Agenda Item No:13
THE VALE OF GLAMORGAN COUNCIL
CABINET MEETING: 25th APRIL
2007
JOINT REPORT OF THE DIRECTOR OF LEGAL, PUBLIC
PROTECTION & HOUSING SERVICES AND THE DIRECTOR OF FINANCE, ICT
& PROPERTY
HOUSING REVENUE ACCOUNT BUSINESS
PLAN
Purpose of Report
1.
To seek Cabinet approval of the revised Housing Revenue Account
(HRA)
Business Plan.
Background
2.
The Council commissioned Tribal HCH to undertake a review of our
Housing Investment options to meet the Welsh Housing Quality
Standards (WHQS) by 2012. The review highlighted that the
Council could retain its housing stock rather than follow a stock
transfer option.
3.
At Cabinet on the 8th November 2006 (Minute No. C2743
refers), it was resolved:
(1) T H A T a stock retention
strategy to enable the Council to meet the WHQS by 2012 be
supported, that resolution to be dependent upon the Council
agreeing to the following key issues to be agreed in 2006/07 and
implemented from April, 2007:
·
re-allocation of estimated costs to the Council General Fund
in2006/07 for the following services;
o Grounds
Maintenance contract estimated at £80,375.
o removal of
rubbish and cleansing of properties estimated at £5,000.
o waste clearance
and abandoned cars estimated at £15,000.
o Housing Strategy
estimated at £100,000.
·
cyclical and responsive repairs based on benchmark figures ensuring
efficiency savings in the Building Maintenance DSO, estimated at
£632,000 per year, to be achieved in the first instance by March,
2008.
·
1% efficiency savings in housing management services from 2007/08
for 5 years and reported back to Cabinet on 31January, 2007 on the
measures proposed to achieve the efficiency.
·
reducing revenue repairs by 10% after the WHQS had been achieved in
2012.
·
utilise the housing capital receipt from the sale of Penarth
Heights.
· introduce
service charges totalling £126,835 per year during 2007.
· successful
negotiations with the WAG regarding the projected Management and
Maintenance allowances, ensuring that future M and M allowances
were at 2% plus RPI.
· restrict
repair and maintenance costs to RPI from 2007/08.
(2) T H A T the HRA Sensitivities 8, 10, 12
and 13 be further analysed and that the Director of Community
Services submit a further report to Cabinet on 31January, 2007.
(3) T H A T the use of prudential
borrowing be not approved until resolutions (1) and (2) above had
been agreed and successfully implemented.
(4) T H A T a stock transfer strategy
be endorsed should the key issues highlighted in resolutions (1)
and (2) above be not agreed and achieved by March 2008 (it being
noted that a decision to support a stock transfer strategy would
rest with full Council).
(5) T H A T the report as amended at
the meeting be forwarded to WAG for information as to the Council’s
current position.
(6) T H A T the Director of Community
Services notify all Council tenants of the Council’s current
position and the key issues that needed to be considered together
with their implications.
4.
The Welsh Assembly Government requested the Council to submit its
HRA Business Plan to achieve the WHQS by 2012, by the
1st April 2007. This applies to all Local
Authorities who have not advised the Welsh Assembly Government that
they intent to ballot their tenants as part of their stock transfer
option.
5.
In order to make the 31st March 2007 deadline set by the
Welsh Assembly Government the Chief Executive agreed to use his
Emergency Powers to be able to submit the HRA Business Plan
Issues/Options
6.
The Business Plan Financial Model has now been updated and the
assumptions and sensitivities referred to in the original
Tribal HCH Stock Retention Financial Analysis Report have been
considered and revised where appropriate. This updated financial
analysis is part of the HRA Business Plan, which is included as
Appendix 1 to this report.
7.
The HRA Business Plan includes
4 financial models, a base model; the base adjusted for a
number of actions; the adjusted base model showing the impact of
Sensitivity 1; and the adjusted base showing impact of Sensitivity
2.
8.
A Base Model, which projects the financial position over 30 years
based on the existing service. Decisions already made have been
incorporated, e.g. reallocation of costs to General Fund for
grounds maintenance, waste and housing strategy totalling
approximately £200,000; use of Penarth Heights Capital Receipt; and
repairs and maintenance costs to rise in line with the Retail Price
index ( RPI). It has been assumed that revenue repairs will reduce
by 50% after 2012 (target date for achievement of the WHQS). Please
note this last assumption varies from that set out in the Cabinet
minute in paragraph 3. This model shows the Council would be unable
to achieve the WHQS by 2012
9.
The above base model was consequently adjusted to take account of
the effect of a series of actions the Council could take as
follows:
Action 1 – Increase Service Charges by
approximately £127,000 per annum from 2008/2009 (Year 2)
onwards. This is in line with the Cabinet minute in paragraph
3 and a review is currently being undertaken by consultants. It is
anticipated that Cabinet will be presented with the results during
the summer of 2007.
Action 2 – Achieve a stepped reduction in
supervision and management costs of 1.30% every 5 years to reflect
the estimated reduction in the housing stock due to Right-to-Buy
sales. It is reasonable to assume that as the housing stock
reduces the management and supervision time would also reduce.
Action 3 – Building Maintenance Client to
reduce their recharge to the Housing Revenue Account by £200,000
from 2008/09 onwards, due to efficiencies being found within the
service.
Action 4 – The Housing Service to achieve
efficiency savings of 1% per annum for 15 years from 2008/09 to
2021/22 on Supervision and Management costs. Cabinet have already
agreed on efficiency savings for 5 years (see minute in paragraph
3), but with the constant pressures facing public services, now and
in the future, 15 years would seem a more appropriate target.
Action 5 – Achieve HRA Land Asset sales
totalling £3 million in 2008/2009. Current financial rules
allow the council to use 50% of the total value. Currently
quotes are due for marketing/valuation advice for the sites
originally highlighted in Tribal’s report.
Action 6 – Undertake Prudential Borrowing
totalling £34.780 million over 30 years to achieve, and maintain
housing stock to, the WHQS.
This model demonstrates that the WHQS can be
achieved and the Housing Revenue remain viable over the period of
the Business Plan. It is suggested that this model form the basis
of the Council’s financial strategy to retain its Housing Stock and
achieve the WHQS.
10. A number of additional sensitivities to
the adjusted base model outlined in the above paragraph were also
analysed and form the basis of the remaining two models included in
the HRA Business Plan :-
· Sensitivity 1 – Management
& Maintenance (M&M) Allowances to increase by 2%+RPI pa
until 2012/13 (instead of RPI only). WAG’s current guidance
is that M&M allowances should increase by inflation only,
however over, the last few years allowances have increased on
average by 2%+RPI, and for 2007/2008 the increase was 5%+RPI.
· Sensitivity 2 - Rent
increases at 5% plus RPI from 2008/09 to 2013/14. Rents in
the adjusted base model are assumed to increase by RPI plus 1%,
which is in line with notional rents in the Subsidy.
These two sensitivities improve the overall
financial position however Sensitivity 1 is beyond the control of
the Council and Sensitivity 2 requires an increase in rent above
WAG guidelines. Consequently, it is not recommended at this
stage that they be adopted as part of the strategy. The position,
however, will be kept under review.
11. Attached as Appendix G to the
HRA Business Plan is a
risk appraisal for the stock retention model. This risk
appraisal highlights the key issues that the Council need to
consider to ensure that a stock retention strategy is
successful.
12.
It is proposed that the use of prudential borrowing is delayed
until at least April 2009. This will allow the Council to
more fully assess the viability of the Retention Strategy. Until
that time the Business Plan proposes to use Major Repair Allowance
(MRA) Funding and Capital Receipts.
13.
Should Cabinet approve the HRA Business Plan and the actions set
out in paragraph 9, the adjusted base will effectively form the
Financial Strategy for stock retention. It will be against this
adjusted Base that future monitoring reports will be brought.
Resource Implications (Financial and
Employment)
14.
The HRA Business Plan outlines the funding required to achieve the
Welsh Housing Quality Standard and for the revenue budget to be
sustainable over the next 30 years. The plan also includes the use
of MRA under spend of £2.8m and 2007/8 MRA of £2.7m which is
essential to the viability of the Council’s chosen Housing Stock
Retention Strategy.
Legal Implications (to include Human Rights
Implications)
15.
Whatever Housing Investment option is followed by the Council,
there will be a need for Legal Services support to ensure all
Statutory requirements are met.
Crime and Disorder Implications
16.
An improved housing stock will help to support the Community Safety
Strategy.
Equal Opportunities Implications (to include
Welsh Language issues)
17.
An improved housing service will support vulnerable people and
families within the Vale of Glamorgan.
Corporate / Service Objectives
18.
The Housing Investment proposals support a key element of the
Corporate Plan "to make the Vale a safe and healthy place in which
individuals, children and families can live their lives to the
full".
Policy Framework and Budget
19.
A decision to support a stock retention strategy is for the
Executive.
20.
A decision to support a stock transfer strategy is for full
Council.
Consultation (including Ward Member
Consultation)
21.
The Council will need to liaise with the proposed Vale Tenants
Panel regarding the proposal for a stock retention strategy.
22.
The Council needs to demonstrate to the Welsh Assembly Government
(WAG) that any stock transfer proposal commands the support of the
majority of tenants. Custom and practice in other Local
Authorities has involved a ballot of tenants. The Council
does not legally have to ballot tenants, however WAG has indicated
any stock transfer proposals without a tenant ballot would be
refused and potentially would be open to judicial review.
Appropriate Scrutiny Committee
23.
The lead Scrutiny Committee is Corporate Resources.
RECOMMENDATIONS
It is recommended that
1.
Cabinet continues to support a Housing Stock Retention Strategy to
enable the Council to meet the WHQS by 2012 and that the supporting
Housing Revenue Account Business Plan included in Appendix 1 be
adopted.
2.
Cabinet agrees the Financial Strategy as outlined in paragraph 9
and exemplified in the adjusted Base Model included in the HRA
Business Plan and approves the following Actions:
Action 1 Review Service Charges
for implementation for 2008/2009
Action 2 Reduce supervision and management
costs in steps to reflect the reduction in the housing stock due to
Right-to-Buy sales.
Action 3 Reduce by £200,000 the recharge to
HRA from Building Maintenance Client from 2008/09 onwards.
Action 4 Housing Service to make Efficiency
Savings of 1% per annum for 15 years on Supervision and Management
costs.
Action 5 Identify potential HRA Land Asset
sales totalling at least £3million by 2008/2009 and bring report
for Cabinet to consider.
Action 6 Approve In principle, Prudential
Borrowing of £34.780 million should Stock Retention remain viable
from 2009/10.
Reasons for Recommendations
(1) and
(2)
To ensure that the Council considers all the relevant issues that
need to be actioned to support a stock retention strategy.
Business Plan
Appendix A
Appendix B
Appendix C-F
Appendix G
Background Papers
Nil.
Contact Officer Alun Billinghurst (01446
709488).
Officers Consulted:
Corporate Management Team
Head of Building Services
Operational Manager Property Section
P.H.Evans
Director of Legal, Public Protection and Housing
Services
S. Davies
Director of Finance, ICT and
Property.