AM 735/26 – Draft Budget for the Financial Year 2026/27, Treasury Management Strategy and Medium Term Financial Plan

AM 735/26

NEW FOREST NATIONAL PARK AUTHORITY
AUTHORITY MEETING – 26 MARCH 2026

DRAFT BUDGET FOR THE FINANCIAL YEAR 2026/27, TREASURY MANAGEMENT STRATEGY AND MEDIUM-TERM FINANCIAL PLAN

Report by: Nigel Stone, Head of Resources (Chief Finance Officer) and Tom Knott, Finance and Sustainable Performance Officer

Summary:

This paper sets out draft budget proposals for the financial year 2026/27 for consideration by the Authority. The report also provides a medium-term projection of the Authority’s financial position up to March 2030 and a forward projection beyond this, all based upon the financial strategy outlined within the report.

Recommendations, to:

1. Approve the Budget for 2026/27
2. Note that the underlying minimum level for the General Fund Reserve remains at £0.35 million
3. Note the implications on the Reserves of the proposed budget for 2026/27
4. Note the Risk Assessment and Section 25 Statement (Section 7)
5. Approve the Treasury Management Strategy in Annex 3
6. Note the Medium-Term Financial Plan up to 2029/30 and the Forward Projection in Annex 4.
7. Delegate authority to the Chief Executive, in consultation with the Chair and Chief Finance Officer, to allocate any supplementary defra funding received, using the principles set out in the report, and reporting back to the next Authority meeting.

Resources:

As set out in the report.

Equality and Diversity Implications:

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

Papers:

• NFNPA AM 735/26 Cover Paper
• NFNPA AM 735/26 Annex 1: Programme Fund Detail 2026/27
• NFNPA AM 735/26 Annex 2: Position of Reserves
• NFNPA AM 735/26 Annex 3: Treasury Management Strategy up to 2028/29
• NFNPA AM 735/26 Annex 4: Medium Term Financial Plan 2026-30 and Forward Projection

Contact:

Nigel Stone, Head of Resources (CFO)
Tel: 01590 646655
Email: nigel.stone@newforestnpa.gov.uk

1 Purpose

1.1 This paper sets out the draft budget proposals for the financial year 2026/27 for consideration by the Authority; a draft of the paper has been through the Resources, Audit and Performance Committee who supported it. The report also provides details of the Treasury Management Strategy and a medium-term projection of the Authority’s financial position up to March 2030 and beyond, all based upon the financial strategy outlined within the report.

2 Budget Planning Process

2.1 The Chief Executive, Chief Finance Officer and Officers have drafted this budget within the overall Partnership Plan and our own Business Plan and thematic workplans for the 2026/27 financial year. The budget resourcing process has been overseen by a members ‘Finance and Facilities Task & Finish Group’ as established by the Resources, Audit and Performance Committee last year. The T&F Group have looked in depth at our financial position, including particular focus around the defra grant, future income generation / asset strategy, treasury investment income and our levels of reserves.

2.2 From 2018/19 to 2024/25, our core defra grant was “frozen” at £3,251,501 each year, therefore equating to significant reductions each year in real terms. The 2025/26 grant was expected to be our sixth year of a frozen grant, however in late February 2025 we were told to expect a 9% cut to the revenue funding from 1 April 2025 instead – taking our core revenue grant down to £3m. Had our 2010 grant settlement increased in line with CPI inflation it would currently be c£6.9m per annum, equating to a loss of over 55% in real terms.

2.3 Within their 2025/26 funding announcement, defra confirmed a new capital funding grant pot available to the English National Parks (totalling £15m) – the New Forest received just under £1.4m of this pot for that financial year. Whilst capital funds are good news for the Authority, its core functions are largely delivered through the revenue funding, and it will still take some time for any capital assets to start generating income to offset these recent revenue grant cuts.

2.4 No formal notification has still been received to date from defra confirming our 2026/27 grant settlement, however we have received a comfort letter confirming the grant figures used in this report. Given the clear emphasis placed by defra and the National Audit Office on governance, and in particular financial governance, it is very disappointing to find ourselves in this position again – the application of standard good practice would provide us with a proposed funding settlement around November/December time, with final confirmation coming in January.

2.5 This budget is based on a flat-cash settlement for the coming year of 2026/27 – equating to £3m revenue and £1.4m capital grants being available to us. The settlement is likely to be confirmed for one year only (2026/27); however, we are told to use these same amounts as indicative figures for 2027/28 and 2028/29 – this covers the length of the financial settlement given to Defra within the government’s Comprehensive Spending Review last Summer.

2.6 Further discussions are currently ongoing with defra regarding a one-off revenue funding boost, similar in nature to the £440,000 received by all English National Parks a few years ago. Should this be forthcoming, and it is currently felt by officers this is more likely than not, the principles for utilisation would be:

• Offset earned income in 2026/27 to maximise funds which can be put aside in reserves and utilised over the next five years
• Invest in the development / underpinning of the next Partnership Plan
• Invest in the nature and climate emergencies
• Invest in income generation
• Leverage the funds as far as possible (e.g. as match funding for larger schemes).

Whilst some of these funds may need to be spent early in the new financial year, for which we are seeking an officer delegation, we would also bring a paper back to Members at the earlier opportunity to seek agreement for its continued and future use.

2.7 Our Medium-Term Financial Plan has been drafted to cover four future financial years however, due to the further single-year confirmation settlements, that period is now beyond the certainty of any future Defra settlements or funding indications. To counter some of this uncertainty, we have created a ‘forward projection’ which indicates at a higher level where our budgets are likely to range in the longer term (up to 10 years).

3 General Fund Budget for 2026/27

3.1 The proposed General Fund Budget for 2026/27 is based upon the following expenditure and income assumptions. The Programme Fund budget is set out in Annex 1, Reserves in Annex 2 and the Medium-Term Financial Plan & Forward Projection in Annex 4.

3.2 Alongside the ‘internally’ funded budgets set out within this paper (funded by the Defra revenue grant and any fee/income generation), the Authority is continuing to successfully attract significant externally-funded projects; historically for every £1 the Authority puts into its partnership projects, a further £25 is generated from partner organisations to be spent in the New Forest.

3.3 The table below outlines some of the key projects for the forthcoming year which will likely be spent alongside our ‘internal’ revenue budgets:

Including the amounts above, the total expenditure by the Authority in 2026/27 will likely be closer to £4.5-5m.

3.4 The Authority has also requested regular capital funds from defra, to fund purchase of income-generating assets / invest-to-save ideas and to fund our Nature Recovery 30x30 works. For 2026/27, we are projecting a further £1.4m core capital grant to the Authority, and this would be allocated in line with the Capital Investment Strategy agreed in 2025 (with the primary need clearly identified as a main office space owned by the Authority). In addition to the annual capital funding, we have requested an £8m one-off capital grant from defra towards our future facilities requirements, we are currently awaiting a response.

3.5 The pie chart below displays how the draft ‘internal’ 2026/27 Revenue Budget (c£4.2m) would spread our staffing resources with the Partnership / Business Plan themes:

3.6 The table below displays the draft 2026/27 Budget in line with the formal year-end (defra) reporting format.

3.7 Income Analysis

3.7.1 The following table shows the estimated income for the year; with comparisons to 2025/26 (any significant variances are then explained in the text below):

3.7.2 The core Defra National Park grant for 2026/27 has yet to be formally confirmed, however we have been told to expect a flat-cash settlement (i.e. same grant figure as 2024/25) This estimates our grant at £3,005,000 as per the comfort letter received at the end of February with a final signed agreement during March. With inflation currently at around 3%, this will equate to a real-terms cut of around £90,000 to our deliverables this year and the grant has over halved in real-terms since austerity began in 2010.

3.7.3 In 2026/27 the Authority will continue to provide a significant number of professional services for other organisations covering areas such as Rangers, Communications and Archaeology. It will also receive other financial contributions towards staffing roles for areas such as the New Forest Tour, the England Coast Path, seasonal rangers and co-ordinating volunteers.

3.7.4 General income generation, largely from the Bransgore affordable homes, guided walks & talks and some event sponsorship, supplemented this year by increased charging of direct staffing and overheads to projects, is expected to be around £90,000 in 2026/27.

3.7.5 Interest on cash flow returns is expected to be around £110,000 in 2026/27. The budgeted interest income is explained further in the Treasury Management Strategy which is attached as Annex 3 to this report.

3.7.6 Proposed use of reserves in 2026/27 (totalling a net £150,000) is set out in section 4 of this report and Annex 2.

3.8 Expenditure Analysis

3.8.1 The following table shows the estimated expenditure for the year; with comparisons to 2025/26 (any significant variances are then explained in the text below):

3.8.2 Projected employee costs for 2026/27 show a small net increase of £10,000 in comparison to 2025/26. The projected 3.5% pay award for 2026/27 equates to an additional £70,000 and scale point rises (for approximately a quarter of employees) will add a further £15,000. 2025/26 included one-off costs for additional planning staffing and maternity covers, whilst other small staffing savings have also been achieved. Pension contributions will be 15% plus 1% set aside in reserve (17.5% previously). As always, the salary budget provides for a 2% ‘expected’ vacancy saving within the year.

3.8.3 Programme Fund budgets are shown in more detail in Annex 1. The overall position seeks to match expenditure to 2025/26 (no reductions but also no inflationary increases).

3.8.4 An additional £10,000 is budgeted within the Strategy & Planning budget in 2026/27, to fund the costs of the Local Plan.

3.8.5 Central costs will increase in 2026/27 due to the increasing costs of external audit, some inflationary pressures too, matched off by a reduction in projected accommodation costs.

4. Reserves

4.1 Annex 2 shows the complete reserves position, identifying the use of reserves in line with the proposed budget for 2026/27. In summary, the movements in reserves are:

General Fund Reserve

• A minimum reserve of £350,000 will be maintained in the General Fund Reserve – this was recently reviewed by the Chief Finance Officer and is still considered appropriate (equating to approximately 12% of our National Park Grant).

Capital / Major Projects Reserve

• The Authority has in place reserves to allow funding of capital and/or major projects, with particular regard to invest-to-save schemes. The fund currently has around £500,000 set aside for such purposes, with around 10% potentially required in the short term for Foxlease. Members will be requested to consider any proposals for the use of this fund as they arise.

Financial Stability Reserve

• In 2022/23 defra awarded us a ‘one-off’ £440,000 to aid our financial stability. Due to the strong financial management of our Authority, we have been able to spread this funding over multiple years to counter the unwanted, delivery-eroding impacts of the flat-cash grant settlements. It is now proposed to utilise the remaining funding over 5 years from 2025/26 (approximately £70,000 per year).

Earmarked Reserves

• It is likely that a net £60,000 will be utilised from the various smaller earmarked project reserves in 2026/27. These are netted off by small additional contributions to the Planning / Risk Reserve (increasing its balance to £200,000) and Housing Reserve (increasing its balance to £150,000).
• Developers Contributions – The Authority still holds a significant balance of Developer Contributions (c£2.1m) which are ringfenced for specific uses, the majority being those for affordable housing and ecological mitigation. The balances will be utilised as and when required during the year, for example regarding further affordable housing developments (c£500,000 likely in 2026/27 for the Burley affordable homes scheme).

5. Risks and Uncertainties

5.1 In setting the budget a number of potential risks / uncertainties are identified, the list for 2026/27 includes:

• National Park Grant – Defra has not yet officially confirmed its cash grant for 2026/27 (estimated here at £3.0m); there also remains an additional risk of possible prior-year or in-year change. The Authority will need to continue to clearly and concisely make its case for increased Defra funding – had our 2010 grant settlement increased in line with CPI inflation it would currently be c£6.9m per annum, equating to a loss of over 55% in real terms.
• Planning Fee Income and Applications – Although the core fee target has been aligned to recent activity and the national fee uplift during 2025/26, economic conditions are such that risks over certainty of this income remain. Secondly, an increase in overall application numbers, or one or two major applications, could require additional resources within the planning team.
• Inflation – Allowance has been made for inflation, currently still at a significant level, within the core budgets where we are aware it unavoidably applies e.g. statutory or contractually (business rates, service charges etc). The other discretionary budgets (largely within the Programme Fund) were agreed from scratch following officer requests.
• Salaries - The budget includes provision for a 3.5% per employee pay award for 2026/27, to reflect the current cost of living / inflation impacts within the wider economy (with 3% estimated for 2027/28 and 2% 2028/29). Every additional 1% award would cost the Authority approximately £22,000. It has also been adjusted to allow for a proportion of normal vacancy savings (-2% of the total salary budget).
• Legal Costs - £5,000 has been budgeted for planning appeals; however, the actual figure could be significantly higher or lower dependent on circumstances (many of which are beyond our control). Further provision is made with the Planning / Risk Reserve.
• Listed Building Urgent Works – No budgetary provision has been made for urgent works to listed buildings and therefore any required works would have to be initially funded from reserves in anticipation of then being claimed back from the owner.
• Externally-Funded Projects – This budget paper sets out how the Authority will spend its own direct funding during 2026/27. In addition, there are likely to be a number of externally-funded schemes throughout the year which are project managed by the Authority (e.g. NFLAS, HLS, Pedall, YouCAN, Farming in Protected Landscapes etc). These projects will be identified and monitored, as previously, within the Authority’s normal monitoring and reporting structure.
• Opportunities / Investments / New Costs – As budgets are becoming tighter year-on-year there will be less likelihood of any unforeseen opportunities or costs being funded from savings elsewhere within the annual budget. For the year ahead, these could include items around the Climate & Nature Emergency, the government responses to Glover, the Comprehensive Spending Review, Devolution / Local Government Reorganisation, those brought out through the Recreation Management Strategy work, Green Halo or ways we can leverage in further funding to increase awareness of the National Park ‘brand’ and the visitor experience. Therefore, a higher probability of supplementary budget requests now exists, and these would have to be funded either from identified savings, in future year’s budgets or more immediately from general/investment reserves.

All these factors will be explicitly monitored and reported upon in the budgetary control reports for 2026/27.

6. Spending plans

6.1 The approach to delivering a “balanced” budget will enable the Authority to develop its annual Work Programme 2026/27 positively and builds further on the noteworthy savings and efficiencies made over the past few years whilst continuing to deliver for the Forest.

6.2 The budget for 2026/27 has been primarily based on the Partnership (Management) Plan requirements and the Authority’s own Business Plan for the coming three financial years.

6.3 Performance monitoring will continue be undertaken throughout the year to keep Members apprised of progress against plans. The effect of strong budgeting and increased financial monitoring procedures over recent years has shown in reduced variances; for example, in recent years the Authority’s outturn has been well within 2% of the original budget and 1% of any revised budget. The 2025/26 financial year is currently on track to produce a balanced budget or small amount of surplus income.

7 Robustness of the Budget and Risk Assessment

7.1 Section 25 of the Local Government Act 2003 imposes a duty on the Chief Finance Officer to report to the budget setting Authority on the following issues:

7.2 Robustness of the estimates:

7.2.1 The preparation of the budget for 2026/27 has been considered over several months, by officers and members, in view of two significant factors: an unknown core government grant settlement and ensuring that the resources are used to deliver the ongoing priorities from the Partnership Plan and our Business Plan.

7.2.2 Key elements of the budget which have been considered here are the previous cut to the core revenue funding in 2025/26, provisions that are made for inflation on pay and prices, the consideration of potential bad-debt and the stability of the various income streams. The major consideration and frustration here has undoubtedly been the Defra grant determination; including the extremely late notification of our settlement, the capital availability and the again single-year nature of the financial settlements.

7.2.3 In the light of all known factors, historic evidence/performance and the level of balances held by the Authority, it is not considered that there is a need to hold a further specific contingency within the budget itself.

7.2.4 The planning for, and determination to achieve, the challenging targets within the budget mean that the budget for 2026/27 can be considered fully robust.

7.3 Adequacy of proposed General Fund Reserve

7.3.1 The Chief Finance Officer is required to make a recommendation as to the adequacy of the level of reserves held by the Authority.

7.3.2 The General Fund Reserve is used to cover unforeseen items of expenditure that cannot be funded within the base budget in any particular year and as a general contingency against unforeseen events in future years. In recent times, the Authority increased the minimum General Fund Reserve level to £350,000 and this is still considered adequate at this time. This will of course be kept under review and particularly in regard to any further information in terms of a new Comprehensive Spending Review settlement.

7.3.3 Further reserves have been set aside for Planning Appeal / Misc Risks (£200,000), Financial Stability (£212,000) and for investment in Capital / Major Projects (c£450,000).

7.3.4 In the light of these factors, the level of financial reserves is considered fully adequate.

8. Medium Term Financial Plan and Forward Projection

8.1 The Authority’s Medium Term Financial Plan, attached as Annex 4, supports the Partnership (Management) Plan, and our Business Plan actions, by ensuring resources are made available to support priorities over the period of those plans. Due to the late nature of the 2026/27 grant settlement announcement, the medium-term position is still unbalanced. However, the Authority has still managed to meet its core fiscal target to balance the next two financial years - 2026/27 and 2027/28.

8.2 Members should note from the projected figures that a further £45,000 (equating to c1% of total income/expenditure) needs to be found for the 2028/29 budgets to balance with adequate provision for the Programme Fund. The corresponding figures after this are £143,000 and £220,000 respectively. These would all increase significantly if future National Park Grant revenue settlements are further reduced. The primary source of closing any funding shortfall will be additional income generation, either internally through the purchase/creation of income-generating assets, through the Fundraising Group or externally through the work of National Parks Partnerships Ltd. Should this level of funding not be available, then the Authority would have to look to cut costs at that time. This position will be kept under close review by officers and members over the next six months.

8.3 The high-level Forward Projection highlights the sustainable ‘standstill’ position of approximately £4m total income required to cover £3m of staffing costs, £0.8m core costs and a £0.20m Programme Fund (all figures given in 2026 equivalents).

Annex 1

DRAFT PROGRAMME FUND 2026/27

1. Includes media monitoring/licences, NPA media library, website, photography, film, social media promotion and external graphic design work.
2. Includes our Annual Review, Park Life x 2 and various leaflets/flyers.
3. Following discussions with the Marque, our support is now split between a cash grant and a part-time Marque ‘Events / Social Media’ post hosted by the Authority.

Annex 2

POSITION OF EARMARKED RESERVES

Annex 3

TREASURY MANAGEMENT STRATEGY TO 2028/29

1 Introduction

1.1 CIPFA’s Treasury Management Code of Practice and the Prudential Code for Capital Finance in Local Authorities requires the Authority to produce a Treasury Management Strategy which explains the Authority’s borrowing and investment activities and the effective management of associated risks. There are three key legislative requirements that apply to this Authority:

• Treasury Management Strategy Statement (see appendix 1a)
• Investment Strategy (see appendix 1a)
• Prudential Indicators (see appendix 1b).

1.2 The Treasury Management Policy requires an annual strategy to be approved outlining the expected treasury activity for the forthcoming three years prior to each financial year. A report is produced after each year-end to report on actual activity for the year. A further interim monitoring report is produced during the year and taken to Resources, Audit and Performance Committee during Autumn.

1.3 A key requirement of this strategy report is to explain both the risks, and the management of the risks, associated with the treasury service.

1.4 There are specific treasury prudential indicators included in this strategy that need approval.

2. Treasury Management Practice – credit and counterparty risk

2.1 MHCLG and CIPFA have each issued recent guidance on treasury investments which has been followed.

2.2 The key intention of the guidance, codes of practice and the Prudential Code is to maintain the current requirement for authorities to invest prudently and that priority is given to security and liquidity before yield. This is particularly true for organisations of our small size, who are actively encouraged to reduce risk to a minimum within their investment portfolios.

2.3 The Authority has adopted this code of practice and will apply its principles to all investment activity.

3. Investment Policy

3.1 The investment policy summarises the main aims and objectives of the investment function within the treasury management service as follows:

• The first priority governing the Authority’s investment criteria is security
• The second priority is liquidity
• The third priority is yield.

3.2 To adopt these main principles, the Authority will ensure that:

• It maintains a policy covering both the categories of investment types it will invest in, criteria for choosing investment counterparties with adequate security and monitoring their security. This is set out in the Specified and Non-Specified investment sections at Appendix 1a, paragraphs 4.6 to 4.13.
• It has sufficient liquidity in its investments. For this purpose, it will set out the maximum periods for which funds may prudently be invested. See Appendix 1a, paragraphs 4.10 to 4.11.
• It will seek to ‘ladder’ its investments i.e. have investments with staggered lengths and maturity dates.

3.3 Strategy consideration for 2026/27

3.3.1 Members will be aware that for the last decade, the Authority has had a Treasury Strategy which favoured a ‘low risk / low reward’ approach, this being deemed most appropriate given the small size of the treasury function, that the costs of attracting larger amounts of interest was prohibitive and the requirement for funds to be available to cash-flow projects which claim in arrears.

3.3.2 In January 2018 the rules surrounding the types of investments made by smaller authorities were tightened further by the government, reclassifying authorities like ours as ‘retail investors’ as opposed to ‘professional investors’.

3.3.3 The overall treasury position has again been reviewed by the Chief Finance Officer and the Finance & Facilities Task & Finish Group, including discussions with other National Parks, a treasury consultant and other nearby local authorities, and it is recommended that the low risk / low reward (and low cost) approach again be taken for 2026/27. Over the last few years there have been strong interest rates available for our size of investments (£0.5-2.5m, with between 4-5% returns), however the administrative costs of attracting any higher rate(s) are still considered prohibitive (an exercise was completed to benchmark our returns against those of other authorities who invest wider / at a higher level than us).

3.3.4 The portfolio value is estimated to be between £2.0m and £4.5m for the year ahead. This will largely be held in four main low-risk accounts:

• Lloyds Current Account (max £2.5m)
• Lloyds Savings Account (max £2m)
• Nationwide Savings Account (max £2m)
• Aberdeen Standard Money Market Fund (max £0.5m)
• UK Govt Debt Management Account Deposit Facility (max £2.5m).

Annex 3 – Appendix 1a

Treasury Management Strategy

1 Introduction

This strategy covers:

• Investment projections
• The expected movement in interest rates
• The investment strategy (in compliance with the guidance)

2 Investment Projections

2.1 The Authority’s treasury position is highlighted in the following table. This shows estimated levels of temporary investments.

3. The Expected Movement in Interest Rates

3.1 Forecast medium term interest rates are as follows:

Medium-Term Rate Forecasts – Annual Averages %

4. Investment Strategy to 2028/29

4.1 Key Objectives

The key intention of the investment guidance is to maintain the current requirement to invest prudently, and that priority is given to security and liquidity before yield.

4.2 Risk Benchmarking

A requirement of the Code is the consideration and approval of security and liquidity benchmarks.

Yield benchmarks are factual and used widely to assess investment performance. Security and liquidity benchmarks are subjective in nature. See Appendix 1c.

4.2.1 Yield

Local measures of yield benchmarks are:

• Investments:
  1. SONIA (Sterling Overnight Index Average), or
  2. returns above the 7-day LIBID rate*
     *calculated as LIBOR less 0.125

4.2.2 Liquidity

In respect of this area the Authority seeks to maintain:

• Bank overdraft - £100,000.

4.3 Investment Counterparty Selection Criteria (Security)

The primary principle governing the Authority’s investment criteria is the security of its investments, although liquidity and yield or return on the investment are also key considerations. After this main principle the Authority will ensure that:

• It maintains a policy covering the categories of investment types it will invest in, criteria for choosing investment counterparties with adequate security, and the monitoring of their security. This is set out in the Specified and Non-Specified investment sections below.
• It has sufficient liquidity in its investments. For this purpose, it will set out procedures for determining the maximum periods for which funds may prudently be committed.

4.4 Credit Ratings

The Authority uses online reports from credit rating agencies to determine which counterparties to use.

Information considered includes:

• Information in the financial press
• Share prices
• Credit watches and credit outlooks from credit rating agencies
• Credit Default Swap spreads to give early warning of likely changes in credit ratings
• Sovereign ratings to select counterparties from only the most creditworthy countries.

When an investment is proposed, credit rating information is researched for all potential counterparties that comply with the criteria below. All ratings information is considered before making an investment.

4.5 The Authority will invest in accordance with paragraphs 4.6 to 4.13 below. This strategy may be reviewed at any time.

Specified Investments

4.6 These investments are made in sterling and have durations of one year or less.

4.7 These are low risk investments where the possibility of loss of principal or investment income is minimal. Specified investments include:

• UK Government - (to include the Debt Management Office)
• Local Authorities - (to include County, Unitary, District, Parish, Police, Fire and Rescue etc.)
• Banks and Building Societies – The Authority will only use UK based Banks and Building Societies and these will generally be:
  • Lloyds TSB Bank
  • Barclays Bank
  • National Westminster Bank
  • HSBC
  • Nationwide Building Society
  • Royal Bank of Scotland Group

  They should have the short-term credit ratings in the table below (any exceptions to be agreed directly by the Chief Finance Officer):

  Credit Rating Agency	Short – Term Credit Rating
  Fitch	F-1
  Moody’s	P-1
  Standard & Poors	A-1

• Money Market Funds (MMF) – which will be AAA rated by a credit rating agency. AAA rating means that the chances of default are considered minimal, however the holding limit for this type of account is lower (see 4.11).

  The MMF is a pool of cash managed by an independent fund management company. Investors purchase units of the fund which are held on their behalf in a custody account. The Authority has instant access to all cash held in the MMF.

Non-Specified Investments

4.8 Non – Specified investments are any other type of permissible investment not defined as specified above and include:

• UK Government Gilts with a maturity of greater than one year.
• Local Authorities, etc. with a maturity of greater than one year.
• Banks and Building Societies. The Authority will only use UK based Banks and Building Societies and these will generally be:
  • Lloyds Bank
  • Barclays Bank
  • National Westminster Bank
  • HSBC
  • Nationwide Building Society
  • Royal Bank of Scotland

  with a maturity of more than one year which will have, as a minimum (any exceptions to be agreed directly by the Chief Finance Officer), the following Fitch credit ratings, and equivalent Moody’s and Standard and Poors credit ratings:

  Long-Term Credit Rating	Short-Term Credit Rating	Support	Maximum Period of Investment
  A (+/-)	F-1	3	Up to 2 years

4.9 The longer-term investments will also need to fit in with the principles of the treasury prudential indicator for total sums invested for periods longer than 364 days as shown at 4.21 below.

4.10 Authority’s own bank (currently Lloyds):

4.10.1 The maximum limit available to be held by the Authority at its own bank is £4.5m, of which a maximum of £2m can be invested without instant access.

4.10.2 If the Authority’s own bank falls below the above criteria the bank will still be used for normal banking transactions. If this happens balances held on account will be kept to a minimum working amount.

4.11 The Authority will endeavour to maximise the spread of investments so that ideally no more than 40% of the current total sum invested is deposited with any one organisation at the time of investment. However, the maximum investment may be £1.5m with any eligible counterparty or maximum ‘holdings’ (i.e. instant access funds) which will be set at £2.0m per counterparty and £2.5m for UK Govt DMO; Money Market Funds will be specifically limited to £0.5m.

4.12 The use of longer-term investments will be within the non-specified investment category. These investments will only be used according to the parameters shown at 4.21 below and will be limited by the core funds available depending on the Authority’s need for liquidity.

4.13 Use of additional information other than credit ratings
The Code of Practice requires the Authority to supplement credit rating information. Market information (for example Credit Default Swaps, equity prices, and negative rating watches/outlooks) will be applied to compare the relative security of investment counterparties.

Exposure to Investment Risk

The Monitoring of Investment Counterparties

4.14 The credit rating of counterparties will be monitored regularly, as a policy at least monthly. Any counterparty failing to meet the criteria will be removed from the list and, if required, new counterparties which meet the criteria will be added to the list. Due care will be taken to consider the country, group and sector exposure of the Authority’s investments.

Treasury Management Prudential Indicators and Limits on Activity.

4.15 The purpose of treasury prudential indicators is to contain the activity of the treasury function within certain limits, thereby managing risk and reducing the impact of an adverse movement in interest rates.

4.16 No indicators for borrowing have been set as no borrowing is currently planned to be undertaken unless it is temporary borrowing for cash flow purposes.

4.17 The limits for investment are:

• Maximum principal funds invested – These limits are set to help identify the total sums available for investment over the year.
• Total principal funds invested for more than 364 days – These limits are based on the availability of investments after each year-end. This is the amount of funds that are not needed for revenue or capital purposes over the short term and could be invested for longer periods if advantageous to and approved by the Authority.
• Fixed and variable interest rate investments – Limits are included for fixed and variable interest rate investments to contain the volatility of the investments.
• Maturity structure of investments – These limits are set to indicate the maturity structure of investments and to ensure that authorities invest in a cautious manner.

4.18 These limits are shown in the following table: -

Sensitivity to Interest Rate Movements

4.19 The Authority is required to disclose the impact of risks on the treasury management activity. Whilst most of the risks facing the treasury management service are addressed elsewhere in this report the impact of interest rate risk is not quantified.

The table below highlights the estimated impact of a 0.5% increase/decrease in all interest rates to treasury management costs/income for next year:

Use of Money Brokers

4.20 The Authority can use money brokers to place investments with counterparties. The broker has access to the money markets and will be able to determine the best rate of investment for the Authority given the counterparties that the Authority can invest with, and type of investment required.

4.21 Several highly rated organisations now conduct their own treasury transactions and no longer use money brokers. The Authority may place investments by dealing directly with these counterparties.

Annex 3 – Appendix 1b

Prudential Indicators 2026/27 to 2028/29

1 Introduction

1.1 Under the Prudential Code the Authority must adopt and monitor a range of indicators.

These indicators are to cover a three-year period from the current financial year.

The New Forest National Park Authority is not expected to borrow to finance capital expenditure. Therefore, all indicators below apply only to temporary borrowing for cash flow purposes and temporary investments.

2 Capital Expenditure

Capital Expenditure

2.1 The following table shows the current forecast for capital expenditure for current and future years.

Notes:

• The rise in 2026/27 represents the potential development of affordable homes in Burley.
• The figures in the table include a £1.4m capital grant from defra which may be made available for 2026/27 (and/or future years).

The Authority’s Resources and the Investment Position

2.2 The use of reserves to finance capital expenditure will have an impact on investments unless resources are supplemented each year from other sources such as asset sales. The following table shows estimates of year end balances for each resource.

3 Limits to Borrowing Activity

Although the Authority is not expected to borrow / have debt during the year, since 1 April 2024 any operating leases are required to be officially classed as debt/borrowing. There are no changes required to the Minimum Revenue Provision Policy originally adopted by the Authority in January 2026.

Current estimates of MRP are:

Should the Authority’s lease at Lymington Town Hall be extended beyond November 2026, potentially to March 2030, these figures would be increased in the range of:

The Authorised Limit

3.1 This is the limit beyond which borrowing is prohibited and needs to be set by the Authority for each financial year even though it is not anticipated that the Authority will need to borrow other than short term loans for cash flow purposes. It reflects the level of borrowing that, while not desired or sustainable, could be required in the short-term.

The Operational Boundary

3.2 This indicator is based on the probable external debt during the course of the year. It is not a limit, and the borrowing of the Authority could vary around this boundary for short times during the year. It is a warning indicator to help ensure that the Authorised Limit is not breached.

4. Affordability Indicators

4.1 All of the affordability indicators recommended by the Prudential Code are to assess the affordability of the Authority’s capital programme.

Financing Costs

4.2 This section shows the cost of financing the Authority’s capital programme. The following table shows the estimated financing costs for the period from 2025/26 to 2028/29.

Annex 3 – Appendix 1c

SECURITY, LIQUIDITY AND YIELD BENCHMARKING

1. Benchmarking and Monitoring Security, Liquidity and Yield in the Investment Service

These benchmarks are targets and so may be breached from time to time. Any breach will be reported with supporting reasons in the Annual Treasury Report.

1.1 Yield
These benchmarks are currently widely used to assess investment performance. Local measures of yield benchmarks are shown at paragraph 4.2.1 in the Treasury Management Strategy at Appendix 1a:

Security and liquidity benchmarks are already intrinsic to the approved treasury strategy through the counterparty selection criteria and some of the prudential indicators. Proposed benchmarks for the cash type investments are shown in the main body of Appendix 1a, and these will form the basis of future reporting in this area.

1.2 Liquidity
This is defined as “having adequate, though not excessive cash resources, borrowing arrangements, overdrafts or standby facilities to enable it at all times to have the level of funds available to it which are necessary for the achievement of its business objectives” (CIPFA Treasury Management Code of Practice).

1.3 Security of the investments
Security is currently evidenced by the application of minimum credit quality criteria to investment counterparties, primarily through the use of credit ratings supplied by the three main credit rating agencies (Fitch, Moody’s and Standard and Poors).

These benchmarks are embodied in the criteria for selecting cash investment counterparties and these will be monitored and reported in the Investment Annual Report.

Annex 3 – Appendix 1d

PORTFOLIO OF HOLDINGS AND INVESTMENTS AT 6 MARCH 2026

Annex 4

Medium Term Financial Plan and Forward Projection (Revenue)