Agenda item

(Finance Portfolio Holder) To consider the attached report (C-066-2014/15).

(1)        That the following be recommended to the Council for approval:

            (a)        the Treasury Management Strategy Statement and Annual Investment        Strategy 2015/16 to 2017/18;

            (b)        the Minimum Revenue Provision (MRP) Strategy;

            (c)        the Treasury Management Prudential Indicators for 2015/16 to        2017/18;

            (d)        the average interest earned for the year on investments as the rate of         interest to be applied to any inter-fund balances; and

            (e)        the Treasury Management Policy Statement.

The Finance Portfolio Holder presented a report on the Treasury Management Strategy Statement & Investment Strategy 2015/16 to 2017/18.

The Portfolio Holder reminded the Cabinet that the Council was required to approve the Treasury Management Strategy and Prudential Indicators, as well as a statement on the Minimum Revenue Provision (MRP) before the start of each financial year.  The Strategies, as amended if necessary, would be scrutinised by the Audit and Governance Committee on 5 February 2015 prior to consideration by the Council on 17 February 2015.

The Portfolio Holder reported that the Strategies had been produced following advice from the Council’s Treasury Advisors, Arlingclose. There had been no major changes to the Strategies since their previous approval in February 2014, but a number of issues was drawn to the Cabinet’s attention. The first of these was Minimum Revenue Provision. Following the borrowing of £185.456million to pay for the Housing Revenue Account self-financing initiative, the Council would normally be required to charge Minimum Revenue Provision to the General Fund. However, the Department of Communities & Local Government had produced regulations  whereby the Council could ignore this borrowing, and therefore, for Minimum Revenue Provision purposes only, the Council was still classed as debt-free. If the Council undertook further borrowing to support its capital expenditure then Minimum Revenue Provision would be required in 2016/17.

The Portfolio Holder stated that the Council had inter-fund borrowed between the General Fund and Housing Revenue Account for many years, and the interest rate charged had been based upon the average investment interest earned for the year. Draft regulations issued by the Chartered Institute for Public Finance & Accountancy (CIPFA) had proposed that this interest rate should be approved by the Council before the start of the financial year, and it was suggested that the average investment interest earned for the year continue to be used as the rate for any inter-fund borrowing.

The Portfolio Holder informed the Cabinet that the Treasury Management Policy Statement was a high level statement which outlined how the Council’s Treasury function would be undertaken. There were no amendments to the Statement currently proposed.

The Portfolio Holder advised that all of the Council’s current investments were denominated in Sterling and the Council had received regular advice from Arlingclose regarding the use of counterparties. The Council currently had an investment portfolio of approximately £63.3million, of which £55.3million was invested in the United Kingdom, and £8million in Sweden. The maturity profile ranged from £24.3million available for instant access to £5million with a maturity date exceeding one year. The continued low interest rates, the use of fewer counterparties and the shorter durations of the Council’s investments had reduced the estimated income for 2014/15 to £400,200.

The Portfolio Holder highlighted that no additional borrowing had been required for the Council’s Capital Programme, and that the Council had approved the provision of prudential borrowing to service providers that it was in a contractual relationship with.

Decision:

(1)        That the following be recommended to the Council for approval:

            (a)        the Treasury Management Strategy Statement and Annual Investment        Strategy 2015/16 to 2017/18;

            (b)        the Minimum Revenue Provision (MRP) Strategy;

            (c)        the Treasury Management Prudential Indicators for 2015/16 to        2017/18;

            (d)        the average interest earned for the year on investments as the rate of         interest to be applied to any inter-fund balances; and

            (e)        the Treasury Management Policy Statement.

Reasons for Decision:

To ensure that the Council complied with Code of Practice on Treasury Management by the Chartered Institute of Public Finance & Accountancy.

Other Options Considered and Rejected:

To request additional information about the Treasury Management Strategy, or decide that alternative indicators were required.