Decision details

Treasury Management Activity 2019/20

Decision Maker: Audit, Risk and Governance Committee

Decision status: Recommendations Approved

Is Key decision?: No


To summarise activity for the first quarter of the financial year


Mike Jensen, Director of Investment presented the Treasury Management Activity for the first half of the financial year 2019/20.


The following points were highlighted:


·  Since the report was produced there had been a deterioration in UK economic data which would influence treasury management activity. The Bank of England was preparing the economy for lower and potentially negative interest rates in the wake of the negative fiscal impact of the UK's exit from the European Union. 


·  With the potential to take borrowing at advantageous rates in the remainder of the year, facility to increase the current borrowing limit to take best opportunity of the market conditions was recommended.


·  With regards to performance, the council's budget monitoring had so far reported a £7million underspend as a result of treasury management activity and this was likely to be substantially improved by the next reporting cycle.


·  The traditional route for local authority funding has been the Public Works Loan Board (PWLB) loan, who had recently increased the cost of borrowing by 1%.  In response, the county council would explore alternative opportunities for funding from the public market which could be substantially cheaper than the new PWLB rates.


·  A recent change to the structure of the UK Municipal Bond Agency would see control passed from the Local Government Funding Agency to a preferred operator, via a procurement process. The agency existed primarily to reduce councils' capital long term financing costs and allowed local authorities to diversify funding sources and borrow at a lower cost than was available via the PWLB. This change would potentially provide an opportunity for improved efficiency for local authorities. Rather than looking solely at long term debt financing, the change could create an opportunity to create a broader platform for funding, including investment, where councils would have more control. The committee would be kept updated regarding these negotiations.


In response to questions it was clarified that:


·  The county council's private finance initiative (PFI) would continue for a further 19 years, however alternative forms of financing would continue to be sought. 


·  Borrowing costs have so far been lower than budget, however, the county council would continue to seek to secure the position through continuing to review opportunities for long term cost effective options.


·  Mike Jensen provided a response to a question on the potential impact on economic indicators of leaving the EU.


Resolved: That


(i)  The Treasury Management Activity for the first half of the financial year 2019/20, as presented, be noted.


(ii)  An increase in the Authorised Borrowing Limit from £1,375m to £1,600m for the remainder of 2019/20, be recommend to Full Council for approval.


Report author: Paul Dobson

Date of decision: 28/10/2019

Decided at meeting: 28/10/2019 - Audit, Risk and Governance Committee

Accompanying Documents: