Agenda item

Report of the Cabinet Member Finance

The Cabinet Member Finance introduced the report and explained that the Treasury Management and Annual Investment Strategy 2014/15 had been scrutinised by the Treasury Management Panel to whom he was grateful. He said that the Council had operated in accordance with the Prudential Indicators and would continue to do so. He explained that the Council had followed a prudent and sensible borrowing strategy which reduced the need for short-term external borrowing whilst investment returns were low. In terms of the annual investment strategy the Council operated a very sophisticated system to determine the creditworthiness of investment counterparties. This was not just based on ratings but on a whole host of other information which was regularly reviewed. He referred to the creditworthiness policy which was laid down in section 4.3 of the report. The Council typically looked to the short end of the market when making investment decisions. He explained that whilst some overseas banks were now permitted as counterparties by the policy these were only the most highly rated institutions in countries which had a minimum sovereign rating of triple A. The Cabinet Member hoped that this strategy and general approach of investment gave the Council the confidence and security it needed.

In response to a question with regard to the Icelandic investments the Cabinet Member Finance confirmed that the council had received the funds from the recent auction of claims in Landsbanki. In response to a subsequent question with regard to the imminent break up of RBS and what that would mean for the council’s investment in the bank, the Cabinet Member Finance explained that investments were continually kept under review. It was important to consider how it could achieve the spread it wanted whilst ensuring that the bank was a safe institution. The council was currently lending short which was a reflection of the current investment policy.

A question was then raised about the possibility of local authorities issuing bonds to provide an alternative source of finance and it was asked where this would fit in the strategy. In response the Cabinet Member said this was at an early stage of development but would be considered and proposed should it be deemed appropriate.

RESOLVED that

1. The Treasury Management Strategy Statement and Annual Investment Strategy for 2014/15 at Appendix 2 be approved including :
2. The general policy objective ‘that Council should invest prudently the surplus funds held on behalf of the community giving priority to security and liquidity’.
3. That the Prudential Indicators for 2014/15 including the authorised limit as the statutory affordable borrowing limit determined under Section 3 (1) Local Government Act 2003 be approved.
4. Revisions to the Council’s lending list and parameters as shown in Appendix 3 are proposed in order to provide some further capacity. These proposals have been put forward after taking advice from the Council’s treasury management advisers Capita (formerly Sector) and are prudent enough to ensure the credit quality of the Council’s investment portfolio remains high.
5. For 2014/15 in calculating the Minimum Revenue Provision (MRP), the Council will apply Option 1 in respect of supported capital expenditure and Option 3 in respect of unsupported capital expenditure as per section 21 in Appendix 3.