Independence...Integrity...Value

June 2016

Jun 8th 2016, 10:13

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27th June 2016

Last week I presented a session of ‘All You Want to Know about Housing Association Finance’ to Members and officers of a County Council; and tomorrow I will be presenting a session of ‘All You Want to Know about Scottish Housing Association Finance’ at a Scottish Housing Association. The differences in approach between England and Scotland are fascinating to consider but the fact that both countries are experiencing a ‘housing crisis’ at a time of austerity makes the subject very topical. How can you work effectively as a Councillor, Housing Association Board Member or Council or Housing Association manager if you don’t have a basic grasp of how the finances work?

The main news this week has been the outcome of the referendum on Britain’s membership of the European Union. I would like, therefore, to write in this blog about the implications for public services including housing and local government. However, this is difficult to do as we don’t know yet what the implications will be!

One of the strange things about last week’s referendum on membership of the European Union is that (in contrast with the Scottish Independence referendum of 2014 when the Scottish Government was obliged to produce a detailed proposal for independence) no one has identified which of the numerous options for operating outside the European Union was actually on the table. This means that the government now needs to decide which option to take – although this is unlikely to happen until after the new Prime Minister is appointed in October.

One option would be to maintain the closest relationship possible with the European Union while not being a full member. This would enable the United Kingdom to continue to trade in the European single market and would reflect the fact that while a majority voted to ‘leave’ a substantial minority voted to ‘remain’ and wanted a continued close relationship with Europe. This would probably involve a similar arrangement to that enjoyed by Norway and Switzerland including joining the European Economic Area. It would ensure continued co-operation and good relations with all European countries. It would enable the United Kingdom to continue working in partnership with other countries on trade, market access, environmental, security and regulatory questions.

Another option would be to re-orientate the United Kingdom economy away from Europe and towards faster growing third world economies such as China. This would involve abandoning most of the European Union legislation around human rights, workers’ rights and consumers’ rights with the objective of reducing costs. It would include abandoning directives such as the working time directive and the temporary agency workers’ directive. These require countries to maintain a limit on average weekly hours, minimum rest periods and paid annual leave; and provide that temporary workers supplied by agencies should not face discrimination over pay and working conditions when they are doing the same work as the employer's own staff.

Whatever option is eventually selected by government will obviously have implications for public services including housing and local government. I intend to provide updates and briefings for my clients through this blog, newsletters, briefing papers, webinars and seminars.

In the shorter term, the decision to ‘leave’ the European Union has already resulted in sharp falls in the value of sterling and the value of United Kingdom companies. The United Kingdom economy dropped from being the fifth largest in the world to being the sixth largest overnight! The United Kingdom government's credit rating has already been downgraded causing an increase in interest rates faced by housing associations. In these circumstances it will be important for the government to pay careful attention to the economy and public finances. While George Osborne has backed away from his original proposal to have an emergency budget, it is likely that measures will need to be taken to protect the value of assets, pensions and savings including changes to interest rates, taxation and public expenditure. As local government, housing and welfare budgets have been ‘unprotected’ since 2010 it is likely that any reductions in public expenditure would impact heavily in these areas.

Our next seminar will be on ‘All You Want to Know about Local Authority Housing Finance’ and will be held in Leeds on 12th July. It is proving popular but we have a few places remaining. For more information or to make a booking please click HERE

We are also holding a webinar on the housing revenue account on 29th June. For more information or to make a booking please click HERE

20th June 2016

There is clearly an increase in interest in mergers among housing associations. I have recently completed the preparation of a joint business case – including a financial model - for two housing associations that wish to merge. The rationale for the merger is that two effective and viable associations see opportunities to achieve greater value for money and improved service outcomes by combining their resources. Both boards have now approved the case and on Wednesday I attended a meeting with the Homes & Communities Agency and the Chairs and Chief Executives of both associations at which we presented the proposal. I am sure that the merger will now go ahead to the benefit of both organisations, their residents and the communities that they serve.

Reductions in government funding and limits on increases in Council Tax have obliged all local authorities to make significant savings in their budgets. Often these are controversial, and sometimes they result in legal cases – for example, the Birmingham City Council case in 2011 where I was involved as an expert witness in finance for the plaintiff and the court ruled that the Council’s Adult Social Care budget had been set unlawfully. Last week I was asked to provide advice in another court case where a challenge is being made to reductions in a local authority’s children’s services budget.

An interesting issue that arises from this case is how medium-term financial planning should relate to public consultation. Councils are obliged to consult before taking a final decision on changes to children’s services. However, when is the final decision taken? When a proposal goes into the medium-term financial plan, when the budget for the year in question is approved, or at an intermediate stage during which the proposals are being worked up and reports are being considered by Members?

The financial challenges faced by local authorities are also encouraging them to make good use of the peer review service offered by the Local Government Association. I am engaged by the Local Government Association to analyse financial information and provide briefings to peer review teams and am busy with some of these reports at the moment.

On Thursday evening I attended the Impact Housing Association Annual General Meeting in Penrith. I am no longer the Chair but I am still a member of the association. The Chair, Mark Costello, described ‘a difficult and challenging year for all of us’; while the Chief Executive, Mike Muir, said that: ‘Things are getting a lot more difficult for many of the people who we support… We will still be supporting some of the most vulnerable people in society... Resilience is our watchword’. Like many housing associations, Impact is continuing to achieve its purpose of ‘Improvement through Action’ in an increasingly difficult environment.

A trend towards increased nationalism has been observed during recent years in most European and other developed countries – including Britain.

I think nationalism can be a good thing when it is focused on pride in your own country combined with a respect for other nationalities and cultures. However, I am becoming increasingly concerned that nationalism in England often owes little to taking a pride in the good things about England but relies mainly on a distrust or even hatred of things ‘foreign’ or ‘different’.

And the list of things that are perceived to be ‘foreign’ or ‘different’ seems to be quite long. It appears to range from foreigners, migrants, refugees and members of ethnic and other minorities; to the European Union and European Court; to supporters of other football teams, Polish food on supermarket shelves and the people who attend the Appleby Horse Fair - to name only some examples.

History shows us that nationalism of this variety is dangerous. What we really have to fear are things such as ‘ignorance’ or ‘greed’, not things that are ‘foreign’ or ‘different’.

Our next seminar will be on ‘All You Want to Know about Local Authority Housing Finance’ and will be held in Leeds on 12th July. It is proving popular but we have a few places remaining. For more information or to make a booking please click HERE

We are also holding a webinar on the housing revenue account on 29th June. For more information or to make a booking please click HERE

14th June 2016

Last week I was in Edinburgh to present ‘All You Want to Know about Scottish Social Housing Finance’. The seminar was well received with delegates saying that the information provided was very relevant, the quality of the presentation was excellent and the training met their needs fully. They described the session as interesting, useful and thorough. One delegate commented that there was ‘a lot of ground covered in a one day session’.

The book that accompanies the seminar can now be bought separately. For more information or to place an order please click HERE

The seminar is also available as an in-house session. For more information about this please contact me at Adrian.waite@awics.co.uk or 017683-51498.

Our next seminar will be the next in our series of ‘All You Want to Know about Local Authority Housing Finance’ and will be held in Leeds on 12th July 2016. This seminar is an introduction and overview of local authority housing finance in England. The session in Leeds is proving popular, but we still have a few places remaining. For more information or to make a booking, please click HERE

Impact Housing Association is holding its 2016 annual general meeting on Thursday. While I stood down as Chair and as a board member last June, I am still a member of the association and so will be attending. As well as receiving the annual report of the Board to the membership and approving the accounts; the annual general meeting will receive presentations on the Vision 2020, young peoples’ services and feedback from Foyer residents on a recent presentation to the National Housing Federation’s Rural Housing Conference. As well as being a leading member of the Placeshapers’ Group, Impact Housing Association is heavily committed to providing housing and other services to young people. There are therefore real concerns about the impact that restrictions on benefits for young people and reductions in funding for young people’s services will have on tenants, service users and the association.

The referendum on Britain’s membership of the European Union is less than a fortnight away. As one of the main arguments of the ‘Brexit’ campaign is that leaving the European Union would enable Britain to abandon the directives of the single market, I thought that I would look at what some of those directives are.

Two of the most significant directives are the working time directive and the temporary agency workers’ directive. These require countries to impose a limit on average weekly hours, minimum rest periods and paid annual leave; and provide that that temporary workers supplied by agencies should not face discrimination over pay and working conditions when they are doing the same work as the employer's own staff. Those who want to leave the European Union complain that these two directives cost British businesses £4.2billion and £2.1billion. So, what would be the effects of abolishing the working time directive and temporary agency workers’ directive in Britain?

First, a potential saving of £6.3billion to British businesses. However, it would reduce workers’ incomes by £6.3billion so whether it would be a good or bad thing would depend on who you are.

Second, if Britain stopped complying with these directives it would be seen as unfair competition by other European states. Britain would have to leave the single market and tariffs would be introduced that would ensure that no competitive advantage was gained when competing in Europe.

Third, it is argued that while the European Union is the largest market in the world it is not the fastest growing. The fastest growing markets are in countries like China, India, Saudi Arabia and Brazil. It is argued that if British businesses are to compete more strongly in these countries they would need to reduce their costs significantly to match the costs of businesses in those countries.

So it appears to me that ‘Brexit’ would offer opportunities to businesses that would like to reduce their costs, especially if they would like to compete in places like China; but would also result in poorer working conditions and lost opportunities to trade in Europe.

It also appears to me that for the public sector and for housing associations ‘Brexit’ could result is lower employment costs but at the expense of abandoning the aspiration that most public bodies and housing associations have of being model employers and employers of choice. Lower incomes are also likely to lead to higher levels of poverty and greater pressure on all public services.

6th June 2016

I am writing this blog while on the train to Edinburgh where I will be presenting our seminar ‘All You Want to Know about Scottish Social Housing Finance’. I am looking forward to meeting the delegates who come from the local authority and housing association sectors.

This seminar is also available as an in-house session. To make enquiries about this please contact me at Adrian.waite@awics.co.uk or 017683-51498.

The book that accompanies the seminar is also available to purchase separately. For further information or to place an order please click HERE

I was shocked to hear when listening to the television news earlier that several million people in the United Kingdom are not registered to vote. With the referendum on membership of the European Union being held on 23rd June and the deadline to register to vote being 7th June this is very worrying. It makes me wonder whether we still have a functioning democracy in the United Kingdom. If any of the readers of this blog aren’t registered to vote I would urge them to do so. I have a postal vote and have voted already.

The National Housing Federation has published a report that it has commissioned on the costs of housing associations. The report concludes that overheads have fallen from a median of 13.6% of turnover in 2008/09 to 11.8% in 2014/15. However, I am not sure that this will be enough to answer the criticisms that have been made recently by ministers that housing associations are not as efficient as they could be, or the questions that have been raised recently by the Homes & Communities Agency that has pointed to ‘large unexplained differences’ between different associations. Furthermore, it appears to me that the associations with the lowest costs are not necessarily the largest calling into question the commonly made assumption that larger associations are always more efficient than smaller ones. The National Housing Federation also reports that expenditure on maintenance per dwelling has fallen by 11% between 2008/09 and 2014/15. But is this a good thing or a bad thing? Does it reflect better efficiency or worse services?

The Department for Communities & Local Government has published its Housing revenue account: draft item 8 credit and item 8 debit (general) determination for 2016. This includes their proposals for what should be done in 2017 when the self-financing transitional period comes to an end. It is quite technical but I know it is of interest to many of my readers. I am pleased to see that the government has decided to address the concerns of people in the sector and proposes to:

  • Continue to allow impairment charges on dwelling assets to be reversed out of the housing revenue account following the end of the transitional period
  • Extend the principle to non-dwelling assets in the housing revenue account from 2017-18
  • Confirm that from 2017-18 depreciation should be charged to the housing revenue account in accordance with proper practices

In other words, they have decided not to introduce their original proposals to make depreciation and impairment real costs in the housing revenue account but to continue the transitional arrangement and extend it to non-dwellings.

However, the proposals do not address the problem faced by authorities with Private Finance Initiative schemes. As things stand they will be obliged to pay twice for major repairs on these properties and will be forced to set aside rents rather than spending them on maintenance or services. I have asked Communities & Local Government to comment on this but have yet to receive a response.

The consultation paper can be downloaded from: https://www.gov.uk/government/consultations/housing-revenue-account-draft-item-8-credit-and-item-8-debit-general-determination

Our next seminar is on ‘All You Want to Know about Local Authority Housing Finance’ and will be held in Leeds. For more information or to make a booking please click HERE

The list of the world’s hundred most powerful women was published today. I am not sure who compiles these lists or what criteria they use to prepare them. However, it is interesting to see that Angela Merkel is top for the sixth year running, Hilary Clinton is up to second and Nicola Sturgeon is the only British woman in the list apart from the Queen. None of the women in the United Kingdom cabinet or shadow cabinet made the list.

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