Agenda item

Cabinet had approved the Council’s 2020/21 Investment Strategy in February of this year; this required regular reports to be presented to the Audit and Standards Committee (A&SC) on the Council’s treasury management activities. Investment activity was also reported to Members through the monthly Members’ Bulletin.  In managing its treasury management activities, the Council followed the Chartered Institute of Public Finance and Accountancy’s (CIPFA) Code of Practice on Treasury Management (revised 2017). 

The report provided an update on a number of areas as follows:

·       The Council had investments in call and deposit accounts with major financial UK institutions.  The Council had also invested £8m in Property Funds. 

·       The Council held £23,839m of investments at 31 March 2020. The total income from investments was estimated at £508,000 (subject to audit); the average rate of return was 1.76%. 

·       As at 31 March 2020, the Council had taken out £11,979m of borrowing and the overall Capital Financing requirement was £15,788m.

·       The Council maintained an under-borrowed position this year, which meant that the Capital Financing Requirement was not fully funded with loan debt. Instead the Council managed its cash flow by using reserves and balances. This strategy was prudent because investment returns had remained low and the counterparty risk associated with placing investments was minimised.

·       The Council’s cash position was managed to ensure that enough cash was available to meet capital plans and other cash flow requirements. To date this had been sourced via a combination of borrowing from the Government, through the Public Works Loan Board (PWLB) and utilising the Council’s cash resources.

·       The Council had invested in the regeneration of Rother through its Property Investment Strategy (PIS) and the draft income out turn from these non-Treasury Investments was provided within the report.

·       The Council had not made any further property purchases since the last report to A&SC on 18 May 2020. The budget for rental income from all investment properties was £1,939,750, made up of £975,670 for the existing assets and £964,080 for properties purchased through the PIS. The draft outturn for 2019/20 was £1,689,786, which was a shortfall of £249,964 and equated to a gross return of 5.72%.  After allowing for borrowing costs, the properties procured as part of the PIS generated an expected return of 2.71%.

·       In the final quarter of 2019/20, the COVID-19 pandemic hit the UK and had a severe impact across all sectors on an unprecedented worldwide basis.  Whilst not impacting the outturn for 2019/20, there were implications for the Council’s treasury activities in the current financial year.

·       The Council had received over £1.7m of additional funding in response to the crisis and had also paid out £24.5m in support grants to small businesses.

Members were given the opportunity to ask questions and the following points were noted during the discussion:

·       the investment portfolio detailed in the report included two deposit accounts that had since matured.  Members were to be provided with an up-to-date position by email after the meeting;

·       the Council was submitting regular returns to the Government regarding spend and income during the COVID-19 pandemic and had projected a gross loss of £3m.  Government support of just over £1m had been received so far.  Indications suggested that additional financial support from the Government in relation to lost income had been announced but the details were yet to be confirmed; and

·       property purchases and income generated from them was below budget due to timing issues associated with the length of time to negotiate such deals.

The Council’s current treasury management and investment strategies remained robust in managing the Council’s cash funds. The investment environment for treasury activities remained difficult and was further exacerbated by the uncertainty over BREXIT and, to a lesser extent, the outbreak of the Coronavirus. The Treasury Management Strategy would be reviewed by officers and discussed with Members in due course.

RESOLVED: That the report be noted.

(Councillor Harmer declared a personal interest in this matter in so far as she was in receipt of a Business Grant and in accordance with the Members’ Code of Conduct remained in the meeting during the consideration thereof).