Issue - meetings

Report of the Cabinet Member Finance

The Leader introduced the Council’s Treasury Management Strategy for 202/21 which had been approved at a meeting on 23rd March 2020. She explained that the Council had borrowed and invested substantial sums of money and was therefore exposed to financial risks including the loss of invested funds and the revenue effect of changing interest rates. The successful identification, monitoring and control of risk remained central to the council’s treasury management strategy. The Council had pursued its strategy of keeping borrowing and investments below their underlying levels, sometimes known as internal borrowing, in order to reduce risk and keep interest costs low.

The coronavirus pandemic had dominated the world economy and had had a detrimental effect on investment returns. Investment income in the Council’s budget for 20/21 was set against a very different economic backdrop. The Bank Rate, which was 0.75% in January 2020, now stood at 0.10%. 

Income on investments was predicted to be £127,500 down. Cash was earning as little as 0.02%, but the council was returning an average rate of 1.77%

Cheltenham Borough Council was however a net borrower. This had resulted in temporary borrowing becoming very cheap and had favoured the borrowing costs, estimated to be a saving of £125,000. 

Overall though, the treasury budget was now expected to come in on target as the borrowing cost saving matched the investment losses.

Pooled Funds at the start of the financial year had taken a big hit on their capital valuations. This had remained throughout the first six months although the dividend returns had been in excess of 4%, however since the announcement of the vaccination, stocks/equities across the UK and indeed the world had climbed.  The UK FTSE had now risen by 16% since the vaccination announcement which in turn had seen capital values of the council’s pooled funds increase by £280,000 in one month.

There was still the added complication of the end of the Brexit transition period on 31st December and what a trade deal may or may not look like that could also have an impact.

The Cabinet Member concluded that overall the mid term report that the  Council was being asked to note was a pleasing result given the difficulties of Covid and Brexit on the investment strategy and added that the Treasury Management Panel had discussed and supported this report at its recent meeting in November.

The Mayor thanked the Cabinet Member for her report.  There were no questions, but a Member commented that she felt Members should be proud of the position they were in given the circumstances and again thanked the officers and Member for the report.  The Cabinet Member expressed her thanks to the council’s financial advisors who had worked closely alongside the treasury management team.

RESOLVED THAT

the contents of the summary report of the treasury management activity during the first six months of 2020/21 be noted.