PCD 1624 Treasury Management Strategy 2024/25

PCD 1624 Treasury Management Strategy 2024/25

The Treasury Management strategy sets out how MOPAC will manage its borrowings and investments over the short and medium term.   

The GLA will continue to implement the MOPAC Treasury Management strategy via the Treasury Management Shared Service arrangement.  MOPAC is a member of the the London Treasury Liquidity Fund LP (LTLF) who manage all MOPAC investments to generate financial and risk reduction benefits.  

The MOPAC Treasury Management Strategy will make use of both the London Treasury Liquidity Fund LP (LTLF) for investment purposes and has the capacity if required to make investments in its own name.  This is designed to spread counter party risk. 

The external debt and treasury management limits and indicators in Appendix 1 are consistent with the MOPAC medium term financial strategy and 2024-25 budget. 

The Deputy Mayor for Policing and Crime is recommended to:   

1. Approve the 2024-25 Treasury Management Strategy Statement and supporting detail as set out in Appendix 1. 

PART I - NON-CONFIDENTIAL FACTS AND ADVICE TO THE DMPC 

1. Introduction and background  

1. The Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice for Treasury Management in Public Services (the CIPFA TM Code) and the Prudential Code require that MOPAC adopts a Treasury Management Strategy Statement (TMSS), Treasury Management Policy Statement and Prudential Indicators on an annual basis. The TMSS also incorporates the Investment Strategy as required under the Communities and Local Government’s (CLG) Investment Guidance. 

2. The Treasury Management Strategy Statement 2024/25 defines the policies and objectives of MOPAC's treasury management activities and roles and responsibilities.  In accordance with the scheme of delegation and consent it is the responsibility of the Deputy Mayor to approve the policy and strategy each year which are set out at Appendix 1. This provides an opportunity to review the current arrangements, and MOPAC’s risk appetite. 

3. The GLA Group Treasury services provide the day to day management and delivery of the MOPAC treasury management function.   

2. Issues for consideration 

1. The MOPAC Treasury Management Strategy, in line with the CIPFA Code of Practice, states that investment priorities are security first, liquidity second and then return. 

Borrowing 

2. Borrowing will only be undertaken where necessary and subject to the profile of capital spend, capital receipts and other funding streams.   

3. The approved 2024/25 capital programme funding includes provision for new borrowing of £282.6m.  MOPAC currently maintains an under-borrowed position, such that the capital financing requirement has not been fully funded with loan debt but by using the cash supporting MOPAC’s reserves, balances and cashflow reducing the need to borrow externally. This is unlikely to be an option in the future as reserve balances are set to reduce significantly.   

4. The delivery of the future capital programme, budgeted revenue savings, use of reserves and the phasing of new asset disposals will impact the cashflow, and will continue to be kept under review. 

5. The proposed strategy includes that if necessary MOPAC borrow temporarily to cover any expected shortfall and where this represents prudent management of MOPACs affairs.   This reduces the risks of holding excess balances and the cost of carry. Where an opportunity to reschedule existing debt is identified this will be undertaken within the limits of this strategy. 

Investment 

6. The MOPAC Group maintains a low risk appetite consistent with good stewardship of public funds. The MOPAC Group’s investment priorities will be security first, portfolio liquidity second and then yield (return). The MOPAC Group will aim to achieve the optimum return on its investments commensurate with proper levels of security and liquidity and within the Group’s risk appetite. Investments are managed in such a way as to make realised losses at the portfolio level extremely unlikely, while capturing the optimum return within these constraints.  

7. All MOPAC investments are carried out in line with the MOPAC Treasury Management Strategy.   

Prudential Indicators and Treasury Management Limits 

8. Appendix 1C sets out the proposed 2024/25 range of prudential indicators and Treasury Management limits.  

Management Arrangements 

9. MOPAC has an Arrangement for Delegation for the treasury management function to the GLA.  It will be the responsibility of the GLA to ensure that the function is adequately resourced and controlled.   

10. The MOPAC Chief Finance Officer will receive regular reporting from the GLA/LTL on risks, performance, progress and strategic financing advice.  Treasury Management advice will be provided by Link Asset Services. 

11. GLA Group Treasury will liaise with MOPAC/MPS for the management of cash flow. 

3. Financial Comments  

1. The cost of borrowing for 2024/25 is currently estimated to be £38.4m for interest payable, and there is budget of £94.5m for minimum revenue provision. Interest receivable is estimated at £13.3m Budgets for this income and expenditure are included in the MOPAC/MPS budget for 2024/25. 

2. The cost of the shared service arrangement with the GLA will be met from within existing resources. 

4. Legal Comments 

1. Under Section 1 of the Local Government Act 2003, MOPAC as a local authority defined under s23 of that Act, may borrow money for any purpose relevant to its functions under any enactment, or for the purpose of the prudent management of its financial affairs.  

2. The Mayor is required under s3 of the Local Government Act 2003 to determine how much money the GLA and each functional body (which includes MOPAC) can afford to borrow. In complying with this duty, Regulation 2 of the Local Authorities (Capital Finance and Accounting)(England) Regulations 2003 requires the Mayor to have regard to the Prudential Code for Capital Finance in Local Authorities when determining how much MOPAC can afford.  

3. Paragraph 4.7 of the MOPAC Scheme of Delegation and Consent provides that the DMPC has authority for the approval of “ The annual Treasury Management Strategy, which will include details of MOPAC investment and borrowing strategy”. 

4. MOPAC’s scheme of delegation and consent provides that the Chief Finance Officer, as the s127 officer, is responsible for the proper administration of the MOPAC’s financial affairs.  Paragraph 6.3 states that the following functions are reserved to the MOPAC Chief Finance Officer “Approval of the arrangements for the Treasury Management function, including the day to day management, production of Treasury Management strategy and supporting policies and procedures, subject to DMPC approval of the strategy” 

5. An investment strategy statement must be completed as part of risk management and good governance. The report is submitted in compliance with TMSS and DCLG requirements in this regard. 

5. Commercial Issues  

1. The provision of the Treasury Management shared service arrangement is on a cost recovery basis.  The benefits of the shared service function are set out above.    

6. GDPR and Data Privacy  

1. MOPAC will adhere to the Data Protection Act (DPA) 2018 and ensure that any organisations who are commissioned to do work with or on behalf of MOPAC are fully compliant with the policy and understand their GDPR responsibilities.   

2. The proposal does not use personally identifiable data of members of the public therefore there are no GDPR issues to be considered. 

7. Equality Comments  

1. MOPAC is required to comply with the public sector equality duty set out in section 149(1) of the Equality Act 2010. This requires MOPAC to have due regard to the need to eliminate discrimination, advance equality of opportunity and foster good relations by reference to people with protected characteristics. The protected characteristics are: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation. 

2. There are no equality or diversity implications arising from this report. 

8. Background/supporting papers 

Appendix 1 Treasury Management Strategy 2024/25