To approve an amendment to the minimum revenue provision policy in the treasury management strategy.  

Council considered a report concerning an amendment to the minimum revenue provision (MRP) contained within the Treasury Management Strategy. The Cabinet Member Finance, Housing and ICT introduced and moved the report and explained the statutory requirement on the council to set an MRP. Guidance issued in 2008 proposed four options for establishing a prudent MRP; following guidance from specialist financial advisors it has been recommended that the annuity method was used to calculate the MRP.

The comments below were raised during the debate:

·         There was concern that the proposal would place a burden on future generations of taxpayers and local residents by delaying the repayment of debt.

·         The proposal was not felt to take adequate account of the capacity of the Council to be able to service debt and make increased repayments from the 2030s onwards. It was noted that the proposal only concerned the debt currently held by the council and not any future borrowing which may occur; the proposed approach would potentially restrict the council’s capacity to borrow in the future. It was noted that a number of cells in the last column of appendix 3 should be coloured red rather than green to denote outstanding debts of £14million by 2066. The Chief Finance Officer confirmed that the underlying loans would not change and loans from the Public Works Loans Board were fixed. It was the accountancy treatment of those loans that would change through the MRP proposal. Inflation had not been taken into account in the calculations in the tables which would reduce the liability to the council in future years.

·         Clarity was required regarding the management and assessment of an assets useful life. It was commented that assets were not necessarily available for their projected life and could become liabilities to the council which was not adequately assessed in the report. There was concern that the proposal would result in greater cost to the council. The cabinet member finance, housing and ICT explained that inflation would have an effect and the proportion of the budget of the council in future years dedicated to the repayment of debt would be reduced. Assets were reassessed and revalued during the course of their lifetime. Interest costs would be tied to the lifetime of assets.

·         The approach had been adopted at other authorities and surprise was expressed that it had not already been implemented at the Council.

·         It was noted that few local authorities had adopted the approach and a significant risk concerned its complexity and impact on staffing. It was not felt that the external auditors had provided a clear endorsement of the proposal. A large number of councils had adopted the policy and a list could be provided if required. The Chief Finance Officer confirmed the external auditors would form an opinion every year about the MRP. 

·         The report outlined a technical accounting issue which had been endorsed by CIPFA. It was felt that members should be focused on the Fairer Funding review report to assess whether the council would be adequately financed in the immediate future.

Councillor AJW Powers proposed and Councillor MD Lloyd-Hayes seconded a motion to include additional wording in recommendation (a): that the money which becomes available from the change in MRP policy be used to help pay off the council’s overall debt more quickly.

Council debated the motion and raised the following comments:

·         The proposed motion would restrict the flexibility of the council in the future.

·         The MRP proposal as set out in the report would reduce the payments of the council to service debt and inflation decreased the overall level of debt. The Chief Finance Officer confirmed that the proposal in the report concerned an accounting adjustment and if changes were required to the processes for the repayment of loans a change to the Treasury Management Strategy would be required.

The motion to include additional wording in recommendation (a): that the money which becomes available from the change in MRP policy be used to help pay off the council’s overall debt more quickly was put to the vote and was lost by a majority of Council.

The Chairman informed Council that the item concerned a budget matter and there was a requirement for a recorded vote.

The recommendation in the report were proposed for approval by Councillor NE Shaw and seconded by AW Johnson.

A recorded vote was then held on the motion to approve the recommendation in the report. The motion was carried: 34 votes in favour, 6 against and 5 abstentions.

For (34): Councillors PA Andrews, BA Baker, WLS Bowen, TL Bowes, H Bramer, CR Butler, ACR Chappell,  MJK Cooper, PE Crockett, P Cutter, BA Durkin, PJ Edwards, CA Gandy, KS Guthrie, DG Harlow, TM James, PC Jinman, AW Johnson, JF Johnson, J Kenyon, JG Lester, RL Mayo, MT McEvilly, PD Newman, CA North, RJ Phillips, PD Price, AR Round, P Rone, NE Shaw, J Stone, EJ Swinglehurst, DB Wilcox, SD Williams.

Against (6): Councillors JM Bartlett, EPJ Harvey, AJW Powers, A Seldon, D Summers, A Warmington.

Abstentions (5): Councillors MD Lloyd-Hayes, PP Marsh, RI Matthews

SM Michael, FM Norman.

Resolved – that an amendment is approved to the current minimum revenue provision policy within the Treasury Management Strategy to be based on the estimated life of the assets, in accordance with regulations, and the method of repayment to be through an annuity calculation (providing a consistent overall annual borrowing charge).

Councillor Tawn returned to the meeting at 11.49 a.m.