Archived decisions
Appendix 9
Treasury Management Strategy 2007/08
The Authority has to approve an annual Treasury Management Strategy. The strategy covers capital finance and debt, interest rates and borrowing strategy and the investment of surplus funds.
Total capital expenditure in 2007/08 is estimated to be £7.9m which it is planned to finance through a combination of revenue contributions, borrowing, capital grant and capital receipts.
Since the Authority was established, 14 long-term fixed-rate loans totalling £5.45m have to date been taken from the Public Works Loan Board (PWLB).
Interest rates and borrowing strategy
The Authority borrows for two main reasons:
· To finance capital expenditure
· To meet short-term cash requirements, for example on days when salaries are paid
The Authority borrows from two main sources:
· The PWLB to finance capital expenditure, normally long-term at fixed rates
· The County Council at variable rates based on local authority seven day notice rates. This can be used to meet short-term cash requirements, or to finance capital expenditure when circumstances are appropriate
Although the recent trend has been down, economic forecasters are expecting long-term interest rates to rise over the next two years, although the pace of such a rise is likely to be very slow. Base rates and other short-term rates are expected to peak at no higher than 5.75%.
Until now the Authority's borrowing strategy has been based on that of the County Council. For a number of years the County Council has borrowed long-term in small amounts, maintaining as far as possible the balance between long-term fixed rate debt, which provides budget stability and protection against rising interest rates, and short-term temporary debt, which enables advantage to be taken off falling rates. It is suggested that this strategy should be retained by the Authority.
In line with the budget proposals the Authority will aim to have re- accumulated balances of £2m by 31 March 2008. However, during the year cashflow requirements will mean that there is not expected to be any scope for any direct long-term investment on the money markets. Therefore, it is assumed that the Authority will invest all its surplus funds with the County Council, earning interest based on the local authority seven-day notice rate.