Surging energy costs, rising inflation and housing repairs have forced Southwark Council to take £6.7 million from its housing reserves, bringing the fund to its “lowest ever point”.
The council dipped into its savings after the housing revenue account (HRA), – which is used to fund housing stock maintenance – overspent by £19.8 million between 2022 and 23, a council report revealed.
The remaining £13.1 million deficit was recouped through “better-than-expected rental income”, underspends elsewhere and “a combination of financing measures”.
But the report, entitled ‘Policy and Resources Strategy: Revenue monitoring report outturn 2022-23’, also said there was “limited scope within the HRA to absorb ever-increasing demands”.
Southwark Council’s cabinet member for finance Cllr Stephanie Cryan told us the council retains “a firm grip” on its finances. But she also called on the government to give local authorities “long-term funding certainty”.
The HRA reserves are essentially the savings for the HRA itself and Southwark Council has basically transferred money from its savings, reflecting the financial pressures it faces as London’s biggest social landlord.
The repair and maintenance of the housing stock took up “by far” the largest proportion of operating resources, the report said.
Supplying heat to the tenants and leaseholders had also been challenging, resulting in a £4.1 million district heating overspend.
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The report described how the district heating account was “exposed to unprecedented price volatility” and that it now carries “a minor deficit for the first time since it was first established in 1985”.
It also said the rent cap on social housing, and the increase in the number of repairs being reported, had put finances under “very significant pressure”.
In a LinkedIn post, Peter John, who led Southwark Council between 2010 and 2020, said he didn’t have “detailed knowledge” of Southwark’s finances but shared his view on the report.
He said: “Firstly, the council’s general fund seems robust and secure. This has never been a local authority which has embarked on a crazy spending spree or dodgy deals.”
But he added: “The reality is that Southwark’s Cabinet will now face some tough decisions about re-profiling their capital and revenue spending over the medium term in order to ease the current pressure on the HRA.”
It is unclear how Southwark Council can “re-profile” capital spending, which is used to fund large housing projects, without losing out on new homes.
The council’s report comes barely a month after housing boss Michael Scorer admitted the council’s pledge to start building 11,000 homes by 2043 was “unfunded”.
Last December, central government agreed to increase local government funding by 9.2 per cent in its annual Local Government Finance Settlement.
But London Councils, the cross-party group representing London’s local councils, warned that boroughs would still have to make £100million in savings to balance budgets.
It said the government’s 2023 to 24 funding settlement left London councils with 18 per cent fewer resources compared to 2010 to 2011.
Cllr Cryan said: “As ever, we urgently need the Government to give long-term funding certainty to all councils to enable us to better plan our resources over the longer term.”
Announcing the settlement in December, Housing Secretary Michael Gove said the 9.2 per cent funding increase would “provide councils with the support they need”. He added: “It gives certainty, ensures stability, provides significant additional resources for social care, and maintains balance on council tax.”
Southwark housing boss admits council hasn’t got cash to meet 11,000 council homes promise