Agenda item

Report of Deputy Chief Executive, Corporate Director and Chief Finance Officer

Glyn Daykin, Finance Analyst, presented the report and was accompanied by Barry Dryden, Senior Finance Manager.

Included within the report was one which was submitted to the Executive Board on 17 June 2014, summarising the 2013/14 performance of the City Council’s external debt investments management, highlighting the following points:

(a)  the average rate of investment payable on external debt increases from 3.788% at 1 April 2013 to 3.795% at 31 March 2014;

(b)  the average rate of interest earned on short-term investments in 2013/14 was 0.652%. This is a benchmarked against the 7 day London Interbank (LIBID) rate provided by the Bank of England, which averaged 0.413% for the same period;

(c)  the 2013/14 out-turn showed General Fund Treasury expenditure of £59.694m;

(d)  updating the improved investment counterparty list, proposing to include Close Brothers Ltd.

Following points were highlighted and responses given to the Committee’s questions:

(e)  there is a good spread of debt across 40 years and the City Council is working well within the parameters set;

(f)  while the Co-Operative Bank has been the Authority’s banker throughout 2013/14, it has not bid for the upcoming banking contract and Lloyds have recently been awarded the contract for banking services.  Several other Local Authorities in the East Midlands have also awarded contracts to Lloyds Bank;

(g)  Close Brothers Ltd is considered a bank of high credit quality, it is on Arlingclose’s counterparty list, it has a credit rating of ‘A’ and its recent share price is performing well relative to other UK banks. It is noted that the Authority requires a minimum credit rating and A-;

(h)  the Local Authority has chosen to use cash surpluses to repay maturing debt to minimise the cash amounts invested;

(i)  no new debt has been created for new capital expenditure;

(j)  opportunities to reschedule/repay debt early have remained very limited during the year, as a result of continuing low interest rates across all periods.  Premiums will apply totalling the amount that would have been paid if the debt had run its time.

Councillors requested that some of the phraseology used regarding the General Fund Revenue Implications, is reconsidered and simplified.

RESOLVED

(1)  to note the 2013/14 Treasury Management Annual Report, as follows, and the above comments of the Committee:

(2)  to endorse the amendment of the 2014/15 Treasury Management Strategy, to add Close Brothers Ltd to the approved counterparty list;

(3)  to provide Audit Committee members with the following briefing notes:

(i)  the rationale behind the parameters set for debt maturity;

(ii)  the recovery of the Icelandic Bank deposits;

(iii)  how Close Brothers Ltd were selected for proposed inclusion in the counterparty list;

(4)  for the next Treasury Management report to include a contingency plan, of how a ‘financial bubble’ bursting would be dealt with in regard to the impact on Nottingham City Council;

(5)  for Treasury Management to consider how the late completion penalty for Phase 1 of the tram was handled and identify what, if any, improvements in process or planning are required, in preparation for receiving any further penalty payments.