Agenda item

(a)       That the draft Treasury Management Strategy 2014/15 be recommended to Cabinet on 18 February 2014 with a request to look into investing with Credit Unions for the economic benefit of the people of Flintshire; and

(b)       That the Treasury Management 2013/14 quarterly update be noted.

The Finance Manager - Technical Accountancy introduced the draft Treasury Management Strategy 2014/15 for review prior to recommendation to Cabinet.  The report also provided an update on matters relating to the Council’s 2013/14 Treasury Management Strategy up to the end of December 2013.  She gave an overview of the minor changes which had been made to the Strategy for 2014/15 compared with 2013/14 Strategy, as indicated in the report, and referred to the detailed information on loans in Appendix 3 which had been previously requested.

The Chair expressed her appreciation to those who had attended the Treasury Management training session earlier in the week and the excellent presentation which had been received from the Council’s Treasury Management advisors, Arlingclose.  She went on to thank the Head of Finance and Finance Manager for the report on this complex subject and drew attention to the responsibility of the Committee to scrutinise the Council’s borrowing and investment activity.

On the long-term borrowing analysis, Mr. Paul Williams referred to concerns previously raised on the high interest rates of loans and penalty clauses, and said that discussion on this subject at the training session had given assurance that the Council was looking at borrowing from a commercial viewpoint and had built robust processes to review debt into the Strategy, supported by professional advice from Arlingclose.

In response to queries raised by Councillor Haydn Bateman on the Investment Strategy, the Finance Manager explained that the option to invest with providers of social housing was available if an appropriate opportunity should arise during the year.  The Strategy also included the option to use an external fund manager, although there were currently no plans to do this.

Councillor Tim Newhouse suggested that the long-term borrowing analysis could identify with an asterisk any loans which were as a result of rescheduling to clarify that these were not new loans.  The Finance Manager confirmed that the additional information would be incorporated in the table and that previously requested details on LOBOS (market fixed rate loans) would be included in the update report to the next meeting.  A further suggestion was made by Councillor Newhouse that with professional advice, the Council could explore investment in a particular bank, with the request for branch presence in a local area.  The Head of Finance explained that treasury management decisions were in relation to risk and return and that banking arrangements were a separate matter.  The Chair said that this suggestion would be noted by officers.

The Chief Executive spoke of the need for a balance to be creative with investments with consideration of security and rates of return for the Council's surplus funds.  In response to comments on the potential for Local Government reorganisation, he pointed out that in the event of any agreement, individual Councils would need to reconsider their policies on liability and structure, however this was not currently an issue.

Councillor Newhouse stated that the treasury management training had confirmed that charges incurred in the early repayment of PWLB fixed loans where prohibitive whereas possibly this was not the case with LOBOS loans.  The Head of Finance agreed that options to reschedule debt in a cost-effective way were limited but reminded Members that borrowing had resulted from necessary Council policy decisions and that the best rates had been sought according to the varying economic cycles at the time.

Mr. Williams explained that he had spoken with the Finance Manager about the inclusion of ‘any other organisation’ in the list of investment criteria and limits (Table 4) and had suggested that the wording be expanded to give assurance of safeguards from risk.  The Finance Manager acknowledged that this was a change in the Strategy and could be removed if Members wished, however there were no current plans in place to progress this investment option and the amounts were minimal.  The Chief Executive gave his view that this new investment opportunity posed a different risk therefore should remain in the Strategy with the assurance that this would not be pursued without further discussion on policy framework and risk assessment.

On the long-term borrowing analysis, Councillor Arnold Woolley suggested that it might be helpful to identify the purpose for which the loans were taken and to split the total figure to show those with supported funding from Welsh Government (WG).  Whilst the Head of Finance agreed that consideration was needed on the context of the information to aid understanding, loans were not allocated to specific projects and were related to the rolling capital programme of work, hence that level of detail could not be given.  The Finance Manager explained that the loans needed to be considered in the wider context of the Council's capital assets which were valued at circa £800m at the last balance sheet date.  She further explained that WG recognised the need for all Councils to borrow through the Revenue Support Grant, with the supported borrowing figure for the next financial year in the region of £4.2m.

When asked by the Chair if reasons could be given for the last five PWLB loans on the long-term borrowing analysis, the Finance Manager confirmed that all five had been as a result of debt rescheduling and were not new loans.

Councillor Ian Roberts questioned the value of advice given by credit rating agencies in relation to Landsbanki and whilst agreeing with the suggestion made by Councillor Newhouse for greater presence of bank branches for local residents, referred to the closure of local NatWest branches.  He asked if consideration could be given to investment in Credit Unions to provide a source of credit for individuals in need thus avoiding the use of more costly alternative institutions.

The Head of Finance spoke about the need to balance the social responsibilities of the Council together with securely investing its surplus funds through the treasury management function, and the potential for policy decisions to combine the two.

The Chief Executive suggested exploring such investments with due consideration to security and rates of return, adding that the option for investment with other organisations could generate modest return for the Council's investments, whilst making a significant difference to those organisations.

Councillor Glyn Banks suggested that the final two organisations listed on the investment criteria could be separated.

Following the earlier suggestion from Councillor Woolley on the presentation of the long-term borrowing analysis, Councillor Newhouse asked if information could be provided to highlight some of the more interesting areas of spend, such as schools.

On recommendation 4.01 of the report, Councillor Woolley proposed that the Committee request that Cabinet follow up the suggestion from Councillor Roberts to look into investing with Credit Unions for the economic benefit of the people of Flintshire.  This was duly seconded by Councillor Roberts and on being put to the vote, was carried.

RESOLVED:

(a)       That the draft Treasury Management Strategy 2014/15 be recommended to Cabinet on 18 February 2014 with a request to look into investing with Credit Unions for the economic benefit of the people of Flintshire; and

(b)       That the Treasury Management 2013/14 quarterly update be noted.