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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 10/01/2006
DRAFT HOUSING REVENUE ACCOUNT REVENUE ESTIMATES
2006-07



Summary & Purpose
This report seeks the views of the Executive on the Housing Revenue Account (HRA) revenue estimates for 2006-07 following the tenants’ vote for the housing stock to remain in the ownership and management of the Council. The requirement for the Council to budget for a balanced HRA and the potential increased cost in some areas of the service means that significant overall savings will need to be made.

APPENDIX B.3
Waverley Borough Council

Executive - 10TH JANUARY 2006



Title:
DRAFT HOUSING REVENUE ACCOUNT REVENUE ESTIMATES
2006-07
[Wards Affected: ALL]


Summary and purpose:

This report seeks the views of the Executive on the Housing Revenue Account (HRA) revenue estimates for 2006-07 following the tenants’ vote for the housing stock to remain in the ownership and management of the Council. The requirement for the Council to budget for a balanced HRA and the potential increased cost in some areas of the service means that significant overall savings will need to be made.



Environmental implications:

There are no direct environmental implications as a result of the recommendations attached to this report.

Social / community implications:

The level of target reductions required in order to balance the budget and maintain the working balance at an adequate level means there is the potential for a reduced level of service to the tenants which in turn may affect the quality of life of individuals and communities.

E-Government implications:

There are no e-government implications.

Resource and legal implications:

Increases in some areas of costs mean that significant overall reductions have to be made. The detail of this is contained within the report together with the implications for the landlord service.




Introduction

1. The tenants’ vote to retain the Council as their landlord has some serious consequences for the HRA and the housing service that are reflected in the draft revenue estimates at Annexe 1.

2. The draft estimates reflect the estimated negative housing subsidy for 2006/07, estimated rent income and depreciation at levels indicated in the subsidy determinations issued by the Office of the Deputy Prime Minister (ODPM) on 21st December.

3. The draft estimates also make provision for:-



Carrying out a further options appraisal 50,000
Re-alignment of balance of cyclical maintenance budget 339,000
Additional costs new measured term contract 250,000
Increased demand responsive repairs 100,000
739,000

The Council must still determine how it will meet the Government’s decent homes standard by 2010/11. Additional consultancy costs, publicity, printing and distribution costs may all be incurred and a 50,000 provision is therefore included in the draft estimates. It is anticipated that the revised specification of the new measured term contract (MTC) for responsive repairs will lead to increased costs. Waverley does not currently carry out any external decorations. It was proposed that the new MTC would allow for an element of external decoration to maintain windows/doors in good order pending replacement. As Waverley is now unable to resource a window replacement programme there are two main issues to consider

a) Re-instating a full programme of external decoration at an estimated annual cost of 700,000. As cyclical maintenance this would be a charge to the revenue account. b) Continuing with the current policy of no external decoration and when windows become beyond repair carrying out one-off replacements.

As the Council does not have the capital resources available to implement a major programme of works and improvements, there is likely to be increased need for unplanned day-to-day repairs. In addition to the above a phased reduction of support costs following the review of the Council’s Supporting People Services is required. A 25% reduction must be achieved in the three years commencing 2006/07 in line with the proposed reduction in grant funding from Surrey County Council. Savings of some 40,000 have been achieved so far for 2006/07 due to the demolition of Dorlcote but a further 37,000 must be achieved.


Subsidy and Rent Levels

4. The final subsidy determinations for 2006/07 were received from the Office of the Deputy Prime Minister (ODPM) on 21st December. The determinations propose that Local Authority formula rents are recalculated from 2000/01 on the ‘new’ rent restructuring rules i.e. using the national average property value at January 1999 and national average rent at April 2000 that apply to Housing Associations. This has the effect of uplifting local authority formula rents and ensuring there can be exact convergence of rents between the two sectors.

5. The guideline limit on individual rent increases remains at RPI +1/2 %+ 2 with an additional requirement that average rent increases in 2006/07 and 2007/08 should not exceed 5%. The draft estimates reflect increased rent income at this level.

6. Waverley currently incurs rent rebate subsidy limitation due to actual rents being above Government guidelines. This means that some 9% of total rent rebates paid is funded by the HRA instead of Government subsidy. Therefore if Waverley were to increase rents further above guidelines the HRA would have to pay for additional benefit costs. In any event, in the recent consultation on the proposed stock transfer, Waverley committed to increasing rents in line with government policy guidelines and in order to maintain this position, the Council will not wish to go beyond the guidelines set.

7. The draft estimates now reflect the final Housing Subsidy determination figures for 2006/07. Whilst there has been a small improvement of 72,000 since the draft determination, tenants will still pay an estimated 8.66m of their rents to the Government.

Current Budget Position

8. With the updated subsidy position the required reductions to achieve a balanced budget are 669,000.

9. The HRA balance at 1m is considered by the Director of Finance to be the appropriate level. It is not possible to draw on it to achieve budget reductions and/or keep rents down.

10. The following savings have already been included in the draft estimates:
Assisted removals 20,000
Consultancy budget 20,000
Transfer grants 12,000 Officer Proposals

11. In response to the remaining projected shortfall of 669,000 officers have examined a number of options. To help offset the effect of re-aligning the funding of the cyclical maintenance programme it is possible to make a corresponding reduction in the level of the capital expenditure funded from revenue.

12. If these two proposals are actioned then target reductions would reduce from 669,000 to 230,000, including the 37,000 savings required on the support budget.

13. During 2006/07 services and costs will be carefully examined and proposals made to deal with target reductions for 2006/07 and the years beyond.


Conclusion

14. The outcome of the tenants’ ballot has left the Council with some difficult choices to make in order, not only to maintain its housing service but also, to achieve the Government’s decent homes standard by 2010/11. Decisions made with regard to service delivery and retaining a balanced HRA may impact on the level of resources available for the achievement of decent homes.

Recommendation

1. That the Executive considers all the available information and indicates its priorities for the way forward within the housing service and the achievement of the Government’s decent homes standard; and

2. The Executive asks the Community Overview & Scrutiny Committee for their comments and suggestions on the draft HRA estimates for 2006/07



Background Papers (DoF)

Housing Revenue Account (Item 8)and Housing Subsidy Determinations 2006-2007



CONTACT OFFICER:

Name: Glennis Pope Telephone: 01483 523252

E-mail: gpope@waverley.gov.uk




comms/executive/2005-06/242
46930