Agenda item

This report summarises the council’s treasury management activity during the first half of 2013/14, required by CIPFA’s Code of Practice for Treasury Management. This report also covers the council’s Prudential and Performance Indicators for the first half of 2013/14, in accordance with the requirements of the Prudential Code.

Declarations of Interest:

During the discussion, it was noted that advice from Deutsche Bank had been provided and Nicholas Harrison declared that he was a Director of the Deutsche Bank UK Pension Scheme.

Witnesses:

Phil Triggs, Strategic Manager – Pension Fund and Treasury

Key Points Raised During the Discussion

1.    The Strategic Manager – Pension Fund and Treasury introduced the report.

2.    In response to a query about the purpose of the Minimum Revenue Provision, the Strategic Manager – Pension Fund and Treasury explained that it was the amount required to be set aside for the capital repayment of debt.

3.    The Strategic Manager – Pension Fund and Treasury informed the Committee that the policy to borrow internally saves significant money on a yearly basis.

4.    An enlarged chart under paragraph 18 was tabled.  A Member questioned the debt maturity profile, suggesting that the load should be spread more evenly.  The Strategic Manager – Pension Fund and Treasury clarified that when the maturity structure was set, debt was cheaper over the long-term.  There is the opportunity to reprofile if expedient to do so.

5.    The Strategic Manager – Pension Fund and Treasury provided an update on the Icelandic deposits.  Advice is being taken from Deutsche Bank on the possible sale of the debt as part of an LGA consortium, which has been considered by the Cabinet.  During December 2013 there would be an artificial push down on the price as it was the year-end, and the matter would be picked up in early 2014. 

6.    Members queried the significant difference in the original estimate of the net interest on short-term cash flow and the year-end projection of net interest on short-term cash flow.  Officers informed the Committee that interest receivable was higher than budget due to many Government grants being received earlier in the year than originally envisaged, leading to higher cash balances on deposit.

7.    The Strategic Manager informed the Committee that he defined short-term as three to six months and long-term as over a year.

8.    Members asked how the Bank of England’s announcement that its Funding for Lending scheme would no longer be available for household lending affected the statement in paragraph 20 of the report.  The Chairman confirmed that the scheme would continue for business lending.

9.    Members asked whether the need for borrowing to fund capital expenditure for school expansions had been included in calculations.  Officers responded that if capital plans are approved, it is then the role of the Treasury Manager to ensure that funding is in place.

10.  The Strategic Manager – Pension Fund and Treasury confirmed that there had been no external borrowing since 2009/10.  At some point over the next three years, it was likely that the policy would be reversed but the timing could not be forecast.  It would be dependent on a range of factors.

11.  The Chairman highlighted that the Council was now in surplus but that this was likely to be run down over the next few months.

Actions/Further Information to be Provided:

None.

Resolved:

To NOTE the content of the Treasury Management Half Year Report for 2013/14.

Next Steps:

      i.        The Pension Fund & Treasury Team will monitor the UK and overseas banking sector and will continue to update this Committee as appropriate.

     ii.        In line with the requirements of CIPFAs Code of Practice for Treasury Management, this Committee will receive a full-year report on the council’s treasury management position for 2013/14 at the meeting in July 2014.

    iii.        The Pension Fund & Treasury Team will prepare the annual Treasury Management Strategy, for consultation with the Audit & Governance Committee, and to be presented as part of the MTFP presented to Council in February 2014.