Agenda item

(Finance Portfolio Holder) To consider the attached report (C-056-2016/17).

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

            (a)        Treasury Management Strategy Statement 2017/18;

            (b)        Minimum Revenue Provision (MRP) Strategy;

            (c)        Treasury Management Prudential Indicators for 2017/18 to 2019/20;

            (d)        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 for 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 Strategy would be scrutinised by the Audit & Governance Committee at its meeting on 6 February 2017, and considered by the Council for final approval at its meeting scheduled for 21 February 2017.

The Portfolio Holder reported that the Strategy had been produced following advice from the Council’s Treasury Advisors, Arlingclose. There had been no major changes to the Strategy since its previous approval in February 2016, but a number of other issues were 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 would be required in 2017/18.

The Portfolio Holder explained that the Council had inter-fund borrowed for many years between the General Fund and Housing Revenue Account, and the interest charge made between the funds had been based on the average interest earned on investments for the year. Draft regulations issued by the Chartered Institute for Public Finance & Accountancy (CIPFA) had proposed that the interest rate applicable to any inter-fund borrowing 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 should 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.  The Policy Statement was last updated as part of the 2016/17 Treasury Strategy. 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 £48.5million, of which all but £2million was invested in the United Kingdom. The maturity profile ranged from £15.5million available for instant access to £14million with a maturity date of three months hence. The continued low interest rates, the use of fewer counterparties and the short durations of the Council’s investments had reduced the estimated interest income for 2016/17. Interest earnings for 2017/18 would reduce further as balances were invested in capital projects rather than short term deposits, and no significant change in interest rates was anticipated over the medium term.

Decision:

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

            (a)        Treasury Management Strategy Statement 2017/18;

            (b)        Minimum Revenue Provision (MRP) Strategy;

            (c)        Treasury Management Prudential Indicators for 2017/18 to 2019/20;

            (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.