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Agenda Item No

 

The Vale of Glamorgan Council

 

Cabinet Meeting 19th November 2012

 

Report of the Leader

 

Initial Housing Revenue Account Budget Proposals 2013/14 and Revised Budget 2012/13

 

Purpose of the Report

1.         To gain Cabinets approval for the revised budget 2012/13 and the initial budget proposals for 2013/14, so that they may be submitted to Scrutiny Committee for consultation.

Recommendations

It is recommended that:-

 

1.         The revised budget for 2012/13 is approved.

2.         The initial budget proposals for 2013/14 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.         Historically the level of rent increase is based on the Subsidy Determination issued by WG. WG are currently reviewing whether the subsidy system will continue or if it will be replaced on 1st April 2013. If the subsidy system is to remain, the subsidy determination will not be released until January 2013. Therefore an average rent increase of 3%, based on the latest Business Plan, has been included in the 2013/14 initial budget proposals.

Revised Estimates

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

 

2012/2013 Original Budget

2012/2013 Proposed Revised Estimate

Variance Favourable (-) Adverse (+)

 

£'000

£'000

£'000

Housing Revenue Account

1,902

1,832

     (70)

 

7.         The net anticipated deficit has decreased by £70,000 due to Budget Reductions of £350,000 on revenue repairs and £379,000 on central recharges which have been offset by £50,000 on agency staff to deal specifically with the welfare reform, £20,000 on other staffing including impacts of Job Evaluation, an agency anti-social behaviour co-ordinator and interim staffing and management proposals.  There is a £44,000 increase in insurance; £10,000 increase on capital financing charges, a loss of rental income though increased Void Days due to WHQs £156,000, £20,000 for the Housing Relocation to the Alps Depot, £20,000 for revenue environmental improvements; a £350,000 increased revenue contribution to capital and other small movements netting off at £9,000.

Base Budget 2013/2014

8.         The Budget Strategy for 2013/14 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 its revenue balance, no Cost Pressures have been formally identified. The budget is presented in the traditional objective analysis format and is shown at Appendix A. The 2012/13 Cost Centre Analysis is included in Appendix B, which breaks the budget down over types of expenditure (subjective).

10.      As a landlord, the ability of tenants to pay their rent will affect the councils own rent collection function. The impact of the Central Government changes to the housing benefit system is likely to lead to an increase in the level of rent arrears and consequently the provision for bad and doubtful debts in the Housing Revenue Account has been increased by £166,000.

11.      The proposed 2013/14 budget is set out at Appendix A

12.      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.

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

·               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 Financing - Cost associated with financing debt.

 

Proposed Increases in Charges

13.      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 2012/13 with the proposed budget for 2013/14.

2012/2013

Original

Budget

Inflation /

 Pay Award

Committed

Growth /

Savings

Estimated Rent

Increase

2013/2014

Proposed

Budget

£000

£000

£000

£000

£000

1,902

113

297

(445)

1867

 

14.      The provision for general inflation includes an allowance for a 1% pay award in 2013/2014, which has been offset by the pay award budgeted but not utilised in 2012/13.  A 1% increase in pay amounts to approximately £14,000.

15.      The committed growth of £297,000 is due to a number of factors;

·               An increase in Capital Expenditure from Revenue Account (CERA) to finance the housing improvement programme in relation to void properties of £650,000 which is offset by a corresponding decrease on revenue repairs of £650,000

·               A net increase in increments and staff changes including interim management of £6,000.

·               A £100,000 agency budget set aside specifically to deal with the welfare reform and preventing tenants falling into arrears.

·               An increase in insurance of £46,000 to the projected expenditure recharge.

·               An increase in the provision of HRA Subsidy payable to WG based on the latest guidance issued of £153,000

·               A decrease in Central Support recharges of £349,000 including a decrease due to Housing Improvement surveyors who are now charged directly to capital for Welsh Housing Quality Standards.

·               An increase in the bad debt provision of £166,000 to account for the anticipated loss of rent due to the welfare reform accommodations cap and the affect on individual benefits.

·               A decrease in rent of £165,000 due to increased void days as a result of WHQs implementation.

·               Other budget adjustments and savings totalling £10,000

 

Next Steps

16.      The next stage is for the estimates to be submitted to Scrutiny Committees 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 Dec 2012.

17.      The Cabinet Budget Working Group will hold a series of meetings in November 2012 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 2013. Before making its recommendation, the Budget Working Group will consider the comments made by Scrutiny.

18.      Cabinet's final budget proposals will be considered by Council at a meeting to be held by the 11th March 2013.

Resource Implications (Financial and Employment)

19.      The Housing Revenue Account working balance at 1st April 2013 is £13,049,735.

 

Sustainability and Climate Change Implications

20.      The promotion of sustainability and action to arrest climate change is a key consideration when allocating scarce resources in the budget to meet the needs of the present without comprising the ability of future generations to meet their needs.

Legal Implications (to Include Human Rights Implications)

21.      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

22.      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)

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

Corporate/Service Objectives

24.      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

25.      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 2013/14 budget will require the approval of Council.

Consultation (including Ward Member Consultation)

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

Relevant Scrutiny Committee

27.      Housing and Public Protection is the relevant Scrutiny

Background Papers

Housing Business Plan - November 2011

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

Contact Officer

Nicola Monckton - Accountant

Officers Consulted

Sian Davies - Managing Director

Miles Punter - Director of Visible Services and Housing

Mike Ingram - Operational Manager Public Housing Services

Responsible Officers:

Miles Punter - Director of Visible Services and Housing

Mike Ingram - Operational Manager Public Housing Services

 

 

 

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