Agenda item

This Council is required by regulations issued under the Local Government Act 2003 to produce a Treasury Management Statement for each financial year.  The draft Statement meets the requirements of the CIPFA Code of Practice on Treasury Management (the Code) and the Prudential Code.

The report was presented to Committee by the Chief Finance Officer.

The CIPFA Code of Practice for Treasury Management in the Public Services (the “CIPFA Treasury Management Code”) and the CIPFA Prudential Code required local authorities to produce a Treasury Management Strategy Statement (TMSS) on an annual basis.   The TMSS detailed the investment and borrowing policies that the Council were to follow during 2023/24.  The CIPFA code and the Department for Levelling Up, Housing and Communities (DLUHC) statutory guidance also required the Council to have a policy on non-treasury investments which was included in the Capital Strategy which was to be approved by Council on 1 March 2023. 

The TMSS set out the counterparties that the Council would invest with and the limits that would be invested with each counterparty.  CIPFA published a revised Treasury Management Code and a revised Prudential Code on 20 December 2021 and stated that revisions needed to be included from the 2023/24 financial year.  The Council was required to reflect the changes to the new Codes of Practice when it prepared the Treasury Management Strategy Statement (TMSS) and Annual Investment Strategy (AIS) reports and also related reports during the financial year.

The revised Treasury Management Code required all investments and investment income to be attributed to one of the following purposes:

•   Treasury Management – investments held for cash purposes

•   Service Delivery – Housing new builds and local infrastructure

•   Investment in assets and facilities to deliver a commercial return to the Council

The revised Treasury Management Code required the Council to implement the following:

•   Adopt a new liability benchmark treasury indicator to support the financing risk management of the capital financing requirements.

•   Long-term treasury investments, (including pooled funds were to be classed as commercial investments unless justified by a cash flow business case

  •   Pooled funds were to be included in the indicator for principal sums maturing in years beyond the initial budget year

•     Amendment to the knowledge and skills register for officers and members involved in the treasury management function – to be proportionate to the size and complexity of the treasury management conducted by each authority

 •  Reporting to members was to be undertaken quarterly

 •  Environmental, social and governance (ESG) issues to be addressed within the Council’s treasury management policies and practices (TMP1).

The Chief Finance Officer informed Members that some of the balances and financial levels referenced  within the appendices may differ slightly when the final budget was set but were based on the best budget estimates at the time of compiling the strategy.

During discussion, Members raised the following points:

·            In reference to loans to Local Authority-owned companies (LAC), the Strategy  confirmed that business plans had to be ‘clear and robust’ and to have demonstrated the affordability of the investment for the LAC.  A Member asked under what terms the Council gave a loan of £571,000 to EnvironmentSK Ltd when there was no clear business plan.

·            As the borrowing rate of the Public Works Loan Board was linked to interest rates, what impact would the current, frequent interest rate rises have on the Council’s funding Strategy going forward?

The Chief Finance Officer informed the Committee that the document was a framework setting out the approach for Treasury Management for 2023 and 2024.  Within the framework was an opportunity for the Council, subject to a business plan having been presented and approved, to make loans to its commercial Local Authority-owned companies provided affordability was demonstrated.  The report set out the Council’s statement as to how it was to consider investments in financial institutions, having regard for the environmental, social and governance arrangements of those institutions.

The Chief Finance Officer continued that the plans of the Public Works Loan Board in terms of investment and borrowing remained uncertain particularly in regard to borrowing as the rates fluctuated daily.  This depended on the amount borrowed and over what timescale as well as the structure of the loan.  It was very likely rates would change again.  The Capital programme had so far been financed from internal borrowing or internal reserves and this involved the use of cash balances in lieu of going to the financial market.  The short-term strategy was to continue that arrangement to avoid being exposed to the volatility of the market.  The Capital programme that was currently being prepared and was ready for consultation did not have any significant expenditure related to larger-sized projects so there was no short-term requirement to go to the market.  The implications of borrowing impacted the revenue part of the Council’s budget and the forecast was currently challenging, given the volatility around utility and pay award costs.  The Council currently had no plans to undertake external borrowing but this was to be kept under review.

The Chairman welcomed the report and complemented the hard work of the Finance Team.

It was proposed, seconded, and AGREED:

That the Committee:

a)         Recommended to Council that the 2023-24 Treasury Management Strategy Statement was approved.