Agenda item

To consider a report by the Head of Finance and Assets (copy enclosed) which incorporates the Treasury Management Strategy Statement 2015/16, Prudential Indicators 2015/16 and Update Report 2014/15.

 

To receive a report by the Head of Finance and Assets (copy enclosed) which incorporated the Treasury Management Strategy Statement 2015/16, Prudential Indicators 2015/16 and Update Report 2014/15.

 

The TMSS, Appendix 1 shows how the Council would manage its investments and its borrowing for the coming year and sets the policies within which the TM function operates.  The report also outlined the likely impact of the Corporate Plan on this strategy and on the Prudential Indicators.  The TM Update Report, Appendix 2, provided details of the Council’s TM activities during 2014/15.  The CA outlined the changes in policy which included the implications pertaining to the Banking Reform Act and the national ending of the subsidy system for the Housing Revenue Account in Wales.

 

Members were informed that the figures contained in the TMSS were draft and would be updated prior to approval by Council based on the latest Capital Plan in February, 2015. 

 

TM involved looking after the Council’s cash which was a vital part of the Council’s work as approximately £0.5bn passes through the Council’s bank account annually.  At any one time the Council had at least £20m in cash so it was important to ensure the best rate of return possible was achieved without putting the cash at risk, which was the reason for investing money with a number of financial institutions.  When investing, the Council’s priorities would be to:-

 

·                 keep money safe (security);

·                 make sure that we get the money back when we need it (liquidity);

·                 make sure we get a decent rate of return (yield).

 

The TMSS for 2015/16 had been set out in Appendix 1.  The report included Prudential Indicators which set limits on the Council’s TM activity and demonstrated that the Council’s borrowing was affordable.  A summary of the detail in Appendix 1 was provided by the CA.

 

The Council Fund indicators were based on the latest proposed capital bids and block allocations and these would be updated prior to submission of the report to Council for approval on the 24^th February, 2015.                                                                                                                           

The Housing Revenue Account indicators had been calculated based on the latest estimates from the Housing Stock Business Plan.  The individual Prudential Indicators recommended for approval had been set out in Appendix 1 Annex A.

 

The WG had concluded negotiations with HM Treasury regarding the reform of the HRA subsidy system in Wales.  There would be a need to borrow between £39m and £55m on the 2^nd April, 2015 to buy out of the subsidy scheme to become self-financing.  The impact of this had been built in to the HRA prudential indicators and further details of the buy-out had been included in Appendix 1 Section 8.  Appendix 3 included a risk and sensitivity analysis relating to the HRA buy-out.

         

The TM update report, Appendix 2, highlighted the changes implemented to the investment strategy, Appendix 1 Section 3, as a result of bail-in risk which would mean that banks would not be able to rely on government support if they get into difficulty and would be required to bail themselves out by taking a proportion of investors’ deposits to build up their capital.  These changes involved moving away from conventional bank deposits to secured investments such as reverse repurchase agreements (REPOs) and covered bonds.

 

Details of the consultation process had been included in the report, and it was confirmed that the revised CIPFA Code of Practice on TM had been adopted on the 28^th February, 2012.  It explained that it was a requirement of the Code for Council to approve a TMSS each financial year.

 

At this juncture in the meeting the Committee resolved to move to Part II to consider Appendix 3 of the report, HRAS Voluntary Agreement Risk and Sensitivity Analysis.

 

PART II

 

EXCLUSION OF PRESS AND PUBLIC

 

RESOLVED that under Section 100A of the Local Government Act 1972, the Press and Public be excluded from the meeting for the following items of business on the grounds that it involved the likely disclosure of exempt information as defined in Paragraph 14 of Part 4 of Schedule 12A of the Local Government Act 1972

 

The CA provided a detailed summary of Appendix 3 which outlined and quantified of some of the risks apparent and possible impacts resulting from the proposed national agreement to end the Housing Subsidy system in Wales.  It also highlighted some of the key financial risks associated with the proposed agreement and possible impacts on the sustainability of the Housing Stock Business Plan.  The CA outlined the recommendations as presented to the Head of Finance and Assets, and highlighted the complex nature of the proposed agreement, particular reference being made to the implications arising from the flexibility of interest rates.

 

The HLHRDS explained that Council had approved the deal in principle and delegated authority to the respective Lead Member and Head of Finance and Assets to negotiate the final detail.  The Chair suggested that the situation be noted and included in the Committees Forward Work Programme following further developments. 

 

In response to a question from Councillor S.A. Davies relating to the right to buy, the CA confirmed that the number of transactions over recent years had been minimal.

 

Following consideration of Appendix 3 the meeting resumed to Part I.

 

PART 1

 

The Chair explained that the CIPFA Code of Practice on TM required the Section 151 Officer to ensure that all Members tasked with TM responsibilities, including scrutiny of the TM function, receive appropriate training relevant to their needs and understand fully their roles and responsibilities.  The CA agreed that training could be provided and details of previous training provision be forwarded to the Chair.

 

RESOLVED – that Corporate Governance Committee:-

 

(a)            receives the TMSS for 2015/16, and the Prudential Indicators for 2015/16, 2016/17 and 2017/18 (Appendix 1).

(b)            notes the TM update report (Appendix 2), and

(c)            agrees that the Chief Accountant provides the Chair with details of previous training provision on TM matters.

     (RW to Action)