The Council’s Revenue and Capital Budgets

Welcome to this latest version of Wealden’s General Fund Medium Term Financial Strategy covering the period 2021-2026.

Wealden District Council (“The Council”, “Wealden”, “we”, “our”) is operating in an environment of greater uncertainties than any other year as a result of the Covid-19 crisis. As a result financial planning is becoming increasingly complex, requiring multiple variables to be balanced in an environment of increasing uncertainty. Having a thorough understanding of the financial outlook and the associated impact on the organisation’s ability to achieve its strategic objectives is an essential starting position for future planning and ensuring sustainability. Resources are becoming scarcer, which coupled with increasing pressures and demands on services, makes it more challenging to ensure that resources are effectively targeted.

This Medium Term Financial Strategy (“MTFS”) sets out how the Council will use its financial resources to underpin the strategic priorities within the Corporate Plan, and builds on its track record of:

• Managing growth to meet future needs;
• Protecting and enhancing Wealden’s unique rural character and environment;
• Supporting our local economy and local businesses;
• Generating sustainable sources of income to invest in local priorities; and
• Helping to improve connectivity and access to services for all our communities.

It is the Council’s commitment to use the financial resources it employs over the coming years to make a positive difference to the area and its residents, and achieve value for money.

Since 2010 the Council, alongside the majority of other local authorities, has experienced unprecedented financial challenges in various forms and has had to adapt to:

• The impact of Central Government funding reductions;
• The Coronavirus (‘’Covid-19’’) pandemic which has reshaped the Council’s services and changed the way Wealden’s residents live, work and socialise;
• The local impacts of the economic crisis and Covid-19 pandemic affecting jobs, housing and business growth, which has in turn created pressure on the generation of local income streams and incurring additional costs;
• The national impacts of the economic crisis and Covid-19 pandemic on the financial markets and subsequent low returns on investments;
• The local impacts of the economic crisis and Covid-19 pandemic creating a rising demand, and increased cost pressures, for council services from customers who rely on the safety net provided by local government; and
• The impact of the vote to leave the EU and the consequent impact on the economic and political landscapes.

During this same period the basis on which local government is funded has undergone radical reform, heralding a new era where local government is funded from local taxes with limited reliance on Central Government. This new methodology for funding local government is inextricably linked to the performance of the local economy via business rates, new homes bonus funding arrangements, council tax and local council tax reduction schemes, and Housing Revenue Account Self-Financing.

Each change to the funding brings new elements of uncertainty and volatility. However, it does present opportunities for local authorities with the freedom from and removal of reliance on Central Government and a key stake in the financial prosperity of its local economy. The Government’s one-year spending review for 2021-22 (“Spending Review 2020”) announced by the Chancellor on 25 November 2020, as opposed to a multi-year review and subsequent 2021-22 Local Government Finance Settlement, provides further longer-term financial uncertainty as to the level of funding the Council will receive.

In response to this environment the Council has delivered a track record of strong financial discipline. Planning ahead, undertaking a transformation programme which secures savings in advance, re-investing in more efficient ways of working, adopting a more commercial approach, whilst making careful use of reserves to meet funding gaps and mitigate risks, is an approach that has served the Council well.

The Council’s successful financial management to date has enabled the protection of core services for the people of Wealden while at the same time allowing the redirection of resources to the priority areas in the Corporate Plan, and the MTFS 2021-22 to 2025-26 builds on this approach. This MTFS will be kept under constant review and will need to adapt in response to new risks and opportunities during this unprecedented period of uncertainty and change.

Laurence Woolven

Head of Finance (S151 Officer)

Background

The purpose of this MTFS is to set out the overall framework on which the Council draws together the strategic planning priorities, demand and resource forecasts and impact of the wider service delivery environment to produce a costed plan for the impact of proposed policies and plans on the longer-term financial sustainability of the Council. The MTFS pulls together in one place all known factors affecting the Council’s financial position and financial sustainability over the medium term (i.e. over a five year period).

In order to achieve its priorities the Council has a clear and robust financial strategy which focuses on its long term financial sustainability. The MTFS does this by balancing the financial implications of objectives and policies against constraints in resources and provides the basis for decisions to be made about its finances.

The MTFS integrates revenue allocations, savings targets, reserves and capital investment, and provides a budget for 2021-22 upon which the 2021-22 Council Tax level (General Fund) and rent levels (Housing Revenue Account(‘’HRA’’)) are determined, and sets out the forecasts for the period 2022-23 to 2025-26.

Whilst the purpose of this MTFS is to provide a costed plan over the period 2021-22 to 2025-26, it must be recognised that this plan becomes more uncertain the further out in time the forecast moves. However, uncertainty is more of a reason to produce a MTFS as the identification of potential longer-term revenues and expenses and the key risks associated with those forecasts and income and expense streams provide valuable insight for the Council and aids decision making.

The MTFS is a living document that forms the basis of the Council’s fiscal strategy. Inevitably the Council’s plans will need to evolve and develop in response to new financial opportunities and risks and new policy directions during the period of the Strategy and the dynamic nature of local government funding. Therefore, the Strategy will be reviewed on a regular basis and at least annually.

The MTFS is underpinned by a sound finance system, coupled with a solid internal control framework, sufficiently flexible to allow the Council to respond to changing demands over time and opportunities that arise.

Objectives

This MTFS seeks to achieve a number of specific objectives:

• Ensure the Council’s limited resources are directed to achieving the vision and strategic priorities within the Council’s Corporate Plan and HRA Business Plan;
• Ensure the Council maintains a sound and sustainable financial base, delivering a balanced budget over the life of the MTFS;
• Provide a range of good quality services that people expect, and offer excellent value for money;
• Deliver key projects that enhance quality of life and wellbeing across Wealden, thoughtfully generating reasonable income streams in line with our Commercial Strategy to achieve a financially stable and self-sufficient council;
• Maintain our measured, professional approach to managing the Council’s finance and investments, and continue to develop our enterprise culture for the benefit of the District as a whole;
• Deliver more by working with partners, continue to extend our use of technology, minimise transaction costs and sustain customer satisfaction;
• Growing the Council Tax and Business Rates tax base, whilst ensuring that Council Tax rate increases are kept an acceptable level;
• Ensure the Council maintains robust, but not excessive, levels of reserve and balances to address any future risks and unforeseen events without jeopardising key services and the delivery of outcomes; and
• Continue to manage down the Council’s recurrent cost base, in line with reductions in overall resources by ensuring the provision of efficient, effective and economic services which demonstrate value for money.

In order to set the framework for the Council’s approach to policy and financial planning it is important to understand the potential impact of the Covid-19 pandemic, economic conditions and overall national policy context, as well as the policy and delivery priorities for the Council over the MTFS period.

Local Priorities

This MTFS is central to identifying the Council’s capacity to deliver its local priority outcomes and it reflects:

• The Council’s current financial position and outlook.
• The Council’s overall financial strategy, including use of reserves.
• Internal and external pressures which may influence the council’s financial position.

The following sub-sections set out the local context and priorities, that we have had regard to in producing a costed plan over the period 2021-22 to 2025-26.

Wealden as a Place:

Wealden is the largest local government district in East Sussex covering 323 square miles and has a population of 160,175[1]. Half the population live in five main towns: Crowborough, Hailsham, Heathfield, Polegate and Uckfield. The rest live in villages and hamlets in some of the most attractive countryside in the South of England.

With two-thirds of the district covered by the High Weald Area of Outstanding Natural Beauty and the South Downs National Park, as well as 41 conservation areas (33 of which are administered by the Council) and 2,241 listed buildings, Wealden has to place a high value on protecting the environment.

Wealden has 8,495 businesses, with small and micro businesses forming a fundamental part of the Wealden economy. 91.3% of Wealden’s businesses employ fewer than 10 people[2].

The largest proportion of business enterprise in the District is in the Professional, Scientific & Technical category at 16.5% followed by construction at 14.5%[3].

Just under a quarter (23%) of the population of the District is traditional retirement age or above (65+).

Three quarters (78%) of Wealden residents own their home; more (44%) own it outright than do through a mortgage (34%).

90% of Wealden residents are happy with where they live, and 76% happy with the way the Council is run – nationally the figures are 79% and 61% respectively.

Financially Stable and Self-sufficient Council:

To avoid cuts to services, the Council continues to explore alternative options of service delivery to ensure that services remain fit for purpose in the context of smaller budgets. This may mean revisiting the expectations of residents in order to protect services for the most vulnerable. It is also an opportunity to work with partners and neighbouring authorities to maintain and improve outcomes against a back drop of reducing public spending.

A key component of the Council being financially stable and self-sufficient, is the Council’s Commercial Strategy which provides a framework for activities that:

• Form an essential part of the solution to the funding gap, which has arisen due to public sector budget cuts, a restructuring of how local authorities are funded and increasing demographic pressures;
• Potentially lead to the generation of disposable income, to provide additional resource to meet the Council’s ambitions and statutory duties for Wealden as set out in other strategies and plans; and
• Deliver functions, services and outputs that bring benefits to local people and in doing so helps meet Corporate Plan objectives.

Partners and the Community:

In line with the values from the Corporate Plan to “deliver more by working with partners”, the Council continues to work with those partners, as well as service users and our communities, to protect and deliver services in new ways:

• Parish and Town Councils – have been proactive in identifying services important to their local communities and working with the District Council and other bodies on local priorities. For example, Mayfield and Five Ashes Parish Council has agreed to commit funding towards a proposed community facility in conjunction with a new doctors’ surgery to be built with funding by Wealden District Council;
• The voluntary sector – has also been keen to deliver services with 16 organisations operating service level agreements with the Council in 2019/20 with £0.271 million of Council funding;
• Wealden Strategic Partnership – is a non-statutory, multi-agency body, which matches Wealden District Council boundaries, and brings together the different parts of the public, private, community & voluntary, and special interest sectors to work to help improve the life of the residents of Wealden;
• Safer Wealden Partnership – brings together a number of agencies from the public, private, education and voluntary sector to improve people’s lives in the area by working together to reduce the levels of crime and anti-social behaviour and to manage the fear of crime;
• East Sussex Strategic Partnership – brings together different parts of our local community – public services, local businesses, community groups, voluntary sector organisations and local people. The Partnership helps organisations and individuals work together in a co-ordinated way to plan local services, tackle the issues that matter to local people and improve quality of life in East Sussex; and
• Sussex Weald Homes Limited – An initiative to contribute towards the self-financing objective was the Council setting up Sussex Weald Homes Limited in December 2017, a 100% owned subsidiary to build properties that will be rented or sold to the Council and privately, and acquisition of commercial properties.

Corporate Plan 2019-23:

The Council’s Corporate Plan sets out our direction and priorities for the next four years, building on our previous Plan 2015-19.

The Council’s vision for the future is:

We will continue to work with our partners to support Wealden’s communities, environment and economy with:

• Engaged, resilient, active communities;
• Access to suitable housing, local jobs, services, facilities, leisure and recreational opportunities;
• Sustainable economic growth; and
• Sound business management.

We aim to:

• Protect and enhance Wealden’s high quality natural environment and heritage;
• Promote a better quality of life for Wealden people through activities that improve health, resilience and well-being;
• Improve access to essential services for all our communities;
• Ensure development meets future needs, with associated investment in infrastructure;
• Take advantage of opportunities to promote new, cleaner technologies;
• Work with partners to regenerate our diverse market towns, creating jobs and attracting investment;
• Support our local businesses and entrepreneurs to achieve a locally sustainable economy; and
• Generate ongoing sources of income to reinvest in local priorities and optimise funding from external sources.

Our strategic priorities for Wealden over 2019-23 cover four themes:

1. Communities

We want people in Wealden’s communities to have the opportunity to enjoy an excellent quality of life through:

• Active, healthy and fulfilling lifestyles;
• Access to good health care;
• Safe environments for all ages;
• Positive democratic engagement;
• Strong community leadership;
•  Skills that match local opportunities and worthwhile jobs;
• Thriving community clubs, sport, recreation and leisure; and
• Good housing local people can afford, in places they want to live.

2. Environment

We are steadfast in our duty and desire to protect Wealden’s beautiful landscape. We want people in Wealden to be able to access and enjoy the outstanding natural beauty and heritage of our landscape and environment, including conservation areas. Also, for residents to live in good quality housing that integrates harmoniously.

Key strands:

• Planned growth that respects our environment;
• Ongoing improvements to infrastructure;
• Working with partners for more renewable energy use;
• Securing sustainable growth in our towns and villages;
• Accessible open spaces close to homes and workplaces;
• Increased action within communities to improve the environment;
• Harnessing our natural resources for sustainable rural enterprise;
• Valuing our green spaces and biodiversity assets;
•  Conserving and enhancing the character of our rural areas; and
• Managing the street scene.

3. Local economy

We want Wealden businesses, communities and residents to thrive and prosper in the District. We are committed to planning and promoting opportunities for sustainable growth through:

• Vibrant town centres and villages;
• Business innovation in a green environment;
• Promoting Wealden as a tourist destination;
• Stimulating high quality tourism experiences;
• Better broadband, 4G and 5G connectivity;
• Appropriate employment spaces;
• Leveraging funding into the District;
• Working with the South East Local Enterprise Partnership;
• Supporting local businesses, the Chambers of Commerce & the Federation of Small Businesses; and
• Re-balancing the housing market to reflect local needs.

4. Sound business management

Wealden will continue to be a well-run Council, well thought of and respected by our residents, peers and partners.

We will:

• Provide the range of good quality services that people expect, and offer excellent value for money;
• Deliver key projects that enhance quality of life and wellbeing across Wealden, thoughtfully generating reasonable income streams in line with our Commercial Strategy to achieve a financially stable and self-sufficient council;
• Maintain our measured, professional approach to managing the Council’s finance and investments, and continue to develop our enterprise culture for the benefit of the District as a whole; and
• Deliver more by working with partners continue to extend our use of technology, minimise transaction costs and sustain customer satisfaction.

National Priorities

The following sub-sections set out the national priorities, that we have had regard to in producing a costed plan over the period 2021-22 to 2025-26.

Covid-19:

The immediate priority for Central Government is providing businesses and individuals with financial support during the Covid-19 pandemic (and administered by Council’s), and protecting vulnerable people.

The significant levels of public sector debt as a result of Central Government spending to support the economy during the Covid-19 pandemic, as well as lower tax receipts, will need to be repaid and could lead to significant reductions in grant funding over the medium term.

Housing, Infrastructure and Other Services:

The Government’s ambition is to increase the numbers of new homes built to 300,000 per annum by the middle of the 2020s.

In March 2020 the Government announced a wide breadth of measures in the Ministry of Housing, Communities and Local Government (‘’MHCLG’’) briefing paper ‘Planning for the Future’, to provide local authorities with greater funding for infrastructure, ensuring that those who strive to build enough homes for their communities and make the most of brownfield land and urban areas are able to access sufficient resources. These measures included:

• Investing another £1.1 billion in local infrastructure to unlock almost 70,000 new homes;
• A new £10 billion Single Housing Infrastructure Fund; and
• Reforming the New Homes Bonus (‘’NHB’’) to reward delivery[4].

Following the briefing paper, MHCLG issued a consultation white paper in August 2020, which covered a package of proposals for reform of the planning system in England, covering plan-making, development management, development contributions, and other related policy proposals. The consultation has proposed to replace the Community Infrastructure Levy (‘’CIL’’) and Section 106 planning obligations with a new consolidated Infrastructure Levy, which is charged as a fixed proportion of development value above a set threshold. Subject to the outcome of the consultation, The Government will seek to bring forward legislation and policy changes to implement the reforms.

The Spending Review 2020, on 25 November 2020 included announcements on the following policies and programmes that are relevant to local authorities:

• £16 million to support modernisation of local authorities’ cyber security systems;
• £254 million of additional resource funding to support rough sleepers and those at risk of homelessness during COVID-19, including £103 million announced earlier this year for accommodation and substance misuse support;
• £165 million for Troubled Families;
• £60 million for Social Housing Decarbonisation;
• £621 million to regenerate high streets, town centres and communities through the Towns Fund; and
• £4 billion levelling up fund, which will invest in local infrastructure that has a visible impact on people and their communities and will support economic recovery.

HRA: On 29 October 2018, the government confirmed that the HRA borrowing cap was abolished with immediate effect. As a result, local authorities with an HRA are no longer constrained by government controls over borrowing for housebuilding and are able to borrow against their expected rental income, in line with the Prudential Code.

Local Government Funding

The Central Government aim through funding reforms (i.e. localised business rates) is to significantly reduce reliance on central grants (i.e. Revenue Support Grant) and move councils to be self-financing. This has required council’s to focus on more local self-sufficiency through other forms of local income generation, such as:

• Council Tax rate increases, within prescribed referendum limits;
• Increases to fees and charges;
• Widening the scope of fees and charges by introducing charges for services not previously charged for;
• Increasing trading activities to generate surpluses for reinvestment, including the establishment of trading companies; and
• Look at ways of commercialising existing services and seeking opportunities to ‘sell’ goods and services externally.

Fair Funding Review and Business Rates Retention Scheme

The fair funding review aims to provide updated formulas for assessing councils’ spending needs, and it will change how central grants are distributed between Councils. The outcomes of the fair funding review are to be implemented alongside the introduction of 75% business rate retention.

The Secretary of State for MHCLG announced in April 2020 (and reaffirmed in the Spending Review 2020), that the fair funding review and changes to the business rates retention scheme due to be implemented from April 2021, were to be postponed because of the Covid-19 pandemic. No date was provided as to when the review will be implemented, but the Secretary of State stated that the Government are committed to reforming the funding framework for local government so that it is simpler, more up to date, and more transparent. The Government has established a steering group and a number of working groups, chaired jointly by MHCLG and the Local Government Association, to develop these reforms.

Business Rates Revaluation

In July 2020, Central Government confirmed that the 2021 revaluation would be postponed to reduce uncertainty for businesses.  Central Government has announced that the next revaluation is likely take effect in 2023. To enable the next revaluation to reflect the impact of Covid-19 more closely, this revaluation will be based on property values as of 1 April 2021.

Fundamental Review of Business Rates

In the Budget 2020 (11 March 2020), Central Government published the terms of reference for a fundamental review of the business rates system to be carried out by HM Treasury. This review is wide-ranging: it will consider all elements of the current system, as well as exploring the potential strengths and weaknesses of alternative property and online taxes put forward as possible replacements for rates, as recommended by the Treasury Select Committee in its report of 31 October 2019. The reviews final conclusions are expected in Spring 2021. This could lead to big changes in the design and yield of the tax, which would matter greatly for local government given that it currently contributes around 30% of non-schools revenues.

Covid-19 Pandemic

The impact of Coronavirus (‘’Covid-19’’) pandemic on the Council was first felt towards the end of March 2020, and continues to have an effect in the 2020-21 financial year. In 2020-21, the Council is experiencing substantial losses across many of its largest streams of income. These include council tax and business rates, building control fees, commercial rents and licensing fees. As with any recession, investment income is reducing which will create further pressures on the Council’s finances. On the expenditure front, some of the key areas of additional pressure include accommodation and support for rough sleepers – some of whom may not have required our support previously, shield and hub costs to protect and support our vulnerable residents, and additional staff costs to cope with the increased demand for some services i.e. revenues and benefits. Whilst Central Government has provided emergency Covid-19 funding to the Council for 2020-21 and 2021-22 this funding does not cover all the financial pressures.

It is uncertain if these losses will continue over the period of the MTFS (i.e. 2021-22 to 2025-26), in addition to the potential adverse impact on the growth of the council and business rate tax base.

In the Spending Review 2020, the Chancellor announced that current sales, fees and charges scheme (which refunds 75% of eligible income loss beyond a 5% threshold) is being extended on a pro-rata basis into the first three months of 2021-22. In addition, councils will receive £670 million of unringfenced grant funding to enable them to continue reducing council tax bills for those least able to pay, including households affected by Covid-19.

The Council has sought in recent years to build up the General Fund reserve balance to ensure the Council is financially resilient. The Council is therefore in a position to draw upon its General Fund reserve balance to balance its budget (within a certain tolerance level) if required.

It is also uncertain over the period of the MTFS if Central Government will be providing further support to businesses and individuals, through schemes that are administered by Wealden on behalf the Government and how these schemes would financially impact the Council.

It is important to note up front that the next few years are particularly uncertain economically and fiscally. There are a number of questions where definitive answers cannot be provided. How high will unemployment rise, how quickly and fully will the economy recover, and what will this mean for councils’ revenues? To what extent will changes in service provision made in an effort to control the Covid-19 pandemic continue, and what will this imply for service delivery costs?

The Public sector finances are increasingly coming under pressure, due to the significant increase in government spending to support the economy during the Covid-19 pandemic, as well as lower tax receipts. The Office for Budget Responsibility’s (“OBR’s”) Economic and fiscal outlook, published on 25 November 2020 (alongside the Spending Review 2020) puts these pressures into stark focus with the following forecasts/expectations:

• Economic outlook remains “highly uncertain”;
• GDP[5] to shrink by 11.3% in 2020;
• Unemployment rate to average 4.4% across 2020, rising to 7.5% at its peak in Q2 2021-21. The unemployment rate is then projected to fall to 4.4% by 2025; and
• Borrowing peaks at £393.5 billion[6], 19.0% of GDP in 2020-21, the highest peacetime level on record, before forecasting to fall to 3.9 per cent in 2025. However, borrowing costs continue to be very low, driven by interest rates that are low by historical standards, making the current costs of servicing this increase in debt affordable.

Provisional estimates indicate that the £173.7 billion borrowed in the first five months of 2020-21 (April to August 2020) was just over three times the £55.8 billion borrowed in the whole of 2019-20.[7]

The economic outlook forecast[8] by the Council’s Treasury Management Advisors, Arlingclose, highlights the follows:

• While the strict initial lockdown restrictions have eased, coronavirus has not been supressed and second waves have prompted more restrictive measures on a regional and national basis. This ebb and flow of restrictions on normal activity will continue for the foreseeable future, at least until an effective vaccine is produced and importantly, distributed;
• However, the scale of the economic shock to demand, ongoing social distancing measures, regional lock downs and reduced fiscal support will mean that the subsequent pace of recovery is limited. Early signs of this are already evident in UK monthly GDP data, even before the latest restrictions; and
• This situation will result in the Bank of England maintaining low interest rates for the medium term. In the UK, the EU Exit is a further complication. Bank Rate is therefore likely to remain at low levels for a very long time (currently 0.1%), with a distinct possibility of being cut to zero. Money markets have priced in a chance of negative Bank Rate.

The Consumer Price Index (‘’CPI’’) fell to 0.3%[9] in November 2020, and is further below Central Government’s target rate of 2%, with the Retail Price Index (‘’RPI’’) standing at 0.9%[10] in November 2020. Both indexes are anticipated to remain low for the foreseeable future[11].

Pressures loom in 2021-22 and beyond. Firstly, falls in council tax and business rates collected will have to be reflected in the following years. Secondly, tax collections and potentially income from sales, fees and charges and commercial activities could remain depressed looking forward, as higher unemployment pushes up the cost of council tax support (‘’CTS’’) schemes and changed consumer behaviour impacts the viability of high streets. Thirdly, a range of spending pressures could persist (or arise) as some services see increased costs and demands, and councils’ pension schemes are revalued in April 2023.

Spending Plans

This MTFS is central to identifying the Council’s financial capacity to deliver its vision and strategic priorities within the Corporate Plan 2019-23, and requires a balance to be struck between the need to support the delivery of the vision with the need to maintain a sustainable financial position. Striking the correct balance between these two requirements becomes ever more difficult in the challenging financial context in which the Council operates. This is compounded by Government funding reductions, the impact of Covid-19, and the localised business rates funding which is subject to uncertainty and volatility.

The Council’s Corporate Plan is supported by a programme of work containing a range of projects that will meet each of the four strategic themes. In the absence of any new Government funding and in the context of the impact of Covid-19, general cost pressures, and savings underpinning the MTFS, the resources to finance these projects have been made possible by allowing the redirection of resources to the priority areas as well as seeking external financial support in the form of grants and contributions.

It should be noted that the full financial implications of the Hailsham Aspires major project, have not been reflected in the costed General Fund Revenue Summary and Capital Programme 2021-22 to 2025-26, because the project is being developed.  At the point when a full business case has been assessed and finalised to demonstrate that the capital investment is affordable and sustainable, the full revenue and capital implications will be built into future iterations of the MTFS.

Spending Pressures

A review of the financial pressures facing the Council over the period of the MTFS has been undertaken. This information has been drawn from a Star Chamber budget challenge process involving members of the Council’s corporate management team, heads of service and budget holders. This challenge process had regard to the experience of previous years, the current economic climate and local and national issues that are likely to influence the financial outcomes.

Inflation – Pay and Prices

The General Fund MTFS follows the Spending Review 2020 announcement on a public sector pay ‘pause’ for 2021-22, except for those earning less than the full-time salary equivalent of £24,000 who will receive a £250 per annum increase (full time equivalent).  Thereafter an allowance has been included for a 2% pay award for staff in 2022-23 to 2025-26, plus an estimate of staff increments.

Automatic inflationary increases of budgets are not provided for all goods and services, instead individual inflation rates have been applied for specific items of expenditure (i.e. contracts), all remaining areas of expenditure are maintained at the previous year’s levels, which is in effect a real terms reduction in spending power.

Revenue implications of the General Fund Capital Programme 

In section 4. ‘General Fund Capital Programme’, the expenditure for major projects such as Hailsham Aspires – phase 1, Crowborough Leisure Centre Teaching Pool and the development phase of Knight’s Farm, has been built into general fund capital programme. This has the following implications for the General Fund – revenue.

• Interest Payable on External Loans – Capital expenditure totalling £8.8 million is anticipated to be funded from borrowing and the interest payable associated with this additional borrowing has been built into the MTFS.
• Minimum Revenue Provision (“MRP”) – As detailed in the Council’s Capital Strategy which will be approved in February, there is a proposal to change the method of charging MRP[12] from 2021-22, to better match the repayment profile to how the benefits of assets financed by borrowing are consumed over their useful life. This change will provide some budget headroom over the medium term to cushion the additional MRP from the increase expenditure in the General Fund Capital Programme (i.e. Hailsham Aspires) that is funded from borrowing. In line with the Council’s MRP policy[13] whereby MRP is charged in the year following when assets become operational, MRP has not been reflected in the MTFS, because it is anticipated the Hailsham Aspires properties will not become operational during the period of the MTFS i.e. before the end of 2025-26.
• Capital Expenditure Charged to Revenue – In 2021-22 and 2022-23 there is an increase in the amount of revenue that is being used to fund the capital programme. However, the impact of this is partly negated on the General Fund through the receipt of the New Homes Bonus grant, and the contribution from earmarked reserves i.e. Capital Investment Fund.

Resources

Business Rates

The MTFS has assumed that Wealden will continue being part of the existing East Sussex Business Rates Pool based on a 50% rate retention, over the period 2021-22 to 2025-26, the agreement to pool is one that is reviewed on an annual basis. The agreement to continue the existing East Sussex Business Rates Pool for 2021-22 was made in early January 2021.

At budget setting 2020-21, business rates for 2021-22 were estimated to reduce to £3.3 million, this has improved significantly since then to an estimated £4.5 million, however then drops off in future years, as previously estimated. The reduction in business rates, which is now expected to be between 2021-22 and 2022-23, is due to the anticipated reset of business rates in 2022-23 (delayed from 2020-21).  This delay to the reset is consistent with the Spending Review 2020 announcement that reaffirmed MHCLG announcements earlier in the year regarding a delay to the implementation of the fair funding review and the move to 75% business rates retention. As part of the reset, the Council will lose any growth it has built up since the last baseline reset in 2013-14. In effect, the Council has benefitted from keeping its growth since 2013, and this reset redistributes the growth. This is a result of how the current redistribution system was designed and implemented in 2013.

The MTFS currently reflects our predicted worst case scenario, as there a number of unknowns that may occur between now and 2022-23 including the reset being delayed further (post 2022-23), the government giving some form of transitional relief to those who lose out and also the impact of the fair funding review and any impact this may have on the reform of the business rates system. The estimates will be reviewed throughout the remainder of this year and through next year ahead of setting the budget for 2022-23.

As part of the measures put in place to help councils during the Covid-19 pandemic the Government announced additional legislation in early November, the Local Authorities (Collection Fund: Surplus and Deficit) (Coronavirus) (England) Regulations 2020, which allows councils to spread the estimated 2021-22 collection fund deficit equally across the next three years. The business rates estimate within the MTFS takes this into account.

Council Tax

The Council’s main income stream is from Council Tax. The Localism Act 2011 introduced a power for residents to approve or veto excessive council tax increases. This means that any local authority setting an excessive increase as set by the Secretary of State would trigger a referendum of all registered electors in their area. The 2% referendum threshold for 2021-22 was highlighted in the Spending Review 2020. MHCLG subsequently confirmed the 2021-22 referendum threshold for shire Districts (which includes Wealden) at 2% or £5.00 whichever is higher[14].

In light of the financial position of the Council and mindful of the potential referendum thresholds the MTFS assumes the following indicative council tax increases and subsequent overall yields:

The council tax base estimate has been produced based on the Council Tax Base (“CTB1”) return completed in September 2020 and adjusted for loss of collection and estimated new builds coming on board in 2021-22. This has been calculated in accordance with legislation in December 2020 and the MTFS has been updated.

Actual council tax increases will be decided on an annual basis taking into account financial circumstances of the Council at the time, the level of resources available and the referendum limits set by Government for each respective financial year. Annual increases remain subject to the decision of both Cabinet and Council.

Revenue Support Grant (“RSG”)

The core grant funding from Government is known as RSG. Since the drive for localisation from 2013-14[15] there has been a reduction in RSG for Wealden up to 2017-18. This MTFS assumes zero RSG in line with government announcements of the intention to remove all core grant.

Central and Specific Grants

Currently, the number of grants received by the Council from Government is very limited. Within the revenue budget we receive a small amount of Rural Services Delivery Grant, and a decreasing amount of New Homes Bonus (“NHB”) which is used to fund the General Fund Capital Programme.

As set out in the National Priorities section above, there are a number of Government reviews that will change how central grants are distributed between councils i.e. reforming the NHB to reward delivery and the fair funding review which aims to provide updated formulas for assessing councils’ spending needs. When the outcome of these reviews are known the implications for Wealden and the MTFS will be determined.

Within some services there are specific grants such as the Homelessness Grant and Housing Benefit & Council Tax Benefit Administration, which are ring-fenced grants and can only be used for clearly defined purposes.

Fees and Charges

The fees and charges levied by the Council are an important source of income. The fees and charges levied include planning fees, garden waste collection and building control.

It is normal practice for the Council to review fees and charges annually and propose revised and new charges from 1 April each year. This will include the development of any policies in respect of discounts and concessions. As part of the annual review, all fees and charges are considered. The fees and charges are approved separately from this MTFS as part of the February round of budget setting for the forth-coming year. Any impact on income budgets arising from these fees and charges are reflected in the income budgets included in this MTFS.

2021-22 Local Government Finance Settlement

The provisional 2021-22 Local Government Finance Settlement (“the Settlement”) was announced in Parliament on 17 December 2020 by the Secretary of Statement for the MHCLG. The Final Settlement will be confirmed in early 2021. It sets out the distribution of centrally allocated resources for local authorities and provides authorities with a combination of grant allocations and their baseline figures within the business rates retention scheme. The headline Settlement grant allocations for Wealden built into the MTFS are as follows:

2021-22

• New Homes Bonus (“NHB”): £1.401 million;
• Lower Tier Services Grant: £0.126 million*;
• Covid Grant: £0.671 million*;
• Rural Services Delivery Grant: £0.217 million*;
• Flexible Homelessness Support Grant: £0.545 million*; and
• Local income guarantee for 2020-21: compensation for BR losses.[16]

In addition to the above, the following grants announced in the Settlement have not been built into the MTFS because either the expenditure that the grant is funding has not been reflected in the MTFS or the amount of the grant is unknown at the time of developing the MTFS:

2021-22

• Sales, fees and charges compensation April – June (amount unknown).

2021-22 to 2023-24 (assumes Collection Fund deficit spread of 3-years)[17]

• Local Council Tax Scheme (“LCTS”) Grant c.£0.200 million; and
• Local income guarantee for 2020-21: compensation for council tax.

In view of the 2021-22 Settlement only being for one year, as opposed to a multi-year, this creates financial uncertainty for the funding to be received centrally from Government from 2022-23. This has meant that assumptions have had to be made, for example, the grants above marked with an asterix (*) have been assumed to be one-off grants in 2021-22, and the NHB reducing to £0.370 million in 2022-23 and ceasing thereafter.

Bridging the gap

The Council’s approach has centred on planning ahead, securing savings in advance, re-investing in more efficient ways of working and adopting a more commercial approach whilst making careful use of reserves to meet funding gaps, and has sought to protect its core services that matter most. The General Fund MTFS includes savings/additional income targets of £0.5 million from 2022-23.

General Fund Revenue Budget and Forecast

Based on the preceding financial objectives, underlying principles, national and local priorities, savings targets, spending pressures and resources assumptions, Appendix 1 provides a five-year (2021-22 to 2025-26) General Fund revenue estimate for the Council.

Risks to the General Fund Revenue Budget and Forecast

The Council has adopted a corporate approach to risk management, and financial risk management is integrated into the Council’s overall management and decision-making processes.

A number of key high-level risks have been identified which could have a positive impact that could yield additional resources, but conversely some risks may have a negative impact and result in a reduction of resources. These key risks are action planned and continually reviewed as the MTFS develops.

The main areas the key risks cover are:

• Future impact of the Covid-19 pandemic;
• Fluctuations in the Business Rates tax base;
• Future changes to the retained Business Rates system;
• Future levels of Central Government funding;
• Delivery of savings targets;
• Impact of current economic climate on both demand for services and income streams;
• Changes to other key external funding sources;
• Changes to other key assumptions within the MTFS; and
• Financial and budget management issues.

These risks form part of our financial risk assessment, Officers will continually monitor and appraise these risks as part of the on-going financial management.

The Council’s approach to determining and funding its investment programmes is set out in the Council’s Capital Strategy, which explains the Council’s financial framework for capital investment in support of its strategic priorities. The General Fund Capital Programme covers all aspects of capital expenditure within the Council, with the exception of the Council’s housing stock, and includes external capital investment that assists in achievement of the Council’s Strategic Priorities.

General Fund Capital Priorities

The Capital Programme is made up of a number of rolling programmes which include repairs, maintenance and improvement programmes to car parks, leisure centres and the Cuckoo Trail, as well as continuing investment in IT and Digital services, and waste containers.

In addition to this, the programme includes a number of major projects that the Council is embarking on, such as Hailsham Aspires, Crowborough Leisure Centre Teaching Pool and the development phase of Knight’s Farm totalling over £12 million over the period of the MTFS.

Indicative allowances have been included within the capital programme to support an additional £8.8 million of borrowing in excess of the allocations within the existing approved programme over the period and this position will be reviewed as the capital programme is developed.

Any capital investment decision will have implications for the revenue budget. The revenue costs over the lifetime of each proposed capital project are considered when the project is being developed to ensure that the impact can be incorporated within the Council’s financial plans and to demonstrate that the capital investment is affordable. Revenue implications may include the costs associated with supporting additional borrowing as well as any changes to the running costs associated with the asset or wider benefits to the council such as the delivery of on-going revenue budget savings or additional income through the generation of business rates, lease income and council tax.

There is the potential that the government will introduced mandatory food waste collections, which would have an impact on the Council’s Capital Programme, it is too early at this stage to say what this impact would be, but if it is introduced, it will need to be incorporated into the Capital Programme.

Resources

The resources necessary to fund the Council’s General Fund Capital Programme are fully identified in Appendix 2, and are summarised below.

Capital receipts

The Council holds a balance of capital receipts from the disposal of land and buildings. These can only be used to fund capital expenditure unless permission is sought from the Secretary of State to use them for a set of specific revenue purposes such as transformation purposes.

The generation of capital receipts can help to provide resources to support additional capital investment or can help to reduce the borrowing requirement and therefore the cost to the revenue budget. Capital receipts totalling £3.3 million have been included within the MTFS projections. If additional capital receipts are generated during the year this provides the Council with the flexibility to consider the introduction of additional projects to the capital programme or the ability to reduce the borrowing requirement.

Grants and Contributions

The Council continues to explore external funding possibilities when developing capital projects to minimise the borrowing requirement as far as possible. Within the MTFS, assumptions have been made around the level of external funding in the future but detailed work programmes will not be committed to until the allocations have been confirmed. Projects and investment plans may therefore be re-prioritised depending on the availability of external funding.

In the capital programme we are anticipating (or have already) to secure external contributions to support a number of project, details of which can be seen in Appendix 2.

Grants incorporated in the capital programme are the NHB (£1.771 million) and the Disabled Facilities Grant (“DFG”) (£5 million). The continuation of the DFG and the amount has not yet been confirmed, and there is a risk that this funding will reduce, however, even without this grant we have a legal obligation to deliver a number of adaptations to some of our residents and would therefore have to look at other sources of funding to support this.

Council Resources

The Council uses revenue (referred to as ‘Capital Expenditure Charged to Revenue’) to fund some projects in the capital programme. However, the impact of this is partly negated on the General Fund through a contribution from earmarked reserves i.e. Capital Investment Fund. This is illustrated in the table below:

* Included in the line ‘Contributions to/(from) Earmarked Reserves’ in Appendix 1.

** The net impact is funded from New Homes Bonus.

Borrowing

The basic principle of the Prudential System is that local authorities are free to invest so long as their capital spending plans are affordable, prudent and sustainable. The Council will need to meet the whole of the capital financing costs associated with any level of extra borrowing through its revenue account. These financing costs cover MRP and interest. The use of prudential borrowing will be as a funding mechanism for some key projects i.e. Hailsham Aspires (following a full financial assessment) and may be used as a short-term measure to fund capital expenditure prior to a capital receipt being received. The MTFS includes a prudential borrowing requirement of £8.8 million over the period 2021/22 to 2025-26. 

In March 2020, Central Government launched a consultation on reforms to the Public Works Loan Board (“PWLB”) intended to prevent the trend, in a minority of local authorities, of taking on debt to buy assets primarily for income.  In the Spending Review 2020 the Government announced the outcome of the consultation[18], which set out that the PWLB will not lend to a local authority that plans to buy investment assets primarily for yield anywhere in their capital plans, regardless of whether the transaction would notionally be financed from a source other than the PWLB.

The Council’s General Fund Capital Programme does not include capital expenditure to buy or construct capital assets primarily for income, in order to retain its access to PWLB loans.

Further details about the Council’s borrowing requirements and the Prudential Indicators can be found in the Council’s Capital Strategy and Treasury Management Strategy.

General Fund Capital Programme

The capital spending plans for the next five years include the delivery of key capital schemes identified to support the delivery of the Council’s Corporate Plan. Appendix 2 provides a five-year (2021-22 to 2025-26) General Fund Capital Programme for the Council.

Risks to the General Fund Capital Programme

The Council has adopted a corporate approach to risk management and financial risk management is integrated into the Council’s overall management and decision-making processes.

A number of key high-level risks have been identified which could have a positive impact but conversely some risks may have a negative impact and result in a reduction of resources. These key risks are action planned and continually reviewed as the MTFS develops. The main areas they cover are:

• Achievement of capital receipts targets;
• Loss of anticipated external resources;
• Increased project costs; and
• Unplanned emergency maintenance to Council’s corporate properties.

The Housing Revenue Account (‘’HRA’’) shows all expenditure and income relating to the Council’s responsibilities as landlord of dwellings and associated property. It is a ‘ring-fenced’ account within the Council’s General Fund.

Housing Revenue Account Business Planning

HRA Self-financing was implemented from 1 April 2012 following a one-off settlement to the Treasury, in order to ‘buy out’ of the old subsidy system. The new system incentivised landlords to manage their assets well and yield efficiency savings. It was anticipated that there would be greater certainty about future income as councils were no longer subject to annual funding decisions by Central Government, enabling them to develop long-term plans, and to retain income for reinvestment. Council landlords were to have greater flexibility to manage their stock in the way that best suits local need with more opportunity for tenants to have a real say in setting priorities looking to the longer term.

Self-financing, however, also significantly increased risks from Central Government to local authorities, meaning that the Council:

• Now bears the responsibility for the long term security and viability of council housing in Wealden;
• Has to fund all activity related to council housing, from the income generated from rents, through to long term business planning;
• Is more exposed to changes in interest rates, high inflation and the financial impact of falling stock numbers; and
• Needs to factor in the impact of changes in government policy e.g. the impacts of the welfare reform on income recovery, and rent setting.

This places a greater emphasis on the need for long-term planning for the management, maintenance and investment in the housing service and housing stock.

The HRA Business Plan

A key element of the self-financing regime is for the Council to construct a 30-year Business Plan for the HRA. The HRA Business plan is a key contributor to the Council’s overall aims and the Council’s Housing Strategy.  The Council has also fully embraced the Government priority of “fixing our broken housing market” by delivering new build Council Housing to contribute to diversification of the local housing market.

The Council’s Housing Revenue Account Business Plan 2020-2050 was updated in July 2020 to reflect housing policy, legislation, best practice and work in progress. It did not reflect costs associated with responding to the coronavirus pandemic and achieving the Council’s climate change aspirations. The Business Plan reflects the impact of Government policy changes and financial assumptions at the time. The Business plan sets out:

• The long term plans for the Council’s housing stock;
• The finances to deliver plans;
• How the Council will manage the income from its stock, demand for housing and stock condition; and
• Identifies resources for building new council dwellings.

The current Business Plan is reflected in this MTFS for the period 2021-22 to 2025-26, and been framed in the light of:

• Government Policy on rents for Social Housing increasing rents from 2021-22 by CPI plus 1% for five years thereafter CPI only;
• One for one replacement of Right to Buy sales and continuation of the Council’s New Build programme which is using local builders to promote local growth and jobs;
• Appropriate capital investment in maintaining the quality of the housing stock through planned maintenance and replacement works; and
• Servicing and repaying debt so that new borrowing is available for future maintenance works or investment in further new build schemes.

The Business Plan is a living document which sets out our short, medium and long-term strategies for the management, maintenance, improvement and addition to the Council’s housing stock. It is continually reviewed on a regular basis to ensure that the priorities reflect local need and political aspirations, to ensure the investment proposals remain fundable and the assumptions on which the plan are based remain correct and that the HRA remains a sustainable and viable entity over the 30-year period.

A complete review of the 30-year Business Plan is currently underway to reflect the required investment in our stock as a result of the recent 100% stock condition survey, to build in known assumptions relating to achieving the Council’s climate change commitments and to reflect the long term impact of the Covid pandemic.

Spending Plans

Spending plans included within the HRA support the delivery of the Council’s strategic priorities within the Corporate Plan and Housing Strategy. The revenue expenditure has been forecast to manage and maintain the council’s housing stock.

Spending Pressures

A high level review of the financial pressures facing the Council over the period of the MTFS has been undertaken. This information has been drawn from experience in previous years, the advice of Corporate Directors, Heads of Service and Budget holders. This process had regard to the experience of previous years, the current economic climate and local and national issues that are likely to influence the financial outcomes.

Inflation – Pay and Prices

The HRA MTFS follows the Spending Review 2020 announcement on a public sector pay ‘pause’ for 2021-22, except for those earning less than the full-time salary equivalent of £24,000 who will receive a £250 per annum increase (full time equivalent).  Thereafter an allowance has been included for a 2% pay award for staff in 2022-23 to 2025-26, plus an estimate of staff increments. 

Automatic inflationary increases of budgets are not provided for all goods and services, instead individual inflation rates have been applied for specific items of expenditure (i.e. contracts), all remaining areas of expenditure are maintained at the previous year’s levels, which is in effect a real terms reduction in spending power

Repairs and Maintenance

The level of expenditure for revenue repairs proposed for 2021/22 is £2.961 million.  This covers costs such as responsive repairs, cyclical works, void repairs and redecoration.

Revenue implications of the HRA Capital Programme

• Depreciation – must be charged to the HRA in accordance with proper accounting practices, it reflects the decline in the value of the HRA council’s stock over time due to wear and tear. The calculation is based on the social housing valuation of the councils stock. The Councils stock is revalued each year and the depreciation value will fluctuate depending on the annual valuations of the Council’s housing stock. Depreciation is transferred to a major repairs reserve to fund the HRA capital programme. This amounts to £3.850 million for 2021-22 and increases in future years to reflect the increases in housing stock from New Builds and inflation.
• Interest Payable – is associated with additional borrowing for capital expenditure on the Housing investment programme, including interest payable on the balance of £46.6 million for the self- financing transaction from 2011-12.
• Provision for Loan Repayments – planned loan repayments have been updated in the MTFS which is key to self-financing and creating opportunities for new borrowing for investment in new builds and major repairs.
• Capital Expenditure Charged to Revenue – the amount of revenue that is being used to fund the capital programme between 2021-22 to 2023-24 includes £4.75 million funding for the development of the former Streatfield House site into 20 new homes, which is mainly being funded out of general HRA revenue reserves. Revenue funding is also used to support the planned maintenance programme over the MTFS period.

Debt write off and impairment

Income collection has become more challenging due to the impact of the Covid-19 pandemic and could lead to an increase in the write off arrears or increased debt provision.

Similarly, the transition to universal credit means that some rents that would have been received automatically are now recoverable from the tenant. Where tenants suffer a financial impact from the current economic climate arrears are likely to increase, with a potential for further write offs/debt provision, which represents a cost to the council. Therefore the budget provision for debt write offs and impairment has been increased to £0.170 million.

Resources

Rents and Service Charges

This is the second year since 1 April 2016 that the Council has been permitted to increase rents. For four years the Government imposed mandatory rent cuts of 1% per annum as part of welfare reform reducing income over that period. The Government introduced the new social rent policy that was effective from 2020-21 for a five year period, enabling councils to increase rents by CPI + 1% per annum, which restores some medium term certainty about income levels.

In line with Government Policy on rents for social housing, rents will be increasing by 1.5% (CPI at September 2020 = 0.50% + 1%) in 2021-22. The average rents are shown in the table below:

When properties become vacant they will continue to be re-let at Formula Rent, in line with the social rent policy. 

The additional income generated by the rent increase of 1.5%, if agreed, will be utilised on a number of HRA items including; maintenance of the stock, supervision and management resources, paying for the cost of investment and running costs where appropriate for the stock.

The MTFS assumes rent increases in line with social rent policy of CPI + 1% per annum up to 2024-25 and thereafter increases are assumed at CPI. The dwellings rent budget also allows for increased rental income from new build properties and reductions in rental income from RTB sales and voids.

Service Charges

• Tenants – in addition to the rent some tenants may also pay service charges. Rents are generally taken to include all charges associated with the occupation of the property, such as maintenance and general housing management services. Service charges reflect additional services which may not be provided to every tenant, or which may be connected with communal facilities. These service charges are reviewed annually and calculated on a per property basis to recover the actual cost of the service. Tenants will be notified in writing of any changes in their rent and service charges for the coming year April to March. The rent notification letter will set out a schedule of services that will be provided and how much we will charge for them. We will only increase service charges within the legal requirement that they will not exceed the cost of the services and will always be reasonable
• Leaseholders (Retirement Living, Shared Ownership and Right-to-Buy) – service charges to leaseholder are charged in accordance with their lease. Service charges are calculated to recover the costs of providing communal services, such as cleaning, repairs, grounds maintenance and electricity. Not all leaseholders receive additional services and the amount that is charged will depend on the type of property a leaseholder lives in, and what services are provided.

Shared ownership Retirement Living leaseholders will be notified in writing how much service charges they will have to pay for the year, April to March. The notification will also tell them of any changes in their rent, where payable, for the coming year.

Right-to-Buy leaseholders are usually notified in April with an annual estimated charge and again within six months of the year end with the Final account figures.

Interest Receivable

Interest is received on HRA cash balances during the year. This is reducing partly due to lower interest rates forecast and reducing general reserve balances.

Other Income

Other Income includes income received from feed in tariffs on solar panels on council dwellings of approximately £0.075 million per annum.

Housing Revenue Account Budget and Forecast

Appendix 3 provides a summary HRA revenue budget and forecast for the period 2021-22 to 2025-26.

Risks to the HRA Budget and Forecast

The Council has adopted a corporate approach to risk management, and financial risk management is integrated into the Council’s overall management and decision-making processes.

A number of key high-level risks have been identified which could have a positive impact that could yield additional resources, but conversely some risks may have a negative impact and result in a reduction of resources. These key risks are action planned and continually reviewed as the MTFS develops.

The main areas they cover are:  

• Future impact of the Covid-19 pandemic;
• Risk of government announcements limiting the flexibilities and freedoms offered by the HRA Self -Financing regime;
• Government changes to legislations such as retro-fitting sprinklers and uncertainty of rent policy after five-years (i.e. from 2025-26);
• Economic shocks such as shortage of labour, building costs;
• Changes to key assumptions within the MTFS e.g. inflation, interest rates etc;
• Efficient delivery of housing repairs;
• Ability to release further revenue resources for investment and improvements;
• The impacts of the Welfare Reform Act; and
• Financial and budget management issues.

HRA Capital Priorities

The Housing Revenue Account Capital Programme covers all aspects of capital expenditure relating to the Council’s landlord function. The Council’s approach to determining and funding its investment programmes is set out in the Council’s Capital Strategy, which explains the Council’s financial framework for capital investment in support of its strategic priorities. The Capital Strategy for the Housing Revenue Account capital programme reflects the self-financing housing regime.

The five-year Housing Revenue Account Capital Programme has been drawn up to ensure that the Council meets its legal obligations as a landlord. The Council has already invested significant resources over recent years to achieve the Decent Homes Standard.

The five-year housing programme comprises the following main areas of work:

• Maintenance of the Decent Homes;
• Health & Safety Requirements – covers the work to meet statutory requirements, and includes fire safety, communal lighting and asbestos removal; and
• New Build and acquisition programme to deliver approximately 153 new council dwellings within the HRA.

A recent 100% stock condition survey was carried out on both the internal and external condition of our properties. The information from the survey is currently being reviewed alongside the delivery of the council’s future climate change aspirations. Once this piece of work is complete the 30-year Business Plan model will be updated and this will inform future capital programmes based on resources available.

Until then the Planned Maintenance Programme is limited to funding available in the MTFS and the New Build Programme in 2024-25 to 2025-26 limited to using retained Right-to-Buy receipts and borrowing for one for one replacement homes only.

Resources

The resources necessary to fund the Council’s HRA Capital Programme are fully identified in Appendix 4.

Major Repairs Reserve

The Major Repairs Reserve (‘’MRR’’) is the main source of capital funding and the mechanism by which timing differences between resources becoming available and being applied are managed. The MRR may be used to fund capital expenditure and to repay existing debt. Depreciation is a real charge on the HRA and is paid into the MRR from the Housing Revenue Account (see Appendix 3) to fund capital expenditure. The total support to the capital programme over the five-year MTFS period 2021-22 to 2025-26 through depreciation is £22.37 million.

Capital Receipts

Housing capital receipts fall within the Governments pooling regime. Under these arrangements capital receipts from Right-to-Buy (‘’RTB’’) sales are pooled until a pre-set limit for government share of the income generated has been achieved. Non-RTB sales primarily are excluded from the pooling arrangement and are now retained in full by the Council for use as the Council sees fit.

Once the target for the government share of the RTB receipts has been reached, the Council may retain 100% of the receipts from any additional RTB sales. These are subject to a formal retention agreement between the Council and the MHCLG and must be used for replacement of the council housing sold, within an agreed timeframe. The retained receipts can only fund up to 30% of the eligible new build expenditure.

New Build Shared ownership sales receipts are used towards funding the New Build shared ownership housing, as the cost of building shared ownership properties is not eligible for use of retained RTB receipts.

The New Build programme is primarily funded by retained RTB receipts, shared ownership receipts and borrowing. 

The proceeds of dwelling sales under the RTB scheme provide a regular source of capital receipts with the number of sales increasing in recent years. The MTFS assumes 12 sales per year from 2021-22 to 2025-26. However, this is a difficult area to predict accurately as it is affected by external factors, such as interest rates, property prices and Government initiatives aimed at further stimulating RTB sales.

Council Resources

The MTFS 2021-22 to 2025-26 includes £6.932 million of direct revenue contributions over the five year period. This includes funding for the development of the former Streatfield House site into 20 new homes, which is mainly being funded out of general HRA revenue reserves. Revenue funding is also used to support the planned maintenance programme over the MTFS period,

Borrowing

The Prudential Code allows the Council to take borrowing if it can demonstrate that such borrowing is affordable, sustainable and prudent in its Prudential Indicators (detailed in the Capital Strategy and Treasury Management Strategy). In October 2018, the government announced the removal of the HRA borrowing cap and issued local authorities determinations to confirm that the removal of the cap was to take immediate effect. Prior to the lifting of the debt cap, Wealden had reached its maximum borrowing it could undertake without eating into the margins of safety (the debt limit imposed was £71.679 million). The Council has now set its own prudential limit for the HRA of £95 million. As with all borrowing decisions, the council will still need to take into account the affordability of borrowing against available revenue streams.

The removal of the debt cap and high value council housing levy gives local housing authorities more certainty for future HRA Business Planning. In light of this, last year the Council agreed the use of £4.9 million of HRA balances to fund the HRA Capital New build investment programme. The HRA balances minimum recommended level is 5% of the budget, which is in the region of £0.9 million. The use of the HRA general balances over the MTFS period reduces the balances to between £1 million – £1.4 million, which is still above the recommended level.

The graph below shows the position of the budget proposals for borrowing for the HRA Capital Programme against the prudential borrowing limit of £95 million[1].

INSERT TABLE Pg 29.

Following the implementation of HRA self-financing on 1 April 2012 the Council has £46.6 million of external debt relating to housing stock which is being repaid over 30-years. In addition to this the Council has undertaken further internal borrowing of £23.8 million as at 2020-21. The provision to repay debt over the MTFS period is £10.5 million with further borrowing of £24.1 million to fund the HRA Capital Programme. This leaves borrowing headroom of £11 million.

HRA Capital Programme

Based on the spending requirements and resource assumptions, Appendix 4 provides a summary HRA capital programme, 2021-22 to 2025-26.

The revenue implications of all capital schemes, have been taken account of and included within the HRA budget (see Appendix 3).

Risks to the HRA Capital Programme

The Council has adopted a corporate approach to risk management and financial risk management is integrated into the Council’s overall management and decision-making processes.

A number of key high-level risks have been identified which could have a positive impact but conversely some risks may have a negative impact and result in a reduction of resources. These key risks are action planned and continually reviewed as the MTFS develops. The main areas they cover are:

• Generation of sufficient revenue surpluses to resource required investment;
• Achievement of capital receipts (including Right to Buy sales) targets;
• Future building costs; and
• Interest rate increases impacting on future borrowing costs.

The minimum prudent levels of reserves and balances that the Council should maintain are a matter of judgement. It is the Council’s safety net for unforeseen circumstances and must last the lifetime of the Council unless contributions are made from future years’ revenue budgets. CIPFA guidance does not set a statutory minimum level but it is up to local authorities themselves, taking into account all the relevant local circumstances, to make a professional judgement on what the appropriate level of reserves and balances should be.

Some reserves and balances are essential for the prudent management of the Council’s financial affairs. These will provide a working balance to cushion the impact of uneven cash flow, a contingency for the impact of unexpected events or emergencies and allow the creation of earmarked reserves to meet known liabilities. The consequences of not keeping a minimum level of reserves can be serious and is therefore one of the considerations taken into account when setting the MTFS.

The Council has a very proactive approach to managing risk and there are effective arrangements for financial control already in place. However, as a result of the changes to the core system of local government funding introduced in April 2013, which saw a move from an absolute funding level to one which is very sensitive to changes in the level of local business rates, the level of volatility and risk to the Council significantly increased. Given this uncertainty of funding that this poses to the Council’s financial position, the prudent minimum level of general reserves is now held at a level greater than previously.

The financial risks identified throughout this document, and an assessment of the estimated exposure, likelihood and possible mitigation of these has been made in the context of the Council’s overall approach to risk management and internal financial controls. This information has been used to determine the optimum level of reserve holdings needed to meet the requirements of a working balance and contingency. The conclusion of this risk assessment is that it is deemed prudent that General Fund reserves are maintained at around £2 million – £3 million, and that Housing Revenue Account reserves are maintained at around £0.9 million – £1 million, over the period of the MTFS.

The general reserves at the end of each year for 2021-22 to 2025-26 are summarised in the table below: 

The overall levels of General Fund and Housing Revenue Account balances are in line with the prudently assessed minimum level of balances, and are believed to be sufficient to meet all of the Council’s obligations over the duration of the MTFS and have been based on a detailed risk assessment.