Agenda item

The committee is requested to consider the Treasury Management Policy Statement, the Treasury Management Strategy Statement, the Investment Strategy and relevant prudential indicators for 2017-18 and recommend these to Cabinet and Council for approval.

The committee considered the report circulated with the agenda (copy attached to the official minutes).

Mr Catlow presented the report.

The committee made the following comments:

·     Queried the availability of any guidance from CIPFA in respect of building returns from investments into base budgets. Mr Catlow advised that there was no guidance but that CIPFA would say be prudent.

·     Query by Philippa Hardwick as why only the Property Fund interest was included in the revenue budget as it could be a volatile income source and shouldn’t the entirety of our pooled funds be put into revenue instead as this income seemed more certain. Mrs Belenger stated that the Property Fund rate of return was considered to be stable as it was based on rental payments received, whereas the other investments were less certain. However, should the investment income be lower than forecast, then an option is to transfer a lesser amount into the investment opportunity reserve.

·     The footnotes next to headings on page 41 are picked up on the following page – this should be amended to refer to Table 5.

·     Queried the meaning of ‘currently rated above BBB’ - The council’s bank is BBB+ rated. We try to minimise what is held within the council’s bank account and to stay within secured investments. If at any time there was a downgrade to the council’s bank we would be able to get our money out and put it in AAA rated money market funds.

·     Reputational and practical risk to changing bank accounts in future – there are clauses within the current bank contract to allow the Council to terminate the contract, if necessary. We found it relatively easy to move bank accounts. If there was a risk then we would move account. We also have arrangements at an alternative bank, Svenska Handelsbanken and in business continuity terms we could use them.

·     Queried the ratings of other banks – Handelsbanken is based in Sweden so probably A- to A rated. They have a particular operating model which means they are seen as very low risk. The majority of UK clearing banks are BBB+ rated or above. Lloyds and Barclays are A- rated. We went through a tendering exercise and Nat West were the best bid in terms of service and price. We monitor them continuously based on credit ratings alerts. Arlingclose also looks at ratings and Credit Default Swops which would alert us if there was an issue.

·     The council does not hold offshores accounts.

·     Automatic sweeping arrangements are set up so that funds are moved within the council’s bank operational current accounts to the deposit account, and vice-versa when there is an overdraft to be covered.  This saves time and resources as officers used to have to do transfer requests and authorise these transfers in the past.

·     Pages 39 para 5.2 Borrowing Sources has no explanation. Table 4 on page 40 dealing with authorised limits lists the borrowing sources. Mr Catlow agreed to move this information to para 5.2.

·     Query regarding benchmarking and the family of authorities chosen. The council uses the family of district councils which use Arlingclose as their treasury adviser. In the past we had used CIPFA’s benchmarking group however due to the cost of that facility and as the numbers had dwindled it was no longer feasible for the council to use this grouping.

·     Clarify in Table 8 where information is coming from – amend to ‘district council average’.

·     Clarify in Table 9 – change to ‘mean of all district councils’

·     Appendix 2 – add definition of ‘internal investments’ and ‘external funds’.

·     Add definition of the benchmarking group.

·     Rate of Return on page 55 – LAPS fund no longer the only one.

·     Mr Oakley requested information about the treatment of the community infrastructure levy (Table 2 page 37) – Mr Catlow advised that this was not part of the Treasury Management Strategy and undertook to provide a written response. 

RECOMMEND TO CABINET

That subject to the amendments suggested above, Cabinet and Council be recommended to approve the Treasury Management Policy Statement, the Treasury Management Strategy Statement, the Investment Strategy and relevant Prudential Indicators and Minimum Revenue Provision statement for 2017-18.