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 sets out the Council's policies for managing its investments and for giving priority to the security and liquidity of those investments.

1.3 The suggested strategy for 2006/07 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:

2 RECOMMENDATION

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

2.2 Note the Prudential Indicators detailed in paragraph 5.2 of Appendix 1 and delegate authority for updating the indicators prior to approval at Full Council on 21^st February 2006 to the Resources Director and Executive Member for Resources.

2.3 Approve the borrowing strategy as detailed in paragraph 5.6 of Appendix 1.

2.4 Approve the investment strategy as detailed in Appendix 2.

3 FINANCIAL IMPLICATIONS

3.1 Included in the report and appendices

4 THE REPORT

4.1 The Prudential Code was introduced for the first time in 2004/05. The Strategy Statement for 2005/06 set Prudential Indicators for 2005/06 - 2007/08, which included a total new borrowing requirement for 2005/06 of £65million (including supported and unsupported borrowing). At the end of December 2005 external borrowing was £40million. This is expected to increase by the end of the financial year as additional capital payments are made.

4.2 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 Council Executive grant delegated authority to the Resources Director and the Executive Member for Resources to agree any changes to the indicators prior to reporting for approval at Full Council on the 21^st February 2006.

4.3 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 or levels of capital receipts).

4.4 The Annual Investment Strategy is attached at Appendix 2 with interest rate forecasts and the Council's lending list attached at Appendix 3 & 4 respectively.

5 RISK MANAGEMENT

6 RATIONALE

6.1 This report is a statutory requirement.

7 OTHER OPTIONS CONSIDERED

7.1 None.

8 CONSULTATION

8.1 Executive councillor, Section 151 Finance Officer, Chief Executive and Monitoring Officer.