Issue - meetings

The Senior Accountant, Treasury and Fixed Assets, introduced the Mid-Year Treasury Report, summarising as follows:  

The report is based on a template provided by Arlingclose, the Authority’s Treasury Management advisors and is compiled specific to Monmouthshire County Council.

The Authority aims to comply with the CIPFA Treasury Management Code which requires the Authority to approve treasury management semi-annual and annual reports and to have regard to the security & liquidity of its investments before seeking additional returns.

The Prudential Code requires the Authority to have a Capital Strategy approved by full Council, laying out how to best meet the wide range of objectives the Authority has with limited capital resources. This was approved by Council on the 19th September 2019 and will be updated annually.

The Treasury Management Code now covers non-treasury investments as well as treasury investments requiring Authorities to show how they provide due diligence in the same way as it does for Treasury investments. The Authority has not increased its holding of non-treasury investments in the first half of 2019/20 but is still looking to spend the full balance of the approved £50m by the end of 2020/21.

There has been economic uncertainty in the first 6 months of 2019/20 with another 6 months likely due to the extension of the Brexit deadline and a deepening slowdown in Europe. Politics abroad has also continued to be a big driver of financial markets for example with continuing tensions between the US and China. The Bank of England maintained rates at 0.75% to support the economy.

Gilt interest rates fell partly due to this uncertainty so the Authority took out £7m of long term borrowing to lock in some longer term benefit from these low rates, a good decision with hindsight as PWLB rates rose by 1% in October 2019.

At 31st March 2019 the Authority had a borrowing Capital Financing Requirement of £183.9m and gross external borrowing of £178.3m. Gross borrowing increased marginally up to £180.1m in the 6 months to the 30th September but net borrowing fell from £158.0 m to £148.9m due to a short term increase in investments.

The Authority continues to hold a minimum of £10m of investments to meet the requirements of a professional client under the Mifid II regulations (Markets in financial instruments directive).  The investment in strategic pooled funds has now been increased from £2m to £3m. These funds have returned income of £63,000 in the first 6 months of the year. Capital losses of £45,000 including a one off £39,000 will be absorbed by the surplus held in the Financial Instruments revaluation reserve.

The Authority is forecasting a saving of £243,000 for 2019/20 in the areas of interest payable and interest receivable against a total net budget of £4.0m.

Questions and comments were invited, and answered as follows:

Audit Committee understood that future long term borrowing from the Public Works Loans Board (PWLB) will be more expensive.  It was considered that the current level of borrowing is sustainable.  A Member sought  ...  view the full minutes text for item 6