Treasury Management, Annual Investment Strategy and Capital Strategy 2018-19
The Assistant Director, Financial Services and Revenues submitted his report to the Committee to consider the draft Treasury Management, Annual Investment Strategy and Capital Strategy and make recommendations to Cabinet and Full Council as appropriate, to ensure that there is an effective framework for the management of the Council’s investments, cash flows and borrowing activities. The Council has some £41.1 million of debt as at 23 January 2018, and investments which can fluctuate between some £15 million and £30 million in the year.
There is a statutory requirement to determine, by full Council, the Treasury Management Strategy Statement, Minimum Revenue Provision (MRP) Policy and Annual investment Strategy prior to the start of the new financial year.
The report was set out in accordance with the Chartered Institute of Public Finance and Accountancy’s (CIPFA) Code of Practice on Treasury Management.
He referred to the changes in this year’s strategy and said that he had received new investment guidelines from the Government on Friday and MRP Guidance position. It leaves no time to produce a Capital Strategy for 2018/19, but steps can be taken in 2018/19 to produce one in time for 2019/20 - as required by the Code of Practice.
Committee members asked many detailed questions covering transparency, whether there is flexibility in the capital strategy, PWLB, MRP guidance commercial property purchase, Housing Company, short term investments, borrowing to cover cash flow and other items.
The Assistant Director, Financial Services & Revenues provided comprehensive replies to all of the queries.
Councillor Davies proposed a motion to approve the application subject to the amendment of Condition 3 to add the words ‘Capital Strategy’. This was seconded by Councillor Chowney.
1. The Audit Committee recommend that the Council adopts the new CIPFA Treasury Management Code of Practice (2017).
2. The Council formally adopts, as part of the Council’s Constitution and financial rules the four clauses recommended by the Code of Practice as detailed in Appendix 8.
3. The Audit Committee recommend that the Council approve the Treasury Management Strategy, Minimum Revenue Provision (MRP) Policy, Annual Investment Strategy, and Capital Strategy.
4. That the strategies continue to be reviewed in 2018/19 in the light of the requirements of the new Codes of Practice and that the Financial rules and Financial Operating Procedures of the Council are reviewed and amendments proposed as necessary.
5. That the authorised limit for external debt is increased by £10m to allow for short term borrowing for cash flow purposes at year end in particular.
The reason for the decision was: The Council seeks to minimise the costs of borrowing and maximise investment income whilst ensuring the security of its investments. The Council is seeking to increase opportunities for income generation, particularly where there are benefits to the residents of Hastings in doing so, and this will continue to involve the Council in taking on additional borrowing. The sums involved are large and the assumptions made play an important part in determining the annual budget. A new CIPFA Code of Practice (2017 Edition) has been released to take account of the more commercialised approach being adopted by councils and the enhanced levels of transparency required. The Code represents best practice and helps ensure compliance with statutory requirements.
The Council has the ability to diversify its investments and must consider carefully the level of risk against reward against a background still of historically low interest rates. Investments can help to close the gap in the budget in the years ahead and thus help to preserve services.