This report gives details of the 2014/15 Mid Year Review of the Treasury Management function.

The Committee received a report of the Finance Officer providing Members with the 2014/15 Mid Year Review of the Treasury Management function. 

The Acting Head of Finance Shared Services provided some of the highlights in the report.  It was noted that the Council was debt free.  He advised that the average returns had slightly increased since the report had been published.  However, at 0.61% it was still slightly below the benchmark rate of 0.62%.  Officers would be producing a report in the New Year looking into the possibility of the Council improving its investments by investing in Government Bonds or Gilts. 

Following a question from the Chair about the expected rates of return, the Director of Finance Shared Services advised that officers had not yet carried out too much research.  She said that if bigger risks were involved the Council would want a bigger return.  She explained that there was a secondary market where it was possible to trade bonds and gilts.  The bonds were either from the Government or other public sector organisations.  They were fairly highly rated.  The Director of Finance Shared Services added that this was the first time officers had mentioned this to Members; officers were seeking a view as to whether the matter should be explored further. 

Following a question from Councillor Khan, the Director of Finance Shared Services responded that officers did not intend moving to high risk investments.

The Acting Head of Finance Shared Services explained that the current Treasury Management Strategy solely referred to investing in UK banks and building societies.  He added that the interest received by the Council helped to support the Council’s budget.

The Director of Finance Shared Services informed Members that the final decision regarding investments would be made by Councillors at Full Council.  It was important for the Council to consider ways it could increase its income.

Councillor Khan asked whether an investment in property would be considered.

The Director of Finance Shared Services agreed that this was an area that could be considered.  It could be property that was used to obtain commercial rents or as part of the property markets.

In response to a question from Councillor Taylor about Gilts and Government Bonds, the Director of Finance Shared Services advised that investing in these could be more risky than placing cash in one of the top rated banks.  However, the UK Government had a reasonable credit rating compared to many other countries.

The Director of Finance Shared Services explained that the rating agencies were the organisations that the financial markets looked to for their views.  The Council would take advice from its credit advisors and review credit ratings before making any recommendations for changes to the strategy.  It was possible to go against an advisor, if the Council felt the risk was worth taking.

The Acting Head of Finance Shared Services stated that it was difficult to predict any difference in returns until research had been carried out.  The Director of Finance Shared Services said that it might be 0.25%.

Councillor Khan said that in his opinion it was important the Council got better returns for its investment and this should be explored.

The Director of Finance Shared Services added that if the Council invested in property this would not be included within the Treasury Management Strategy but part of the income stream shown in the budget from assets.

The Chair concluded that the Committee had had a thorough discussion on this subject and officers had been made aware of Members’ views.

RESOLVED –

1.         that contents of the 2014/15 Mid Year Review of the Treasury Management function be noted.

2.         that Members’ comments about future investments be noted.