111. MINUTES

RESOLVED :

THAT the Minutes of the meeting of the Executive held on 11 February 2004 be confirmed.

112. DECLARATIONS OF INTEREST

There were no declarations of interest.

113. REVENUE SUPPORT GRANT SETTLEMENT AND BUDGET 2004-5

The Portfolio Holder introduced an updated report on the revenue support grant settlement and budget 2004-5 that was considered at the Executive meeting on 11 February which took into account the consultation responses.

A recommendation was circulated at the meeting. This differed from the earlier report in that Appendix 3 now recommended the postponement of the findings of the Members Remuneration Panel, there had been a reduction in the amount set aside for the pending APTC pay award and there was also a reduction in the amount set aside for inflation on the procurement for goods and materials. Therefore the Council Tax increase that was being proposed was 4.9%.

RESOLVED TO RECOMMEND TO FULL COUNCIL :

THAT the proposed budget, as attached to these minutes, be recommended to Full Council

CHAIRMAN

i) That the revised estimates for 2003/04 as set out in Appendix 2 be approved.

ii) That the revenue estimates for 2004/05 be £157,749,000 allocated to Service Units as set out in Appendix 2.

iii) That a Schools Budget of at least £60,631,000 be set for 2004/5 exclusive of the LSC allocation.

iv) That the Schools Budget shares be determined by the Strategic Director of Education and Community Development within the approved service budget.

v) That the Medium Term Forecast for 2005/6 and 2006/7 as set out in Appendix 3 be approved for planning purposes.

vi) That the recommendations of the Executive in respect of the 2004/05 capital programme as set out in Appendix 4 be approved and that authority be delegated to the Executive to determine the capital programme within the limit of available resources, having given consideration to the views of Select Committees, and thereafter for the Directors Group to manage the programme from day to day within available resources and subject to any direction from the Executive.

vii) That a contingency of £2 million of unsupported capital borrowing be approved, for use in the event of planned capital receipts not being received, or for projects which would be self financing or profit making over the medium term and subject to a robust business case being approved by the Executive.

viii) That the recommendations of the Executive as set out in Appendices 5 and 6 in respect of the new CIPFA Prudential Code for Capital Finance and the Treasury Strategy for the 2004/05 financial year be approved.

ix) That it be noted that at its meeting on 21st January 2004 the Council calculated the amounts for the year 2004/05 in accordance with regulations made under Section 33(5) of the Local Government Finance Act 1992 (The Tax Base).

x) That the amounts now calculated by the Council for the year 2004/05 in accordance with Sections 32 to 36 of the Local Government Act 1992 be as set out in Appendix 1.

xi) That it be noted that for the year 2004/05 the Hampshire Police Authority has stated the following amounts in Precepts issued to the Council, in accordance with Section 40 of the Local Government Finance Act 1992, for each of the categories of dwellings below:

Valuation Bands - Precepting Authority

	£
Band A	72.24
Band B	84.28
Band C	96.32
Band D	108.36
Band E	132.44
Band F	156.52
Band G	180.60
Band H	216.72

xii) THAT, having calculated the aggregate in each case of the amounts at paragraph xi) above and paragraph g) of Appendix 1, the Council, in accordance with Section 30(2) of the Local Government Finance Act 1992, hereby sets the following amounts as the amounts of Council Tax for the year 2004/05 for each of the following categories of dwelling shown below -

Council Tax Banding Calculation 2004/05 Including Police Precept

	A*	A	B	C	D	E	F	G	H
Arreton	661.94	794.33	926.71	1,059.10	1,191.49	1,456.27	1,721.04	1,985.82	2,382.98
Bembridge	668.86	802.63	936.41	1,070.18	1,203.95	1,471.49	1,739.04	2,006.58	2,407.90
Brading	675.47	810.56	945.65	1,080.75	1,215.84	1,486.03	1,756.21	2,026.40	2,431.68
Brighstone	662.76	795.31	927.87	1,060.42	1,192.97	1,458.07	1,723.18	1,988.28	2,385.94
Calbourne	666.68	800.01	933.35	1,066.68	1,200.02	1,466.69	1,733.36	2,000.03	2,400.04
Chale	665.29	798.35	931.41	1,064.47	1,197.53	1,463.65	1,729.77	1,995.88	2,395.06
Cowes	667.02	800.42	933.82	1,067.23	1,200.63	1,467.44	1,734.24	2,001.05	2,401.26
East Cowes	669.09	802.91	936.72	1,070.54	1,204.36	1,472.00	1,739.63	2,007.27	2,408.72
Freshwater	666.46	799.75	933.05	1,066.34	1,199.63	1,466.21	1,732.80	1,999.38	2,399.26
Gatcombe	664.91	797.89	930.88	1,063.86	1,196.84	1,462.80	1,728.77	1,994.73	2,393.68
Godshill	664.47	797.37	930.26	1,063.16	1,196.05	1,461.84	1,727.63	1,993.42	2,392.10
Gurnard	670.41	804.49	938.57	1,072.65	1,206.73	1,474.89	1,743.05	2,011.22	2,413.46
Lake	662.89	795.47	928.04	1,060.62	1,193.20	1,458.36	1,723.51	1,988.67	2,386.40
Nettlestone & Seaview	662.94	795.53	928.12	1,060.71	1,193.30	1,458.48	1,723.66	1,988.83	2,386.60
Newchurch	661.08	793.30	925.52	1,057.73	1,189.95	1,454.38	1,718.82	1,983.25	2,379.90
Niton & Whitwell	662.40	794.88	927.36	1,059.84	1,192.32	1,457.28	1,722.24	1,987.20	2,384.64
Rookley	664.16	796.99	929.82	1,062.65	1,195.48	1,461.14	1,726.80	1,992.47	2,390.96
Sandown	672.04	806.45	940.85	1,075.26	1,209.67	1,478.49	1,747.30	2,016.12	2,419.34
Shalfleet	664.51	797.41	930.32	1,063.22	1,196.12	1,461.92	1,727.73	1,993.53	2,392.24
Shanklin	665.32	798.39	931.45	1,064.52	1,197.58	1,463.71	1,729.84	1,995.97	2,395.16
Shorwell	663.03	795.63	928.24	1,060.84	1,193.45	1,458.66	1,723.87	1,989.08	2,386.90
St Helens	666.66	799.99	933.33	1,066.66	1,199.99	1,466.65	1,733.32	1,999.98	2,399.98
Totland	669.16	802.99	936.83	1,070.66	1,204.49	1,472.15	1,739.82	2,007.48	2,408.98
Ventnor	673.77	808.52	943.27	1,078.03	1,212.78	1,482.29	1,751.79	2,021.30	2,425.56
Wootton	669.94	803.93	937.91	1,071.90	1,205.89	1,473.87	1,741.84	2,009.82	2,411.78
Wroxall	663.82	796.58	929.34	1,062.11	1,194.87	1,460.40	1,725.92	1,991.45	2,389.74
Yarmouth	669.71	803.65	937.59	1,071.53	1,205.47	1,473.35	1,741.23	2,009.12	2,410.94
Unparished	656.97	788.36	919.75	1,051.15	1,182.54	1,445.33	1,708.11	1,970.90	2,365.08

*(disabled Reduction)

Appendix 1

	TOTAL EXPENDITURE AND PARISH PRECEPTS

a)	£252,273,804	being the aggregate of the amounts which the Council estimates for
		the items set out in Section 32(2)[a] to [e] of the Act, which includes
		Parish and Town Council Precepts totalling			£640,793	which are
		detailed at (e) below.
b)	£94,185,700	being the aggregate of the amounts which the Council estimates for
		the items set out in Section 32(3)[a] to [c] of the Act.
c)	£158,088,104	being the amount by which the aggregate at (a) above exceeds the
		aggregate at (b) above, calculated by the Council, in accordance with
		Section 32(4) of the Act, as its budget requirement for the year,
		which includes	£640,793	in respect of Parish and Town Council
		Precepts and a Collection Fund surplus of £301,689.
d)	£101,641,785	being the aggregate of the sums which the Council estimates will be
		payable for the year into its General Fund in respect of redistributed
		Non-Domestic Rates, Revenue Support Grant or additional grant and
		calculated in accordance with the Collection Fund (General)(England)
		Directions 2004 and the Local Authorities (Alteration of Requisite
		Calculations)(England) Regulations 2004.

e)	Parish & Town Council Precepts
	Arreton	8.95
	Bembridge	21.41
	Brading	33.30
	Brighstone	10.43
	Calbourne	17.48
	Chale	14.99
	Cowes	18.09
	East Cowes	21.82
	Freshwater	17.09
	Gatcombe	14.30
	Godshill	13.51
	Gurnard	24.19
	Lake	10.66
	Nettlestone & Seaview	10.76
	Newchurch	7.41
	Niton & Whitwell	9.78
	Rookley	12.94
	Sandown	27.13
	Shalfleet	13.58
	Shanklin	15.04
	Shorwell	10.91
	St Helens	17.45
	Totland	21.95
	Ventnor	30.24
	Wootton	23.35
	Wroxall	12.33
	Yarmouth	22.93

		being the amounts precepted by Parish and Town Councils divided by
		the amounts of their respective Taxbase.
f)	£1,086.51	being the amount at [c] above less the amount at [d] above, all divided
		by the amount of its Taxbase, calculated by the Council in accordance
		with Section 33(1) of the Act as the basic amount of its Council Tax
		for the year.

g)	£1,074.18	being the amount at [c] above net of Parish and Town Council Precepts
		less the amount at d) above, all divided by the amount of its Taxbase
		calculated by the Council in accordance with Section 33(1) of the Act
		as the basic amount of its Council Tax for the year for those parts of
		its area to which no Parish and Town Council Precepts relate.

h)	Part of the Council's Area	£
	Arreton	1,083.13
	Bembridge	1,095.59
	Brading	1,107.48
	Brighstone	1,084.61
	Calbourne	1,091.66
	Chale	1,089.17
	Cowes	1,092.27
	East Cowes	1,096.00
	Freshwater	1,091.27
	Gatcombe	1,088.48
	Godshill	1,087.69
	Gurnard	1,098.37
	Lake	1,084.84
	Nettlestone & Seaview	1,084.94
	Newchurch	1,081.59
	Niton & Whitwell	1,083.96
	Rookley	1,087.12
	Sandown	1,101.31
	Shalfleet	1,087.76
	Shanklin	1,089.22
	Shorwell	1,085.09
	St Helens	1,091.63
	Totland	1,096.13
	Ventnor	1,104.42
	Wootton	1,097.53
	Wroxall	1,086.51
	Yarmouth	1,097.11
	Unparished	1,074.18

	being the amounts given by adding to the amount at (g) above the amounts of the Parish and Town
	Council Precepts relating to dwellings in those parts of the Council's area contained at (e) above,
	calculated by the Council, in accordance with Section 34(3) of the Act, as the basic amounts of its
	Council Tax for the year for dwellings in those parts of its area which are parished.

I)	Valuation Bands - Parts of the Council's Area

	As detailed below, the amounts given by multiplying the amounts at paragraph (h) above by the
	number which, in the proportion set out in Section 5(1) of the Act, is applicable to dwellings listed
	in a particular valuation band divided by the number which in that proportion is applicable to dwellings
	listed in valuation band, calculated by the Council in accordance with section 36(1) of the Act, as the
	amounts to be taken into account for the year in respect of categories of dwellings listed in different
	valuation bands.

Council Tax Banding Calculation 2004/05
Excluding Police Precept (Appendix 1)

	A	A	B	C	D	E	F	G	H
	(Disabled
	Reduction)
Arreton	601.74	722.09	842.43	962.78	1,083.13	1,323.83	1,564.52	1,805.22	2,166.26
Bembridge	608.66	730.39	852.13	973.86	1,095.59	1,339.05	1,582.52	1,825.98	2,191.18
Brading	615.27	738.32	861.37	984.43	1,107.48	1,353.59	1,599.69	1,845.80	2,214.96
Brighstone	602.56	723.07	843.59	964.10	1,084.61	1,325.63	1,566.66	1,807.68	2,169.22
Calbourne	606.48	727.77	849.07	970.36	1,091.66	1,334.25	1,576.84	1,819.43	2,183.32
Chale	605.09	726.11	847.13	968.15	1,089.17	1,331.21	1,573.25	1,815.28	2,178.34
Cowes	606.82	728.18	849.54	970.91	1,092.27	1,335.00	1,577.72	1,820.45	2,184.54
East Cowes	608.89	730.67	852.44	974.22	1,096.00	1,339.56	1,583.11	1,826.67	2,192.00
Freshwater	606.26	727.51	848.77	970.02	1,091.27	1,333.77	1,576.28	1,818.78	2,182.54
Gatcombe	604.71	725.65	846.60	967.54	1,088.48	1,330.36	1,572.25	1,814.13	2,176.96
Godshill	604.27	725.13	845.98	966.84	1,087.69	1,329.40	1,571.11	1,812.82	2,175.38
Gurnard	610.21	732.25	854.29	976.33	1,098.37	1,342.45	1,586.53	1,830.62	2,196.74
Lake	602.69	723.23	843.76	964.30	1,084.84	1,325.92	1,566.99	1,808.07	2,169.68
Nettlestone & Seaview	602.74	723.29	843.84	964.39	1,084.94	1,326.04	1,567.14	1,808.23	2,169.88
Newchurch	600.88	721.06	841.24	961.41	1,081.59	1,321.94	1,562.30	1,802.65	2,163.18
Niton & Whitwell	602.20	722.64	843.08	963.52	1,083.96	1,324.84	1,565.72	1,806.60	2,167.92
Rookley	603.96	724.75	845.54	966.33	1,087.12	1,328.70	1,570.28	1,811.87	2,174.24
Sandown	611.84	734.21	856.57	978.94	1,101.31	1,346.05	1,590.78	1,835.52	2,202.62
Shalfleet	604.31	725.17	846.04	966.90	1,087.76	1,329.48	1,571.21	1,812.93	2,175.52
Shanklin	605.12	726.15	847.17	968.20	1,089.22	1,331.27	1,573.32	1,815.37	2,178.44
Shorwell	602.83	723.39	843.96	964.52	1,085.09	1,326.22	1,567.35	1,808.48	2,170.18
St Helens	606.46	727.75	849.05	970.34	1,091.63	1,334.21	1,576.80	1,819.38	2,183.26
Totland	608.96	730.75	852.55	974.34	1,096.13	1,339.71	1,583.30	1,826.88	2,192.26
Ventnor	613.57	736.28	858.99	981.71	1,104.42	1,349.85	1,595.27	1,840.70	2,208.84
Wootton	609.74	731.69	853.63	975.58	1,097.53	1,341.43	1,585.32	1,829.22	2,195.06
Wroxall	603.62	724.34	845.06	965.79	1,086.51	1,327.96	1,569.40	1,810.85	2,173.02
Yarmouth	609.51	731.41	853.31	975.21	1,097.11	1,340.91	1,584.71	1,828.52	2,194.22
Unparished	596.77	716.12	835.47	954.83	1,074.18	1,312.89	1,551.59	1,790.30	2,148.36

								Appendix 2
	Revised 2003-04	Base 2004-05	Legislation, service pressures	Service improve-ments	Service Reductions	Reduce inflation provision	One-off resource	Draft budget 2004-05
	£000	£000	£000	£000	£000	£000	£000	£000
Housing benefits etc.	3,590.5	2,518.1		50.0		-4.5	330.0	2,893.6
Corporate Services Directorate	206.0	206.7				-0.2		206.6
Legal & Democratic	824.2	842.1			-25.0	-7.9		809.2
Human Resources	1,034.6	864.3		16.0		-1.8		878.4
Policy & Communications	1,624.6	1,771.2		25.0		-15.5		1,780.7
Economic Development	796.1	223.9				-0.9		223.0
Select Committee Support	342.9	364.7				-0.9		363.8
Finance & Business	2,009.9	2,072.7				-15.1		2,057.6
ICT and Organisational	2,612.6	2,243.4				-23.2		2,220.2
Education	64,406.1	67,153.5		415.0	-567.0			67,001.5
Community Development	4,388.8	4,429.9		50.0	-63.0	-25.6		4,391.3
Wight Leisure	1,882.7	1,964.8			-141.0	-18.4		1,805.5
Tourism	1,379.8	1,201.6			-54.0	-41.7		1,105.9
Property Services	77.1	163.6				-3.0		160.6
Planning	1,569.6	1,672.8			-40.0	-9.8		1,623.0
Engineering	12,008.8	12,217.0		295.0		-18.2		12,493.8
Consumer Protection	1,562.2	1,609.6		28.0		-3.2		1,634.4
Fire & Rescue	5,156.5	5,531.0				-5.4		5,525.7
Emergency Planning	53.0	59.6				-0.3		59.4
Social Services	32,171.4	33,981.7	1,650.0		-349.0	-50.3		35,232.5
Housing	1,337.8	1,532.1		300.0		-1.2		1,831.0
Building Maintenance	1,066.0	1,099.9						1,099.9
Precepts	1,680.3	1,512.3						1,512.3
Capital	8,900.7	10,789.7						10,789.7
Other financing	-2,934.0	49.7						49.7
	147,748.0	156,076.0	1,650.0	1,179.0	-1,239.0	-247.0	330.0	157,749.0

Revenue Support Grant	-56,057.7							-62,658.1
Business Rates	-40,260.5		Council Tax Band D			£1,074.18		-38,983.7
Council Tax	-51,429.8		Increase on 2002-03 (%)			4.9		-56,107.2
Withdrawal from General Reserve	0.0		Increase per week, Band D			£0.96		0.0
General Reserve brought forward	2077.1		Increase per week, Band C			£0.86		2,077.1
General Reserve at year end	2,077.1							2,077.1

Appendix 3

Medium Term Forecast	2004-05	2005-06	2006-07
	£000	£000	£000

Standstill budget 2004-05	157,405	157,405	157,405

One off resource, empty property yield	490
Pay and price inflation		6,121	12,094
Pension contributions		784	1,467
Capital financing costs		1,809	2,886
Education pressures		928	1,335
Social Services pressures		234	310
Waste management		178	562
Fire audit fee (one-off)		-25	-25
MORI BVPP poll		0	15
Bids (excluding one-off items)	604	604	604
Headroom	-323	-323	-323
Members allowances - postpone	-106	-106	-106
Reduced procurement inflation contingency	-247	-247	-247
APTC pay at 2.8	-74	-74	-185

One off savings not repeated		102	102
Funding changes		702	702
Unidentified net savings required	0	-3,334	-4,508

Net expenditure	157,749	164,758	172,088

Revenue Support Grant and business rates	101,642	107,350	111,226
Withdrawal from reserves	0	0	0
One off support in 2004-05	0	-858	-858

Council Tax yield	56,108	58,266	61,720

Tax base (band D equivalents)	51,951.80	51,659	52,116
Collection Fund surplus	302	0	0

Band D Council Tax	###1,074.18	1,127.89	1,184.28
Tax increase (%)	4.9	5.0	5.0

APPENDIX 4

Capital Programme 2004 / 2007

The Supported Capital Expenditure (SCE) that is applicable to the 2004/05 financial year is allocated to services as detailed below.

Education 8,393,700

Highways 6,305,000

Housing 1,702,000

Social Services 111,000

Fire Service 122,000

16,633,700

In addition to the above are the Highways allocations specific to the Ryde Interchange and the Undercliff Drive, and those applicable to approved Coast Protection Scheme.

The following bids which fall outside the Single Capital Pot and Supported Capital Expenditure (SCE), are recommended to be financed from capital receipts.

Bid	2004/5	2005/6	2006/7
1. Ventnor Botanic Gardens, foul drainage	£300,000	▬	▬
2. Acquisition of Land at Pan (approved by Executive)	£200,000	£200,000	£200,000
3. Maintenance of buildings, including Disability Discrimination Act	£300,000	£300,000	£300,000
4. Cemeteries	£50,000	£50,000	£50,000
5. Cliff Falls, Landslip etc	£100,000	£100,000	£100,000
6. Community Development	£250,000	£250,000	£250,000
7. Housing Disabled Facilities Grant	£240,000	£240,000	£240,000
	£1,440,000	£1,140,000	£1,140,000

Notes:

1. Replacement of Foul Drainage System which is an essential Health & Safety requirement.

2. Already approved by Executive as part of the Capital Investment Strategy for Pan.

3. Essential works to meet legal requirements, Health & Safety and priorities or objectives for service delivery.

4. The establishment of an annual budget to address a backlog of essential repairs and associated risk.

5. This sum is considered as necessary provision to meet unforeseen costs associated with cliff falls and landslips.

6. This budget is for prioritisation by the relevant Strategic Director to address Health and Safety issues, and ensure the maintenance of revenue income streams from leisure facilities etc.

7. This is the Council’s anticipated funding share of an expenditure programme which attracts 60% Government Grant. The programme enables the provision of basic facilities to accommodate the needs of disabled people in their own homes.

APPENDIX 5

Prudential Indicators

The prudential framework for self-management of capital finance focuses upon the following elements:

Capital expenditure plans
External debt
Treasury management

The prudential indicators are designed to support and record local decision making in these three areas.

In the Prudential Code, the indicators are set out according to whether they are indicators of affordability or prudence. This is necessary for an understanding of the role each indicator plays in the overall decision-making framework. The indicators are listed below:

Prudential indicators for affordability

- Estimate of the incremental impact of capital investment decisions upon Council Tax. It is important to note that all associated borrowing is supported and any saving through not undertaking the programme would be a one off, as a result of the probable loss of FSS for later years.

- Ratio of financing costs to net revenue stream

Prudential indicators for Prudence

- Net borrowing and the capital financing requirement

- Confirmation that treasury management is carried out in accordance with good professional practice

- External debt within prudential and sustainable limits

Prudential indicators for capital expenditure, external debt and treasury management

Capital Expenditure

- Estimates of Capital expenditure

- Capital financing requirement

External Debt

- Authorised limit

- Operational boundary

Treasury Management

- Interest rate exposures

- Maturity structure of borrowing

- Total principal sums invested for periods in excess of 364 days

The prudential indicators are not designed to be comparative performance indicators, and to use them in this way would be misleading. It is only intended that they be used to measure performance within the authority over time. It also needs to be borne in mind that the indicators need to be considered collectively, rather than individually.

NOTES

1. Ratio of financing costs to net revenue stream is the total of capital financing costs divided by the Councils total income from Council Taxpayers and Government Grants as contained in its Consolidated Revenue account

2. The Capital Financing Requirement (CFR) is a new measure introduced by the Prudential Code, which represents the amount of capital spending which has yet to be financed.

3. The operational boundary for external debt represents the maximum level of borrowing that the Council is planning to have outstanding from its spending plans. The authorised limit on borrowing is set at a higher level in order to cover any unavoidable and unforeseen borrowing that may become necessary due to adverse cash flow movements.

The following sets out, for approval, the mandatory indicators recommended by the Prudential Code –

Indicator	Basis	Period	Definition	SCC Methodology	Unit	2004/05	2005/06	2006/07
Affordability
Estimates of ratio of financing costs to net revenue stream	Estimate	Years 1, 2 and 3	Estimate of financing costs / estimate of net revenue stream x 100%	Interest payable re. borrowing + interest payable re. finance leases + gains/losses on early settlement of borrowing - interest on investments + MRP	%	7.369%	8.294%	9.174%
Estimates of the incremental impact of capital investment decisions on Council Tax	Estimate	Years 1, 2 and 3 (and longer as necessary)	(i) forecast the total budgetary requirements for the authority based on no changes to the existing capital programme	(i) Council Tax requirement under existing plans	£ per Band D Equivalent	11.47	55.24	99.68
			(ii) forecast the total budgetary requirements for the authority with the changes proposed to the capital programme	(ii) Council tax requirement including proposed capital scheme	%	1.14%	5.50%	9.92%
			(iii) addition or reduction to Council Tax as a result of the difference between (i) and (ii)	(ii) - (i)	%	1.14%	5.50%	9.92%
Capital Expenditure
Estimates of capital expenditure	Estimate	Years 1, 2 and 3 (and longer as necessary)	Estimate of total capital expenditure to be incurred	Capital budgets	£000	29,155	35,239	22,977
Estimates of capital financing requirement (CFR)	Estimate	Years 1, 2 and 3	Estimate of underlying need for credit as at the end of years 1, 2, 3	Fixed assets + deferred charges + FARR + Capital Financing Reserve + government grants deferred + credit arrangements	£000	155,712	180,115	191,173
External Debt
Authorised limit (for borrowing)	Estimate	Years 1, 2 and 3	Authorised limit for borrowing.	Estimates of borrowing + other long term liabilities (3rd party balances, provisions, amounts outstanding on leases, government grants deferred and other contributions deferred)	£000	171,000	198,000	210,000
Authorised limit (for other long term liabilities)	Estimate	Years 1, 2 and 3	Authorised limit for other long term liabilities	Estimates of borrowing + other long term liabilities (3rd party balances, provisions, amounts outstanding on leases, government grants deferred and other contributions deferred)	£000	10,000	10,000	10,000
Authorised limit (for total external debt)	Estimate	Years 1, 2 and 3	Authorised limit for borrowing + authorised limit for other long term liabilities	Estimates of borrowing + other long term liabilities (3rd party balances, provisions, amounts outstanding on leases, government grants deferred and other contributions deferred)	£000	181,000	208,000	220,000
Operational boundary (for borrowing)	Estimate	Years 1, 2 and 3	Operational boundary for external debt	As above less contingency provision.	£000	156,000	180,000	191,000
Operational boundary (for other long term liabilities)	Estimate	Years 1, 2 and 3	Operational boundary for external debt	As above	£000	10,000	10,000	10,000
Operational boundary (for total external debt)	Estimate	Years 1, 2 and 3	Operational boundary for external debt + operational boundary for other long term liabilities	As above	£000	166,000	190,000	201,000
Treasury Management
Adoption of the CIPFA Code of Practice for Treasury Management in the Public Services			The Local Authority has adopted CIPFA's Code of Practice		ADOPTED FEBRUARY 2003	ü	ü	ü
Fixed interest rate exposure - upper limit	Estimate	Years 1, 2 and 3	Interest payable on borrowing at fixed rates - interest receivable on fixed rate investments or principal sums outstanding in respect of borrowing at fixed rates - principal sums outstanding in respect of investments at fixed rates	Upper limit	%	100%	100%	100%
Variable interest rate exposure - upper limit	Estimate	Years 1, 2 and 3	Interest payable on borrowing at variable rates - interest receivable on variable rate investments or principal sums outstanding in respect of borrowing at variable rates - principal sums outstanding in respect of investments at variable rates	Upper limit	%	20%	20%	20%
Maturity structure of borrowing (upper and lower limits)	Estimate	All years	Amount of projected borrowing that is fixed rate maturing in each period / total projected borrowing that is fixed rate x 100%	Ranges for each period		See below	See below	See below
Total principal sums invested for periods longer than 364 days	Estimate	All years	Total principal sum invested to final maturities beyond the period end		£000	10,000	10,000	10,000

Maturity Structure of Borrowing		2004-5	Future Years
Period	Upper Limit	Lower Limit	Upper Limit	Lower Limit
Under 12 months	10%	0%	10%	0%
12 months and within 24 months	10%	0%	10%	0%
24 months and within 5 years	20%	0%	20%	10%
5 years and within 10 years	50%	25%	50%	25%
10 years and above	95%	50%	95%	50%

APPENDIX 6

TREASURY STRATEGY 2004-2005

1. TREASURY POLICY

1.1 This Strategy is pursuant to the Treasury Policy and in accordance with CIPFA’s revised Code of Practice for Treasury Management in Local Authorities, and Treasury Management Practices (TMP) as adopted in February 2003.

2. TREASURY MANAGEMENT

2.1. The Council’s Treasury Management activities may include the following activities:

1) Cash Flow (daily balances and longer term forecasting)

2) Investing surplus funds

3) Borrowing to finance day to day cash fluctuations

4) Funding of capital payments through borrowing, capital receipts, grants or leasing

5) Management of debt (including restructuring and monitoring an even maturity profile)

6) Interest rate exposure management

7) Dealing procedures with brokers, bank and Public Works Loan Board (PWLB).

3. OBJECTIVES

The major objectives to be followed in 2004-2005 are:

3.1. BORROWING

a) To minimise the revenue costs of debt

b) To manage the Council’s debt maturity profile, i.e. to leave no one future year with a high level of repayments that could cause problems in re-borrowing

c) To affect funding in any one year at the cheapest cost commensurate with future risk

d) To forecast average future interest rates and borrow accordingly (i.e. short term and/or variable when rates are “high”, long term and fixed when rates are “low”). Similarly maturity loans can be taken when rates are relatively low, to lock in the principal for the maximum period, and possibly annuity loans or equal installments of principal loans when rates are considered higher.

e) To monitor and review the level of variable interest rate loans in order to take advantage of interest rate movements.

f) To restructure debt in order to take advantage of potential savings as interest rates change.

3.2. INVESTMENT

1. To invest such monies as are temporarily surplus to requirements

2. To maintain capital security

3. To achieve a level of return equal to or greater than would be secured by internal investment

4. To maintain policy flexibility.

5. The Council is estimated to have investments of £27.5 million as at 31^st March 2004. This represents the investment of reserves, temporary surpluses on cash flow, and any advance drawdown of loans to finance the capital programme.

4. FORECAST OF INTEREST RATES FOR 2004-2005

Bank base rate had remained at 4.0% since 8^th November 2001, (the longest incidence of no movement in base rate for some decades) before falling to a low of 3.5% in July 2003. Base Rate moved back up to 3.75% in November 2003 and commentators are expecting further rises throughout 2004, with a full 1% increase by the end of the year.

5. STRATEGY

5.1. CAPITAL FINANCE

To maximise the use of Supported Capital Expenditure, to maximise the use of capital grants and to utilise available capital receipts and leasing to finance a capital programme consistent with the Council’s revenue budget.

5.2. BORROWING

The strategy will in general be:

i to borrow long term when interest rates are relatively low and to borrow short term when interest rates are judged to be high.

ii to keep a reasonable balance between short term and long term loans so that

o there is not an unreasonable exposure to short term loans with corresponding risk of increased interest charges; or

o over reliance on long term loans which could restrict flexibility in renewing debt at advantageous interest rates.

iii to aim generally to be in a net day to day borrowing position so that the need for investment of temporary excess funds is avoided as far as possible.

This will be subject to variation in order to take advantage where appropriate of prevailing market conditions.

For 2004-2005 the strategy will be to continue to borrow medium to long term at fixed interest rates, having regard to the low interest rates that are currently available.

5.3. TEMPORARY INVESTMENTS

To invest funds temporarily surplus so as to produce the maximum return.

5.4. DEBT RESTRUCTURING

To use available PWLB quota to take advantage of opportunities to redeem PWLB debt or convert from fixed to variable rates or vice versa and replace debt so as to smooth the pattern of debt repayment and/or minimise overall long term capital financing costs. Consideration will be given to the availability and attractiveness of loans other than PWLB for debt restructuring purposes.

6. RAISING CAPITAL FINANCE

6.1. The following list specifies which borrowing instruments, on and off-balance sheet, can be adopted. Only those marked a are currently used by the Council.

Fixed Variable

PWLB a a

Market Long-term a a

Market Pooled Funds a a

Market Temporary a a

Local Bonds

Overdraft a

Negotiable Bonds

Stock Issues

Internal (capital receipts and revenue balances) a a

Leasing a a

Bills

7. SOURCES OF FINANCING

The following list specifies which borrowing instruments the Council may adopt.

7.1. PUBLIC WORKS LOAN BOARD (PWLB)

1) The main source of longer term borrowing for the Council for many years has been from the Government through the Public Works Loan Board.

2) It is still likely that the PWLB will remain the major source of the Council’s long term borrowing requirements. The 2004-2005 quota for the Council is estimated to be £17.7 million, excluding the sums for Undercliff Drive and Ryde Interchange.

3) Forecasts are that interest rates on long-term loans (including long term PWLB loans) will rise in the near future, and the timing of borrowing will therefore take account of this forecast.

7.2. MONEY MARKET LOANS - LONG TERM AND POOLED FUNDS

The availability of PWLB loans has become easier and their rates of interest are expected to remain competitive. Loans are also available through the London money market in particular longer term loans (40 years) which carry a low initial period of interest, but where the lender has the option to raise the rate after this period. If that option is taken, the Council is free to repay if it so chooses without penalty. These Lenders Option: Borrowers Option (LOBO) loans carry the necessary security ratings and can be an effective complement to PWLB borrowing in structuring the loan portfolio and debt rescheduling.

7.3. MONEY MARKET LOANS -TEMPORARY (LOANS UP TO 364 DAYS)

Short term loans are used to avoid any unforeseen overdrawn position with the bank.

7.4. OVERDRAFT

An overdraft limit of £3m is available with the Council’s bankers. This facility will be used on occasions when temporary borrowing is difficult, or for amounts of under £250,000 wherever the transaction costs outweigh any benefits from using the money market.

7.5. INTERNAL

Internal funds include “reserved” or “set-aside” capital receipts which are to be used to repay debt as a substitute for new borrowing. There is no provision in legislation to compel authorities to use such receipts in the year they are received, and those funds are normally used internally thereby reducing the need for external borrowing but they could be externalised and new borrowing taken up if conditions merit such an approach.

7.6. LEASING

This form of finance will be used where appropriate and economically viable (eg for the purchase of equipment and vehicles), and where the transaction costs are within available resources and show no material cost over that of borrowing.

8. BORROWING

8.1. The Council will have an estimated borrowing requirements in 2004-2005 of £17.7 million, in order to finance supported capital expenditure.

The estimated requirements of £17.7m may be met as follows: £M

Total Requirement 17.7

Less: movement in amounts set aside 4.6

Minimum External Borrowing Requirement 13.1

9. APPROVED ORGANISATIONS FOR INVESTMENT

9.1. The current policy is that the investment of surplus funds is limited to:

Major British Clearing Banks and Subsidiaries

Larger Merchant Banks

Top Building Societies

Other Local Authorities

9.2. The Council will also use Pooled money resources that may become available through the auspices of approved organisations for Investment, as contained above and to include H M Treasury. The limit of such investment to be placed at £8 million per each approved source and varied at the discretion of the Chief Financial Officer. The exercise of such discretion to be reported to the Executive as part of the Annual Reporting requirement as contained under TMP6.

9.3. There may be exceptions to this approved list from time to time depending on individual circumstances, and with the agreement of the Portfolio holder for Resources. The list of above organisations is continually reviewed having regard to their credit ratings.

Apart from the Council’s own bank not more than £8 million may be loaned to any single institution on one date. Not more than £3 million may be loaned to any subsidiary of one of the clearing banks and no such loan may exceed 1 month. A maximum advance of £8 million may be loaned to Building Societies with appropriate credit ratings for a period of up to three months.

9.4. Approved organisations will be continually reviewed taking into account credit rating and other relevant information and amended by the Chief Financial Officer or his nominated deputy.

10. SECTION 45 OF THE LOCAL GOVERNMENT AND HOUSING ACT 1989

10.1. POLICY ON INTEREST RATE EXPOSURE

1) The Prudential Code requires the Council to fix each year the maximum proportion of interest on borrowing which is subject to variable rate interest.

2) In order to take advantage where appropriate of low short-term interest rates it is proposed that for the financial year 2004-2005.

the limit on the proportion of interest payable by the Council which is at a rate or rates which can be varied by the person to whom it is payable or by reference to any external factors be 20%.

10.2. OVERALL BORROWING LIMIT

Taking account of existing debt and the requirements for 2004/05 and the borrowing powers available:

the maximum amount which the authority may have outstanding by way of external debt be £181 million.

10.3. SHORT TERM BORROWING LIMIT

Taking account of the need for flexibility in borrowing and in order to take advantage of low short term interest rates as appropriate:

the maximum amount which the authority may have outstanding by way of short term borrowing (being part of the overall borrowing limit) be £40 million.

11. POLICY ON EXTERNAL ADVISERS

11.1. Treasury Advisers have been employed by the Council to:

· forecast movements in long term and short term interest rates

· advise on long term borrowing and debt maturity profiles

· advise on leasing and capital finance legislation

· restructuring of PWLB debt

· advise on future interest rate movements (including PWLB) and other market developments

The Chief Financial Officer has responsibility for the review of future provision of such advice, and to amend the conditions or appoint different advisers as appropriate.