Issue - meetings

To receive and consider report 148/08 of the Strategic Director. 

(Time: 2.53pm to 2.55pm)

The Executive received and considered report 148/08 of the Strategic Director which set out the detailed treasury management strategy for 2009/10 and gave an indication of expected treasury operations for 2010/11 and 2011/12.

The preparation of a strategy was governed by the prudential capital financing regime which laid down four key legislative requirements:

·         The reporting of the prudential indicators setting out the expected capital activities.  This formed part of the budget proposal to the Council in February

·         If the Council borrowed to fund capital expenditure it would need a minimum revenue provision policy to set out how the Council would pay for capital assets through revenue each year.  However, this was not applicable to this Council at this time but if it was a report would be brought forward

·         A treasury management strategy statement, which set out how the Council’s treasury service would support the capital programme and revenue budget, the day to day treasury management, and the limitations on activity through treasury prudential indicators

·         An investment strategy which set out the Council’s criteria to select investment counterparties and limiting exposure to the risk of loss

The report set out the Council’s powers for investing funds and guidance on prudent investment.  Priority had to be given to security and liquidity but it was reasonable to seek the highest return consistent with those aims.  The guidance discouraged the use of speculative investments such as equities.  Borrowing to invest remained unlawful. 

The Treasury Management and Investment Strategy Statement set borrowing limits, investment objectives, approved organisations for investment, guidelines and performance criteria for the in-house operation.  There had been no significant change in the Council’s circumstances but the current economic climate and difficulties in the money markets had prompted a review of approach.  The result had been to maintain similar base criteria as in previous years but tailor it by:

·         implementing a more restrictive operational approach than that set out in the strategy until such time as the banking system returns to normal operation.  This approach had been in adopted since October 2008 (following the collapse of the Icelandic bank in which the Council had investment).  However, the strategy would allow the investment service flexibility to return to the fuller criteria without a further Council resolution

·         including those institutions with wholesale guarantees where the Government had a sovereign ‘AAA’ rating from all three main rating agencies.  Any investments would be limited to amounts and maturities within the terms of the guarantee

The Executive supported the proposed strategy. 

R E C O M M E N D E D

that recommend to Council to approve:

(i)                 the Treasury Management Strategy 2009/10 to 2011/12 and the treasury prudential indicators, contained within Appendix B to these minutes;

(i)                 the Authorised Limit Prudential Indicator;

(ii)               the Investment Strategy 2009/10 contained in the treasury management strategy and the detailed criteria included in Annex A1 to the appendix.