Agenda item

A copy of the report considered by Cabinet on 12 November 2015 is attached, together with a report by the Executive Director (Corporate Services) on the Council’s Borrowing and Investment Strategy.

NOTE – the press and the public are likely to be excluded from the meeting during consideration of the appendices relating to the report considered by Cabinet in accordance with the provisions of Section 100(A)(4) of the Local Government Act 1972 (exempt information as defined in paragraph 3 of Schedule 12A of the Act).

Council is RECOMMENDED to:

(a)        APPROVE the expansion of the housing company portfolio over a six year period 2015/16 to 2020/21, as set out in option C of the Cabinet report.

(b)        APPROVE the adoption of the five year business plan set out in Appendix B of the Cabinet report.

(c)        APPROVE the establishment of three new fixed term posts to deliver the business plan.

(d)        APPROVE the establishment of a Board to oversee the work of the company as set out in paragraphs 29 to 31 of the Cabinet report.

(e)        APPROVE an amendment to the Council’s Borrowing and Investment Strategy to include additional Council capital expenditure and borrowing of £100 million for on-lending to Ermine Street Housing with effect from December 2015.

(f)        APPROVE an amendment to the Council’s Borrowing and Investment Strategy for the minimum revenue provision to include a fixed and floating charge over or an equity share of an asset of value as a full or partial proxy for the provision.

Council APPROVED:

(a)        the expansion of the housing company portfolio over a six year period 2015/16 to 2020/21, as set out in option C of the Cabinet report.

(b)        the adoption of the five year business plan set out in Appendix B.

(c)        the establishment of three new fixed term posts to deliver the business plan.

(d)        the establishment of a Board to oversee the work of the company as set out in paragraphs 29 to 31 of the Cabinet report.

(e)        an amendment to the Council’s Borrowing and Investment Strategy to include additional Council capital expenditure and borrowing of £100 million for on-lending to Ermine Street Housing with effect from December 2015.

(f)         an amendment to the Council’s Borrowing and Investment Strategy for the minimum revenue position to include a fixed and floating charge over or an equity share of an asset of value as a full or partial proxy for the provision.

Councillor Mark Howell, Portfolio Holder for Housing, presented a report which set out the performance of the housing company pilot and sought a decision on the future of the company.  The appendices to the report contained exempt information in accordance with paragraph 3 of Schedule 12A of the Local Government Act 1972, as amended.  Council agreed that Members would not discuss or divulge any of the exempt information contained within the appendices, therefore meaning that the press and public did not need to be excluded from the meeting.

Councillor Howell reminded Council that it had agreed to the establishment of a housing company pilot project on 28 November 2013 and agreed to advance up to £7 million of funding to secure a market rented portfolio of homes, and that the pilot scheme went live in May 2014.  A number of objectives for the housing company had been set at the outset of setting up the pilot, which were set out in paragraph 7 of the report.  Councillor Howell reported that the loan portfolio in respect of assets held at the time of writing the report was £6,837,970 and resulted in the company owning 34 homes, with two further acquisitions in progress, with all those intended for letting now occupied.  In addition, the company had secured long-term management deals with the Defence Infrastructure Organisation and had a further 42 properties under management for five years, with more in the pipeline. 

Councillor Howell reported that the pilot had been successful, it had generated an additional income stream for the Council and also provided the opportunity for learning in a new area of business.  During the course of the pilot the Council had received interest payments from the company, providing returns in excess of £100,000.  It was also noted that the pilot spanned the first year of operation for the company and, as a result, included significant set up costs resulting in the company making a trading loss in year one.  Councillor Howell emphasised that this was expected.

Referring to the options contained within the report, Councillor Howell proposed option C, which sought to expand the portfolio over a five year business period, investing approximately £100 million, with the aim of owning and managing 500 properties by the end of that period.  He highlighted the proposed governance arrangements set out in paragraphs 29 to 31 of the report, which would see a Board established consisting of six voting members to include two elected Members, two executive officers (the Company Director and the Company Secretary) and two independent members selected for their skill sets.  The lead manager for the company would also attend meetings of the Board as a non-voting member.

Councillor Ray Manning, Leader of the Council, seconded the proposal.

The Chairman used her discretion to allow Councillor Howell to speak more than once in order that he could answer questions by Members on the business case.  The following points were noted during this exchange:

·         the £100 million would be borrowed by the Council for the lowest possible exchange rate, the source of which had yet to be identified, with the Council subsequently loaning the money to the housing company at a higher level of interest;

·         the housing company sought to operate as an ethical landlord, and would take extra steps where it could to offer support to tenants when necessary.  However, there had to be a clear distinction between the housing company and the Council;

·         recent announcements regarding stamp duty could incur an additional 3% increase per home, but it was noted that companies which owned 15 or more houses would be exempt from this increase;

·         in questioning the amount of the proposed £100 million investment it was noted that this was based on £20 million of investment per year over a five year period.  This was the amount necessary to enable a positive impact on the Council’s budget in view of the significant reduction in Government grant, which had reduced by £6 million since 2008.  An investment of this amount would provide the Council with an additional income stream sufficient enough to enable the provision of high quality services and address the loss of Government grant funding;

·         many other Councils across the country were interested in the way this company had been set up and how it was operating, with South Cambridgeshire District Council being seen as a model of good practice in this respect;

·         risk registers would be reviewed on an ongoing basis, and in particular would be reviewed and amended where necessary to reflect the implications of the Government’s autumn statement;

·         the amount of assets owned by the housing company had to be greater than the amount it would owe the Council so that it was in a position where it could pay back the outstanding debt to the Council if it needed to, thereby negating any risk;

·         the Corporate Governance Committee was satisfied that the necessary processes were in place from an audit perspective to protect the Council, having been assured by internal and external auditors.  Councillor Howell welcomed this and also wanted to see the Partnerships Review Committee take a role in reviewing the company’s operation, from the interests of both the Council and the company itself;

·         the housing company would operate under the terms of the business plan as approved by the Council;

·         the two officers who had supported the pilot to date were a key reason for its success and one of the biggest risks to the ongoing success of the company was the retention of their knowledge and skills;

·         the business plan should have included more proposals to build new houses with the investment, encouraging use of local businesses and services.  Councillor Howell explained that this was something he envisaged the company doing in the future and was very supportive of this approach.

Voting on the proposition, with 45 votes in favour, 4 votes against and 2 abstentions Council APPROVED:

(a)        the expansion of the housing company portfolio over a six year period 2015/16 to 2020/21, as set out in option C of the Cabinet report.

(b)        the adoption of the five year business plan set out in Appendix B.

(c)        the establishment of three new fixed term posts to deliver the business plan.

(d)        the establishment of a Board to oversee the work of the company as set out in paragraphs 29 to 31 of the Cabinet report.

(e)        an amendment to the Council’s Borrowing and Investment Strategy to include additional Council capital expenditure and borrowing of £100 million for on-lending to Ermine Street Housing with effect from December 2015.

(f)        an amendment to the Council’s Borrowing and Investment Strategy for the minimum revenue position to include a fixed and floating charge over or an equity share of an asset of value as a full or partial proxy for the provision.

Enough Members as prescribed by the Council’s Standing Orders requested a recorded vote.  Votes were therefore cast as follows:

In favour

Councillors David Bard, Val Barrett, Henry Batchelor, Anna Bradnam, Francis Burkitt, Tom Bygott, Grenville Chamberlain, Graham Cone, Pippa Corney, Christopher Cross, Kevin Cuffley, Sue Ellington, Andrew Fraser, Jose Hales, Roger Hall, Lynda Harford, Philippa Hart, Tumi Hawkins, Roger Hickford, James Hockney, Mark Howell, Caroline Hunt, Sebastian Kindersley, Janet Lockwood, Mervyn Loynes, Ray Manning, Mick Martin, Raymond Matthews, David McCraith, Cicley Murfitt, Charles Nightingale, Des O’Brien, Tony Orgee, Alex Riley, Tim Scott, Ben Shelton, Bridget Smith, Hazel Smith, Richard Turner, Robert Turner, Bunty Waters, Aiden Van de Weyer, John Williams, Tim Wotherspoon and Nick Wright.

Against

Councillors Neil Davies, Robin Page, Deborah Roberts and Edd Stonham.

Abstention

Councillors Nigel Cathcart and Douglas de Lacey.