Agenda item

2.10 p.m.

The report contains the annual Treasury Management Strategy Statement and Annual Investment Strategy for 2021/22 in compliance with the CIPFA Code of Practice. The report sets out the borrowing and investment strategies for 2021/22 and relevant background information.

The Audit & Governance Committee is RECOMMENDED to endorse the Treasury Management Strategy for 2021/22 as outlined in the report.

Tim Chapple, Treasury Manager introduced the Treasury Management Strategy and Annual Investment Statement for 2021/22 outlining the Council’s risk appetite and strategic objectives in terms of its debt and investment management for the financial year 2021/22.

The following adjustments were made to the report taking into account forecast updates as follows:

·         Paragraph 26 – the central case is for the 10-year and 20-year to rise to around 0.6%, rather than the 0.5% previously stated, rising to 0.9%, rather than the 0.75% stated in the report.

·         Paragraph 29 – borrowing rates were forecast in the report to be 0.80 – 1.55%, however this has now risen to 0.90 – 1.70% in the short to medium term.

Tim Chapple responded to Members’ queries as follows:

·         There is speculation in the media of negative interest rates, which cannot be ruled out, however these are viewed as the last resort by the Bank of England.

·         Instruments with a negative yield would be avoided if possible and replaced with rolling local authority deposits. Positive or zero yielding call accounts could also be used instead of negative money market fund

·         The Local Government Treasury Management is bound by the code of practice and security is prioritised, there are not a large number of products available that would fulfil the security criteria whilst ticking all the boxes on environmental issues, therefore the market needs to move with us to satisfy that type of investment.

·         At the end of 2019, the amount to invest in strategic funds was agreed and that is the amount currently held. 

·         We will extend a small credit facility to OxLEP.  As the accountable body, we will ensure there is sufficient funding for OxLEP to be able to repay the borrowing, as the funding reduces, we will have first call on future business rates as security.

·         As part of the capital financing requirement, there is an extra £200m worth of borrowing, to fund the capital programme.  Treasury Management will make a decision as to whether this is internal or external borrowing, and information on this will be included in the mid-term review in future monitoring reports.

Councillor Charles Mathew asked if enough consideration had been given to investing larger amounts in the strategic funds?  Tim Chapple responded that core cash balances were agreed at the end of 2019 and that the amount currently invested is appropriate.  Exposure comes with risk and would not want to be in a position where we were forced to divest away from long-term external funds and risk having to sell below purchase price as this would have to be funded by the revenue budget.  Lorna Baxter, Director of Finance stated that whilst she agreed with Tim Chapple’s comments, the Treasury Management Strategy Team could consider other options again, and report back to the Committee.  The council would not borrow above its borrowing requirement.

Councillor Roz Smith requested that for the next report, feedback on investments that have been considered and rejected would be interesting for Members.

RESOLVED to endorse the Treasury Management Strategy for 2021/22 as outlined in the report.