Agenda item

Councillor Butcher, Deputy Cabinet Member for Resources, introduced Buckinghamshire Council’s Treasury Management Strategy 2023-24, that was attached at Appendix 1 to the report. It was noted that it was a requirement for each local authority to approve a Treasury Management Strategy by 1 April each year. This strategy had been developed in line with the CIPFA code of practice.

The Council continued to pursue a strategy of keeping borrowing and investments below their underlying levels, sometimes known as internal borrowing, to reduce risk and keep external financing costs low. The Council would continue the strategy of internal borrowing while it made sense to do so. In the current economic climate, it was considered appropriate to maintain a degree of liquidity to cover cash flow needs but the Council would also consider investing for periods of up to 12 months with high credit rated financial institutions, whilst investment rates remain elevated.  The Council was considering opportunities for investments with longer exposure, but also ensuring that there was sufficient liquidity to meeting any short-term significant costs that may arise.

The Bank of England’s Monetary Policy Committee had made clear at its November 2022 meeting that further rate increases were in the pipeline and markets expect Bank Rate to peak at 4.5%-4.75%. As such, investing in 2023/24 was likely to be conducted, first, in a rising interest rate environment, but then potentially in a falling interest rate environment at the end of the financial year.  This would depend on how quickly inflation fell back and on levels of economic growth.

The Council’s main objective when borrowing money was to strike an appropriately low risk balance between securing low interest costs and achieving certainty of those costs over the period for which funds are required. The continuation of the Council’s strategy of using surplus cash instead of external borrowing, keeping external financing costs low.  The Council was actively reviewing opportunities for rescheduling long term debt.

The only proposed change to the 2023/24 TMSS compared to the 2022/23 TMSS was to amend the section for investments with other local authorities so that the investment could only be placed with the prior approval of the Council Leader, the Chief Executive and the Service Director of Finance (Section 151 officer) or deputies in the case of leave. Furthermore, if a local authority that the Council had invested in subsequently issued a section 114 or is given a capitalisation directive, or any other untoward financial event experienced by an authority who the Council held an investment in would be reported to the Audit and Governance Committee at the earliest opportunity.  Members were informed that Slough and Thurrock Councils had fully repaid on time the loans made to them.

Several Members commented on the tightening of rules for lending to other local authorities.  It was explained that a local authority had never defaulted on repaying a loan to another local authority although it was prudent and reputationally unsound not to lend to any authority that was experiencing financial difficulties.  It was further explained that the low interest rates experienced for the last decade had meant that the best returns on investments had often been through lending to other local authorities.  However, markets had changed radically now that interest rates had been rising. It was always incumbent on the Council to seek to maximise the interest received on monies when the Council had surplus funds whilst at the same time not putting those monies at risk which was why the Council had a Treasury Management Strategy.

It was moved by Councillor Butcher, seconded by Councillor Newcombe, and

RESOLVED –

(1)               That the Treasury Management Strategy for 2023/24 be APPROVED.

(2)               That the operational boundary for external borrowing, the authorised limit for external borrowing, the maturity structure of borrowing and the upper limit for principal sums invested for longer than 365 days, and the liability benchmark be APPROVED.