Spring Supplementary Estimate 2010-11
Response to SSE queries 2010-11
SPRING SUPPLEMENTARY ESTIMATE 2010/11
QUESTIONS RAISED BY DCLG SELECT COMMITTEE FROM THE LETTER DATED 23 MARCH 2011
SPRING SUPPLEMENTARY ESTIMATE 2010-11
Question 1
Why has the Department drawn down £200 million for the National Affordable Housing Programme and £50 million for Kickstart, when these programmes’ budgets had been cut in May 2010 by £100 million and £50 million respectively?
Answer
This is a timing issue. The total capital budget provided to the Homes and Communities Agency by the previous administration was £4.4 billion. This included an expectation of £610 million of End Year Flexibility being awarded in the Spring Supplementary. At Emergency Budget in May the Homes and Communities Agency reviewed its uncommitted programme funds against its total budget and due to prudent management of commitments was able to reduce the total budget by £230 million including £100 million from the National Affordable Housing Programme and £50 million from Kickstart.
A further review focusing on End Year Flexibility (EYF) was undertaken in June. The Government decided that £390 million of EYF was affordable (including £200 million for NAHP and £50 million for Kickstart) to assist the delivery of the Housing Pledge.
Question 2
The Committee requests a copy of the letter from the Chief Secretary to the Treasury in of 29 June 2010 agreeing this draw-down, referred to on p.20 of the Explanatory Memorandum.
Answer
A copy of the letter is attached as requested.
Question 3
Did the Department made any announcement of this agreement and the funding consequences for the relevant programmes at the time?
Answer
The Homes and Communities Agency made an announcement on 25 May about the impact of the Government’s Saving Review on the Agency’s programme and on 6 July about the availability of the £390 million fund. These announcements are at Annexes A and B.
Question 4
In a number of places the EM justifies the changes to spending plans which the Estimate effects with the phrase "to meet emerging pressures". The nature of those "emerging pressures" is, however, not clearly explained. The Committee therefore requests a fuller explanation of what the "emerging pressures" are which are referred to at various points in the Explanatory Memorandum
Answer
At the time of the supplementary estimate we were negotiating ending the FireControl contract and were in discussions with two Fire Authorities over the possible return to the Department of leases for their Fire Control Centres. The return of the leases would have cost the Department around £36m and, while we considered it unlikely these costs would materialise, we felt it was prudent to set aside £20m of additional capital receipts and £16m of underspends that had been surrendered from various programmes.
By February, we had successfully concluded the negotiations without the risk crystallising and so it was decided to release the £20m receipts back to the HCA. We anticipate that the remaining funds will not be used, resulting in a small underspend.
Annex A
25 May 2010
HCA Briefing note
Impact of HM Treasury announcement on HCA spending
Following yesterday’s (24 May 2010) announcement by HMT on spending cuts, the Homes and Communities Agency will be implementing a package of programme savings totalling £230 million. This is part of a wider package of programme savings being made by our sponsor department – CLG – of £780 million for the current financial year 2010/11.
Programme savings
The HCA savings are made up of reductions to the following programme budgets:
• National Affordable Housing Programme (NAHP) - £100 million
This money is not yet allocated against any schemes.
Total 2010/11 budget = £2,401,659,000
• Kickstart Round 2 - £50 million
There are currently bids totalling £214 million that have gone through the due diligence process. The sum available to fund Kickstart projects will be reduced by £50m.
Total 2010/11 Kickstart (Round 1 and Round 2) budget = £420,200,000
• Gypsy and Traveller programme - £30 million
The 2010/11 bidding round (on which bids have been made, but not decided) will not proceed.
Total 2010/11 budget = £45,100,000
• Housing Market Renewal - £50 million
This represents a reduction on the allocations announced in December and will be subject to consultation.
Total 2010/11 budget = £311,000,000
Commitments on hold
In addition to the programme savings outlined (above), further commitments on the remaining uncommitted funds for the National Affordable Housing Programme, Kickstart Round 2 and Local Authority New Build programmes will remain on hold, until Government funding decisions are detailed in the Chancellor’s 50 day budget on 22 June 2010.
The NAHP funding is currently not allocated to any specific schemes.
A full list of Kickstart Round 2 schemes, approved by the Agency but not yet contractually agreed is linked along with a list of LANB schemes, where legal agreements were not concluded prior to the election purdah period.
The HMR and Growth fund budget allocations for 2010/11 will also not be confirmed until June.
All affected stakeholders will be receiving correspondence from the HCA explaining the current situation and the implications.
The explanatory notes below cover the Agency’s overall funding position.
Efficiencies
As part of the Government’s overall drive to reduce operating costs, CLG and its Arms Length Bodies will be expected to make overall ‘in year’ efficiencies of 10 per cent in their running costs. (This will be in addition to the existing target saving of 3 per cent on operating costs as well as a 2 per cent cash standstill)
During 2010/11 the HCA will reduce its running costs in line with this. Saving will be achieved through a range of measures including job vacancy control, reducing use of consultants, reducing research and travel costs.
Comment
Commenting on the impact on the HCA, chief executive Sir Bob Kerslake said: "This represents the HCA’s contribution to Government saving on both programmes and efficiencies, and we will aim to implement these in a way that minimises impact."
Explanatory Notes
1. The Housing Pledge was announced in June 2009. In total, the Pledge involved additional expenditure of £1.5bn in 2009/10 and 2010/11 to deliver 20,000 additional affordable housing starts. The Pledge was funded from a number of sources including redeployment of funds within the HCA’s own budget.
2. An element of the Pledge funding was dependent on underspends arising from within CLG and other Government Departments, as reported to Parliament at the time (http://www.publications.parliament.uk/pa/cm200910/cmselect/cmcomloc/391/39110.htm). The Agency has managed its commitments to ensure that it could cover this sum should the underspends not be forthcoming.
3. As part of the Government’s announcement on savings, it has been concluded that £780 million of previously agreed Departmental funding (including other Government Department underspends) can no longer be regarded as secure. The position on this funding will not be confirmed until the emergency budget in June.
4. Given the level of existing commitments of the Agency, we have decided to put a complete hold on all uncommitted spending until the position is clarified in the June budget. HMR Pathfinders and Growth Areas have also been advised to hold on their commitments until June.
5. The Treasury has indicated that it will ‘re-cycle’ £170 million of the £500million of Government savings back into the Agency to reinvest in social rented housing. This has reduced the level of funding uncertainty.
The Agency will continue to fund existing commitments pending the June budget.
ENDS
Annex B
6 July 2010
HCA briefing note
Funding for the HCA announced
The Chief Secretary to the Treasury yesterday (5 July) made an announcement confirming £390m for the HCA against the potential shortfall of £610m.
Commenting on the settlement, chief executive, Sir Bob Kerslake said: "We are pleased to have confirmation of the £390m and are working on how we can use it to maximise the impact for maintaining the supply of affordable housing and creating opportunity for communities. We can now firm up the position with our partners to create more certainty around schemes that have been on hold.
"It also means that we are now in a position to both meet commitments across our entire funding programme as well as providing funding for some additional affordable housing schemes."
How the HCA’s funding adds up
• On 24 May reductions were made to the HCA’s programmes of £230m as part of wider efficiency saving imposed on CLG. These were made up of £100m (National Affordable Housing Programme); £50m (Kickstart Round 2); £30m (Gypsy & Traveller Programme); £50m (Housing Market Renewal, subject to consultation).
• As part of the Government’s announcement on the above reductions, it was indicated that Housing Pledge funding for the HCA of £780m was not secure. However, the Treasury also indicated that £170m of funding would be reinvested in the HCA for social rented housing, creating an overall potential shortfall in funding for the Agency of £610m (£780m - £170m = £610m).
• The Government has decided that granting the remaining £610m in full is unaffordable, given the extent of similar commitments across the rest of government. However, the Government has guaranteed that £390m will be available this year, on top of the £170m announced on 24 May 2010. This will be prioritised towards new affordable housing as well as meeting existing commitments on Decent Homes and Mortgage Rescue.
• In total the £780m coupled with £230m in programme cuts, created a total potential shortfall in funding of £1.010 billion. This set against a funding commitment from government of £170m and now a further £390m means that the HCA has a programme reduction in 2010/11 of £450m in total (£230m (as above) plus £220m as per yesterday’s announcement). This reduces the HCA’s capital budget for 2010/11 by around 10 per cent, to £4.11bn.
HCA funding can be summarised as follows:
£m
Shortfall in Pledge (24 May) - 780
Recycled funding (24 May) +170
Secured (5 July) +390
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Balance -£220
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Programme reductions (24 May) - £230
Overall balance - £450
Meeting existing commitments
As a result of the funding settlement, the HCA has confirmed that it will be able to meet existing contractual commitments across all of its programmes. It will also be able to provide funding for those Round 2 Kickstart schemes approved before 6 April.
The balance of funding available will be used to maximise delivery of affordable housing. The HCA local investment teams will therefore review pipeline NAHP schemes, the remaining Kickstart round 2 schemes and LANB schemes which are not in contract and will determine which of those can be funded with available resources based on the aim of maximising affordable housing and achieving best value for money.
Details of Kickstart Round 2 schemes that have secured funding and those that have not secured funding - but are subject to further evaluation are available.
Details of Local Authority New Build schemes that are contractually committed and have secured funding and those LANB schemes that are not contractually committed – but are subject to further evaluation are also available.
Efficiencies
As part of the Government’s overall drive to reduce operating costs, CLG and its Arms Length Bodies will be expected to make overall ‘in year’ efficiencies of 10.5 per cent in their running costs. (This will be in addition to the existing target saving of 3 per cent on operating costs as well as a 2 per cent cash standstill).
During 2010/11 the HCA will reduce its running costs in line with this. Savings will be achieved through a range of measures including job vacancy control, reducing use of consultants, reducing research and travel costs.
ENDS
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