Agenda item

To present the report of the Director of Function (Resources)/Section 151 Officer.

The report of the Director of Function (Resources)/Section 151 Officer on the treasury management position and activity midway through the 2019-20 financial year was presented for the Committee’s consideration.

The Director of Function (Resources)/Section 151 Officer highlighted the following –

•           That there are no policy changes to the Treasury Management Strategy Statement which was approved by the Full Council on 27 February, 2019. The report updates the position in light of the updated economic position and budgetary changes already approved.

•           That with regard to its investment portfolio, the Council held £18.551m of investments as at 30 September, 2019 (£14.333m at March, 2019) and the investment portfolio yield for the first six months of the year was 0.62%. A full list of investments as at 30 September, 2019 was provided in Appendix 3 along with a summary of investments and rates in Appendix 4. The approved limits within the Annual Investment Strategy were not breached during the first six months of 2019/20.

•           That the Council’s budgeted investment return for the whole of 2019/20 is £0.031m and performance for the year to date exceeds the budget with £0.041m received to the end of Quarter 2 this being due to investing surplus cash with other local authorities creating a better investment return than a bank call account. The table as at 5.7 shows a list of investments made with other local authorities during the first half of the 2019/20 financial year. Given that security of funds is the key indicator of this Council other local authorities are seen as the most secure way of investing funds giving a greater return than most bank call accounts.

•           That in terms of borrowing, the Council has projected year end borrowings of £127.6m and will have used £12.6m of cash flow funds in lieu of borrowing. This is a prudent and cost effective approach in the current economic climate but will be subject to ongoing monitoring. No borrowing was undertaken during the first half of this financial year and it is not anticipated that any additional external borrowing will need to be undertaken during the second half of the financial year. There will be a borrowing requirement to fund a part of the 2019/20 capital programme, but this will be through internal borrowing.

•           That on 9 October, 2019 the Treasury and Public Works Loans Board (PWLB) announced an increase in the borrowing rate by 100 basis points or 1%. This was done without prior warning meaning that every local authority has to fundamentally reassess how to finance their external borrowing needs and the financial viability of capital projects in their capital programme due to the unexpected increase in the cost of borrowing. Whereas this Authority has previously relied on PWLB as its main source of funding, it now has to fundamentally reconsider alternative cheaper sources of borrowing.

•           That debt rescheduling opportunities have been very limited in the current economic climate and none has taken place to date in the current financial year.

•           That section 7 of the report sets out the progress of the Council’s capital position and confirms that the Council has not breached any of its prudential indicators in the first six months of the financial year. There are some changes to the financing of the capital programme due to a significant underspend on three capital schemes in 2019/20 (paragraph 7.2.1 refers).The Council is also slightly below the original forecast Capital Financing Requirement (the Council’s borrowing need) as a result of the forecast underspend in borrowing mainly down to the 21st Century Schools Programme.

In relation to the Council’s investment activities, the Director of Function (Resources) referred to a news article about the sum of  £5m which the Authority had invested with Cheltenham Borough Council (being one of a number of authorities which had similarly invested funds with Cheltenham Council); the article headlined the story in such a way as to make the investment  appear inappropriate creating the impression that the funds were being invested in a business park being developed by Cheltenham Borough Council. On the basis of the article the public had come to  misleading and critical conclusions about how the Council uses and manages public money as evidenced by e-mails from Anglesey ratepayers to the Council Leader and Section 151 Officer extracts from which the Director of Function (Resources)/ Section 151 Officer read out. The Director of Function (Resources)/Section 151 Officer emphasised that the Council had not invested any public money in the development in Cheltenham and clarified that inter-authority lending is standard practice and has the advantages of providing a secure source of investment, better returns than were the money invested with a bank and provides the borrowing authority (in this case Cheltenham Borough Council) with a cheaper loan. The investment made by Anglesey Council with Cheltenham Borough Council was short-term for a period of 65 days and generated a return of £5,800 when paid back compared to £3,500 that investing the sum with one of Council’s banks at 0.4% would have produced.

The Committee agreed that it was important to ensure that the correct information is disseminated so that the public can be clear about the Council’s investment decisions and why it makes them, thereby providing assurance about the way it manages public money.

It was resolved to accept and to note the Treasury Management Mid-Year Review Report 2019/20 without further comment.

THERE WERE NO PROPOSALS FOR ADDITIONAL ACTION