Agenda item

The Head of Finance presented the 2022/23 Mid-Year Treasury Management Report. Following presentation of the report, questions were invited:

A Member asked about unrealised Capital losses of c£500,000 and queried if that would be a problem in the future. If the authority was to sell assets, there would be more shortfall than £500,000 also properties have just been valued. It was queried if this would increase the deficit or help the valuations.  It was explained that this is an externally managed pooled fund investment and as such would be continuously valued by the markets. In terms of capital losses under the current Welsh Government regulations, it is allowable to carry losses on the balance sheet year on year without impacting on the income and expenditures account which would then impact upon Council taxpayers. The regulation is currently renewed every year. There would be no impact on the revenue account until those funds were disposed of.

A Member asked about the £476,000 capital loss; if it was a temporary dip in the value of the property funds or reorganisation of bought shares.  It was confirmed that these are pooled funds, that are exposed to temporary movements in equity markets and property funds that are externally managed working closely with our treasury advisers.. The £4million investment in pooled funds is balanced against other lower risk investments and should be regarded as a long-term investment. Reference was also made to the requirement to hold £10million worth of cash balances under the MiFID regulations to retain our status in the treasury markets.

A Member asked about the level of comfort with the £4million investment because of the 4.5% rate of return and questioned if there were any plans to increase investment in pooled funds. It was responded that, in consultation with our treasury advisers, this had been considered however uncertainties arising from the pandemic and Russian /Ukraine hostilities paused any plans.

Regarding CIPFA codes, it was confirmed that consideration is being given to defer reporting quarterly to this Committee and instead provide more streamlined reports or focus on specific areas of treasury performance.

In response to a question, the Head of Finance clarified that EIP stands for Equal Instalments of Principal and the difference in rates reflect the turbulence in the market this year.

The Chair summarised that he looked forward to a revised treasury strategy and would like to understand some more about the overall governance arrangements, the size, capability and capacity of the in-house treasury team and the relationship with the treasury advisers.

As per the report recommendations, the Committee has reviewed and commented on the treasury management activities for the first six months of 2022/23, and notes that all treasury and prudential indicators set as part of the Treasury strategy approved by full Council have been adhered to during the period.