Agenda item


Report of Deputy Chief Executive/ Corporate Director of Resources


Pete Guest, Treasury Management Officer, presented the report which asked the Committee to consider, comment on and approve the Treasury Management Strategy 2014/15 prior to its consideration by Full Council on 3 March 2014.


This document sets the strategic context, within the Council’s planning cycle, for how treasury management activity will take place in the forthcoming year. Within this context, the objectives of the strategy are:


·  to achieve the lowest net interest rate costs on the City Council’s external debt, whilst recognising the risk management implications;

·  to protect the Medium Term Financial Strategy (MTFS) from fluctuations in interest rates and to prevent the need for excessive borrowing in future years, when rates may be unfavourable;

·  to maintain the security and liquidity of external investments, and within those parameters, to seek to maximise the return on such investments.


The main elements of the proposed strategy for 2014/15 are:


·  Borrowing requirement and strategy

·  Debt restructuring

·  Debt repayment (Minimum Revenue Provision statement)

·  Housing Revenue Account strategy

·  Investment strategy

·  Prudential indicators

·  Risk Management Action Plan


Peter Guest added the following information:


(a)  investment is a risk internationally and while the Local Authority has considered UK banks to be financially sound, the governments of the UK, Europe and USA do not want to provide another bail out should the need arise, and so are working together on 'bail in' arrangements. If a bank is in trouble, then the first course of action will be for shareholders and investors to 'take a hit'. As retail deposits will be included in the regulations, there is a possibility that there could also be an impact on local authorities;

(b)  in 2012 Nottingham undertook a lot of advanced borrowing to fund the tram and also halved the level of investment. To try and keep Nottingham City Council's level of investment low, the Council is under borrowing and using 'surplus cash to finance the capital programme as this results in reduced risk;

(c)  there is an increase in local authority lending to local authority as they will get a better rate of return and central Government currently guarantees local authority debt.

(d)  other forms of protected investment will also be investigated, including covered bonds although there will be less money invested in the future.


Peter Guest responded to committee members’ questions as follows:


(e)  the stock market is artificially high at the moment, central Government want to avoid a repeat of the 2008/09 crash and will be unlikely to provide more bail outs;

(f)  in relation to pension funds, a lot of money has been switched to bonds as these offer better protection but could, under the proposed plans, be subject to 'a financial hit';

(g)  the suggestions of the City Council's independent financial advisors, Arlingclose, are always considered and while they have provided a list of 'safe' counterparts, it is always the City Council's decision as to what suggestions are acted upon.




(1)  to note the proposed 2014/15 Treasury Management and investment Strategies;


(2)  to ask Peter Guest to circulate to committee members the latest list of eligible counterparties for investment as advised by the City Council's independent financial advisors Arlingclose.


Supporting documents: