Agenda item - Treasury Management Strategy Statement, Prudential Indicators and Minimum Revenue Provision Statement for 2017/18

Agenda item

Treasury Management Strategy Statement, Prudential Indicators and Minimum Revenue Provision Statement for 2017/18

Minutes:

Consideration was given to the report detailing the Treasury Management Strategy Statement, Prudential Indicators and Minimum Revenue Provision Statement for 2017/18.

Cabinet noted the first Treasury Management Strategy Statement noting that other reports will follow (minimum of three per year).

 

The Council is required to manage a balanced budget, the Treasury Management Strategy will ensure this is done, adequately planned, with funds available when and where needed.  The Treasury Management Strategy will also ensure the adequate funding of the Council’s Capital plans which provide a borrowing guide for the Council’s needs.  It was noted that as of the end of 2016 the Council had £210 million of long term borrowing and £235 million of investments. It is believed that the Council will need to undertake further borrowing of £46 million for 2018/19 to maintain forecast investments balances at £30 million.  The Council’s Borrowing Strategy is in place and was noted together with the Investment Strategy both of which are detailed and comprehensive.

 

For the reasons set out in the report and statutory codes Cabinet:

 

  1. Approved  the Treasury Management Strategy Statement (TMSS)

 

  1. Approved the Prudential Indicators set out in appendix B of the report

 

  1. Approved the Annual Minimum Revenue Provision statement for 2017/18 set out in appendix C of this report.

 

  1. Cabinet agreed to recommend the annual TMSS and MRP statements 2017/18 to Council for approval.

 

Other Options Considered

 

The CLG Guidance and the CIPFA Code do not prescribe any particular treasury management strategy for local authorities to adopt.  The Chief Financial Officer, having consulted with the Cabinet Member for Financial Management believes that the above strategy represents an appropriate balance between risk management and cost effectiveness.  Alternative strategies, with their financial and risk management implications, were considered and are listed below:

 

Alternative

Impact on income and expenditure

Impact on risk management

Invest in a narrower range of counterparties

Interest income will vary depending on the counterparties used

Lower chance of losses from credit related defaults, but any such losses will be greater

Invest in a wider range of counterparties

Interest will again vary depending on the counterparties used.

Increased risk of losses from credit related defaults, but any such losses will be smaller

Invest in deposits with a longer duration

Interest income will be higher

Increased risk of losses from credit related defaults and a reduction in liquidity

Invest in deposits with a shorter duration

Interest income will be lower

Decreased risk of losses from credit related defaults and an increase in liquidity

Borrow additional sums at long-term fixed interest rates

Debt interest costs will rise; this is unlikely to be offset by higher investment income

Higher investment balance leading to a higher impact in the event of a default; however long-term interest costs will be more certain

Borrow short-term or variable loans instead of long-term fixed rates

Debt interest costs will initially be lower

Increases in debt interest costs will be broadly offset by rising investment income in the medium term, but long term costs will be less certain

Reduce level of borrowing

Saving on debt interest is likely to exceed lost investment income

Reduced investment balance leading to a lower impact in the event of a default; however long-term interest costs will be less certain and there may be additional costs occurred from restructuring

 

Supporting documents: