Agenda Item No. 8(a)
THE VALE OF GLAMORGAN COUNCIL
COUNCIL MEETING: 25 JUNE 2014
REFERENCE FROM CABINET: 16 JUNE 2014
C2356 EXIT FROM HOUSING REVENUE ACCOUNT SUBSIDY SYSTEM (HBMCS) ( SCRUTINY COMMITTEE – HOUSING AND PUBLIC PROTECTION)
Matter which the Chairman had decided was urgent by reason of the need to update due to information received from Welsh Government.
Members were updated on the proposed arrangements for exiting the Housing Revenue Account Subsidy system.
The Welsh Government had been in discussions with HM Treasury since 2010 with a view to agreeing a financial settlement that would enable the eleven stock retaining Councils to exit from the Housing Revenue Account Subsidy (HRAS) system.
The principle for Local Authorities buying themselves out the system were that â€œevery stock retaining authority should be better off than the current positionâ€. This included not only the financial benefits from exiting HRAS but also the benefits of becoming self-financing.
Welsh Government announced in June 2013 that an agreement had been reached with HM Treasury, which together with the introduction of new self-financing arrangements was expected to generate revenue savings for the eleven Councils each year. This would allow Councils to increase their investment in their existing stock and, where possible, support the delivery of additional housing supply.
(1) A consultation paper, on the Self Financing of Council Housing in Wales was distributed to the 11 stock retaining local authorities prior to a meeting that was held on the 16th of May 2014. Officer and Member representatives were asked to consider a number of questions posed by Welsh Government relating to the exit from the HRAS. In attendance for the Vale of Glamorgan Council were the Cabinet Member for Housing, Building Services and Community Safety, the Head of Housing and Building Services and the Housing Accountant
Each stock retaining local authority had now been asked by Welsh Government to formally respond by 19th July, 2014 to the 6 questions set out within this report (a) - (f) above confirming if the Council accepts the WLGA Coordinating Committee's recommendations.
The following detailed the Vale of Glamorgan Council's proposed response in respect of the 6 questions posed by Welsh Government.
(a) Do you agree with the proposal to distribute the settlement value based on negative subsidy amounts? (Option 1 - attached as appendix 1)
This is acceptable.
(b) Do you agree with the proposal to distribute the borrowing cap based upon option 3 (see appendix 2) to allow for new build commitments whilst also providing potential headroom for new build to every local authority?
The preferred option for the Vale of Glamorgan Council was option 2 as this gave additional borrowing capacity in terms of new build. However, all 11 local authorities were compromising in order that the overall borrowing cap was not exceeded, tight timescales were met and that new build requests were in some part acceded to, therefore, option 3 was acceptable to the Vale of Glamorgan Council in terms of this.
(c) Do you agree that the Welsh Government should retain a small proportion of the borrowing headroom as a contingency? (Proposed at £5M)
This was rejected as the borrowing cap was a local authority borrowing cap and should be used as such.
(d) What are your views on how Welsh Government allocate any unallocated borrowing headroom now or in the future?
Unallocated borrowing headroom should be distributed between the 7 local authorities that had not initially included new build within their business plans.
(e) Do you agree that the borrowing cap should be reviewed every three years with the 1st review in 2018/19?
It should be recognised that major capital projects were complex in terms of delivery. Business plans were long term planning documents. The rational in reviewing borrowing cap usage in such a short period of time may lead to uncertainty in relation to long term strategic planning.
(f) What action should the Welsh Government take on a Council who has not delivered on their ability to utilise their borrowing cap?
It was not felt that employing sanctions in terms of not using the allocated cap would be of any benefit in this process. Experience tells us from delivering Social Housing Grant schemes that a myriad of things can impact on an organisation’s ability to always deliver. Flexibility in the borrowing cap allocation should only be sought between Councils through trading arrangements.
The Welsh Government considered that Borrowing Cap Option 3 was the preferred option. Option 3 in terms of the Vale of Glamorgan's Housing Business Plan would give the Authority headroom to consider new build council housing (see Appendix 2 attached to the report). Based on existing financial assumptions the additional borrowing had been modelled and was affordable.
The final decision on the borrowing cap distribution would be subject to agreement by the Minister for Housing and Regeneration. Option 3 would be supported by the following process:
Each Council would be allocated an â€œindicative allocationâ€ of the borrowing headroom as set out in option 3.
Each Council would need to advise the Welsh Government by end of October 2014 on whether they would take up their 'indicative allocation' for new build by March 2018.
If a Council wished to take up their 'indicative allocation', the Council would need to submit proposals to the Welsh Government by end of October 2014 that set out how and when they could utilise this for new build and whether this together with their allocation for WHQS and % share for new build was "affordable" within the business plan.
At this time the Council had no information on whether the additional borrowing headroom could be used for regeneration projects on council estates.
This was a matter for Council decision.
(1) T H A T the report and the attached appendices be endorsed and Cabinet’s views on the process proposed and the responses to the questions posed by Welsh Government contained within paragraph 12 (a) to (f) be referred to Full Council.
(2) T H A T the Head of Housing and Building Services submit regular reports to Cabinet and Council as necessary on the progress in exiting the Housing Revenue Account Subsidy system.
(3) T H A T the urgent decision procedure be used if necessary as set out in article 13.09 of the Council's Constitution in view of the need to submit a response to Welsh Government by 19 July, 2014.
(4) T H A T the report be submitted as an urgent reference to Scrutiny Committee (Housing and Public Protection) on 18 June, 2014. The report and any comments from Scrutiny Committee (Housing and Public Protection) then be referred to Scrutiny Committee (Corporate Resources) on 24 June, 2014. The report and any further comments from Scrutiny Committee (Corporate Resources) then be submitted to Full Council on 25 June, 2014.
Reasons for decisions
(1) In order for the exit from the subsidy system to be achieved by March 2015 all eleven stock retaining local authorities need to come to an agreement on the Treasury settlement 'offer' and the mechanisms by which the borrowing cap would be distributed. The changes in how the Housing Revenue Account operates have implications for the Housing Business Plan, this is outside the current policy framework, therefore the decision associated with these changes must be agreed at Full Council.
(2) In terms of progress Cabinet will need to be informed. Full Council would need to agree the voluntary agreement to allow the Vale of Glamorgan Council to exit from the Housing Revenue Account Subsidy system by March 2015.
(3) The urgent decision procedure was invoked due to the timescales set down by Welsh Government and the availability of a Council meeting prior to this date
(4) To allow Members to fully consider the report, before being submitted to Full Council.
Attached as Appendix - Report to Cabinet - 16th June