Agenda item

To consider a report by Councillor Julian Thompson-Hill (copy enclosed) which outlines the Council’s investment and borrowing activity during 2012/13, and provides details of the economic climate at that time and shows how the Council complied with its Prudential Indicators.

Councillor Julian Thompson-Hill presented the report, circulated previously, on the Council’s Treasury Management (TM) activities, investment and borrowing activity during 2012/13 and it provided an overview of the economic background for the year.

RESOLVED - that Cabinet:-

(a)  notes the Annual Treasury Management Report for 2012/13, and

(b)  requests that the concerns raised regarding Prudential Borrowing in respect of the HRA be conveyed to Welsh Government.

Councillor Julian Thompson-Hill presented the report, circulated previously, on the Council’s Treasury Management (TM) activities, investment and borrowing activity during 2012/13 and it provided an overview of the economic background for the year. 

Councillor Thompson-Hill explained that it was a requirement of the CIPFA Code of Practice on Treasury Management for the Council to prepare an annual report on treasury activity for the previous financial year.  Cabinet had been required to note the performance of the LA’s TM function, and its compliance with treasury limits and Prudential Indicators during 2012/13 as reported in the Annual TM Report 2012/13.

The TM included the management of the Council’s borrowing, investments and cash flow with approximately £0.5bn passing through the Council’s bank accounts annually.  The Council’s outstanding borrowing was £133.26m, with an average annual interest rate charge of 5.77%.  At any point during the year the Council would have between £20-£35m to invest which on average currently earned 0.80%.

It was confirmed that the Council had consulted with its treasury advisers Arlingclose Ltd.  The governance of TM was scrutinised by the Corporate Governance Committee throughout the year and they had reviewed the Annual TM Report for 2012/13 prior to its submission to Cabinet.  Councillor J.M. McLellan, Chair of the Corporate Governance Committee, confirmed that the Committee had endorsed the performance of the Council’s Treasury Management function during 2012/13, and its compliance with the required Prudential Indicators as reported in the Annual TM Report 2012/13.

The HFA responded to a question from Councillor H.Ll. Jones and provided an explanation as to why the Council were not permitted to undertake debt re-financing.

It was emphasised that TM was a vital part of the Council’s work.  It required a sound strategy and appropriate controls to safeguard the Council’s money to ensure reasonable returns on investments and the effective and prudent management of debts.  The HFA referred to the four main drivers of growth and explained that consumer confidence had initiated some of the growth in recent times.  Good investment and borrowing decisions would allow for additional resources to be directed to other services.  The impact of the HRA on the Council’s Revenue Budget was highlighted for Members and particular reference was made to Appendix B, compliance with prudential Indicators 2012/13:-

·                     Estimated and Actual Capital Expenditure.

·                     Estimated and Actual Ratio of Financing Costs to Net Revenue Stream.

·                     Capital Financing Requirement.

·                     Authorised Limit and Operational Boundary for External Debt.

·                    Upper Limits for Fixed Interest Rate Exposure and Variable Interest Rate Exposure.

·                     Maturity Structure of Fixed Rate borrowing.

·                     Total principal sums invested for periods longer than 364 days.

·                     Adoption of the CIPFA Treasury Management Code

The report summarised the purpose of the Annual TM Report which had been to:-

·                    present details of capital financing, borrowing, debt rescheduling and investment transactions in 2012/13.

·                    report on the risk implications of treasury decisions and transactions.

·                    confirm compliance with treasury limits and Prudential Indicators.

TM was inherently risky and the Council monitored and controlled potential risks as outlined in the report, however it was confirmed that it would be impossible to eliminate these risks completely.  The TM strategy and procedures were audited annually and the latest internal audit review had been positive with no significant issues raised.

Reference was made to the discontinuation of the Housing Subsidy System in Wales.  A buyout of the Subsidy System had been negotiated with the Treasury by Welsh Government, and the impact for Denbighshire would be a capital sum of £40m which would be borrowed on as specific date.  The Chief Account explained that the buyout figure would represent a better deal than the Subsidy System.

Cabinet endorsed the views expressed by Councillor E.W. Williams that Denbighshire would be penalised for embarking on good working practice and agreed that the concerns raised regarding Prudential Borrowing in respect of the HRA be conveyed to Welsh Government.

RESOLVED - that Cabinet:-

(a)  notes the Annual Treasury Management Report for 2012/13, and

(b)  requests that the concerns raised regarding Prudential Borrowing in respect of the HRA be conveyed to Welsh Government.