At its meeting on 8 February 2018, the Cabinet considered Paper BCa/17/46 and accepted the recommendations as set out in the report.
Recommendations to both Councils
(1) That the following be approved:
(a) The Treasury Management Strategy for 2018/19, including the Annual Investment Strategy as set out in Appendix A.
(b) The Treasury Management Policy Statement set out in Appendix B.
(c) The Treasury Management Indicators set out in Appendix E.
(d) The Prudential Indicators and Minimum Revenue Provision Statement set out in Appendices F and G.
(2) That the key factors and information relating to and affecting treasury management activities set out in Appendices C, D and H be noted.
Minutes:
30.1 Councillor Patrick introduced the report and MOVED the recommendations highlighting the importance of investment income to the Council fortunes and the exposure of the Council from the vagaries of the market due to the strategic policy of borrowing to invest in property. He went on to say that the items listed in paragraph 2 of the report needed to be approved to minimise the risk to the Council.
30.2 Commenting further he also informed Council that the Joint Audit and Standards Committee had scrutinised the report and their comments had been incorporated in the report.
30.3 Councillor Busby queried the big increase in the first line of the General Fund with the figure rising from £18.6 to £57m and also why the high interest rates were being paid to the public works loan for both Councils?
30.4 In response the Section 151 Officer confirmed that the big increase was due to the transactions from CIFCO. She also stated that the interest rates for the Public Works Loan Board were correct because they were historic loans where the interest rate was fixed at the point the loan was actually taken out.
30.5 Councillor Busby then asked what the interest rate would be if the Council were to take out a loan with the Public Works Loan Board today?
30.6 In response the Section 151 Officer confirmed that a 30-year loan would attract around a 3% interest rate.
30.7 Councillor Ferguson sought clarification on the capital financing requirements for both Councils as there appeared to be a huge difference in terms of the cumulative net borrowing.
30.8 In response the Section 151 Officer informed Council that the table reflected how the borrowing had increased each year. In respect of the large difference the Section 151 Officer confirmed that Mid Suffolk was looking to make a major purchase and investment of a site.
30.9 Councillor Kemp asked how the Council produced 5.9% interest from £9.63 million of other pooled funds?
30.10 The Section 151 Officer replied that the Council took a decision about 2 years ago to change the Treasury Management Strategy and invest in things like the CCLA, which is churches and charities and local authorities properties fund which generates a return of about 5%. We have also got some money invested in a Schroders fund and a UBS fund so they all generate a better return on those investments hence how the Council has achieved the average rate illustrated.
30.11 Councillor Hinton queried how much the Council had lost from the funding circle investment and asked how bearing in mind the announcement that the Public Works Loan Board was going to be wound up and all debts transferred to the treasury how this was going to influence the Council’s ability to borrow at competitive rates and would the Council be asked to pay back to improve their balance sheet?
30.12 The Section 151 Officer confirmed that the Funding Circle hadn’t performed as well as expected, however the Council had only invested between six and seven hundred thousand pounds. Based on the Council’s experience with the Funding Circle the Council has taken the decision not to put any further money into the Funding Circle and this was referenced in the Treasury Management Strategy. In terms of the Public Works Loan Boards (PWLB) the Section 151 Officer stated that in terms of the PWLB being wound up it was anticipated that there would not be any significant changes in the way that local authorities access the fund it just wouldn’t be under this separate body anymore.
30.13 Councillor Hinton sought clarification on the amount that was agreed by each Council to invest in the Funding Circle?
30.14 In response the Section 151 Officer confirmed that it was £1m for each Council.
30.15 Councillor Arthey requested that future financial tables have a separate line for CIFCO.
30.16 In response the Section 151 Officer informed Council that the Joint Audit and Standards Committee had made similar comments. Also there had been some recent guidance issued from the Government around investment strategy and other disclosures so further changes to the format of the report would be made for next year. However in terms of CIFCO as a wholly owned company of the Council in accounting terms this would not be shown as external investments to the Council.
It was RESOLVED:-
That the following be approved:-
(i) (a) The Treasury Management Strategy for 2018/19, including the Annual Investment Strategy as set out in Appendix A.
(b) The Treasury Management Policy Statement set out in Appendix B.
(c) The Treasury Management Indicators set out in Appendix E.
(d) The Prudential Indicators and Minimum Revenue Provision Statement set out in Appendices F and G.
(ii) That the key factors and information relating to and affecting treasury management activities set out in Appendices C, D and H be noted.
Supporting documents: