Agenda item

To scrutinise the revenue and capital proposals relating to the 2021/22 Draft Budget and the Medium Term Financial Strategy for 2021/22 to 2025/26.

 

John O’Keefe, Head of Capital and Major Projects, introduced the report on the Council’s draft budget for 2021/22 and 5-Year Medium Term Financial Strategy (MTFS) for 2021/22 – 2025/26 and proposals relating to the Panel’s remit, highlighting the following points:

• That a number of revenue and capital proposals were being put forward for the Panel’s consideration.
• That as of February 2020, the financial position had been for a budget reduction of £1.9m in 2021/22 and of £3.1m in 2022/23. However, by December 2020, the financial position was now for a required budget reduction of £17.0m in 2021/22 and of £10.041m in 2022/23.
• Net savings of £11.6m had been identified for 2021/22.
• £5.4m of reserves would be used to balance the budget for 2021/22.
• Significant risks with the budget still remained, including the impact of Covid, Brexit, planned savings not being delivered and a lack of clarity on the level of government support beyond 2021/22.

 

David Joyce, Director of Housing, Regeneration & Planning, provided some further details on the savings proposals:

• The overall revenue budget for Housing, Regeneration & Planning was relatively small compared to other departments. The majority of the funding came from alternative sources such as work under capital, work charged to the Housing Revenue Account and work funded by income such as planning and building control or through grants.
• The Housing, Regeneration and Planning department had a strong record of delivery and had a continued ambition to deliver services and projects such as new Council homes and investment in town centres. The intention was therefore to make savings through income and not by reducing activity. The majority of the savings proposals resulted from the cross-cutting Property Rationalisation work.
• The revenue savings for 2021/22 amounted to just over £1m:

o   HO101: Housing Team Salaries – Increase HRA contribution (£274k)

o   HO102: HfH taking over the lease of PSL properties on their expiry (£209k)

o   EC101: Additional Recharge to Housing Services (£300k)

o   EC102: Additional Planning income from introducing new charges (£200k)

o   EC103: Reduction in Energy Consumption on corporate buildings (£50k)

• The new capital investment items were listed as follows:

o   Housing (509): CPO – Empty Homes

o   Economy (404): Good Economy Recovery Plan

o   Economy (473): 551b High Road (part of Enterprising Tottenham High Road scheme)

o   Economy (453): New workspace scheme at Stoneleigh Road car park

o   Economy (454): HALS Improvement Programme

o   Economy (455): Replacement Cloud based IT solutions for Planning, Building Control & Land Charges

 

Cllr Ruth Gordon then introduced questions on Housing issues:

• Cllr Diakides commented on the relationship between the Housing Revenue Account (HRA) and the General Fund noting that around half of the revenue savings simply involved transferring money from one to the other. He acknowledged the reassurances that this approach was legally sound but said that this was more of a political issue impacting on the long-term viability of the Borough’s Council housing and that he was concerned about loading more costs onto the HRA. He said that arguments could be made for costs relating to temporary accommodation or communal open spaces to be met from the General Fund. David Joyce responded that the charges to the HRA are governed by legislation and accounting codes of practice and also did not affect the HfH management fee. He said that this involved appropriately charging the HRA for activities including the building of 1,000 new Council homes and the acquisition of Right to Buy properties that would ultimately benefit the HRA by generating rent and reducing overcrowding. He added that the temporary accommodation budget would continue to be funded through the General Fund and that the saving outlined in the agenda pack related only to the transferring of the management of private leases to HfH to enable the charging of higher rents (paid through Housing Benefit). Cllr Diakides responded that the Broad Lane Square project was originally going to be funded through the General Fund but a decision had then been made to fund this through the HRA so there were choices involved. David Joyce said that questions over charges were not always clear cut, including in the example referred to, but he added that advice on the legal framework and from finance colleagues were sought on such issues in order to reach a view. However, he said that the basis of the savings outlined in the agenda pack was clear given the advice that had been received. In response to a further question from Cllr Diakides, he said that that following a development where the Council is the freeholder, private leasehold units remain as assets within the HRA. Asked whether the HfH Board had been consulted on the savings proposals, David Joyce said that the new homes programme was run from within the Council so it was Council business, but added that the Department worked closely with HfH including, for example, on the specifications of new properties.
• Cllr Gordon asked for further explanation on the HfH management fee of £41.15m and the Other Costs for GF Services of £4.357m listed on Table 9.3 on page 72 of the agenda pack. David Joyce explained that the management fee is the amount charged to the Council by HfH to run the housing management services, including rent collection, repairs and leaseholder services. He stressed that this management fee was unaffected by the savings outlined in the agenda pack as these related to other unrelated areas of work. Kaycee Ikegwu, Head of Finance & Business Partnerships, said that ‘Other Costs for GF Services’ related to recharges from the General Fund for services provided to the HRA.
• Cllr Brabazon asked about a point raised in the presentation about risks which included the possibility of the planned savings not being delivered. She said that the savings tracker on page 242 of the Cabinet papers from December 2020 showed shortfalls in savings achieved that were not shown in the savings tracker provided to the Panel. This included a shortfall of £326k in 2020/21 for item HO1 (Temporary Accommodation Reduction Plan). She asked for clarification on the impact on the budget when savings were not achieved. David Joyce said that unachieved savings were clearly important as they added to the scale of the savings challenge in subsequent years and so additional savings measures would then be required. However, the figures reported were from around month 6 of 2020/21, so there was still some time remaining to make further progress on the savings. Kaycee Ikegwu added that the savings gap for 2020/21 was less than the savings proposed for delivery this year, but the impact of Covid had put more pressure on this and increased the risk of the required savings not being met. John O’Keefe added that at the end of the year there would be an outturn report looking at the financial outcomes across the Council and mitigations could then be put in place. Any savings that had not been achieved would be rolled forward into the next version of the MTFS the following year.
• Cllr Hare commented that properties acquired from a developer would be more expensive than those built by the Council. He asked how long it typically takes to reach the break-even point on these properties and also whether the properties acquired were chosen because they met the Council’s requirements or whether they were mainly properties that the developer found difficult to sell. David Joyce noted that the acquisition of properties were part of the HRA business plan, so did not relate to any of the specific budget proposals being put before the Panel, but said that care was taken to ensure that the properties acquired were those that fit the Council’s needs. He added that the price of acquired properties varied across different schemes so it wasn’t necessarily the case that they would cost a fixed amount more than Council-built properties. Cllr Gordon said that, in her view, if the cost of acquisitions from developers was higher than the additional borrowing required, this meant that this query was relevant to the budget discussion. Cllr Gordon said that her understanding was that the cost to the Council of building homes on Council land was around £200k per unit whereas some recent acquisitions from private developers had cost around £350k per unit and asked how this extra cost could be justified. David Joyce said that the HRA Business Plan, which sets out both acquisition and new delivery, showed that the overall programme was affordable. A whole range of factors impacted on the costs of individual units and the viability of a specific scheme and so assessments needed to be made on a scheme-by-scheme basis to build the overall business plan. Acquisitions were valued by the Property Team in order to ensure value for money. He added that the combination of both acquisition and direct delivery properties was necessary in order to maximise the stock of Council homes. He also said that some of the acquisitions were properties that had previously been designated as shared ownership, which there was a demand for, but as the need for homes for social rent was so acute it had been determined that acquiring them for this purpose was justified. Asked whether sufficient family-sized housing was being acquired, David Joyce said that a lot of family-sized housing was being built in the programme overall and at acquired sites, noting that at the Rosa Luxemburg building which was under construction, a number of ground floor units were being converted to family-sized accommodation adapted to be suitable for severely disabled children. Cllr Diakides commented that the valuations alone could not ensure value for money and that the checks and balances of scrutiny, audit and standards were also required.
• Cllr Barnes asked about the figures provided in Table 9.4 on page 73 of the agenda pack (Draft HRA 5 Year Capital Programme) including:

o   What contingency had been applied to the figures for the New Homes Build Programme relating to the possible risks associated with Brexit. David Joyce said that contingency for this was already built into the schemes on site and that some contractors had already stockpiled the required building materials for example. He acknowledged that contingency had yet to be built into other schemes where contractors had not yet been appointed and so this was a risk that would need to be monitored as disruption was possible.

• • What confidence there was in the value for money in the purchase of equipment under the figures for Fire Safety, as the cost of products such as fire doors could vary considerably, and what contingency has been applied to the figures for Fire Safety given the uncertainty about future regulation relating to cladding. David Joyce said that the HRA business plan included an ongoing plan for fire safety where it was anticipated that more investment would be required in the first three years due to a raft of new regulations expected following the Grenfell fire and this was reflected in the figures in Table 9.4.
  • Why the figure for Market Sales Receipts was zero in 2022/23 but not for any of the other years. Kaycee Ikegwu explained that no schemes were expected to make contributions in 2022/23 due to the timing of completions.
• Referring to paragraph 9.2 on page 66 of the agenda pack which related to the setting of housing rents, Cllr Diakides noted that the rent increases appeared to be lower than previously stated and asked what impact this had on the viability of the HRA. Kaycee Ikegwu said that this was because rent levels were set by Government and not the Council. He said that the rent increase allowed by the Government was set by the Consumer Price Index (CPI) plus 1% and as the CPI at September 2020 was 0.5%, the Council could not raise rents by any more than 1.5% in 2021/22. In terms of the impact on viability, he said that the drop in inflation also had compensatory effects on the HRA which balanced this out, such as the reduction in the cost of borrowing for building. He also noted that the HRA’s financial plan was prudent in planning for lower CPI rates than forecast by the Office for Budget Responsibility so he had confidence that the plan was robust. Cllr Gordon then asked for further explanation on the capital investment referred to in paragraph 9.1.6 on page 66 of the agenda pack. Kaycee Ikegwu referred the Panel to page 73 of the agenda pack, noting that the figures for Existing Stock Investment (Haringey Standard) were heavier in the earlier years. Paragraph 9.1.7 referred to the importance of rent collection in the context of the pressure of this heavy capital investment. The surplus income from the rents is used to help fund capital work, as detailed in the ‘Revenue Contributions to Capital’ section of Table 9.3 (Draft HRA 5-Year Revenue Budget) on page 72 of the agenda pack.
• Asked by Cllr Brabazon and Cllr Gordon about the slippage/underspends in capital projects, David Joyce said that the impact of the pandemic on the delivery of capital projects had been substantial and was the main reason for this. A lot of work was still continuing however, such as at Osborne Grove nursing home and on the acquisition of properties by the Community Benefit Society.
• Cllr Brabazon asked about the impact of the Mayor of London’s new affordable homes guidance which specified that demolitions were not supported. David Joyce said that this approach would apply to the prospectus for the next affordable housing fund, whereas existing schemes such as the Love Lane/High Road West scheme, were funded through the current affordable housing programme. The new guidance could impact on future schemes, though the detail of the new guidance did specify some flexibility that could be applied. Asked when the new guidance would come into effect and how this could impact on the High Road West scheme, Peter O’Brien said that the funding from the affordable housing programme originally expired in March 2022, but this had now been extended by 12 months. Negotiations with the GLA had been continuing over the High Road West scheme and a position was close to being agreed. Announcements on this would take place at the appropriate time followed by a ballot of residents.

 

The Panel considered each individual savings proposal as follows:

 

HO101 – Housing Team Salaries – Increase HRA contribution

David Joyce explained that this proposal involved charging salaries to the HRA. The HfH management fee was unaffected by this and it involved the Housing team doing more work and charging the HRA appropriately for certain types of activity, such as the delivery of more Council homes, which would result in long-term benefits for the HRA.

 

Cllr Diakides commented that, while he had no objections to the procedures that had led to this change, there were wider political concerns about the relationship between the HRA and the General Fund on which he would like to see more scrutiny work.

 

Cllr Brabazon suggested that, given the concerns about the pressures on the HRA, a caveat could be added that there should be transparency and monitoring over the charging of these salaries to the HRA to demonstrate that the proportion of officer time charged related to social housing and benefitted the tenants that pay into the HRA.

 

David Joyce said that there were checks and balances on this and the amount of officer time used on the Housing Programme would be kept under review. Kaycee Ikegwu added that the Finance team asks questions about the proportion of officer time spent on HRA activities and, where this is not clear cut, legal advice was sought. Auditors also examined this and asked for evidence where appropriate and their reports were placed in the public domain. Cllr Brabazon said that the key point was that there should be clear monitoring and apportionment of time and that there had now been assurances on this from officers.

 

HO102 – HfH taking over the lease of PSL properties on their expiry

David Joyce explained that this proposal related to the way that residents were placed in temporary accommodation. When the Council placed residents in temporary accommodation this was funded from the General Fund and there was a limit, set by Government, in the level of rent that could be charged which was paid by the Housing Benefit of the residents. Other parties were able to charge higher amounts, so by transferring the leases to HfH they could charge higher levels of rent and because this is paid by the Housing Benefit of the residents, this does not financially impact the residents.

 

Cllr Brabazon noted that PSLs were to be transferred to HfH but that, according to the savings tracker, PSLs were also being transferred to the Community Benefit Society (CBS) and queried how these were both happening. She also asked why landlord incentives were required, as referred to in page 118 of the agenda pack. David Joyce said that the PSLs were being transferred into the management of HfH but remained within the General Fund. PSLs were also being transferred into the CBS as, in both cases, this provided greater flexibility in the rents that can be charged. David Joyce agreed to supply a more detailed written response on the point about the landlord incentives. (ACTION)

 

Cllr Say queried the point on page 89 of the agenda pack which stated that “rent increases will be met from increased benefits and will have no effect on tenants themselves” commented that it would be more likely to trap tenants on benefits and would make it harder to earn enough to pay a higher rent when returning to work.

 

Cllr Gordon noted from the implementation details on page 89 of the agenda pack that the project was already underway including the recruitment of staff. David Joyce noted that the transferring of PSLs was something that the Council already does and that this was a proposal to make further savings by doing more of it. In response to a question about the staffing for this work, Simon Eversley, Housing Strategy & Commissioning Manager, said that this included staff in both HfH and within his own team administrating the scheme. He added that his position and that of the person lead monitoring it were interim posts. Cllr Gordon expressed concern about this and noted discussions in previous years about reducing the consultancy budget and suggested that a caveat on this point be added to the Panel’s recommendations to the Overview & Scrutiny Committee.

 

Cllr Brabazon said that the transferring of PSLs in previous budgets related to the CBS rather than HfH and that it was unclear how much of the previously agreed savings had actually been achieved so she felt that more clarity was needed.

 

Cllr Diakides expressed concerns that the proposal could involve more costs being shifted to the HRA via the HfH management fee.

 

EC101 – Additional Recharge to Housing Services

David Joyce explained that this proposal was a recharge for the work that the Property Team does, such as valuing properties that the Council was buying back through Right to Buy receipts for example. He emphasised that there was a clear budgetary framework around what could be charged to the HRA and that only appropriate charges were made.

Christine Addison, AD for Capital Projects and Property, said that historically the Property team had not charged the HRA or the Housing team for the work done on their behalf, though charges were made to the Regeneration team. The Property team had been involved in a substantial amount of work on acquisitions relating to Housing Programme. She added that the finance team oversaw the rules that specified what could be charged to the HRA but the point was that these charges had not previously been made.

 

EC102 – Additional Planning income from introducing new charges

David Joyce explained that this proposal involved driving up income in the Planning service through raising pre-application fees to developers. A benchmarking exercise had demonstrated that Haringey Council was not charging as much for this service as some other London Boroughs.

Cllr Say queried how this could be affected by the government’s reported plans to abolish Section 106 agreements. She also noted that the delivery confidence on this proposal was only 3 on the 5-point scale. Rob Krzyszowski, AD for Planning, acknowledged that this was mentioned in the Government’s recent White Paper but said that the plans were not very detailed at this stage and that, even if the plans did go ahead, it would take at least a couple of years and there would still be other forms of financial contributions towards affordable housing that could be used. The level of risk was therefore considered to be low.

Asked about the role of the Carbon Management team in this proposal, Rob Krzyszowski said that the income target related to the Planning team, but that the Carbon Management team’s advice was sometimes drawn upon in relation to planning applications. While this was a relatively small proportion of the target, the proposal overall was to charge developers appropriately for the officer time provided.

Asked by Cllr Brabazon how much of the Planning service’s budget was funded by fees, Rob Krzyszowski said that just over half of the budget came from income which included fees while the rest came from general revenue. In the first few months of the year, income from fees had been lower than expected because of the impact of Covid reducing the number of planning applications. However, this had picked up again in recent months and fee income had recovered to pre-Covid levels.

Asked by Cllr Gordon about the current vacancy for Head of Planning Policy and Transport Planning, Rob Krzyszowski said that this was his normal role but that he was currently acting up as AD for Planning. The AD role was currently being advertised and so he would return to his previous position when this was filled. Asked about timescales for this, David Joyce said that the recruitment process would begin in January. He added that he was confident in the Planning service’s ability to deliver these proposals and noted that it was a high-performing service and had recently been nominated for the LGA Team of the Year. In response to a question form Cllr Gordon, Rob Krzyszowski confirmed that the Building Control team was currently fully staffed.

Asked by Cllr Hare how Tree Protection Order (TPO) work was being funded, Rob Krzyszowski said that this was from fees and noted that his team were working closely with colleagues in Environment and Neighbourhoods to recruit another officer, so work in this area should shortly be better resourced. In response to a question from Cllr Diakides, he confirmed that the intention was for this work to be done in-house rather than through the previous arrangements with Islington Council.

 

EC103 – Reduction in Energy Consumption on corporate buildings

David Joyce explained that, as part of this proposal, the Sustainability Team had been looking at buildings across the corporate estate to identify areas where short-term capital investment could reduce energy costs, such as by replacing boilers or improving insulation.

Asked by Cllr Gordon whether this proposal was achievable, Rob Krzyszowski said that he believed that it was and that by reducing energy bills, and assuming that energy costs were likely to rise further in future, this would also create further savings in the future. Asked about staffing, he confirmed that this would involve recruiting a project manager and while this may be possible to be done internally, decisions on resourcing this had not yet been made.

Asked by Cllr Gordon about the risks and mitigations on this item, Rob Krzyszowski said that, as the detailed work on the buildings had not yet been done, there were possible unforeseen circumstances that could have an impact on costs/savings but that this was not out of the ordinary for this kind of work.

 

The Panel considered the new capital investment items as follows:

Housing (509): CPO – Empty Homes

Cllr Say noted that CPOs were known to be a slow and laborious process. John O’Keefe acknowledged that it was a slow process but noted that the regulations on this required the Council to be able to show that it had the resources to conclude a CPO. This increased budget would therefore enable an increased number of potential CPO processes to proceed at one time.

 

Cllr Gordon said that, as of 2019, she understood there to be 996 long-term empty homes in Haringey, which had increased to 1,355 homes by 2020 and queried whether these were new build homes or older properties. David Joyce said that the vast majority of these were homes within the existing housing stock. Cllr Gordon asked what was driving the increase in empty homes and whether any Council Tax enforcement action was taking place. Cllr Diakides commented that the threat of a CPO was often a prominent mechanism to incentivise action on empty homes. Cllr Gordon requested that further written information be provided to show the breakdown of the empty homes (in terms of new-build and existing housing stock) and what kind of remedial action (such as increased Council Tax rates) was possible and had been taking place before reaching the CPO stage. (ACTION) David Joyce commented that the Council was ambitious about bringing empty homes back into use and that CPOs were an important tool in achieving that. It was also important to be prepared to follow through on the threat of CPO use hence the need for the increased budget.

In response to a question from Cllr Gordon, John O’Keefe clarified that the increase of £5m to this part of the budget would be in addition to the base budget of just over £2m which could be carried forward, subject to Cabinet approval in June 2021.

 

Economy (404): Good Economy Recovery Plan

David Joyce said that this bid involved investment in employment support and town centres. The Panel did not ask any questions on this item.

 

Economy (473): 551b High Road (part of Enterprising Tottenham High Road scheme)

David Joyce explained that this bid was part of a scheme that would deliver important workspace in an existing Council building.

In response to a question from Cllr Brabazon, Peter O’Brien clarified that the focus of this proposal related to Potters House and not Morrison Yard, thought there would be wider public realm improvements. It was further clarified that Potters House was owned by the Council while Morrison Yard was leased by the Council.

 

Economy (453): New workspace scheme at Stoneleigh Road car park

David Joyce said that this bid included capital investment to develop employment space and also deliver Council homes on a number of Council-owned car parks. The Council homes aspect would be appropriately funded through the HRA while the employment aspects would be funded through the General Fund.

Cllr Brabazon expressed reservations about this proposal and suggested that it required further examination, noting that it related to several car parks and that parking would be necessary to support any future improvements to Tottenham High Road.

 

Economy (454): Haringey Adult Learning Service (HALS) Improvement Programme

David Joyce said that this bid was to invest in an improvement programme for adult learning which would include improvements to online teaching but also to the classroom environment. The Panel did not ask any questions on this item.

 

Economy (455): Replacement Cloud based IT solutions for Planning, Building Control & Land Charges

David Joyce said that this bid would address problems with the IT system used by the Planning, Building Control & Land Charges team which was out of date and suffered from multiple outages. The proposal was to move to a cloud-based system which would provide a better service for customers and provide real-time information to residents. The Panel did not ask any questions on this item.

 

 

On other budget related issues, the Panel made the following additional comments:

 

• Cllr Hare asked why the proportion of HMOs brought under licence was still low according to the savings tracker on page 117 of the agenda pack (Item PL1). David Joyce said that this item actually fell under the responsibility Environment and Neighbourhoods Department and so it would be necessary to obtain a response from the relevant team. (ACTION) After some further discussion it was established that while this item was not under the operational responsibility of Housing, Regeneration and Planning, it was included in the Cabinet portfolio of Cllr Emine Ibrahim.
• Cllr Diakides noted that the revenue proposals mainly involved either increases in fees or the transferring of funds from one budget to another. He proposed that, in approving the proposals with relevant caveats attached, the Panel should require a clear process of assessing the relationship between the HRA and General Fund and of the long-term viability of the HRA to ensure that there would be sufficient funds for maintaining Haringey housing estates in future. David Joyce reiterated that the proposals were all based on the HRA Business Plan which was balanced, affordable and based on prudent assumptions. Cllr Diakides said that there hadn’t been any consultation with residents on this. Cllr Gordon indicated that the points made by Panel Members on the HRA would be raised at the Overview & Scrutiny Committee meeting.
• Cllr Gordon noted that reductions to the consultancy budget had been discussed at previous scrutiny meetings and questioned why this had not been included in the budget proposals this year. She suggested that concerns about this should be raised at the Overview & Scrutiny Committee meeting.
• Cllr Brabazon proposed a recommendation to the Overview & Scrutiny Committee that more clarity was needed on the impact of the unachieved savings from 2020/21 on the budget for 2021/22 and beyond. She added that the additional information required should specifically include details on shortfalls and the plans to mitigate.