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Agenda item
Draft Treasury Management, Annual Investment Strategy and Capital Strategy 2022/23
Minutes:
The Chief Finance Officer presented a report 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.
The Council is expected to have some £64.06 million of external debt (as of 31 March 2022), and investments which can fluctuate between £15 million and £30 million in the year. The level of debt is set to increase to some £90.4 million by 2023/24.
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 property, housing and energy generation initiatives, and this will continue to involve the Council taking on additional borrowing.
A question was raised regarding the Homes England grant funding for the Bulverhythe housing development and the associated financial risks if planning permission is not granted. In response the Chief Finance Officer said that if planning permission was granted but the Council did not proceed with the project the Council may be liable to repay the grant. However, if planning permission was refused the Council would not have to repay the grant.
In response to a question regarding the revised net cost of the 2021/22 Capital Programme the Chief Finance Officer said this was partly down to over optimism on project start dates, with some projects slipping into the following year. Some capital expenditure has been revised down as the Council is planning to use a capital receipt to fund some future schemes.
The Chair noted that there are a variety of schemes requiring financing in the 2022/23 Capital Programme, with some debate around the level of risk and merit of individual projects. The Chief Finance Officer noted that the Audit Committee are being asked to agree that the Capital Programme is affordable and manageable within the Council’s current strategies. Approval of the recommendations is not necessarily an endorsement of the merits of individual schemes.
RESOLVED (by 4 votes for, to 1 against):
Audit Committee recommends to Cabinet and full Council that:
A. The Council approve the Treasury Management Strategy, Minimum Revenue Provision (MRP) Policy, Annual investment Strategy and the Capital Strategy.
B. The strategies listed are updated as necessary during 2022/23 in the light changing and emerging risks and the Council’s evolving future expenditure plans.
C. 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.
Reasons: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 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), previously adopted by the Council, was released to take account of the more commercialised approach being adopted by councils and the enhanced levels of transparency required. The Code has represented 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 very 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.
Supporting documents:
- Treasury Management Covering Report - Audit Committee 13 January 2022 v2, item 136. PDF 449 KB
- Treasury Managment Strategy 2022-23 - Draft v3, item 136. PDF 1 MB
- Capital Strategy 2022-23 - Draft 3, item 136. PDF 721 KB
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