Agenda item

Consideration was given to a report presented by the Director of Housing and Neighbourhoods, and the Financial Strategy Manager which stated that the implementation of Housing Revenue Account Self-Financing Initiative, from April 2012, presented the Council with significant investment opportunities. The report stated that, under this arrangement, Councils would be allocated a proportion of the national housing debt, and would, in return, be allowed to collect and retain all housing income.  All risk was transferred from the Government Department for Communities and Local Government to local authorities who would have to utilise the income to manage debt, repair and maintain housing stock and estate infrastructure and provide housing management services to ensure a sustainable business in the future.

Members noted that changes in inflation, local rent policy, interest rates and investment and debt management decisions would impact on the financial viability of the Council’s Business Plan.  Robust, proactive management of all aspects of the Plan will be essential throughout the thirty-year Business Plan.  The submitted report demonstrated how the risks identified within the Business Planning process were being managed and mitigated by Neighbourhood and Adult Services and Financial Services. 

Within the Business Plan, the following factors were represented: -

• Current costs of delivering housing services as per the 2012/13 revenue budget;
• Current treasury management assumptions and forecasts associated with servicing existing debt;
• The thirty-year capital investment requirements of the existing stock as identified from the APEX stock condition survey;
• The Authority would work towards rent convergence by 2016/17.

The Business Plan was made on a number of key assumptions.  It was imperative that they were based upon sound knowledge, were robustly challenged, monitored and updated on an ongoing basis in order that the self-financing initiative in Rotherham realised maximum benefits so that local and national policies were fulfilled and first-class housing services were provided. 

Key Assumptions included: -

·        General inflation based on Retail Price Index.  Based on 3.2% for 2013/14. 

·        Interest rates – applied to the outstanding HRA debt of £304 million, were based on 4.71% for 2012/13, rising to 5% in 2016/17 and rising to 6% thereafter. 

·        Rent convergence – the Business Plan had the Authority working towards convergence in 2015/16, with actual convergence being achieved in 2016/17. 

·        Capital Investment Requirements – an extensive data cleanse and detailed survey exercise was being undertaken to ensure that all information incorporated into the Asset Management Strategy was robust. 

Quarterly performance monitoring and annual updates would ensure that the key assumptions, risks and mitigation actions remained up to date and risk managed. 

In addition to internal key assumptions, there were a number of national policy issues that could also impact on the Business Plan: -

• Right to Buy receipts;
• Welfare Reform. 

Discussion ensued, and the following issues were raised by members of the Audit Committee: -

• Changing housing landscape and how the thirty year-business plan would reflect ongoing changes. 
• Investment;
• Renegotiation of debt. 

The Chair of the Audit Committee thanked the officers for their presentation of a comprehensive report. 

Resolved:- (1) That the report be received and its contents noted.

(2) That the steps being taken to manage and mitigate risk to this Council of the Housing Revenue Account Self-Financing Initiative be noted.