Agenda item

Treasury Management - 2019/20 Annual Report and 2020/21 Update



The Finance Manager presented the treasury management activities for 2019/20 and gave an update of the position for 2020/21 to date.  The treasury portfolio ended the year with net indebtedness of £245.7m which was a reduction of £5.5m over the year.  The base had been reduced twice during 2020 and remained at 0.1%.  It was expected that low rates would remain for a considerable period due to Covid 19 and a zero or negative rate could not be ruled out.  The borrowing strategy for 2019/20 was temporary borrowing at low interest rates, reviewing longer term borrowing as appropriate.  Maintaining high levels of cheap temporary borrowing had contributed to a surplus treasury management surplus of £20m since 2015/16.  


Overall the treasury delivered a net over-achievement of £3.837m against the budget in 2019/20 which helped the Council’s bottom line.  Longer term borrowing during the year was undertaken following advice from Arlingclose which was to manage the exposure to fluctuations of interest rates.  The 2020/21 strategy remained consistent with that of 2019/20 taking close advice from Arlingclose, particularly in respect of counterparty advice and borrowing updates.  The Council faces many pressures and from a treasury perspective especially around the monitoring of the cash flow and maintaining sufficient funds to maintain financial obligations.  Some emergency Government funding had been received which had assisted and been able to borrow temporary funds at lower interest rates.  If temporary funds became unavailable, longer term PWLB borrowing would be undertaken, however 4% had been budgeted for new borrowing and this should be sufficient to cover in the eventuality it is needed.  Prudential borrowing would be required under the current capital programme and advice would be sought prior to investing in longer tem borrowing and all prudential indicators during 2019/20 had been met.


The Group Accountant gave an overview of the regulation framework relating to treasury management and the CIPFA Code.


The portfolio position as at 2019/20 was set out in the table ie net indebtedness against the borrowings and this included the Nuplace investments.  Slightly better indebtedness between the years as due to the Covid 19 pandemic payments made by the Government right at the end of the last financial year.


The report also set out details on regarding the Council’s finances due to Brexit, Covid 19 impacts, financial markets and the creditworthiness of institutions that the council will deal with in respect of investments.  With regard to borrowing, the original assumption  at the start 2010/20 was  0.75 % and these were due to rise, but due to the impact of Covid 19 two interest rate cuts saw this fall to 0.25 and then to 0.1% mid March.


In 2019/20 the Council took out £25m of new PWLB loans and £7.9m matured through the year.  All loans were taken prior to the PWLB rate increase imposed by treasury.  No PWLB loans were repaid or rescheduled in advance or early.  Investments would be managed in house maintaining a diversified portfolio in order to manage risk.  All investments were short-dated in order to maintain cash flow and liquidity.  Over the year the Council achieved an average rate of return of investments of 0.57% against the benchmark of 0.44%.   The Council operated within the treasury limits and prudential indicators set at the start of the year and there were no breaches during the year.


The 2020/21 update up to 31 May 2020 reported that the Treasury strategy was approved at Council on 5th March 2020.  No new PWLB loans have been taken and during 2020 £7.9m of PWLB loans will mature. Performance throughout the year will be closely monitored by officers due to Covid 19 impacts on the treasury position.


During the discussion some Members raised questions with regards to whether any new borrowing had been taken out this year and the ethical nature of investments held.


The Finance Manager reported that no new PWLB borrowing had been raised in 2020 and that the only borrowing undertaken was for cash flow purposes.  At 31 May we have investments held in Lloyds which earns interest and in the Debt Management Office which was Government backed.   Investments are also held in Money Market Funds which are diversified across many counterparties and is a secure way of investing although nothing was risk free.  The investments were not just in British Companies, but details could be circulated to Members in this regard.


RESOLVED – that the report be noted.


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