Agenda item

The Committee received the Council’s Treasury Management Strategy Statement 2024-25 to 2026-27 which would be presented to Full Council at its meeting on 21 February 2024. Councillor T Butcher, Deputy Cabinet Member for Accessible Housing and Resources to present the Strategy.

The Local Government Act 2003 (“the Act”) and the Regulations made under the Act required the Council to have regard to the Prudential Code for Capital Finance in Local Authorities and to set Prudential Indicators for the next three years to ensure that the Council’s capital investment plans were affordable, prudent and sustainable.

The Act also required the Council to set out a statement of its treasury management strategy for borrowing and to prepare an Annual Investment Strategy (AIS) (as shown in Appendix 1). This set out the Council’s policies for managing its investments and for giving priority to the security and liquidity of those investments. The Treasury Management Strategy Statement and Annual Investment Strategy must both have regard to guidance issued by the Department for Levelling Up, Housing and Communities (DLUHC) and must be agreed by Full Council.

Treasury management at the Council was conducted within the framework of the Chartered Institute of Public Finance and Accountancy’s Treasury Management in the Public Services: Code of Practice 2021 Edition (the CIPFA Code) which required the Council to approve a treasury management strategy before the start of each financial year. This report fulfilled the Council’s legal obligation under the Local Government Act 2003 to have regard to the CIPFA Code.

The Investment Strategy was considered separately within the Capital Investment Strategy. The TMSS and AIS form part of the Council’s overall budget setting and financial framework. The strategy covered the three main areas of capital; borrowing; and managing cash balances. 

During discussion, points raised included:

·       It was highlighted as per paragraph 3.5 of the report, that the Council complied with CIPFA’s Prudential Code for Capital Finance in Local Authorities recommendation that the Council’s debt should be lower than its highest forecast CFR over the next three years. The Council was under borrowing at present which allowed for some flexibility for limited early borrowing in future years to take advantage of potential favourable interest rates.

·       Attention was drawn to changes from last year’s Strategy as detailed in paragraphs 5.5 and 5.6 of the report. To align with the UK’s sovereign rating of AA- it was recommended to lower the sovereign rating from AAA to AA- which was in line with advice from Link Treasury Services Ltd, the Council’s external treasury management advisor. If the Council was not to reduce the rating, the Committee heard that this would reduce investment options available, so setting the rating at AA- ensured that there would be a degree of flexibility.

·       In terms of aligning the strategy with assessing equalities and human rights issues, it was confirmed that the Council had no power over the sovereignty ratings, although the Treasury Management team would take these issues in to account when making an investment decision. By implementing exclusions, it would again affect investment flexibility which was important to ensure the best returns were achieved to assist in delivering services to residents.

·       The country limits were recommended to increase by a further £40m to £80m, the Committee was advised that this was to increase flexibility to the Council’s investment strategy and maximise its effectiveness. This was particularly important, as the flexibility around fast-moving investments in other local authorities had been removed, given the required sign offs from the Chief Executive, Leader, and S151 Officer. At present, it was confirmed that the Council held no investments in local authorities and had no plans to, although the strategy still allowed for this should future plans change. 

·       The implementation of the change in accounting standards for 2023/24 under International Financial Reporting Standards 9 was delayed until 31 March 2025. This set out that any potential loss or gain from selling certain investments would need to be taken in to account within the Council’s balance sheet. This affected investment instruments such as the pooled Local Authority Property Fund administered by CCLA.

·       A Member queried the upper limit within the borrowing strategy, and questioned if it were too generous. The Committee was advised that the limit provided important flexibility and it was unlikely that the limit would be reached. The key determinates would still be accounted for when taking any decision on borrowing. A mid-year treasury management report would be presented to the Committee for further oversight, and it was confirmed that the Cabinet Member and Deputy Member regularly reviewed the position and challenged any changes.

·       The Committee discussed the provision of potentially including a dashboard in the report to cover prudential indicators and give some clearer understanding to Members and residents when the report is put before Full Council in February 2024. Given the tight turnaround between this meeting and Full Council it would be difficult to include this in this year’s report, and it was noted that the current report followed the structure and advice from Link. This would be reviewed in the mid-year report with a view to inclusion in the next annual TMSS. The Committee requested that benchmarking of investment returns against similar local authorities would also be a good indicator to look at in the future.

ACTION: D Skinner / H Shah to consider the inclusion of a dashboard in future years Treasury Management Strategy Statement’s along with benchmarking investment data, with an update on both to be considered during the mid-year TMSS update.

·       The economic outlook section was ever moving and provided a view at the current point in time, this would be updated to reflect the current economic outlook in time for Full Council.

RESOLVED:

That Full Council be recommended to approve:

1.      The Treasury Management Strategy Statement (TMSS);

2.      The Borrowing Strategy as set out in Section 4;

3.      The Prudential Indicators (PI) set out in Sections 3, 4 and 5;

4.      Changes to the Country Ratings and aggregate limits as detailed in paragraphs 5.5 to 5.7;

5.      The Annual Investment Strategy set out in Appendix 1; and

6.      The Minimum Revenue Provision Policy set out in Appendix 2.