Issue - meetings

To consider a report by Councillor Julian Thompson-Hill, Lead Member for Finance, Corporate Plan and Performance (copy enclosed) updating members on the performance of the treasury management function and demonstrating compliance with treasury limits and Prudential Indicators during 2015/16.

RESOLVED that the Annual Treasury Management Report for 2015/16 be noted.

Councillor Julian Thompson-Hill presented the report updating Cabinet on the performance of the treasury management function and demonstrating compliance with treasury limits and Prudential Indicators during 2015/16.

In summarising the report Councillor Thompson-Hill referred to the economic background and impact on treasury management activities.  He highlighted the main points for members in terms of borrowing and investment activity including the buyout of the County Hall PFI agreement and the Housing Revenue Subsidy buyout, both of which would result in significant savings to the authority.  He also confirmed compliance with all prudential indicators set and guided members through those indicators as detailed in Annex B to the report.  The Chief Finance Officer reminded members that the Council’s borrowing was driven by its capital expenditure linked to the capital plan.  Following the vote to leave the European Union there had been some fluctuation in financial markets which had since settled.  Cabinet noted that the Corporate Governance Committee received a regular update on treasury management activities.

The following matters were raised during the ensuing debate –

·         the recent announcement that banks may introduce negative interest rates, which would effectively mean they would start charging to accept deposits from business customers, was discussed.  It was confirmed that such a measure would affect cash in the Council’s current account and, if introduced, the risk would need to be carefully managed in order to limit exposure for holding money in current accounts and may result in modifying the current strategy in order to deposit more cash with the treasury than in banks

·         the treasury management strategy was based on balancing risk with return on investment and over the last eight years returns had been very low compared to pre 2008 and a cautious approach was taken in that regard

·         reference was made to the current borrowing strategy as a means of determining borrowing amounts and repayment periods – it was explained that the strategy was governed by the current debt portfolio and maturity dates together with capital financing requirements; the debt profile was considered over a fifty year term

·         assurances were sought over banks credit ratings and the Chief Finance Officer reported upon real time updates provided to the Council from its treasury advisers, Arlingclose Ltd to ensure immediate action could be taken to safeguard cash in those circumstances and the situation was constantly monitored.  The latest advice in that regard was that no action was necessary.

Cabinet also expressed concern over the future financial uncertainties for both local government and the wider local and national economy and the impact of the vote to leave the European Union.  Assurances were sought that members would be kept abreast of any developments in that regard as they emerged and that the Council would be in a position to influence and respond quickly in order to maximise any benefits to the county.

RESOLVED that the Annual Treasury Management Report for 2015/16 be noted.