Agenda item - Housing Revenue Account Budget and Investment Programme 2018/19 and Medium Term Financial Strategy

Report of Executive Director for Finance & Resources and Executive Director for Neighbourhoods, Communities & Housing (copy attached).

 

(1)        That the Housing & New Homes Committee:

 

a)          recommends that Policy, Resources & Growth Committee approves and recommends to full Council the updated HRA revenue budget for 2018/19 as shown in Appendix 2;

 

(b)        recommends that Policy, Resources & Growth Committee approves and recommends to full Council the capital programme expenditure and financing budget of £36.344m for 2018/19 and notes the 3 year programme as set out in Appendix 4;

 

 

(c)        approves a rent reduction of 1% in line with government legislation as detailed in paragraph 3.13;

 

(d)        approves service charges and fees as detailed in Appendix 3;

 

(e)        notes the HRA forecast outturn for 2017/18 in Appendix 1 of a £0.425m underspend;

 

(f)          notes the Medium Term Financial Strategy and 30 year financial projections shown in Appendix 5;

 

(g)        notes the Integrated Service and Financial Plan (savings proposals) in Appendix 6

 

71.1   The Committee considered a report of the Executive Director, Finance & Resources and the Executive Director, Neighbourhoods, Communities and Housing which presented the proposed Housing Revenue Account (HRA) revenue and capital budget for 2018/19 as required by the Local Government and Housing Act 1989. Members were required to consider the revenue budget proposals including savings and service pressures as well as changes to rents, fees and charges and also the capital programme. The report also set out the Medium Term Financial Strategy and 30 year financial forecast. The report was presented by the Deputy Chief Finance Officer and the Head of Housing Strategy, Property & Investment.

 

71.2   The Chair noted that three amendments had been received from the Green Group.

 

71.3   Councillor Gibson stated that the report showed a sound and comfortable future for the Housing Revenue Account under the current constraints. He raised questions/issues on the following:

 

·       Capital buy back budget - What was the basis of cutting this important use of Right to Buys and borrowing to provide new housing?

·       The assumption in the modelling was about CPI plus 1% which was over 3 years, whereas the government had said that CPI plus 1% was going to relate to caps on rent increases for 5 years.

·       Projection to breach the borrowing cap by 2021 - the report stated that there would be reserves of 6.3m. Yet the amount the council proposed to breach the cap was even by 2022/23 only projected to be under a million. Was that excessively cautious when there was a housing crisis?

·       No model had been carried out on the impacts of the high value voids issue.

·       Clarification was requested on figures on the Estate Development Budget – Last year’s budget including the top up from reserves had been cut.  The likely spend this year was £407,000 and was likely to be cut to £348,000 next year.  What consultation had taken place or was proposed over that particular cut? 

·       Proposal to fund the Children’s Centres from the HRA – Councillor Gibson referred to the legal advice provided in the report which stated that “Whilst this expenditure (of £170,000) is not directly linked to the council’s housing functions, it probably falls within the discretion afforded by the Circular….” Councillor Gibson wondered if there could be more clarification about the circular and in particular the thrust of the circular under the general principals which was saying that the HRA, from which the committee were being asked to fund Children’s Centres, should be “primarily a landlord account containing income and expenditure arising from the housing authorities’ landlord functions. There was a massive concern about funding Children’s Centres out of the landlord account. Were Children’s Centres a landlord function?

 

71.4   Councillor Gibson stated that he was proposing three amendments. Amendment 1) would increase the capital programme expenditure and financing budget to £39,344m. Amendment 2) proposed a way of funding this additional expenditure. This amendment would increase temporary and emergency accommodation.  Amendment 3) was requesting that Children’s Centres should continue to be funded by the whole community via Council Tax.   

 

71.5   The Head of Housing Strategy, Property & Investment stated that with regard to the buy back policy, members agreed to increase the budget for buy backs for the pilot scheme from £1m to £2m, from notionally four homes to eight homes and that was reflected in the budget. 

 

71.6   Councillor Gibson replied that if the budget was continued at the same level it would be £4m for a period of a year enabling the buying back of 16 properties. Yet the budget shown in the report was £1m plus likely underspends. 

 

71.7   The Executive Director, Neighbourhoods, Communities and Housing stated that the initial intention was to buy back a fewer number of properties, and an amendment doubled that figure.  Concerns were raised as to whether the council would be able to spend that amount of money in time and it was agreed with finance colleagues that the additional money should be carried over to the following financial year in order to continue the programme.

 

71.8    The Deputy Chief Finance Officer responded as follows:

 

• With regard to questions about the long term projections in the medium term financial strategy, the CPI point was one of being generally prudent. Government policies could change so finance officers would always, when undertaking long term projections, build in an element of risk protection. This was considered a reasonable adjustment to make to take account of possible changes of government policy over that period.
• Quite a large element of the reserves (£3m) had to be held by the HRA as lifetime cover against general risks. Over time many assumptions could change and fluctuate, such as the impact that welfare reform might have on rents and collection performance. There were many other general risks that might change the balance of reserves over time.
• The amendments, although meeting the deadline, had come to the attention of officers at a late stage. A breach of the debt cap was already highlighted within the report and this amendment could potentially add to that issue.  Although it appeared that there would be enough reserves to deal with the projected breach, officers needed more time to model and review the proposal in detail and understand what impact, if any, this might have on reserves. At this time amendments 1 and 2 would not therefore be safe. The Deputy Chief Finance Officer did not have enough information at this stage and he did not recommend that the committee consider those amendments today.  However, all groups were able to put forward alternative budget proposals. He suggested that these amendments could come forward to the Policy, Resources & Growth Committee or to Budget Council subject to further consideration and checks by officers. 

 

71.9   Councillor Gibson stated that he would follow finance officers advice and would like to give the officers time to prepare a response. He would withdraw amendments 1 & 2 and refer them to Policy, Resources & Growth Committee. He would not withdraw amendment 3 in relation to the funding of Children’s Centres. 

 

71.10 The Principal Accountant stated that with regard to question about the Estate Development Budget, new figures were available under the Targeted Budget Management (TBM) month 9 monitoring forecast. The estimated spend under EDB was in 2017/18 was now £350,000.

 

71.11  The Senior Lawyer referred to the question that asked whether children’s centres were a landlord function and as such chargeable to the HRA.  The Senior Lawyer stated that Councillor Gibson had picked up her reservations in the legal implications. She advised that it was not clear. Children’s Centres were not an obvious landlord function and she could not say that it was definitely chargeable to the HRA. She thought that there was an element of discretion and if, as there appeared to be, there was an argument to be made that the particular service was targeted at HRA tenants then the council might be able to make an exception. She could not give any legal guarantees but the risk of a judicial review was considered fairly low in practice.

 

71.12  Councillor Bell referred to paragraph 5.2 on page 140 with regard to consultation.  This stated that a letter had been sent to all Area Panel representatives and Chairs explaining the budget proposals. He had spoken to his East Area Chairman and his Ward representative and neither of them had received the letter. Councillor Bell requested that the letter be resent, and also sent to committee members. The Chair agreed to this request. 

 

71.13  Councillor Hill referred to the amendment relating to the Children Centre contribution. She stressed that Budget Council in 2017 agreed that the HRA should contribute £250,000 to funding Youth Services and this had been supported by the Green councillors. There were some other areas where the HRA made a contribution to costs such as local newsletters.  The HRA should be used in ways which best supported the tenants. The Committee had been told it was low risk. The General Fund was under pressure and council tax revenue only accounted for about 15% of the council’s income. Councillor Hill wanted the contribution to remain. It was in the interest of council tenants and it was a good use of money.

 

71.14  Councillor Moonan supported the fact that the council had spent HRA money on youth services. The argument for that decision was that these youth services would be targeted at areas where there was a high proportion of council housing and it would benefit families, some of which were particularly vulnerable and in high need.  The same argument applied to early year’s provision, which could change vulnerable children’s lives.  All these services were at risk and the contribution was a small proportionate amount of money. In terms of the legal risk there were a significant number of local authorities around the country who were looking at using the HRA more creatively, due to the pressure that the General Fund was under. She commended the recommendation within the budget and would vote against the amendment.

 

71.15  Councillor Druitt seconded the third amendment which was proposed by Councillor Gibson and is as follows:

 

“To add recommendation 2.2 g and add brackets as shown below in bold italics:

 

2.1 That Housing and New Homes Committee;

 

a)   recommends that Policy Resources and Growth Committee approves and recommends to full council the updated HRA revenue budget for 2018/19 as shown in appendix 2 (as amended by 2.2 g)

 

2.2 That Policy Resources and Growth Committee:

a)   Recommends that full council approves the updated HRA revenue budget for 2018/19 as shown in Appendix 2 (as amended by 2.2 g)

 

 (g) That the proposed £170k costs towards Children Centres continue to be funded by Council Tax through the General Fund Budget, with Appendix 2 amended to reflect this change

 

2.3 That the full Council:

 

a)   Approves the updated HRA revenue budget for 2018/19 as shown in Appendix 2 (as amended by 2.2 g)”

 

71.16  Councillor Druitt agreed that the Green councillors had supported the funding of Youth Services last year; however they were now questioning who should fund those services. Tenants were under a great deal of financial pressure and it was not right that they subsidised services that were available to the whole community. If the burden was spread across all council tax payers then everyone’s burden would be much lower. There was an opportunity this year to raise council tax by an extra 1%. It was not fair that tenants were being asked to pay twice, through their council tax and again through their rent for a service the whole community benefited from. This was not specifically a tenant service. The burden should fall across the wider community.

 

71.17  The Chair stressed that early years improved life chances for the most vulnerable young people in the city. She believed that this provision should remain in the budget.

 

71.18  The Committee had a short recess at this point to discuss the amendment.

 

71.19  Once the meeting reconvened, the Committee voted on the Green amendment set out in paragraph 71.15 above. There were two votes for the amendment, four votes against the amendment and three abstentions. The amendment was therefore not carried.

 

71.20  RESOLVED:-

 

(1)        That the Housing & New Homes Committee:

 

(a)    recommends that Policy, Resources & Growth Committee approves and recommends to full Council the updated HRA revenue budget for 2018/19 as shown in Appendix 2;

 

(b)        recommends that Policy, Resources & Growth Committee approves and recommends to full Council the capital programme expenditure and financing budget of £36.344m for 2018/19 and notes the 3 year programme as set out in Appendix 4;

 

(c)        approves a rent reduction of 1% in line with government legislation as detailed in paragraph 3.13;

 

(d)        approves service charges and fees as detailed in Appendix 3;

 

(e)        notes the HRA forecast outturn for 2017/18 in Appendix 1 of a £0.425m underspend;

 

(f)          notes the Medium Term Financial Strategy and 30 year financial projections shown in Appendix 5;

 

(g)        notes the Integrated Service and Financial Plan (savings proposals) in Appendix 6.

 

Note: Councillor Wealls was not present during the discussion and decision on this item, having left the meeting after item 70.