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Blog 16th October 2017

Oct 16th, 13:59

Blog 16th October 2017

In this week’s blog, I refer to: Housing Business Planning in an Uncertain Environment, the Homes & Communities Agency, Stress Testing, the Resolution Foundation, Welfare Reform, the National Association of Head Teachers and Schools’ Funding.

I am currently putting the finishing touches to our seminar on: ‘Housing Business Planning in an Uncertain Environment’ that will be held in London on 7th November 2017 and in Leeds on 21st November 2017.

One aspect of business planning that housing associations have adopted and that local authorities may wish to consider is ‘stress testing’.

To comply with the Governance and Financial Viability Standard set by the Homes & Communities Agency, all housing associations are required to ensure their long-term viability by:

“Carrying out detailed and robust stress testing against identified risks and combinations of risks across a range of scenarios, and putting appropriate mitigation strategies in place.”

The Code of Practice elaborates on this requirement by suggesting that organisations should:

  • Go beyond simple sensitivity testing and include multivariate analysis which tests against potential serious economic and business risks;
  • Explore those conditions which could lead to failure of the business;
  • Consider both the long-term, cyclical nature of economic factors that impact on the business as well as internal business risks.

Stress testing goes beyond sensitivity analysis in that it asks the question: ‘How much of a variation would make the business unviable?’ For example, by how much would interest rates have to increase to make the business unviable? With multivariate analysis, combinations of risks are considered. For example, the business plan would be tested to see what increases in interest rates, increased maintenance costs, increased voids and reduced capital receipts taken together would make the business unviable.

I recently carried out some stress testing as part of preparing a business case for a housing association merger.

Stress testing is one of the subjects that will be considered at our seminar on: ‘Housing Business Planning in an Uncertain Environment’. For further information or to make a booking for, please click HERE

The Resolution Foundation has published a report that looks at the effect that the benefits ‘freeze’ is having on claimants in the light of increasing inflation. Inflation has increased to 2.9% (as measured by the consumer prices index) and is expected to increase further. Obviously, the higher the rate of inflation the larger the real terms reduction in the value of benefits that is caused by the ‘freeze’. The Resolution Foundation's analysis found that a single unemployed person would be £115 worse off, a single parent in work with one child would be £225 worse off, and a single earner couple with two children would be £305 worse off. They are calling for benefits to be increased in line with inflation from 2018.

We are holding seminars on: ‘Welfare Reform: The Implications for Housing’ during December 2017. For more information or to make a booking, please click HERE

Since 2010 we have been told that education budgets have been protected from austerity. However, the National Association of Head Teachers has now written to every member of the House of Commons highlighting that schools’ budgets have lost a total of £2.8billion since 2015 and that 70% of their 29,000 members expect their budgets to be untenable by 2019.

According to the National Association of Head Teachers, pressure on school budgets has been exacerbated by: changes to National Insurance and Pensions, which have increased employers’ contributions by more than 5.5% since April 2015; £600m in cuts to the Education Services Grant, which covered services such as Human Resources and facilities management; unfunded teacher pay awards; and the apprenticeship levy, which has added an extra 0.5% to the payroll costs of most maintained schools and academies.

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