Agenda item

The Finance Manager’s report presented to the Board the draft revenue and capital budgets for 2026/27 relating to the Housing Revenue Account (HRA).  Recommendations from the meeting would be presented back to Cabinet on 4 February 2026 to finalise the 2026/27 budget proposals to recommend to Council.

The HRA recorded expenditure and income on running the Council’s housing stock and related services and facilities which were provided primarily for the benefit of the Council’s own tenants.  The HRA was a ring-fenced account within the General Fund, with strict legal and accounting rules to maintain separation from the General Fund.  The HRA must always remain in surplus, and this needed to be considered when setting each year’s budget and future planning.  The Finance Manager’s report explained what was considered as capital and revenue and that the Council was allowed to borrow to fund capital expenditure, but not revenue without specifically required central government permission.

The key revenue budget areas and general spending categories set by the Chartered Institute for Public Financial Accountability (CIPFA), and a brief summary of what was included in each was set out in the report:

·        Income.

·        Repairs and maintenance.

·        Supervision and management.

·        Other expenditure/special services.

·        Capital charges.

The HRA was currently considered to be stable but continued to face, significant financial pressure in the medium to longer term.  These pressures were being seen in other stock holding local authorities and arose from a range of factors including:

·        A high stock investment requirement.

·        Increased consumer and regulatory standards including new legal duties relating to damp and mould.

·        General inflation.

·        Net zero expectations.

·        Disrepair claims.

·        Complaint resolution.

·        High void and decant costs.

In recognition of this the Council had developed a strategic plan to address the immediate pressures and ensure a long-term sustainable business model was in place to ensure it could provide safe, warm and regulatory compliant homes.

A financial sustainability / efficiency plan was in place to address and respond to the short-term financial pressures facing the HRA. This plan set out a range of measures to increase income and deliver savings over the next 5 years and included recommendations from the Chartered Institute of Public Finance & Accountancy (CIPFA), who undertook a health check of the HRA in 2024/25.

Savills, a market leading property consultancy, had also undertaken a business plan and options review. This led to the development of a 30-year Business Plan Financial Model which underpinned immediate and longer-term budget setting decisions. This model underpinned budget setting for 2026/27 and would form the basis of a formally published 30-year Business Plan in 2026.

An Asset Management Strategy was also under development and would outline investment priorities over the medium term. This would reflect the findings of the stock condition survey completed in 2025 and would outline how the Council would effectively manage its assets ensuring investment was targeted and efficient.

Overall HRA income was expected to be £140k above the Business Plan target. The

majority of the increase arose from a planned increase in service charge income. Total HRA costs were budgeted to be around £518k below the Business Plan target. The majority of saving in the current year derived from a reduction in repairs expenditure from improved contract management.  The overall 2026/27 budget achieved a net positive position of + £658k above the Business Plan target.

The proposed capital budget priorities for 2026/27 had been influenced and informed by the stock condition survey and Business Plan review and included:

·        Addressing category 1 and 2 hazards.

·        Tackling damp and mould.

·        Continuing to ensure regulatory compliance.

·        Increasing the number of Decent Homes.

·        Reduced responsive repairs through planned investment programmes.

·        Addressing major repair works.

·        Reducing void turnover times.

·        Development and acquisition of new affordable homes.

The proposed capital programme amounted to a significant investment in the Council’s housing stock.  The investment would result in a substantial level of additional borrowing and an increase in the overall HRA debt burden.  The servicing of the debt would be met from within the HRA revenue budget and therefore create further pressure on revenue in future years.  The additional interest expense burden would be offset by efficiencies, savings, income generation and strategic asset disposals.

The Director – Finance informed the Board that the budget for 2026/27 presented a good picture, but there continued to be future pressures and investment requirements of the housing stock doing forward.  It was noted that the information contained in the report was compared to the 2025/26 budget, not the actual current position of the 2025/26 budget.  The Director – Finance reported that internal monitoring indicated that the budget was on target, with a capital underspend currently.   This would need to be monitored in terms of delivery of the capital programme.

The HRA business plan would be presented to the next meeting of the Housing Review Board and a workshop session would be run for members in advance.  The 30 year business plan would come alongside the asset management strategy.

RECOMMENDED:  that the draft revenue and capital estimates are approved by the Housing Review Board and recommended to Cabinet to finalise the 2026/27 budget proposals.