To receive and review the Mid Term Treasury Report 2022-2023.

The Portfolio Holder for Finance presented the Mid Term Treasury Management Report 2022/23.

Members were referred to the Treasury Management Strategy Statement and Annual Investment Strategy detailed at Appendix A, pages 113 to 132 of the Agenda refer.

In introducing the report, the Portfolio Holder for Finance referred to the Council’s Investment Policy and Strategy.  It was noted that the Council had a higher level of surplus funds available for investment following the receipt of New Towns Funding and that there were less counterparties currently available to the Council.  As a result, it was becoming increasingly difficult to invest short-term funds for longer durations at higher rates.

The recommendations were duly proposed and seconded

Member were asked to consider the recommendation that the Sovereign Country Limit be increased from £5m to £10m (excluding the UK which had no limit).  The bank group or individual limit would remain at £5m.

This recommendation was considered at Audit and Governance Committee on 23 November 2022, Minute No. 33 refers and agreed that it be recommended to Council that the Sovereign Investment Limit be increased from £5 to £10m, however the Committee decision was not unanimous.

Members were invited to put their comments and questions forward.

Councillor Jackson, a Member of the Audit and Governance Committee highlighted that one of the discussions at Committee was centred around risk and she considered that an increase from £5m to £10m was a potential large risk and was concerned as the policy did not take into consideration countries of different sizes when making an investment.  Current factors such as the crypto currency crisis and crash, the energy crisis related to the war in Ukraine and the property market in China were further highlighted and together with ongoing huge financial volatility this was a further concern and potential risk.

Councillor Jackson further highlighted the ecological, social and governance factors (ESG) that were not incorporated within treasury management procedures relating to investment.  Furthermore, it was considered that ESG factors should be given weight in the Council’s treasury investment decisions.

Following which, Councillor Jackson proposed that two amendments be made to and included within the treasury management strategy as follows:

• That whilst the Council increased the sovereign country rate to £10m, countries with a population of below 3 million should remain at a sovereign country limit of £5m.

• That ESG factors should be given weight in the Council’s treasury investment decisions.

The proposals were seconded by Councillor Tony Howard.

In response to Councillor Jackson’s proposals, the Leader of the Council considered that the matter relating to the sovereign country limits was a matter for the Audit and Governance Committee and asked that clarity be provided on this matter.

The Chief Executive confirmed that the responsibility for this report rested with Full Council so it was for Council Members to decide on the content.

The Leader of the Council stated that he could not support the amendment given the nature of the banking markets and how countries were involved, irrelevant of the size of its population and stated that it was the safety of the organisation that was important.

Upon being put to the vote, the first Amendment detailed below (in bold text) was declared lost.

‘Countries with a population of below 3 million should remain at a sovereign country limit of £5m’.

Further discussion ensued and in relation to investments in middle eastern countries, Councillor Howard considered that the Council was not doing anything to support regimes and that the Council needed to have not only a financial responsibility, but a moral responsibility and be more careful where it invested its money.

A further Member commented that from her experience as a County Councillor, the type of ethical issues referred had real depth and implication in terms of treasury management and funding and would urge against a hasty decision and put forward that this could be an item for a Reserved Members’ Day.

In response, the Leader of the Council acknowledged the valid points made during the discussion and stated that ESG factors would have to be considered carefully and following the debate today was hopeful that the profile of this issue was more prominent.

In response to the comments received Councillor Jackson acknowledged the points made but reiterated that there was no mention of ESG factors in treasury management documents and nothing to instruct officers that they could look at decisions for investment in other than security, yield and liquidity.

Upon being put to the vote, the second Amendment detailed below (in bold text) was declared lost.

‘That Ecological, Social and Governance factors should be given weight in our treasury investment decisions’.

Debate returned to the substantive proposition.

Following confirmation from the Leader that the Council that the Council no longer placed investments in Qatar, a Member requested that a more up to date list be provided of where the Council currently invested its money.  In response, the Leader of the Council stated that he was happy to provide this.

As a point of clarification in relation to how placing £10m into one bank fitted the Council’s risk register, Members were advised that the issue raised was the country limit rather than bank limit, therefore £10m could be invested into two banks in one country.  Members were further advised that in terms of figures involved for large numbers, the investment was only for a matter of months, making best use of the funds whilst retaining flexibility.  Therefore, the risk increase was just in terms of flexibility of the particular bank.

Following which it was

RESOLVED

1.     That the contents of the report attached at Appendix A be received and reviewed;

2.   That the recommendation approved by the majority of the Audit & Governance Committee held on 23 November 2022, that the Sovereign Country Limit (excluding the UK which has no limit) be increased from £5m to £10m be approved. 

The bank group or individual limit would remain at £5m.  The current sovereign limit of £5m was recorded within the Treasury Management Strategy Statement 2022/23 and formed part of the budget setting report which was approved by Council on 2 March 2022.