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Agenda Item No.

 

THE VALE OF GLAMORGAN COUNCIL

 

CABINET: 12TH JANUARY 2015

 

REFERENCE FROM SCRUTINY COMMITTEE (CORPORATE RESOURCES): 9TH DECEMBER 2014

 

“ INITIAL HOUSING REVENUE ACCOUNT BUDGET PROPOSALS 2015-2016 AND REVISED BUDGET 2014/2015 (DVSH) –

 

The report had been previously considered by the Scrutiny Committee (Housing and Public Protection) at its meeting held on 3rd December 2014.  Following consideration at that time, the Committee recommended:

 

“(1) T H A T the revised budget estimate for 2014/15 be noted.

 

(2) T H A T the initial Housing Revenue Account budget proposals for 2015/16 be noted.”

 

The Scrutiny Committee (Corporate Resources) was now considering this matter as the lead Scrutiny Committee overseeing the budget process.  As reported in previous years, year local housing authority was required under Section 74 of the 1989 Local Government and Housing Act to keep a Housing Revenue Account.  Section 76 of the above Act required local authorities to set a budget for their Housing Revenue Account (HRA) on an annual basis.  The budget must be such that the HRA was not in deficit at the year end.  In addition, local authorities were also required during the course of the year to review their HRA expenditure and income and if, on the basis of the information available, the account was heading for a deficit, they must take steps as were reasonably practicable to prevent such a deficit.  Any deficit would be carried forward and must be made good the following financial year.  Each local authority should endeavour to have a working balance on the HRA, for any exceptional circumstances that may arise.

 

The level of rent increase was based on determination by the Welsh Government (WG) however, this would not be known until December 2014.  An average rent increase of 3.5% had been provisionally included in the 2015/16 initial budget proposals.  Set out below was a summary table comparing the original budget with the proposed revised estimate

 

 

2014/15

Original Budget

 

£'000

 2014/15

Proposed Amended Budget

 

£'000

Variance

Favourable (-)

Adverse (+)

£'000

 Housing Revenue Account

 3,514

 3,514

 0



 

The net anticipated deficit would remain unchanged and a review of the current budget had found a potential saving for the current year of £680,000, the main reasons for this were £200,000 allocated to the restructure, which was not likely to be fully staffed until the next financial year and that the staff vacancies within the existing structure of £160,000.  In addition, the current Ty Iolo budget was higher than required and consistently underspent, particularly in terms of premises and supplies and service costs and accordingly this had been reduced by £135,000.  The level of interest repayments expected in the year on existing and any new borrowing was lower than originally budgeted by £86,000 and other running costs relating to estate management and sheltered properties of £99,000.  These savings had been offset by an increase in planned fire risk assessments within the Council’s blocks of flats of £300,000 and resurfacing of highways on Housing land £251,000.  There had also been an increase in Central Recharges of £129,000. 

 

In terms of the base budget for 2015/16 the Strategy outlined that, in order to establish a base line, services should prepare revenue budgets for next year based on the cost of providing the current level of service and approved policy decisions.  This meant that the cost of price increases and pay awards should be included. 

 

Due to the nature of the HRA, in that it was ringfenced and any growth had to be funded from the balance, no cost pressures had been formally identified.

 

A separate report on this matter was subject of a Chairman’s Urgent Item and would be considered later in the meeting.

 

The Housing (Wales) Act 2014 which had been passed in September 2014 would replace the existing housing subsidy system with self-financing.  Stock retaining Authorities in Wales would be able to buy themselves out of the current subsidy system.  A planned settlement was set for April 2015.  An initial report submitted to Cabinet on 16th June 2014 (Minute No. C2356) and a further report on the implications of the exit from the Housing Business Plan would be brought when normal notification of the Council’s share of the settlement figure was received. Therefore, for the purpose of the report, it had been assumed that the subsidy would remain in place and the initial budget proposals for 2015/16 reflected the latest approved Housing Business Plan.

 

The proposed 2015/16 budget was set out in Appendix A and included the following matters:

 

• HRA (General) - This budget head relates to net income from rents and service charges as well as general expenditure such as insurance, audit and 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 and 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.

 

The charges for rent and other services provided by the Housing Service were reviewed annually.  These would be subject to a future report when the information had been received from WG.  Detailed below was a summary of the original budget for 2014/15 with the proposed budget for 2015/16:

 

2014/15

Original

Budget

£000

Inflation /

Pay Award

 

£000

Committed

Growth /

(Savings)

£000

Estimated Rent

Increase

 

£000

2015/16

Proposed

Budget

£000

 3,514

 112

 (2,724)

 (583)

 319



 

 

A provision for general inflation included an allowance of 1% for pay awards in 2015/16.  A 1% increase in pay amounted to approximately £15,000.

 

 

The net saving of £2,724,000 was due to a number of factors viz:

 

• A decrease in Capital Expenditure from Revenue Account (CERA) to finance the Housing Improvement Programme of £3,846,000. The amount of revenue contribution required was dictated by available revenue balances and the value of the Housing Improvement Programme.

• A decrease in insurance charges of £4,000.

• A decrease in interest earned on Revenue Balances of £14,000.

• A decrease in costs at Ty Iolo Hostel of £113,000, due to the factors outlined above.

• Other savings of £21,000.

• These savings have been offset by:-

• An increase in the Housing Repairs budget to include voids repairs of £633,000.

• An increase in the provision of HRA Subsidy payable to WG based on the current Housing Business Plan of £197,000.

• An increase in Capital Financing charges of £332,000 in relation to unsupported borrowing being taken out in 2015/16 to fund the Housing Improvement Programme.

• Future planned highways repairs on Council Estates of £112,000.

 

The HRA working balance at 1st April 2015 would be £5.441m. 

 

In accordance with the Medium Term Financial Plan budget strategy, Scrutiny Committees were being consulted on the budget process with the Scrutiny Committee (Corporate Resources) being the lead Scrutiny Committee who would be required to respond to the Cabinet on the budget by no later than 16th December 2014.  The Cabinet’s final proposals on the budget would be considered by the Council on 4th March 2015. 

 

RECOMMENDED –

 

(1) T H A T the revised budget estimate for 2015/16 be noted.

 

(2) T H A T the Initial Housing Revenue Account budget proposals for 2014/15 be noted.

 

(3) T H A T the Initial Housing Revenue Account budget proposals for 2015/16 be noted.

 

Reasons for recommendations

 

(1) In acknowledgement of monitoring the budget for 2014/15.

 

(2&3) To inform Cabinet of the outcome of the scrutiny process on this matter.”