Agenda item

2.10 p.m.

Report by the Director of Finance

The Treasury Management Strategy & Annual Investment Strategy for 2022/23 outlines the Council’s strategic objectives in terms of its debt and investment management for the financial year 2022/23. 

Changes to the Treasury Management Strategy will be recommended to Council to be delegated to the Director of Finance in consultation with the Leader of the Council and Cabinet Member for Finance.

The Audit & Governance Committee is RECOMMENDED to endorse the Treasury Management Strategy for 2022/23 as outlined in the report.

The Committee considered a report setting out proposed changes to the Treasury Management Strategy which would be referred to Council for approval, along with a recommendation that the Director of Finance, in consultation with the Leader of the Council and the Cabinet Member for Finance, be granted the necessary delegated authority in accordance with the proposed changes.

It was recommended that the Audit & Governance Committee endorse the Treasury Management Strategy for 2022/23 as outlined in the report.

Tim Chapple, Treasury Manager, presented the report.

In the subsequent discussion, the following points were raised.

(a)       The Chair noted that, in Paragraph 8 of the report, it stated that the introduction of a “Liability Benchmark” was set out in Paragraph 50 of the report. This was, in fact, set out in Paragraphs 51 et seq. of the report [under the subheading “Liability Benchmark”].

(b)       Regarding the “Changes from 2021/22 Strategy” (Paragraph 7 of the report), it was proposed that, following a review of the balance sheets for the current year, the long-term lending limit for 2022/2023 be increased from £185 million to £205 million.

(c)        The Council had used LIBOR as a benchmark of performance. As LIBOR ceased to exist on 1 January 2022, officers now used the Sterling Overnight Index Average (SONIA) as the interest rate benchmark.

(d)       If, under a LOBO (Lender Option Borrower Option) agreement, the lender chose to increase the rates under the loan agreement, the Council would repay the loan and seek alternative funding.

(e)       The proposed changes in the 2022-2023 strategy were based on projections of average cash balances over the medium term with just under 50 percent retained for long-term investments.

(f)         Regarding the Oxfordshire County Council Liability Benchmark 2022/23 [Page 18 of the agenda pack], this reflected the Council’s Capital Financing Requirement compared with actual external debt and the minimum borrowing requirement.

(g)       Paragraph 16 “Forecast Treasury Portfolio Position”: The “Average In-House Cash” i.e., net position, referred to in the table in Paragraph 16 included earmarked reserves; capital & development contributions; general balances; internal borrowing; adjustments for working capital; and deferred income, from which the average in-house cash position could be calculated.

(h)       Paragraphs 22 & 100: Geopolitical Risks and Carbon Commitment: As a lender, the Council’s portfolio was primarily with other local authorities. In April of this year the Council would review its Environmental, Social and Governance (ESG) strategy in accordance with revised CIPFA Code of Practice. The ESG strategy would, in turn, be incorporated into the Council’s Treasury Management practices.

(i)          Paragraph 29 Prudential Borrowing: The phrase “borrowing for prudential borrowing” was tautologous and would be reworded.

(j)          Paragraph 33 et seq. OxLEP Ltd: The Council borrowed money on behalf of the LEP from the Enterprise Zone Business Rate which was collected by South Oxfordshire District Council on behalf of the Enterprise Zone thereby limiting the risk to the Council.

The Chair proposed, and it was agreed, that a briefing for Members be provided with information about OxLEP Ltd and the Council’s role as the accountable body for OxLEP Ltd.

ACTION: Director of Finance to include a briefing on OxLEP Ltd. in the Programme of Workshops, and to invite Nigel Tipple, Chief Executive, OxLEP Ltd. to the briefing.

(k)        Paragraph 30 et seq. Internal Borrowing: There were risks attached to internal borrowing as it entailed using short-term cash flow to fund longer term projects. Accordingly, internal borrowing was constantly monitored.

(l)          Paragraphs 93 & 94 Investment Training: Regarding whether it was appropriate to allow persons with one year’s relevant professional experience to make investment decisions on behalf of the authority, it was noted that this was in accordance with the Markets in Financial Instruments Directive (2004/39/EC) (MiFID). Given the experience within the Council’s Treasury Management team, officers were satisfied with the requirements of MiFID.

(m)      Paragraph 100 Carbon Commitment: Consideration also had to be given to investments that may have a negative impact on the Council’s carbon commitment.

(n)       Oxfordshire County Council as Lender: It was within the Council’s statutory powers to lend to other local authorities. Although the loans were technically unsecured, there was a tacit guarantee from central government that, should a local authority cease to exist, it’s liabilities would be passed on to the replacement authority.

(o)       Paragraph 104: Before lending to another authority, the Council carried out due diligence to ensure that it was appropriate, within the context of the Council’s policies and strategies, to lend money to that authority.

RESOLVED: To endorse the Treasury Management Strategy for 2022/23 as outlined in the report.