Agenda item

The purpose of this report is to provide Members with information on the proposed Treasury Management Strategy Statement, Minimum Revenue Provision (MRP) Policy Statement and Annual Investment Strategy for 2021/22.

Members considered the Treasury Management Strategy Statement, Capital Strategy, Minimum Revenue Provision (MRP) Policy Statement and Annual Investment Strategy for 2020/21 presented by Mark Saunders.

Mark Saunders stated that this report is the first of three reports that members will consider over the course of the year with regard to the Treasury Management function. He added that the first one sets out the strategy for the coming year, the second report will be the Annual Report in July and in November there will be the Mid-Year Review of the Treasury Management activities for the first six months of the year.

Mark Saunders explained that all of the reports that are considered by the Audit and Risk Management Committee will then feed into the Budget Report for 2021-2022 and will be considered by Council on the 23 February 2021. He explained that it is an integral part of the process as the strategy provides the framework and indicators within which all of the treasury management activities of the Council operate throughout the coming year.

Mark Saunders stated that the detail and policies in the report comply with all the latest guidance and regulations of CIPFA and the MHCLG and there are no significant variances from the activities currently carried out. He summarised the detail in the report, identified the key issues and pointed out the detail surrounding the Council’s capital investment plans which are prudent, affordable and sustainable.

Mark Saunders referred to the minimum revenue provision part of the report and explained that when the Council undertakes any form of borrowing there is a legal requirement to make prudent provision for the repayment of the borrowing over the medium term. He explained that the various methods of repayment of the loans are detailed in the report and stated that it does depend on the detail of the loan, for what it is for and the purpose of it, which will then determine what type of MRP policy will be followed.

Mark Saunders stated that the Treasury Management Strategy is in place so that the Council has sufficient cash resources to meet its various obligations and to ensure payments are made at the appropriate time. He added that if there is any surplus cash available then that is invested with various institutions.

Mark Saunders explained that he has already stated that compliance is adhered to with regard to the guidelines as set out by CIPFA in terms of strategies and policies, however, there is one indicator that the Council does not comply with and this has been the case since 2007 when the Council’s housing stock was transferred and the indicator that this relates to is the gross borrowing and capital finance requirement. He added that in normal circumstances the gross borrowing would not exceed the capital finance indicator, but because of the debt that was left over due to the stock transfer and the fact that it is very financially disadvantageous to pay that debt off due to the excessive premiums that it attracts, the Council has always been in a position where that indicator is not complied with and there is no penalty for that none compliance. It has been approved by the Council every year and it has been assessed by the auditors every year who do not see it as a problem as there is a good reason for the non-compliance.

Mark Saunders referred to the total external interest which is currently just under £500,000 and is based on the Council’s current long term debt of £7.8 million pounds and the estimate next year is at £530,500, which is based on the fact that there maybe the requirement to borrow to fund the capital programme next year which will mean that the interest payments will increase. He stated that reference is made in the report to the Commercial Investment Strategy and the £25,000,000 that has been set aside to fund it and once those monies have been loaned out it will attract annual interest payments at the current rate of £287,000. He added that the intention is that the money that we borrow for that purpose will be recouped through investments or loan repayments from the local authority company.

Mark Saunders stated that the report contains detailed information concerning interest rates and the future prospects and added that the bank rate is expected to stay the same at 0.1% throughout the period of the strategy. He added that as the rate is so low it has had an impact of reducing the Council’s investment income to very low levels and is unlikely to change over the next couple of years, which is good news if you are trying to borrow money, but not ideal when lending money and added that there is the assumption that there will be the need to borrow funds over the medium term period of four years.

Mark Saunders explained that the report contains a great deal of information concerning the Council’s annual investment strategy and the intention of the strategy is to provide security of investments and appropriately manage risk and he added that the report also details information concerning specified and non-specified investments and gave members an overview of them, highlighting the differences and outcomes. He explained that this is an ongoing project currently being undertaken with the assistance of the Treasury Advisers to gain assurances that access to funds can be achieved when they become available and are appropriate to the council’s risk appetite.

Mark Saunders stated that the Council’s Capital Strategy contains information with regard to the Capital Programme and how it is being funded and the borrowing requirements is currently being updated to include the detail of the Council’s Commercial Investment Strategy and this will be presented to Council in February. 

Councillor Mrs French congratulated and thanked Mark Saunders and the Finance Team for all their hard work in what has been an exceptionally difficult year.

Members agreed that the strategy detailed in the report to be included in the final budget report for 2021/22 be endorsed.