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Agenda Item No. 8

 

The Vale of Glamorgan Council

 

Scrutiny Committee (Housing and Public Protection) 3rd December 2014

 

Report of the Director of Visible Services and Housing

 

Initial Housing Revenue Account Budget Proposals 2015/16

 

Purpose of the Report

1.         To submit for consultation the initial Housing Revenue Account budget proposals for 2015/16 and to inform Scrutiny Committee of the amended original budget for 2014/15.

Recommendations

It is recommended that:-

 

1.         The revised budget estimate for 2014/15 be noted.

2.         The initial Housing Revenue Account budget proposals for 2015/16 be considered and any recommendations be passed to Corporate Resources Scrutiny Committee as the lead Scrutiny Committee.

Reasons for the Recommendations

1.         To facilitate monitoring of the revised budget.

2.         In order that Cabinet be informed of the recommendations of Scrutiny Committee before making a final proposal on the budget.

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 determination by the Welsh Government.  This is not due for release until December 2014. An average rent increase of 3.5% has provisionally been included in the 2015/16 initial budget proposals.

Amended Budget

 

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

 

2014/15

Original Budget

2014/15 Proposed Amended

Budget

Variance Favourable (-) Adverse (+)

 

£'000

£'000

£'000

Housing Revenue Account

3,514

3,514

    0

 

7.         The net anticipated deficit will remain the same. A review of the current budget has found a potential saving this year of £680,000, the main reasons for this are £200,000 allocated to the restructure, which is not likely to be fully staffed until the next financial year and other staff vacancies within the existing structure of £160,000.  In addition, the current Ty-Iolo budget is higher than required and consistently underspends, particularly in terms of premises and supplies and services costs, this has been reduced by £135,000. The level of interest repayments expected this year on existing and any new borrowing is lower than originally budgeted by £86,000 and as are other running costs relating to estate management and sheltered properties of £99,000.  These savings have 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 has also been an increase in Central Recharges of £129,000.  

Base Budget 2015/16

 

8.         The Budget Strategy for 2015/16 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 Housing (Wales) Act 2014, which was passed in September 2014, will replace the existing housing subsidy system with self-financing.  Stock retaining authorities in Wales will be able to buy themselves out of the current subsidy system.  The planned settlement is set for April 2015.  An initial report was brought to Cabinet on 16th June 2014, (minute no. C2356) and a further report on the implications of the exit on the Housing Business Plan will be brought when formal notification of the Authority's share of the settlement figure is received. Therefore, for the purpose of this report, it has been assumed that the subsidy will remain in place and the initial budget proposal for 2015/16 reflects the latest approved Housing Business Plan.

11.      The proposed 2015/16 budget is set out at Appendix 1.

·         HRA (General) - This budget head relates to net income from rents and service 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.

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 2014/15 with the proposed budget for 2015/16.

 

2014/15

Original

Budget

Inflation /

 Pay Award

Committed

Growth /

(Savings)

Estimated Rent

Increase

2015/16

Proposed

Budget

£000

£000

£000

£000

£000

3,514

112

(2,724)

(583)

319

 

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

14.      The net saving of £2,724,000 is due to a number of factors;

·           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 is 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.

Next Steps

 

15.      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 HRA Budget Proposals and any recommendations that other Scrutiny Committees have made. The responses of Scrutiny Committee must be made no later than the 16th December 2014.

16.      The Budget Working Group will hold a series of meetings in November 2014 with the relevant Cabinet Members and officers to consider the budget proposals. They will submit their recommendations so that Cabinet may make its final budget proposal no later than the 23rd February 2015. Before making its recommendation, the Budget Working Group will consider the comments made by Scrutiny.

17.      Cabinet’s final budget proposals will be considered by Council at a meeting to be held on 4th March 2015.

Resource Implications (Financial and Employment)

18.      The Housing Revenue Account working balance at 1st April 2015 will be £2,892,000.

Legal Implications (to Include Human Rights Implications)

19.      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

20.      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)

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

Corporate/Service Objectives

22.      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

23.      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 2015/16 budget will require the approval of Council.

Consultation (including Ward Member Consultation)

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

Relevant Scrutiny Committee

25.      Housing and Public Protection is the relevant Scrutiny

Background Papers

Housing Business Plan - December 2013

Contact Officer

Lori Bigglestone - Accountant

Officers Consulted

Sian Davies - Managing Director

Alan Jenkins - S151 Officer

Miles Punter - Director of Visible Services and Housing

Hayley Selway - Head of Housing and Building Services

Responsible Officers:

Miles Punter

 

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