Top

Top

 

Agenda Item No 9(g).

 

 

THE VALE OF GLAMORGAN COUNCIL

 

COUNCIL MEETING: 6TH MARCH, 2013.

 

REFERENCE FROM CABINET: 25TH FEBRUARY, 2013.

 

C1230            Treasury Management (L) (SCRUTINY COMMITTEE – CORPORATE RESOURCES) –

 

Cabinet received an interim report on the Council’s treasury management operations for the period 1st April 2012 to 31st December 2012 and considered the proposed 2013/14 Treasury Management and Annual Investment Strategy. 

 

On 1st April 2004, the capital finance regulations came into force. Under these regulations, the Welsh Government (WG) provided the Council with a General Capital Funding grant and the Authority was also advised of a level of borrowing that WG was prepared to fund via the Revenue Support Grant Settlement. If the Council wished to borrow in excess of this level to increase its capital expenditure, then it could. However, it would either have to find the additional costs of borrowing through savings in other services or increase council tax.

 

In order to manage the increased flexibility, Part1 of the Local Government Act 2003 required local authorities to have regard to the Prudential Code, which had been developed by the Chartered Institute of Public Finance and Accountancy (CIPFA) as a professional code of practice.

 

The key objectives of the fully revised Prudential Code were to ensure that the capital investment plans of local authorities:

  • were affordable;
  • all external borrowing and other long term liabilities were within prudent and sustainable levels;
  • The treasury management decisions were taken in accordance with professional good practice.

In March 2012 the Council adopted the CIPFA Treasury Management in the Public Services: Code of Practice 2011 Edition that required the Council to approve a treasury management strategy before the start of each financial year.

 

The Code of Practice and legislation required the Council to set out its Treasury Management Strategy and to prepare an Investment Strategy. The Welsh Government (WG) 2010 revised guidance required the Council to approve an investment strategy before the start of each financial year and stated that authorities may produce a single strategy document, covering both the requirements of the CIPFA Treasury Management Code and WG's guidance.

 

The proposed Treasury Management and Investment Strategy for 2013/14, was attached at Appendix 1. The Treasury Management Strategy itself covered a rolling period of three years and was intended to link in to the Medium Term Financial Planning process.

 

Interim Report

 

In so far as the Council’s treasury management operations entered into for the period 1st April 2012 to 31st December 2012 are concerned, all activities were in accordance with the Council’s approved strategy on Treasury Management. The following table set out the monies borrowed / repaid during the period.

 

Loan Type

Opening Balance

      Received

         Repaid

Closing Balance

 

01/04/2012

 

 

31/12/2012

 

          £’000

          £’000

          £’000

           £’000

PWLB

95,977

0

2,423

93,554

 

 

 

 

 

Other Long Term Loans

6,004

0

2

6,002

Temporary Loans

100

0

0

100

Totals

102,081

0

2,425

99,656

 

 

  • Loans borrowed from the Public Works Loan Board (PWLB) were intended to assist Local Authorities in meeting their longer term borrowing requirements.  The above loans were all at fixed rates of interest. The rate paid on each loan was largely dependent upon the original duration of the loan and date taken out.
  • Other Long term loans represented those non-PWLB loans that were repayable at least 1 year or more from the date they were advanced.  The bulk of this debt was represented by two market loans of £2,000,000 and £4,000,000. The balance of this debt was local bonds. These total £2,100 and were made up of small individual sums that were invested with the Council for a number of years by members of the public.  
  • Temporary Loans represented those loans that were borrowed for a period of less than 1 year, ard were borrowed on notice. 

External interest at an average rate of 5.619% and amounting to £4,521,571 had accrued on these loans for the first 9 months of 2012/2013.

The Council had made the following investments for the period 1st April 2012 to 31st December 2012 and  are set out below:-  

 

Borrowing Institution

Opening Balance

    Invested

     Returned

Closing Balance

 

01/04/2012

 

 

31/12/2012

 

          £’000

       £’000

       £’000

          £’000

Local Authorities

 

4,000

0

4,000

0

Debt Management Account Deposit Facility

100,000

1,006,000

997,550

108,450

 

 

 

 

 

Totals

104,000

1,006,000

1,001,550

108,450

 

Interest, at an average rate of 0.25% and amounting to £242,195 has been accrued from these investments for the first 9 months of 2012/2013.

 

This was a matter for Council decision.

 

RESOLVED -

 

That Cabinet recommend the following to Council -

 

(1)       T H A T  the Treasury Management interim report for the period 1st April to 31st December 2012 be endorsed.

 

(2)       T H A T The proposed 2013/14 Treasury Management and Investment Strategy be endorsed and referred to Council for approval including the following specific resolutions as set out in the Strategy Action Plan:

  • The Authorised Limit for External Debt be set at £167,000,000 for 2012/13, £174,000,000 for 2013/14, £191,000,000 for 2014/15 and £203,000,000 for 2015/16.
  • The Operational Boundary for External Debt be set at £151,000,000 for 2012/13, £156,000,000 for 2013/14, £173,000,000 for 2014/15 and £184,000,000 for 2015/16.
  • The Section 151 Officer be given delegated authority within the total Authorised Limit and Operational Boundary as estimated for individual years to effect movement between the separately agreed limits for borrowing and other long term liabilities.
  • An upper limit is set on its fixed interest rate exposures for 2012/13 of £140,000,000, for 2013/14 of £147,000,000, for 2014/15 of £163,000,000 and for 2015/16 of £174,000,000 of its net outstanding principal sum on its borrowings / investments.
  • An upper limit is set on its variable interest rate exposures as an absolute value for 2012/13 of +/-£144,000,000, for 2013/14 of +/- £154,000,000, for 2014/15 of +/- £151,000,000 and for 2015/16 of +/- £149,000,000 of its net outstanding principal sums on its borrowings / investments.
  • An upper limit of £30,000,000 is set for total principal sums invested for over 364 days for 2012/13, 2013/14, 2014/15 and 2015/16.
  • The amount of projected borrowing that is fixed rate maturing in each period as a percentage of total projected borrowing that is fixed rate for 2013/14 be set as below:

 

Upper Limit

Lower Limit

Under 12 months

20%

0%

12 months and within 24 months

20%

0%

24 months and within 5 years

30%

0%

  5 years and within 10 years

30%

0%

10 years and above

100%

0%

 

  • The Prudential Indicators set out in paragraph 4.1 and 4.2 in this Strategy be approved.

Reasons for decisions

 

(1)                     To present the Treasury Management Interim Report.

 

(2)                     The Treasury Management and Annual Investment Strategy is prepared as required by the Local Government Act 2003.

 

Share on facebook Like us on Facebook