Agenda item

The Cabinet is requested to consider the agenda report with its three appendices and to make the following resolution:

The summary of treasury management activities and performance for 2017-2018 be noted.

RESOLVED

The summary of treasury management activities and performance for 2017-2018 be noted.

[Note For technical reasons there is no audio recording for this item and accordingly a fuller summary of the Cabinet member’s introduction is provided]

The Cabinet received and considered the agenda report and its three appendices.

This item was presented by Mr Wilding.

Mrs Belenger was in attendance for this matter.

Mr Wilding said that the report (previously considered by the Corporate Governance and Audit Committee) summarised CDC’s treasury activities during the last financial year. Performance was summarised against a benchmark of other district councils (appendix B) and a compliance report of performance against CDC’s own treasury limits (appendix C). 

CDC’s treasury portfolio ranged between £50 and £70 m over 2017-2018.  At the year-end just under £54 m of funds were under management (table 1).  The £54 m figure comprised Capital Grants received in advance of spending £7.8 m (including the Community Infrastructure Levy and Housing Grants), Earmarked Reserves £24.3 m (set aside for planned future expenditure and which included the Asset Replacement Programme fund, New Homes Bonus and other funds), General Fund Reserve £14.8 m, section 106 receipts of £5.5 m to be spent in connection with new housing, and Cash Flow £1.6 m.

The most significant decision taken during the year was to invest a further £7.9 m in external pooled multi-asset and corporate bond funds - a summary of the CDC’s external pooled investments was shown in table 2.  Appendix A showed a graphical summary of the return and changes in capital values for these funds over the financial year.  Whilst revenue returns on these investments remained between 3 and 4%, since the end of 2017 external pooled funds had declined in value by around 2% - the main reason was the upfront cost of purchasing Local Authority Property Fund due to stamp duty and other related costs.  However, the decline in value of external pooled funds was much less than the income received.

The most pressing issue relating to these funds was the imposition of IFRS9 in 2018-2019 – without a suitable statutory override any unrealised gains or losses on those investments were likely to be chargeable to CDC’s General Fund at 31 March 2019.

With that in mind, it was encouraging that the Ministry of Housing, Communities and Local Government (MHCLG) was currently consulting on issuing a statutory override for a time limited period of three years for this issue.  The consultation would close at the end of September 2018 and officers would respond on behalf of CDC.  In short, their view was that CDC should support the issue of this statutory override for all external pooled funds, but they did not understand why the override should be time-limited and so would ask MHCLG to review this aspect when finalising the statutory guidance.

There were revised Codes of Treasury Management Practice to comply with going forward, together with updated statutory guidance from the MHCLG.  A key theme of those documents related to greater consideration and disclosure of non-treasury investments (mainly CDC’s investment properties). As a first step, this information was now incorporated into section 5 of the report. Officers were working through these new requirements and would incorporate them into the 2019-2020 strategy that the Cabinet was due to consider early in 2019.

Mr Wilding clarified that the reference in para 4.2 to appendix ‘2’ should in fact say ‘B’.

Mrs Belenger did not wish to add to Mr Wilding’s introduction. 

There was no discussion of this item.

Mr Dignum commented briefly on the nature and purpose of the Local Authority Property Fund (table 2 on page 52 and para 5.2), pointing out that the income derived from the purchase of assets would in the long term far exceed the initial capital costs of acquisition.

Mr Ward explained the technical aspects of retained business rates.

Decision

The Cabinet voted unanimously on a show of hands to make the resolution below. 

RESOLVED

The summary of treasury management activities and performance for 2017-2018 be noted.