Agenda item

(Item 5 – Report by the Cabinet Member for Finance and Business, Mr John Simmonds and the Corporate Director of Finance and Procurement, Mr Andy Wood)

Cabinet received a report of the Member and officer named above, the purpose of which was to detail, and seek agreement to, changes to the Council’s Annual Treasury Strategy as originally agreed by Cabinet in January 2012.  Mr Simmonds introduced the report to Cabinet and in particular referred to the following details contained within it:  

• That the current economic climate continued to provide challenges for treasury management and the important balances to be made between risk and return.
• That the Government’s Debt Management office was currently offering very low interest rates of approximately 0.2%.  In addition, ratings agencies had undertaken various reviews of financial institutions, and indeed countries, which had affected the investment landscape.
• In light of this Kent County Council’s ratings criteria for those organisations in which it would invest, had been reduced to A+ to A- in light of rating reviews and available returns. This would enable continued investments without it being necessary to use the DMO.  A Multi-Party Treasury Advisory Group had been established in order that in the current volatile financial climate all of the council’s current and future investments were tightly monitored.
• That the council’s current investments were considered to be sound and in particular officers were confident that investment in Santander was wholly safe given the separation between the UK and European entities.
• That £55m of cash reserves had been utilised in order to settle debts matured this year.  This decision reflected the disparity between interest rates on cash and on borrowing.
• That initial research was being undertaken into investments in other countries, particularly in Australia and Canada as alternatives to K banking investments should ratings fall further in the future.  Agreement was sought for banks from both countries to be added to the agreed counterparty list with certain conditions detailed within the report and recommendations.
• That in order to establish the Local Authority Mortgage Scheme intended to help local residents to purchase homes KCC would need to invest monies in Lloyds bank for a minimum term.  The actual deposit was not yet known but there was a maximum liability of £12m.  Formal agreement for this course of action was sought and detailed within the report and recommendations.

Following a question from the Leader of the County Council, Mr Carter, regarding the figures quoted within the report, the Corporate Director for Finance and Performance confirmed that they were separate from the Pension Fund which had its own banking arrangements and treasury management strategy.  Therefore any strategy agreed today would be relevant only to the main KCC budget.

Mr Dance further elaborate don this theme and reported conversations that took place at a recent meeting on local authority investment that had taken place in London.  Here it had been reported that Canadian firms had used pension fund monies to invest in long term projects expected to return profits, such as infrastructure projects, and that this would be of benefit to the efforts to create economic upturn England should the rules be adjusted to allow it.

RECORD OF DECISION: