Agenda item

Councillor Roger Ramsey (Cabinet Member for Value) introduced the report

The Council’s investment policy was set out in the Treasury Management Strategy Statement, which was agreed by full Council as part of the budget setting process in February.

The Council’s investment policy had regard to the Department for Communities and Local Government’s Guidance on Local Government Investments (“the Guidance”) and the 2011 revised CIPFA Treasury Management in Public Services Code of Practice and Cross Sectoral Guidance Notes (“the CIPFA TM Code”).  The Council’s investment priorities were security first, liquidity second, then return.

The report proposed two amendments to the approved investment policy:

(1) To amend the group limit for UK institutions to the higher of £25m or 25% of the investments’ opening balance at the start of the month

(2)To create an additional £5m overnight limit (in excess of any previously set limit) with the Council’s banker to allow for late receipt of cash.

Hitherto, the group limit had been the lower of £25m or 25% of the investments’ opening balance at the start of the quarter as, prior to the introduction of the HRA refinancing reform, traditionally the start of the quarter was always the highest cash position. With rental incomes being generated throughout the month this was no longer the position and changing the lending limit would allow flexibility should cash levels increase.

Should the additional overnight limit be used, the cash would be placed with a more suitable counterparty the following working day.

Reasons for the decision:

The statutory Codes required Member approval of any amendments to the Annual Investment Strategy for 2012/13.

Other options considered:

1)     Not to implement the changes to the strategy: this would have meant that the Council would continue to utilise the Debt Management Office and other Local Authorities, often at a cost.

2)     To increase the number of available counterparties used by the Authority: this would have meant using lesser-rated institutions or those that for various reasons do not appear on the Council’s approved lending list. Officers were not prepared to recommend this approach to Members.

Members were advised that a need for flexibility in short-term investment had become more noticeable recently because of changes in housing finance, the flow of capital receipts and a reduction in the number of financial institutions that could be used.

Cabinet approved the changes to the Annual Investment Strategy.