This is the submission from Swindon Tenants Campaign Group to the Council consultation on options for dealing with the loss of income resulting from the government’s policy of cutting Council rent by 1% a year for 4 years. We explain why freezing ‘debt’ payments would be the best means of preventing a backlog of work building up.
Swindon Council rent cut consultation
Swindon Tenants Campaign Group submission
Swindon Tenants Campaign Group is calling for suspension of the £5 million ‘debt’ payment for the 4 years when the rent cut of 1% a year is being applied by the government.
Swindon Council’s consultation suggests 4 options for dealing with the loss of income resulting from the rent cut.
A) Use some of our ‘reserves’.
B) Repay less of our debt.
C) Reduce the amount we spend on improvements to our homes.
D) A combination of options A and B.
Since the ‘reserves’ are at £7 million use of them is only a one-off option. There are insufficient reserves to cover the shortfall in our capital budget. Moreover, it would be risky to leave the Housing Revenue Account with no reserves which are held for unforeseen events or circumstances. We do not, therefore, believe that they should be used.
As a result of the rent cut we are estimated to face a shortfall in our capital budget of £13.022 million over the four years in question. Reducing our capital spending will have significant consequences. For instance there is a proposal to cut the programme for kitchens for next year by half. If this was repeated over the four years of the rent cut that would mean somewhere in the region of 1,000 less kitchens renewed. Such a backlog of work would mean the cost of doing it in future would be higher as inflation kicks in. And inflation for building work is usually higher than the general headline level of inflation.
Option B would in our view be the most sensible option. If we suspend paying the £5 million for four years we will pay more interest over the course of the 30 year business plan than originally intended: an extra £166,000 a year in interest payments. With 26 years left of the business plan that means an extra £4.316 million would be paid. However, the advantage of this option is that when the cost of that extra interest is deducted (in each of these 4 years), we would have £4.834 million a year extra to spend. This would mean that we could both maintain the level of spending on replacement of bathrooms and kitchens and other components, and we would still have more money available to invest in our non-traditional housing stock. This would mean that over the four years we would prevent a backlog of work building up.
This option would provide us with £19.336 million more over the four years. This would cover the shortfall in our capital budget and leave us with £6.314 million in addition which could be used for additional investment on non-traditional stock.
For the reasons explained above we would oppose this option because money from the reserves would be a one-off. We understand CIPFA recommends keeping £4 million, so at best only £3 million would be available.
Option B is the best means of dealing with the loss of £22.8 million rent and preventing the build up of a backlog of work over 4 years. The more work that can be done in that time-frame the better. As yet we have no idea what government rent policy will be after that. Using the extra £5 million for each of these four years would be the best means of preventing deterioration in the condition of our housing stock.
It means in effect deciding to pay off the ‘debt’ more slowly. However, the additional cost in interest payments at £4.316 million over the remaining 26 years of the business plan is manageable.
The alternative of continuing to pay the £5 million debt would mean a significant cut in our renewals programme, at a time when the housing department considers it necessary to step up spending on our non-traditional stock. Cutting our renewals programme now will cost us more in the long run.
on behalf of
Swindon Tenants Campaign Group
December 18th 2015