Agenda item

To enable the Committee to review the Draft Annual Capital and Treasury Strategy for 2021/22 and to submit comments thereon to Cabinet.

It was reported to the Committee that on the 7 April 2021, the Corporate Finance and Governance Portfolio Holder had agreed the Annual Capital and Treasury Strategy for 2021/22 (including the Prudential and Treasury Indicators) for the purpose of consultation with this Committee prior to consideration of adoption of the strategy. The points highlighted in that report were:

·         The Local Government Act 2003 and supporting regulations required the Council had set out its treasury strategy for borrowing, and had prepared an Annual Investment Strategy (required by Investment Guidance subsequent to the Act) that had set out the Council’s policies for managing its investments and for giving priority to the security and liquidity of those investments, “having regard” to the Chartered Institute of Public Finance and Accountancy’s (CIPFA) Prudential Code and the CIPFA Treasury Management Code of Practice. Revised editions of both documents were issued in December 2017.

·         From 2019/20 the Capital Strategy had been combined with the Treasury Strategy into one document, which was required to be updated / approved annually.

·         The proposed Annual Capital and Treasury Strategy for 2021/22 was set out in Appendix A.

·         The Capital Strategy element of the combined document covered the various elements surrounding capital investment decisions and the key criteria that investment decisions were considered against.

·         The Treasury Strategy element of the combined document covered the various elements that satisfied the requirements of the various codes that governed the borrowing and investment activities of the Council and had been prepared in the light of advice received from the Council’s Treasury advisors and reflected the latest codes and guidance.

·         Prudential and Treasury indicators were included as an Annexe to the combined strategy and were therefore included within Appendix A.

·         Under the Prudential Code the Council had freedom over capital expenditure as long as it was prudent, affordable and sustainable. The Prudential Indicators either measured the expected activity or introduced limits upon the activity, and reflected the underlying capital appraisal systems and enabled the Council to demonstrate that it was complying with the requirements of the Prudential Code.

·         The Council’s investments would be undertaken in accordance with its Treasury Management Practices. Those were expanded to include use of non-specified investment in property to yield both rental income and capital gains from 2016/17. If credit ratings remained at their current extremely low levels it was likely that a significant proportion of the Council’s investments would continue to be in government securities such as with other Local Authorities. The business rates grant process associated with COVID 19 had demonstrated a need to maximise flexibility in the range of counterparties the Council used plus rates paid by the Debt Management Office had frequently been negative since autumn 2020, which was why two Money Market Funds were opened up in December 2020.

·         As part of the same report, 2020, the Capital and Treasury Strategy reflected the exploration of using property investment funds as part of the Council’s wider investment portfolio. However, at the present time that was no longer being actively pursued given the significant impact from COVID 19 and how unclear it had made the risk / reward equation going forward. All references to that type of investment had been removed from the strategy for 2021/22. However, it would be revisited once the economic recovery from COVID 19 had reached the point where it may again be considered as a potential useful addition to the investment portfolio.

·         As was always the case, other ‘quality’ investment opportunities would always be explored during the year in consultation with the Council’s external advisors to maximise returns on investments within a continuing and overall risk-averse approach.

After a detailed discussion the Committee RESOLVED:

·         To request that the head of Democratic Services and Election and the Section 151 Officer to develop proposals for training for the members of the Committee in relation to Local Government Finance and implement this on the basis that further training needs may then be further identified.

·         The Committee also recommended that Cabinet approves the submission of all schemes for which they were reserve previsions and one off funds set aside to finance, be subject to the assessment set out in the draft Annual Capital and Treasury strategy 2021/22 and presented to the Office Project Board to determine whether the funding should be released.