Agenda item

The Assistant Director, Finance & Audit introduced a report which summarised treasury activity in 2013-14 and the first part of 2014-15. The report detailed the position in relation to the Council’s borrowings and investment activity.

Members noted that external debt had been reduced during 2013/14 and investment income of £0.542m had been achieved, with a rate of return of 0.59%.  The Treasury Management Strategy 2014/15 adopted by Council in February 2014 increased diversity in the portfolio, whilst continuing to prioritise security and liquidity over yield. 

A Member queried the decision to change the Council’s banking from the Co-Operative Bank to Lloyds Bank. It was explained that Moody’s had downgraded the long term rating of Co-Op bank from Caa1 to Caa2, reflecting the agency’s view that the ongoing deleveraging process at the Co-Op would lead to a smaller and less systematically important institution.

Members discussed the approach to debt repayment and the range of strategies that local authorities were taking in relation to treasury management.  Members were informed that the remaining balance due from its previous investment in Icelandic Banks had been refunded.

Responding to why investments had been made with Newcastle City Council and Northumberland County Council, it was explained that in August 2014 the Council invested £5m each with the local authorities for a period of three years at rates of 1.40% and 1.5% respectively. These were seen as favourable rates for the credit risk the Council was taking on. It was also brought to Members attention that the Council was investigating the possibility of establishing a subsidiary housing company, to increase revenue income  and that a report would be taken to Cabinet regarding this matter in the near future.    

Resolved –  That the Treasury Management activities for 2013-14 and the beginning of 2014-15, as set out in the body of the report, be noted.