Agenda item

Treasury Management Strategy 2024/2025

Report of the Treasurer to the Fire Authority


Mark Kimberley, Interim Treasurer, and Tracy Stevenson, Temporary Head of Finance, presented the report seeking approval for the proposed Treasury Management Strategy for 2024/25 and the Authority’s Minimum Revenue Provision Policy for 2024/25, and highlighted the following points:


(a)  The Local Government Act 2003 requires the Authority to set out its treasury

  strategy for borrowing and to prepare an annual investment strategy which sets

  out the Authority’s policies for borrowing, for managing its investments and

  for giving priority to the security and liquidity of those investments.


(b)  The Authority is required to operate a balanced budget, which broadly means

  that cash raised during the year will meet cash expenditure. Part of the

  treasury management operation is to ensure that this cash flow is adequately

  planned, with cash being available when needed. Surplus monies are

  invested in low risk counterparties or instruments commensurate with the

  Authority’s low risk appetite, ensuring adequate security and liquidity before

  considering investment return.


(c)  The second main function of the treasury management operation is the

  funding of the Authority’s capital plans. These capital plans provide a guide to

  the borrowing need of the Authority, essentially the longer-term cash flow

  planning, to ensure that the Authority can meet its capital spending

  obligations. The management of longer-term cash may involve arranging long

  or short-term loans or using longer-term cash flow surpluses.


(d)  The strategy covers:

·  prudential and treasury indicators;

·  the borrowing requirement;

·  prospects for interest rates;

·  the borrowing strategy;

·  policy on borrowing in advance of need;

·  debt rescheduling;

·  the investment strategy;

·  creditworthiness policy;

·  policy on use of external service providers;

·  the Minimum Revenue Provision policy;

·  training of Officers and Members.


(e)  It is a statutory requirement under Section 32 of the Local Government Finance Act 1992 for the Authority to produce a balanced budget. A local authority must calculate its budget requirement for each financial year to include the revenue costs that flow from capital financing decisions. This includes a statutory requirement to make a prudent provision for an annual contribution from its revenue budget towards the reduction in its overall borrowing requirement. This charge is known as the Minimum Revenue Provision (MRP). This means that increases in capital expenditure must be limited to a level whereby increases in the following charges to revenue remain affordable within the projected income of the Authority for the foreseeable future:

·  increases in interest charges caused by increased borrowing to finance additional capital expenditure;

·  any increases in running costs from new capital projects, and any increases in the Minimum Revenue Provision.


(f)  The Authority uses a main current account, an investment account and a petty cash account. All of these accounts are held with Barclays Bank PLC and are managed online. This system allows the Authority to make transfers to and from accounts in real time and thus allows the current account balance to be maintained at a minimum level. All surplus funds are held either in the investment account for short periods or are lent to institutional borrowers over longer periods.


(g)  The Authority will have regard to the Department of Levelling Up, Housing and Communities (DLUHC) Guidance on Local Government Investments, the CIPFA Treasury Management in Public Services Code of Practice and Cross Sectoral Guidance Notes 2021, and the CIPFA Treasury Management Guidance Notes 2021. The Authority’s investment priorities are the security of capital and the liquidity of its investments.


(h)  One of the requirements of the revised Treasury Management Code of Practice is that the Authority adopts a policy relating to Environmental, Social and Governance (ESG) considerations, which has been completed.


(i)  The Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations 2008 came into force on 31 March 2008. These regulations were an amendment to the 2003 regulations and introduced several changes to the capital finance regime for local authorities (including fire authorities) in England. The most significant of these were provisions dealing with the calculation of Minimum Revenue Provision (MRP), which is the amount an authority charges to its revenue account in respect of the financing of capital expenditure.


(j)  A change introduced by the revised MRP Guidance was the allowance that any charges made over the statutory minimum revenue provision (MRP), voluntary revenue provision or overpayments, can, if needed, be reclaimed in later years if deemed necessary or prudent. In order for these sums to be reclaimed for use in the budget, this policy must disclose the cumulative overpayment made each year. Up until the 31 March 23 the total VRP overpayments were £1.312m.


During the discussion that followed the following comments were made:


(k)  There are a limited number of countries that the Authority consider safe for investment due to their ratings to ensure security in the investments, which are reviewed frequently.


(l)  The Authority engage specialist investment advisors who supply daily updates.


Resolved to approve


(1)  The Treasury Management Strategy for 2024/25.


(2)  The Minimum Revenue Provision Policy for 2024/25.


As this is the last Full Authority meeting of the municipal year, the Chair thanked Tracey and Mark for all of their hard work during their interim positions with the Authority.

Supporting documents: