Decision details

The Leader and Cabinet Member for Finance submitted a report which set out the suggested Treasury Management Strategy for 2015/2016 in respect of the following aspects of the Treasury Management function.

The Strategy is based upon the Treasury officers’ views on interest rates, supplemented with leading market forecasts provided by the Council’s Treasury advisor. 

The Strategy covers the following:-

·      treasury limits in force which will limit the treasury risk and activities of the Council;

·      prudential and treasury indicators;

·      the current treasury position;

·      prospects for interest rates;

·      the borrowing strategy;

·      the borrowing requirement;

·      debt rescheduling;

·      the investment strategy;

·      the minimum revenue provision policy.

The primary objective of the Council’s treasury management function will continue to be the minimisation of financing costs whilst ensuring the stability of the Authority’s long term financial position by borrowing at the lowest rates of interest and by investing surplus cash to earn maximum interest, all at an acceptable level of risk.

The overall strategy for 2015/2016 will be to finance capital expenditure by running down cash/investment balances and using short term temporary borrowing rather than more expensive longer term loans. The taking out of longer term loans (1 to 10 years) to finance capital spending would only then be considered if required by the Council’s underlying cash flow needs. Some long term loans (over 10 years) may be undertaken to replace debt which matures in the year. With the reduction of cash balances the level of short term investments will fall. Given that investment returns are likely to remain low (0.50%) for the financial year 2015/2016, then savings will be made from running down investments rather than taking out more expensive long term loans.

This approach does have a refinancing risk and it should be noted that with a 2 pool approach to Housing Revenue Account (HRA) and General Fund (GF) debt, whilst the HRA is fully funded, the GF is carrying all of this risk.

All prospects for rescheduling debt will be considered, in order to generate savings by switching from high costing long term debt to lower costing shorter term debt.

RECOMMENDATION TO COUNCIL:

That approval be given to the submission of the following to Council for consideration:-

·         Prudential Indicators Forecast for 3 years;

·         Treasury Management Strategy 2015/2016;

·         Minimum Revenue Provision Policy for 2015/2016;

·         Scheme of Delegation and Responsibility as set out in Appendices 2 and 6 of the report submitted.