Agenda item

Report of Head of Financial Services

The Head of Financial Services presented a report to seek the panel’s views regarding the treasury management framework proposals for 2012/13, prior to their consideration by Council.

It was advised that at its meeting on 14 February 2012, Cabinet had considered a report entitled ‘Treasury Management Strategy 2012/13’. In line with the updated (2011) Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice on Treasury Management, the Budget and Performance Panel had been explicitly named as responsible for scrutiny of the treasury management function, including review of the annual strategy.

Given the timing of Budget and Performance Panel meetings it had unfortunately not been possible to provide for scrutiny of the treasury management proposals prior to them being considered by Cabinet. However any recommendations arising from the meeting could be reported to Budget Council on 29 February, when members would be asked formally to approve the framework.

To give context, the Head of Financial Services summarised the key points of the 2011/12 Treasury Management Progress Report, which outlined activities undertaken in pursuance of those strategies during the financial year up to the end of quarter 3.

The panel considered the Treasury Management Strategy 2012/13 to 2014/15 which was appended to the report. The key elements and assumptions feeding into the budget proposals were outlined to members. It was advised that the physical borrowing position of the council was projected to remain constant over the next three years, but additional borrowing of £32.1M would be needed to support the HRA self financing buy out.

The investment aspects of the strategy were outlined to the panel. It was advised that 2011/12 had been dominated by a soverign debt crisis, which had had a negative impact on the Euro zone as well as the UK economy, including the widespread downgrading of banks.

The main changes to the investment limits for 2012/13 onwards were an increase to the proposed investment limits with Lancashire County Council, and a move away from banks that had access to the Government’s ‘guarantee’ scheme, but which were not part-nationalised UK institutions.

The Investment Strategy 2012/13 to 2014/15 was outlined to the panel, it was advised that overall the strategy put forward followed on from 2011/12 in that it was based on the council having a low risk appetite with focus on high quality deposits, and with the potential for a core of cash to be placed fixed term with Lancashire County Council to enhance yield.

Members asked questions regarding the following areas:

·         Investment rates for fixed term accounts with Lancashire County Council.

·         The council’s current levels of investments with different banks.

·         The proposed move away from banks which were not part-nationalised UK institutions.

·         Scenarios relating to the sale of land located at South Lancaster being sold in 2012/13.

·         Proposed investments with Lancashire County Council, and the level of risk.

·         The situation regarding cash being returned from Icelandic banking investments.

Resolved:

(1)        That the report be noted.

(2)        That the panel recognise that Treasury Management is a very specialised field requiring specialist knowledge, and is a very onerous responsibility.

(3)        That the panel recognise that Cabinet and Budget and Performance Panel will trust and rely on officer advice, who in turn will rely on advice from financial advisors.

(4)        That the panel agree that despite the low rates of return, caution and fluidity are the best approaches in regards to the council’s investment strategy.

(5)        That the panel note that significant progress has been made in relation to the return of cash from Icelandic bank investments.