Agenda item

Consideration was given to a report presented by Derek Gaffney, Chief Accountant, which detailed that, in accordance with the Prudential Code for Capital Finance, the Secretary of State’s Guidance on Local Government Investments, the CIPFA Code of Practice for Treasury Management in Local Authorities and with Council policy, the Director of Finance was required, prior to the commencement of each financial year to seek the approval of the Council to the following:-

·                The Prudential Indicators and Limits for 2015/16 to 2017/18.

·                A Minimum Revenue Provision (MRP) Statement which sets out the Council’s policy on Minimum Revenue Provision.

·                An Annual Treasury Management Strategy in accordance with the CIPFA Code of Practice on Treasury Management including the Authorised Limit.

·                An Investment Strategy in accordance with the Department for Communities and Local Government (CLG) investment guidance.

The Council’s investment policy’s continuing primary governing principle was the security of its investments, although yield or return on investments was also a consideration.

The Council continued to operate the treasury management guidelines well within the boundaries set by the approved selection criteria so as to minimise the risks inherent in operating a treasury management function during volatile and adverse economic and financial conditions.  To this end, the Council has continued to invest any surplus funds primarily with the Bank of England’s Debt Management Office.

In addition, investment levels over the last twelve months remain low as market conditions still dictated that it continued to be prudent to defer borrowing plans and to fund on-going capital commitments through the use of the Council’s internal cash-backed resources. 

Actual returns on investment opportunities remain subdued when compared to previous years but have been effectively and prudently managed by significantly reducing expected capital financing costs by delaying borrowing plans.  This enabled the Council to stay within its capital financing budget cash limit and for budget savings to be put forward in support of both the Council’s 2014/15 and 201/516 revenue budget.  This was a significant achievement given the difficult economic and financial conditions prevailing throughout the current financial year.

The Council’s counterparty list for investments, with whom the Council did business, used the criteria as set out in the report and provided the Council with the opportunity to maximise security of any invested funds by allowing all funds to be placed with the DMO and UK Single Tier and County Councils and reducing the maximum level and time of investments that could be placed with financial institutions that do not meet all the upper limit credit rating criteria.

Further information was provided on the effect on the counterparty list of the transfer to the NatWest Bank following the Co-operative Bank’s decision to withdraw from banking services to Local Authorities.

In terms of the Prudential Indicators it was noted that only schemes in the Council’s approved capital programme were included in the indicators as listed.

There were four treasury Prudential Indicators, the purpose of which was to contain the activity of the treasury function within certain limits, thereby managing risk and reducing the impact of an adverse movement in interest rates.  The indicators submitted for approval were shown in detail as part of the report.

The limits for interest rate exposures were consistent with those approved within the Mid-Year report on the 2014/15 Strategy; the maturity structure detail had been maintained; and the investment limits beyond 364 days have been maintained to reflect the continued investment strategy.

An update was also provided on the current investments of the Council and the how the Treasury Management and Investment Strategy sought to minimise the risks in operating the Treasury Management function during these difficult economic and financial conditions.

Resolved:-  That Cabinet be asked to recommend to Council:-

(1)  The approval of the Prudential Indicators and limits for 2015/16 to 2017/18 contained in Appendix A to the report.

(2)  The approval of the Minimum Revenue Provision Statement contained in Appendix A which sets out the Council’s policy on Minimum Revenue Provision.

(3)  The approval of the Treasury Management Strategy for 2015/16 to 2017/18 and the Authorised Limit Prudential Indicator (Appendix B).

(4)  The approval of the Investment Strategy for 2015/16 to 2017/18 (Appendix B – Section (e) and Annex B1).