Agenda item

This TMSS/AIS report has been prepared in compliance with the Chartered Institute of Public Finance and Accountancy’s (CIPFA) Code of Practice on Treasury Management 2021. CIPFA published the updated Treasury Management and Prudential Codes on 20^th December 2021 and has stated that after a soft introduction of the Codes, Local Authorities are expected to fully implement the required reporting changes from 2023/ 24.

[20 Minutes]

          Upon invitation of the Chair, the Senior Accountant (Treasury Management) introduced the report, which was the Annual Treasury Management Strategy relating to the 2023/24 activities. This required the approval of Full Council and was a mandatory requirement under the Local Government act 2003. The Annual Treasury Management Strategy was the management of the borrowing, investments and cash flows, and the effective control of the risks associated with those activities; security, liquidity and yield in that order. The main changes were due to the new treasury management and prudential codes introduced in December 2021.

The Senior Accountant went on to highlight a few key areas from the body of the report as follows:

• 1.2.2 (page 269-270) - there would be 4 reports per year starting from 2023/24. The additional report would not be required to go to Full Council but was for scrutiny in the September Committee meeting.
• 1.4 (page 271-272) - with the new codes there was even more emphasis on training for Members and Officers responsible for Treasury Management. On  22 June 2023 a 1.5 hour training session would be taking place, and work was being done to develop a self-assessment form for Members to complete to assess their knowledge and skills.
• 2.3 (page 275-276) - an additional performance indicator, Liability Benchmark, had been introduced as a result of the new codes. A liability benchmark below the current maturity profile, as was the case for Arun, highlighted a no additional borrowing need due to the level of investments.
• 3.7 (page 286) - there were potential new options for borrowing if required.
• 4.1 (page 288-289) - as a result of the change in accounting standards for 2022/23 under IFRS 9, override, this had been extended to 31 March 2025 which impacted any losses or gains, therefore they would not be taken to the General Fund in 2023/24.
• 4.2 (page 289) - Environmental, Social and Governance (ESG) was a new area as a result of the code. These areas would be considered and work was being done to asses each counterparty.
• 4.5 (Page 294) - listed all changes as a result of the new codes. This also contained the addition of 2 counterparties and the removal of 1.
• 4.6 (Page 295) – The Link Group Benchmarking Club showed Arun’s returns were just above the upper returns guidelines, and were performing well compared to other councils.

          Councillor Wallsgrove felt Abu Dhabi should be removed from the list of counterparties which she said was due to their use of child labour, investments in palm oil and paper products, their failure to cut all reduction on the Paris Agreement on Climate Change and their government committing human rights violations. She felt Arun District Council should not be investing in this kind of bank. She Proposed an amendment to recommendation 2) which was that Abu Dhabi be added to the list of Removals of Counterparties. This amendment was seconded by Councillor Bennett.

          The Group Head of Finance and Section 151 Officer explained Officers worked with the treasury management advisors for advice, which was why Abu Dhabi was on the list. He explained Members were able to remove Abu Dhabi from the list, but as a Council the priority was to look at Security, Liquidity and Yield. Members should be aware that they may not be able to achieve a better investment rate.

          The Chair invited debate on the amendment and one Member made the point that they felt security of investments was important, but it was a comparatively small amount invested, and it was felt there were more ethical investments and the amendment was supported.

          The Seconder fully supported this amendment and felt the human rights issues should take priority. The Council were investing taxpayer’s money and it was important they were looking at investing in not only financially safe areas, but safe areas in terms of the human population as well.

          Councillor Wallsgrove, as the Proposer, explained the Council should be looking after people’s human rights, and the abuse some people faced was horrific.

          A recorded vote on the amendment was requested. Those voting for were Councillors Bennett, Brooks, Oliver-Redgate and Wallsgrove. No Councillors voted against. Councillors Chace, Chapman and Clayden abstained from voting. The vote was therefore declared CARRIED

Turning to the substantive, the Chair invited questions from Members and the following points raised:

• It was understood there was still £6m invested with Qatar National Bank, and £1m with Abu Dhabi, would these be withdrawn and money returned to Council funds? The Group Head of Finance and Section 151 Officer would provide a written response to this after the meeting.
• One Member pointed out these were fixed term investments and it was not expected they would be withdrawn earlier and investments lost.

Councillor Bennett believed it was possible to withdraw from these investments early, and he Proposed an amendment to the recommendations, which was that a fourth recommendation be added. This would be as follows ‘Officers be requested to enquire into the early withdrawal of all investments in Qatar National Bank and First Abu Dhabi Bank and report back to the Audit & Governance Committee at its next meeting with the findings.’

This amendment was seconded by Councillor Wallsgrove, who expressed the view that the Council should be looking at the morals of the banks being investing in, and felt it was not right to invest public money in companies that abused human rights.

A brief debate took place in which one Member felt this would be very difficult to support, as he understood why the Council would want to remove these counterparties from future investments, but did not feel it was right to incur fees using Council Tax payer’s money to withdraw early. Another Member expressed the view that nothing would happen until the report had come back, and so it was felt a reasonable request.

The Group Head of Finance and Section 151 Officer confirmed that this amendment was that a report be brought back to the Audit & Governance Committee with information around the charges and implications of early withdrawal from investments with the Qatar National Bank and Abu Dhabi, some of which would have already matured by the next meeting.

          A recorded vote on the amendment was requested. Those voting for were Councillors Bennett, Brooks, Chapman, Clayden, Oliver-Redgate, Wallsgrove. No Councillors voted against. Councillor Chace abstained from voting. The vote was therefore declared CARRIED

          The substantive recommendations were proposed by Councillor Bennett and seconded by Councillor Oliver-Redgate.

The  Committee

RESOLVED

     That Officers be requested to enquire into the early withdrawal of all investments in Qatar National Bank and First Abu Dhabi Bank and report back to the Audit & Governance Committee at its next meeting with the findings.

RECOMMEND TO FULL COUNCIL that

1.    The Treasury Management Strategy Statement for 2023/24 to 2025/26 be approved and adopted.

2.   The Annual Investment Strategy for 2023/24 to 2025/26, including the addition of two new counterparties and removal of two, be approved and adopted;

Additions:

Australia & New Zealand Banking Group (ANZ)

National Bank of Canada

Removal:

Qatar National Bank

Abu Dhabi

3.    The Prudential Indicators within the TMSS and AIS for 2023/24 to 2025/26 as contained in appendix 1 and the body of the report, be approved.