Agenda item

The Council's Revenue and Capital Budget 2020/21

Meeting of Budget Council, Council, Friday, 6th March, 2020 10.00 am (Item 18.)

Minutes:

The Council met to consider and set the 2020/21 budget, Council Tax resolution for 2020/21 and Collection Fund budget for 2020/21. In doing so, the proceedings of the Art Galleries Committee on 12 February 2020 which provided details of the Art Galleries budget for 2020/21 were submitted for approval. In addition, the part proceedings of the Executive on 12 February 2020 were submitted for approval, which contained details on the following:

· The Councils Budget 2020/21 – Covering Report;

· Medium Term Financial Plan 2020/21 - 2022/23;

· Capital Strategy and Budget 2019/20;

· Council Business Plan 2020/21;

· Children and Education Budget 2020/21;

· Adult Social Care and Population Health Budget 2020/21;

· Manchester Health and Care Commissioning Budget

· 2020/21;

· Homelessness Budget 2020/21;

· Neighbourhoods Directorate Budget 2020/21;

· Growth and Development Budget 2020/21;

· Corporate Core Budget 2020/21;

· Dedicated Schools Grant 2020/21;

· Housing Revenue Account 2020/21 to 2022/23;

· Treasury Management Strategy Statement and Borrowing Limits and Annual Investment Strategy 2020/21;

· Budget 2020/21 Public Consultation Outcomes; and

· Budget 2020/21 Equality Impact Assessment.

The Council also considered the following reports:-

· The Capital Strategy and Budget 2020/21;

· The Treasury Management Strategy Statement and Borrowing Limits and Annual Investment Strategy 2020/21; and

· The Council Tax Resolution 2020/21.

In addition, the Council received the minutes of the Resources and Governance Scrutiny Committee on 24 February 2020 that had considered the Budget Report 2020-2021.

Councillor Leese moved the proceedings of the Art Galleries Committee and part proceedings of the Executive, both held on 12 February 2020, the Revenue and Capital Budgets (as amended by the joint report of the City Treasurer, Chief Executive and City Solicitor) and the recommendations as detailed in the above reports, which were seconded by Councillor Ollerhead (Executive Member for Finance and Human Resources). In seconding the recommendations, Councillor Ollerhead, presented his budget statement for 2020/21 to Council.

Councillor Stanton, Opposition Lead Member on Finance, responded to the Executive Member for Finance and Human Resources budget statement for 2020/21.

The Council then considered four amendments to the Council Budget 2020/21.

The first amendment, moved by Councillor Stanton, and seconded by Councillor Kilpatrick was as follows:-

“To allocate a budget of £960,000 phased equally over three years to enable the Council to make available a £10,000pa Green Neighbourhood Investment Fund in each of the 32 wards, encouraging our neighbourhoods to participate in carbon reduction on a community-led basis shaped by the priorities of the Manchester Climate Change Action Plan; to be funded out of the proposed £2.079m contribution to the Business Rates Reserve for 2020/21”.

The second amendment, moved by Councillor Kilpatrick and seconded by Councillor Stanton was as follows:-

“To allocate a budget of £960,000 phased equally over three years to enable the Council to deliver a programme of target hardening (including further alleygating) in areas of benefit; to be funded out of the proposed £2.079m contribution to the Business Rates Reserve for 2020/21 and to allocate a budget of £1.5m to enable the Council to deliver road safety & traffic calming schemes in areas of need; to be funded through transfer from the On-street Parking reserve”.

The third amendment, moved by Councillor Leech and seconded by Councillor Kilpatrick was as follows:-

“To establish a three-year budget totalling £600,000 to at least double 24-hour toilet provision in the City Centre, lessening the impact of any Public Space Protection Order on our homeless population; funded through a release of reserves”.

The fourth and final amendment, moved by Councillor Flanagan and seconded by Councillor Johns was as follows:-

“We wish to amend to amend this year’s budget and call on the Council to set up a one-off fund for £250,000 to be called the Spring Challenge Fund”.

Members then commented on the proposed amendments.

In his right of reply, Councillor Leese moved a motion without notice under Council Rule of Procedure 19.1(k), to suspend particular Rules, in order to suspend Rule of Procedure 18 - Amendments to be moved at Council.

On the motion without notice being put to the vote, the Lord Mayor declared it carried.

Councillor Leese then moved the following amendment in relation to the motions submitted by Councillors Stanton and Kilpatrick, which was seconded by Councillor N Murphy:-

“That Council neither supported or opposed the amendments and instead agrees to refer the consideration of the proposals within these amendments to the Executive”.

On the amendment proposed by Councillor Leese being out to the vote, the Lord Mayor declared it carried the result being:-

For the amendment (79)

Councillors Chohan, Akbar, Ahmed Ali, Azra Ali, Nasrin Ali, Shaukat Ali, Alijah, Andrews, Battle, Bridges, Butt, Chambers, Clay, Collins, Cooley, Craig, Curley, M Dar, Davies, Doswell, Douglas, Evans, Farrell, Flanagan, Grimshaw, Hassan, Hewitson, Hitchen, Hughes, Ilyas, Jeavons, Johns, S Judge, T Judge, Kamal, Karney, Kilpatrick, Kirkpatrick, Leech, Leese, J Lovecy, Ludford, Lynch, Lyons, McHale, Midgley, Madeleine Monaghan, Mary Monaghan, N Murphy, Newman, Noor, O'Neil, Ollerhead, B Priest, H Priest, Rahman, Raikes, Rawlins, Rawson, Razaq, Reid, Riasat, Richards, Rowles, Russell, M Sharif Mahamed, Sheikh, A Simcock, K Simcock, Stanton , Stogia, Stone, Taylor, Watson, Wheeler, Whiston, White, Wills, Wilson and Wright

Against the Amendment (0)

Abstentions (0)

Non voting (2)

Councillors Dobson and Holt

The Lord Mayor then put the remaining amendments from Councillors Leech and Flanagan to the vote. On being put to the vote the Lord Mayor declared that the amendment proposed by Councillor Leech was lost, the result being:-

For the amendment (5)

Councillors Ahmed Ali, Kilpatrick, Leech, Reid and Stanton

Against the Amendment (74)

Councillors Chohan, Akbar, Azra Ali, Nasrin Ali, Shaukat Ali, Alijah, Andrews, Battle, Bridges, Butt, Chambers, Clay, Collins, Cooley, Craig, Curley, M Dar, Davies, Doswell, Douglas, Evans, Farrell, Flanagan, Grimshaw, Hassan, Hewitson, Hitchen, Hughes, Ilyas, Jeavons, Johns, S Judge, T Judge, Kamal, Karney, Kirkpatrick, Leese, J Lovecy, Ludford, Lynch, Lyons, McHale, Midgley, Madeleine Monaghan, Mary Monaghan, N Murphy, Newman, Noor, O'Neil, Ollerhead, B Priest, H Priest, Rahman, Raikes, Rawlins, Rawson, Razaq, Riasat, Richards, Rowles, Russell, M Sharif Mahamed, Sheikh, A Simcock, K Simcock, , Stogia, Stone, Taylor, Watson, Wheeler, Whiston, White, Wills, Wilson and Wright

Abstentions (0)

Non voting (2)

Councillors Dobson and Holt

and the amendment proposed by Councillor Flanagan was carried, the result being:-

For the amendment (79)

Against the Amendment (0)

Abstentions (0)

Non voting (2)

Councillors Dobson and Holt

The Lord Mayor then invited Council to vote on the amended budget motion as the substantive budget resolution, and in doing so, sought Council to:-

(1) Approve proposals to ensure that the Housing Revenue Account for 2020/21 did not show a debit balance (as set out in Appendix 1 to these minutes);

(2) Approve the virements over £0.5m between capital schemes to maximise use of funding resources available to the City Council (as part of the recommendations within Capital Programme Monitoring 2019/20 (Minute Exe/20/11 refers));

(3) Approve for 2020/21:-

· an increase in the basic amount of Council Tax (i.e. the Council’s element of Council Tax) by 3.99%. The Council has consulted on the 2% Adult Social Care precept increase. If agreed, it is proposed to prioritise this resource to support adults with learning disabilities to help meet the increased need and complexity of residents;

· the contingency sum of £0.860m;

· corporate budget requirements to cover levies/charges of £71.327m, capital financing costs of £44.507m, additional allowances and other pension costs of £9.580m and insurance costs of £2.004m;

· the inflationary pressures and budgets to be allocated sum of £10.271m; and delegate the final allocations to the Deputy Chief Executive and City Treasurer in consultation with the Executive Member for Finance and Human Resources. The Manchester Health and Care Commissioner (MHCC) elements of these costs have already been included in the Pooled Budget. The use of these budgets will be agreed with the MLCO Partnership Board, which has representation from all key partners, along with identifying whether any more formal approvals are required in line with the Council’s key decision thresholds.

· the estimated utilisation of £9.579m in 2020/21 of the surplus from the on street parking and bus lane enforcement reserves, after determining that any surplus from these reserves is not required to provide additional off street parking in the authority; and

· the planned use of, and movement in, reserves as identified in the report, subject to the final call on reserves after any changes are required to account for final levies,

as set out in the Medium Term Financial Plan (Minute Exe/20/13 refers).

(4) Approve the budget changes for the 2019/20 capital programme (as detailed in the Capital Strategy and Budget 2019/20 to 2023/24 report);

(5) Approve the capital programme as presented in Appendix 2 (for £318.0m in 2019/20, £378.4m in 2020/21, £288.8m in 2021/22, £208.3 in 2022/23 and £55.3m in 2023/24) which will require prudential borrowing of £710.7m to fund non-HRA schemes over the five year period for which provision has been made in the revenue budget for the associated financing costs (within limits previously agreed).

(6) Delegate authority to:-

· The Deputy Chief Executive and City Treasurer in consultation with the Executive Member for Finance and Human Resources to approve capital expenditure on schemes which have budget approval.

· The Chief Executive and Director of Highways in consultation with the Executive Member for Environment for the approval of the list of schemes to be undertaken under the Highways capital programme.

· The Chief Executive and Director of Highways to implement the Highways schemes in accordance with the Capital Approval process and after consultation with the Executive Member for Environment on the final details and estimated costs.

· The Deputy Chief Executive and City Treasurer in consultation with the Executive Member for Finance and Human Resources to add qualifying spend to save projects to the capital budget accordingly up to a maximum of £5m in 2020/21 and then £5m per year thereafter.

· The Deputy Chief Executive and City Treasurer, in consultation with the Executive Member for Finance and Human Resources to accelerate spend from later years when necessary within the programme subject to resource availability.

· The Deputy Chief Executive and City Treasurer in consultation with the Executive Member for Finance and Human Resources to agree and approve where appropriate the programme of schemes for the delivery of the corporate asset management programme.

· The Deputy Chief Executive and City Treasurer and City Solicitor in consultation with the Executive Member for Finance and Human Resources to agree and approve the governance process for bids to the proposed VCSE Fund.

(7) Approve the proposed Treasury Management Strategy Statement (as detail in the Treasury Management Strategy Statement and Borrowing Limits and Annual Investment Strategy 2020/21 report (Minute Exe/20/19 refers)), in particular the:-

· Borrowing Requirement listed in Section 7 of the report;

· Borrowing Strategy outlined in Section 10 of the report;

· Annual Investment Strategy detailed in Section 11 of the report;

· Prudential and Treasury Indicators listed at Appendix 3 of these minutes;

· MRP Strategy outlined in Appendix 4 of these minutes;

· Treasury Management Policy Statement at Appendix 5 of these minutes;

· Treasury Management Scheme of Delegation as detailed at Appendix 6 of these minutes;

(8) Delegate to the Deputy Chief Executive and City Treasurer, in consultation with the Executive Member for Finance and Human Resources, the power to pursue any restructuring, rescheduling or redemption opportunities available, including amendments to the Treasury Management Strategy if the changes require it. Any changes required to the Strategy will be reported to members at the earliest opportunity; and

In considering the Council Tax Resolution report, the Council was asked to:-

(9) Adopt the part proceedings of the Executive on 12 February 2020 and as amended today.

(10) Note the position on reserves as detailed in Appendix 10 to these minutes.

(11) Note that the budget has been prepared on the basis that the amendment to establish a Spring Challenge Fund of £250,000 is approved.

(12) Note that the Council tax resolution included at Appendix 11 reflects the budget position, including the amendment reported at recommendation (11).

(13) Approve the Council Tax determination attached as Appendix 11, subject to whether the proposal outlined at recommendation 3 is accepted to this report. The Council Tax determination:

· Calculates the Council tax requirement in accordance with Section 31A of the Local Government Finance Act 1992 as amended by the Localism Act 2011.

· Calculates a basic amount of Council Tax and an amount of tax for each valuation band (the City Council element) in accordance with Sections 31B and 36 of the Local Government Finance Act, 1992, as amended.

· Sets an amount of Council Tax for each category of dwellings in each valuation band in accordance with Section 30 of the Local Government Finance Act, 1992.

(14) Determine affordable borrowing limits, prudential indicators, proposals in respect of treasury management, annual investment strategy and minimum revenue provision strategy. The prudential indicators are listed in Appendix 3 to this report.

(15) Approve the Collection Fund Budget for 2020/21 as set out in Appendix 11 to this report.

For the motion (79)

Councillors Chohan, Akbar, Ahmed Ali, Azra Ali, Nasrin Ali, Shaukat Ali, Alijah, Andrews, Battle, Bridges, Butt, Chambers, Clay, Collins, Cooley, Craig, Curley, M Dar, Davies, Doswell, Douglas, Evans, Farrell, Flanagan, Grimshaw, Hassan, Hewitson, Hitchen, , Hughes, Ilyas, Jeavons, Johns, S Judge, T Judge, Kamal, Karney, Kilpatrick, Kirkpatrick, Leech, Leese, J Lovecy, Ludford, Lynch, Lyons, McHale, Midgley, Madeleine Monaghan, Mary Monaghan, N Murphy, Newman, Noor, O'Neil, Ollerhead, B Priest, H Priest, Rahman, Raikes, Rawlins, Rawson, Razaq, Reid, Riasat, Richards, Rowles, Russell, M Sharif Mahamed, Sheikh, A Simcock, K Simcock, Stanton, Stogia, Stone, Taylor, Watson, Wheeler, Whiston, White, Wills, Wilson and Wright

Against the Motion (0)

Abstentions (0)

Non voting (2)

Councillors Dobson and Holt

The Lord Mayor declared that the motion was carried.

Decisions

(1) To approve the proceedings of the Art Galleries Committee on 12 February 2020 which provided details of the Art Galleries budget for 2020/21, and the part proceedings of the Executive on 12 February 2020, which contained details on the following:

· The Councils Budget 2020/21 – Covering Report;

· Medium Term Financial Plan 2020/21 - 2022/23;

· Capital Strategy and Budget 2019/20;

· Council Business Plan 2020/21;

· Children and Education Budget 2020/21;

· Adult Social Care and Population Health Budget 2020/21;

· Manchester Health and Care Commissioning Budget 2020/21;

· Homelessness Budget 2020/21;

· Neighbourhoods Directorate Budget 2020/21;

· Growth and Development Budget 2020/21;

· Corporate Core Budget 2020/21;

· Dedicated Schools Grant 2020/21;

· Housing Revenue Account 2020/21 to 2022/23;

· Treasury Management Strategy Statement and Borrowing Limits and Annual Investment Strategy 2020/21;

· Budget 2020/21 Public Consultation Outcomes; and

· Budget 2020/21 Equality Impact Assessment.

(2) To note the minutes of the Resources and Governance Scrutiny Committee on 24 February 2020.

(3) To approve the proposals, as set out in Appendix 1 of these minutes, to ensure that the Housing Revenue Account for 2020/201does not show a debit balance.

(4) To approve the recommendations as detailed in minute reference Exe/20/13 of the part proceedings: Medium Term Financial Plan

· an increase in the basic amount of Council Tax (i.e. the Council’s element of Council Tax) by 3.99% (including 2% for Adult Social Care);

· the contingency sum of £0.860m;

· the corporate budget requirements to cover levies/charges of £71.327m, capital financing costs of £44.507m, additional allowances and other pension costs of £9.580m and insurance costs of £2.004m;

· delegation of authority to the Deputy Chief Executive & City Treasurer, in consultation with the Executive Member for Finance and Human Resources to make allocations from the inflationary pressures and budgets to be allocated sum of £10.271m. In doing it was noted that the Manchester Health and Care Commissioner (MHCC) elements of these costs had been included in the Pooled Budget and were subject to draw-down in consultation with MHCC Finance Committee, and consultation with the Executive Member for Finance and Human Resources;

· the position on reserves as identified in the report submitted, noting that the position is subject to any further calls on reserves that had arisen prior to the meeting.

(5) To approve the budget changes for the 2019/20 capital programme.

(6) To approve the capital programme as presented in Appendix 2 (for £318.0m in 2019/20, £378.4m in 2020/21, £288.8m in 2021/22, £208.3 in 2022/23 and £55.3m in 2023/24) which will require prudential borrowing of £710.7m to fund non-HRA schemes over the five year period for which provision has been made in the revenue budget for the associated financing costs (within limits previously agreed).

(7) To agree to delegate authority to:

· The Deputy Chief Executive and City Treasurer in consultation with the Executive Member for Finance and Human Resources to approve capital expenditure on schemes which have budget approval;

· The Deputy Chief Executive & City Treasurer in consultation with the Executive Member for Finance and Human Resources to add qualifying spend to save projects to the capital budget accordingly up to a maximum of £5m in 2020/21 and then £5m per year thereafter;

· The Deputy Chief Executive & City Treasurer, in consultation with the Executive Member for Finance and Human Resources to accelerate spend from later years when necessary within the programme subject to resource availability.

· The Deputy Chief Executive & City Treasurer in consultation with the Executive Member for Finance and Human Resources to agree and approve where appropriate the programme of schemes for the delivery of the corporate asset management programme.

· The Deputy Chief Executive & City Treasurer and City Solicitor in consultation with the Executive Member for Finance and Human Resources to agree and approve the governance process for bids to the proposed VCSE Fund.

(8) To approve the recommendations within the Treasury Management Strategy Statement, Borrowing Limits and Annual Investment Strategy 2020/21 report (Minute Exe/20/19 refers):-

· The proposed Treasury Management Strategy Statement, in particular the:

· Prudential and Treasury Indicators listed at Appendix 3 of these minutes;

· MRP Strategy outlined in Appendix 4 of these minutes;

· Treasury Management Policy Statement at Appendix 5 of these minutes;

· Treasury Management Scheme of Delegation as detailed at Appendix 6 of these minutes;

· Borrowing Requirement listed in Appendix 7 of the report;

· Borrowing Strategy outlined in Appendix 8 of the report;

· Annual Investment Strategy detailed in Appendix 9 of the report;

· Delegation to the Deputy Chief Executive & City Treasurer, in consultation with the Executive Member for Finance and Human Resources, the power to pursue any restructuring, rescheduling or redemption opportunities available, including amendments to the Treasury Management Strategy if the changes require it. Any changes required to the Strategy will be reported to members at the earliest opportunity.

(9) That in consideration of the Council Tax Resolution report of the Deputy Chief Executive & City Treasurer, Chief Executive and City Solicitor which presented the recommended Council Tax resolution and Collection Fund budget for 2020/21, approval be given to:

· Adopt the part proceedings of the Executive on 12 February 2020 and as amended today.

· Note the position on reserves as detailed in Appendix 10 to these minutes.

· Note that the budget has been prepared on the basis that the amendment to establish a Spring Challenge Fund of £250,000 is approved.

· Note that the Council tax resolution included at Appendix 11 reflects the budget position, including the amendment reported above.

(10) To approve the Council Tax determination attached as Appendix 11, which:

· Calculates the Council tax requirement in accordance with Section 31A of the Local Government Finance Act 1992 as amended by the Localism Act 2011.

· Sets an amount of Council Tax for each category of dwellings in each valuation band in accordance with Section 30 of the Local Government Finance Act, 1992.

(11) To agree the affordable borrowing limits, prudential indicators, proposals in respect of treasury management, annual investment strategy and minimum revenue provision strategy.

(12) Approve the Collection Fund Budget for 2020/21 as set out in Appendix 11 to this report.

Appendix 1

Housing Revenue Account Budget 2019/20 – 2022/23

	2019/20 (Forecast) £000	2020/21 £000	2021/22 £000	2022/23 £000	See Para.
Income
Housing Rents	-59,775	-60,881	-62,030	-63,497	5.6
Heating Income	-754	-600	-612	-625	5.15
PFI Credit	-23,586	-23,374	-23,374	-23,374	5.1
Other Income	-1,164	-1,281	-1,203	-1,069	5.10
Funding from General HRA Reserve	3,029	-18,441	-14,016	-14,068	7.1
Total Income	-82,250	-104,577	-101,235	-102,633

Expenditure
Northwards R&M & Management Fee	20,379	20,694	20,984	21,455	5.27
PFI Contractor Payments	31,824	36,296	32,599	31,639	5.1
Communal Heating	858	584	595	607	5.15
Supervision and Management	5,020	5,223	5,291	5,360	5.29
Contribution to Bad Debts	504	613	937	1,279	5.25
Depreciation	17,279	17,378	17,517	17,785	5.20
Other Expenditure	1,295	1,169	1,189	1,016	5.29
RCCO	2,287	19,841	19,360	20,762	5.29
Interest Payable and similar charges	2,804	2,779	2,763	2,730	5.2
Total Expenditure	82,250	104,577	101,235	102,633

Total Reserves:
Opening Balance	-107,365	-110,394	-91,953	-77,937	7.1
Funding (from)/to Revenue	-3,029	18,441	14,016	14,068
Closing Balance	-110,394	-91,953	-77,937	-63,869

Appendix 2 – The proposed Capital Programme Budget

Project Name	2019/20 Proposed Budget	2020/21 Proposed Budget	2021/22 Proposed Budget	2022/23 Proposed Budget	2023/24 Proposed Budget
Highway Programme
Highways Planned Maintenance Programme
Planned Highways Maintenance Programme	400	75	0	0	0
Drainage	3,575	2,051	1,871	0	0
Large Patching repairs	2,884	1,311	1,311	0	0
Carriageway Resurfacing	6,485	3,697	3,563	0	0
Footway schemes	892	4,050	3,857	0	0
Carriageway Preventative	6,096	6,325	3,054	0	0
Bridge Maintenance	370	3,782	3,048	0	0
Other Improvement works	122	6,595	7,186	0	0
Highways Major Projects
Hyde Road (A57) Pinch Point Widening	1,535	3,579	0	0	0
Manchester/Salford Inner Relief Road (MSIRR)	7,783	100	0	0	0
Great Ancoats Improvement Scheme	2,121	6,074	105	0	0
Mancunian Way and Princess Parkway NPIF	4,178	4,111	87	0	0
School Crossings	3,017	2,653	0	0	0
Cycle City Phase 2	1,475	2,843	0	0	0
Green Bridge at Airport City	2,055	839	71	0	0
A6 Stockport Road Pinch Point Scheme	183	730	8	0	0
Highways Stand Alone Projects Programme
Velocity	54	0	0	0	0
Safe Routes to Loreto High School	212	0	0	0	0
20mph Zones (Phase 3)	70	86	0	0	0
Flood Risk Management - Hidden Watercourses	0	49	0	0	0
Flood Risk Management - Higher Blackley Flood Risk	0	41	0	0	0
Cycle Parking	15	0	0	0	0
Shadowmoss Rd / Mossnook Rd	12	0	0	0	0
Princess Rd Safety Review	47	439	0	0	0
Public Realm	1,056	1,974	400	0	0
Street Lighting PFI	9,000	3,657	0	0	0
Didsbury West S106	1	23	0	0	0
A56 Liverpool Road	83	0	0	0	0
A56 Chester Road	51	0	0	0	0
Sunbank Lane S278	40	0	0	0	0
Sharston Roundabout SCOOT	40	0	0	0	0
Derwent Avenue S106	6	8	0	0	0
Woodhouse Park	50	15	0	0	0
Christie Extension RPZ	40	306	9	0	0
Residents Parking schemes	133	545	0	0	0
Arena Security Measures	185	12	0	0	0
Ladybarn District Centre	223	20	0	0	0
Levenshulme Mini Holland Cycling and Walking scheme	151	606	0	0	0
CCTV Operating System Upgrade	150	283	0	0	0
Northern/Eastern GW Walking and Cycling scheme-devel costs	119	601	0	0	0
Chimebank S.106	34	0	0	0	0
Highways Maintenance Challenge Fund	50	1,025	0	0	0
SEMMMS PROGRAMME
Local Roads (temp SEMMMS A6 Stockport)	255	0	0	0	0
SEMMMs A6 to Manchester Airport	50	0	0	0	0
Bus Priority Package Programme
Bus Priority Package - Oxford Road	5	302	0	0	0
Bus Priority Package - Princess Street/Brook Street	140	13	0	0	0

Total Highways Programme	55,443	58,820	24,570	0	0

Environment Programme
Waste Reduction Measures	250	1,209	0	0	0
Waste Contract	2,089	3,840	0	0	0
Smart Litter Bins	258	0	0	0	0
Leisure Services Programme
Parks Programme
Hollyhedge Park Drainage IMPS	2	0	0	0	0
Heaton Park Pay & Display	8	0	0	0	0
PIP - Park Events Infrastructure	289	0	0	0	0
Parks Development Programme	413	3,136	2,965	2,965	2,965
Heaton Park Bowls	48	0	0	0	0
Somme 100 Year Memorial	33	0	0	0	0
Painswick Park Improvement	30	0	0	0	0
Heaton Park Southern Play Area	370	0	0	0	0
Wythenshawe Park Sport Facilities S106	139	0	0	0	0
Northenden Riverside Park	75	0	0	0	0
King George V Park	81	0	0	0	0
Leisure & Sports Facilities
Indoor Leisure - Abraham Moss	1,408	5,962	13,168	902	0
Indoor Leisure - Moss Side	93	0	0	0	0
Boggart Hole Clough - Visitors Centre	0	535	0	0	0
Mount Road S106	32	0	0	0	0
Velodrome Track	71	0	0	0	0
HSBC UK NCC Immediate Works	450	0	0	0	0
Active Lifestyle Centre Artificial Grass Pitch Replacement	198	0	0	0	0
Interactive Football Wall - Platt Fields Park	84	0	0	0	0
MAC - Booth St Car Park	148	0	0	0	0
Culture Website	42	0	0	0	0
Festive Lighting Strategy	138	0	0	0	0
Manchester Regional Arena Track Replacement	812	254	434	0	0
Cremator & Mercury Abatement Plant Replacement Strategy	0	1,007	544	0	0
Hough End Master Plan - Strat Football Hub Development Costs	52	189	0	0	0
Range Stadium Capital Project	465	0	0	0	0
Libraries and Info Services Programme
Relocation of Manchester Visitor Info Centre (MVIC)	59	0	0	0	0
GM Archives Web Portal	48	80	0	0	0
Central Library Wolfson Award	32	0	0	0	0
Central Library Refresh	0	194	763	0	0
Roll Out of Central Library ICT	7	0	0	0	0
Newton Heath Library	17	0	0	0	0
Open Libraries	157	301	0	0	0
Contact Theatre loan	200	0	0	0	0

Total Neighbourhoods Programme	8,598	16,707	17,874	3,867	2,965

Cultural Programme
First Street Cultural Facility	14	0	0	0	0
The Factory (Build)	29,860	53,959	13,277	0	0
The Factory (Public Realm)	210	1,723	457	0	0
Corporate Estates Programme
Asset Management Programme	9,317	11,650	9,030	0	0
MAC feasibility works	933	0	0	0	0
Town Hall Complex Transformation Programme	67	0	0	0	0
Hammerstone Road Depot	163	9,333	9,524	695	0
Carbon Reduction Programme	697	6,388	1,959	0	0
Estates Transformation	0	0	800	0	0
Estates Transformation - Hulme District Office	702	0	0	0	0
Estates Transformation - Alexandra House	5,639	5,994	133	0	0
Ross Place Refurbishment	434	0	0	0	0
Proud Trust - Sidney Street	250	0	0	0	0
Development Programme
Digital Assets Board (MCDA)
The Space Project - Phase 2	0	987	0	0	0
The Sharp Project	60	540	0	0	0
Digital Asset Base - One Central Park	3,651	0	0	0	0
Strategic Acquisitions Board
Strategic Acquisitions Programme	5,860	3,000	1,323	0	0
Sustaining Key Initiatives	0	0	5,000	8,600	0
Northern Gateway
Northern Gateway	6,175	6,675	7,275	4,875	0
Eastern Gateway
Eastern Gateway - Central Retail Park	400	729	0	0	0
Eastern Gateway - New Islington Marina	3,522	61	0	0	0
Hall and Rogers	57	0	0	0	0
City Centre
ST Peters Square	999	0	0	0	0
Medieval Quarter Public Realm	76	1,587	0	0	0
City Labs 2	2,023	0	0	0	0
Manchester College	5,000	5,000	0	0	0
Digital Business Incubators	2,000	0	0	0	0
Lincoln Square	0	0	1,200	0	0
Other Strategic Development Initiatives
Hulme Hall Rd Lighting	36	0	0	0	0
New Smithfield Market	0	469	0	0	0
Heron House & Registrars	3,085	1,388	0	0	0
Civic Quarter Heat Network	9,557	9,507	4,000	0	0

Total Growth & Development Programme	90,787	118,990	53,978	14,170	0

Town Hall Refurbishment Programme
Our Town Hall refurbishment	17,051	49,132	92,739	99,321	34,652

Total Town Hall Refurbishment Programme	17,051	49,132	92,739	99,321	34,652

Private Sector Housing Programme
Brunswick PFI
Brunswick PFI Land Assembly	1,176	550	558	0	0
Collyhurst
Collyhurst Regeneration	0	178	1,000	2,700	0
Collyhurst Environmentals	0	55	0	0	0
Collyhurst Land Assembly Ph1	4	29	0	0	0
Collyhurst Land Acquisitions Ph2	0	0	210	799	0
Eccleshall Street - 3 Sites	0	500	0	0	0
Housing Investment Model	0
Site Investigation and Early Works HIF Pilot Sites	185	65	0	0	0
Miles Platting PFI
Miles Platting PFI Land Assembly	6	550	0	0	0
Private Housing Assistance
Disabled Facilities Grant	6,500	7,501	6,200	0	0
Toxteth St CPO & environmental works	15	141	0	0	0
Bell Crescent CPO	0	0	0	0	482
Redrow Development Programme
Redrow Development Phase 2 onward	3	20	0	0	0
West Gorton
West Gorton Compensation	0	4	0	0	0
West Gorton Ph 2A Demolition & Commercial Acquisitions	15	433	904	0	0
Private Sector Housing - Stand Alone Projects
HCA Empty Homes Cluster Phase 2	386	415	891	0	0
Princess Rd	0	100	0	0	0
Empty Homes Scheme (s22 properties)	0	2,000	0	0	0
HMRF	100	40	54	0	0
Collyhurst Acquisition & Demolition (Overbrook & Needwood Close)	-3	0	664	0	0
Extra Care	0	1,245	1,200	0	0
Moston Lane Acquisitions	0	0	0	0	7,500
Equity Loans	0	397	0	0	0
West Gorton Community Park	1,026	805	0	0	0
Ben St. Regeneration	379	877	0	0	0
Marginal Viability Fund - New Victoria	505	6,705	3,290	0	0

Total Private Sector Housing Programme	10,297	22,610	14,971	3,499	7,982

Public Sector Housing
Northwards - External Work
Charlestown - Victoria Ave multistorey window replacement and ECW - Phase 1	3,740	8,209	3,574	0	0
External cyclical works phase 3a	2	0	0	0	0
Harpurhey Lathbury & 200 Estates external cyclical works ph 3b	0	-18	31	0	0
Environmental works	19	0	0	0	0
Harpurhey Shiredale Estate externals	0	0	15	0	0
Moston Miners Low Rise externals	0	0	18	0	0
Newton Heath Limeston Drive externals	0	0	6	0	0
External cyclical works ph 3b Moston Estates (Chauncy/Edith Cliff/Kenyon/Thorveton Sq)	0	0	2	0	0
External cyclical works ph 3b Ancoats Smithfields estate	156	25	0	0	0
External cyclical works ph 4b Charlestown Chain Bar low rise	0	0	45	0	0
External cyclical works ph 4b Charlestown Chain Bar Hillingdon Drive maisonettes	0	0	15	0	0
External cyclical works ph 4b Cheetham Appleford estate	0	0	2	0	0
External cyclical works ph 4b Crumpsall Blackley Village	0	0	34	0	0
External cyclical works ph 4b Higher Blackley South	6	0	1	0	0
External cyclical works ph 4b Newton Heath Assheton estate	0	0	27	0	0
External cyclical works Ph 4b Newton Heath Troydale Estate	0	0	89	0	0
External cyclical works Ph 5 New Moston (excl corrolites)	0	0	9	0	0
Environmental improvements Moston corrolites	75	21	0	0	0
ENW distribution network phase 4 (various)	222	5	0	0	0
Dam Head - Walk up flates communal door renewal	140	0	0	0	0
Various Estate based environmental works	65	100	135	0	0
Delivery Costs	816	918	440	0	0
Northwards - Internal Work
Decent Homes mop ups ph 9 and decent homes work required to voids	1	0	89	0	0
One offs such as rewires, boilers, doors, insulation	3	0	30	0	0
Ancoats - Victoria Square lift replacement	427	0	0	0	0
Aldbourne Court/George Halstead Court/Duncan Edwards Court works	12	0	0	0	0
Boiler replacement programme	-5	-6	0	0	0
Harpurhey - Monsall Multis Internal Works	1,500	1,062	200	0	0
Newton Heath - Multies Internal Works	200	3,153	250	0	0
Higher Blackley - Liverton Court Internal Works	800	45	0	0	0
Various - Bradford/Clifford Lamb/Kingsbridge/Sandyhill Court Internal Works	2,598	132	0	0	0
Charlestown - Rushcroft/Pevensey Court Internal Works	700	711	150	0	0
Collyhurst - Mossbrook/Roach/Vauxhall/Humphries Court Internal Works	2,348	343	106	0	0
Decent Homes mop ups phase 10 and voids	378	384	0	0	0
One off work - rewires, boilers, doors	158	0	0	0	0
Fire precautions multi storey blocks	0	150	0	0	0
Installations of sprinkler systems - multi storey blocks	218	0	273	0	0
ERDF Heat Pumps	0	3,768	350	0	0
Charlestown - Rushcroft/Pevensey Courts Lift Refurb	0	0	525	0	0
One off type work (rewires/boilers/doors)	100	300	0	0	0
Fire Risk Assessments	300	3,046	2,500	0	0
Northwards - Harpurhey 200 Estate Internal Works	250	686	0	0	0
Rushcroft and Pevensey Courts Ground Source Heat Pumps	0	2,518	137	0	0
Delivery Costs	1,814	1,440	492	0	0
Northwards - Off Debits/Conversions
Bringing Studio Apartments back in use	7	0	10	0	0
Various Locations - bringing bedsits back into use	0	0	104	0	0
Delivery Costs	2	0	13	0	0
Homeless Accommodation
Improvements to Homeless accommodation city wide	1	0	36	0	0
Plymouth Grove Women's Direct Access Centre	0	0	28	0	0
Improvements to Homeless Accommodation Phase 2	345	662	147	0	0
Delivery Costs	46	73	23	0	0
Northwards - Adaptations
Public Sector Northwards Adaptations	200	0	0	0	0
Adaptations	750	770	0	0	0
Northwards - Unallocated
Northwards Housing Programme	0	2,120	0	21,982	0
Retained Housing Programme
Collyhurst Maisonette Compensation & Demolitions	0	89	0	935	0
West Gorton Regeneration Programme
West Gorton PH2A Low & High Rise Demolition	10	16	0	0	0
Future Years Housing Programme
Collyhurst Estate Regeneration	0	0	0	1,541	0
Buy Back Properties - Right to Buy	155	0	0	0	0
Collyhurst Regen - Highways Phase 1	0	190	97	1,394	0
Collyhurst Regen - Churnett Street	0	0	0	790	0
Collyhurst Regen - Needwood & Overbrook acquisition / demolition	0	125	0	0	0
Willert Street Park Improvements	0	10	0	0	0
North Manchester New Builds	227	319	0	0	0
North Manchester New Builds 2	442	2,850	0	0	0
North Manchester New Builds 3	294	351	0	0	0
Parkhill Land Assembly	0	0	4,270	0	0
Collyhurst	100	3,655	13,890	955	0
Buying Back Former Council Homes	0	500	500	500	0

Total Public Sector Housing (HRA) Programme	19,622	38,722	28,663	28,097	0

Children's Services Programme
Basic Need Programme
Holy Trinity VC Primary	47	0	0	0	0
Lytham Rd	100	0	0	0	0
Plymouth Grove Refurbishment	107	0	0	0	0
Beaver Rd Primary Expansion	94	0	0	0	0
Lily Lane Primary	54	0	0	0	0
St. James Primary Academy	8	0	0	0	0
Crossacres Primary School	30	0	0	0	0
Ringway Primary School	5	0	0	0	0
Webster Primary Schools	11	0	0	0	0
Dean Trust Expansion	1,000	2,784	0	0	0
Brookside Rd Moston	362	4,920	1,745	28	0
North Hulme Adv Playground	278	3,400	683	11	0
Monsall Road (Burgess)	290	3,717	979	20	0
Roundwood Road	330	5,525	1,127	34	0
KS3/4 PRU Pioneer Street	70	0	0	0	0
SEND Expansions - Melland & Ashgate	866	0	0	0	0
Basic need - unallocated funds	200	488	22,115	43,286	0
Universal Infant Free School Meals (UIFSM) - Allocated	266	0	0	0	0
Universal Infant Free School Meals (UIFSM) - Unallocated	75	0	0	0	0
Schools Maintenance Programme
Moston Lane - re-roof	19	0	0	0	0
Abbott Primary School Fencing	11	0	0	0	0
Crowcroft Park PS-Rewire	-2	0	0	0	0
Broad Oak Primary School Kitchen	85	730	0	0	0
All Saints Primary Rewire	419	0	0	0	0
Armitage Primary Windows	101	0	0	0	0
Bowker Vale Primary Heating	267	0	0	0	0
Buton Lane Primary Roof	183	0	0	0	0
Cheetwood Primary Heating	142	0	0	0	0
Crosslee Comm Heating	81	0	0	0	0
Crowcroft Park Roof Repairs	120	0	0	0	0
Grange School Sports Hall	163	0	0	0	0
Higher Openshaw Rewire	773	0	0	0	0
Lily Lane Primary Windows	7	46	0	0	0
Moston Fields Joinery	184	0	0	0	0
Ringway Primary Roof	175	0	0	0	0
Sandilands Primary Windows	106	0	0	0	0
St Mary's Junior Windows	34	0	0	0	0
Ringway Primary School	10	0	0	0	0
Alma Park Gas Improvement	1	0	0	0	0
Schools Capital Maintenance - unallocated	1,644	2,854	3,000	0	0
Education Standalone Projects
Paintpots	3	6	0	0	0
Early Education for Two Year Olds - Unallocated	0	52	0	0	0
Gorton Youth Zone	1,275	0	0	0	0
Healthy Pupil Capital Funding	257	0	0	0	0
North Ridge SEN	283	2,747	9	0	0
Special Educational Needs grant	0	1,160	0	0	0
Seymour Road	1,200	0	0	0	0
Commercial Wharf/ISS Refurbishment of YJS Building	294	0	0	0	0
Ghyll Head	25	1,091	0	0	0
Acquisition of land at Hyde Road	13,144	13	12	0	0

Total Children's Services Programme	25,197	29,533	29,670	43,379	0

ICT Capital Programme
ICT
Solaris	2	0	0	0	0
ICT Infrastructure & Mobile Working Programme
New Social Care System	1,699	0	0	0	0
End User Computing	117	0	0	0	0
Core Infrastructure Refresh	83	0	0	0	0
Internet Resilience	23	27	0	0	0
New Rent Collection System	33	0	0	0	0
Communications Room Replacement Phase 2	61	1,795	3,996	514	0
Data Centre Network Design and Implementation	2,867	250	0	0	0
End User Experience	699	3,425	0	0	0
Replacement Coroners System	83	0	0	0	0
Telephony	0	200	200	0	0
ICT Investment Plan	0	0	6,728	8,900	7,690
Infrastructure
Wider Area Network Redesign	22	0	0	0	0

Total ICT Programme	5,689	5,697	10,924	9,414	7,690

Corporate Capital Programme
ONE System Developments	11	0	0	0	0
Pay and Display Machines	750	174	0	0	0
Phase 1 Implementation - Locality Plan Programme Office	485	100	0	0	0
Integrated Working - Gorton Health Hub	1,970	17,171	2,272	481	0
Alcohol Treatment for Fibroscan Machine	40	0	0	0	0
BioMedical Investment	7,958	6,100	2,700	0	0
Band on the Wall	200	0	0	0	0
Manchester Jewish Museum Loan	0	290	0	0	0
Manchester Airport Car Park Investment	3,700	1,900	0	0	0
FC United	250	0	0	0	0
VCSE Small premises works	0	500	500	0	0

Total Corporate Capital Programme	15,364	26,235	5,472	481	0

Inflation Fund	0	12,000	10,000	6,000	2,000

Total Manchester City Council Capital Programme	248,048	378,446	288,861	208,228	55,289

Projects carried out on behalf of Greater Manchester
Housing Investment Fund	70,000	0	0	0	0

Total GM projects	70,000	0	0	0	0

Total CAPITAL PROGRAMME	318,048	378,446	288,861	208,228	55,289

Appendix 3

Treasury Limits and Prudential Indicators for approval

Please note last years approved figures are shown in brackets

Treasury Management Indicators	2020-21 %		2021-22 %		2022-23 %
Estimated Financing Costs to Net Revenue Stream^{^[1]}	6.7%		7.3%		7.4%

Authorised Limit - external debt	£m		£m		£m
Borrowing	1,384.5	(1,684.5)	1,396.2	(1,412.9)	1,396.2
Other long term liabilities	190.0	(170.0)	190.0	(170.0)	190.0
TOTAL	1,574.5	(1,900.5)	1,586.2	(1,582.9)	1,586.2
Operational Boundary - external debt
Borrowing	1,006.2	(1,151.7)	1,176.9	(1,275.0)	1,295.5
Other long term liabilities	190.0	(170)	190.0	(170.0)	190.0
TOTAL	1,196.2	(1,321.7)	1,366.9	(1,445.0)	1,485.5
Estimated external debt	792.8	(977.4)	1,016.4	(1,141.5)	1,174.3
Upper limit for total principal sums invested for over 364 days	0	(0)	0	(0)	0
Estimated Capital Expenditure
Non - HRA	339.6	(370.3)	260.2	(207.4)	180.2
HRA	38.8	(48.7)	28.6	(36.6)	28.1
TOTAL	378.4	(419.0)	288.8	(244.0)	208.3
Estimated Capital Financing Requirement (as at 31 March)
Non – HRA	1,543.1	(1,477.1)	1,706.5	(1,611.1)	1,802.5
HRA	299.2	(299.2)	300.0	(300.0)	301.0
TOTAL	1,842.3	(1,776.3)	2,006.5	(1,911.1)	2103.5

Maturity structure of borrowing during 2020-21	Upper Limit		Lower limit
under 12 months	80%	(80%)	0%	(0%)
12 months and within 24 months	70%	(70%)	0%	(0%)
24 months and within 5 years	60%	(50%)	0%	(0%)
5 years and within 10 years	50%	(50%)	0%	(0%)
10 years and above	80%	(80%)	40%	(40%)
Has the Authority adopted the CIPFA Treasury Management Code?				Yes

The status of the indicators will be included in Treasury Management reporting during 2020/21. They will also be included in the Council’s Capital Budget monitoring reports during 2020/21.

Definitions and Purpose of the Treasury Management Indicators noted above (Indicators are as recommended by the CIPFA Prudential Code last revised in 2017)

Estimated Financing Costs to Net Revenue Stream

The authority will set for the forthcoming year and the following financial years an estimate of financing costs to net revenue stream. The indicator recognises that ultimately all debts of a local authority fall on the taxpayer, and that therefore when considering affordability it is important to review the scale of financing costs to net revenue.

Estimated Capital Expenditure

The authority sets a capital budget for each financial year, which includes an estimate of the capital expenditure which might be incurred. The figures here also include changes to other long term liabilities.

Estimates Capital Financing Requirement

The capital financing requirement reflects the authority’s underlying need to finance capital expenditure, and is based on all capital expenditure including that incurred in previous years.

Authorised Limit - external debt

The local authority will set for the forthcoming financial year and the following two financial years an authorised limit for its total external debt, excluding investments, separately identifying borrowing from other long-term liabilities. Other long term liabilities include PFI’s, service concessions and finance leases. Due to the introduction of IFRS16 (Leasing) on the 1st of April 2020, more of the Council’s lessee leases will be classed as finance leases and will therefore fall under the categorisation, therefore the value has increased from previous years. Work is underway to determine the value of this change in accounting standards, but £20.0m has been added to the indicator at this stage, and will be reviewed once this work is complete. This prudential indicator is referred to as the Authorised Limit.

Operational Boundary - external debt

The local authority will also set for the forthcoming financial year and the following two financial years an operational boundary for its total external debt, excluding investments, separately identifying borrowing from other long-term liabilities. This prudential indicator is referred to as the Operational Boundary.

Both the Authorised Limit and the Operational Boundary need to be consistent with the authority’s plans for capital expenditure and financing; and with its treasury management policy statement and practices. The Operational Boundary should be based on the authority’s estimate of most likely, i.e. prudent, but not worst case scenario. Risk analysis and risk management strategies should be taken into account.

The Operational Boundary should equate to the maximum level of external debt projected by this estimate. Thus, the Operational Boundary links directly to the Authority’s plans for capital expenditure; its estimates of capital financing requirement; and its estimate of cash flow requirements for the year for all purposes. The Operational Boundary is a key management tool for in-year monitoring.

It will probably not be significant if the Operational Boundary is breached temporarily on occasions due to variations in cash flow. However, a sustained or regular trend above the Operational Boundary would be significant and should lead to further investigation and action as appropriate. Thus, both the Operational Boundary and the Authorised Limit will be based on the authority’s plans. The authority will need to assure itself that these plans are affordable and prudent. The Authorised Limit will in addition need to provide headroom over and above the Operational Boundary sufficient for example for unusual cash movements.

Estimated external debt

After the year end, the closing balance for actual gross borrowing plus (separately), other long-term liabilities is obtained directly from the local authority’s Balance Sheet.

The prudential indicator for Estimated External Debt considers a single point in time and hence is only directly comparable to the Authorised Limit and Operational Boundary at that point in time. Actual external debt during the year can be compared.

Upper limit for total principal sums invested for over 364 days

The authority will set an upper limit for each forward financial year period for the maturing of investments made for a period longer than 364 days. This indicator is referred to as the prudential limit for Principal Sums Invested for periods longer than 364 days.

The purpose of this indicator is so the authority can contain its exposure to the possibility of loss that might arise as a result of its having to seek early repayment or redemption of principal sums invested.

Maturity structure of new borrowing

The authority will set for the forthcoming financial year both upper and lower limits with respect to the maturity structure of its borrowing. These indicators are referred to as the Upper and Lower limits respectively for the Maturity Structure of Borrowing.

Local Prudential Indicators

The Council has not yet introduced Local Prudential Indicators to reflect local circumstances, but will review on a regular basis the need for these in the future.

Appendix 4

Minimum Revenue Provision Strategy

The Council implemented the new Minimum Revenue Provision (MRP) guidance in 2011/12 and has assessed its MRP for 2020/21 in accordance with the main recommendations contained within the guidance issued by the Secretary of State under section 21(1A) of the Local Government Act 2003.

The Council is required to make provision for repayment of an element of the accumulated General Fund capital spend each year through a revenue charge (the Minimum Revenue Provision - MRP).

MHCLG Regulations require full Council to approve an MRP Statement, in advance of each year. If the Council wishes to amend its policy during the year this would need to be approved by full Council. A variety of options are available to councils to replace the previous Regulations, so long as there is a prudent provision. The options are:

· Option 1: Regulatory Method – can only be applied to capital expenditure incurred prior to April 2008 or Supported Capital Expenditure. This is calculated as 4% of the non-housing CFR at the end of the preceding financial year, less some transitional factors relating to the movement to the new Prudential Code in 2003.

· Option 2: CFR Method – a provision equal to 4% of the non-housing CFR at the end of the preceding financial year.

· Option 3: Asset Life Method – MRP is calculated based on the life of the asset, on either an equal instalment or an annuity basis.

· Option 4: Depreciation Method – MRP is calculated in accordance with the depreciation accounting required for the asset.

Options 1 and 2 may be used only for supported expenditure, which is capital expenditure for which the Council has been notified by Government that the costs of that expenditure will be taken into account in the calculation of Government funding due to the Council.

It is important to note that the Council can deviate from these options provided that the approach taken ensures that there is a prudent provision. The Council has historically followed option 1 for supported expenditure based on the level of support provided by Government through Revenue Support Grant (RSG).

The assets created or acquired under Supported Capital Expenditure predominantly had long asset lives of c. 50 years, such as land or buildings, and an MRP of 4% suggests a significantly shorter asset life. As the level of notional RSG the Council receives has reduced in recent years, it was considered prudent to review the approach to MRP on supported borrowing to reflect the Government support received.

It was therefore agreed that from 2017/18 a provision of 2% of the non-housing CFR as at the end of the preceding financial year is to be made. This is in line with many other local authorities who have reviewed the basis for their MRP and have applied similarly revised policies.

It is the Council’s policy that MRP relating to an asset will start to be incurred in the year after the capital expenditure on the asset is incurred or, in the case of new assets, in the year following the asset coming into use, in accordance with MHCLG’s guidance.

The Council recognises that there are different categories of capital expenditure, for which it will incur MRP as follows:

· For non HRA Supported Capital Expenditure: MRP policy will be charged at a rate of 2% on a similar basis to option 1 of the guidance (the regulatory method) but at a lower rate, better reflecting the asset lives of the assets funded through Supported Borrowing.

· For non HRA unsupported capital expenditure incurred the MRP policy will be:

· Asset Life Method – MRP will be based on a straight line basis or annuity method so linking the MRP to the future flow of benefits from the asset, dependant on the nature of the capital expenditure, in accordance with option 3 of the guidance.

· If the expenditure is capital by virtue of a Ministerial direction, has been capitalised under a Capitalisation Directive, or does not create a council asset, MRP will be provided in accordance with option 3 of the guidance with asset lives calculated as per the table below:

Expenditure type	Maximum period over which MRP to be made
Expenditure capitalised by virtue of a direction under s16 (2) (b).	20 years.
Regulation 25(1) (a). Expenditure on computer programs.	Same period as for computer hardware.
Regulation 25(1) (b). Loans and grants towards capital expenditure by third parties.	The estimated life of the assets in relation to which the third party expenditure is incurred.
Regulation 25(1) (c). Repayment of grants and loans for capital expenditure.	25 years or the period of the loan if longer.
Regulation 25(1) (d). Acquisition of share or loan capital.	20 years, or the estimated life of the asset acquired.
Regulation 25(1) (e). Expenditure on works to assets not owned by the authority.	The estimated life of the assets.
Regulation 25(1) (ea). Expenditure on assets for use by others.	The estimated life of the assets.
Regulation 25(1) (f). Payment of levy on Large Scale Voluntary Transfers (LSVTs) of dwellings.	25 years.

· For PFI service concessions and some lessee interests: Following the move to International Accounting Standards arrangements under private finance initiatives (PFIs) service concessions and some lessee interests (including embedded leases) are accounted for on the Council’s Balance Sheet, and with the introduction of IFRS16 (Leasing) from the 1st of April 2020 more lessee leases will be classified in a similar way. Where this occurs, a part of the contract charge or rent payable will be taken to reduce the Balance Sheet liability rather than being charged as revenue expenditure. The MRP element of these schemes will be the amount of contract charge or rental payment charged against the Balance Sheet liability. This approach will produce an MRP charge comparable to that under option 3 in that it will run over the life of the lease or PFI scheme.

In some exceptional cases, the Council will deviate from the policy laid out above provided such exceptions remain prudent. Any exceptions are listed below:

· Where capital expenditure is incurred through providing loans to organisations, and where those loans are indemnified or have financial guarantees protecting against loss from a third party of high credit quality, no MRP will be charged in relation to the capital expenditure. Similarly, loans given by the Council where any losses incurred on the investment will impact solely on a third party, such as those provided under the City Deal arrangement with the HCA, will not require an MRP charge.

Appendix 5

Treasury Management Policy Statement

1. This organisation defines its treasury management activities as:

The management of the organisation’s investments and cash flows, its banking, money market and capital market transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks.

2. This organisation regards the successful identification, monitoring and control of risk to be the prime criteria by which the effectiveness of its treasury management activities will be measured. Accordingly, the analysis and reporting of treasury management activities will focus on their risk implications for the organisation, and any financial instruments entered into to manage these risks.

3. This organisation acknowledges that effective treasury management will provide support towards the achievement of its business and service objectives. It is therefore committed to the principles of achieving value for money in treasury management, and to employing suitable comprehensive performance measurement techniques, within the context of effective risk management.

The Council will invest its monies prudently, considering security first, liquidity second, and yield last, carefully considering its investment counterparties. It will similarly borrow monies prudently and consistent with the Council’s service objectives.

Appendix 6

Treasury Management Scheme of Delegation

i Full Council

· receiving and reviewing reports on treasury management policies, practices and activities

· approval of annual strategy

ii Responsible body – Audit Committee

· approval of/amendments to the organisation’s adopted clauses, treasury management policy statement and treasury management practices

· budget consideration and approval

· approval of the division of responsibilities

· receiving and reviewing regular monitoring reports and acting on recommendations

· approving the selection of external service providers and agreeing terms of appointment

iii Body with responsibility for scrutiny - Resource and Governance Scrutiny Committee

· reviewing the treasury management policy and procedures and making recommendations to the responsible body

iv Deputy Chief Executive and City Treasurer

· delivery of the function

Appendix 7

Borrowing Requirement

The potential long-term borrowing requirements over the next three years are:

Table 2	2020/21 £’m estimate	2021/22 £’m estimate	2022/23 £’m estimate
Planned Capital Expenditure funded by Borrowing	200.4	197.8	133.3
Change in Grants & Contributions	21.9	26.0	43.4
Change in Capital Receipts	(0.2)	(4.3)	(8.5)
Change in Reserves	27.5	27.7	14.8
MRP Provision	(26.6)	(30.9)	(33.3)
Refinancing of maturing debt (GF)	3.0	6.8	7.5
Refinancing of maturing debt (HRA)	0.0	0.5	0.8

Estimated Borrowing Requirement	226.0	223.6	158.0
Funded by:
GF	226.0	223.1	157.2
HRA	0.0	0.5	0.8

The borrowing detailed in Table 2 maintains the Council within the revised Government Debt Deal limit. The current Debt Deal expires in 2019/20 and it is not clear what will happen for the next Spending Review Period.

Appendix 8

Borrowing Strategy

General Fund

Following the HRA debt settlement in 2012 the Council’s debt position is one of significant internal borrowing meaning cash backed reserves and provisions are being used in lieu of external debt. The external debt held is predominantly long term in nature.

The proposed Capital Budget, submitted to Executive in February and Council in March contains significant capital investment across the city. The scale of the investment suggests that the Council will need to undertake external borrowing in the future and will not be able on to rely on internal borrowing alone. Where possible, internal borrowing will remain the first option due to the interest savings generated.

To this aim, the Council’s borrowing strategy will utilise the annual provision it is required to make to reduce debt, in the form of its Minimum Revenue Provision (MRP). If MRP is not used to reduce external debt it is held as cash so the most efficient arrangement is for MRP to be used to reduce the new long term debt expected to be required. This ensures that MRP is utilised and does not accumulate as cash on the Balance Sheet. Alternatively MRP could be used to repay existing debt but this would be at considerable cost in the current interest rate environment.

Beyond the forecast period for capital investment and matching to the same principles as above, a prudent strategy is to seek to borrow in the medium term with maturities to match the estimated MRP that is generated in the same period. This avoids an accumulation of cash on the Balance Sheet that would need to be invested at a potential net cost and investment risk to the Council.

The overall strategy is therefore for the Council to continue to use reserves and provisions to maximise internal borrowing whilst seeking to rebalance the portfolio with more medium term debt when there is a need to externally borrow. This must be done with a strong focus on achieving value for money on interest costs and balancing the risks to the overall debt portfolio.

HRA

The Council’s proposed capital budget for 2020/21 and beyond does not contain any requirement for the HRA to borrow. It is expected that proposals will be brought forward that require funding via borrowing so it is likely the HRA will have a borrowing requirement in 2020/21. The level of borrowing affordable is restrained by the statutory requirement for the HRA Business Plan to avoid going into a deficit.

The impact of any required further long term borrowing on the Business Plan will be reviewed which will inform the borrowing options pursued. Any temporary borrowing required will be sought from the General Fund. This is discussed further in Appendix I.

Note, in the event that some of the current debt is required to be repaid, for example if one of the LOBO loans was called, the refinancing arrangements would need to be considered.

Borrowing Options

As stated above the Council’s borrowing strategy will firstly utilise internal borrowing. However as the overall forecast is for long term borrowing rates to increase the short term advantage of internal and short term borrowing will be weighed against the potential cost if long term borrowing is delayed as rates for longer term loans are expected to increase.

New borrowing will be considered in the forms noted below. All options will be evaluated alongside their availability and which provides best value for money. The options below are not presented in a hierarchical order.

Public Works Loan Board (PWLB)

PWLB borrowing is available for between 1 and 50 year maturities on various bases. This offers a range of options for new borrowing which could spread debt maturities away from a concentration in longer dated debt and allow the Council to align maturities to MRP.

In October 2019 the Treasury increased all PWLB rates by 100 basis points, citing concerns regarding the increased levels of debt local authorities were requesting in the current low-rate market environment. This means that although PWLB remains a highly accessible form of debt finance, it may not provide value for money and other market options may be preferable.

The Link forecast for the PWLB Certainty Rate is as follows:

Table 3	Mar 20	Jun 20	Sep 20	Dec 20	Mar 21	Mar 22	Mar 23
Table 3	%
Bank Rate	0.75	0.75	0.75	0.75	1.00	1.00	1.25
5 yr PWLB rate	2.40	2.40	2.50	2.50	2.60	2.90	3.20
10 yr PWLB rate	2.70	2.70	2.70	2.80	2.90	3.20	3.50
25 yr PWLB rate	3.30	3.40	3.40	3.50	3.60	3.90	4.10
50 yr PWLB rate	3.20	3.30	3.30	3.40	3.50	3.80	4.00

A more detailed Link forecast is included in Appendix G to this report.

European Investment Bank (EIB)

The EIB’s rates for borrowing are generally favourable compared to PWLB although the margin of benefit has now reduced. Rates can be forward fixed for borrowing from the EIB and this option will be considered if the conditions can be met and it offers better value for money.

The EIB appraises its funding plans against individual schemes, particularly around growth and employment and energy efficiency, and any monies borrowed are part of the Council’s overall pooled borrowing.

Third Party Loans

These are loans from third parties that are offered at lower than market rates, for example Salix Finance Ltd is offering loans to the public sector at 0% to be used specifically to improve their energy efficiency and reduce carbon emissions.

Homes and Communities Agency funding

This is funding from Government and can only be used in specific circumstances. It is, in effect, a ‘loan’ of the HCA’s receipts from the disposal of its land and property within Greater Manchester (GM), as agreed in the GM City Deal. The City Council is currently the accountable body for these funds, but decisions on how the funding should be used are made by the Greater Manchester Combined Authority. It is anticipated that the existing debt of this type held by the City Council, shown in the forecast portfolio earlier in this report, will be novated to the Combined Authority in 2020.

Inter-Local Authority advances

Both short and medium term loans are often available in the inter Local Authority market.

Market Loans

Following the increase in PWLB rates noted above, there has been a considerable increase in market activity relating to local authority debt. At the time of writing the report, the market is still developing and may take a couple of months to form and for debt pricing and structure to become clear.

It is anticipated that there will be a range of structures available, including forward starting loans.

Local Authority Bond Agency

The UK Municipal Bonds Agency was established in June 2014 with the primary purpose of reducing local authority financing costs by:

· Issuing bonds in the capital markets and on-lending to councils.

· Lending between councils.

· Sourcing funding from 3rd party sources, and on-lending to councils.

Although the Agency’s aim is to raise finance for Local Authorities by issuing municipal bonds to capital markets, at the time of writing the first bond has yet to be issued. The Council will continue to monitor the Agency’s development and whether it can offer a competitive option for future borrowing.

These types of borrowing will need to be evaluated alongside their availability, particularly whilst there is a very limited availability of traditional market loans. The traditional market loans available tend to be Lender Option Borrower Option (LOBO) loans and they are not currently offered at competitive rates of interest. LOBOs provide the lender with future options to increase the interest rate whilst the local authority has the option to repay if the increase in the rate is unacceptable to them.

Following HRA reform the vast majority of the Council’s existing debt portfolio consists of LOBOs and the Authority needs to consider diversifying its loan book to reduce the impact of any volatility that may cause these loans to be called. It should be noted that the Council’s current LOBO loans are unlikely to be called in the medium term at current interest rates.

Sensitivity of the forecast

In normal circumstances the main sensitivities are likely to be the two scenarios noted below. Council officers in conjunction with the treasury advisors will continually monitor the prevailing interest rates and the market forecast, adopting the following responses to a change of sentiment:

If it were felt that there was a significant risk of a sharp FALL in long and short term rates, e.g. due to a marked increase of risks around relapse into recession or of risks of deflation then long term borrowings will be postponed.

If it were felt that there was a significant risk of a much sharper RISE in long and short term rates than that current forecast, perhaps arising from a greater than expected increase in world economic activity or a sudden increase in inflation risks, the portfolio position will be re-appraised. The likely action will be that fixed rate funding will be drawn whilst interest rates remain relatively cheap.

External v. Internal borrowing

The current borrowing position reflects the historic strong Balance Sheet of the Council as highlighted in Section 6. The policy remains to keep cash as low as possible and minimise temporary investments.

The next financial year is again expected to be one of historically low Bank Rate. This provides a continuation of the opportunity for local authorities to review their strategy of undertaking new external borrowing. At Appendix F there is an in depth analysis of economic conditions provided by Link Asset Services, the Council’s independent treasury advisors.

Over the next three years, investment rates are expected to be significantly below long term borrowing rates. This would indicate that value could best be obtained by limiting new external borrowing and by using internal cash balances to finance new capital expenditure or to replace maturing external debt.

This will be weighed against the potential for incurring additional long term costs by delaying new external borrowing until later years when longer term rates are forecast to be significantly higher. Consideration will also be given to forward fixing rates whilst rates are favourable.

Against this background caution will be adopted within 2020/21 treasury operations. The Deputy Chief Executive and City Treasurer will monitor the interest rate market and adopt a pragmatic approach to changing circumstances, reporting any decisions to the appropriate decision making body at the next available opportunity.

Policy on borrowing in advance of need

From a statutory point of view a Local Authority has the power to invest for ’any purpose relevant to its functions under any enactment, or for the purposes of the prudent management of its financial affairs.’ The MHCLG takes an informal view that local authorities should not borrow purely to invest at a profit. This does not prevent the Council temporarily investing funds borrowed for the purpose of expenditure in the reasonable near future.

This Council will not borrow in advance of need to on lend and profit from the difference in interest rate. Any decision to borrow in advance in support of strategic and service delivery objectives will be in the context of achieving the best overall value for money, for example to minimise the risk of borrowing costs increasing in the future and that the Council can ensure the security of such funds. In determining whether borrowing is undertaken in advance of need the Council will:

· ensure that there is a clear link between the capital programme and maturity profile of the existing debt profile which supports the need to take funding in advance of need;

· ensure the ongoing revenue liabilities created and implications for future plans and budget have been considered;

· evaluate the economic and market factors that might influence the manner and timing of any decision to borrow;

· consider the merits and demerits of alternative forms of funding;

· consider the alternative interest rate bases available, the most appropriate periods to fund and repayment profiles to use; and

· consider the impact of borrowing in advance temporarily (until required to finance capital expenditure) increasing investment cash balances and the consequent increase in exposure to counterparty risk, and other risks, and the level of such risks given the controls in place to minimise them.

Forward Fixing

As noted above, the Council will give consideration to forward fixing debt, whereby the Council agrees to borrow at a point in the future at a rate based on current implied market interest rate forecasts. There is a risk that the interest rates proposed would be higher than current rates; however, it can be beneficial as it avoids the need to borrow in advance of need and suffer cost of carry. It may also represent a saving if rates were to rise in the future. Any decision to forward fix will be reviewed for value for money and will be reported to Members as part of the standard treasury management reporting.

Debt Rescheduling

It is likely that opportunities to reschedule debt in the 2020/21 financial year will be limited due to prevailing debt interest rates being relatively low.

As short term borrowing rates will be considerably cheaper than longer term rates, there may be some opportunity to generate savings by switching from long term debt to short term debt. These savings will need to be considered in the light of the premiums incurred and the likely cost of refinancing those short term loans once they mature compared to the current rates of longer term debt in the existing portfolio.

The debt portfolio following HRA reform consists mainly of LOBOs, and the premia for rescheduling these make it unlikely there will be a cost effective opportunity to reschedule. The premia relates to the future interest payments associated with the loan and compensation for the lender for the buy-back of the interest rate options the loan has embedded in it.

The Council will continue to monitor the LOBO market and opportunities to reschedule, redeem or alter the profile of existing LOBO debt. The reasons for any rescheduling to take place will include:

· the generation of cash savings and / or discounted cash flow savings;

· helping to fulfil the strategy outlined above in this section;

· enhancing the balance of the portfolio (amending the maturity profile and/or the balance of volatility)

Any restructuring of LOBOs will only be progressed if it provides value for money and reduces the overall treasury risk the Council faces. The Council’s Constitution delegates to the Deputy Chief Executive and City Treasurer the authority to pursue any restructuring, rescheduling or redemption opportunities available.

Consideration will also be given to the potential for making savings by running down investment balances to repay debt prematurely. It is likely short term rates on investments will be lower than rates paid on current debt.

All rescheduling will be reported to the Executive as part of the normal treasury management activity. If rescheduling requires amendments to the Treasury Management Strategy the Deputy Chief Executive and City Treasurer will be asked to approve them in accordance with the delegated powers accorded to the position and the changes will be reported to Members.

Appendix 9

Annual Investment Strategy

General Fund

Introduction

The Council will have regard to the MHCLG’s Guidance on Local Government Investments (the Guidance) and the 2011 and 2017 revised CIPFA Treasury Management in Public Services Code of Practice and Cross Sectoral Guidance Notes (the CIPFA TM Code). The Council’s investment priorities are:

· The security of capital; and

· The liquidity of its investments.

The risk appetite of the Council is low in order to give priority to the security of its investments. The Council will aim to achieve the optimum return on its investments commensurate with desired levels of security and liquidity.

The borrowing of monies by an Authority purely to invest or on-lend and make a return is unlawful and this Council will not engage in such activity. However the Council may provide loan finance funded from borrowing if this supports the achievement of the Council’s strategies and service objectives.

The Council’s TMSS focusses solely on treasury management investments. The Council does not hold any commercial investments and details of strategic capital investments can be found in the Capital Strategy and Budget Report to the Executive.

Investment Policy

The Council’s investment policy is to manage the Council’s cash flow through investments in high credit quality.

As in previous years, the Council will not just utilise ratings as the sole determinant of the quality of an institution. It is important to continually assess and monitor the financial sector on both a micro and macro basis and in relation to the economic and political environments in which institutions operate. The assessment will also take account of information that reflects the opinion of the markets. The Council will engage with its advisors to maintain a monitor on market pricing such as ‘credit default swaps’^{^[2]} and overlay that information on top of the credit ratings.

Investment in banks and building societies are now exposed to bail-in risk following the introduction of the EU’s Banking Recovery and Resolution Directive, which means depositor’s funds over £85,000 are at risk of “bail-in” if the bank fails. In response to this, the Council adopted lower operational limits for such investments in 2016/17 and these remain.

The exception is the limit with Barclays bank; Barclays is the Council’s main banker and is the investment destination of last resort for the close of daily trading. These revised limits are operational changes and to preserve flexibility should circumstances change the overall investment limits approved for banks and building societies for 2019/20 will be maintained in 2020/21.

In line with the policy adopted in this strategy in previous years, options to diversify the investment portfolio have been reviewed and adopted. The Council now actively uses money market funds alongside deposits with banks, other local authorities and the Debt Management Agency.

For 2020/21 the Council will continue to consider investing in Treasury Bills, Certificates of Deposit and Covered Bonds. In addition to diversification each of these options offer the Council benefits which are noted in more detail below. These instruments require the Council to have specific custodian and broker facilities which have been opened. Officers are working to monitor these markets to prompt participation in the instruments when rates are favourable, and to identify and resolve any governance challenges arising from investing in instruments which have an active secondary market. Work is continuing to open further access points to markets and to identify opportunities for benefit which are new to the Council.

It should be noted that, whilst seeking to broaden the investment base officers will seek to limit the level of risk taken. It is not expected that the measures considered above will have a significant impact on the rates of return the Council currently achieves.

Specified and Non-Specified Investments

Investment instruments identified for use in the financial year are listed below and are all specified investments. Any proposals to use other non-specified investments will be reported to Members for approval.

Specified investments are sterling denominated, with maturities up to a maximum of one year and meet the minimum ‘high’ rating criteria where applicable. Further details about some of the specified investments below can be found in later paragraphs in this Section.

Table 4	Minimum ‘High’ Credit Criteria	Use
Term deposits – banks and building societies^{^[3]}	See Creditworthiness Policy.	In-house
Term deposits – other Local Authorities	High security. Only one or two local authorities credit-rated	In-house
Debt Management Agency Deposit Facility	UK Government backed	In-house
Certificates of deposit issued by banks and building societies covered by UK Government guarantees	UK Government explicit guarantee	In-house
Money Market Funds (MMFs)	AAA_M	In-house
Treasury Bills	UK Government backed	In-house
Covered Bonds	AAA	In-house

Creditworthiness Policy

The Council applies the creditworthiness service provided by Link Asset Services. This service employs a sophisticated modelling approach utilising credit ratings from the three main credit rating agencies; Fitch, Moody’s and Standard & Poor’s. Link supplement the credit ratings of counterparties with the following overlays:

· credit watches and credit outlooks from credit rating agencies

· Credit Default Swap spreads to provide early warning of likely changes in credit ratings

· sovereign ratings to select counterparties from only the most creditworthy countries

The above are combined in a weighted scoring system which is then combined with an overlay of CDS spreads. The end product is a series of colour coded bands which indicate the relative creditworthiness of counterparties.

The Council has regard to Link’s approach to assessing creditworthiness when selecting counterparties as it uses a wider array of information than just primary ratings and by using a risk weighted scoring system does not give undue prominence to just one agency’s ratings.

In summary the Council will approach assessment of creditworthiness by using the Link counterparty list and then applying its own counterparty limits and durations. All credit ratings will be monitored on a daily basis and re-assessed weekly. The Council is alerted to changes to ratings of all three agencies through its use of the Link creditworthiness service.

· if a downgrade results in the counterparty/investment scheme no longer meeting the Council’s minimum criteria, its further use as a new investment will be withdrawn immediately.

· in addition to the use of Credit Ratings, the Council will be advised of information in Credit Default Swap against the iTraxx benchmark^{^[4]} and other market data on a weekly basis. Extreme market movements may result in the downgrade of an institution or removal from the Council’s lending list.

Sole reliance will not be placed on the use of this external service. In addition the Council will also use market data and market information, information on government support for banks and the credit ratings of that government support.

Investment Limits

In applying the creditworthiness policy the Council holds the security of investments as the key consideration and will only seek to make treasury investments with counterparties of high credit quality.

The financial investment limits of financial institutions will be linked to their short and long-term ratings (Fitch or equivalent) as follows:

Long Term Amount

Fitch AA+ and above £20 million

Fitch AA/AA- £15 million

Fitch A+/A £15 million

Fitch A- £10 million

Fitch BBB+ £10 million

The Council will only utilise those institutions that have a short term rating of F2 or higher, (Fitch or equivalent).

UK Government (including the Debt Management Office) £200 million

Greater Manchester Combined Authority £200 million

Other Local Authorities £20 million

In seeking to diversify the Council will utilise other investment types which are described in more detail below and ensure that the investment portfolio is mixed to help mitigate credit risk. The following limits will apply to each asset type:

Total Deposit Amount

Local Authorities £250 million

UK Government £200 million

Debt Management Office

Treasury Bills

Money Market Funds £75 million

Certificates of Deposit £25 million

Covered Bonds £25 million

It is proposed that the limit for Money Market Funds increases by £15m, when compared to last year’s Strategy. This reflects the role the funds have been playing in the Council’s investment portfolio, and would allow the Council to have 5 active funds as opposed to 4. There is a risk to taking this approach, in that it potentially increases the investments in one type of instrument at any given time, but the nature of Money Market Funds and the diversification of instruments within the Fund helps to mitigate this.

It may be prudent to temporarily increase the limits shown above, as in the current economic environment it is increasingly difficult for officers to place funds. If this is the case officers will seek approval from the Deputy Chief Executive and City Treasurer and any increase in the limits will be reported to Members through the normal treasury management reporting process.

Durational Limits

Operationally the Council has in recent years not invested cash for more than three months, which was a product of security concerns following the financial crisis of 2008/09 and the relatively volatile nature of the Council’s cash flow.

The financial markets have changed significantly since 2008/09, and the transparency of creditworthiness has improved. It is therefore proposed that the Council formally states, as part of the Investment Strategy, that it will invest for up to 364 days provided that such investments form part of the management of the cash flow and not for increased yield. On this basis, such investments will only be made if the cash flow forecast at the time indicates a level of “core” cash which will not be required for the investment period.

Money Market Funds

The removal of the implied levels of sovereign support that were built into ratings throughout the financial crisis has impacted on bank and building society ratings across the world. Rating downgrades can limit the number of counterparties available and to provide flexibility the Council will use MMFs when appropriate as an alternative specified investment.

MMFs are investment instruments that invest in a variety of institutions therefore diversifying the investment risk. The funds are managed by a fund manager and have objectives to preserve capital, provide daily liquidity and a competitive yield. The majority of money market funds invest both inside and outside the UK. MMFs also provide flexibility as investments and withdrawals can be made on a daily basis.

MMFs are rated through a separate process to bank deposits. This looks at the average maturity of the underlying investments in the Fund as well as the credit quality of those investments. The Council will only use MMFs where the institutions hold the highest AAA credit rating and those which are UK or European based.

As with all investments there is some risk with MMFs in terms of the capital value of the investment. European legislation has required existing and new Constant Net Asset Value MMFs to convert to a Low Volatility Net Asset Value (LVNAV) basis by January 2019. This basis allows movements in capital value, but there is a restriction that the deviation cannot be more than 20 basis points, e.g. on a deposit of £100 the Fund must ensure withdrawal proceeds are no greater than +/- 20p.

Treasury Bills

Treasury Bills are marketable securities issued by the UK Government and counterparty and liquidity risk is relatively low although there is potential risk to value arising from an adverse movement in interest rates unless they are held to maturity.

Weekly tenders are held for Treasury Bills so the Council could invest funds on a regular basis. This would provide a spread of maturity dates and reduce the volume of investments maturing at the same time.

There is a large secondary market for Treasury Bills so it is possible to trade them in earlier than the maturity date if required and to purchase them in the secondary market. In the majority of cases the Council will hold to maturity to avoid any potential capital loss from selling before maturity and will only sell the Treasury Bills early if it can demonstrate value for money in doing so.

Certificates of Deposit

Certificates of Deposit are short dated marketable securities issued by financial institutions so the counterparty risk is low. The instruments have flexible maturity dates so it is possible to trade them in early although there is a potential risk to capital if they are traded ahead of maturity and there is an adverse movement in interest rates. Certificates of Deposit are subject to bail-in risk as they are given the same priority as fixed deposits if a bank was to default. The Council will only deal with Certificates of Deposit that are issued by banks and meet the credit criteria.

Covered Bonds

Covered Bonds are debt instruments secured by assets such as mortgage loans. They are issued by banks and other non-financial institutions. The loans remain on the issuing institutions’ Balance Sheet and investors have a preferential claim in the event of the issuing institution defaulting. All issuing institutions are required to hold sufficient assets to cover the claims of all covered bondholders. The Council would only deal with bonds that are issued by banks which meet the credit criteria, or AAA rated institutions, (e.g. insurance companies).

Liquidity

Based on cash flow forecasts, the level of cash balances in 2020/21 is estimated to range between £0m and £230m. The higher level can arise where for instance large Government grants are received or long term borrowing has recently been undertaken.

Investment Strategy to be followed in-house

Link’s view of forecast Bank Rate is noted at Section 9. The current economic outlook is that the structure of market interest rates and government debt yields have several key treasury management implications.

On the assumption that the UK and EU agree a Brexit deal including the terms of trade by the end of 2020 or soon after, then Bank Rate is forecast to increase only slowly over the next few years. Link’s view is that Bank Rate will rise to 1.00% by March 2021.

This suggest that investment returns are likely to remain relatively low during 2020/21, and beyond given the global economic outlook.

There will remain a cost of carry to any new borrowing which causes an increase in investments as this will incur a revenue loss between borrowing costs and investment returns.

The Council will avoid locking into longer term deals while investment rates are at historically low levels unless attractive rates are available with counterparties of particularly high creditworthiness which make longer term deals worthwhile and within the risk parameters set by the Council.

For 2020/21 it is suggested the Council should target an investment return of 0.50% on investments placed during the financial year. For cash flow generated balances the Council will seek to utilise its business reserve accounts and short-dated deposits (overnight to three months) in order to benefit from the compounding of interest.

End of year Investment Report

At the end of the financial year, the Council will receive a report on investment activity as part of the Annual Treasury Management Report.

Policy on the use of External Service Providers

The Council uses Link Asset Services as external treasury management advisors and has access to another provider who is an approved supplier should a second opinion or additional work be required. The Council recognises that responsibility for treasury management decisions remains with the organisation at all times and will ensure that undue reliance is not placed upon its external service providers.

The Council recognises there is value in employing external providers of treasury management services to acquire access to specialist skills and resources. It will ensure the terms of the Advisor’s appointment and the methods by which their value is assessed are properly agreed and documented, and subjected to regular review.

Appendix 10

Proposed Use of Reserves

Reserve	Closing Balance 31/03/2020 £000	Withdrawals £000	Additions £000	Closing Balance 31/03/2021 £000	Closing Balance 31/03/2022 £000	Closing Balance 31/03/2023 £000	Closing Balance 31/03/2024 £000	Purpose
Schools Reserve	19,069	(259)	1,923	20,733	22,398	22,139	21,880

General Fund Reserves
Statutory Reserves	21,734	(10,015)	9,951	21,670	23,424	24,748	26,222
Earmarked Reserves	296,130	(105,188)	93,695	284,637	264,606	266,671	261,240
General Fund Reserve	21,420	0	1,597	23,017	23,017	23,017	23,017
Total General Fund	339,284	(115,203)	105,243	329,324	311,047	314,436	310,479
Housing Revenue Account Reserves:
Housing Revenue Account General Reserve	73,960	(17,996)	0	55,964	41,748	27,480	25,978
Major Repairs Reserve	1,240	(1,240)	0	0	0	0	0
HRA PFI reserve	10,000	0	0	10,000	10,000	10,000	10,000
HRA Residual liabilities fund	24,000	0	0	24,000	24,000	24,000	24,000
Housing Insurance reserve	1,789	0	200	1,989	2,189	2,389	2,589
Total HRA	110,989	(19,236)	200	91,953	77,937	63,869	62,567
TOTAL RESERVES	469,342	(134,698)	107,366	442,010	411,382	400,444	394,926
SCHOOLS RESERVE
LMS Reserve	22,916	(259)	0	22,657	22,398	22,139	21,880	School balances assumed year-end position. These are not MCC resource and so cannot be used by MCC. There are no further known schools planning to transfer to academy status.
Dedicated Schools Grant (DSG)	(3,847)	0	1,923	(1,924)	0	0	0	DSG - Allocation to schools and retained Central DSG. £3.847m to be recovered over two years from DSG.
Sub Total Schools	19,069	(259)	1,923	20,733	22,398	22,139	21,880
STATUTORY RESERVES
Bus Lane Enforcement Reserve	13,084	(4,275)	4,546	13,355	13,547	13,239	12,931	Ring-fenced reserve which can only be applied to specific transport and highways related activity.
On Street Parking	3,881	(5,304)	5,405	3,982	5,852	7,831	9,810	Ring-fenced reserve which can only be applied to specific transport and highways related activity.
Ancoats Square Reserve	2,732	(118)	0	2,614	2,496	2,378	2,260	Received from the Homes and Communities Agency to cover the revenue costs of maintaining Ancoats Square for a period of at least 25 years.
Spinningfields Commuted Sum	607	(9)	0	598	589	580	571	Funds received as part of an agreement to cover maintenance costs.
Great Northern Square Maintenance Fund	283	(20)	0	263	243	223	203	Set up in accordance with the agreement with the developers of the site. It will be used for upgrading of the square.
Education Endowments	17	0	0	17	17	17	17	For future payments for school prizes
Landlord Licensing Reserve	400	(170)	0	230	119	0	0	Smoothing reserve
Art Fund Reserve	31	0	0	31	31	0	0	For art purchases
Manchester Safeguarding	69	(69)	0	(0)	(0)	(0)	(0)	Children's Safeguarding Board activity. The Board is a joint responsibility with MCC & CCG
St Johns Gardens Contingency	630	(50)	0	580	530	480	430	Contribution from St Johns Gardens tenants for maintenance works
Sub Total Statutory	21,734	(10,015)	9,951	21,670	23,424	24,748	26,222
EARMARKED RESERVES
BALANCES HELD FOR PFI'S
Street Lighting PFI	250	(250)	0	0	0	0	0	Established to fund the requirements over 25 years re: the PFI contract for Street Lighting service via external contractors
Temple PFI	689	(125)	12	576	453	307	307	Established to fund the requirements of the PFI scheme over 25 years
Wright Robinson PFI Reserve	1,351	0	40	1,391	1,431	1,471	1,511	PFI Scheme 25 year contract drawdown will be in future years as expenditure exceeds grant.
Total held for PFI's	2,290	(375)	52	1,967	1,884	1,778	1,818
?Reserves directly supporting the revenue budget
Adult Social Care	7,695	(5,545)	0	2,150	0	0	0	To support Adult and Social Care Improvement Plan
Social Care Reserve	13,255	(7,135)	920	7,040	1,462	1,462	1,462	To address pressures in social care, in particular the need to invest in early help and prevention in Children's Services and continued pressures on LAC budgets
Crime and Disorder	1,080	(540)	0	540	0	0	0	To fund the Anti-Social Behaviour Team
Budget smoothing reserve	10,651	(7,066)	0	3,585	0	0	0	Planned use to smooth the impact of previous funding reductions on the revenue budget
Total held to support the revenue budget	32,681	(20,286)	920	13,315	1,462	1,462	1,462
RESERVES HELD TO SMOOTH RISK / ASSURANCE
Risks
Planning Reserve	2,467	(300)	0	2,167	1,867	1,567	1,267	Used to smooth the volatility of planning fee income to avoid budget pressures if fee income drops
Transformation Reserve	9,483	(333)	0	9,150	8,817	8,483	8,149	To support costs of future service change.
Airport Dividend reserve	55,809	(47,080)	47,080	55,809	55,809	55,809	55,809	The income in the reserve is from the Manchester airport dividend which is then used a year in arrears to support the Medium Term Financial Plan
Land Charges Fees Reserve	320	(320)	0	0	0	0	0	To smooth the budget impact, planned to utilise in 2020/21
Pension Risk Fund	524	0	0	524	0	0	0	To fund external pension liabilities
Manchester International Festival	1,493	0	10,667	12,160	11,160	10,113	9,019	To fund agreed future Manchester International Festivals / Factory grant from the reserve. Grant agreement will be aligned to the Arts Council England funding cycle.
Highways reserve	1,010	(89)	0	921	832	743	654	Funds received as part of developer agreements that will be utilised for highways schemes in future years
Insurance Fund	17,091	(500)	0	16,591	16,091	15,591	15,091	The insurance fund has been established to fund risks that are self-insured.
Fleet Maintenance Reserve	25	(25)	0	0	25	50	0	Reserve created for smoothing the impact of vehicle repair and maintenance costs.
Taxi Licensing Reserve	1,000	(1,000)	0	0	0	0	0	This is a smoothing reserve to equalise the income and expenditure of running the function over financial years. Income ring-fenced by statute.
Newton Heath Market Reserve	22	0	0	22	22	22	22	To fund the future market provision
Rogue Landlord reserve	40	(40)	0	(0)	(0)	(0)	(0)	This reserve holds the funding for investigation into poor property conditions in the private rented sector in Manchester with the purpose of improving housing conditions for tenants by enforcing compliance with statutory regulations and standards.
Selective Licensing reserve	346	(165)	0	181	0	0	0	Costs for administering the reputable landlord initiative and ensure compliance
Investment Estate smoothing reserve	1,524	(700)	0	824	824	824	824	To manage budget pressures due to the volatility in investment income.
Business Rates Reserve	22,737	(3,165)	2,754	22,326	19,161	18,671	18,181	To mitigate Business Rates income risk due to the volatility of assumptions
TOTAL Risk/Smooth	113,891	(53,717)	60,501	120,675	114,608	111,873	109,016
RESERVES HELD TO FUND CAPITAL SCHEMES AND OTHER SPECIFIC PROJECT RELATED COSTS
Investment Reserve	12,623	(2,325)	0	10,298	8,723	7,523	6,323	To deliver priority regeneration projects.
Enterprise zone reserve	1,084	(1,061)	1,500	1,523	1,962	2,401	3,333	To underwrite the borrowing costs for development in the Oxford Road Corridor
Capital Fund Reserve	68,408	(10,366)	17,559	75,601	75,601	79,425	77,048	Contribution to schemes which are supporting employment and growth, future carbon reduction investments and high priority strategic development opportunities in the city .
Capital Financing Reserve	34,730	0	5,000	39,730	44,730	49,730	54,730	To reflect increase in borrowing costs due to the Council’s capital investment
Eastlands Reserve	3,434	(5,682)	5,118	2,870	2,740	2,941	3,670	This reserve reflects the contribution from Manchester City Football Club and will be used for various projects including English Institute of Sport.
Total to fund capital scheme and other specific relates costs	120,279	(19,434)	29,177	130,022	133,756	142,020	145,104
RESERVES TO SUPPORT GROWTH AND REFORM
Integration Reserve	2,343	(1,273)	0	1,070	1,070	1,070	1,070	The reserve is a joint resource between Manchester City Council and Manchester Clinical Commissioning Group to support the infrastructure requirements that underpin the mobilisation of the Locality Plan.
Town Hall Reserve	10,668	(3,185)	2,400	9,883	7,467	5,041	0	To fund commitments for the Town Hall Complex Programme
Troubled Families Reserve	1,332	(1,332)	0	0	0	0	0	This was set up to support the scaling up on the community budgets work
Our Manchester reserve	3,570	(2,556)	530	1,544	0	0	0	Additional investment made available as part of the 2017-2020 budget process to drive forward the delivery of Our Manchester initiatives
TOTAL	17,913	(8,346)	2,930	12,497	8,537	6,111	1,070
GRANTS USED OVER ONE YEAR