Housing Transformation Programme: amendment to the Medium Term Financial Plan 2013 – 2015.

STATES OF JERSEY

HOUSING TRANSFORMATION PROGRAMME: AMENDMENT TO THE MEDIUM TERM FINANCIAL PLAN 2013 – 2015

Lodged au Greffe on 23rd April 2014 by the Council of Ministers

STATES GREFFE

2014   Price code: B  P.59

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to refer to their Act dated 8th November 2012 in which they approved the Medium Term Financial Plan 2013 to 2015 and –

to  agree,  in  accordance  with  the  provisions  of  Article 9(1)  of  the Public  Finances  (Jersey)  Law  2005  and  Article 10  of  the  Social Housing  (Transfer)  (Jersey)  Law  2013,  that  the  Plan  should  be amended  as  a  consequence  of  the  transfers  made  by  the  Social Housing (Transfer) (Jersey) Law 2013 and therefore –

1. to agree  that  the  intended  total  amount  of  States'  income should  be  amended  from  £674,217,000  in 2014  and £711,398,000  in 2015  as  approved  in the  Plan,  to £688,051,000 in 2014 and £740,870,500 in 2015 (as set out in Summary Table A);
2. to agree  that  the  total  amount  of  States'  net  expenditure should  be  amended  from  £669,599,000  in 2014  and £691,157,000  in 2015  as  approved  in the  Plan,  to £683,433,000 in 2014 and £720,629,500 in 2015 (as set out in Summary Table A);
3. to agree that the revenue head of expenditure of the Housing Department should be amended from £(27,971,500) in 2014 and  £(29,338,500)  in 2015  as  approved  in the  Plan,  to £(14,188,500) in 2014 and £0 in 2015 (as set out in Summary Table B);
4. to agree that the revenue head of expenditure of the Social Security Department be increased from £186,207,000 in 2014 and  £190,036,000  in  2015  as  approved  in the  Plan,  to £186,258,000 in 2014 and £190,170,000 in 2015 (as set out in Summary Table B).

COUNCIL OF MINISTERS

REPORT

Background

The States adopted P.33/2013, "The Reform of Social Housing" and requested the Minister for Housing to, inter alia –

"take the necessary action to prepare for Company status and to bring forward for approval by the Assembly the necessary legislation to give effect to the proposals with a target date for commencement of the company's operation of 1st July 2014".

Subsequently,  the  Minister  for  Housing  lodged  P.63/2013: "Draft  Social  Housing (Transfer) (Jersey) Law 201-" which was approved by the States in July 2013 and has since received the approval of the Privy Council and has been registered in the Royal Court.

Regulations under the Social Housing (Transfer) (Jersey) Law 2013 are being put forward  by  the  Minister  for  Housing  for  debate  by  the  States  in  the  Sitting commencing 3rd June 2014. If approved this will, amongst other things, give effect to the transfer of the Housing Stock to Andium Homes and establish the Terms and Conditions of the transfer.

These Regulations will be supplemented by a Funding Agreement which will establish the amount and basis on which the Annual Return to the States will be made. There will also be a Memorandum of Understanding between the Minister for Treasury and Resources and Andium Homes. This is to ensure the appropriate conduct of Andium Homes and to put in place an accountability framework appropriate to the company as a provider of social housing.

Next Steps

If the States approve the Regulations brought forward by the Minister for Housing under  the  Social  Housing  (Transfer)  (Jersey)  Law  2013,  the  new  Company's operations will commence on 1st July 2014.

The Medium Term Financial Plan (MTFP) 2013 – 2015 as approved by the States does not reflect this change, although the impact of such change was highlighted, and indicative figures demonstrating the impact of the change were included in the MTFP (see page 296).

Indicative pre-incorporation and post-incorporation positions were also set out in more detail in the Annual Update to the MTFP Department Annex for 2014 and included with the Budget Statement 2014.

Article 9 of the Public Finances (Jersey) Law 2005 restricts the ability to amend an MTFP approved by the States. This only allows the Council of Ministers to lodge a proposition to amend an MTFP under certain circumstances.

In respect of the amendment required for the Housing Transformation Programme, Article 10 of the Social Housing (Transfer) (Jersey) Law 2013 states –

"10  Amendment of medium term financial plan approved under Public

Finances (Jersey) Law 2005

Despite Article 9(2) of the Public Finances (Jersey) Law 2005, the Council of Ministers may lodge a proposition for a purpose described in Article 9(1) of that Law, in consequence of –

1. the  transfers  effected  by  the  coming  into  force  of  this  Law,  or  of Regulations made under this Law; or
2. an increase in the rents payable by tenants of social housing pursuant to a decision of the States to adopt P.33/2013."

If the Regulations under the Social Housing (Transfer) (Jersey) Law are approved by the  States  in  the  Sitting  commencing  3rd  June  2014,  then  as  a  consequence  the Council of Ministers will be required to bring forward an amendment to the MTFP to reflect the changes resulting from that approval.

Amendments required to MTFP

The proposed amendments needed to reflect the financial impact are set out in the Proposition. They refer back to the original approval given by the States to figures in Summary Table A on page 144 of the MTFP 2013 – 2015 and summary Table B on page 145 of the MTFP 2013–2015. These reflect the requirement to –

• increase States Income targets to reflect the new annual return from the new incorporated Housing Association in 2014 and 2015 and the estimated funding to be received from Housing Trusts in respect of additional Income Support costs arising from rent increases;
• increase States total net revenue expenditure in 2014 and 2015 to reflect the transfer of the contribution from Housing Department net revenue expenditure budget and the additional Income Support costs for Social Security arising from rent increases in the Housing Trust Sector.

A reconciliation showing the changes to Summary Table A, States Income and Total  Net  Revenue  Expenditure  is  attached,  marked  as  Appendix A  within Appendix 2 to this report.

A reconciliation showing the changes to Summary Table B, Departmental Net Revenue Expenditure is attached, marked as Appendix B within Appendix 2 to this report.

It should also be noted that the "Update to the MTFP Department Annex for 2014" document did include sections which highlighted the potential impact of the changes –

• Housing (excluding Incorporation) – pages 93 to 99
• Housing (post Incorporation) – pages 103 to 110.

This Proposition will give effect to the required amendments which are now based on the updated current best estimates. There are 2 resulting changes to the potential impact of the changes as set out in the "Update to the MTFP Department Annex for 2014" referred to above. These are –

1. The indicative Return from the new Housing Company in 2014 (page 104) is now  £13,783,000  rather  than  £14,220,000.  This  is  on  the  basis  of  better available information.
2. The indicative Return from the new Housing Company in 2015 is £29,338,500 rather than £28,534,000. This isto ensure that the Net Expenditure allocation for Housing is fully removed from the MTFP (see Table B on page 145 of the MTFP).  The figure  of  £28,534,000  reflects  the  position  after Approved variations  to the  MTFP  as  set  out  in  the  Budget  2014  are  applied.  This proposed adjustment in the Proposition isto adjust the original MTFP figure to which the Approved variations will be applied.

It is important to note that the proposed adjustments to the MTFP are based on estimates.

If approved, the Regulations under the Social Housing (Transfer) (Jersey) Law 2013 provide for the adjustments required as a result of the transfer to Andium Homes. This will be effected following the production of audited accounts as at 30th June 2014.

Financial and manpower implications

There are no financial or manpower implications for the States arising from this proposition.