Agenda item

This report provides the annual update on the baseline position for the Housing Revenue Account Business Plan projections. The HRA Business Plan forecasts income, expenditure, investment and borrowing in respect of council housing stock over a 30-year period.

The Interim Head of Housing introduced his report and advised members that the Housing Revenue Account Business Plan (HRABP) report was required to be updated annually and that the objective of the plan was to increase housing stock and ensure stock was fit for purpose. He confirmed that there were some challenges to overcome in terms of reducing cost while achieving efficiency gains. He informed members that a review of charging for services would be undertaken to increase cost recovery. He also advised that there was a need for a greater use of borrowed finance from the HRA capital programme.

The Chair then introduced Glenn Smith from Housing Finance Associates Ltd who stated that an annual update of the HRABP allowed for officers to take a longer-term view of pressures and opportunities facing the HRA. Confirming that the current position was presenting differently than previous years as the world had changed. Inflationary pressures had hit the HRA severely not just at this council but nationally. There had also been constraints placed on rents that could be charged, restricted authority ability to generate rent to pay for additional costs. There had been overspend against the budget and this had put the council in a challenging position. With all of this, it had meant that an in depth look at measures that could be taken in order to address the situation, in order to make things manageable.  

He then talked members through the graphs in the report and laid out each step that would be taken to ensure that the HRA was brought back to a more comfortable position.

The Chair asked for Glenn to elaborate on the overspend, she stated that the Committee understood the national situation, however more detail was needed regarding rent capping. Glenn then explained the percentage rent increase as detailed at paragraph 4.17 showed increases within the projections. A 7% increase was the maximum increase amount, an assumption had been made that the following year would see an increase of inflation plus 1% which had been based on the predicted inflation from the Bank of England. It was confirmed that if the rent cap was not in place, the council would be looking at an 11% maximum increase. He referred to graph at paragraph 4.5 in the report and explained that the bulge showed where the spare capital could be used for the reinstatement of a larger development programme. But that other pressure would also emerge and would require consideration.

It was then queried that the bulge on the graph starts in 2038 and it was clear that this was having to be done as a measure to keep the council afloat. Many members of the committee were not happy with this and wanted reassurance that the £3m spend allocated for the decarbonisation strategy would still be completed given the legal regulations that were attributed to this.  

The Head of Housing advised that an application for a grant had been completed and the council would be match funding should the application be successful. He explained that there would also be further rounds of grant funding that could be applied for. He said he was committed to continue with the strategy but caveated that with unknown future risks.  Discussion was also had regarding Gas boiler replacement; members were keen to clarify that although the report showed no further expenditure after 2024 that the project would continue. The Head of Housing advised that another report on this project would be produced next year where it was hoped that the situation the council was in now, would have improved as well as further knowledge of grants that could be applied for to support this work.

The Chair then invited debate and thanked Glenn Smith for providing such a detailed explanation which unfortunately confirmed that the HRA was in a worse position than originally anticipated. One Member of the Committee outlined that she had compared last year’s report with this year’s report, and this confirmed that:

·       New build numbers had been reduced dramatically.

·       There was no money in the Capital Reserve Fund as all the Right to Buy receipts had been spent.

·       The dec-carbonisation project bid of £3m had yet to be agreed with Government and still had to be match funded and following the Member Briefing held on 5 January 2023 briefing it appeared that the Council had missed first round of the bidding.

·       There was £2.5m in repairs reserve but that would have to be ringfenced.

·       A rental increase of 7% was being proposed for 23/24 in line with the government rent cap. Rent increases of CPI + 1% are assumed for 24/25 so if this is capped at a lesser amount the Council would be in a worse situation than projected.

·       The minimum balance threshold of £2Mmentioned in section 3.2 of the report will be breached for the next few years and is then projected to return above the £2M level after 7 years.

·       £6m mentioned from capital for sheltered housing improvements but what about the progress of this review and the outcomes of that baseline project could make now, allowances for additional costs. Would the council be making redundancies relating to looking after its stock? There was no safety belt which was discouraging when last year and year before was so encouraging, was there anything else that could be done?

·       Referring to paragraph 4.3 of the report, it was noted that the baseline projections make no allowances for further additional costs on energy efficiency or decarbonisation on existing stock and given changes to regulations it was vital this was monitored closely to ensure the plan stayed on track.

·       Further risk factors identified by way of incorrect assumptions, additional spending pressures and reactive repairs.

·       The overspend on HRA was a huge concern, but clarity sought on what efficiency gains from costs of managing stock meant. Did it mean redundancies?

The Director Environment and Climate Change Services was invited to make comment on the points raised. She explained that the Council was now in a very difficult financial position and that the reason an annual review of the HRABP was in place was because it helped to forecast and model the future position, ensuring that it had the right support, regular monitoring and reporting to react to the challenging financial position. There were plans to restructure the department to ensure that it had the right people in the right place to enable a strong team that focused on strong compliance.  A commitment to move to a greener infrastructure was in place alongside more sheltered housing work of which a report will be brought to the committee outlining the next stages. She advised that it was a big programme but would also come with its challenges. She confirmed that officers were not shying away from the challenging position they were in, they were focused on putting in the right measures to bring up standards and get service performance up to upper quartile.

The Chair stated that the position was a very fragile one. But she was satisfied that there was a plan in place to deal with the challenges on the table. She said that she felt it was a positive plan that would resolve the issues. However, the committee would scrutinise that process, it was clear no member was happy this was the position presented however the best plan was in place to deal with the situation.

The Vice Chair then commented that the briefing held on 5 January 2023 was helpful and covered a lot of detailed information. She asked if a 6-month update was planned to be given to the committee or were officers going to continue with just the annual update. The Head of Housing confirmed the annual report was what was planned; however, he will review with Glenn Smith throughout the year to ensure further risks and or improvements are known at their earliest, he would then be able to keep members updated in this way also.

The Chair said she would like to have an update report presented in 6 months’ time and there was agreement across the committee for this also. It was then proposed by Councillor Gregory and seconded by Councillor English that a 6 monthly update report brought back to the Committee.

The recommendations in the report were then proposed by Councillor Gregory and Councillor Cooper

The Committee

          RECOMMEND TO FULL COUNCIL that

1)    the annual update of the Housing Revenue Account Business Plan 2022/23 be noted.

The Committee also

                     RESOLVED

That an interim review of the HRA be brough back to this Committee in six months’ time.