Agenda item

The Divisional Director – Business Support presented this item.

He said that the report covered actual Treasury Management activities for the first six months of the current financial year. He said the policy of keeping the cash balances to as near zero as possible in order to minimise investments and borrowings had continued. During the period it had been possible to repay £5m of borrowing. There would have to be extra borrowing later in the current financial year as capital schemes are completed. As a result of a single-member decision an £8m stake in a commercial estate in Bath had been purchased, which would have to be funded at some point during the year. The policy of not holding direct investments in the Eurozone had continued. The Bank of England base rate cut would eventually feed through and he expected investment returns to fall further.

The Chair asked for an update on the Avon County Council residual debt (paragraph 5.9). The Divisional Director – Business said this is managed by Bristol City Council (BCC) on behalf of all the former Avon authorities. A share of it is notionally allocated to each of the successor councils, who pay BCC for a share of the interest on it. Discussions were taking place with BCC about the possibility of allocating a portion of the debt to the other councils, so that they can more actively manage this debt. The conversation with BCC was challenging, partly because they have had more than five Section 151 Officers within the past fourteen months. They had appointed a new permanent Section 151 Officer this week, whom he would meet in January 2017 in the hope that this matter could be resolved as a priority.

A Member asked whether the Treasury Management strategy would be modified in view of increasing market volatility. The Divisional Director – Business Support replied that the policy of keeping cash balances low would be maintained for as long as the low interest rate environment persisted. The chart on page 64 showed that the Council had been that a substantial proportion of the Council’s investments was in the form of loans to other local authorities. This gave the Council a great deal of flexibility and there are quite a few local authorities who need to take on short-term debt. UK bank exposure was low and would probably remain so. Not many banks were looking for loans and the Council was very aware of the risks associated with banks. The Council did not loan money to NatWest because of their current position; there are now many bankers who do not leave money with NatWest overnight. The Council had considerable exposure to banks, but only those that are AAA rated and the Council’s funds were spread between banks to minimise risk. The Council did have a small exposure to building societies. He did not expect a significant change to the Council’s current Treasury Management policy over the next twelve months.

RESOLVED:

1. To note the Treasury Management Report to 30^th September, prepared in accordance with CIPFA Treasury Code of Practice.

2. To note the Treasury Management Indicators to 30^th September 2016.