Update on treasury and cash management activities and the Prudential Indicators

The Cabinet approved the Treasury Management and Investment Strategy at the beginning of each financial year.  This identified proposals to finance capital expenditure, borrow and invest in the light of capital spending requirements, the interest rate forecasts and the expected economic conditions.  At the end of each financial year the Cabinet received an Annual Report which detailed performance against the Strategy.

Councillor Phil Davies informed that the approach that the Council had taken had been commended as an example of good practice and it was now considered to be an innovative Council in the way it invested its funds.

Councillor Phil Davies introduced a report by the Interim Director of Resources which presented a mid-review of Treasury Management policies, practices and activities during the first half of 2013.  It confirmed compliance with treasury limits and prudential indicators being prepared in accordance with the revised CIPFA Treasury Management Code and the revised Prudential Code for Capital Finances in Local Authorities.

The Interim Director’s report also estimated that there would be an under spend of £0.75 million from all Treasury Management activities in 2013/14.

Councillor Phil Davies drew attention to the fact that the Council had £2m deposited with Heritable Bank, a UK registered Bank, at an interest rate of 6.22% which was due to mature on 28 November 2008.  The Company had been placed in administration on 7 October 2008.  Members had received regular updates regarding the circumstances and the latest situation. In March 2009 an Audit Commission report had confirmed that the Council acted, and continued to act, prudently and properly in its investment activities.  To date, £1,980,321 had been received with further payments due from the administrators, Ernst & Young. The amounts and timings of future payments were estimates as favourable changes in market conditions and  could lead to higher than estimated repayments.

If Heritable Bank was unable to repay in full, a pre-emptive claim against Landsbanki Islands HF had been made for the difference.  When the original investment had been made it was with Landsbanki Islands HF providing a guarantee to reimburse the Council should Heritable be unable to repay.  The Cabinet noted that Landsbanki Islands HF was also in Administration.

Councillor Phil Davies thanked everyone involved in Treasury Management Performance Monitoring for their hard work.

RESOLVED: That

(1)  the Treasury Management Performance Monitoring Report be  accepted in meeting the Council’s obligations under the Treasury Management Code; and

(2)  the estimated under spend of £0.75 million in 2013/14 which has been incorporated into the Council Financial Monitoring report be noted.