Agenda item

Members considered a report on treasury activities undertaken during the financial year 2017/18.  In line with the agreed Treasury Management Strategy, the Council continued to be both a short term investor of cash and borrower to manage day-to-day cash flows.  Current forecasts indicated that in the future, temporary borrowing continued to be required to fund normal day to day cash flow activities.

The first half of the year saw the successful sale of the Friars Walk development which allowed borrowing which had been undertaken in relation to the loan provided to Queensberry Newport Ltd to be repaid.  All borrowing in relation to this development was now fully repaid and this had meant that loan borrowing for the year had fallen from £209.2m to £147.5m during the year (a decrease of £61.7m on 31/3/17, as part of its strategy for funding previous years’ capital programmes.  The year-end position was shown in table 3 (page 102).  

All borrowing and investments during the year were expected and within the Council’s agreed limits for 2017/18.  As at 31 March 2018 there was a £21.0m balance of short-term investments.

The Assistant Head of Finance explained that the report highlighted that the Council had met its limits for indicators for treasury management in March 2017.  Everything had been compliant.  The next report to Audit Committee on Treasury Management Strategy would give Audit Committee set limits and also the capital strategy new requirement of CIPFA policy.

Comments made included:-

·         Page 104 refers the upper limit on fixed interest rate exposure.  Can you explain what the percentage means? 100% of what? – Having a fixed interest rate meant less risk for the Council.  All current borrowing was based on fixed interest rates with none being on variable interest rates.  Looking forward it would be necessary to take advice from the Council’s Treasury Advisors.  The Council would be re-financing for stock issue re-payable in 2019.  100% was considered to be a very low risk in the current environment.   The upper limit was the Council’s maturity profile.  The Council did not want to be borrowing 100% in one year.  The reason it was high was because of Friar’s Walk.  The Council was currently at 2%.  During the year it would have been a lot higher but not above 80%.

·         Can you explain why it refers to £126.5m net borrowing in Table 2 (page 101) and then total debt £193m in Table 8 (page 104) as at 31/03/18? – The total borrowing is £148m plus the PFI liability. When Council budgets were set the revenue budgets were set at the set at the same time.  The Council had set the capital programme at a level that would not require it to increase its borrowing because that put more pressure on the revenue budget.  The Council would increase that borrowing if the business case allowed us to borrow more.  The operational boundary was linked to the capital programme.  The actual figure would come below that due to slippage.  It only looked higher this year due to Friar’s Walk.

·         When will the Local Government Bonds be paid? – One is due next April £40m (8% interest).  This would be re-financed April 2019 probably at about 3% which would be a welcome saving.

Agreed

1.    To note the Annual Report on Treasury Management for the Financial Year 2017/18.

2.    To note that the 2017/18 Prudential Indicators for Treasury Management were in line with those set by Council in March 2018.