At its meeting on 15 December Cabinet will consider the Treasury Management Mid-Year report. Nigel Kennedy, Head of Financial Services, and Bill Lewis, Financial Accounting Manager, will be available to present the report and answer questions.

The Panel is recommended to NOTE the report, having raised any questions it may have and having AGREED any recommendations to make to Cabinet arising therefrom.

Bill Lewis, Financial Accounting Manager, presented to the Panel the Cabinet’s Treasury Management Mid-Year Report.

Most importantly, the Council had complied with all its treasury and prudential indicators in the year to date. A number of causes – such as lower external borrowing, increased investment and lower minimum revenue provision-levels – meant that the overall the Council was expected to have £211k more from Treasury investments than budgeted. The capital value of the property funds had recovered since the start of the pandemic, with CCLA being higher than its pre-pandemic level and Lothbury approaching that level. Investments in multi-asset funds were showing dividend returns at expected levels.

The Panel’s Scrutiny explored issues around broadening the asset base for treasury investments, though the suggestions made typically did not constitute treasury investments but capital spends. The Panel noted that that the Council had been sent a breakdown of the ethical, social and governance policies of their investments and requested that that information be shared with members. A progress update on the Council’s £7.5m holding in Barclays was requested and it was confirmed that the money had been withdrawn. This was due to the accounts being replaced with ones paying significantly lower rates of interest. To date a suitable replacement had not been found. Finally, discussion was held over the resilience of the Council’s finances with changes to how property funds should be accounted for. Government changes could technically make it harder it to set a balanced budget in the event of a significant slide in property values. However, having seen good levels of capital appreciation since purchase a significant buffer existed to protect the Council from this situation.

The report was NOTED and no recommendations made to Cabinet.

At its meeting on 15 September Cabinet will consider the Treasury Management Performance and Activity Report. Nigel Kennedy, Head of Financial Services, and Bill Lewis, Financial Accounting Manager, will be available to present the report and answer questions.

The Panel is recommended to NOTE the report, having raised any questions it may have and having AGREED any recommendations to make to Cabinet arising therefrom.

Bill Lewis, Financial Accounting Manager, presented the Treasury Management Performance and Activity report to the Panel.

The Council’s treasury investments amounted at the end of the financial year to approximately £80m. The returns realised on those investments were approximately £0.9m below budgeted forecasts. The two principal reasons behind this shortfall was an overall reduction in interest rates nationally, and more locally, a reduction in interest payments from the Council’s companies. The Council had £198.5m in PWLB loans; in March 2021 £20m became due and was rolled over. However, owing to capital spending reductions over the year the Council had taken out less borrowing that it otherwise would.

The Panel questioned the reasons behind the steepness of the fall in investment income. Interest rates generally had fallen, but also returns from lending to other local authorities had diminished to the point where they were similar to returns offered by the money markets. The Council’s performance, when benchmarked against others, was strong. Those Councils which ranked higher were doing so at the cost of being exposed to more risk than the Council was willing to accept.

The adequacy of safeguards against unethical investments was explored by the Panel, as well as the potential for avoiding indirect investments through money deposited with banks with poor ethical records. Concerning direct investment, the Council was reliant on the advice provided by its treasury advisors. It was too resource intensive for the Council to undertake ethical audits on its own holdings. Concerning indirect investment through deposits, the Council used a green account with Barclays which was ring-fenced. Although it was accepted that Barclays did engage with investments relating to fossil fuels, when the process to select a bank was undertaken it had proven difficult to find banks which satisfied the Council’s criteria. Those scoring higher on environmental, social and governance criteria did not meet the Council’s risk standards, and the Council had a responsibility primarily to protect public money. The reason for the tender in the first place was because the preferred candidate on both ethical and risk factors was pulling out of the local authority deposit market. Letters had been written to the Council’s bank to express its concern over particularly egregious investments, such as tar sand investment.

The report was NOTED. No recommendations were made.

Should the Panel consider it necessary to go into confidential session, it will be necessary to pass a resolution in accordance with the provisions of Paragraph 4(2)(b) of the Local Authorities (Executive Arrangements) (Access to Information) (England) Regulations 2012 to exclude the press and members of the public during discussion of this item on the grounds that it might involve disclosure of exempt information as described in the relevant paragraphs of Schedule 12A of the Local Government Act 1972.

The Panel AGREED in accordance with the provisions of Paragraph 4(2)(b) of the Local Authorities (Executive Arrangements) (Access to Information) (England) Regulations 2012 to exclude the press and members of the public during discussion of this item on the grounds that it might involve disclosure of exempt information as described in the relevant paragraphs of Schedule 12A of the Local Government Act 1972.