To consider the Head of Financial Services’ Report No. FIN1802 (copy attached) which sets out the Treasury Management Strategy, Prudential Indicators for Capital Finance and the Minimum Revenue Provision Statement for 2018/19.
The Committee considered the Head of Financial Services’ Report No. FIN1802, which set out the Treasury Management Strategy, Annual Borrowing Strategy and Annual Investment Strategy, Prudential Indicators and Minimum Revenue Provision Statement for recommendation to the Cabinet for approval.
The Committee noted that CIPFA had conducted reviews of the Prudential Code and the Treasury Management Code of Practice in 2017 and that the Ministry of Housing, Communities and Local Government (MHCLG) had also recently undertaken a consultation on treasury management issues. However, neither of these institutions had produced additional new definitive reference and guidance. The Treasury Management Strategy Statement for 2018/19 had therefore been prepared in accordance with the existing 2011 CIPFA Treasury Management Code of Practice and the 2010 MHCLG Investment Guidance. It was expected that CIPFA and the MHCLG would provide further definitive guidance in the coming months. Should this be the case, then a revision and an update to the Treasury Management Strategy for 2018/19 might be required during the current financial year.
The Report set out the purpose and functions of the treasury management operation and the Strategies, Indicators and Statement set out in Appendices A, B and C provided an approved framework within which officers undertook the day-to-day capital and treasury activities.
Members were advised that Arlingclose continued to indicate that the Council should diversify investment risk (spreading smaller amounts over an increasing number of counterparties) wherever possible. The Council was progressively incurring further borrowing and Arlingclose had advised that, in the circumstances of some current specific investments reaching their maturity dates, the Council should not replace them. This strategy would allow for a natural reduction in overall investments balance during a period when borrowing was increasing.
The Committee was also advised that the Council had incurred prudential code borrowing in 2016/17 of £6.548 million in relation to its capital expenditure. Further borrowing to support the financing of the approved Capital Programme for the 2017/18 financial year would be required. The Council had therefore commenced the 2018/19 financial year in a position where its investment holdings continued to remain significant, but the Council also carried some accumulating debt. Members were advised that there would be an inevitable requirement to incur some further borrowing to service capital expenditure in future years.
The Report advised that careful observation of the Prudential Indicator “gross debt v capital financing requirement” would need to be undertaken progressively throughout the financial year. This meant that the Council might need to redeem an element of its core pooled fund investments at some time in the future in order to adhere to the requirements of this Indicator.
During discussion, Members asked questions in respect of borrowing in respect of Aldershot Regeneration projects, the role of Arlingclose and levels of risk in respect of investment.
(i) the Cabinet be recommended to approve
(a) the Treasury Management Strategy, Annual Borrowing Strategy and Annual Investment Strategy, as set out in Appendix A to the Head of Financial Services’ Report No. FIN1802;
(b) the Prudential Indicators, as set out in Appendix B; and
(c) the Minimum Revenue Position Statement, as set out in Appendix C; and
(ii) an all Member seminar be organised on the role and work of Arlingclose in due course.