Return to Agenda

Return to EX9

ITEM EX9 - Supplement

EXECUTIVE - 10 DECEMBER 2002

HOMES FOR OLDER PEOPLE REDEVELOPMENT PROGRAMME

FURTHER FINANCIAL ANALYSIS

Supplementary Report by Director of Social & Health Care

1. In respect of the capital programme, there have been a number of changes to the closure programme, compared to that assumed in the initial model. These changes have reduced the overall level of capital receipts likely to be realised, but also reduced the requirement to spend on land. If the Executive endorses the current proposals, and the new proposal for OCP to lease the land at Witney directly, rather than via a land purchase by the Council, the net impact on the capital programme is broadly neutral.
2. A further issue which will impact on the capital programme is the final decision on the three homes currently subject to option appraisal. The initial model which was the basis of the Council’s decision in December 2001 assumes all three sites will be sold at full open market value. This value is in excess of that provided for the sale of the sites as a going concern i.e. if the sites were to be sold as homes for older people. If the Executive finally accepts an option which involves a sale price below the full open market value, then options to address the resulting shortfall on the capital programme will also need to be identified.
3. In respect of the revenue budget, the issues are much more complex. There have been a number of changes to the initial financial model, and it has not been possible at this time to agree with OCP, the impact on the model of these changes. These changes include the variations to the closure programme, and the variations in the nature of care provided including the development of options for very sheltered housing. The costs resulting from the borrowing requirements will also need to be revised, once the detailed cost of the building works associated with the final redevelopment programme have been agreed.
4. In examining the cost variations, the Council and OCP need to agree which of those are a legitimate variation to the financial model, and therefore to be reflected in the price per bed. It also needs to be determined which of the savings should be set against the annual savings target of £500,000 set by the Council in agreeing the final contract. Officers from all partner organisations continue to work to ensure that the revenue costs can be contained within the approved financial strategy, but this cannot be confirmed at the current time.
5. In respect of the decision required at Witney, the published report makes clear that the decision to lease is of direct benefit to the Council’s capital programme. As stated above, if the proposal is accepted, the benefit to the capital programme will balance previous movements, which had led to a net loss on the capital programme.
6. A decision for the Council not to purchase the land at Witney does also have revenue consequences. The financial model includes rental income to the Council in respect of all land owned by the Council. The net loss to the annual revenue budget of the decision not to proceed with the purchase of land at Witney is estimated at £55,000 pa.
7. In terms of cost effectiveness, the loss of revenue income is seen to be broadly equal to the gain from the benefit of the one off saving if land does not have to be purchased. This is because the rental level was based on the return the Council would have made if the money was invested elsewhere, allowing for any residual value in the land at the end of the contract.
8. In terms of the revenue budget, the £55,000 pa loss will have to be considered alongside the other alterations to the financial model discussed above. At this stage, it is not clear that this cost will eventually fall to the Council, but may rather be absorbed within the other cost variations. If the cost is to fall to the Council, it should be noted that the figure of £55,000 pa is a very small share of the pooled budget for the purchase of residential and residential care, representing around 3 beds of an overall total purchase of 1,600 beds. Given the difficulty of finding an alternative site within Witney for the new home, the potential annual loss to the Council of £55,000 is not seen to be a significant barrier, and should be able to be absorbed within the overall pooled budget if required.

CHARLES WADDICOR
Director of Social & Health Care

Background papers: Nil

Contact Officers: Nicholas Welch, Assistant Director 01865 81 5714

Nigel Holmes, Service Manager 01865 854480

December 2002

Return to TOP