Agenda item

To provide pre-decision scrutiny to the strategy being proposed (report of the Deputy Chief Executive (Corporate Development) & S151).

Consideration was given to the report of the Deputy Chief Executive - Corporate Development which provided pre-decision scrutiny to the strategy being proposed.

The Interim Treasury and Investment Manager introduced the report which detailed the Draft Treasury Management Policy and Strategy Statement for the 2023/24 financial year which would be included within the Budget Setting Report submitted to Council for approval. As a treasury report, scrutiny from the Governance and Audit Committee was required prior to its submission to Cabinet and Council.

• Appendix A outlined The Treasury Management Policy Statement 2023/24; and
• Appendix B detailed the Draft Treasury Management Strategy Statement, Minimum Revenue Provision Policy Statement and Annual Investment Strategy 2023/24.

The main points of the report and appendices were outlined in a presentation to the Committee at the meeting, which included:

• Reporting requirements as set out by the CIPFA (Chartered Institute of Public Finance and Accountancy) 2021 Prudential and Treasury Management Codes;
• Treasury Management Strategy for 2023/34;
• Training;
• Capital Prudential Indicators 2022/23 to 2027/28 which included capital expenditure and financing; and borrowing need ;
• Minimum Revenue Provision (MRP) Policy Statement;
• Borrowing;
• Annual Investment Strategy;
• Prudential Indicators; and
• Treasury Management Practice (TMP1) - Credit and Counterparty Risk Management.

Members considered the report and presentation and made the following comments:

• Members queried whether the value/performance of assets were assessed, and a discussion ensued which distinguished between assets, revenue and capital spend.
  • The Assistant Director – Finance clarified that:
    • performance of council assets was the responsibility of respective Assistant Directors;
    • the £5m borrowing requirement referred to at point 2.2 of the report related to the Capital programme which incorporated the longer-term financial view of an asset, whereas the Revenue account covered the day to day running of a service, such as stationery and salaries. Spending relating to the Capital programme included the utilisation of working capital, grant funding or borrowing;
    • to support communication of the services details, a budget book would be produced alongside the budget papers and circulated to all members, which presented the net operation cost for each asset function in a granular format; and[MC1] 
    • the purpose of the Treasury Management Strategy was to provide a treasury management function which captured cash movements within services and identified any surplus or deficit.

• Regarding the utilisation of reserves, Members asked if the lowest balance kept in reserve, as a ‘safety net’, could be disclosed[MC2] .
  • The Interim Treasury and Investment Manager responded that the figure would be considered and decided by the Section 151 Officer as part of the budget setting process.

• Members referred to the Internal Drainage Board precept and asked whether the ‘without referendum’ increased Council Tax payment was expected to revert to previous levels in future years.
  • The Assistant Director – Finance responded that the settlement announced on 19 December 2022 was the greater of 3 per cent or £5. It was assumed that the current level would remain for 2024/25 but it was not known what the levels would be after this date.

• During discussions around the Council’s authorised borrowing limit compared with the operational boundary debt, stipulated at point 3.2 of the report, the Interim Treasury and Investment Manager confirmed that a £4million difference was maintained/safeguarded for unforeseen circumstances such as disasters and emergencies. Members highlighted the existence of the Bellwin scheme which enabled local authorities to seek financial compensation from central government where disasters had occurred in their areas.

• Regarding assessment of investment risk, members asked whether this was independently scrutinised.
  • The Interim Treasury and Investment Manager responded that the following risk assessment process for investments was in place:
    • Link Group collated credit rating data (from Fitch, Moody’s, and Standard and Poor’s) and provided the Council with a ‘Counterparty Credit Criteria’ which listed credit ratings for both banks and sovereign countries;
    • ratings informed where investments could be placed in conjunction with the criteria outlined in the Annual Investment Strategy;
    • a maximum of £5million could be invested per sovereign country;
    • whilst the £5million overall limit did not apply to the UK, a £5million limit existed per UK banking group;
    • any concerns/warnings received for existing investments would be referred to the Section 151 officer for appropriate action.

• Members questioned whether the Council adhered to a moral code when considering where investments could be placed.
  • The Assistant Director – Finance responded that, sequentially, the priorities for the placement of investments were: security, liquidity and yield. Link Group provided information which the Council utilised to inform potential investments however there had been instances where investments had not been made due to the consideration of wider socio-economic circumstances; and
  • The Interim Treasury and Investment Manager stated that the Treasury Strategy required investments to consider environmental, social and governance (ESG) issues and the Council was seeking specialist advice on this matter.

• The Interim Treasury and Investment Manager confirmed to members that interest earned on Council balances was not taxable.

• Members referred to section 2 of Appendix B and asked whether the £67.456million Housing Revenue Account (HRA) debt needed to be repaid by 2062.

o   The Interim Treasury and Investment Manager confirmed that the Council was not required to make a minimum revenue provision for HRA debt and if necessary, could seek to borrow funds from the markets when the loan matured; and

o   the Council could change the maturity profile of debt by rescheduling it at an earlier stage.

·       Members referred to section 5.3 of Appendix B regarding ‘Specified Investments’. These had been referred to in the meeting as ‘not complex’ and members asked whether this the term was subjective?

o   The Interim Treasury and Investment Manager responded that subjectivity was generally dependent upon experience. In Local Government, the Section 151 Officer and Deputy Section 151 Officer were generally knowledgeable of certain types of financial instruments. The services of external Treasury Advisers would usually be utilised for complex ‘non-Specified’ investments.

• Members referred to the Capital Budget and asked whether the Council’s fleet of vehicles were to be transferred to electric vehicles.
  • The Assistant Director – Finance responded that:
    • an allowance for replacement vehicles had been included in the budget however the type of vehicles purchased would be a policy decision.
    • regarding HRA vehicles, the requested information would be checked and circulated when available[MC3] .

• Members’ appreciation of the presentation at the meeting was conveyed to the Interim Treasury and Investment Manager and the Assistant Director – Finance. Members also stated full confidence in the content of the report and appendices.

AGREED:

That following scrutiny of the Treasury Management Policy (Appendix A) and the Treasury Management Strategy Statement, Minimum Revenue Provision Policy and Annual Investment Strategy 2023/24 (Appendix B), the comments of the Panel be noted for consideration by Cabinet on 14 February 2023 and Council on 2 March 2023 when the documents are to be considered as part of the budget report.