Budget transfer to Housing Department: Income Support and Housing Rents

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A decision made 22 July 2013:

Decision Reference: MD-S-2013-0066
Decision Summary Title :	Budget transfer as a result of the proposed Housing Rent and Income Support increases from October 2013		Date of Decision Summary:	17 July 2013
Decision Summary Author:	Management Accountant, SSD		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	Budget transfer as a result of the proposed Housing Rent and Income Support increases from October 2013		Date of Written Report:	17 July 2013
Written Report Author:	Management Accountant, SSD		Written Report : Public or Exempt?	Public
Subject: A budget transfer from the Social Security Department to the Housing Department amounting to £148,700 in 2013, £600,200 in 2014 and £622,300 in 2015 as a result of lower than forecast increases proposed for Income Support and Housing rents from October 2013.
Decision(s): The Social Security Minister approved a budget transfer from the Social Security Department to the Housing Department amounting to £148,700 in 2013, £600,200 in 2014 and £622,300 in 2015 as a result of lower than forecast increases proposed for Income Support and Housing rents from October 2013.
Reason(s) for Decision: The Social Security Department are forecast to make savings in income support as a result of lower than forecast increases in Income Support from October 2013. The department has agreed to contribute a large proportion of these savings to fund a shortfall in the forecast rental income to the Housing Department as a result of the lower increase in housing rents proposed from October 2013. Both increases are proposed at 2.15% compared with 3.61% forecast in the MTFP.
Resource Implications: The Social Security revenue head of expenditure to decrease by £148,700, £600,200 and £622,300 in 2013, 2014 and 2015 respectively with a corresponding increase in the Housing Department’s revenue head of expenditure.
Action required: The SSD Director of Finance and Governance to notify the Head of Financial Planning, Treasury and the SSD Finance Manager that this decision has been approved. Copy of signed decision to be submitted to the Treasury Department.
Signature:		Position: Minister
Date Signed:		Date of Decision (If different from Date Signed):

Budget transfer to Housing Department: Income Support and Housing Rents

Social Security

Ministerial Decision Report

BUDGET TRANSFER AS A RESULT OF THE REDUCED INCREASE IN INCOME SUPPORT AND HOUSING RENTS FROM OCTOBER 2013.

Purpose of Report

To enable the Minister for Social Security to approve a budget transfer from the Social Security Department to the Housing Department amounting to £148,700 in 2013, £600,200 in 2014 and £622,300 in 2015 as a result of lower than forecast increases proposed for Income Support and Housing rents from October 2013.

Background

The Medium Term Financial Plan (MTFP) 2013-2015 included forecast assumptions for the increases to income support and rent increases for October 2013 and the Social Security and Housing Departments’ cash limits are based on these assumptions. The forecast assumption was 3.61% being half-way between the MTFP forecast of RPI and average earnings for 2013. Similar assumptions were included for October 2014 and October 2015.

The States have recently debated and approved P33/2013 - The Reform of Social Housing. This proposition sets the future strategy for social housing in Jersey and included annual rental increases at RPI plus 0.75%. The Housing Department intends to introduce this metric, as approved, in the course of the transition to its new status. The RPI figure for March 2013 is 1.4% and the relevant average earnings increase is 1.5%. As a result the increase in rent proposed for October 2013 is 2.15%, being 1.4% inflation rate and the additional 0.75%.

In order that the increases in income support and housing rents are kept on a similar basis as assumed in the MTFP, and in line with past practice, the Minister for Social Security was advised of the housing rent proposals and has obtained States approval for a similar increase for income support. P66/2013 Draft Income Support (Amendment No.9)(Jersey) regulations 201- proposes increases to income support at the level of 2.15% from October 2013.

The impact on the Housing Department is a forecast reduction in rental income of £148,700 in 2013, compared to the MTFP. The full year affect of this reduction in 2014 is £600,200 and by 2015 compounds to £622,300. If this reduction is not compensated for the Housing Department states that this will cause the Business Model presented to the States as R15/2013 to become unviable.

The Social Security Department will accrue savings as a result of the lower than anticipated increase in income support from October 2013. A proportion of these savings are broadly equivalent to the loss of rental income to Housing for States tenants on income support. This represents about two thirds of the loss of housing rental in each year. The remaining third of the housing loss of rental income being for States tenants not on income support.

In addition, the Social Security Department will also accrue savings in respect of private sector tenants on income support. It has been requested that the Social Security Department contribute a proportion of these additional savings to offset the total loss of rental income to the Housing Department. It is recognised that this is not a direct offset or contra adjustment but a contribution from Social Security from what could otherwise be savings made for 2013, 2014 and 2015.

3. Recommendation

The Minister for Social Security is recommended to approve a budget transfer from the Social Security Department to the Housing Department of £148,700 for 2013 The Minister is also recommended to approve that £600,200 and £622,300 is transferred from the Social Security Department to the Housing Department for 2014 and 2015 respectively, representing the recurring full year effect of the October 2013 reduction in increases in income support and housing rents from those budgeted.

4. Reason for Decision

To enable the Housing Department to recover losses on income caused by lower than forecast increases proposed for Housing rents from October 2013.

5. Resource Implications

To decrease the Social Security Department revenue head of expenditure by £148,700 in 2013, £600,200 in 2014 and £622,300 in 2015 with a corresponding increase in the Housing Department’s revenue head of expenditure.