Agenda item

Members are asked to consider the reports of the Chief Finance Officer whichreviews the Council’s borrowing and investment activity (Treasury Management) for the periods 1April to 31 December 2019 (Quarter 3) and 1 April 2019 to 31 March 2020 (Quarter 4), which present performance against the Prudential Indicators. 

The Committee received the reports of the Chief Finance Officer for Quarters 3 and 4 of 2019-29, which asked Members to consider and comment on the information contained therein, to comply with the Treasury Management Code of Practice.

Members noted that the reports reviewed the Council’s borrowing and investment activity (Treasury Management) for the periods 1April 2019 to 31 December 2019 (Quarter 3) and 1 April 2019 to 31 March 2020 (Quarter 4) and presented performance against the Prudential Indicators.

Quarter 3

Officers explained that on average the Council’s investments totalled £63.9m over the first 3 quarters at an average rate of 0.92%, and had earned interest of £441k (£304k allocated to the General Fund; £137k allocated to the HRA) which was £114k above the year to date budget. Whilst cash balances were expected to reduce over the year, should interest rates remain static, forecast returns could be in the region of £572k, a budget surplus of £137k. However, a no-deal Brexit could lead to a cut in the Bank Rate and therefore the position would be kept under review.

The Committee were informed that in addition to investments held in the NYCC investment pool, the Council had £4.83m invested in property funds as at 31 December 2019, with a net rate of return of 2.42% (3.95% revenue return and 1.53% capital loss), and achieved revenue income of £146.2k to the end of Quarter 3 and a capital loss of £75.2k.

Officers also explained that long-term borrowing had totalled £59.3m at 31 December 2019, (£1.6m relating to the General Fund; £57.7m relating to the HRA). Interest payments of £2.5m were forecast for 2019/20, which was a saving of £0.3m against budget. The Council had no short term borrowing in place as of 31 December 2019. The Council’s affordable limits for borrowing were not breached during this period.

Quarter 4/Annual Review 2019-20

The Committee noted that the Council’s investments held in the NYCC investment pool totalled £66.04m over the year at an average rate of 0.91% and earned interest of £601k (£415k allocated to the General Fund; £186k allocated to the HRA) which was £166k above the total annual budget.  This exceeded estimates at Quarter 3, which remained prudent in the event that Brexit would result in a sharp decline in rates. For the General Fund £65k interest earned above a £350k threshold would be transferred to the contingency reserve.

Members were informed that in addition to investments held in the pool, the Council had £4.69m invested in property funds as at 31 March 2020. The funds achieved 3.46% revenue return and 4.54% capital loss. This resulted in revenue income of £168.9k to the end of Quarter 4 and an ‘unrealised’ capital loss of £222.8k. These funds were long term investments and changes in capital values were realised when the units in the funds were sold.

Officers gave details of the long-term borrowing that totalled £59.3m at 31 March 2020, (£1.6m relating to the General Fund; £57.7m relating to the HRA), Interest payments of £2.5m were paid 2019/20, a saving of £0.3m against budget. The Council undertook no short term borrowing in year and the Council’s affordable limits for borrowing were not breached during this period.

Lastly, looking ahead to 2020/21, investment returns were expected to be significantly lower as a result of the cut in Bank Base Rate to 0.1%, in response to the economic challenges arising from the Covid-19 global pandemic. No changes to the Treasury Management Strategy were proposed but revised forecasts would inform a revised budget for 2020/21, and the next refresh of the Medium-Term Financial Strategy.

Members asked for more information from Officers regarding the 0.9% return on a balance of £66m; Officers confirmed that this would be supplied to the Committee after the meeting.

RESOLVED: The Committee

i.          endorsed the actions of officers on the Council’s treasury activities for Q3 2019/20 and Q4 2019/20 and approved the reports;

ii.         noted that general fund investment income received over the £350k threshold was to be transferred to contingency reserve, equating to £65k for the year; and

iii.       asked Officers to provide further information on the 0.9% interest return on the balance of £66m, as detailed in the report.