Treasury Management, Annual Investment Strategy and Capital Strategy 2019/20
The Assistant Director, Financial Services and Revenues presented a report that asks the Audit Committee to consider the draft Treasury Management Strategy, Annual Investment Strategy, Minimum Revenue Provision (MRP) Policy and Capital Strategy and make recommendations to Cabinet and Full Council as appropriate. He advised this is to ensure that there is an effective framework for the management of the Council's investments, cash flows and borrowing activities prior to the start of the new financial year.
The Council has some £46.7 million of debt (as at 1 January 2019), and investments which can fluctuate between £15m and £30m in the year. The level of debt is set to increase to some £78m by 2020/21.
There is a statutory requirement to determine, by Full Council, the Treasury Management Strategy Statement, Minimum Revenue Provision (MRP) Policy, Capital Strategy 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.
The Council is required to operate a balanced budget. Treasury management ensures that cash flow is adequately planned with cash being available when needed. Council’s capital plans provide a guide to its borrowing needs. Management of investments, borrowing and cash flow remains crucial.
The Chief Finance Officer advised that the Capital Strategy was a new requirement for 2019/20, and would be developed further through 2019/20 as the Councils Capital planning over the medium term (up to 20 years) is brought forward.
The report makes a number of recommendations which the Assistant Director, Financial Services and Revenues went through. These included recommending not increasing borrowing levels for 2019/20 until spending plans were determined and investing a further £3million with the CCLA. Decisions about the Councils future financial plans would need to go to Full Council for agreement should borrowing levels require amendment.
The Councillors asked questions about borrowing. The working arrangements with the PLWB. It was discussed how the PLWB interest rates could vary and given that base rates may increase in autumn. It was important that income streams were secure as some loans will be paid back over the course of 50 years.
Councillors asked questions about reserves. There was a minimum level of reserves set at £6m for 2018/19. The minimum level for 2019/20 would maintain at the same levels. It was increased in 2018/19 due to commercial property acquisition. Currently the commercial property has been doing well as the number of tenants in those properties has been maintained. There is currently £8million in earmarked reserves but this is restricted for funds such S106s and the Disabled Facilities Grant. The Councillors asked if there was data showing the difference between non-restricted reserves and restricted reserves. Currently there isn’t one as legally there isn’t a division between the two types of reserves.
Councillors raised points about the accessibility of the reports again. The Assistant Director, Financial Services and Revenues responded that there will be more training and briefing sessions for Councillors. Further Guidance from CIPFA was being awaited.
Councillor Charman proposed a motion to approve the report as set out in the resolution below, which was seconded by Councillor Berelson.
RESOLVED (unanimously) that the Audit Committee recommends to Cabinet and full Council that:
1. The Council approve the Treasury Management Strategy, Minimum Revenue
Provision (MRP) Policy, Annual Investment Strategy, and the Capital Strategy.
2. That the strategies be updated as necessary in 2019/20 in the light changing and emerging risks, the Council’s evolving future expenditure plans, along with further expected guidance on the Codes of Practice and government regulations.
3. That the Financial rules and the Financial Operating Procedures of the
Council are reviewed and revised (as necessary) to meet the new requirements of the Code.
4. That the Investment Policy includes the use of CCLA’s Diversified Income
Fund with a limit of up to £3m being invested within it (£5m in total with CCLA)
Reasons for Recommendations
The Council seeks to minimise the costs of borrowing and maximise investment income whilst ensuring the security of its investments. The Council continues to make substantial investments in commercial property, housing and energy generation initiatives, and this will continue to involve the Council in taking on additional borrowing.
The sums involved are significant and the assumptions made play an important part in determining the annual budget. The CIPFA Code of Practice (2017 Edition), adopted by the Council last year, was 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, assist in the regeneration of the town, provide additional housing and enhance the long term sustainability of the town.
- Treasury Management, Annual Investment Strategy and Capital Strategy 2019/20, item 45. PDF 143 KB
- Enc. 1 for Treasury Management, Annual Investment Strategy and Capital Strategy 2019/20, item 45. PDF 861 KB
- Treasury Management Strategy, item 45. PDF 861 KB
- Capital Strategy 2019 - 20, item 45. PDF 418 KB