Chichester District Council
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Treasury Management Policy 2016-2017 Update

Meeting: 19/07/2016 - Council (Item 136)

Treasury Management Policy 2016-2017 Update

(See report at Agenda Item 9 (pages 96 - 111) of the Cabinet papers of 12 July 2016.)

 

DRAFT RECOMMENDATION

 

That the revised Treasury Management Strategy 2016-17 be approved.

 

Minutes:

Mrs Hardwick (Cabinet Member for Finance and Governance), seconded by Mr Dignum, moved the recommendation of the Cabinet. She explained that minor adjustments were required to the Council’s treasury management strategy to reflect the necessary framework changes in the limits etc., as detailed in appendix 1 to the Cabinet report, rather than a complete update in terms of context and the market. This was because the framework of the strategy enabled the treasury team to have the flexibility required to make decisions, taking into account the prevailing market conditions, when considering investment opportunities for the Council’s surplus funds.

 

For example, it had been the Council’s intention to invest up to £10m in the Local Authority Property Fund. Having placed £5m in the fund in February 2016, it was intended to place a further £5m in May 2016; however in light of the referendum and possible impact on commercial property values, officers held off making further investments in the fund at that time. However, the recommended capital limits would still permit this, if conditions made it appropriate.

 

Officers were looking at alternative investment opportunities including different pooled funds, such as bond funds or multi-asset funds that had a diversified pool of equity, bond and property exposures. The use of any new investment vehicles would have due diligence undertaken by officers, including taking external advice in order to fully understand the risks attached, and prior approval by the Head of Finance and Governance Services.

 

The advice from Arlingclose (the Council’s Treasury advisors) regarding the use of the Local Authority Property Fund, was to buy and hold these funds for the long term, so that the income was the main source of return, and the Council had time to ride out the ups and downs of capital values. A formal revaluation of the existing Property Fund investment was currently awaited, and it was likely that there would be a reduction in value. However, the property fund investment was intended to be a long term investment.

 

Mrs Hardwick added that the Cabinet had asked for a further report later in the year on any significant changes in market conditions that might affect the Strategy. However, she made the following interim statement.

 

“The economic outlook for the UK has changed significantly following the referendum result. However, the financial markets seem to have stabilised following the initial shock.

 

“In the short term, the economy is expected to slow due to the uncertainty which is likely due to deferred investment decisions, but the equity markets seem to have remained relatively positive and calmer in the early weeks of July. This might reflect a more optimistic longer term investment horizon, due to evidence supporting the view that trading nations outside the EU such as Australia, New Zealand and China are already making overtures to the UK about establishing trade deals, having been frustrated with the lack of progress with EU negotiations.

 

“Sterling has depreciated in response to the Governor of the Bank of England indicating that further  ...  view the full minutes text for item 136


Meeting: 12/07/2016 - Cabinet (Item 225)

225 Treasury Management Policy 2016-2017 - Update pdf icon PDF 50 KB

Referring to minute 131 of 26 January 2016, to recommend the Council to amend the Treasury Management Strategy in order to fully implement the Council’s approved investment strategy and to reflect the recent change in its banker.

Additional documents:

Decision:

RECOMMENDED TO COUNCIL

 

That the revised Treasury Management Strategy 2016-17 be approved.

 

RESOLVED

 

That the Head of Finance and Governance Services be asked to update the Cabinet at its next meeting on any significant changes in market conditions that may affect this Strategy.

Minutes:

Referring to minute 131 of 26 January 2016, the Cabinet considered the report circulated with the agenda (copy attached to the official minutes).

 

Mrs Hardwick introduced the report, reminding the Cabinet that the Council had approved its Annual Investment Strategy on 26 January 2016. This Strategy provided for a diversification of Council investments into more secure and/ or higher yielding asset classes during 2016-17, including the Local Authority property fund, covered and corporate bonds. The Strategy now needed updating to reflect the change of the Council’s banker to National Westminster Bank Plc. The revised Strategy allowed more headroom for management of cash balances and raised limits on the use of the Local Authority property fund. She added that this revised Strategy had been drawn up before the results of the EU referendum were known. This had affected the national economic context.

 

The Chairman thanked Mr Catlow (Group Accountant) for his contribution to drafting the revised Strategy.

 

Mr Catlow stated that the proposed changes to the Strategy enabled the Treasury Management Team more flexibility to invest. It was too early to assess the economic impact of the referendum, although it could be expected that interest rates would fall and remain low until at least 2020. He suggested that an update be presented to the Cabinet in September.

RECOMMENDED TO COUNCIL

 

That the revised Treasury Management Strategy 2016-17 be approved.

 

RESOLVED

 

That the Head of Finance and Governance Services be asked to update the Cabinet at its next meeting on any significant changes in market conditions that may affect this Strategy.


 

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