Agenda item

RECOMMENDED:      1)         The Treasury Management Strategy Statement 2016/2017, including treasury indicators for 2016/2020.

2)       The Investment Strategy 2016/2017 be approved with the following amendment: Diversification Policy - the limits be set at £7m for UK Government backed organisations, and £4m for other organisations.

3)       The Minimum Revenue Provision Policy 2016/2017.

4)       Adopt the revised Treasury Management Practices (TMPs).

Reason for the Decision

The Council must produce a Treasury Management Strategy Statement, Minimum Revenue Provision Policy Statement and Annual Investment Strategy 2016/2017 by 31 March 2016.  The amendment was approved to minimise the risk of the level of investment in non UK Government backed organisations.

The Group Accountant presented a report which explained that the Council was required to receive and approve a Treasury Management Strategy Statement, Minimum Revenue Provision Policy Statement and Annual Investment Strategy which covered:

·       Capital plans, including prudential indicators

·       A Minimum Revenue Provision (MRP) Policy

·       The Treasury Management Strategy

·       An Investment Strategy

The report covered the requirements of the Local Government Act 2003, the Chartered Institute of Public Finance Accountants (CIPFA) Prudential Code, the Department of Communities and Local Government (CLG) MRP Guidance, the CIPFA Treasury Management Code and the CLG Investment Guidance.

The report also looked at the period 2016/2020 which fitted with the Council’s Financial Plan and capital programme. The report was based upon the Treasury officers’ views on interest rates, supplemented with leading market forecasts provided by the Council’s treasury advisor, Capita Asset Services, Treasury Solutions.

In the presentation of the report the Group Accountant explained that the maximum limits to borrowing may have to be adjusted during the course of the year to take account of approved projects.  He also drew attention to proposed changes to the diversification policy which were proposed to change from a £5m maximum investment for non UK Government based institutions and £7m maximum investment for UK Government funded institutions to £6m maximum investment for both.

Councillor Lord Howard expressed concern about the level of deposits which could potentially be placed with a single non UK funded institution at £6m.  He asked how many institutions would be on the list to invest with from the UK to which it was explained that there were approximately 8 or 9 UK counterparties on the list, currently with an acceptable credit score, and the level had been set as the maximum amount the Authority would be happy to invest, and the level proposed would allow advantage to be taken of putting the money out for a two year period and allowing flexibility to take advantage of opportunities as they became available.

Councillor Howard commented that the felt that when there was a greater interest rate offered it was often at greater risk.  He proposed that the limits be set at £7m when backed by the UK Government and £4m for any others.  This was seconded by Councillor Pope and agreed.   

Councillor Pope asked for clarification on the BNP reference which had no rating shown.  The Principal Accountant undertook to inform Members of the rating, which was for the Banque Nationale de Paris. NB: This was confirmed as AAA rated.

Councillor Pope, in referring to Appendix 1 and the table showing Council Tax band D discount asked if the figures were showing the amount the council tax would increase by.  The Group Accountant explained that the figure showed the impact of implementing the financing costs on the figures approved to date. 

Councillor Long asked if the figures currently deposited with Santander would remain so even with the newly agreed investment levels above.  Councillor Beales responded that he considered that the investment would stand to the end of its term, whereupon it would be re-invested accordingly.

Councillor Howard also asked if, when investments were made in other countries, they were made in sterling.  This was confirmed as being the usual occurrence.

Councillor Pope sought clarification on the term "net debt" in the table in 5.3 of the report, commenting that the Council would presumably not be in the situation of having a net debt.  This was clarified that as being the limit on the borrowing, on which the Group Accountant undertook to provide a plain English explanation.  He also drew attention to the table in 5.3 of the report which showed the Council's maximum amount of fixed rate borrowing or variable rate borrowing for the designated financial years.

Councillor Beales drew attention to the deliberations of the Audit Committee who had considered the report and supported the recommendations.

RECOMMENDED:  1)       The Treasury Management Strategy Statement 2016/2017, including treasury indicators for 2016/2020.

2)     The Investment Strategy 2016/2017 be approved with the following amendment: Diversification Policy - the limits be set at £7m for UK Government backed organisations, and £4m for other organisations.

3)     The Minimum Revenue Provision Policy 2016/2017.

4)       Adopt the revised Treasury Management Practices (TMPs).