Agenda item

Report of Chief Finance Officer.

Cabinet lead member:  Councillor Gill Mattock

(1) Content of report and work being undertaken to set a sustainable housing revenue account business plan noted.

(2) Senior head of community, in consultation with the lead cabinet member for community, given delegated authority to respond to the government proposal to outline long term implications of the changes.

46.1 Cabinet considered the report of the senior head of community informing them of the latest update of the housing revenue account (HRA) 30 year business plan and implications of recent government announcements relating to the operation of the HRA.

46.2 The ‘self financing’ regime for HRAs had been introduced in 2012, and since that time all local authorities had been expected to support all expenditure relating to its housing stock from its rental income.  The council had received a one off £30m settlement payment to be used for debt repayment in order for the long term HRA business plan to be sustainable.  The settlement was based on the HRA business plan being sustainable over 30 years.

46.3 There were a number of legislative changes proposed in the Housing and Planning Bill and the Welfare Reform and Work Bill that would have a financial impact for both the council and Eastbourne Homes Limited (EHL).  The key points were:

·         1% reduction in social housing rents for four years.

·         Sale of council housing high value assets.

·         ‘Pay to stay’, where high earners would be expected to pay more rent.

The bill also proposed the extension of ‘right to buy’ to housing association tenants, which would be funded by the sale of council housing high value assets as noted above.  All of these proposed changes would have an impact on the 30 year business plan, in particular the change to the rent policy.  The business plan had therefore been re-modelled and a revised business plan produced.  Early calculations indicated a reduction in rental income of £560,000 over the 4 years to 2020.  Other factors impacting on the sustainability of the business plan included a reduction in EHL’s management fee of £100,000; further potential efficiencies from collaborative working with neighbouring councils; the potential for an increase in right to buy sales as a consequence of pay to stay; changes in inflation and interest rates and impact on refinancing costs; and the cumulative impact of pressures upon public sector partners increasing demand for support to complex high need groups.

46.4 When making the self-financing settlement the government set a debt cap for each authority for the maximum amount of borrowing the HRA was allowed. The debt cap originally was set at £42.9m and since then an additional £0.3m borrowing approval had been received.  The total HRA borrowing at 1 April 2012 was £36.7m giving head room of £6.5m for future borrowing.  Once the current capital programme for the new build and empty homes programmes had been completed this head room would have been fully utilised and no further borrowing would be available to the HRA.  The capital programme would therefore be limited to the major works programme of around £4.4m annually funded from the major repairs reserves for work on maintaining the existing stock, and a small sum for new stock funded from the element of the right to buy receipts set aside for replacement stock.

46.5 The council and EHL were working to fully understand the long term implications of the proposed changes and at this time there were still significant detail to be released on how the proposals would work in practice and be funded.  The council and EHL would take the outcome of the financial impact and sustainability of the HRA business plan into account when setting the annual management fee for EHL, HRA budget and capital programme.

46.6 Resolved (key decision): (1) That the content of the report and work being undertaken to set a sustainable housing revenue account business plan be noted.

(2) That the senior head of community, in consultation with the lead cabinet member for community, respond to the government by outlining the long term implications of the proposed changes.