Treasury Management
Strategy
Information
Treasury Management is defined as “The management of the
Authority’s investments and cash flows, its banking, money
market and capital market transactions; the effective control of
the risks associated with those activities; and the pursuit of
optimum performance consistent with those risks.”
The Local Government Act 2003 (the Act) and supporting Regulations
requires the Authority to “have regard to” The
Chartered Institute of Public Finance and Accountancy (CIPFA)
Prudential Code and the CIPFA Treasury Management Code of Practice
to set Prudential and Treasury Indicators for the next three years
to ensure that the Authority’s capital investment plans are
affordable, prudent and sustainable. The Code also requires the
Authority to approve a treasury management strategy before the
start of each financial year. The authority also adheres to
investment guidance issued by the then Ministry of Housing,
Communities and Local Government (MHCLG).
The definition of investments in the codes is wide raging and
includes non-treasury investments for example loans to third
parties and the holding of property to make a profit. Where these
are held a separate strategy is required. However, it is not
considered that the Combined Fire Authority hold any such assets,
and it does not propose to engage in any such investments in
2025/26.
Treasury Management Strategy for 2025/26
This Strategy Statement has been prepared in accordance with the
CIPFA Treasury Management Code of Practice. Accordingly, the
Lancashire Combined Fire Authority's Treasury Management Strategy
will be approved by the full Authority, and there will also be a
mid-year and a year-end outturn report presented to the Resources
Committee. In addition, there will be monitoring and review reports
to members in the event of any changes to Treasury Management
policies or practices. The aim of these reporting arrangements is
to ensure that those with ultimate responsibility for the treasury
management function appreciate fully the implications of treasury
management policies and activities, and that those implementing
policies and executing transactions have properly fulfilled their
responsibilities regarding delegation and reporting.
This Authority has adopted the following reporting arrangements in
accordance with the requirements of the revised Code: -
Table 1 Treasury
Management Reporting Arrangements
|
Area of Responsibility
|
Committee/ Officer
|
Frequency
|
|
Treasury Management Policy Statement
|
Resources
Committee/Authority
|
Annually
|
|
Treasury Management Strategy
/ Annual Investment Strategy / MRP policy – scrutiny and
approval
|
Resources Committee/
Authority
|
Annually before the start of the year
|
|
Treasury Management mid-year report
|
Resources
Committee
|
Mid-year
|
|
Treasury Management Strategy
/ Annual Investment Strategy / MRP policy – updates or
revisions at other times
|
Resources
Committee
|
As required
|
|
Annual Treasury Management Outturn Report
|
Resources Committee/
Authority
|
Annually by 30 September after the end of the year
|
|
Treasury Management Monitoring Reports
|
Director of
Corporate Services
|
Quarterly
|
|
Treasury Management Practices
|
Director of
Corporate Services
|
Annually
|
The Treasury Management Strategy, covers the following aspects of
the Treasury Management function:
•
Prudential Indicators which will
provide a controlling framework for the capital expenditure and
treasury management activities of the Authority;
•
Current Long-term debt and
investments;
•
Prospects for interest
rates;
•
The Borrowing Strategy;
•
The Investment Strategy;
•
Policy on borrowing in advance of
need.
Setting the Treasury Management Strategy for 2025/26
In setting the treasury management strategy the following factors
need to be considered as they may have a strong influence over the
strategy adopted:
•
Economic position and
forecasts.
•
Interest rate forecasts.
•
The current structure of the
investment and debt portfolio.
•
Future Capital Programme and
underlying cash forecasts.
Economic background:
The third quarter of
2024 (July to September) saw:
·
GDP growth stagnating in July following downwardly revised Q2
figures (0.5%);
·
A further easing in wage growth as the
headline 3myy rate (including bonuses) fell from 4.6% in June to
4.0% in July;
·
Consumer Price Index (CPI) inflation hitting its target in June
before edging above it to 2.2% in July and August;
·
Core CPI inflation increasing from 3.3% in July to 3.6% in
August;
·
The Bank of England initiating its easing cycle by lowering
interest rates from 5.25% to 5.0% in August and holding them steady
in its September meeting;
·
10-year gilt yields falling to 4.0% in September.
The economy’s stagnation in
June and July pointed more to a mild slowdown in UK Gross Domestic
Product (GDP) growth than a sudden drop back into a recession.
However, in the interim period, to 12 December, arguably the
biggest impact on the economy’s performance has been the
negative market sentiment in respect of the fallout from the
Chancellor’s Budget on 30 October.
If we
reflect on the 30 October Budget, our central case is that those
policy announcements will prove to be inflationary, at least in the
near-term. The Office for Budgetary Responsibility and the Bank of
England concur with that view. The latter have the CPI measure of
inflation hitting 2.5% y/y by the end of 2024 and staying sticky
until at least 2026. The Bank forecasts CPI to be elevated at 2.7%
(Q4 2025) before dropping back to sub 2% in 2027. Nonetheless,
since the Budget, the October inflation print has shown the CPI
measure of inflation bouncing up to 2.3% y/y with the prospect that
it will be close to 3% by the end of the year before falling back
slowly through 2025. The RPI measure has also increased
significantly to 3.4%.
How
high inflation goes will primarily be determined by several key
factors. First amongst those is that the major investment in the
public sector, according to the Bank of England, will lift UK real
GDP to 1.7% in 2025 before growth moderates in 2026 and 2027. The
debate around whether the Government’s policies lead to a
material uptick in growth primarily focus on the logistics of
fast-tracking planning permissions, identifying sufficient skilled
labour to undertake a resurgence in building, and an increase in
the employee participation rate within the economy.
Interest rate Forecast
The
Authority has appointed Link Group as its treasury advisor and part
of their service is to assist the Authority to formulate a view on
interest rates.
Current Treasury Portfolio Position
At the 31 December 2024 the debt and investments balances were:
-
Table 2 Debt and Investments
Balances
|
Debt
|
Principal
|
%
|
|
£m
|
|
Fixed rate loans from the Public Works Loan Board
|
(2.000)
|
100
|
|
Variable rate loans
|
-
|
-
|
|
Total loans
|
(2.000)
|
100
|
|
Investments
|
|
Variable rate investments with The Debt Management Office (DMO)
|
26.863
|
57
|
|
Fixed rate investments
|
20.000
|
43
|
|
Total investments
|
46.863
|
100
|
The level of investments represents the Authority’s
cumulative surplus on the General Fund, the balances on other
cash-backed earmarked reserves and a cash-flow balance generated by
a surplus of creditors over debtors and by grant receipts in
advance of payments. There is a net investment figure of
£44.863m.
Borrowing and Investment Requirement
In the medium term LCFA borrows for
capital purposes only. The underlying need to borrow for capital
purposes is measured by the Capital Financing Requirement (CFR),
while usable reserves and working capital are the underlying
resources available for investment. The table below compares the
estimated CFR to the debt which currently exists, this gives an
indication of the borrowing required. It also shows the estimated
resources available for investment. An option is to use these
balances to finance the expenditure rather than investing, often
referred to as internal borrowing. The table gives an indication of
the minimum borrowing or investment requirement through the
period.
The CFR forecast includes the impact
of the latest forecast of the funding of the Capital Programme
which currently assumes that there will be no borrowing until
2026/27. A voluntary MRP was made in 2019/20 to take the future
loans element of the MRP to nil.
Table 3 Borrowing/Investment
Need
|
|
2023/24
£m
|
2024/25
£m
|
2025/26
£m
|
2026/27
£m
|
2027/28
£m
|
|
Capital Financing Requirement
|
11.868
|
11.339
|
10.762
|
14.322
|
40.130
|
|
Less long-term liabilities (PFI and finance leases)
|
(11.868)
|
(11.339)
|
(10.762)
|
(10.144)
|
(9.458)
|
|
Less external borrowing
|
(2.000)
|
(2.000)
|
(2.000)
|
(2.000)
|
(2.000)
|
|
Borrowing requirement
|
(2.000)
|
(2.000)
|
(2.000)
|
2.178
|
28.672
|
|
Reserves and working capital
|
(27.213)
|
(24.500)
|
(14.239)
|
(7.621)
|
(7.621)
|
|
Borrowing/(Investment) Need
|
(29.213)
|
(26.500)
|
(16.239)
|
(5.443)
|
21.051
|
CIPFA’s Prudential Code for Capital Finance in Local
Authorities recommends that the Authority’s total debt should
be lower than its highest forecast CFR over the next three years.
However, the table above shows that the level of loans was above
the CFR at 31/3/24. This was the result of the Authority adopting a
policy of setting aside additional Minimum Revenue Provision (MRP)
to generate the cash to repay loans either on maturity or as an
early repayment.
The table above indicates that rather than having a need for
borrowing it is estimated that the authority has an underlying need
to invest until 2025/26 although the available balances are
forecast to reduce. Based on the latest capital programme the
authority will have a borrowing requirement in 2026/27.
Although the Authority does not have plans for new borrowing until
2026/27 it does currently hold £2.0m of loans as part of its
strategy for funding previous years' capital programmes.
Borrowing Strategy
The draft Capital Programme implies there may be a requirement to
use borrowing to fund the capital programme in the later years. At
this stage it is extremely unlikely that borrowing will be required
in 2025/26. However, it is still best practice to approve a
borrowing strategy and a policy on borrowing in advance of need. In
considering a borrowing strategy the Authority needs to make
provision to borrow short term to cover unexpected cash flow
shortages or to cover any change in the financing of its Capital
Programme.
In the past the Authority has raised all its long-term borrowing
from the Public Works Loan Board, but if long term borrowing was
required other sources of finance, such as local authority loans,
and bank loans, would be investigated that may be available at more
favourable rates.
Short-term borrowing if required would most likely be taken from
other local authorities.
Therefore, the approved sources of long-term and short-term
borrowing are:
•
Public Works Loan Board
•
UK local authorities
•
any institution approved for investments
•
any other bank or building society authorised by the Prudential
Regulation Authority to operate in the UK
•
UK public and private sector pension funds
Policy on Borrowing in Advance of Need
In line with the Prudential Code the Authority will not borrow
purely to profit from the investment of the extra sums borrowed.
However advance borrowing may be taken if it is considered that
current rates are more favourable than future rates and that this
advantage outweighs the cost of carrying advance borrowing. Any
decision to borrow in advance will be considered carefully to
ensure value for money can be demonstrated and that the Authority
can ensure the security of such funds and relationships.
In determining whether borrowing will be undertaken in advance of
need the authority will:-
•
Ensure that there is a clear link between the capital programme and
the maturity profile of the existing debt portfolio which supports
the need to take funding in advance of need.
•
Ensure the on-going revenue liabilities created, and the
implications for future plans and budgets have been considered.
•
Evaluate the economic and market factors that might influence the
manner and timing of any decision to borrow.
•
Consider the merits and demerits of alternative forms of
funding.
•
Consider the alternative interest rate bases available, the most
appropriate periods to fund and repayment profiles to
use.
Debt Restructuring
The Authority’s debt has
arisen because of prior years' capital investment decisions. It has
not taken any new borrowing out since 2007 as it has been utilising
cash balances to pay off debt as it matures, or when deemed
appropriate with the authority making early payment of debt. The
anticipated holding of debt at 31 March 2025 is £2.0m. All
the debt is from the Public Works Loans Board (PWLB) and is all at
fixed rates of interest and is repayable on maturity. The table
below shows the maturity profile and interest rate applicable on
these:-
Table 4
Outstanding Loans
|
Loan Amount
|
Maturity Date
|
Interest rate
|
|
£650k
|
December 2035
|
4.49%
|
|
£650k
|
June 2036
|
4.49%
|
|
£700k
|
June 2037
|
4.48%
|
(Note, this debt was taken out in
2007 when the base rate was 5.75% and when the Authority was
earning 5.84% return on its investments.)
If the loans were to be repaid early there would be an early
repayment (premium) charge. Previous reports on treasury
management activities have reported that the premium and the
potential loss of investment income have been greater than the
savings made on the interest payments therefore it has not been
considered financially beneficial to repay the loans especially
with the potential for increased interest rates. However, at 31
December the Authority would save £10k in interest, split
over 10-years, if the loans were to be repaid early. However, with
the Authority budgeting a borrowing requirement to fund the capital
programme from 2026/27, the additional interest on new loans would
outweigh the £10k saving achieved from early repayment.
Investment Strategy
At 31 December 2024 the Authority held £46.863m invested
funds, representing income received in advance of expenditure plus
existing balances and reserves. During the year the
Authority’s investment balance has ranged between £60m
and £27m. The variation arises principally due to the timing
of the receipt of government grants. It is anticipated that there
will be reduced cash levels in the forthcoming year, due to a
drawdown in reserves to finance capital expenditure.
Both the CIPFA Code and government guidance require the Authority
to invest its funds prudently, and to have regard to the security
and liquidity of its investments before seeking the highest rate of
return, or yield. The Authority’s objective when investing
money is to strike an appropriate balance between risk and return,
minimising the risk of incurring losses from defaults and the risk
of receiving unsuitably low investment income.
Therefore, in line with the guidance the Treasury Management
Strategy is developed to ensure the Fire Authority will only use
very high-quality counterparties for investments.
The Authority may invest its surplus funds with any of the
counterparties in the table below, subject to the cash and time
limits shown.
Table 5 Investment
Counterparties
|
Counterparty
|
Cash Limit
|
Time Limit
|
|
Banks and other organisations and
securities whose lowest published long-term credit rating from
Fitch, Moody’s and Standard & Poor’s is a minimum
of AA-
|
£5m each
|
5 years
|
|
Call accounts with banks and other organisations with minimum A-
credit rating
|
£10m
|
Next day
|
|
Call account with the Debt Management Office
|
Unlimited
|
Next day
|
|
UK Central Government (irrespective of credit rating)
|
Unlimited
|
50 years
|
|
UK Local Authorities (irrespective of credit rating)
|
£5m each
|
10 years
|
|
Secured bond funds AA rating and weighted average life (WAL) not
more than three years
|
£5m each
|
N/A
|
|
Secured bond funds AAA rated and WAL not more than five years
|
£m each
|
N/A
|
Allowable bond funds are defined by credit rating and WAL.
Investing in senior secured bonds backed by collateral provides a
protection against bail-in. Although the average life of the
securities within the fund will be either 3 or 5 years, funds can
be redeemed within 2 days of request but in general these should be
seen as longer-term investments.
The Authority currently has access to a call (instant access)
account with the Debt Management Office, which pays slightly lower
than bank base rate, this is 4.70% at 31 December. Each working day
the balance on the Authority's current account is invested to
ensure that the interest received on surplus balances is
maximised.
Regarding the risk of investing with another local authority, only
a few authorities have their own credit rating, but those that do
are the same or one notch below the UK Government reflecting the
fact that they are quasi-Government institutions. Overall, credit
ratings are seen as unnecessary by the sector because the statutory
and prudential framework within which the authorities operate is
amongst the strongest in the world. In addition, any lender to a
local authority has protection, under statute, by way of a first
charge on the revenues of that authority. No local authority has
ever defaulted to date, and this also may be an indication of
security. However, when the UK credit rating by the rating agencies
has been downgraded those local authorities with a rating saw a
reduction in their ratings. Therefore, consideration has been given
to reducing the risk associated with the investment with other
local authorities.
Table 6 Investment
Limits with Local Authorities
|
Investment Period
|
Maximum Individual Investment
(£m)
|
Maximum Total Investment
(£m)
|
Maximum Period
|
|
Up to 2 years
|
5
|
40
|
2 years
|
|
Over 2 years
|
5
|
25
|
10 years
|
The call account with Lancashire County Council (LCC) has been
replaced by a call account with the Debt Management Office,
therefore all Local Authority investments are within the above
limits.
In respect of banks taxpayers will no longer bail-out failed banks
instead the required funds will be paid by equity investors and
depositors. Local authorities' deposits will be at risk and
consequently although currently available within the policy it is
unlikely that long term unsecured term deposits will be used at the
present time.
Currently all the Authority's fixed investments are with other
local authorities. To enhance the interest earned the following
investments are already impacting 2025/26.
Table 7 Current
Investments
|
Start Date
|
End Date
|
Principal
|
Rate
|
Interest 25/26
|
|
29/08/2024
|
28/08/2025
|
£5,000,000
|
4.80%
|
£97,973
|
|
02/10/2024
|
01/10/2025
|
£5,000,000
|
4.70%
|
£117,822
|
The Authority has the below future deals
which impact 2025/26 which have yet to commence.
|
Start Date
|
End Date
|
Principal
|
Rate
|
Interest 25/26
|
|
03/02/2025
|
30/09/2025
|
£5,000,000
|
5.65%
|
£140,863
|
|
19/02/2025
|
18/02/2026
|
£5,000,000
|
5.50%
|
£243,356
|
Consideration is given fixing further
investments if the maturity fits with estimated cash flows and the
rate is attractive. This will continue to be reviewed. Suggested
rates payable by other local authorities indicated:
Table 8 Indicative
Interest Rates on Investments with other Local
Authorities
|
Investment length
|
Interest Rates
|
|
3-month investment
|
5.55 – 5.75%
|
|
6-month investment
|
5.50 – 5.70%
|
|
12-month investment
|
5.30 – 5.60%
|
|
3-year investment
|
4.80 - 5.00%
|
|
4-year investment
|
4.70 - 4.90%
|
The overall combined amount of interest
earned on fixed/call account balances as at 31 December 2024 is
£1.712m on an average balance of £43.932m at an
annualised rate of 5.17%. This is more than the benchmark 7-day
Sterling Overnight Index Average (SONIA) rate which averages a
yield of 5.01 over the same period.
In addition to the above the authority uses NatWest for its
operational banking. Balances retained in NatWest are very low,
usually less than £5,000. However, if required monies are
retained at NatWest this would be in addition to the limits set out
above.
Minimum Revenue Provision (MRP)
Under Local Authority Accounting arrangements, the Authority is
required to set aside a sum of money each year to reduce the
overall level of debt. This sum is known as the minimum revenue
provision (MRP).
The Authority will assess their MRP for 2025/26 in accordance with
guidance issued by the Secretary of State under section 21(1A) of
the Local Government Act 2003.
The Authority made a voluntary MRP in 2019/20 and it is anticipated
that the MRP on loans will be nil in 2025/26, this will be the case
until capital expenditure is financed by borrowing.
Whilst the Authority has no unsupported borrowing, nor has any
plans to take out any unsupported borrowing in 2025/26 it is
prudent to approve a policy relating to the MRP that would apply if
circumstances change. As such in accordance with guidelines, the
MRP on any future unsupported borrowing will be calculated using
the Asset Life Method. This will be based on a straightforward
straight line calculation to set an equal charge to revenue over
the estimated life of the asset. Estimated life periods will be
determined under delegated powers. To the extent that expenditure
is not on the creation of an asset and is of a type that is subject
to estimated life periods that are referred to in the guidance,
these periods will generally be adopted by the Authority.
However, the Authority reserves the right to determine useful life
periods and prudent MRP in exceptional circumstances where the
recommendations of the guidance would not be appropriate.
As some types of capital expenditure incurred by the Authority are
not capable of being related to an individual asset, asset lives
will be assessed on a basis which most reasonably reflects the
anticipated period of benefit that arises from the
expenditure. Also, whatever type of expenditure is involved,
it will be grouped together in a manner which reflects the nature
of the main component of expenditure and will only be divided up in
cases where there are two or more major components with
substantially different useful economic lives.
Assets held under a PFI contracts and finance leases form part of
the Balance Sheet. This has increased the overall capital financing
requirement and results in an MRP charge being required. The
government guidance permits a prudent MRP to equate to the amount
charged to revenue under the contract to repay the liability. In
terms of the PFI schemes this charge forms part of the payment due
to the PFI contractor.
Revenue Budget
The capital financing budget currently shows that income received
exceeds expenditure. This excludes the PFI and Finance lease
payments, which are included in other budgets. Based on the
Strategy outlined above then the proposed budget for capital
financing are:
Table 9 Capital Financing
Charges Included in Revenue Budget
|
|
2024/25
£m
|
2025/26
£m
|
2026/27
£m
|
2027/28
£m
|
|
Interest payable
|
0.090
|
0.090
|
0.204
|
1.600
|
|
MRP
|
0.000
|
0.000
|
0.000
|
0.084
|
|
Interest receivable
|
(1.050)
|
(1.385)
|
(0.875)
|
(0.675)
|
|
Net budget
|
(0.960)
|
(1.295)
|
(0.671)
|
1.009
|
Prudential Indicators for 2024/25 to 2027/28 in respect of the
Combined Fire Authority's Treasury Management Activities.
In accordance with its statutory duty and with the requirements of
the Prudential Code for Capital Finance and the CIPFA Code for
Treasury Management, the Combined Fire Authority produces each year
a set of prudential indicators which regulate and control its
treasury management activities.
The following table sets out the debt and investment-related
indicators which provide the framework for the Authority’s
proposed borrowing and lending activities over the coming three
years. These indicators will also be approved by members as part of
the Capital Programme approval process along with other capital
expenditure-related indicators but need to be reaffirmed and
approved as part of this Treasury Management Strategy.
It should be noted that contained within the external debt limits,
there are allowances for outstanding liabilities in respect of the
PFI schemes and leases. However, accounting standards are changing
in relation to recording leases. In effect more leases are likely
to be included on the balance sheet and therefore will be included
against the other long term liabilities indicators. At this stage
work is on-going to quantify the impact of the change and therefore
the other long term liabilities limits may be subject to
change.
Treasury Management Prudential Indicators
|
2024/25
£m
|
2025/26
£m
|
2026/27
£m
|
2027/28
£m
|
|
1.
Adoption of the Revised CIPFA Code of Practice on Treasury
Management (2011)
|
Adopted for all years
|
|
2.
Authorised limit for external debt - A prudent estimate of
external debt, which includes sufficient headroom for unusual cash
movements.
|
|
|
|
|
|
Borrowing
|
4.000
|
4.000
|
10.000
|
45.000
|
|
Other long-term
liabilities
|
30.000
|
30.000
|
30.000
|
30.000
|
|
Total
|
34.000
|
34.000
|
40.000
|
75.000
|
|
3.
Operational boundary for external debt - A prudent estimate
of debt, but no provision for unusual cash movements. It
represents the estimated maximum external debt arising as a
consequence of the Authority's current plans.
|
|
|
|
|
|
Borrowing
|
3.000
|
3.000
|
8.000
|
35.000
|
|
Other long-term
liabilities
|
16.000
|
15.000
|
15.000
|
14.000
|
|
Total
|
19.000
|
18.000
|
23.000
|
49.000
|
|
4. Upper limit for fixed interest
rate exposure
|
|
|
|
|
|
Upper limit of borrowing at fixed
rates
|
100%
|
100%
|
100%
|
100%
|
|
Upper limit of investments at fixed
rates
|
100%
|
100%
|
100%
|
100%
|
|
5. Upper limit for variable rate
exposure
|
|
|
|
|
|
Upper limit of borrowing at variable
rates
|
50%
|
50%
|
50%
|
50%
|
|
Upper limit of investments at
variable rates
|
100%
|
100%
|
100%
|
100%
|
|
|
|
|
|
|
|
6. Upper limit for total principal
sums invested for over 364 days (per maturity date)
|
40.000
|
40.000
|
40.000
|
40.000
|
|
7. Maturity structure of
Debt
|
Upper Limit %
|
Lower Limit %
|
|
Under 12 months
|
100
|
-
|
|
12 months and within 24
months
|
50
|
-
|
|
24 months and within 5
years
|
50
|
-
|
|
5 years and within 10
years
|
75
|
-
|
|
10 years and above
|
100
|
-
|
8. Estimated Capital
Expenditure
|
|
2023/24
Actual
|
2024/25
Forecast
|
2025/26
Budget
|
2026/27
Budget
|
2027/28
Budget
|
|
Capital Expenditure (£m)
|
6.034
|
5.859
|
12.761
|
14.796
|
30.078
|
9. Proportion of Financing Costs to
Net Revenue Stream
|
|
2023/24
Actual
|
2024/25
Budget
|
2025/26
Budget
|
2026/27
Budget
|
2027/28
Budget
|
|
Financing costs
(£m)
|
(1.260)
|
(0.960)
|
(1.295)
|
(0.671)
|
1.009
|
|
Proportion of net revenue
stream
|
(1.85%)
|
(1.28%)
|
(1.67%)
|
(0.84%)
|
1.23%
|
Appendix 1
Treasury Management Policy Statement
The Fire Authority adopts the key recommendations of CIPFA’s
Treasury Management in the Public Services: Code of Practice (the
Code), as described in Section 5 of the Code.
Accordingly, the Authority will create and maintain, as the
cornerstones for effective treasury management:-
·
A treasury management policy statement stating the policies,
objectives and approach to risk management of its treasury
management activities.
·
Suitable treasury management practices (TMPs), setting out the
manner in which the Authority will seek to achieve those policies
and objectives, and prescribing how it will manage and control
those activities.
The Authority delegates responsibility for the implementation and
monitoring of its treasury management policies and practices to the
Resources Committee and for the execution and administration of
treasury management decisions to the Director of Corporate
Services, who will act in accordance with the organisation’s
policy statement and TMPs, IMPs and CIPFA’s Standard of
Professional Practice on treasury management.
The Authority nominates the Resources Committee to be responsible
for ensuring effective scrutiny of the treasury management strategy
and policies.
Definition
The Authority defines its treasury management activities as: the
management of the Authority’s investments and cash flows, its
banking, money market and capital market transactions; the
effective control of the risks associated with those activities;
and the pursuit of optimum performance consistent with those
risks.
Risk management
The Fire Authority regards the successful identification,
monitoring and control of risk to be the prime criteria by which
the effectiveness of its treasury management activities will be
measured. Accordingly, the analysis and reporting of treasury
management activities will focus on their risk implications for the
organisation, and any financial instruments entered into to manage
these risks.
Value for money
The Fire Authority acknowledges that effective treasury management
will provide support towards the achievement of its business and
service objectives. It is therefore committed to the principles of
achieving value for money in treasury management, and to employing
suitable comprehensive performance measurement techniques, within
the context of effective risk management.
Borrowing policy
The Fire Authority greatly values revenue budget stability and will
therefore borrow the majority of its long-term funding needs at
long-term fixed rates of interest. However, short term and variable
rate loans may be borrowed to either offset short-term and variable
rate investments or to produce revenue savings. The Authority will
also constantly evaluate debt restructuring opportunities of the
existing portfolio.
The Fire Authority will set an affordable borrowing limit each year
in compliance with the Local Government Act 2003 and will have
regard to the CIPFA Prudential Code for Capital Finance in Local
Authorities when setting that limit. It will also set limits on its
exposure to changes in interest rates and limits on the maturity
structure of its borrowing in the treasury management strategy
report each year.
Investment policy
The Fire Authority’s primary objectives for the investment of
its surplus funds are to protect the principal sums invested from
loss, and to ensure adequate liquidity so that funds are available
for expenditure when needed. The generation of investment income to
support the provision of local authority services is an important,
but secondary, objective.
The Fire Authority will have regard to the then Ministry of
Housing, Communities and Local Government Guidance on Local
Government Investments. It will approve an Investment Strategy each
year as part of the Treasury Management Strategy. The strategy will
set criteria to determine suitable organisations with which cash
may be invested, limits on the maximum duration of such investments
and limits on the amount of cash that may be invested with any one
organisation.
