The Head of Financial Services has submitted  reportwhich sets out the Council’s Treasury Management activity and performance for the financial year 2017/2018.

Recommendations:That the City Executive Board resolves to:

Note the report.

The Head of Financial Services had submitted a report which set out the Council’s Treasury Management activity and performance for the financial year 2017/2018.

The Head of Financial Service introduced the report. Despite low interest rates the Council’s investments had succeeded in generating more return  than had been targeted. The £0.17 million outstanding with failed Icelandic banks would probably have to be written off (but without prejudice to subsequent efforts to have the funds returned). If the Council’s investments had all been risk free its financial position would be worse than it was now. The focus of the Council’s non-specified investments was on property investments, with a bias towards retail;  this emphasis was currently being reviewed. Most direct investments were, deliberately, in Oxford. The two property funds the Council invested in were performing well. All Council investments were subject to an ethical code, it was agreed, for the sake of clarity, that this should be referred to in subsequent reports.

The City Executive Board resolved to:

Note the report.

The City Executive Board on 18 September 2018 will be asked to note the Treasury Management Annual Report 2017/18. 

The report sets out the Council’s Treasury Management activity and performance for the financial year 2017/2018, including the returns the Council has earned on its financial investments and prudential indicators.

Finance Panel has a role in monitoring the Council’s Treasury Management function. The Panel is asked to note and discuss the report and may wish to agree recommendations to the City Executive Board.

Nigel Kennedy, Head of Financial Services, and Anna Winship, Management Accountancy Manager, have been invited to present the report and answer questions.

The Head of Financial Services introduced the report and explained that the Council held investments of £80.96 million as at 31st March 2018. Interest earned during the year was £1.55 million against a target of £1.23 million.

The average rate of return on the Council’s investments in 2017/18 was 1.17% compared to 1.05% in 2016/17.The Council had £0.17 million outstanding with the failed Icelandic Bank, and the viability of the remaining balance was under review. It was expected that this would be irrecoverable, and the balance will be written off.

The Bank of England interest rates had risen from 0.25% to 0.50%. In relation to capital expenditure, planned prudential borrowing of £17.420m had slipped significantly to £305,000 owing to slippage in lending to OXWED and the Council’s Housing Company.

The Panel agreed that the report was positive, and showed effective treasury management. Members asked about how the rise in interest rates affected investment returns to the Council. The Head of Financial Services explained that the Council’s investments are primarily located in fixed rate returns.  The change in base rate interest would have an impact of increasing income, but only once current investments expire and new ones are taken out. Investments typically ran for 6 months.

The Panel suggested that it may be worth trying to sell the outstanding £170,000 of debt with the Icelandic banks. It was explained that Deutsche Bank previously bough some of the debt, but the outstanding amount is likely irrecoverable and of little value. Most local authorities had balances outstanding with Icelandic banks.

In response to questions, the Head of Financial Services explained that OXWED were in the process of selecting a preferred development partner, and whilst it had taken some time to get to this stage, work was still progressing.

The Head of Financial Services has submitted a report on the performance of the Treasury Management function for the 6 months to 30th September 2017.

Recommendation: That the City Executive Board resolves to:

Note the performance of the Treasury Management function for the six months to 30th September 2017.

The Head of Financial Services has submitted a report on the performance of the Treasury Management function for the 6 months to 30th September 2017.

The Head of Financial Services spoke to the report and noted that while base rates had changed since the period covered by the report it was not anticipated that it would make a significant difference to the position that would be described in relation to the  current quarter.

The City Executive Board resolved to:

Note the performance of the Treasury Management function for the six months to 30th September 2017.

The Treasure and VAT Technical Officer introduced the report.  She said that economic growth was down and that interest rates were poor, notwithstanding the recent rise in the base rate which had occurred outside of this reporting period.  Overall the Council’s investment income was on track.  Property funds had recovered the value that was lost following the Brexit referendum (values were based on a valuation rather than a market price).  The Council had undertaken no new market borrowing and was keeping the case for borrowing in advance of need under review.

The Panel questioned why the £5m real lettings investment referred to in paragraph 11 had been reclassified and heard that the biggest efficiency was from reduced spending on temporary accommodation, on the service side rather than the treasury side.  The Panel noted that the Council had some borrowing headroom and was considering making additional investments in property funds. 

The Panel considered the merits of investing in property funds verses real lettings at a time when asset prices were high.  While the Panel note that the matched funding for the real lettings scheme is no longer available, the Panel expressed support for investments that contribute to improved housing outcomes in the city, as well as a financial return.