Question 1: Do you have any comments or observations on the amendments to the code relating to Investment Management Practices and other recommendations relating to non-treasury investments in Section 8 are required under the Clauses to be formally adopted? (Treasury Management Code section 5).
This section outlines CIPFA’s recommendation of good practice four clauses for local authorities to adopt as part of their standing orders, financial regulations, or other policy document. As recommended good practice, the clauses seem reasonable and sufficiently flexible in adoption, but due regard should be given to views expressed by individual local authorities.
Question 2: Do you have any comments or observations on the amendments to the code relating to the definition of treasury management being amended to explicitly include borrowing? (Treasury Management Code section 6)
This appears to be reasonable.
Question 3: Do you have any comments or observations on the amendments to the code relating to TMP1 (1) on counterparty credit risk: counterparty policy to set out the organisation’s policy and practices relating to environmental, social and governance (ESG) investment considerations? (Treasury Management Code section 7).
Question 4: Do you have any comments or observations on the amendments to the code relating to TMP 1 treasury risks have been renamed to align with general practice? (Treasury Management Code section 7)
Question 5: Do you have any comments or observations on the amendments to the code relating to TMP 10 on training requiring a knowledge and skills schedule? (Treasury Management Code section 7)
Questions 3, 4, and 5 all refer to proposals in section 7 of the code. The proposals appear to be sufficiently flexible and as already noted we are pleased that the requirement for all councils to have a Treasury Management Committee has been dropped. As ever due regard should be given to views expressed by individual local authorities on the detailed aspects.
Question 6: Do you have any comments or observations on the amendments to the code relating to Section 8 on non-treasury (ie service and commercial) investments definitions updated in line with Prudential Code? (Treasury Management Code section 8)
Question 7: Do you have any comments or observations on the amendments to the code relating to all reporting under the TM Code to address service and commercial investments in appropriate categories, as well as treasury ones? (Treasury Management Code section 8)
Question 8: Do you have any comments or observations on the amendments to the code relating to the purposes, objectives, and management of each category of service and commercial investment being described? (Treasury Management Code section 8)
Question 9: Do you have any comments or observations on the amendments to the code relating to the risks of commercial investments should be proportionate to the organisation's financial capacity? (Treasury Management Code section 8)
Question 10: Do you have any comments or observations on the amendments to the code relating to the Investment Management Practices for non-treasury investments? (Treasury Management Code section 8)
Questions 6 to 10 cover amendments to section 8 of the code. By and large these amendments seek to align the new Treasury Management Code with changes proposed for the Prudential Code. While we agree that the two should be aligned, we would refer you to comments we have made in response to the Prudential Code consultation, with particular reference to clarity. In particular, it is not clear how these interrelate with the additional documents published alongside the Prudential Code.
The clarity of these definitions in the Treasury Management Code itself could be improved. The opening statement is “The definition of treasury management includes all the investments of the organisation. This may include investment activity which is outside the purposes of normal treasury management”. This appears to suggest that “treasury management” and “normal treasury management” may be different things, which is confusing.
We have also heard concerns expressed that including some treasury management activity within a definition of commercial investments will restrict councils’ options and have an impact on councils’ ability to invest in pooled funds, particularly pooled property funds, while encouraging a short-term view and prioritising holding cash.
Question 11: Do you have any comments or observations on the changes for the new guidance on the treasury management prudential indicators? (Treasury Management code Chapter 3)
This is a technical area and the views of individual local authorities and of finance and treasury management practitioners within the sector on these proposed changes will be important.