Agenda item

(Director of Resources) To consider the attached report (AGC-012-2016/17).

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 2016/17, 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 2016/17 had indicated expenditure of £47.597million, which would be financed by capital grants, capital receipts and revenue. The Capital Programme for the three-year period ending 31 March 2019 had predicted expenditure of £102million, partly funded by borrowing of £12.6million, with £2.99million available in usable capital receipts and £nil in the Major Repairs Reserve. As it was possible for the vast majority of the Capital Programme to be undertaken without borrowing, 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 £52.9million under investment as at 30 September 2016, and the average net investment position of the Council had been approximately £61.9million throughout the first half of 2016/17. The Council’s investments as at 30 September 2016 had consisted of £33million in fixed investments, £19.9million in variable investments and £nil in long-term investments. The Council had received no further dividends from the administrators of the Heritable Bank; the Council had received 98% of the value of its deposits. The Administrator had indicated that they were seeking to extend the period of administration for another year until 6 October 2017. 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 2016, the majority of which had funded the self-financing of the Housing Revenue Account. It was anticipated that the Council would require further loans up to £16million in 2016/17 to fund capital projects such as the Epping Forest Shopping Park. The revised Capital Programme for the five-year period to 2020/21 would be considered by the Cabinet at its meeting on 1 December 2016.

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 Committee, the Director stated that having 38% of the Council’s investments in variable rate products was higher than Officers would like, but there was a need to have funding easily available for the St John’s Road development in Epping. The Director agreed with the Chairman that as current interest rates were so low, and they could only conceivably go up, then there was little risk to the Council as investment rates should improve.

The Director acknowledged that the current Housing Revenue Account (HRA) 30-Year Financial Plan was not as assured as before; the Government had reduced the rents that could be charged to tenants and had introduced a levy on high value assets to finance the Right-to-Buy scheme beyond 2017/18. The HRA Financial Plan would be kept under review to assess whether the Council Housebuilding Programme remained financially viable. The Director also reassured the Committee that the Council’s external Treasury Management advisors provided a minimum of monthly updates to the credit ratings for the financial institutions on the Council’s counterparty list, or more frequently if an event occurred which affected financial markets; these were distributed to four different Officers, who could take any urgent action necessary in the absence of the Director.

Resolved:

(1)        That the mid-year progress report on Treasury Management and the prudential Indicators for 2016/17, and the management of the risks therein, be noted;

(2)        That none of the Prudential Indicators had been breached during the first half of 2016/17 be noted; and

(3)        That the importance of regularly reviewing the HRA 30-Year Financial Plan be emphasised.