Agenda item
Treasury Management Strategy 2018/19
The report presents the draft Treasury Management Strategy for 2018/19 for consideration by the Committee. The final version of the Strategy, incorporating the views of the Committee, will be included in the budget report to be approved by the Council on 26 February 2018.
Minutes:
Sawan Shah (the Council’s Finance Analyst - Accountancy / Treasury) presented the draft Treasury Management Strategy for 2018/19 which contained details about the Council’s current investment and borrowing position and approach to investments and borrowing for the forthcoming financial year. The Strategy’s final version, alongside with the views of the Committee, would be included in the budget report to be approved by the Council on 26 February 2018. Mr Shah drew the Committee’s attention to key parts of the document:
- As a result of the recent rise in interest rates, the return on the Council’s investments had increased over the early part of the year. However, the impact of the rate on borrowing costs had been limited because the Council’s debt portfolio was predominantly made up of fixed rate Public Works Loan Board (PWLB) borrowing. It was expected that the Council’s borrowing portfolio would remain stable for up to 12 months.
- An increase in interest rates by the Bank of England had contributed to the slightly higher return. However, the Council’s Treasury Management advisers, Arlingclose, forecast that the official UK Bank Rate would likely remain at 0.5% for the immediate to medium-term. Any increase in the bank rates would be expected to be limited and at a gradual pace.
- The Council had a low-risk approach to its investment strategy and this had led to a lower yield. The performance of the Council’s investment portfolio had been reasonably good in comparison with other local authorities which indicated that the Council’s Treasury Management Strategy had been successfully executed over the recent years.
In response to a question about the UK Municipal Bonds Agency (MBA), Conrad Hall (the Council’s Chief Finance Officer) explained that as the Council did not foresee an immediate need to borrow, and as it was aware of the risks of joint and several liability, it did not take any part in setting up the Municipal Bonds Agency (MBA). However, it remained on the Authority’s list of potential borrowing sources and the option of joining the MBA was continually under review.
A Member of the Committee enquired about the reclassification of the Council as a retail client under the revised Markets in Financial Instruments Directive regulations and the position of other authorities on this matter. Mr Shah explained that many other authorities were opting up to professional client status as was Brent. He directed the Committee to pages 226 and 227 to the Agenda pack which contained a list of institutions which met the Council’s credit worthiness criteria and noted that despite the fact that the jurisdictions of some institutions were abroad, most of them had UK-based operations which meant that any deposits were likely to be kept in the UK part of the organisation and fall within the scope of the directive.
The Independent Member commented that the draft Treasury Management Strategy dealt well with complicated issues. Referring to the implementation and approval process, he said that he had spoken to Mr Hall regarding the process for Cabinet and Council approval of the actual Treasury Management Strategy in terms of the balance between Borrowing and Investments. This process should highlight any deviation between the current and desired balance between Borrowing and Investments. Where appropriate Council and Cabinet should be made aware of any limiting factors affecting the pace at which the Council can achieve the desired balance. Mr Hall agreed that this would be included in the final version that would be presented to Full Council on 26 February 2018.
RESOLVED that draft Treasury Management Strategy 2018/19, be noted.
Supporting documents:
- 16. Treasury Management Strategy Cover Report, item 15. PDF 79 KB
- 16a. Treasury Management Strategy 2018-19, item 15. PDF 500 KB