Agenda item

(a)       That the draft Treasury Management Strategy 2015/16 be recommended to Cabinet on 17 February 2015; and

(b)       That the Treasury Management 2014/15 quarterly update be noted.

The Finance Manager - Technical Accountancy introduced the draft Treasury Management Strategy 2015/16 for review prior to recommendation to Cabinet, and provided an update on matters relating to the Council’s 2014/15 Treasury Management Strategy up to the end of December 2014.

In line with the usual practice to assist in the approval of the Strategy for 2015/16, all Council Members had been invited to attend a Treasury Management training session giving the opportunity to receive detailed information on the changes to the Strategy and to raise any queries with the Council’s Treasury Management advisors, Arlingclose Ltd.

In presenting the draft Strategy for 2015/16, the Finance Manager drew particular attention to sections on local context and treasury management implications from exiting the Housing Revenue Account (HRA) Subsidy system.  In addition, there were alterations to the table on investments criteria and limits due to legislative changes reforming procedures were a financial institution to get into financial difficulties, known as ‘bail-in’, as discussed at the previous meeting and training session.  The Borrowing Strategy would change from the previous year. Borrowing would be required in 2015/16, however more certainty would be required from spending plans as the year goes on to determine the exact amounts and to ensure the Council borrows in the most cost-effective way.

During an update on treasury management activity in 2014/15, the Finance Manager anticipated a move to smaller investment amounts spread across an increasing number of counterparties.

Councillor Haydn Bateman thanked officers for the report and for the recent training session.  In response to a query, the Finance Manager provided clarity on the impact of ‘bail-in’ legislation which had been reflected in the training presentation slides.

When asked by Councillor Glyn Banks about borrowing limits, it was explained that the graph shown in the report was based on predictions and was therefore subject to change through monitoring during the year.  Whilst there was a statutory need for the Council to set itself a maximum borrowing limit in line with its plans, 2015/16 limits were higher than 2014/15 as confirmation was awaited on the settlement payment from the HRA subsidy reform.

In response to a question on the timing of borrowing, the Finance Manager said that the approach in 2015/16 would be to wait until the investment balance dropped and there was a need to borrow.  However, borrowing would need to be done at the appropriate time, when interest rates were low, and when it was certain it was needed and capital plans confirmed.  The forecast from Arlingclose Ltd predicted a rise in interest rates in August 2015 and it would not be recommended to borrow at the present time as this would mean borrowing for investment purposes at higher borrowing interest cost than return generated on the investments.

Following queries from Councillor Bateman on the investment balance, the Finance Manager explained about work on reserves which informed cashflow forecasting to give an indication of when to invest.  She went on to talk about the timing of long-term investments based on the predictions for interest rate movement with the priority for security first, then liquidity and finally yield.

RESOLVED:

(a)       That the draft Treasury Management Strategy 2015/16 be recommended to Cabinet on 17 February 2015; and

(b)       That the Treasury Management 2014/15 quarterly update be noted.