967
The Deputy Chief Executive and Strategic Housing Lead submitted a report a copy of which had been circulated to each Member together with the resolution and recommendation from the Scrutiny Panel at its meeting on 8 July 2025.
Councillor Dundas attended and, with the consent of the Chair, addressed Cabinet to express concern that despite the length of time this had been in preparation, it had been referred to the Scrutiny Panel the day before Cabinet, which did not allow sufficient time for detailed scrutiny or for further information to be requested. This showed some disrespect to the Scrutiny Panel and needed to be avoided in future. The Business Plan increased the level of debt significantly, whilst reducing the level of service. It also raised rents by more than the rise in the cost of living. In terms of accounting, there was no independent verification as there were no approved accounts for the last four years. Councillors on Scrutiny Panel and Governance and Audit have asked for more information and it was hoped that this would be provided without the need for Freedom of Information requests, otherwise there was little point in referring matters to them. Cabinet needed to look at the detail of the assumptions and modelling and fully understand the implications of the decision.
Councillor King, Leader of the Council and Portfolio Holder for Strategy, explained that he accepted that the gap between Scrutiny Panel and Cabinet in this instance was not ideal and would seek to ensure that there was at least a gap of one week in future. In terms of viability, borrowing for a purpose was entirely acceptable. In terms of added cost to tenants, over recent years the costs had been reduced at the direction of government, but this had not helped the Housing Revenue Account (HRA). Therefore it had been necessary to look at issues such as standards of housing. However, it remained the case the Council was committed to providing a good home at a decent standard to those in need.
Anna D’Alessandro, Section 151 Officer and Interim Chief Financial Officer, was invited to respond on the issue of viability. She explained that she met with Savills and had looked at their processes and assumptions and whilst she was not an HRA expert, she was used to dealing with large budgets, and she had been comfortable with the approach. There were a number of safeguards such as regular reviews and an increased minimum level of reserves set for the HRA.
Philip Sullivan, Chief Executive of Colchester Borough Homes and Strategic Lead for Housing, was also invited to contribute. Whilst the point raised about increasing debt was understood, without intervention the debt in the existing plan would rise to £721 million, and the debt level in proposed new Business Plan was over £250 million less. The debt needed to be looked at in the context of the ability to service the debt and the proposed plan enabled the debt to be serviced. The proposed Business Plan was therefore sustainable, although there were risks to be managed.
Councillor Sunnucks attended and with the consent of the Chair addressed the Cabinet to express concern that he believed a number of fundamental issues had not been addressed. For example, the Business Plan increased the debt over the first five years. Councillors needed to be given access to the model that had been used. It was concerning that councillors were expected to take responsibility for this level of capital spending without seeing the model on which it was based. The Chair of the Scrutiny Panel had requested the model. A presentation of the model was not sufficient. There were a number of issues that caused concern. These included interest cover with an overly optimistic interest rate being used, depreciation and costs. He believed that there was something wrong and Councillors needed to look at it. This was an opportunity to review the model before the Plan was approved. If the model was not disclosed, he would submit a Freedom of Information request. The resolution from the Scrutiny Panel had not been supported by Conservative members, who did not feel that there had been an opportunity for proper and effective scrutiny.
Julia Hovell of Savills was invited to address Cabinet, and explained that the Business Plan was a separate activity to the Council’s statement of accounts. Depreciation was dealt with differently within the HRA compared to the General Fund and the private sector and it had been dealt with in the Business Plan in accordance with HRA regulations. The plan did include significant borrowing, but the level of borrowing had been reduced by reducing the level of investment towards the Decent Homes Plus standard. The level of borrowing would be higher if it sought to maintain the current Just in Time standard. 70% of the borrowing in the first five years related to the delivery of new homes, which would generate new rental income to support the borrowing. The level of interest rates assumed in the plan was lower than the level of gilts at the moment, but was a consolidated rate provided by the Council’s Treasury Team, rather than by Savills. It would need to be kept under review, but there was an expectation that rates would reduce in the future. It would be reviewed every six months as part of the regular review process.
Councillor King sought clarification of Savills view about the request for the release of the model. Julia Hovell explained that this was an unprecedented request but was a decision for the Council. The model had been provided to officers under the terms of the contract with Savills and it was for the Council to determine who was given access to it. It was a complex financial model and therefore the best way of sharing it may be through a supported briefing session. Councillor King stated that the principle of sharing the model was agreed, and the details of how this would be done would be determined later.
Councillor King also sought a view form Savills, as experts in the field and in comparison with other authorities they worked with, whether there was anything that gave rise to material concerns in the Business Plan or in the approach that had been taken to it. Julia Hovell explained that on a comparative basis, she had no reservations. The process that had been followed was very inclusive, with a wide project team and extensive consultation. The assumptions and financial information provided was consistent with that provided by other authorities and the provision of information had been exemplary throughout. There were no concerns with the Business Plan as presented to Cabinet.
Anna D’Alessandro, was also invited to comment further and stressed that the process had been very robust and as Section 151 Officer, she had no immediate concerns. In terms of the points made about depreciation, she had commissioned an expert independent consultant in respect of the HRA, which would include work on depreciation. This would be submitted to the Governance and Audit Committee in due course.
Councillor J. Young, Portfolio Holder for Housing, introduced the report. She thanked the Scrutiny Panel for their robust scrutiny and challenge. There had been no intention to show any disrespect. The Business Plan was based on an unprecedented level of engagement, with both tenants and councillors. Going forward, there would regular six monthly reviews, which would provide ongoing transparency and accountability. This would help the Council respond to the unprecedented level of change in the housing sector. The current plan was not fit for purpose and therefore the decision to approve the new Business Pan should not be delayed. The concerns expressed at this meeting and at Scrutiny Panel about the accounting were noted, but these had been addressed by Savills, who were industry leaders who also supported 40 other local authorities, and who had explained that the Council’s approach had been exemplary.
There were a number of key challenges in the sector, including rising costs, inflation, a new regulatory regime, Awaab’s Law, capped rent increases and the new Business Plan would help the Council address these. Whilst the new plan did take £130 million out of the Plan, there was extra contingency provided. Both Savills and the Council’s officers had provided rigour, expertise and reassurance in responding to the issues that had been raised and thanks were expressed to them for their work in bringing the Plan forward. It was commended to Cabinet.
In discussion Cabinet members raised several points as follows:
• The importance of housing as an issue, and the number of families in temporary accommodation and on the housing waiting list.
• The benefits of Colchester Borough Homes as an ALMO and the vital services it provided, such as the financial inclusion work.
• The Business Plan addressed the issue of triangulation by reducing overall debt, whilst providing more housing and maintaining a decent standard of housing. It was financially sustainable.
• The current Business Plan was not fit for purpose, partly as a result of the parameters put on the Council by central government. The absence of a fully up to date HRA had been an issue of real concern to Governance and Audit Committee in particular.
• The importance of the six-monthly reviews, which would enable close monitoring of the HRA and early identification of any issues.
• The role of Councillors was to ensure governance and provide direction and not to impinge on the role of professional expert officers.
• The direction of travel in terms of audited accounts was positive.
• The sharing of the model with all Councillors would provide reassurance.
• The wide-ranging consultation and involvement of tenants in developing the Business Plan.
• The excellent work undertaken by the Council’s officers and the significant reassurance provided by Savills and the Section 151 Officer.
The recommendation from the Scrutiny Panel in respect of the timing of Scrutiny and Cabinet meetings was agreed and the positive resolution of support for the Business Plan was noted.
RESOLVED that:-
(a) The revised Housing Revenue Account Business Plan 2025 to 2055 be approved.
(b) When setting the calendar of future committee meeting dates, more time be provided between Scrutiny Panel meetings and the Cabinet meetings which follow them.
REASONS
The HRA Business Plan set out the Council’s strategic plan for managing and maintaining the Council’s social housing stock. It set out in detail the Council’s short to medium term plans and priorities for its housing and asset management services (5 years) and provided a long term (30 year) forecast on stock investment and financial planning.
ALTERNATIVE OPTIONS
To continue with the existing plan but this was forecast not to be viable in the longer term and was out of date due to changes in legislation and regulation. It did not reflect the Council’s current priorities for delivery of new affordable housing or maintaining its existing stock.