Agenda item

Treasury Management Update


Cabinet had approved the Council’s 2020/21 Investment Strategy in February of this year; this required regular reports to be presented to the Committee on the Council’s treasury management activities. Investment activity was also reported to Members through the monthly Members’ Bulletin.  The report had been prepared in compliance with the Chartered Institute of Public Finance and Accountancy’s (CIPFA) Code of Practice on Treasury Management. 


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


·         The Council continued to hold investments in call accounts with major financial UK institutions and also held investments totalling £8m in Property Funds (PF).

·         The Council held £32.430m of treasury investments as at 30 September 2020. There was £11.927m of borrowing and the Capital Financing Requirement (CFR) was estimated to be £40.287m by 31 March 2021.

·         The total income from investments was forecast at £302,000 which was £50,000 higher than the previous forecast.  The largest investment returns were from property funds averaging between 3.47% and 3.86%.  Market values had been adversely impacted by the COVID-19 pandemic; the future overall economic situation was uncertain.

·         As at 30 September 2020, the Council held £24.4m in its General Account (GA); this included £7.6m which was the balance of Government funding for payment of Business and Discretionary Grants during lockdown.  GA funds would also need to be kept available for other large payments such as Council Tax and Business Rates payments.

·         In 2020/21, the Capital Programme included new borrowing of £23.412m.

·         The Council’s borrowing position remained unchanged from the previous quarter.

·         Due to the increase in forecast interest income, net financing costs as a proportion of the net revenue stream had reduced from 3.89% to 3.57%.

·         The Council continued to maintain an under-borrowed position, which meant the CFR was not fully funded by loan debt but managed by using reserves and balances.  As returns remained low, this was a prudent strategy that also minimised the counterparty risk associated with placing investments.  The Council’s Treasury Management advisors were supportive of this approach.

·         The Council had not made any further property purchases however, negotiations were continuing with several parties and acquisitions were anticipated over the next few months.  The budget for rental income from all investment properties was £1,919,840; the latest estimated outturn for 2020/21 was £1,719,840 a shortfall of £200,000.  This equated to a 6.27% gross return and after allowing for borrowing costs the expected return on the Council’s Property Investment Strategy (PIS) properties was 2.71%.  Retaining and investing in property, in the long-term would generate income to support the Council’s financial position and strengthen regeneration of the district.

·         As a result of the second national lockdown, the Government announced several support packages including cash injections for local authorities, business grants, ‘test and trace’ payments for low income households and extended the furlough scheme until March 2021.


The investment activity conformed to the approved strategy, and the Council had no liquidity difficulties.The investment environment for treasury activities remained difficult with absolute returns continuing to be very low. The diversification into PFs had increased the overall return but did come with a greater degree of capital risk than other investments and was less liquid.  The Council’s PIS was expected to generate net returns of 2.7% however the risks associated with the long-term commitment to repay borrowing and the operational management of properties would remain


RESOLVED: That the report be noted.

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