Agenda item

To update members of the Housing and Wellbeing Committee on the Housing Revenue Account “HRA” Forecast for 2023/24.

(Councillor Walsh returned to the meeting during the discussion of this item)

The Chair reminded the Committee that Appendix 1 of the report was a restricted document.   If the Committee wished to discuss the appendix members will need to pass a resolution for the press and the public to be excluded to this item.  Following a question from a member concerning the order of items on the Agenda pertaining to exempt matters, the Committee Manager explained that once the Committee had considered the appendix they would need to make a resolution to return into open session to enable them to vote on the recommendation.

The Chair invited the Group Head of Finance and Section 151 Officer to present the report to members. 

He explained that this was a forecast report, produced by Finance and Housing, providing a detailed review of the Housing Revenue Account’s financial position as at Quarter 2.  All major cost elements in this account had been reviewed and revised. He drew attention to the Table 1 at paragraph 4.1 that summarised the forecast for 2023-24 for the Housing Revenue Account (HRA) reserve.  The HRA was expected to reduce to £902,000 by the end of March 2024, which was a reduction of approximately £281,000 below the budget forecast originally predicted for 2023-24.  He referred to the minimum balance set by the Council for the HRA of £2million.  He stressed that this target was a Council set target, not a statutory target, and referred to the Committee to paragraph 4.2 that explained the Council’s position.  Therefore, it could be necessary for officers to revise the target at a future date to ensure it was realistic.  It should also be noted that the reserve level set by this Council was high for the size of its housing stock.  It was crucial that the HRA budget avoided a deficit, as this would result in an intervention from the Department of Levelling Up, Housing and Communities with the Council possibly losing control of its housing stock. 

Details of mitigating actions being taken to improve the forecast were set out at paragraphs 4.12 to 4.14.  Details of the main variations in the report were provided: The situation concerning Supervision and Management overspend of £386,000 due to the use of agency staff was improving but still had some distance to go; Loan Charges was £111,000 overspent, as an interest rate of 3.2% was used to set the budget but the actual rate is currently 4.81%, but this had been partially offset due to no borrowing on the De-Carbonisation and the Sheltered Accommodation schemes; Whilst Repairs and Maintenance had a small underspend of £48,000 it was important to note that there was a large overspend of £304,000 for Responsive Repairs within this budget. Details of the steps being taken to improve this budget, at Paragraph 4.7, were outlined.

The recommendation was proposed by Councillor Wiltshire and seconded by Councillor Bicknell.

The Chair invited questions and comments from members.

During the discussion concerns were raised about the balances in the HRA and whilst it was understood that setting a minimum balance was not mandatory, the Council was in a situation that should be taken seriously.  As regards to the actions set out to improve the HRA forecast, clarification was requested on the amounts set out in Paragraphs 4.12-4.14.  A question was asked that if there was a reduction in spending what the implications of that on the Housing Service’s ability were to carry out its service.  The Interim Group Head of Housing advised that the forecast had been positively adjusted to that of the current profile of spending assuming there would not be an increase in the current spend during the remainder of the financial year.  Savings had been made due to fewer voids than originally predicted. The Cyclical Redecorations and Maintenance budget was currently unspent with funds set aside for repairs on a property expected to commence during Quarter 4.  He advised that there would not be an underspend during 2024-25 as the remainder of the planned works would be carried out during Quarters 1 and 2. The completion of the backlog of Fire Compliance work had reduced the financial impact on the budget.  Details were provided of the Retrofit Inspections due to be carried out that involved inspections to assess the general standards of housing stock, ensuring the Council’s de-carbonisation obligations were met.  These inspections would also assess the quality of the Council’s housing stock for reporting to the Council’s Regulator, which he confirmed could be done within the budget.  He confirmed that inspections would also be carried out by the Technical Service Team of the retro fit work undertaken to ensure it had been carried out satisfactorily.  He confirmed that the savings made would not result in a reduction of services.

Responding to further questions, the Group Head of Finance and Section 151 Officer advised that the outstanding HRA debt in respect of the Housing Revenue Account Reform buyout that had taken place in 2012 was approximately £35million.  He referred members to the Audit and Governance agenda papers of the meeting held on 30 November 2023, which provided further details.  Whilst he understood the Committee’s concerns that the HRA account was in a serious situation, which officers were taking very seriously it should be stressed that it was not a situation that would lead the Council to enter into bankruptcy.  With regard to housing rent increases the Interim Group Head of Housing explained that the Council’s 7% Council housing rent increase for 2023-24 was the rate agreed by the Government.  The increase going forward year on year was expected to be the conventional rate of CPI plus 1%.

The Group Head of Finance and Section 151 Officer explained that both the Housing and the Finance services had reviewed the HRA’s depreciation charges and they were confident that the figures arrived at were correct but they also stated that they would be kept under review.  The Interim Group Head of Housing added that a reduction of 1.2 million in depreciation had already been achieved already and had been included in the updated forecast.

Responding to a question on the Government's position as regards to relacing gas boilers with air source heat pumps and whether the replacement of these boilers was factored into voids, the Interim Group Head of Housing explained that the current boiler replacement programme replaced the boilers on a ‘like for like’ basis.  The trajectory for the Council’s de-carbonisation programme included electric sources of heat.  However, one of the challenges of air source heat pumps was they were only suitable for houses with a C EPC rating or above.  If homes were not properly sealed it would allow air to escape, creating fuel poverty whilst meeting the Government's carbon neutral targets. A member commented that he hoped the Council was looking into installing efficient electric sources of heat for its new builds, as they should be properly insulated. 

The Committee:

RESOLVED

 That the Committee has made observations on and noted this report.