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Agenda item
Treasury Management, Annual Investment Strategy and Capital Strategy 2020/21
- Meeting of Budget meeting, Cabinet, Monday, 10th February, 2020 6.00 pm (Item 242.)
- View the background to item 242.
Decision:
Cabinet recommend to 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 are 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.
5. Due to the previous amendments to Agenda Item ‘Revenue Budget 2019/20 Revised and 2020/21, plus Capital Programme 2020/21 – 2022/23’, there will be minor changes to the use of reserves.
Minutes:
Councillor Forward left the room for the discussion and vote of this item due to a prejudicial interest.
The Assistant Director Financial Services and Revenues (Chief Finance Officer) presented a report for Cabinet to consider the draft Treasury Management Strategy, Annual Investment Strategy, Minimum Revenue Provision (MRP) Policy and Capital Strategy and make recommendations to 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 stated there would be an amendment in the capital strategy as a result of the last agenda item. This would be a minor change to the use of reserves as a result of the change in funding for community cohesion (hate crime monitoring).
The Chief Finance Officer explained that this report is all about the management of the Council’s cash and resources. This report doesn’t include every project in the pipeline, e.g. the Bohemia development and the Lower Tier Site development. There would have to be a separate discussion if there is a decision made to borrow money ourselves for these purposes. If the borrowing levels proposed in this document are not agreed, then the Capital programme as proposed cannot proceed. The level of borrowing set out in the report is affordable. The debt and investment strategies are both reasonable and prudent.
The Leader stated that the capital programme is bigger than it used to be and there is a limited revenue budget. The Leader hopes that the deficit will be further addressed by some commercial property purchases. We have an extra burden this year regarding essential repairs, such as the West Hill Cliff Railway and Buckshole Reservoir. The debt here compared to other councils remains at a relatively affordable level.
Councillors wanted to thank officers for their hard work in creating the strategy and also explaining the strategy to councillors. They acknowledged the Chief Finance Officer’s comments about this strategy being affordable and prudent given the level of reserves and the diversified portfolio of properties that the Council owns.
The Assistant Director Financial Services and Revenues added a further recommendation to the report as;
Chowney proposed the approval of the recommendations of the report. This was seconded by Councillor Fitzgerald.
RESOLVED - (6 For, 2 Against)
Cabinet recommend to 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 are 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.
5. Due to the previous amendments to Agenda Item ‘Revenue Budget 2019/20 Revised and 2020/21, plus Capital Programme 2020/21 – 2022/23’, there will be minor changes to the use of reserves.
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.
Supporting documents:
- 1. Treasury Management Covering Report -Cabinet 10 Feb 2020, item 242. PDF 195 KB
- 2. Treasury Managment Strategy 2020-21 - Cabinet 10 Feb 2020 as at 30 Jan 2020, item 242. PDF 453 KB
- 3. capital Strategy 2020-21 at 21 Jan 2020, item 242. PDF 467 KB
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