Minutes of a meeting held on 12th November, 2013.


Present: Councillor M.R. Wilson (Chairman); Councillor Mrs. P. Drake (Vice-Chairman); Councillors K.J. Geary, H.C. Hamilton, H.J.W. James, P.G. King, R.A. Penrose, G. Roberts and A.C. Williams.





This was received from Councillor K. Hatton.



587     MINUTES –


RECOMMENDED – T H A T the minutes of the meetings held on 1st and 15th October, 2013 be approved as a correct record.





No declarations were received.





The report considered by the Cabinet at its meeting held on 21st October 2013 outlined the overall Disabled Facilities Grant (DFG) performance which was within agreed targets.  The Cabinet at that time also noted that the time taken between a client’s first point of contact with the Council and the Occupational Therapist’s (OT’s) recommendation was behind target.  However, when comparing performance on a quarterly basis, there had been an improvement in this stage from the previous quarter.  This underperformance was being addressed through additional staffing and an additional OT had been employed who had commenced work with the Council from the beginning of November 2013 and would replace an existing OT who would continue to be engaged up until Christmas 2013.  Appendix 1, as attached to the report, provided detailed information on the performance of the delivery of DFGs during Quarter 1 of the financial year 2013/14 with Appendix 2 to the report also providing an update on the implementation of the agreed Action Plan delivering further service improvements. 


Cabinet at that time had subsequently resolved:


(1)          That the report on performance for delivering Disabled Facilities Grants in Quarter 1 of 2013-14 be noted.


(2)          That the report be referred to the Scrutiny Committees (Housing and Public Protection, Health and Social Care and Corporate Resources) for information.


The Scrutiny Committee in considering the matter raised concerns regarding delays in providing to applicants financial information to allow an early determination as to the affordability and reference was made to a specific case in Penarth.  In response the Head of Public Protection alluded to a presentation made to the last meeting of the Scrutiny Committee which referred to an increased emphasis provided to the assessment process which would see applicants receiving a means test within 13 days of receipt of an application.  This would allow for the applicant to make an informed decision regarding affordability earlier in the process.


Reference was also made to the statistics contained within the Appendix to the report with one Member of the Committee expressing the view that the relevance of the statistics was questionable.  In response the Head of Public Protection, whilst acknowledging the point raised, reminded the Committee that the statistics collected and as set out in the Appendix reflected the legislative requirements.


RECOMMENDED – T H A T the Council performance delivering Disabled Facilities Grants in Quarter 1 of 2013/14 be noted.


Reason for recommendation


In acknowledgement of the Council’s performance to date.





The Head of Adult Services / Locality Manager gave a comprehensive update, including a summary in respect of the following matters:


-         brought to the attention of the Committee the current position in Adult Services regarding revenue expenditure

-         provided an analysis of pressures on budget for Adult Services

-         provided an update on the actions being taken to mitigate anticipated overspends, in part through delivery of the Social Services Budget Programme. 


Committee were advised that resource management in Adult Social Care was inherently problematic for the following reasons:


·         Potential demand for most social care services would often exceed supply and so the Council was always involved with establishing eligibility

·         Like all local authorities in Wales, the Council was heavily dependent on funding from the Welsh Government.  The formula used to allocate this funding was especially problematic for the Vale of Glamorgan in that Social Services here received substantially less money for spending on social services than local authorities similar in size.  The outcome was that the Council’s average spend per head of population was relatively low

·         Decisions which affected the type and cost of services being provided were often outside the Council’s control and may be unpredictable

·         Some individual services were very expensive.  Even with the appropriate monitoring and efficiency measures and controls operating well, packages of care for adults with especially complex needs could exceed £100,000 per year

·         Financial decisions had to follow the changing needs of individual users

·         Market pressures meant that Councils could face escalating costs when purchasing services from independent providers

·         Whilst some services were low volume and high cost, others such as the provision of home care and some residential care services were notable for their high turnover and volatility, brought about by changes in circumstances such as admission to hospital

·         Expenditure incurred during one year may lock the Council into financial commitments on behalf of individual service users for many years to come.  For example, a package of care commissioned for someone who had just turned 18 may still be required into old age

·         To balance the competing priorities of managing service demand, improving quality, meeting higher expectations and reducing expenditure was especially difficult in situations where safeguarding people from significant harm had to be a key factor in decision making.


Given this challenging context, it was essential that the Council had in place a coherent strategy for securing financial stability within the resources available.  On 30th July 2012, Cabinet had endorsed the Social Services Budget Programme.  Since that time, the Social Care and Health Scrutiny Committee had received monthly progress updates on the way in which the programme had been implemented.


In respect of the overall budget programme, the Social Services Directorate was currently required to find savings totalling £6.0m. by the end of 2016/17.  Savings totalling £6.189m. had been identified.  The surplus would be used to mitigate any additional savings to be found in future years.


The current forecast for Social Services was an overspend at year end 2013/14 of £876k.  This was after deducting savings of £2.04m. which had been identified for the year. 


In Adult Services, the major issue was the continuing pressure on Community Care Packages.  This was the Division’s most volatile budget and the one most dependent on levels of service demand which were not within the Council’s direct control.  At present, the projected year end position for this budget was an overspend of £1.635m., following the reduction in budget to accommodate the savings target for the year of £685k.  There were potential underspends elsewhere in Adult Services of around £466k. which could be used to offset this position.  The overall projected overspend for the Division at year end was £1,169k.


The level of additional funding identified by the Welsh Government for the First Steps Initiative (which resulted in the introduction of the £50 cap for non-residential services) had been announced at £646k. for the current year.  This would reduce the overall overspend.


The allocation of additional funding for the next and subsequent years had not yet been determined but Committee were advised that they would receive a further report when a definitive decision on this matter had been made by the Welsh Government. 


Committee were advised that a report on the budget proposals would be brought before Cabinet later in November 2013 which would refer to the ongoing pressures on the Social Services Budget.   


The Head of Adult Services / Locality Manager also made reference to the Directorate’s delivery of actions which were currently ongoing and, in particular, he referred to improved financial monitoring which had provided a better understanding of service demands. 


In response to a question from the Committee in regard to the Welsh Government’s expectation of the increase in takeup of assistance as a result of the introduction of the First Steps Initiative and the level of variation of the takeup across Wales, the Director responded by indicating that it was difficult to explain the thinking behind the way in which the Welsh Government had introduced the initiative.  Key factors in understanding the potential impact had been misinterpreted, particularly given that the reimbursement of the initial allocations of funding had been based on the Older People Formula.  In terms of the Council’s specific case of underfunding, the Welsh Government had requested figures for anticipated increase in costs from the Council using a formula which was too restrictive and had subsequently been disregarded when allocating funding to deal with the loss of income.  He reminded the Committee that the Council’s initial allocation from the Welsh Government under the above formula had been £373,000 (3.69%).  He also alluded to the appendices attached to the report which contained the Council’s efforts to establish the exact costs to the Council of delivering the Initiative and the extent of the detail to elaborate the costs.  He also referred to previous deputations to the Deputy Minister attended by the Council’s Leader, Deputy Leader and himself to address the issue of funding and to highlight the inequitable arrangements which had been put in place.  These representations had received what he considered to be a favourable hearing.  Without such representations, it was highly likely that the Council would have only received an additional funding allocation of £118,000 from the £3.2 million additional finance made available by Welsh Government.  Whilst he welcomed the additional funding, the problem was that the funding imbalance would continue in future financial years as the formula used for allocating the additional funding was only for the current financial year whereupon the one-off grant would be absorbed into the RSG from 2014/15 according to the provisional budget set by Welsh Government.  Separately, he felt that the additional allocation did not address the real strain on the Council’s overall resources and to that end he referred to ongoing representations made by the Leader of the Council to the Minister that this was not the way to proceed in the future and requested that the method / criteria for the allocation of future funding be looked at again. 


In reinforcing the comments made by the Director, the Head of Finance intimated that the impact of the cap related to the loss of income for the Council and did not take account of the extent of increased expenditure.  In discussions with Welsh Government officers, it had been clearly stated that they would only reimburse the Council costs based on the application of the formula. 


General discussion ensued with a number of comments being expressed by the Committee in regard to the efforts made by officers to resolve the current imbalance in funding arrangements, the effect of providing additional funding which had been factored into the Council’s RSG and the problem that the Council had traditionally low funding settlements which would only serve to exacerbate the application of the funding cap; that it also appeared that the Council was subsidising the application of a Welsh Government policy which was questionable and whether the Auditor General for Wales would have a view on such arrangements and latterly, the degree of support provided by the Assembly Minister for the Vale of Glamorgan in pursuing the matter with the Welsh Government to address the funding issue.  In addition to these matters, reference was also made as to whether a difference would be made if the cap was index linked and the Director indicated that the capping figure had been in place for a three year period, however from 2014 the cap would be adjusted to take account of inflation and the impact of Welfare Reform changes.  He also alluded to more significant changes proposed by the Minister which would be considered post 2015. 


The Chairman, in referring to Appendix 2 to the report, endorsed the view that the Council’s case as submitted to the Welsh Government Minister was a very good case.  However, he was concerned that action needed to be taken as soon as possible to address any further financial impact for the financial year 2014/15 and to continue to lobby the Welsh Government for a fairer funding settlement.  He considered that it was important for the Council to be in the position to make a robust case, but acknowledged some of the previous comments made by Members in respect of the stance taken by the Welsh Government.  He felt that the matter was so important that he proposed that he should write on behalf of the Scrutiny Committee seeking a fairer funding settlement in future financial years.  The Director indicated that whilst this would be helpful, he suggested that there was a broader question that required to be addressed and that related to how care of the elderly in the future was funded and the fact that funding allocations were not future-proofed / sustainable.  There are a number of potential models, including use of general taxation or insurance.   He also considered that the current older people formula for the allocation of funding was based too much on deprivation indicators and the fact of the matter was that the elderly population in the country was increasing, clients were more aware of their needs and their rights.  Unsurprisingly, residents who did not previously seek support from the Council were now taking advantage of the £50 cap. 


Discussion also briefly touched upon the feasibility of utilising universities to develop a case study around the Council’s circumstances which could be utilised in any further representations to the Welsh Government.


In summing up the Chairman reiterated his comments regarding representations to be made to the Welsh Government and he considered the most appropriate way forward was for him to write to the Welsh Government on the lines set out above with a copy of the letter to be circulated to the Members of the Scrutiny Committee and the relevant Cabinet Member.  He further thanked the officers for their very comprehensive report on this matter.


It was




(1)          T H A T current position with regard to the 2013/14 revenue budget be noted.


(2)          T H A T the progress made in managing increased demand and delivering measures to control expenditure be noted.


(3)          T H A T the report be referred to Cabinet for information.


(4)          T H A T the Chairman of the Scrutiny Committee be authorised to write to the relevant Welsh Government Minister expressing concern in regard to the implications of implementing the First Steps Initiative in particular the ongoing financial implications for the Council should the current formula for the allocation of funding be continued to be based on the Older People Formula in the financial year 2014/15.


Reasons for recommendations


(1)          That Members are aware of the current position with regard to the 2013/14 revenue budget and the actions being taken to bring expenditure within the budget set for the Adult Services Division.


(2&3)  That Members are able to exercise effective oversight of the way in which the budget was being managed.


(4)       To seek a commitment from the Welsh Government Minister that the future funding allocation of the First Steps Initiative for future financial years is allocated on a more equitable arrangement.





The report sought to update the Scrutiny Committee on the work currently undertaken by the Council in regard to the implementation of the UK Government’s Welfare Reform agenda.  The work undertaken by the Council to mitigate the effect of the Reforms by providing assistance to those individuals affected related to the following matters:


Council Tax Reduction Scheme


The Council Tax Reduction Scheme was implemented as part of the 2013-14 Council tax billing process.  The scheme was applied to 10,973 Council tax accounts in April 2013.  The claimant count is currently 10,917. The scheme was 'fully funded', i.e. there was no general requirement for claimants of CTR to make a contribution.  The withdrawal of second adult rebate affected 96 claimants. 


Expenditure on the scheme was currently £9.157m, compared with a budget of £9.4m. The collection rate at quarter 2 was 58.4%, compared with 57.8% at the same stage last year.  Since the scheme was funded there had not been a significant effect on the collection rate.


The National Assembly for Wales in passing the enabling regulations inserted a 'sunset' clause, which required a new set of regulations to be passed for the scheme to operate from 2014/15.  It was anticipated that the scheme would again be 'fully funded' i.e. there would be no general requirement for claimants of CTR to make a contribution 2014/15.  The revised regulations were currently subject to technical consultation.  There would now be a requirement to inform and consult claimants regarding the 2014/15 scheme as the position was clarified.  A further report would be made when the 2014/15 scheme was finalised by WG.  This would again require approval by Council before the end of January 2014.


There were likely to be further changes to the scheme from 2015/16, which was being developed by a working group of officials from the Welsh Government, the WLGA and the CAB.


Local Housing Allowance (LHA) 


The LHA scheme was introduced on 7 April 2008 and has since been amended several times.  From April 2013 the scheme was amended so that the rent officer determined the LHA figures annually to apply from the beginning of April of each year.  Each year’s LHA figure was set at the lower of either the rent set at the 30th percentile or by the previous year’s LHA figure uprated by the Consumer Price Index for the preceding September.  The April 2013 LHA rates were detailed in the report. 


Rules on under occupancy (size restriction)


The changes to housing benefit in the social rented sector, where working age tenants were deemed to under occupy their homes was implemented from 1st April 2013.  A reduction of benefit of 14% for under occupancy by one room or 25% for two or more rooms had been made. 


The benefits service had identified households to try to alleviate the issues surrounding the size restriction.  The number of households affected by the size restriction was 1,035 which was a reduction to the original list.    


There were currently 625 Council tenant households affected by the changes. Each of those households had been contacted on at least four occasions by the two dedicated Welfare Advice officers based within the Housing Income Team.


Rent income continued to be closely monitored and though the Department had seen an increase in arrears of £7,000 for those affected since April 2013. This was well below the modelling scenarios undertaken earlier in the year.  Of the 625, 48% of accounts continued to be clear or in credit, 11% showed their arrears to be improving and 41% where accounts had worsened. The Housing Department had yet to evict any tenants for pure under occupation Charge arrears.


Of the households impacted, 248 were registered on the Council Homes4U lettings scheme with 19 tenants being rehoused since April into smaller accommodation.  A major issue facing the Department was a lack of appropriate 1 bedroomed accommodation with only 460 properties and of those only 15 becoming vacant in the last 12 months.  The Department continued to explore a range of initiatives to increase the stock available through de designation, sharing and where possible new build through partner RSLs and S106 agreements.          


The Benefit Section and Housing Service had been inundated with enquiries regarding the new rule.  This change had had the most significant impact on the service.  The use of DHPs has cushioned the immediate effect of the reforms and some of the interventions above would only have a short term benefit.  Officers would continue to monitor the position closely.


Social Fund


The Social Fund had been replaced by the Discretionary Assistance Fund (DAF) in Wales from April 2013.  The Discretionary Assistance Fund was a grant scheme which can provide payments or in-kind support for two purposes: 


·         Emergency Assistance Payment (EAP) - Provide assistance in an emergency or when there is an immediate threat to health or wellbeing

·         Individual Assistance Payment (IAP) - Enable independent living or continued independent living, preventing the need for institutional care 


Payments were available to people who did not have alternative means of paying for what they need and the payment did not need to be paid back.  Both EAP and IAP grant awards were for one-off needs rather than on-going expenses.


The role of the Council was to signpost potential claimants, particularly in relation to clients of social services and housing. Social Services had registered with DAF to help clients apply for payment if required.


Discretionary Housing Payments (DHP)


The policy for the administration of discretionary housing payments had been reviewed and agreed by Cabinet on 1st July 2013.


Additional funding was provided by the DWP for DHPs to help alleviate some of the impacts on the benefit changes.  


Of the total of £219,639 allocated by the DWP, £119,161.39 had been spent and £43,112.65 was committed.  This totalled £162,274.04 leaving £57,464.96 available for further commitments. 


The purpose of a DHP was to help benefit claimants meet a shortfall in their rent or to help people move to cheaper alternative accommodation. DHPs were not only to assist people who had been affected by the Welfare Reforms but were available for all housing benefit claimants where there was a need.  However, the majority of DHP applications had been from those who had been affected by the size restriction.  DHPs were only a short term measure as there was a limited fund available.  761 DHPs had been received to date, 678 had been processed, 300 had been awarded for different period lengths, 378 did not qualify and 83 were waiting to be processed.  


July 2013 Changes


Introduction of the Personal Independence Payment


As part of the wider Welfare Reforms, the Personal Independence Payment (PIP) replaced the Disability Living Allowance (DLA) for new claims from people who were aged between 16 and 64 on 8th April 2013 or reach 16 after this date. The scheme was piloted from April 2013 and introduced for all new claimants from July 2013.


This was originally intended that reassessments from DLA to PIP would be phased in nationally from October 2013; however, assessments were taking longer than expected resulting in a backlog of cases.  As a result there had been a delay and a gradual introduction would take place starting from 28th October 2013.  DLA/PIP claims would be reassessed where a child in receipt of DLA turned 16, where there was a significant change in circumstances which would affect the rate of DLA, where a time limited DLA claim expired after 17th March 2014 or where there was a request to move from DLA to PIP. 


The Council was not responsible for any action but it may have an impact on Housing Benefit and Council Tax Reduction entitlements.  The change also affected social services clients and the charging policy.  Social services were monitoring impact of the changes, but there had been relatively few cases yet.


Introduction of the Benefit Cap


An overall cap on the amount of benefit was introduced in July 2013.  A cap of £500 p.w. applied to couples and singe parents and £350 p.w. to single persons.  Certain categories of claimants were exempt from the cap, such as those within the household who were claiming disability living allowance or the personal independence payment.  The cap was implemented by a reduction in housing benefit however where the full amount of rent exceeded the cap a minimum payment of 50p housing benefit must be paid.    


Implementation commenced in the Vale on 15th July 2013 and had been completed.  This impact was as follows: - 


Reduction in Benefit


Under £25 p.w.


£25 to £50 p.w


£50 to £75 p.w.


£75 to £100 p.w.


£100 to £125 p.w.


£125 to £150 p.w


£150 to £175 p.w


£175 to £200 p.w.


Over £200 p.w.



A total of 36 claims were originally affected by the benefit cap, 3 had since moved out of the area and 33 remained affected. The benefit reduction ranged from £3.76 p.w. to £210.65 p.w.


The DWP had sent letters to all those affect by the cap in May 2013 and also letters were sent by the Benefits Section informing them of the reduction in their housing benefit entitlement.


Introduction of the Universal Credit (UC)


The Universal Credit (UC) applied to working age claimants. The implementation of the UC began in a small number of pathfinder areas in benefit offices in the north west of England.  One pathfinder (Ashton under Lyme) commenced processing UC claims in April 2013.  This was rolled out to Wigan on 1st July 2013 and Oldham and Warrington on 29th July 2013.  It was originally intended that the scheme would be phased in nationally from October 2013 for new claimants and claims where there are major changes in circumstances.  This had now been delayed.  It was not clear when the national rollout would start, however, it seemed unlikely that there would be any significant impact in the Vale in 2014/15.  The plan was still to complete the migration of all housing benefit claims to UC by October 2017.


Associated with the UC was the Claimant Commitment.  Those who were fit and ready for work would be expected to look for a job on a full time basis dependent on circumstances.  The Claimant Commitment will rollout nationally from October 2013 to the spring of 2014 to around 100 job centres per month.  20,000 Jobcentre+ advisers will be retrained to provide enhanced job search support to deliver the claimant commitment. This will not impact on housing benefit but if claimants did not comply their Job Seeker Allowance (JSA) will be sanctioned therefore their JSA will be reduced.


Officers from the Council and the stakeholder group were currently working with local DWP offices on the Localised Support Services Framework, mapping existing services and considering future requirements.  It was anticipated that localised support services would be delivered by partnerships led by local authorities working closely with the DWP and other local partners to assist claimants. 


Changes to Pension Credit


There were also proposals to transfer housing benefit claimants of guaranteed pension credit age to the Pension Service.  This would not start before March 2015, but was also planned for completion by October 2017.


In thanking the Head of Finance for his report, the Chairman enquired of the future availability of discretionary housing payments given the likely ongoing impact of the bedroom tax in the remainder current financial year.  In response the Head of Finance indicated that it was anticipated that Government funding would continue but expected to see a phased reduction in the allocation of future discretionary housing payment allocations as clients/ tenants became acclimatised to the Welfare Reform changes.  As clients adjusted to these changes, it was likely that the pressure on discretionary housing payments in the future would be less problematic.  However, he suggested that the Council’s Housing Strategic Planning arrangements needed to take account of the changing housing needs of clients and tenants as a result of the implementation of the Welfare Reforms.


RECOMMENDED – T H A T the current work undertaken by the Council in implementing the UK Government’s Welfare Reform agenda be noted.


Reason for recommendation


In acknowledgement of work undertaken to mitigate the impact of the Welfare Reforms.





The purpose of the report was to provide a mid-year report on the Council’s Treasury Management operations for the period 1st April 2013 to 30th September 2013 which was a requirement of the 2011 edition of the CIPFA Treasury Management in the Public Services: Code of Practice.  Also submitted for consideration were proposals to amend the existing Treasury Management and Investment Strategy and to further set out the latest Treasury Management indicators.


The Council approved the 2013/14 Treasury Management Strategy at the meeting held on 6th March 2013.  The objective of this strategy was to secure the best return on its investments whilst having regard to capital security within the parameters laid down.  In addition the Council’s borrowing strategy estimated that it would borrow £3,827,000 of new external loans to support the Capital Programme for 2013/14.  Council officers in conjunction with the treasury advisors had and would continue to monitor the prevailing interest rates and the market forecast and adopt a pragmatic approach to changing circumstances in respect of its borrowing needs.  In commenting on the report the Head of Financial Services was pleased to report that all treasury management activity undertaken during the above period complied with the approved strategy, the CIPFA Code of Practice and the relevant legislative provisions. 


The Head of Financial Services also referred to the part of the report which related to Economic Review / Interest Rate Prospects and concluded that at the time of writing the report that the UK economic outlook appeared to have improved and the projected path for growth had risen but remained relatively subdued, with a distinct reliance on household consumption, which itself remained under pressure given the deterioration in real earnings growth, high unemployment and general low confidence.  The latest forecast for Bank Rate from the Council’s advisors "Arlingclose" was set out in paragraph 16 of the report.


In addition to the above matters the Head of Financial Services also referred to the interim report which included a table that summarised the treasury management transactions undertaken by the Authority during the first half of the current financial year.  All activities were in accordance with the Council’s approved strategy on Treasury Management with paragraph 17 of the report including a table of information regarding money borrowed / repaid during this period.


Loans borrowed from the 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 one 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 totalled £2,000 and were made up of small individual sums that were invested with the Authority for a number of years by members of the public.  


Temporary Loans represented those loans that were borrowed for a period of less than one year. They were borrowed on seven day notice.


External interest at an average rate of 5.6019% and amounting to £2,894,495 had been accrued on these loans for the first 6 months of 2013/2014.


The Authority had made the following investments for the period 1st April 2013 to 30th September 2013  as set out below:-  




Opening Balance



Closing Balance
















UK Local Authorities








Debt Management Office
















Interest, at an average rate of 0.2633% and amounting to £131,716 has been earned from these investments for the first six months of 2013/2014.


In terms of the Council’s investment strategy it can be seen from the above table that the Council had invested with the Debt Management Office (DMO) or UK Local Authorities.  This strategy was considered prudent considering the continuing pressures on the financial markets and the Head of Financial Services indicated that he would always have regard to the security and liquidity of the investments before seeking the highest rates of return, or yield. 


The Head of Financial Services indicated that given the above uncertainties, it meant that the Council needed additional flexibility to deal with monies received after midday on a working day and therefore too late to be accepted as an investment on the money market.  The proposal was to provide an option for the Authority to place the monies in "call bank accounts" in UK banks which had a short term credit rating criteria of a minimum of F1 (Fitch), P-1 (Moody’s) and A-1 (Standard and Poor’s) even when there was a negative rating watch / outlook on the bank.  The rating criteria in respect of the credit rating criteria were also set out in the report.  The Head of Financial Services also indicated that there would be no maximum on the amount deposited with any such deposits being withdrawn from the account and invested on the money market in the usual manner at the earliest opportunity. 


He also indicated that in addition it was considered appropriate at the time to increase the total amount that could be invested with UK Local Authorities from £20 million to £30 million.  The investment with UK Local Authorities would usually give a better rate of return than the DMO without impacting on security of the investment.  He further indicated that investments with the UK Local Authorities were not restricted to a maximum investment duration of six months as with the DMO, which would accordingly reduce costs of administration.  The maximum investment with any individual Authority would remain limited to £5 million. 


The Head of Financial Services also referred to the Council’s Debt Management Strategy which was set out in paragraph 24 of the report.  He also referred separately to the Treasury Management Indicators which was the criteria on how the Authority measured its exposure to treasury management risks using the following indicators as at 30th September 2013:


Interest Rate Exposure


This indicator was set to control the Authority's exposure to interest rate risk. The exposures to fixed and variable rate interest rates, expressed as an amount of net principal borrowed were:






Upper limit on fixed rate exposures




Upper limit on variable rate exposures

+/- 154m



Fixed rate investments and borrowings are those where the rate of interest is fixed for the whole financial year.  Instruments that either mature during the financial year or have a floating interest rate are classed as variable rate.


Maturity Structure of Borrowing


This indicator was set to control the Authority's exposure to refinancing risk. The maturity date of borrowing is the earliest date on which the lender can demand repayment. The maturity structure of fixed rate borrowing as at 30th September 2013 was:



Upper Limit

Lower Limit



Under 12 months




12 months and within 24 months




24 months and within five years




Five years and within 10 years




10 years and above





Principal Sums Invested for Periods Longer than 364 Days


This indicator was to control the Council’s exposure to the risk of incurring losses by seeking early repayment of its long term investments.  The total principal sums invested to final maturities beyond the period end were:






Limit on principal invested beyond year end




Actual principal invested beyond year end




Within limit?


Having regard to the above matters, it was




(1)       T H A T the Treasury Management mid-year report for the period 1st April 2013 to 30th September 2013 be noted.


(2)          T H A T the proposal to replace paragraph 8.6 of the current Treasury Management and Investment Strategy with the following be noted:


"Certain contingencies are required to be included in the strategy for instances where sums of money cannot be invested on the money market either because it is received too late in the working day or for any other reason. In such cases –


    Either these monies can be deposited in ' call bank accounts' in UK banks which have a short term credit rating of a minimum of  F1 (Fitch), P-1 (Moody's) and A-1 (Standard and Poor's) even where there is a negative rating watch / outlook on the bank. There would be no maximum on the amount deposited. Any such deposit must be withdrawn from the account and invested on the money market in the usual manner at the earliest opportunity; or


    The monies can be placed with the Co-operative Bank (the Council’s Bankers) even though the Bank did not meet the minimum credit rating criteria and it could result in exceeding the maximum investment limit. Any such deposit must be withdrawn from the account and invested on the money market in the usual manner at the earliest opportunity".


(3)          T H A T the proposal to amend the current Treasury Management and Investment Strategy to increase the total amount that can be invested in UK Local Authorities from £20 million to £30 million with no change to the individual authority limit of £5 million be noted.


(4)          T H A T the latest Treasury Management Indicators be noted.


Reasons for recommendations


(1)          To present the Treasury Management mid-year report as required by the CIPFA Treasury Management in the Public Services: Code of Practice.


(2)          To apply the short term credit criteria to overnight deposits in particular circumstances.


(3)          To allow an increase in the overall total investment with UK Local Authorities.


(4)          To present an update of the Treasury Management Indicators which are included in the Treasury Management Strategy.