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Meeting of the Executive held on 04/02/2003
APPENDIX B.4 - HOUSING REVENUE ACCOUNT REVENUE ESTIMATES AND
RENT LEVELS – 2003/2004 – UPDATE REPORT


This report provides Members with the latest position regarding the draft 2003/2004 Housing Revenue Account (HRA) Estimates.

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APPENDIX B4

WAVERLEY BOROUGH COUNCIL

EXECUTIVE – 4TH FEBRUARY 2003



Title:

HOUSING REVENUE ACCOUNT REVENUE ESTIMATES AND
RENT LEVELS – 2003/2004 – UPDATE REPORT
[Wards Affected: N/A]


Summary and Purpose

This report provides Members with the latest position regarding the draft 2003/2004 Housing Revenue Account (HRA) Estimates.


Introduction

1. The draft Estimates were compiled in October 2002 and submitted to the Executive for comment and consideration on 10th December 2002. Members are requested to bring with them the copy of the draft HRA Revenue Estimates that was circulated for the December meeting. The Housing Subsidy Determinations for 2003/04 and other guidance on housing policy has been received from the Office of the Deputy Prime Minister (ODPM) since that time and are detailed below.

2. Annexe 2 details various options for rent increase that affect balances in different ways. The Management Board preferred option is Option E, an average increase of 5.75%.

Housing Subsidy

3. The final Subsidy Determinations for 2003/2004 were received from the ODPM on 18th December 2002. Increases in management and maintenance allowances are higher than Ministers had previously planned in order to take account of the resource implications of moving guideline rents toward the formula rent for rent restructuring purposes. The result for Waverley has been an increase in the maintenance allowance of 7% and in the management allowance an increase of 4.8%. Waverley’s guideline rent for the purposes of calculating subsidy entitlement has increased by some 5.8%. Despite this notional increase in allowances, it is estimated that Waverley’s subsidy will reduce by some £550,000 to £788,000 in 2003/04.



Service Charges

4. The ODPM has confirmed its earlier proposals to change the rent rebate subsidy limitation system for 2003/04 and future years so that local authorities benefit progressively from separating out service charges. Work has begun on identifying service charges that were previously part of Waverley’s pooled rent and this will be reflected in the final draft of the 2003/04 HRA Estimates.

Supporting People

5. A letter of 12th December 2002 from the ODPM confirmed the proposals in the June 2002 consultation paper that the cost of transitional protection, for tenants who at 31st March 2003 are in receipt of support services but not in receipt of housing benefit, should be met by local authorities from their ‘windfall’ (the amount that will be released by disaggregating support costs from the HRA but not reducing rents). Current indications are that approximately 30% of those tenants in receipt of support are not in receipt of housing benefit and this is reflected in the figures shown at Annexe 1. Ministers have also decided that authorities should retain their discretion to account for the support services that they deliver to tenants of their HRA dwellings either within the HRA or within the General Fund. As there is currently no justification for a change of accounting policy, it is proposed that Waverley continues to account for Support Services within the HRA. The overall effect of the Supporting People regime on the HRA is expected to be neutral, certainly in the first year, but continuing to account for support costs within the HRA will retain a degree of flexibility for the future. However, the support costs that have been identified for supporting people purposes will be shown separately within the HRA (Annexe1) with consequent reductions in costs within the Supervision and Management (S & M) Special Account.

Rent Increase 2003/04 6. In addition to the variations included in the Draft Estimates circulated in December, a further variation will be required in the S & M Special Account to allow for the anticipated extra cost of the re-negotiated Environmental Cleaning Contract. The effect of this and the other proposed budget variations and the level of subsidy estimated as a result of the HRA Subsidy Determination for 2003/04 is a shortfall well in excess of £0.5m in the HRA before the application of any rent increase. The Director of Finance stressed at the Finance Seminar on 8th October that a prudent level of reserves must be maintained and that the HRA working balance is approaching the level below which he and the District Auditor feels it should not fall. For this reason it was considered that no more than £36,000 should be used from balances in 2003/04. The projections incorporated in the Strategy are as follows:


7. It is therefore now felt by the Management Board that its preferred option of an average 5.75% rent increase will sustain the HRA working balance at an acceptable level. Members are reminded that a shortfall of £95,000 approximates to a 1% rent increase. Detailed rent options are attached at Annexe 2 and summarised in the table below, together with the associated impact on balances.
Observations of the Community Overview and Scrutiny Committee

8. The Committee could not reach a conclusion on the question of rent levels for the year 2003/04. Options A and F in Annexe 2 were unanimously discounted but, although all other options were considered, the Committee reached no clear consensus that could be passed to the Executive. The Committee did endorse the proposal to continue to account for support costs within the HRA.

Recommendations to Council

It is recommended that the Executive makes the following recommendations to Council:-

Background Papers (DoF)

There are no background papers (as defined by Section 100D(5) of the Local Government Act 1972) relating to this report.



Contact Officer: Ms G Pope Telephone: 01483 523252
E-mail gpope@waverley.gov.uk


COMMS/EXEC/2002-03/532
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