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Agenda Item No

 

The Vale of Glamorgan Council

 

Cabinet Meeting 16th November 2011

 

Report of the Leader

Initial Housing Revenue Account Budget Proposals 2012/2013 and Revised Budget 2011/2012

 

 

Purpose of the Report

1.             To gain Cabinets approval for the revised estimates 2011/2012 and the initial budget proposals for 2012/2013, so that they may be submitted to Scrutiny Committee for consultation.

Recommendations

It is recommended that:-

 

1.             The revised budget estimate for 2011/2012 is approved.

2.             The initial budget proposals for 2012/2013 are approved for consultation with Scrutiny Committee.

3.             The increase for rent and other services are subject to a future report as soon as the information is available from the Welsh Government (WG).

Reasons for the Recommendations

1.             To facilitate monitoring of the revised budget

2.             In order that Cabinet be informed of the comments of Scrutiny Committee before making a final proposal on the budget.

3.             In order to meet the statutory deadline to notify tenants of the new charges as required by Statute.

Background

2.             Each local housing authority is required under Section 74, of the 1989 Local Government and Housing Act to keep a Housing Revenue Account. Section 76 of the Act requires Local Authorities to set a budget for their Housing Revenue Account (HRA) on an annual basis. The budget must be such that the Housing Revenue Account is not in deficit at year end.

3.             During the course of the year, Local Authorities must review their HRA expenditure and income and if, on the basis of the information available the account is heading for a deficit, they must take steps as are reasonably practical to prevent this deficit. A Local Authority is not prohibited from being in deficit but will need to demonstrate that the deficit has arisen through exceptional circumstances and that it has revised its original proposals so far as reasonably practical to avoid the deficit. Such a deficit shall be carried forward and must be made good the following year.

4.             Each Local Authority should endeavour to have a working balance on the HRA, for any exceptional circumstances that may arise.

5.             The level of rent increase is based on the Subsidy Determination issued by the WG. This is not due for release until January 2012, although a provisional figure is due during December 2011. An average rent increase of 3%, based on the latest Business Plan, has been included in the 2012/2013 initial budget proposals.

 

Revised Estimates

6.             Set out below is a table comparing the original budget with the proposed revised estimate.

 

2011/2012 Original Budget

2011/2012 Proposed Revised Estimate

Variance Favourable (-) Adverse (+)

 

£'000

£'000

£'000

Housing Revenue Account

(2,176)

(2,204)

(28)

 

7.             The net increased surplus of (£28,000) in this budget is due to several reasons. The housing repairs budget has reduced by (£500,000); central support recharges has reduced by (£126,000); capital costs has reduced by (£73,000) as a result of increased receipts; the Hostel refurbishment and staff restructure is expected to save (£100,000); and other small budget savings amount to (£5,000).These savings have been offset by an increase in capital expenditure from revenue account (CERA) of £751,000 to finance the planned capital improvement programme. As a result there has also been a decrease in anticipated interest earned on HRA balances of £25,000.

 

Base Budget 2011/2012

8.             The Budget Strategy for 2012/13 outlined that, in order to establish a baseline, services should prepare revenue budgets for next year based on the cost of providing the current level of service and approved policy decisions. This means that the cost of price increases and pay awards should be included.

9.             Due to the nature of the HRA in that it is ring fenced and any growth has to be funded from the balance no Cost Pressures have been formally identified. The budget is presented in the traditional objective analysis format.

10.        The proposed 2012/13 budget is set out at Appendix A.

·               HRA (General) - This budget head relates to net income from rents and services charges as well as general expenditure such as insurance, audit & legal fees.

·               Housing Repairs - This budget relates to the repairs and maintenance service undertaken on the Council Housing Stock. 

·               HRA Subsidy Payable - This budget relates to the estimated proportion of rent payable to the WG.

·               General Management - This budget head relates to the general management of the Council's housing stock, for work carried out within the Housing service, and for various issues relating to the Council tenancies excluding the repairs and maintenance function.

·               Special Services - This budget relates to the running expenses and the cost of staff employed directly within the Housing service, in relation to functions such as sheltered housing schemes, running the hostel and temporary accommodation.

·               Central Support & Operational Building Charges - This budget relates to the services provided by other Departments within the Council, and the cost of office accommodation occupied by the Housing Services staff.

·               Capital Expenditure from Revenue Account (CERA) - This budget relates to a contribution from the Housing Revenue Account to fund capital expenditure.

·               Capital Financing - Cost associated with financing debt.

 

Proposed Increases in Charges

11.        The charges for rent and other services provided by the Housing Service are reviewed annually.  These will be subject to a future report once the information has been received from WG. Set out below is a table summarising the original budget for 2011/12 with the proposed budget for 2012/13.

2011/2012

Original

Budget

Inflation /

 Pay Award

Committed

Growth /

Savings

Estimated Rent

Increase

2012/2013

Proposed

Budget

£000

£000

£000

£000

£000

(2,177)

32

5,252

(442)

2,665

 

12.        A provision has been made for general inflation including an allowance of 1% for pay awards in 2012/13. A 1% increase in pay amounts to approximately £12K.

13.        The committed growth of £5,252,000 is due to a number of factors;

·               An increase in Capital Expenditure from Revenue Account (CERA) to finance the housing improvement programme £5,132,000

·               An increase in increments and staff changes to support the delivery of the housing improvement programme £219,000

·               An increase in the provision of HRA Subsidy payable to WG based on the latest guidance issued £121,000

·               An increase in Central Support recharges as a result of increased resources required to deliver the housing improvement programme £194,000

·               An increase in the bad debt provision as per latest business plan assumptions £60,000

·               An increase in the provision of software upgrades and licence fees to drive forward and monitor the asset database and housing improvement programme £50,000

·               A reduction in county court recharge income £26,000

·               An increase in the incentive to move scheme £24,000 

These have been offset by:-

·               A reduction in Housing Repairs £440,000

·               A reduction in Capital Costs £70,000

·               A reduction in insurance costs £39,000

·               An increase in water commission income £22,000

·               Other budget adjustments and savings totalling £3,000

 

Next Steps

14.        The next stage is for the estimates to be submitted to Scrutiny Committee for consultation.  Corporate Resources Scrutiny Committee is the lead Scrutiny Committee and will consider both the Initial Housing Revenue Account Revenue Budget Proposals and any comments that the Scrutiny Committee (Housing and Public Protection) has made. Responses from the relevant scrutiny Committee(s) will need to be made by 20th December 2011.

15.        The Cabinet Working Group will hold a series of meetings in November 2011 with the relevant Cabinet Members and officers to consider the budget proposals.  They will submit their recommendations so that the Cabinet may make its final budget proposal no later than the 29th February 2012. Before making its recommendation, the Budget Working Group will consider the comments made by Scrutiny.

16.        Cabinet's final budget proposals will be considered by Council at a meeting to be held by the 7th March 2012.

Resource Implications (Financial and Employment)

17.        The Housing Revenue Account working balance at 1st April 2012 is £14,330,000. However it should be noted that we will not be informed of a provisional recommended rent increase until December 2011.

Legal Implications (to Include Human Rights Implications)

18.        The Council under the 1989 local Government and Housing Act have a legal obligation to set a budget for the Housing Revenue Account.  Notices of any increases have to be sent to tenants 28 days in advance of the new changes coming into effect.

Crime and Disorder Implications

19.        Many HRA activities have a positive impact on the reduction of crime and the fear of crime.

Equal Opportunities Implications (to include Welsh Language issues)

20.        Housing Services are carried out in accordance with the Councils Equal Opportunities policies and practices.

Corporate/Service Objectives

21.        Housing Services support the following Corporate/Service objectives:-

·               Social Well Being and Tackling Disadvantage

Ensuring that all Vale residents have access to good quality, affordable and appropriate accommodation that is sufficient for their needs.

·               Environmental Improvement

Maintaining and improving the quality of the public housing stock

·               Community Leadership

Encouraging tenants and residents to participate in the management of housing stock.

 

Policy Framework and Budget

22.        This report is following the procedure laid down in the Constitution for the making of the budget and so does not need to be referred to Council. However the final 2012/2013 budget will require the approval of Council.

Consultation (including Ward Member Consultation)

23.        The Corporate Management Team has been consulted on this report. The initial budget proposals do not require Ward Member consultation.

Relevant Scrutiny Committee

24.        Housing and Public Protection is the relevant Scrutiny

Background Papers

Finance Department papers

Housing Business Plan - November 2011

Housing Revenue Account Subsidy and Item 8 Determination - latest guidance.

Contact Officer

Rhodri Morgan - Accountant

Officers Consulted

Sian Davies - Director of Finance, ICT and Property

Tony Jaques - Head of Housing Services

Responsible Officer:

Sian Davies - Director of Finance, ICT and Property

Peter Evans - Director of Legal, Public Protection and Housing Services

 

 

 

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