Agenda item

(Finance & Economic Development Portfolio Holder) To consider the attached report (C-020-2010/11).

(1)        That the transfer of the non-housing assets, as listed in Appendix 1 of the report, to the General Fund be recommended to the Council for approval at its meeting scheduled for 2 November 2010;

(2)        That authority be delegated to the Director of Finance & ICT to write to the Secretary of State to request permission for the transfer of the properties listed in Appendix 1 of the report from the Housing Revenue Account to the General Fund; and

(3)        That the Housing and Finance & Performance Management Scrutiny Panels be requested to hold a joint meeting to consider the proposed transfer and to provide its views and recommendations on the proposals to the Council on 2 November 2010.

A report upon the transfer of non-housing assets within the Housing Revenue Account to the General Fund was presented by the Portfolio Holder for Finance & Economic Development.

The Portfolio Holder reminded the Cabinet that within the prospectus for the disassembling of the Housing Subsidy System there had been an emphasis that the Housing Revenue Account (HRA) should remain a ring-fenced account and should still primarily be a landlord account, containing the income and expenditure arising from a housing authority’s landlord functions. Many commercial properties had been transferred from the former Greater London Council and had been placed in the HRA. These assets were currently held as investment properties, and the HRA received rental income on these shops, public houses and a petrol station. The transfer of the non-housing assets to the General Fund would result in additional rental income to the General Fund but, because of the mechanism for setting rents, would not cause rents for tenants to increase. Amended versions of the five and thirty year forecasts for the HRA had been produced. The five year forecast still had a balance of just under £4 million for the HRA at the end of 2014/15. However, the amended thirty year forecast indicated that, without a savings or efficiency programme, the HRA would fall into deficit in year 12, compared to year 28 in the previous forecast.

The Cabinet then received a representation from the Vice-Chairman of the Council’s Tenants & Leaseholders Federation, the main points of which was as follows:

(i)         The list of non-housing assets currently within the HRA had been valued at £15.5million, which appeared very low. The Federation felt that the Council should have an up-to-date valuation of the properties provided before the matter was considered further and a decision made.

(ii)        Some important pieces of information had not yet become available, such as the outcome of the Government’s Comprehensive Spending Review or the review of the financing arrangements for Housing Revenue Accounts. Any decision should be postponed until all the relevant information had become available.

(iii)       The transfer would have a detrimental impact upon the quality of housing services provided to tenants, particularly from year 12 onwards, and the Council would find it more difficult to set rents below the restructuring level.

(iv)       The report had stated that there were no equalities issues with the proposed transfer; however as Council tenants were disproportionately among the equalities groups, they would be disproportionately affected.

A petition was handed in by the Vice-Chairman of the Federation calling upon the Council not to proceed with the proposed transfer.

The Housing Portfolio Holder reiterated the comments of the Federation and added that the current economic situation would necessitate savings being required across all budgets. The Portfolio Holder could not support the proposals, due to the effects upon the Account in year 12 of the forecast, and the estimated reduction in the HRA’s capital programme, which would affect tenants and leaseholders in Year 11.

The Portfolio Holder for Finance & Economic Development responded that substantial reserves had been accumulated within the HRA, however the proposals would not harm the HRA until year 12 of the 30-year forecast. It was felt that the Council had to be fair to both its tenants and other residents within the District. The Council was potentially facing a 20% cut in its Revenue Support Grant and it was important to protect the Council’s front-line services. The Council could wait until after the Comprehensive Spending Review, however the budget setting process for 2011/12 had already begun, and any deferral of this decision would require further savings in the Continuing Services Budget of £500,000. The Portfolio Holder assured the Cabinet that a proper valuation would be undertaken before any transfer was proceeded with.

The Chairman of the Housing Scrutiny Panel felt that this was the wrong time for the Council to make this decision as the outcome of the Comprehensive Spending Review had not yet been published and the new Government might yet amend the proposals for the replacement of the Housing Subsidy System. The HRA was currently forecast to be in deficit after 12 years, however a small variation to this forecast could give rise to difficulties earlier than currently suggested. There was concern that this issue had not been considered by the Housing Scrutiny Panel and the Cabinet was urged to defer the decision until further information had become available.

The majority of the Cabinet felt that these properties should be transferred. There were all sorts of possibilities that could occur before year 12 of the forecast which would mitigate the effects of the transfer. Private tenants and homeowners could also be struggling financially and that the Council had a responsibility to all its residents within the District. It was acknowledged that further valuations needed to take place before the transfer could happen, although the value of some properties would have been reduced by being leasehold not freehold.

It was suggested that the issue should be considered by the Housing Scrutiny Panel prior to it being discussed at the Council. It was highlighted that the proposals had been carefully considered by Officers as well as the Finance & Performance Management Cabinet Committee in May 2010, and that all Councillors would have an opportunity to fully debate the proposals at Council. It was also suggested that the Finance & Performance Management Scrutiny Panel should consider the proposals as well. The Acting Chief Executive proposed that a joint meeting of both Scrutiny Panels should be held to consider the proposals, before reporting separately to the Council meeting scheduled for 2 November 2010.

Decision:

(1)        That the transfer of the non-housing assets, as listed in Appendix 1 of the report, to the General Fund be recommended to the Council for approval at its meeting scheduled for 2 November 2010;

(2)        That, in the event of the Council approving the transfer, authority be delegated to the Director of Finance & ICT to write to the Secretary of State to request permission for the transfer of the properties listed in Appendix 1 of the report from the Housing Revenue Account to the General Fund; and

(3)        That the Housing and Finance & Performance Management Scrutiny Panels be requested to hold a joint meeting to consider the proposed transfer and to provide its views and recommendations on the proposals to the Council on 2 November 2010.

Reasons for Decision:

To ensure that the Housing Revenue Account was operated on the correct basis as a landlord account, and that the benefit of the rental income was shared amongst all residents and not confined to the Council’s tenants and leaseholders.

Other Options Considered and Rejected:

To leave the non-housing assets and their rental income within the Housing Revenue Account.