Agenda item

The Divisional Director, Housing Services and the Chief Finance Officer submits a joint report that summarises the financial position of the Housing Revenue Account (HRA) for 2010/11 and 2011/12 based on the draft Subsidy Determination.  Members are asked to note that if there are any changes to these figures in the Final Determination they will be reported to Members at the meeting.  The Board is asked to consider the report and advise Cabinet of its views on the recommendations.

The Divisional Director, Housing Services and the Chief Finance Officer submitted a joint report that summarised the financial position of the Housing Revenue Account (HRA) for 2010/11 and 2011/12 based on the draft Subsidy Determination.

The Director of Housing Services introduced the report.  He stated that further to the information contained within it, the final subsidy figures from Central Government had been received which would see an increase in subsidy (i.e. less negative subsidy) of £314,000. 

The Board heard that the overall average increase in rent for 2011/12 would equate to 6.3%.  Councillor Westley, Cabinet Lead Member for Housing, was also in attendance and was invited to address the Board.  He informed Members that he was proposing to use £267,000 from HRA balances to reduce the average rent increase from 6.3% to 5.9%; this would be achieved by still applying the Government’s rent formula to calculate 2011/12 rents, but that individual rent increases would now be limited to a maximum of 6.3%.  This move was generally welcomed by the Board, though it was acknowledged that there was a risk that the government could impose the rate at 6.3%.  It was also confirmed that this rate would be sustained for one year only. 

The Director, Housing Services, reported that an additional £2.5m of subsidy was to be ‘clawed back’ by the Government via a worsening of Leicester’s negative subsidy position for 2011/12 bringing the overall clawback to over £20m. However the Council does get £13.5m of support towards its capital programme giving a net deficit of some £6.5m.

Members were also informed that changes in the housing finance system were to be implemented from 2012/13, which would see the HRA becoming self-financing.  Further clarity from the Government on this was expected by February 2011.  It was explained that a number of budget reductions had been proposed in anticipation of changes that will be made under the new financial system.  The Director, Housing Services, informed the Board that the Housing Performance Panel were in support of the proposals within the report.

The Director, Housing Services, was asked to outline the key risks that could be faced as a result of the proposals.  In response, he explained that that there was uncertainty around the value that would be placed on Leicester’s Council housing stock by Government, with a higher valuation posing greater financial problems than a lower one.  It would then be determined at what rate money would be paid back to the Government, and until both of these issues became clear, it was difficult to summarise the full extent of risks.  A further risk related to rent convergence, and it was reported that Government was in favour of Local Authorities aligning their rents to other Social Landlords and Social Landlords having to raise their rents to 80% of private sector rents, which would see a substantial increase in rents for Council tenants in future years, which would consequently place significant pressure on service delivery and tenant’s ability to pay.

Members generally expressed concern around the impact that rent increases would pose on poorer tenants in light of additional pressures on people’s finances arsing from increase in areas such as VAT and the cost of purchasing petrol.  It was accepted that the proposed reduction in the average rent increase to 5.9% would ease this to an extent.  The Director, Housing Services, also raised awareness of the work undertaken to ensure that people received all benefits that they are entitled to, and that last year alone, an additional £1m of unidentified benefits were paid.  Councillor Westley also spoke of ways in which the Council supports those who experience genuine difficulties in paying their rent.

A query was raised around the 25% increase in miscellaneous payments.  The Director, Housing Services, clarified the matter by stating that this related to decorating allowances for carrying out work in tenants’ homes.  The payments had remained at the same rate for eight years, and were significantly below the required level.

A question was asked around the effect of the savings proposed in the reports.  In respect of cash office closures, the Director, Housing Services stated that there were various alternative methods of transacting payments, which had reduced the need for cash offices, and would therefore have a minimal effect.  In terms of the reduction in highways and grounds maintenance expenditure, it was explained that this could potentially lead to fewer grass cuttings in some areas, and that longer repair waiting times may be experienced.

In respect of reducing the HRA contribution to the Leicester Anti-Social Behaviour Unit (LASBU), Members heard that this would see those who worked in housing offices dealing with low-level incidents of ASB, which would allow LASBU to concentrate on more serious cases.  This was generally welcomed by members and seen as a positive move.

RESOLVED:

That the report be noted and the recommendations contained within it be endorsed.