Meeting documents

1 THE ISSUE

1.1 The Local Government Act 2003 requires the Council to `have regard to' the Prudential Code and to set Prudential Indicators for the next three years to ensure that the Council's capital investment plans are affordable, prudent and sustainable.

1.2 The Act therefore requires the Council to set out its treasury strategy for borrowing and to prepare an Annual Investment Strategy; this report sets out the Council's policies for managing its investments and for giving priority to the security and liquidity of those investments.

2 RECOMMENDATION

2.1 Approve the actions proposed within the Treasury Management Strategy Statement (Appendix 1).

2.2 Approve the borrowing and debt rescheduling strategy as detailed in Appendix 1.

2.3 Approve the investment strategy as detailed in Appendix 2.

2.4 Approve the changes to the authorised lending list detailed in Appendix 2 and highlighted in Appendix 4.

2.5 Approve the proposed policy on Minimum Revenue Provision and depreciation of assets as detailed in Appendix 5.

2.6 Note the Prudential Indicators detailed in Appendix 1 and delegate authority for updating the indicators prior to approval at Full Council on 19^th February 2008 to the Assistant Director Support Services (Finance) and Executive Member for Resources.

3 FINANCIAL IMPLICATIONS

3.1 Included in the report and appendices.

4 COMMUNITY STRATEGY OUTCOMES

4.1 This report is of a corporate and technical nature and therefore does not directly contribute to Community Strategy outcomes.

5 CORPORATE IMPROVEMENT PRIORITIES

5.1 This report is of a corporate and technical nature and therefore does not directly contribute to individual Corporate Improvement Priorities.

6 CPA KEY LINES OF ENQUIRY

6.1 The report does not directly relate to the CPA Key Lines of enquiry but does form part of the financial processes tested under the CPA Use of Resources inspection.

7 THE REPORT

7.1 The Local Government Act 2003 requires the Council to `have regard to' the Prudential Code and to set Prudential Indicators for the next three years to ensure that the Council's capital investment plans are affordable, prudent and sustainable.

7.2 The Act therefore requires the Council to set out its treasury strategy for borrowing and to prepare an Annual Investment Strategy; this sets out the Council's policies for managing its investments and for giving priority to the security and liquidity of those investments.

7.3 The suggested strategy for 2008/09 in respect of the following aspects of the treasury management function is based on the Treasury officers' views on interest rates, supplemented with leading market forecasts provided by the Council's treasury advisor.

The strategy covers:

7.4 It is a statutory requirement under Section 33 of the Local Government Finance Act 1992, for the Council to produce a balanced budget. In particular, Section 32 requires a local authority to calculate its budget requirement for each financial year to include the revenue costs that flow from capital financing decisions. This, therefore, means that increases in capital expenditure must be limited to a level whereby increases in charges to revenue from: -

7.5 The Prudential Code was introduced for the first time in 2004/05. The Strategy Statement for 2007/08 set Prudential Indicators for 2007/08 - 2009/10, which included a total borrowing requirement at the end of 2007/08 of £102million (including supported and unsupported borrowing). At the end of December 2007 external borrowing was £80million, with no further borrowing planned in the 2007/08 financial year. The lower amount borrowed is due to various factors affecting cashflow including re-phased capital spend including the cash backed capital contingency and favourable capital grant profiles.

7.6 The proposed Treasury Management Strategy is attached at Appendix 1 and includes the Prudential Indicators required by the Prudential Code. The Prudential Indicators contained within this report are currently draft and could be affected by changes made to the capital programme, following decisions on the budget report which is also on the agenda for this meeting. It is therefore requested that the Cabinet grant delegated authority to the Assistant Director Support Services (Finance) and the Executive Member for Resources to agree any changes to the indicators prior to reporting for approval at Full Council on the 19^th February 2008.

7.7 Although the Prudential Indicators provide for a maximum level of total (supported and unsupported) borrowing, this should by no means be taken as a recommended level of borrowing as each year affordability needs to be taken into account together with other changes in circumstances (for example, revenue pressures, levels and timing of capital receipts and changes to capital projects spend profiles).

7.8 The Annual Investment Strategy is attached at Appendix 2 incorporating proposed additions to the Council's authorised lending list, with interest rate forecasts and the Council's lending list attached at Appendix 3 & 4 respectively.

7.9 Draft regulations are expected soon that will be effective from 31^st March 2008. In this The Secretary of State is expected to recommend that before the start of each financial year a local authority prepares a statement of its policy on making Minimum Revenue Provision (MRP) in respect of that financial year and submits it to the full council.

7.10 Appendix 5 provides background to these regulations and sets out a provisional MRP policy for the Council which is subject to the final published regulations.

8 RISK MANAGEMENT

8.1 The report author and Lead Executive member have fully reviewed the risk assessment related to the issue and recommendations, in compliance with the Council's decision making risk management guidance.

8.2 The Council's lending & borrowing list was last reviewed in November 2007 and credit ratings are monitored throughout the year. All lending/borrowing transactions are within approved limits and with approved institutions. Investment & Borrowing advice is provided by our Treasury Management consultants SECTOR.

9 RATIONALE

9.1 This report is a statutory requirement.

10 OTHER OPTIONS CONSIDERED

10.1 None.

11 CONSULTATION

11.1 Executive Councillor; Section 151 Finance Officer; Chief Executive; Monitoring Officer

11.2 The report was circulated by email for comments.

12 ISSUES TO CONSIDER IN REACHING THE DECISION

12.1 Corporate;

13 ADVICE SOUGHT

13.1 The Council's Monitoring Officer (Council Solicitor) and Section 151 Officer (Strategic Director - Support Services) have had the opportunity to input to this report and have cleared it for publication.