Item 10 Housing Revenue Account (HRA) Revenue Budgetary Control Report to 31 January 2025 (Period 10)
West Dunbartonshire Council · 26 March 2025
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WEST DUNBARTONSHIRE COUNCIL Report by the Chief Officer – Resources Council – 26 March 2025 ___________________________________________________________________ Subject: Housing Revenue Account (HRA) Budgetary Control Report to 31 January 25 (Period 10) 1. Purpose 1.1 The purpose of this report is to advise Council of the 2024/2025 HRA revenue budget position on 31 January 2025 and the forecast HRA reserves position on 31 March 2025. 2. Recommendations 2.1 Council is asked to: i. note the HRA revenue account is forecasting an adverse variance of £0.723m which will reduce the HRA reserve to under the prudential target. ii. note the HRA will need to replenish its reserves to meet its prudential target. iii. note work continues to identify efficiencies across all areas of the HRA revenue account budget to minimise the adverse variance. 3. Background Revenue 3.1 The Council approved a £53.218m HRA revenue budget for 2024/2025 on the 6 of March 2024. 4. Main Issues Revenue 4.1 This report advises Council of the key issues contributing to the Housing Revenue Account (HRA) forecasting a 2024/25 deficit of £0.723m. If required, the deficit will be addressed by using HRA reserves. The application £0.723m of HRA reserves in 2024/25 would leave the HRA with closing reserves of £0.245m at 31st March 25. The HRA prudential reserve target for 2025/26 is £1.16m (2% of gross expenditure) and the HRA will need to steadily rebuild its reserves through future years rent strategies. Furthermore, using reserves to address a funding deficit adds risk to the wider HRA financial position, with reduced capacity to absorb any unforeseen future costs until reserves are rebuilt. The forecast deficit has reduced from the position reported to Council in December 2024 and the update provided in the rent report approved by Council on 5 March 2025. The summary financial performance is detailed in Exhibit 1. ITEM 10
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4.2 A previous report to Council on 18 December 2024 advised Council of its commitment to the WDTRO that the Housing Maintenance Trading Organisation (HMTO) surplus, used to support the General Services budget, would be phased out over a three-year basis at a projected £0.290m per annum. Council decided at its meeting of 5 March 2025 that the forecast HMTO surplus 2024/25 of £0.594m would be returned to the HRA revenue account at the end of this financial year. This decision has reduced HRA revenue costs and, consequently, the forecast HRA deficit. 4.3 Council has been advised that the Housing Senior Management Team have targeted efficiencies across all areas of the HRA revenue account to minimise the in-year deficit. Council received a report on progress at its last meeting. The financial forecast report shows an improved position with a projected deficit of £0.723m. Exhibit 1 – Movement in HRA Forecast BCR07 to BCR10 Subjective Summary Forecast BCR05 2024/25 Forecast BCR07 2024/25 Forecast BCR10 2024/25 Movement BCR10 v BCR07 RAG Status £000 £000 £000 £000 Employee Costs 7,283 7,377 7,467 90 Property Costs 2,600 2,600 2,582 (18) Transport Costs 158 158 158 - Supplies & Services 411 439 437 (2) Support Services 2,785 2,633 2,633 - Other Expenditure 560 626 568 (58) Repairs & Maintenance 13,393 12,564 11,800 (764) Bad Debt Provision 879 1,002 1,002 - Void Loss / Council Tax 1,282 1,095 1,338 243 Loan Charges 26,041 26,041 26,041 - Total Expenditure 55,392 54,535 54,026 (509) Total Income (53,218) (53,218) (53,303) (85) Net Expenditure 2,174 1,317 723 (594) 4.4 The key changes (favourable and adverse) to the previous forecast HRA spend are detailed in Exhibit 2. Exhibit 2 – Movement in Forecast + / - £50,000. Subjective Summary Movement Key Factors £000 Employee Costs 90 Additional staff recruitment across key front-line posts to ensure that service meets service commitments. Other Expenditure (58) Reduced rent abatements as the service reduces demand for this service through active management of the decant process.
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Subjective Summary Movement Key Factors £000 Repairs & Maintenance (764) Additional savings identified include: o £594,000 HMTO surplus returned to the HRA revenue account following Council decision on 5th March 2025 o £120,000 reduction on void spend due to ongoing operating efficiencies in this area. o £110,000 reduction in planned maintenance spend following a review of the commitments across the suite of planned maintenance programmes. Additional expenditure identified. o £80,000 reduction in rechargeable repair income forecast because invoice levels have tapered off over the past 2 – 3 months. Void Loss (Council Tax / Lost Rents) 243 The service is forecasting additional costs because a previous assumption around council tax reductions has overestimated the saving that could delivered this year. The service is also forecasting higher than anticipated void rent loss. Income (85) Seventy Clydebank East properties will be let during 2024/25 and this provides additional rental income. 4.5 Exhibit 3 below summaries performance against budget. Exhibit 3 – HRA Financial Forecast 2024/25 Subjective Summary Forecast 2024/25 Budget 2024/25 Variance 2024/25 RAG Status £000 £000 £000 Employee Costs 7,467 7,661 (194) Property Costs 2,582 2,600 (18) Transport Costs 158 148 10 Supplies & Services 437 406 31 Support Services 2,633 2,788 (155) Other Expenditure 568 330 238 Repairs & Maintenance 11,800 15,208 (3,408) Bad Debt Provision 1,002 876 126 Void Loss / Council Tax 1,338 1,109 229 Loan Charges 26,041 22,092 3,949 Total Expenditure 54,026 53,218 808 Total Income (53,303) (53,218) (85) Net Expenditure 723 - 723
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HRA Variance Report on Variances > £50,000 Adverse Variances Other Expenditure - £0.238m Adverse (BCR07 - £0.223m Adverse) 4.6 The key adverse variance is a forecast rent abatement overspend of £0.150m. Demand is exceeding the new reduced abatement budget. There has been considerable progress in reducing this area of spend with the 2024/2025 rent abatement spend forecast to be more than £0.190m less than the 2023/2024 spend. 4.7 A further variance is a forecast spend of £0.084m to Women’s Aid. The HRA budget 2024/2025 removed payments to Women’s Aid, however through discussions with the Women’s Aid organisations officers have agreed to retain the spend in 2024/25. Bad Debt Provision - £0.126m Adverse (BCR07 - £0.126m Adverse) 4.8 The Council needs to make prudent provision for the non-collection of HRA debt. HRA debt has been increasing as officers more stringently apply the rechargeable repairs policy for repairs caused by tenant neglect / abuse. These debts are difficult to collect because tenants often have multiple other debts with the Council and others. Void Loss & Council Tax - £0.229m Adverse (BCR07 - £0.014m Favourable) 4.9 The BCR07 forecast assumed the HRA would secure council tax savings on payments for longer term void houses. This assumption was based on securing 100% relief for several of our longer-term void properties. While relief has been secured for twenty-two properties, negotiations are still ongoing about the scope to exclude additional properties from the council tax register. Council tax payments are forecast to be £0.118m more than budget, however this is a prudent forecast, and every effort is being made to secure further relief to reduce the overspend. 4.10 Regarding void losses, there has been considerable progress in reducing void levels and there is a consistent decrease in the number of vacant properties through 2024/25. As previously reported, this reduction is being achieved whilst the HRA reduces the cost to bring a void property back to the Councils' relet standard, including a reduced reliance on overtime working and the support of sub-contractors. However, void time and void loss continue to be impacted by meter challenges with energy suppliers resulting in time delays in returning several of our void properties to the letting pool. Reducing the void loss remains an operational priority area and the Council’s Void Working Group and Building Services Improvement Plan will drive ongoing improvement in this key area. Void losses are forecast to be £0.127m more than budget.
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Loan Charges - £3.949m Adverse (BCR07 - £3.949m Adverse) 4.11 The main pressure on the HRA revenue account is elevated borrowing costs leading to higher interest and expense payments on new borrowing and debt refinancing. When the Council went to rent consultation in the last quarter of 2023 and drafted the 2024/2025 HRA budget, a HRA loan charge budget of £22.092m was set with the assumption that council borrowing costs would fall during 2024/2025. Unfortunately, local authority borrowing costs are exceeding the rates used when setting the HRA budget. HRA outstanding debt on 31 March 2024 was £301m, with the HRA debt expected to increase to £352m on 31 March 2025. Interest and expense payments are forecast to be £3.531m more than the 2024/2025 budget. 4.12 A further pressure on the HRA loan charge budget is higher than planned debt repayments. The HRA repays capital borrowing over the expected economic life of the asset invested in. (E.g. heating systems – 15 years, new build properties – 60 years). The HRA debt repayment period has decreased (leading to higher annual debt repayment) as the Council has recently reprofiled capital expenditure on housing stock to improve the condition of the asset to allow a quicker turnaround of void properties – more information is provided at paragraph 4.17. Debt repayments are forecast to be £0.418m more than the 2024/2025 budget. Favourable Variances 4.13 The HRA cost pressures present unprecedented financial challenges for the Council’s Housing Revenue Account. As reported at 4.3 above, officers have been reviewing HRA spend on an ongoing basis to deliver revenue savings to mitigate cost pressures. Employee Costs - £0.194m Favourable (BCR07 - £0.284m Favourable) 4.14 The HRA employee cost budget is £7.661m. The spend against this budget is influenced by staff turnover, staff overtime spend and the success in recruiting to posts as they become vacant. Management have targeted staffing efficiencies to deliver a significant underspend against budget in 2024/2025, including tighter controls on staff recruitment and overtime together with a review of the HRA staff recharge to the HRA capital account and the General Fund account. Support Services - £0.155m Favourable (£0.152m Favourable) 4.15 The HRA central support charge budget is £2.788m. A review of the central support recharge to the HRA identified a saving of £0.150m because the previous HRA forecast had not taken account of reduced employer pension contribution costs within Central Services. Repair & Maintenance – £3.408m Favourable (BCR10 - £2.644m Favourable) 4.16 The HRA repair and maintenance budget is £15.208m. This budget primarily funds reactive repairs, void repairs, planned maintenance, compliance works, and environmental works.
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4.17 Officers continuously review spend to identify larger value works that qualify for capitalisation (for works which extend the lifespan of assets). A review of work conducted in void properties to bring properties back to relet standard assessed that a considerable proportion of works extend the lifespan of assets and should be appropriately charged to the HRA capital account. Furthermore, the completion of an Electrical Installation Condition Report (EICR) is complementary to the environmental sensor installation programme and is also being financed through the capital account. The spending review has identified a £2.550m underspend across repair budgets. 4.18 Discussions with Greenspace colleagues about reducing cost through reducing operational activity will deliver a £0.150m saving. 4.19 Council decided at its meeting of 5th March 2025 that the forecast HMTO surplus 2024/25 of £0.594m would be returned to the HRA revenue account at the end of this financial year. This decision will reduce HRA revenue costs and increased the repairs underspend. 5. People Implications 5.1 There are no people implications. 6. Financial and Procurement Implications 6.1 Other than the financial position noted above, there are no financial implications of the budgetary control report. There are no procurement implications arising from this report. 7. Risk Analysis 7.1 The main financial risks to the ongoing financial position relate to unforeseen cost being identified between now and the end of the financial year. This can affect all service areas. 8. Equalities Impact Assessment (EIA) 8.1 The report is for noting and therefore no Equalities Impact Assessment was completed for this report. 9. Consultation 9.1 All services involved in delivering the HRA revenue budget have been consulted during the compilation of this report. 10. Strategic Assessment 10.1 Proper budgetary control and sound financial practice are cornerstones of good governance and support Council and officers to pursue the five strategic priorities of the Council’s Strategic Plan. This report forms part of the financial governance of the Council. This report is for noting and, therefore, does not directly affect any of the strategic priorities.
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Laurence Slavin Chief Officer – Resources Date: 27 February 2025 ___________________________________________________________________ Person to Contact: Jim McCarron - Business Unit Finance Partner Telephone: 07772 322055 e-mail james.mccarron@west-dunbarton.gov.uk Appendices: Appendix 1 - Budgetary Position (Revenue) Appendix 2 - Variance analysis (Revenue) Background Papers: None Wards Affected: All