Issue - meetings

The CFO introduced a report setting out the Council's Treasury Management Annual Strategy Statement for 2015/16 (TMSS).

Assembly noted that the overall TMSS included details of the proposed borrowing limit for the year and a range of other aspects aimed at ensuring that the Council had prudent and robust arrangements in place to meet all of its financial commitments and responsibilities, in line with the requirements of Section 15(1) of the Local Government Act 2003.

Responding to the report, Councillor Gill sought clarification as to the proposal to extend the authorised Borrowing limit to the maximum statutory limit of £800m in 2015/16 with no plans to repay loans.  The CFO explained that the principle reason to maximise borrowing limits was to achieve headroom in the short term to allow the Council to maintain a healthy cash flow to meet its ongoing revenue commitments. He confirmed that there are no existing loans due to mature next year although officers constantly review all current loans to make sure the Council is achieving the best terms. 

The Assembly resolved to:

(i)  Note that on 15 January 2015 the Council borrowed £89 million from the European Investment Bank as outlined in section 4.5 of the report;

(ii)  Adopt the Treasury Management Strategy Statement for 2015/16 as set out in the report and in doing so:

(a)  Note the current treasury position for 2015/16 and prospects for interest rates, as referred to in sections 4 and 7 of the report;

(b)  Approve the Council’s Borrowing Strategy, Debt Rescheduling Strategy and Policy on borrowing in advance of need for 2015/16 as referred to in section 9 of the report;

(c)  Approve the Annual Investment Strategy and Creditworthiness Policy for 2015/16 outlining the investments that the Council may use for the prudent management of its investment balances, as set out in Appendix 1 to the report;

(d)  Approve the Authorised Borrowing Limit of £800m for 2015/16, representing the statutory limit determined by the Council pursuant to section 3(1) of the Local Government Act 2003, as set out in Appendix 3 to the report;

(e)  Approve the Treasury Management Indicators and Prudential Indicators for 2015/16, as set out in Appendix 3 to the report;

(f)  Approve the Minimum Revenue Policy Statement for 2015/16, representing the Council’s policy on repayment of debt, as set out in Appendix 4 to the report;

(g)  Maintain the authority delegated to the Chief Finance Officer, in consultation with the Cabinet Member for Finance, to proportionally amend the counterparty lending limits agreed within the TMSS to take into account the initial increase in cash from the EIB but also the subsequent decrease in cash balances as payments are made to the SPV; and

(h)  Agree that the delegated responsibility be reviewed as part of the 2014/15 Treasury Management Outturn Report to Assembly in July 2015.

The Cabinet Member for Finance presented the Council’s draft Treasury Management Strategy Statement (TMSS) for 2015/16.

The Cabinet Member referred to the Council’s treasury position at 31 December 2014, which included a £4.626m investment in Barking Riverside Limited which the Chief Finance Officer provided further details on.  A further £89m had been borrowed from the European Investment Bank (EIB) in January 2015, to support the estate regeneration proposals approved by the Cabinet on 4 August 2014 (Minute 16 refers), at a rate of 2.207% for the full 30-year term of the loan which was a significantly better rate than was used in the financial modelling for the project.  The Cabinet Member explained that whilst that was clearly to the benefit of that project, the projections elsewhere in the TMSS in relation to income from cash balances meant that the Council may not achieve its income targets unless interest rates increased in the next year or two.

The Cabinet Member also highlighted changes to the investment strategy going forward in respect of duration and counterparty risks, which would enable the Council to take advantage of potential higher returns while retaining sufficient safeguards.

Cabinet resolved to recommend the Assembly to:

(i)  Note that on 15 January 2015 the Council borrowed £89 million from the European Investment Bank as outlined in section 4.5 of the report;

(ii)  Adopt the Treasury Management Strategy Statement for 2015/16 as set out in the report and in doing so:

(a)  Note the current treasury position for 2015/16 and prospects for interest rates, as referred to in sections 4 and 7 of the report;

(b)  Approve the Council’s Borrowing Strategy, Debt Rescheduling Strategy and Policy on borrowing in advance of need for 2015/16 as referred to in section 9 of the report;

(c)  Approve the Annual Investment Strategy and Creditworthiness Policy for 2015/16 outlining the investments that the Council may use for the prudent management of its investment balances, as set out in Appendix 1 to the report;

(d)  Approve the Authorised Borrowing Limit of £800m for 2015/16, representing the statutory limit determined by the Council pursuant to section 3(1) of the Local Government Act 2003, as set out in Appendix 3 to the report;

(e)  Approve the Treasury Management Indicators and Prudential Indicators for 2015/16, as set out in Appendix 3 to the report;

(f)  Approve the Minimum Revenue Policy Statement for 2015/16, representing the Council’s policy on repayment of debt, as set out in Appendix 4 to the report;

(g)  Maintain the authority delegated to the Chief Finance Officer, in consultation with the Cabinet Member for Finance, to proportionally amend the counterparty lending limits agreed within the TMSS to take into account the initial increase in cash from the EIB but also the subsequent decrease in cash balances as payments are made to the SPV; and

(h)  Agree that the delegated responsibility be reviewed as part of the 2014/15 Treasury Management Outturn Report to Assembly in July 2015.