Agenda item

(Director of Resources) To consider the attached report (AGC-014-2015/16).

The Director of Resources presented the mid-year progress report on Treasury Management and Prudential Indicators, which covered the treasury activity for the first half of 2015/16, and was a requirement of the Chartered Institute of Public Finance & Accountancy (CIPFA) Code of Practice on Treasury Management.

The Director reported that, during the first half of the year, the Council had continued to finance all capital expenditure from within internal resources. The estimate for the Capital Programme during 2015/16 had indicated expenditure of £26.428million, which would be financed by capital grants, capital receipts and revenue. The Capital Programme for the three-year period ending 31 March 2018 had predicted expenditure of £72million, with £3million available in usable capital receipts and £2million in the Major Repairs Reserve. Therefore, it was considered that adequate resources existed for the Council’s Capital Programme in the medium term.

The Director advised the Committee that the Council had £53.1million under investment at 30 September 2015, and the average net investment position of the Council had been approximately £61.9million throughout the first half of 2015/16. The Council’s investments as at 30 September 2015 had consisted of £45.5million in fixed investments, £2.6million in variable investments and £5million in long-term investments. The Council had also received a further dividend from the administrators of the Heritable Bank; the Council had now received 98% of the value of its deposits. No further update had been received from the Administrator. The importance of carefully monitoring and controlling the Council’s cash flow to ensure enough funds were available each day to cover outgoings was highlighted; this would become more difficult as the Council used up its capital receipts and reduced its investment balances.

The Director stated that the Council held loans totalling £184.7million at 30 September 2014, the majority of which had funded the self-financing of the Housing Revenue Account. It was not anticipated that the Council would require further loans in 2015/16, but it was expected that further borrowing would occur in 2016/17 to fund capital projects such as the Epping Forest Shopping Park. The revised Capital Programme for the five-year period to 2019/20 would be considered by the Cabinet at its meeting on 3 December 2015.

Finally, the Director added that there had been no breaches of any of the prudential indicators relating to capital activity, the indebtedness for capital purposes and the Council’s overall Treasury position.

In response to questions from the Members of the Committee, the Director of Resources stated that the return on the Epping Forest Shopping Park would be significantly higher than the rates currently available on the Money Market. The forecast was that the Council would receive approximately £2.5million in rent each year for an estimated build cost of £30million. Councils were generally looking to invest in property to increase their financial resilience.

The Director acknowledged that the Council’s total investments had decreased a little over the period, and a longer term trends table could be provided for Members if they wished. It was clarified that the 98% return from the Council’s investment with Heritable Bank included both the initial deposit and interest due. The Council had not breached any of its Prudential Indicators previously, and the ‘cost of carry’, i.e. the cost of borrowing in advance of need, was explained for the benefit of the Committee.

The Committee noted that, with only very low interest rates available on the money markets, the Council had embarked on a strategy of capital investment in order to obtain better returns for its money. It was accepted that the report did not indicate any real cause for concern with the management of the Council’s Treasury Management function at the current time.

Resolved:

(1)        That the mid-year progress report on Treasury Management and the prudential Indicators for 2015/16, and the management of the risks therein, be noted.