The Council is required to operate a balanced budget, which broadly means that cash raised during the year will meet cash expenditure. Part of the treasury management operation is to ensure that this cash flow is  adequately planned, with cash being available when it is needed.  Surplus monies are  invested in low risk counterparties or instruments commensurate with the Council’s low risk appetite, providing adequate liquidity initially before considering investment return.

The Strategic Director of Corporate Services will submit Document “AH” which shows the Council’s Treasury Strategy for borrowing for the three financial years commencing 2017/18 and the Annual Investment Strategy for 2017/18.

Resolved-

That the Treasury Management Policy (Document “AH”) be noted and referred to Council for adoption.

                                                                        (David Willis – 01274 432361)

The Council was required to operate a balanced budget, which broadly meant that cash raised during the year will meet cash expenditure. Part of the treasury management operation was to ensure that this cash flow was  adequately planned, with cash being available when it was needed.  Surplus monies were invested in low risk counterparties or instruments commensurate with the Council’s low risk appetite, providing adequate liquidity initially before considering investment return.

The Strategic Director of Corporate Services submitted Document “AH” which showed the Council’s Treasury Strategy for borrowing for the three financial years commencing 2017/18 and the Annual Investment Strategy for 2017/18.

It was reported that the Council was currently maintaining an under-borrowed position which meant that the Capital Financing Requirement had not been fully funded with loan debt as cash supporting the Council’s reserves, balances and cash flow had been used as a temporary measure.  This strategy was sensible as investment returns were low and counterparty risk was still an issue that needed to be considered.

Members were informed that the level of under borrowing had increased over the last two years and a decision was made in December to take advantage of currently low interest rates to borrow against loans maturing in March 2017.Loans to the value of £25.9m were therefore taken out at an average rate of 2.6187%, and would replace loans of the same amount maturing in March, that had a average interest rate of 8.947%.This would reduce the average interest rate on the overall debt portfolio by 0.5% in March 2017, saving £1.65m per year.

It was reported that with the risks within the economic forecast, caution would be adopted with the 2017/18 treasury operations.  The Strategic Director Corporate Services would monitor interest rates in financial markets and adopt a pragmatic approach to changing circumstances.

Members were informed that the cash balances for the Council were invested at present in liquidity funds, term deposits, certificate of deposits  and Treasury bills. The money market had undertaken great change since 2008 with the number of banks available for the council to invest in and their funding requirements reducing.

It was proposed that to  increase the products the Council was able to invest in the following should be included:

a)bonds  issued by the  UK Government and  banks/ building society  including covered bonds (Appendix 2 to Document “AH”).

b) Floating rate notes again issued by the UK Government and banks/ building society including covered.

Members were informed that the maturity and credit rating would follow the same criteria as the current investments.

It was reported that the additional products  would help in the following way without increasing risk.

·         certain banks only issue in the products above .

·         better rates may be available than the Council was able to gain from the products that were used at present.

·         Covered bonds  and covered floating rate notes had better credit ratings and so offered another layer of protection.

·         Both bonds and floating rate note notes were tradable and so could be sold before they matured which gave greater flexibility.

In response to a Member’s question it was reported that although the Council’s cash position was reducing, it would be prudent to have further options to invest in.

It was reported that better rates were explored for loans coming to maturity.

Resolved-

That the Treasury Management Policy (Document “AH”) was considered and  referred to Council for adoption.

Action:           Strategic Director of Corporate Services