Issue - decisions

Cabinet considered report 38/11 of the head of finance, which advised councillors of the performance of the treasury management function (the management of the council’s investments) for the financial year 2010/11.  This showed that the return on cash invested in 2010/11 was lower than initially expected due to sustained low interest rates.  The predicted net income for 2011/12 was £371,800 and the officers expected to achieve this.  However, income over the next four years was likely to reduce from that shown in the medium term financial plan. 

Cabinet noted that the Audit and Governance Committee had also considered this report and had agreed with the recommendations. 

Councillor Dudley Hoddinott was invited to address Cabinet.  He asked the following questions:

1. What effect could Italy have on the Vale’s finances if Italy defaulted on its debt? 
2. When was the last time the council’s asset management company was appraised? 
3. What is Investec’s rate for charging fees and other management costs? 
4. There are many asset companies, so how has Investec performed in comparison to other companies and where did it rank in performance against all other companies in this sector?
5. When will the council carry out its next appraisal with a view to changing its asset management company if Investec’s performance is shown to be inferior to other companies in this sector?

The strategic director reported that the economic failure of any other country had no direct consequence for the council although it could affect the banking sector’s available investment and lending options to the council.  He reported that Investec, the council’s external fund manager, had a medium to long-term strategy rather than base its investment decisions on short term gain.  The council had reviewed Investec’s performance two years ago and had been content.  It had achieved several high-performing years.  However, over the last two years, performance had dropped as the world economy had suffered and its particular investment strategy was affected more than some others.  Cabinet noted that the officers were keeping Investec’s performance under review. 

The Cabinet member for property also reported that the property portfolio meetings would review the level of investment in land and buildings. 

RECOMMENDED: To Council to:

(a)               approve the treasury management outturn report 2010/11;

(b)       approve the actual 2010/11 prudential indicators (appendix 1 to report 38/11:

(c)        note the prospects for the return on investments from 2011/12 onwards and review Investec’s performance to see if the council achieve a higher rate of return by using the in-house investment team; and

(d)       consider increasing investment in property (land and buildings) closer to the council’s agreed limit.