Treasury Management, Annual Investment Strategy and Capital Strategy 2020/21
- Meeting of Audit Committee, Wednesday, 22nd January, 2020 6.00 pm (Item 79.)
- View the background to item 79.
The Chief Finance Officer presented a report to 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. 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. This report also provides an update on performance to 31 December 2019.
The Council has some £64.55 million of debt (as at 1 January 2020), and investments which can fluctuate between £15m and £30m in the year. The level of debt is set to increase to some £104m by 2021/22 with a consequently increase in risks.
The Chief Finance Officer explained that the key changes within this report compared to the council’s current strategy to date are levels of borrowing and investment, and the use of money markets and the way this affects the council as a whole.
Councillors asked about ethical investments.
The Chief Finance Officer advised that the council are not currently knowingly investing in any areas where any of the council’s requirements on ethical investments are not being met. The Chief Finance Officer does not see this to be a particular issue for Hastings Borough Council given the limited investments made and the institutions involved. However an ethical investment policy will be developed.
Councillors stated they would welcome seeing such a document which would summarise the council’s investments.
Councillors also discussed various factors which need to be kept an eye on by this committee throughout the year, such as MRP.
The Audit Committee recommend 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. The strategies listed be updated as necessary during 2020/21 in the light changing and emerging risks and the Council’s evolving future expenditure plans.
3. The Financial rules and the Financial Operating Procedures of the Council are reviewed and revised as necessary to meet the requirements of the Code of Practice.
4. The Cabinet and full Council note that there is likely to be the use of Money Market Funds in 2020/21 – as already allowed for in the investment strategy.
Reasons for Recommendations
1. 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.
2. The sums involved are significant and the assumptions made play an important part in determining the annual budget. The CIPFA Treasury Management 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.
3. The Council has the ability to diversify its investments and must consider carefully the level of risk against reward against a background of historically relatively 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. However over reliance on such income streams would involve taking unnecessary risks with the future of the Council and its ability to deliver statutory services.
4. The Council has the option of using Money Market funds within its Investment Policy already. These are on occasion providing higher rates of return than some straight deposit accounts and as such the use of these funds is likely to occur in the near future.
- Treasury Management, Annual Investment Strategy and Capital Strategy 2020/21, item 79. PDF 196 KB
- (i) Treasury Management Strategy (TMS) for 2020/21, item 79. PDF 441 KB
- (ii) Draft Capital Strategy 2020/21, item 79. PDF 401 KB