Treasury Management Mid-Year Report 2018/19

The Treasury Management strategy 2018/19 sets out planned capital spending and how MOPAC will manage its borrowings and investments during this financial year. The GLA Treasury Management team provide the operational support for this function and through the Group Investment Syndicate (GIS) manages all MOPAC investments, to generate financial and risk reduction benefits.

All investment and borrowing activity during 1 April 2018 and to 30 September 2018 was undertaken within the guidelines and objectives set out in the relevant policy and investment and borrowing strategies.

Debt management costs for the period are £9m and are forecast to be below the budget of £20.4m at year end. There was no new long term borrowing in the period. To 30 September 2018 interest income for the first half year was £0.5m, which is slightly below the expected half year budget of £0.65m due to lower cash balances and is more than offset by lower than expected borrowing costs. At 0.74%, the weighted average yield exceeds the benchmark by 0.11%.

That the DMPC notes the activity and performance on the Treasury Management function for the first half year 2018/19

1. Introduction and background

1.1. MOPAC approved the 2018/19 Treasury Management Strategy in March 2018, PCD 330. This paper fulfils the requirement for reporting of mid-year performance to the DMPC.

2. Issues for consideration

Borrowing

2.1. There has been no new long term borrowing in the first six months of 2018-19 and, due to loan repayments, the total borrowing has reduced from £143m to £123.8m – a reduction of £19.2m. Borrowing costs for the first 6 months was £3.1m and are forecast to be £7m against a budget of £8.4m.

Investment

2.2. The weighted average yield on investments was 0.74%, compared with the LIBID 3 month benchmark of 0.63%, generating income of £0.5m. The annual budget for interest receivable is £1.3m and is forecast to be slightly below budget but the shortfall offset by the lower borrowing costs.

Prudential Indicators and Treasury Management Limits

2.3. The attached appendix sets out the detail of performance against the prudential indicators and treasury management limits. All transactions undertaken during the year met the criteria for lending to institutions and activity has been within the Prudential Code indicators set out in the TM Strategy 2018-19.

Forthcoming issues

2.4. The draft capital programme included in the budget submission envisages new borrowing to meet the further investment proposed. The revenue costs of the additional borrowing are included in the revenue budget. The delivery of the future capital programme, budgeted revenue savings, use of reserves and the phasing of new asset disposals will impact the cashflow, and any further need for borrowing will be kept under review.

3. Financial Comments

3.1. This is a financial report and the details are set out in the body of the report

4. Legal Comments

4.1. The DMPC has the authority to approve the “annual Treasury Management Strategy, which will include details of MOPAC investment and borrowing strategy” para 4.7 SoD&C. The DMPC approved the 2018/19 Treasury Management Strategy on 26 March 2018.

4.2. The Treasury Management Strategy sets out the requirement for mid-year reporting which this paper fulfils.

5. GDPR/Data Privacy

5.1. This report does not use personally identifiable data of members of the public therefore there are no GDPR issues to be considered

6. Equality Comments

6.1. There are no equality implications arising from this proposal

7. Background/supporting papers

7.1. Appendix 1 GLA Report