Report of the Strategic Director (Growth and Development) and Deputy Chief Executive and City Treasurer attached

This report presents members with details on the proposed Housing Revenue Account (HRA) budget for 2021/22 and an indication of the 2022/23 and 2023/24 budgets.

The Committee considered a report of the Strategic Director (Growth and Development) and Deputy Chief Executive and City Treasurer, which presented Members with details on the proposed Housing Revenue Account (HRA) budget for 2021/22 and an indication of the 2022/23 and 2023/24 budgets.

Key points and themes in the report included:-

·                As at November 2020 the HRA was forecasting that expenditure would be £22.156m lower than budget, which would result in an in year surplus of £3.524m;

·                In order to ensure a balanced budget it was proposed that reserves of £19.495m would drawn down;

·                Key budget assumptions used in preparing the HRA budget included:-

·                Tenants’ rents for all properties will increase by 1.5% in April 2021, which still remained well within the limits of local housing allowance levels;

·                There was also a proposed 1.5% increase in Garage rents in line with dwelling rents;

·                Other income was forecasted to be around £1.092m in 2021/22;

·                The current PFI reserve would continue to remain frozen at £10m as at 31 March 2021 and would be used to part fund the outstanding HRA debt;

·                The existing wholesale gas contract expired soon, and latest prices indicated that the current wholesale gas price would reduce by 10% with effect from April 2021;

·                The depreciation charge in 2021/22 was forecasted to be £18.435m and this would be used to fund capital expenditure;

·                It was currently anticipated that the HRA reserves would fall below the £60m required to continue funding the proportion of debt in 2030/31, this would result in an increase in the interest costs charged to the HRA;

·                The provision of bad debt would increase to 1.5% for 2021/22, and would then be increased annually by 0.5% until 2023/24 at which point it would peak at 2.5%, it was then planned to reduce by 0.5% per year until it levels out at 1.5% for the remainder of the plan;

·                The amount payable for the management of stock currently managed by Northwards would change once the future arrangements had been agreed;

·                Details of other expenditure; and

·                Inflationary Assumptions.

Some of the key points that arose from the Committees discussions were:-

·                Had the figure of £1.5m earmarked for the Local Delivery Vehicle (LDV) been benchmarked and if so what had Salford City Council paid for their LDV;

·                Was there a way to ensure that the capital investment underspend was invested in a way to ensure projects were delivered more efficiently;

·                Did it matter if the future projected HRA would be in deficit and if so what would be the consequences;

·                It was suggested the Members would benefit from future training/briefing on the HRA;

·                Who was responsible for determining that the Council’s HRA Business Plan was sound;

·                If the Council was in a financial position to put additional money into the HRA to address the project deficit in future years, would it be permitted to; and

·                Clarification was sought as to whether the Business Plan included figures for investment to contribute towards becoming a zero carbon city.

The Director of Housing and Residential Growth advised that the £1.5m for the Local Delivery Vehicle was an estimated figure based the likely professional cost and investigatory work that would need to be undertaken.  Awareness of other LDV’s around the country had been used as a framing for this cost but it was not benchmarked. He advised that he did not have the details of what it had cost Salford City Council but commented that he could ask but caveated this with the fact that the scale and nature of what Manchester was looking to deliver was different to that of Salford.

The Committee was advised that the Council was looking at bringing into the Council the management and delivery of the Capital Investment programme to ensure quality standards were being met and satisfaction levels of tenants improved.

The Deputy Chief Executive and City Treasure advised that the Council had a statutory requirement to ensure that the HRA Business Plan was deliverable and sustainable over the 30 year period and whilst there was some margin for change, small changes in assumptions taken now could leave to huge changes in the future financial position.  She agreed that future training session on the HRA could be arranged for Members.

It was clarified that it was not a requirement for DCLG to approve the HRA Business Plan.  The Council’s external auditors reviewed the Plan each year and the Council also had to complete a number of government returns that monitored the position against the Business Plan.  It was also clarified that as the HRA was ringfenced it would not be possible for the Council to put further funding into it to address the projected deficit.

The Director of Housing and Residential Growth advised that in the projected capital programme for the HRA, there was in the region of £85m proposed to invest in low carbon related schemes in homes, however one of the challenges that existed was the increase in standards to meet zero carbon.  Emerging grants for retrofitting where starting to appear and it was anticipated that these would help the overall picture but putting the issue into context, it was a city wide challenge and it was estimated that £4.5b would be required to address the issue of zero carbon across the whole housing stock of the city.

Decisions

The Committee:-

(1)       Notes the proposed HRA budget for 2021/2 and that the Executive will be requested to consider this at its meeting in February.

(2)       Requests that Officers arrange appropriate training on the HRA for Members.

(3)       Agrees that in writing the Chancellor of the Exchequer in relation to the Local Government Financial Settlement, the Chair also addresses the challenges the Council will face with its HRA in future years without additional government funding.