Agenda item

(Finance Portfolio Holder) To consider the attached report (C-068-2015/16).

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

             (a)      the Treasury Management Strategy Statement and Annual Investment      Strategy 2016/17 to 2018/19;

             (b)      the Minimum Revenue Provision Strategy;

             (c)      the Treasury Management Prudential Indicators for 2016/17 to        2018/19;

             (d)      the rate of interest to be applied to any inter-fund balances; and

             (e)      the Treasury Management Policy Statement.

The Finance Portfolio Holder introduced a report on the Treasury Management Strategy Statement and Investment Strategy for the period 2016/17 to 2018/19.

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 had been scrutinised by the Audit and Governance Committee on 1 February 2016, but they had not requested any amendments. The Strategies would be considered by the Council for final approval at its meeting scheduled for 18 February 2016.

The Portfolio Holder reported that the Strategies had been produced following advice from the Council’s Treasury Advisors, Arlingclose. The only major change to the Strategies since their previous approval in February 2015, had been the reduction in the Cash Limits for investment types and organisations following advice from Arlingclose. A number of other issues was also drawn to the Cabinet’s attention.

The Portfolio Holder declared that 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. However, as the Council was likely to undertake further borrowing to support its capital expenditure then Minimum Revenue Provision could be required in 2017/18.

The Portfolio Holder explained 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 £54.6million, all of which was invested in the United Kingdom. The maturity profile ranged from £13.6million available for instant access to £10million with a maturity date of nine months to 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 2015/16; however, this had been partially offset by the loan to the Waste Management Service Provider.

Decision:

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

             (a)      the Treasury Management Strategy Statement and Annual Investment      Strategy 2016/17 to 2018/19;

             (b)      the Minimum Revenue Provision Strategy;

             (c)      the Treasury Management Prudential Indicators for 2016/17 to        2018/19;

             (d)      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 the Code of Practice on Treasury Management from 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.