Agenda item


To receive a report from the Executive Director of Finance, Resources & Customer Services presenting the Council’s proposed 2018/19 Treasury Management Strategy & Prudential Indicators.



RECEIVED a report from the Executive Director of Finance, Resources & Customer Services setting out the Council’s 2017/18 Treasury Management Strategy Statement & Prudential Indicators.




1.    The Treasury Management Strategy was approved at full Council on the 21 February 2018 and any comments the committee have will be picked up at the mid-year review. Next year, the team are hoping to bring this item earlier to committee so that comments can be fed in at an earlier stage.

2.    As detailed at Section 2 (page 3) of the report, policies and objectives haven’t been changed as compared to previous years. Section 2 sets out the issues that have been taken into account when undertaking external borrowing. The investment strategy of the Council continues to focus on 3 principles; Security, Liquidity and Return, in that order of importance.

3.    Section 3 (pages 3-5) of the report, sets out reporting requirements, procedures and scheme of delegation. Including, where the Audit & Risk Management Committee’s role fits into that as regards scrutiny before being recommended to full Council. The Committee is responsible for scrutiny and review of the treasury management policy and procedures and making recommendations to the responsible body.

Finance have to provide 3 main reports each year on the treasury management strategy, this being one of them, a mid-year treasury management report and an annual treasury report.

4.    As detailed on page 5 of the report, the 2018/19 Treasury Management Strategy covers  two main areas:

·         Treasury Management Issues

·         Capital Issues

           The items covered under each of the headings above are what the strategy covers, as detailed on page 5 of the report.

5.    Some of the key areas that were highlighted:

a.    Training & Consultancy – In the past, finance had provided some training sessions for Audit & Risk Management Committee members and are able to do the same if required. At present, finance are using Link Asset Services as the Council’s treasury advisers, providing advice and training where necessary including council officers.

b.    Borrowing Strategy – The Council will not borrow more than or in advance of its needs purely to profit from the investment of the extra sums borrowed. Any such decision will be taken within approved Capital Financing requirements. An exercise will be done to demonstrate whether or not it would provide value for money. When the exercise was done, it proved it didn’t so finance did not go ahead with that.

c.    Debt rescheduling – More recently, short term interest rates have been very low and debt rescheduling is something people consider. Finance had not found this to be viable so far, because of penalties that have to paid to redeem the debt earlier. Finance have been looking at the best mix of short and long term loans for each borrowing decision the council make.

d.    Investment Strategy – As detailed at Appendix 4A on page 11 of the report, Table 1 sets out the approved investment counterparties and limits and all those are in accordance with the guidance.

e.    Existing Debt – As detailed on page 10 of the report, the table shows the breakdown of the Council’s existing debt as at 31 March 2017 and 31 December 2017 and how it has changed over the period. There has been a small shift from short term borrowing to long term borrowing. This has been a conscious decision to fix rates while they are low.

6.    As detailed on page 21 of the report, graph 1 & 2 demonstrate that the Council’s borrowing is well below the authorised limit, over the 4 year period, which is required by the prudential code. These are the 2 key indicators of the prudential code that finance have to produce each year to show that the council can afford what it is borrowing.

The lines show the authorised limit, the operational boundary and the capital financing requirement. The blue blocks are showing the external borrowing over a period of 4 years and there is headroom above the borrowing for all those measures. These graphs have to be published each year to show that the council is not exceeding its limits or boundaries.

7.    The following issues & queries raised in response to the report:

a.    The Council’s long term loans (90%) are all on fixed interest rates. So any increases in interest rates will be insulated on those loans. There are no variable interest rate loans at all.

b.    The Council did not borrow any money that it would not be using. Cash flow is monitored on a daily basis and if money is borrowed and is not needed straight away then it is invested. The Council tries to borrow only when they need to. Borrowing is minimised to more than it needs to and do more internal borrowing.

c.    Councillor Hayward asked what amount of money had the council borrowed which is still waiting to be used. James Rolfe replied, no he could not, because on top of the cash that had been borrowed for capital investment, the council also had cash coming in from day to day business. Separating out the two was difficult as regards cash flow management. The council is not allowed to borrow ahead for any significant period. Highly unlikely that the council has spare cash from borrowing with no advantage as the council would be paying more for borrowing. What the council agrees to is the authority to borrow, the actual borrowing decision is down to officers to decide.

d.    As clarified by Andrew Barnes, the council does set the authorised limit for borrowing. The council is looking to the future, in terms of what they will anticipate spending on. The table at the bottom of page 21 of the report, demonstrated the percentage of council money coming in that is being spent on interest costs. The table shows that that is not changing.

e.    As debt matures, the council looks to replace those with cheaper loans.

f.     Councillor Hayward queried the £9m European Investment Bank (EIB) loan, as detailed in the table on page 10 of the report, and if there was a contract to say that the council does not have to repay that amount immediately because the UK are out of Europe (Brexit). James Rolfe clarified that the EIB was one of the issues being discussed by central government and the EU about how that is to be dealt with once the UK were out of Europe.

8.    The Chair thanked Jayne Fitzgerald (Head of Corporate Finance) for her report.



AGREED that the update on the 2017/18 Treasury Management Strategy & Prudential Indicators be noted and approved.



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