Business Services
- Risks associated with
BREXIT had been considered within the document.
- A no deal BREXIT was
considered a relatively small risk and interest rate projections
had been based on that.
- BREXIT was in the
- Projections looked at
3 to 5 year interest rate moves.
- Projections were
based on some form of BREXIT deal being agreed.
- The risk of a no deal
BREXIT was assessed as quite low.
- If there was a no
deal BREXIT, interest rates might go up and inflation might go up.
Interest rates might also get cut.
- It was their
assessment that there would be a BREXIT deal within 6-9
It was RESOLVED:
That the Committee consider and review the Mid-Year Review
That the Committee agree that the
Mid-Year Review Report be circulated to all Members of the
That the Committee review the Treasury
Management Report for 2019/20 prior to its approval by Council and
endorse the changes outlined in paragraph 5.15