Issue - meetings

The report of the Cabinet Member for Finance was submitted to inform Council of the Treasury Management activities and performance for 2017/18 against the approved Prudential Indicators for External Debt and Treasury Management. 

RESOLVED to note that:

(i)  borrowing activities had been undertaken within the borrowing limits approved by Council on 21 February 2018;

(ii)  current Investment strategy is to continue to diversify into more secure and/or higher yielding asset classes and move away from the increasing risk and low returns gained from short term unsecured bank investments.  Returns during 2017/18 were £1.41M at an average rate of 3.73%;

(iii)  the Council’s strategy was to minimise borrowing to below its Capital Financing Requirement (CFR), the difference representing balances, reserves, provisions and working capital.  This approach lowers interest costs, reduces credit risk and relieves pressure on the Council’s counterparty list.  Throughout the year, capital expenditure levels, market conditions and interest rate levels were monitored to minimise borrowing costs over the medium to longer term and to maintain stability;

(iv)  the differential between debt costs and investment earnings continued to be acute, resulting in the use of internal resources in lieu of borrowing often being the most cost effective means of financing capital expenditure. As a result the average rate for repayment of debt, (the Consolidated Loans & Investment Account Rate – CLIA), at 3.31%, is lower than that budgeted and slightly lower than last year (3.33%).This includes £30M of short term debt which was taken during the year. No new long term loans were taken during the year due to slippage in the capital programme and higher than expected balances.  The predicted forecast rate for longer term debt is already showing a steady increase. It is likely that any new long term borrowing will be taken out above this rate, leading to an increase in the CLIA rate. In line with the current Treasury Strategy it is the intention to continue to borrow in the short term markets during 2018/19 to take further advantage of the current interest environment;

(v)  in achieving interest rate savings the Council is exposed to interest rate risk by taking out variable debt.  This was and continues to be very financially favourable in current markets but does mean that close monitoring of the markets is required to ensure that the Council can act quickly should the situation begin to change;

(vi)   net loan debt decreased during 2017/18 from £278M to £254M (£24M) as detailed in paragraph 14; and

(vii)  there has been full compliance with the Prudential Indicators approved by Full Council on 21 February 2018.