Agenda item

The purpose of the report was to consider the draft Investment Strategy 2019/20.

The investment strategy was a new report for 2019/20, meeting the requirements of statutory guidance issued by the government in January 2018.

For comparison purposes the tables in the report set out the combined position for Taunton Deane Borough Council and West Somerset Council for the years up to and including 2018/19.

The Council invests its money for three broad purposes:

·         Surplus cash as a result of its day-to-day activities, for example when income is received in advance of expenditure (known as treasury management investments),

·         to support local public services by lending to other organisations (service investments), and

·         to earn investment income (known as commercial investments where this is the main purpose).

The strategy focused on the second and third of these categories.

The Council typically received its income in cash (e.g. from taxes and grants)   before it pays for its expenditure in cash (e.g. though payroll and invoices). It also holds reserves for future expenditure and collects local taxes on behalf of other local authorities and central government.  These activities, plus the timing of borrowing decisions, lead to a cash surplus which is invested in accordance with guidance form the Chartered Institute of Public Finance and Accountancy (CIPFA). The balance of treasury management investments is expected to fluctuate between £50m and £90m during the 2019/20 financial year.

The contribution that these investments make to the objectives of the Council is to support effective treasury management activities. Full details of the Council’s policies and its plans for the 2019/20 treasury management investments are covered in a separate document, the treasury management strategy.

The Council lends money to local businesses, local charities and employees to support local public services and stimulate local economic growth.    

The main risk when making service loans is that the borrower will be unable to repay the principal lent and/or the interest due. In order to minimise this risk and ensure that total exposure to service loans remains proportionate to the size of the Council, upper limits on the outstanding loans to each category of borrower have been set as follows:

Table 1: Loans for Service Purposes

Accounting standards require the Council to set aside a loss allowance for loans, reflecting the likelihood of non-payment. The figures for loans in the Councils statement of accounts from 2018/19 onwards will be shown net of this loss allowance. However, the Council makes every reasonable effort to collect the full sum lent and has appropriate credit control arrangements in place to recover overdue payments.

During the discussion of this item Members made comments and statements and asked questions, and the following main points were raised:

·         This was supported by Scrutiny, the scale of investment activity had increased.

·         Any investment decision for future projects would be backed by the business case.

·         An agreed Governance Framework would be set up, the correct people were involved in creating this.

·         Funding raised relating to commercial investments would be undertaken being fully aware of the risks and growing expertise in skills and knowledge in this area.

·         Further guidance would be provided in the coming months, investments would be proportionate to the scale suited to the authority with risks mitigated with an investment risk reserve.

·         Government guidance was still to be provided in relation to this, there had been some questionable decisions made by some local authorities; taking advantage of opportunities was a main focus of the new authority including increasing the business rate base.

RESOLVED that the Shadow Executive recommends the draft Investment Strategy for 2019/20 as included within this report, for approval by Shadow Council.