Agenda item

(CSP: MEC & MEC1)

Purpose:  To inform Members of the treasury management activity and performance of the Council's investments for the financial year 2014/15

Resolved that the previous year’s treasury management activities and performance of the fund be noted.

This decision is not subject to call in as:

·      Report is to note only

therefore it will be implemented immediately.

The Executive considered a report (Agenda Item 8) concerning the treasury management activity and performance of the Council’s investments for the financial year 2014/15.

The aim of the Council’s Treasury Management Strategy was to manage the Council’s cash flow to ensure sufficient funds were available on a day to day basis for the Council’s operations. Any surplus funds were invested to generate the most interest, while minimising the exposure of investments to risk. 

The average level of funds invested by the Council in 2014/15 (net of short term borrowing) was £12.7 million. Funds were invested in instant access deposit accounts with Natwest, Bank of Scotland, and the Goldman Sachs Global Liquidity money market, which paid rates of interest of up to 0.43%; a deposit account with Santander UK which paid 0.8% in 2014/15 but was now reduced to 0.4%; and fixed term deposits with UK Building Societies for an average period of 42 days and an average rate of 0.55%. The maximum amount invested with any one institution was £5 million.

The Council earned total interest on these investments (net of interest paid on short term borrowing) of £93,000 or 0.73% of the average fund value. The Council also received a discount of 3.1% or £298,000 on its contributions to the Berkshire Pension Fund, by paying the contributions in advance. Taking into account this saving, the total net amount earned through cashflow management was £391,000.

During the course of the year, the Treasury Management team arranged a number of short term loans from other Local Authorities to cover short term cashflow needs. The average length of loan was 12 days and the average rate of interest paid was 0.41%. The team also arranged £17.7 million new longer term loans from the Public Works and Loans Board (PWLB) to fund capital expenditure in 2014/15 and earlier years. The loans were for between 5 years at 1.5% interest and 40 years at 3.21%, with the length of loan linked to the estimated useful life of the asset funded. £3.4 million repayments were made on existing capital financing loans, bringing the Council’s total long term capital financing debt with the PWLB to £115.7 million.

The Treasury Management Group (which included the Portfolio Holder for Finance and the Head of Finance) would continue to monitor and review the Council’s investment and borrowing activities during 2015/16, with a view to ensuring the security and liquidity of and return on the Council’s funds and to financing the Council’s Capital Programme at the most advantageous rates available.

Councillor Dillon asked if a Member of the Opposition might be invited to participate in the Treasury Management Group; Councillor Croft advised he would consider the suggestion.

In response to a query regarding the Berkshire Pension Fund, Councillor Croft advised that investment was made on a year-by-year basis and so long as inflation was static the current investment arrangements would continue. Investment would also depend on the trustees offering the pre-payment bonus.

Councillor Dillon asked if there had been an evaluation of any loans held above current interest rates and if so, whether refinancing had been considered. Councillor Croft advised that the rate paid to the PWLB had been reviewed and he was not aware of any recommendations to make changes.

Councillor Dillon further asked whether the Council lent to other local authorities; Councillor Croft replied that the Council was actively seeking to do so.

RESOLVED that the previous year’s treasury management activities and performance of the fund be noted.

Reason for the decision: To ensure compliance with the updated CIPFA Code of Practice for Treasury Management in the Public Services 2009 and in accordance with Best Practice.

Other options considered: n/a