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Agenda Item No

 

The Vale of Glamorgan Council

 

Cabinet Meeting 18th November 2013

 

Report of the Leader

Initial Housing Revenue Account Budget Proposals 2014/2015 and Revised Budget 2013/2014

 

Purpose of the Report

1.         To gain Cabinet's approval for the revised estimates 2013/14 and the initial budget proposals for 2014/2015, so that they may be submitted to Scrutiny Committee for consultation.

Recommendations

It is recommended that:-

 

1.         The revised budget estimate for 2013/2014 is approved.

2.         The initial budget proposals for 2014/2015 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 2014. An average rent increase of 3%, based on the latest Business Plan, has been included in the 2014/2015 initial budget proposals.

 

Revised Estimates

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

 

2013/2014 Original Budget

2013/2014 Proposed Revised Estimate

Variance Favourable (-) Adverse (+)

 

£'000

£'000

£'000

Housing Revenue Account

8,452

8,129

    (323)

 

7.         The net anticipated deficit has decreased by (£323,000) due to an increase in net income of (£324,000), because of an extra rent week in 2013/2014; recharges have decreased by (£56,000); there is a saving of (£109,000) on staff costs due to vacancies; (£32,000) reduction in council tax expenditure on empty properties. In addition there's a (£25,000) saving on insurance costs.  Further savings on the budget are; the HRA Subsidy payment is expected to be (£159,000) lower than current estimates; the anticipated growth in the bad debt provision has reduced by (£85,000), based on the current bad debt level.  In addition there are further savings totalling (£4,000) on various other items in the Housing Revenue Account. These savings have been offset by budget increases of £30,000 on the repairs budget because of changes to the Gas Servicing contract costs, the Capital Expenditure from Revenue Account (CERA) has increased by £279,000, due to demands on the Housing Improvement Programme (£186,000 slippage, £600,000 expenditure on Voids, £150,000 Sheltered scheme acceleration, offset by additional useable capital receipts utilised (£657,000)) .  There has also been an increase in the loss of rental income through increased void days due to WHQS £162,000. 

 

Base Budget 2014/2015

8.         The Budget Strategy for 2014/2015 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.

10.      The proposed 2014/2015 budget is set out at Appendix A in the traditional objective analysis format.

·           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 (Housing Improvement Programme).

·           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.

11.      The 2013/2014 Summary Cost Centre Analysis is included at Appendix B, which breaks the budget down over types of expenditure.

 

Proposed Increases in Charges

12.      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 2013/2014 with the proposed budget for 2014/2015.

 

2013/2014

Original

Budget

Inflation /

 Pay Award

Committed

Growth /

(Savings)

Estimated Rent

Increase

2014/2015

Proposed

Budget

£000

£000

£000

£000

£000

8,452

38

(4,591)

(476)

3,423

 

13.      A provision for general inflation includes an allowance of 1% pay awards in 2014/2015.  1% increase in pay amounts to approximately £13,000.

14.      As mentioned above, the rent increase is estimated at 3% based on the latest Housing Business Plan, for 2014/2015 this equates to (£476,000).  The actual rent increase is not due for release until January 2014.

15.      The net saving of (£4,591,000) is due to a number of factors;

·           A decrease in Capital Expenditure from Revenue Account (CERA) to finance the Housing Improvement Programme of (£4,995,000). The amount of revenue contribution required is dictated by available revenue balances and the value of the Housing Improvement Programme.

·           A (£120,000) decrease in Central Support recharges.

·           A decrease in the expected growth in the bad debt provision of (£135,000).  The original anticipated loss of rent due to the welfare reform accommodations cap is thought to be less than originally budgeted for.

·           A decrease in insurance charges of (£24,000).

·           The above savings have been offset by an increase in staff expenditure. A restructure is being drafted for 2014/2015, which could cost an additional £200,000, but is intended to strengthen the service in terms of dealing with anti-social behaviour, statutory compliance (e.g. fire risk assessment work, gas and electrical safety) asset management and welfare reform  and make it fit for forthcoming challenges.

·           An increase in the provision of HRA Subsidy payable to WG based on the current guidance issued of £195,000

·           An increase in Capital Financing charges of £193,000 in relation to unsupported borrowing being taken out for the first time in 2014/2015 to fund the Housing Improvement Programme.

·           A decrease in interest earned on Revenue Balances £80,000.

·           Further budget increases of £15,000.

 

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 Revenue Budget Proposals and any comments that other Scrutiny Committees have made. The responses of Scrutiny Committee must be made no later than the 13th December 2013.

17.      The Cabinet Budget Working Group will hold a series of meetings in November 2013 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 24th February 2014. 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 on 5th March 2014.

 

Resource Implications (Financial and Employment)

19.      The Housing Revenue Account working balance at 1st April 2014 will be £5,441,000. However it should be noted that we will not be informed of a provisional recommended rent increase until January 2014

Sustainability and Climate Change Implications

20.      Improving homes to the Welsh Housing Quality Standard provides tenants with modern, energy efficient homes

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 2014/2015 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

Finance Department papers

Housing Business Plan - December 2012

Housing Revenue Account Subsidy and Item 8 Determination - latest guidance

Contact Officer

Lori Bigglestone - Accountant

 

 

Officers Consulted

Sian Davies  - Managing Director

Hayley Selway - Head of Housing and Building Services

 

Responsible Officer:

Miles Punter - Director of Visible Services and Housing

Hayley Selway - Head of Housing and Building Services      

Mike Ingram - Operational Manager - Housing

 

 

 

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