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Agenda Item No.

 

THE VALE OF GLAMORGAN COUNCIL

 

SCRUTINY COMMITTEE (CORPORATE RESOURCES): 20TH DECEMBER, 2011

 

REFERENCE FROM SCRUTINY COMMITTEE (HOUSING AND PUBLIC PROTECTION): 1ST DECEMBER, 2011

 

 

“           INITIAL HOUSING REVENUE ACCOUNT BUDGET PROPOSALS 2012/2013 AND REVISED BUDGET 2011/2012 (DLPPHS) -

 

Each 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 Housing Revenue Account 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 deficit.  Such a 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 increases was based on the Subsidy Determination issued by the Welsh Assembly Government, however, this was not due for release until January 2012, although a provisional figure was due during December 2011.  An estimated average rent increase of 3%, based on the latest Business Plan, had been included in the 2012/13 initial budget proposals.  Appended to the report was the revised budget for 2011/12 and set out below was a summary table comparing the original budget with the proposed revised estimate.

 

 

2011/2012

Original

Budget

2011/2012

Proposed

Revised

Estimate

 

Variance

Favourable (-)

Adverse (+)

 

£’000

£’000

 

£’000

Housing Revenue Account

(2,176)

(2,204)

(28)

 

The net increased surplus of (£28,000) in this budget was due to several reasons. The housing repairs budget had reduced by (£500,000); central support recharges reduced by (£126,000); capital costs had reduced by (£73,000) as a result of increased receipts; the Hostel refurbishment and staff restructure was expected to save (£100,000); and other small budget savings amount to (£5,000). These savings had been offset by an increase in capital expenditure from revenue account (CERA) of £751,000 to finance the planned capital improvement programme.  As a result there had also been a decrease in anticipated interest earned on HRA balances of £25,000.

 

The Budget Strategy for 2012/13 outlined that in order to establish a baseline, services should prepare revenue budget 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 ring fenced and any growth had to be funded from the balance, no cost pressures had been formally identified.  The budget was presented in the traditional objective analysis format.  The proposed 2012/13 budget was detailed in Appendix A to the report and encompassed budget areas in respect of HRA (General); e.g. General Management; Special Services; Housing Repairs Fund Contributions; Central Support and Operational Building Charges and Capital Financing. 

 

The charges for rent and other services provided by the Housing Service were reviewed annually and would be subject to a future report once the information had been received from the WG.  Detailed below was a summary of the original budget for 2011/12 with the proposed budget for 2012/13. 

 

2011/2012

Original

Budget

Inflation /

 Pay Award

Committed

Growth /

Savings

Estimated

Rent

Increase

2012/2013

Proposed

Budget

£000

£000

£000

£000

£000

(2,177)

32

5,252

(442)

2,665

 

A provision for general inflation was included and an allowance was made for a pay award of 1% for 2012/13.  A 1% increase in pay amounted to approximately £12,000.

 

Committed growth of £5,252,000 was due to a number of factors, namely:

 

·                    An increase in Capital Expenditure from Revenue Account (CERA) to finance the housing improvement programme £5,132,000

·                    An increase in increments and staff changes to support the delivery of the housing improvement programme £219,000

·                    An increase in the provision of HRA Subsidy payable to WG based on the latest guidance issued £121,000

·                    An increase in Central Support recharges as a result of increased resources required to deliver the housing improvement programme £194,000

·                    An increase in the bad debt provision as per latest business plan assumptions £60,000

·                    An increase in the provision of software upgrades and licence fees to drive forward and monitor the asset database and housing improvement programme £50,000

·                    A reduction in county court recharge income £26,000

·                    An increase in the incentive to move scheme £24,000.

The above areas of growth had been offset by:

 

·                    A reduction in Housing Repairs £440,000

·                    A reduction in Capital Costs £70,000

·                    A reduction in insurance costs £39,000

·                    An increase in water commission income £22,000

·                    Other budget adjustments and savings totalling £3,000

 

As indicated in earlier reports considered, Scrutiny Committees were being consulted on the budget proposals 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 20th  December 2011.  Cabinet’s final proposals on the budget would be considered by the Council on 7th March 2012.

 

The Housing Revenue Account working balance at 1st April 2012 was £14,330,000.  The Council would not be informed of a provisional rent increase until December 2011.

 

Having regard to the above and related issues it was

 

RECOMMENDED -

 

(1)       T H A T the revised budget estimate for 2011/12 be noted.

 

(2)       T H A T the initial budget proposals for 2012/13 be noted and referred to the Scrutiny Committee (Corporate Resources).

 

(3)       T H A T the suggested increase for rent and other services be subject to a further report to this Scrutiny Committee once information became available from the WG.

 

Reasons for recommendations

 

(1)       In acknowledgement of monitoring the budget for 2011/12.

 

(2)       To allow further consideration by the Scrutiny Committee prior to the Cabinet making final proposals on the budget.

 

(3)       In acknowledgement of the statutory deadline to notify tenants of the new charges as required by Statute.”