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The Vale of Glamorgan Council

Cabinet Meeting 16th November 2015

Report of the Leader

Initial Housing Revenue Account Budget Proposals 2016/17 and Amended Budget 2015/16

Purpose of the Report

  1. To gain Cabinets approval for the amended budget 2015/16 and the initial budget proposals for 2016/17, so that they may be submitted to Scrutiny Committee for consultation.

Recommendations

It is recommended that:-

  1. The amended Housing Revenue Account budget for 2015/16 as set out in Appendix 1 be approved.
  2. The initial Housing Revenue Account budget proposal for 2016/17 be approved for consultation with the relevant Scrutiny Committee.
  3. The recommendations of Scrutiny Committees are passed to Corporate Resources Scrutiny Committee as the lead Scrutiny Committee in order for their views to be forwarded to Cabinet.
  4. The increase for rent and other services are subject to a future report to Cabinet as soon as the information is available from the Welsh Government (WG).

Reasons for the Recommendations

  1. To facilitate monitoring of the amended Housing Revenue Account budget
  2. In order to gain the views of Scrutiny Committee regarding the 2016/17 Housing Revenue Account Budget proposals.
  3. In order that Cabinet be informed of the comments of Scrutiny Committee before making a final proposal on the budget.
  4. In order to meet the statutory deadline to notify tenants of the new charges as required by Statute.

Background

  1. 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.
  2. 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.
  3. Each local authority should endeavour to have a working balance on the HRA, for any exceptional circumstances that may arise.
  4. The level of rent increase is based on a rent policy introduced by the Welsh Government, however recent events in England regarding social rents, have brought this policy into question. It is anticipated that WG will amend the existing policy, however, at the time of writing this report, an announcement has not yet been made. Therefore, an average rent increase of 3.5%, has been included in the 2016/17 initial budget proposals, as per the Housing Business Plan - December 2014.

Amended Budget

  1. Set out below is a table comparing the original budget with the proposed amended budget.
 

2015/16

Original Budget

2015/16 Proposed Amended

Budget

Variance Favourable (-) Adverse (+)

 

£'000

£'000

£'000

Housing Revenue Account

(129)

1,265

     1,394

  1. The net budget has changed from a surplus of £129,000 to a deficit of £1,265,000. A review of the current budget has found a potential net saving this year of £455,000. The main reason for this is that the estimated increase in the provision for bad and doubtful debts has been reduced by £902,000 as the Universal Credit and its effects are not likely to impact on Housing Rent collection until 2016/17. There has been little increase in the actual level of rent arrears in this financial year and it is not anticipated that the provision will need to be substantially increased. In addition there has been a reduction in the Repairs and Maintenance budget of £300,000 which was originally identified for an external painting programme which is now unlikely to commence until 2016/17. These savings have been offset by an adjustment in the rental income expected of £253,000 which relates to properties that are no longer accounted for in the HRA, £120,000 which relates to feasibility studies on sites for development, £281,000 increase in Capital Financing Costs following the final HRAS buyout settlement agreement and other cost increases of £93,000. These adjustments alone would give an amended HRA budget of £584,000. The level of HRA reserves brought forward is £1,876,000 and is higher than anticipated. In order to minimise the amount of unsupported borrowing required in year to fund the Housing Improvement Programme it is prudent to use HRA revenue reserves up to a minimum balance. The level of CERA (Capital Expenditure funded from Revenue Account) has been recalculated at £5,334,000 which is an increase of £1,849,000. This change will leave a minimum HRA reserve of £611,000 which is in line with the level set in the latest Housing Business Plan.

Base Budget 2016/17

  1. The Budget Strategy for 2016/17 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.
  2. 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.
  3. The proposed 2016/17 budget is set out at Appendix 1 and is identified over the following areas.
  • Supervision & Management (General) - 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.
  • Supervision & Management (Special) - 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.
  • Housing Repairs - This budget relates to the revenue repairs and maintenance service for the Council Housing Stock.
  • Capital Financing - Costs associated with financing debt.
  • Rents, Rates, Taxes and Other Charges - This budget head relates to items such as expenditure on Council Tax at long void properties, legal expenses, surveying costs, compensation and Insurance.
  • Increase in Provision for Bad Debts - This budget identifies the amount by which the current level of provision should be increased by in year.
  • Capital Expenditure from Revenue Account (CERA) - This budget relates to a contribution made from the Housing Revenue Account to fund capital expenditure.
  • Dwelling Rents - This is the net rent due to the Council for all properties whether General Needs, OAP designated, Sheltered Complexes, Hostel or Temporary Accommodation.
  • Non Dwelling Rents - This represents rental income due to the Council for HRA owned garages.
  • Interest - This budget relates to Interest receivable on the average HRA Reserve Balance.
  • Charges for Services and Facilities - This budget identifies amounts due to the Council by tenants and leaseholders and some private individuals for services and facilities provided by the HRA.

Proposed Increases in Charges

  1. 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 guidance has been received from WG regarding the setting of rents. Set out below is a table summarising the original budget for 2015/16 with the proposed budget for 2016/17. 

2015/16

Original

Budget

Inflation /

 Pay Award

National Insurance Change

Committed

Growth /

(Savings)

Estimated Rent

Increase

Increase/ (Decrease) in CERA

2016/17

Proposed

Budget

£000

£000

£000

£000

£000

£000

£000

(129)

130

34

1,408

(604)

(851)

(12)

  1. A provision for general inflation includes an allowance of 1% pay awards in 2016/17 which equates to approximately £18,000.
  2. The impact of the changes to Employer National Insurance Contributions for Housing staff has been identified as £34,000.
  3. A decrease in Capital Expenditure from Revenue Account (CERA) to finance the Housing Improvement Programme of £851,000 has been assumed. The amount of revenue contribution required is dictated by available revenue balances and the value of the Housing Improvement Programme. Adjusting the level of CERA by this amount will leave a minimum HRA Reserve of £623,000, which is in line with the latest Housing Business Plan.
  4. The net growth of £1,408,000 is due to a number of factors;
  • An increase in Capital Financing charges of £877,000 in relation to unsupported borrowing being taken out in 2016/17 to fund the Housing Improvement Programme, and adjustments required following the HRAS buy-out.
  • An adjustment to the net rental due from dwellings of £260,000 to account for properties no longer accounted for in the HRA.
  • An increase in staff costs for increments and staff changes of £40,000
  • An increase of £60,000 in central recharges.
  • A contribution of £22,000 to support Safer Vale for activities which benefit Council tenants and leaseholders.
  • An increase of £133,000 on the bad debt provision, to reflect the assumption that 6% of net rental income will need to be provided for to mitigate the potential increase in arrears following the introduction of Universal Credit in February 2016.
  • Various other minor adjustments of £16,000.

Next Steps

  1. 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 15th December 2015.
  2. The Cabinet Budget Working Group will hold a series of meetings in November 2015 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 22nd February 2016. Before making its recommendation, the Budget Working Group will consider the comments made by Scrutiny.
  3. It was planned that Cabinet's final budget proposals would be considered by Council at a meeting to be held on 2nd March 2016. However, due to the delay in receiving the final budget settlement from Welsh Government this date is now under review.

Resource Implications (Financial and Employment)

  1. The Housing Revenue Account working balance at 1st April 2016 will be £611,000.

Legal Implications (to Include Human Rights Implications)

  1. Under the 1989 Local Government and Housing Act the Council has a legal obligation to set a budget for the Housing Revenue Account. Notices of any rent increases have to be sent to tenants 28 days in advance of the new changes coming into effect.

Crime and Disorder Implications

  1. 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)

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

Corporate/Service Objectives

  1. 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

  1. 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 2016/17 budget will require the approval of Council.

Consultation (including Ward Member Consultation)

  1. The Corporate Management Team has been consulted on this report. The initial budget proposals do not require ward member consultation.

Relevant Scrutiny Committee

  1. The lead Scrutiny Committee is Corporate Resources.

Background Papers

Housing Business Plan - December 2014

Contact Officer

Lori Bigglestone - Accountant

Officers Consulted

Carys Lord - Head of Finance

Miles Punter - Director of Environment and Housing

Hayley Selway - Head of Housing and Building Services

Responsible Officers:

Miles Punter - Director of Environment and Housing

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