The report of the Chief Executive was to follow and is now enclosed.

(Councillor Midgely declared a prejudicial interest in this item of business and disconnected from the meeting while it was being considered.)

The Chief Executive submitted a report to inform the Executive of the outcome of recent review of the Housing Revenue Account (HRA) and the Arm’s Length Management Organisation (AMLO), Northwards Housing. Northwards looked after 13,300 of the council’s nearly 16,000 council homes.

The review had examined the sustainability of the HRA and how it could best be utilised to ensure a good housing service to tenants and provide for the investment required in the housing stock. The analysis of the business plan had shown that HRA reserves would fall below £60m in 2027/28, triggering increased interest charges on debt in 2027/28. The HRA reserves were forecast to be exhausted by the end of the 30-year business plan leaving a deficit of over £11m. In addition to that, the need to retro-fit the properties to achieve full zero-carbon was being estimated at an additional £213m. When that was added into the business plan the plan would go below the £60m level in 2025/26; into deficit in 2031/32, and end the 30-year business plan period with a deficit of £438m.

The review of the work of Northwards Housing had been undertaken by a combination of interviews, document review, attendance at relevant governance and management meetings, reflection on previous reviews and some level of benchmarking. It had sought to try and determine if the ALMO provided a service as good as, if not better, than that experienced by other social housing tenants in Manchester, and whether the ALMO provided good value for money. The outcome of the reviews was that weaknesses had been identified and action needed to be taken, and those were explained in the report, including interim arrangements for the appointment of a suitably qualified Interim Chair of the Board.

The review had also considered some initial modelling of three options on the future of the ALMO:

• taking the ALMO function back in-house into the Council; or
• making the ALMO work more efficiently; or
• transfer of the housing stock.

The efficiencies and savings from each of these options had not been fully modelled as there had not yet been a full analysis of expenditure under each of them. It was however explained that the transfer option was not considered to be feasible as it was estimated that using the stock transfer formula the stock had a negative value of -£140m and so would require a substantial dowry payment to be made. Making the ALMO work more efficiently would require a combination of much more efficient working on their part and a transfer of additional council services to the ALMO to gain a better level of economies of scale. Bringing the ALMO functions back into the Council was therefore the preferred option at this time.

It was therefore proposed and agreed that work be done to develop a detailed business case and undertake consultation with tenants, employees, trade unions and other stakeholders, which will lead to a future recommendation being made.

Decisions

1.         To approve consultation on the preferred option identified as part of the HRA review to bring the ALMO back in-house, with a further report to be made in September 2020;

2.         To approve the commission of due-diligence exercise of the Northwards ALMO, including consultation with staff, unions, tenants and local stakeholders, to review the costs of options.

3.         To agree that Northwards be asked to make interim arrangements for a suitably qualified Interim Chair and defer any recruitment until the consultation and due diligence exercises have concluded.