The East Hampshire District Council Cabinet was scheduled to meet to discuss the first quarterly finance, risk and performance report for 2025-26, the future of the building control service, and the allocation of affordable housing contributions for shared equity housing in Medstead. The Cabinet was also scheduled to note a delegated decision regarding an upgrade to Admers Crescent and the Lyndons Playground.

Quarterly Finance, Risk and Performance Report

The Cabinet was scheduled to receive and note the recommendations in relation to the Quarterly 1 Finance, Risk and Performance Report 2025-26. The report provided a strategic overview of performance for Quarter 1 of 2025/26 in relation to the corporate priorities in the Council's Council Strategy. The report noted that central government announced a review of governance structures for local government in December, and that local authorities in Hampshire submitted a bid for fast track reorganisation, which was accepted. The budget for 2025/26 was set in February 2025 with a great deal of uncertainty around the ongoing future of local government services in the East Hampshire District. Preparation for Local government reorganisation has added additional work for the Council above the normal, which has meant that there will be related additional costs. The budget has been rebased to reflect these changed financial priorities. The inherent uncertainly has also impacted the phasing of savings included in the base budget, and it may not be possible to make some of the original saving proposals, as resources will be required to deliver additional work. The Council will still be in existence until April 2028 and will need to continue to provide its range of services, and is looking for staff retention by investing in training and skills within the workforce. The 2025/26 base budget included government grants being ring fenced for future proposals and projects, and due to changes in financial priorities, some of this can be released now to help fund LGR transition work and mitigate unachieved savings. The saving proposals included in the 2025/26 base budget have been reviewed and revised savings targets proposed. The main areas of budget changes included in during this quarterly review are as follows: The pay award was applied centrally as part of the budget setting process, as the amount was not known at time of budget setting. This has now been agreed and so applied to the services. There was a saving against budget on this area. However, the employer NI % and threshold was increased from 1 April 2025. The Council received a grant from central government towards this increase, but it did not cover the full amount. The shortfall was about equal to the saving on budget from the pay award. Therefore, the NI growth has been covered in these figures. The Council continues to closely review the property budgets, especially the investment property area. This area has had additional funding in the in the past to ensure affordability. As discussed in previous reports, the Council is robustly and proactively managing this area. The good news is that this has meant more property has been rented out, and the income stream is higher than previously forecast. Therefore this budget includes a reduction in net budget in this area of £250k. This reflects the additional work undertaken in the property team in order to decrease costs and increase income. Another area that is more closely reviewed is the car parking budget. The overall number of off-street parking instances has remained consistent, and income has increased due to the higher parking charges. However, there are still a few remaining base issues arising from changes from the split with Havant and Hampshire. Income from Parking Permits has settled at a lower level than previously experienced, this reflects the change in workforce hybrid working. Therefore, it is proposed that the budget in this area in increased by £250k. The managers will still robustly manage this area and look for any other income and savings opportunities. During budget setting in 2025/26, additional budget was included in Environmental Services to reflect uncertainties with the future waste provision and the introduction of food waste. There is more certainty in these areas now with the Council negotiating an extension to the current Norse contract, and the food waste service is expected to be launched during the 2026/27 year, so most cost will be avoided in 2025/26. Government has stated that some funding will be given to the Council in 2026/27 to fund the new schemes. However the amount has not yet been announced. Therefore, revision of the base budget had shown that £500k of budget reductions can be made in this area. These have been returned to central savings area. Additionally, the Council has the Council now runs three garden waste rounds and numbers subscribing have surpassed the estimates. Therefore and additional £400k income is being forecast in 2025/26. Budget savings. As discussed above, the budget savings to be made in the centralised so that the remaining £259k is held centrally. This adds transparency to service reporting. These savings have not been assumed as being made during the year, due to changes discussed above. However, the Management team is reviewing this to try and deliver further savings and protect reserves. 2025/26 continues from the challenging financial position that the organisation faced in 2024/25. The economic climate has meant that some costs have risen more than originally anticipated and, in some areas, income is down. The revenue monitoring report for Q1 shows a projected favourable position at the yearend for the net cost of services of £0.005 million The figures in this report have been verified through a review of actual figures against budgets with input with Budget Managers, considering known profiling changes. This report includes actuals year to date however not all budgets are spent at equal rates during the year, so this does give rise to some timing differences. The Capital Programme and spend for 2025/26 is limited to a couple of main areas; Investment Property activity Whitehill & Bordon Splashpad Environmental Waste Vehicles including Waste Disability Facilities Grant (DFG) UKSPF/Rural England With the except of DFG where activity is driven by resident requests, spend and activity is relatively limited at this stage as work on the projects gather pace for delivery of the scheme. Any new requests for Capital activity outside of the existing programme are being raised through the Investment Group for review and if approved, raised through the appropriate democratic process. The report shows current estimates against approved budget and focuses on forecast exceptions to meet the approved budget. Detailed appendices showing the individual directorate and services are included in Q1 Appendix A - Revenue Forecast. The main revenue directorate variances against the revised budget are set out in the table below.

Community - £0.010 million adverse. Case Management: £0.070 million favourable this is predominantly through vacancies across the service and reduced spend on 3rd party costs District Team; £0.110 million adverse, this is predominantly within Car Parking and is currently showing as an overspend however there are plans being developed to address and correct this shortfall subject to Members engagement. Environmental Health: £0.106 million favourable through vacancies across the service. Housing: £0.083 million adverse, additional homelessness costs that are not funded via the grant received SEHF Savings: revised target of £0.069 million is expected to be achieved.

Operations - £0.148 million favourable. Planning; £0.105 million adverse due to a lag in planning application income receipts. This budget is forecast to balance at end of year and will be further reviewed during Q2. Building Control: £0.077 million favourable through vacancies which are being held in lieu of the potential changes in the service following the ending of the IAA with Havant Borough Council. Property: £0.091 million favourable through reduced Headlease and Business rate costs within Woolmer Trading Estate and lower than anticipated rates within our Operational Estate. Waste Services: £0.085 million favourable through a additional income relating to glass recycling, bulking items and garden waste). SEHF savings; revised target of £0.083 million is expected to be achieved.

Corporate Services - £0.314 million adverse. Project and Programme Management: £0.047 million favourable through vacancies across the service IT/Digital: £0.208 million adverse, additional pressures to deliver our IT infrastructure, mainly our Azure environment and Licences. In addition, the annual increases on key contracts have been above inflation. Legal Services: £0.132 million adverse through additional costs for agency staff covering vacancies, increased software costs and lower income forecasted. SEHF savings; £0.040 million of savings is expected to be achieved.

Finance – £0.102 million favourable. Corporate Finance: £0.063 million adverse, a combination of increased audit fees including Housing Benefit Audit, Insurance and banking charges. Revenue & Benefits: £0.166 million favourable through a combination of vacancies across the service offset by an overspend in relation to Housing Benefit/DWP subsidy claim.

Currently there are 2 main risks to the outturn, which have not been included due to uncertainty around timing and costs. As further information becomes available, these will be incorporated into the forecast and reported accordingly. These main risk areas are; Investment Portfolio: a few leases for our Investment Portfolio have either ended or nearing the end and these are being actively managed to ensure that the conditions of the assets remain fit for purpose. renew leases. seek new tenants. Unfortunately, the market and climate continues to be challenging and if leases are not secured then not only is EHDC impacted through loss of income, we are also then liable for the running costs (i.e. business rates, utilities, security etc). These costs are being reviewed, and there will be a requirement to draw down from property ear marker reserve in the year. ICT Exit and subsequent settlement is being negotiated with Havant Borough Council following the decision to manage our ICT function internally. As the exit process continues, services and costs are being tracked and or identified that may affect the current outturn position i.e. new or enhanced software that was originally part of the 5C contract offering. It is expected that this will be within the estimate approved by members at the start of the project in February 2023 and so contained within drawdown from earmarked reserves. As discussed in this report, the current LGR has raised some uncertainties and potential additional costs. A separate report around this will be brought to Members later in September. Further savings/efficiencies will be required in future years to ensure we safeguard services going forward. Work is currently underway on the budget setting for 2026/27 budget setting process which will be reported to members in February 2026. The Government had indicated that it will change the delivery of local government funding for 2026/27 and beyond. Details are expected to be shared with Council in November 2025. It is expected that this will result in East Hampshire District Council receiving less central funding in the future. At the same time, it is expected what costs will continue to increase, as will demand on our services Officers are already working on modelling future budgets requirement for the budget setting Council in February 2026. Any funding changes will be built into future budget and MTFS work. Full details of Local Government Reorganisation are not known and will not be clearer until the minister makes a decision on new structures for Hampshire. This means the budgets will need to be continually reviewed over next few years to ensure they are robust and as required by the business. As per previous reports, Q1 reporting on key performance indicators of services are contained at Appendix B - EHDC Quarterly Performance Report Q1. The Corporate Risk Register is currently under review and will be shared half yearly to members and quarterly to officers. The information contained within this report has been gathered through quarterly budget forecasting supplied by Budget Managers as well as information supplied by Executive Directors against corporate plan objectives. The report has been reviewed by Strategic Board.

Building Control Service Review

The Cabinet was scheduled to receive and note the report in relation to the options for the future of the Building Control Service. East Hampshire District Council has shared a building control service with Havant Borough Council since 2011. Havant Borough Council have given East Hampshire notice to exit these arrangements. The report provided information on the impact of this exit. The council will align its staff with its sole council service which is currently under a recharge basis with Havant Borough Council. Havant Borough Council will be removed from the shared IT platform which is held by East Hampshire District Council. There is also a budget saving of £53,000 to be noted in the realignment of this service. Building Controls purpose is to help maintain a higher standard of construction and improve the safety, accessibility and energy efficiency of buildings that the department inspects within East Hampshire District Council. The departments functions are as follows- Enforcing the Building Regulations by ensuring that new buildings, extensions, and renovations comply with the building regulations, which cover aspects like structural stability, fire safety, energy efficiency, accessibility, and sanitation. Plan checking and site inspections. Building control surveyors review building plans and specifications to ensure they meet the regulations. They also conduct site inspections at various stages of construction to verify that the work is progressing according to the approved plans and regulations. Have the powers to deal with demolitions and dangerous structures. Improve energy efficiency in buildings, helping to conserve fuel and power and protect the environment. Helping people with disabilities. Building Control check compliance with Access regulations to commercial buildings and new build dwellings. They also cannot charge fees for works linked to access improvements to domestic property. Building Control acts as an independent third-party to assess compliance with building regulations throughout the building process. Building control provides advice and guidance to building owners and the public on building regulations and how to comply with them. Local Authority Building Control competes with private sector Building Control providers for work. Comply with the Operational Standards Rules set out by the Building Safety Regulator (Overseer of Building Control) Building Control has been a shared service since 2020 between East Hampshire District Council and Havant Borough Council, an arrangement that was renewed in 2022 when a new IAA was arranged. The shared Building Control service pools staff and shares an IT platform (Tascomi) and management team. Havant Borough Council has now issued notice, under the terms of the Inter Authority Agreement to withdraw from the agreement on the 17th October 2025. There are two main impacts from HBC exiting these arrangements: Separating the staff who were working in the shared service and aligning to the EHDC resource requirements Separating HBC out of the IT platform Tascomi The shared service was designed to provide economy of scale and robustness of service across the geography of East Hampshire and Havant. People are employed either by Havant or East Hants, and we cross charge any 'over the border working' each quarter. People working in the service have mainly been working within their 'home' geography. The shared service was never a 50:50 arrangement as East Hampshire has a much larger geography than Havant and therefore more people employed and more cases to manage. The case demand for East Hampshire per year forecast is as follows:

In assessing the resource need for these cases, it was concluded that the number of people employed by East Hampshire exceeds this requirement, and the opportunity has been taken to remove one vacant post. The residual team will provide a robust and safe service for the annual number of East Hampshire cases. The residual EHDC service is as follows:

There are no staffing impacts on this proposal, we have East Hampshire employed people already in these posts, except for the plan checking contractor who is an external resource to provide resilience. The council is working with its IT platform supplier, Tascomi, to isolate the HBC cases and to return all records to HBC in a legally compliant way. There are costs associated with the removal of the casework from Tascomi, which fall to HBC to pay as they have requested the exit. All cases are on track to be removed and returned by 17 October 2025. The costs of the residual employees are already budgeted for in the annual Building Control budget. There is a vacancy which can be deleted, providing a corporate saving of £53,000. The proportionate IT Platform costs to the end of the current contract (March 26) and any costs of removing HBC from the technology is a burden for HBC to pay as part of their exit costs. There is a risk that someone continues to work on a case not belonging to their home authority after 17 October 2025, which they would not have a lawful delegation to do so. This risk is being mitigated by a clear exit plan, and the teams have already split new work so no new cases area being allocated to nonhome authority staff members. There is a risk that the IT exit is not ready in time. This risk is being mitigated by close working between all parties, and leadership from the IT manager at EHDC and the building control manager. There is a risk that, post exit, the lack of resilience the partnership provided causes a resource issue at EHDC. This risk is low as this was a rare occurrence. The Building Control manager has access to external resources who can be used in cases of emergency. The Building Control Service is a high user of car transport. By HBC exiting these arrangements there is an unintended benefit to the carbon produced by this service as people will no longer be travelling cross border to provide services which are further away from officer's home base. HBC did not consult on the exit of this service before serving the notice. They are not required to publicly consult. Members will be advised that this service is no longer shared in the next member newsletter. The public will not be communicated with as the channels in to use our service are not impacted.

Allocation of Affordable Housing Contributions

The Cabinet was scheduled to receive and consider recommendations in respect of the allocation of affordable housing contributions for the delivery of shared equity housing at Boyneswood, Medstead. The paper was submitted for a policy decision to fund 7 affordable homes in Medstead, using Affordable Housing Developer Contributions (AHDC), subject to conditions. The use of £545,000 of Affordable Housing Developer Contributions (AHDC), to fund 7 shared equity homes on the site detailed in the Exempt Appendix, with the release of funds conditional upon completion of a Deed of Variation to the (affordable housing) planning obligation for the site with planning reference number 25256/050, and payment of the AHDC, by the developer to the Council, as triggered by the terms of the Deed of Variation. The Executive Director of Community in consultation with the Monitoring Officer be delegated authority to take all necessary actions to facilitate the use of the AHDC (referred to in 2.1a above) to fund the 7 shared equity homes on the site detailed in the Exempt Appendix. The Council has a well-established process for funding shared equity housing, with approval previously given by Cabinet to fund 43 shared equity homes across 6 sites, in the last 5 years. These homes, delivered in partnership with Merlion Housing Association, were sold to people in housing need at discounts of up to 50% market value, with no rental element. An opportunity has arisen for the Council to fund 7 shared equity homes in Medstead. This report recommends the use of AHDC for this purpose, in line with previous schemes, to provide 3 No. three-bedroom houses and 4 No. two-bedroom maisonettes on a shared equity tenure. Merlion HA has brought this opportunity to the Council after agreeing heads of terms with the developer. The site developer and Merlion HA will bear responsibility for the delivery of the affordable housing obligation. The Council's role, in the context of this report, is to provide funding to Merlion HA for the shared equity homes. All decisions relating to the construction of these homes fall outside of the Council's sphere of influence. Planning permission has been granted and a s106 details the affordable housing obligation. The developer is unable to deliver the s106 requirements due to the lack of a willing housing provider to procure the affordable homes. Both the Housing and Planning Officers are satisfied that the developer has made all reasonable attempts to satisfy the s106 obligation. The developer has submitted a Deed of Variation application to the Council which clearly sets out the revised affordable housing obligation. This application was approved as a delegated decision, and the subsequent Deed is being reviewed by Legal Services prior to signing and sealing, by the respective parties. Irrespective of the Cabinet decision, the shared equity homes cannot be delivered without a completed Deed of Variation, as reflected in the conditional nature of the recommendations. The revised affordable housing obligation will take the form of 7 affordable (shared equity) homes on the application site and an affordable housing developer contribution of £1,910,000 (rounded). The first tranche payment from the developer is expected to be circa £477,500. Receipt of this sum is required to provide sufficient funds for the transaction to proceed, as well as being required as per recommendation 2.1a (condition a2.). The Council's investment will trigger a funding fee, paid by MHA to the Council, as detailed in the Exempt Appendix. The Council will also be awarded equity in each home, secured by Deed, at percentages detailed in the exempt section. Should one of the dwellings be sold in the future the Council will redeem its charge, with the funds being returned to the AHDC budget for reinvestment in more affordable housing. The expectation is that funds received from redemptions will be considerably greater than the original investment due to the structure of the model and likely house price inflation. The Affordable Housing Strategy 2022-2025 includes the expansion of the shared equity housing initiative as a key priority. Increasing the supply of affordable homes is a priority within the Council Strategy 2024-28, specifically within the themes of Thriving Communities and Economic Growth and Prosperity. The option to do nothing was considered, as there is no obligation upon the Council to fund affordable housing schemes. However, the AHDC fund is ringfenced for the sole purpose of providing affordable housing. If AHDC are not used within a specified period, ranging between 5-10 years, they must be returned to the original developer, with interest. There are no other Cabinet approved sites requiring AHDC, at this time. Council investment of AHDC will ensure delivery of 7 affordable homes on the application site at significantly greater discounts than would have otherwise been possible. This genuinely affordable housing is an important step to helping our residents onto the housing ladder. This is considered to be the best option. The Council's costs for this project will be solely met by the AHDC budget, which will include an AHDC payment from the site developer of circa. £477,500. The AHDC budget currently has an unallocated balance of £336,902.38 rising to an estimated £814,402.38 after payment of the first tranche AHDC by the site developer. Upon receipt of payment by the developer, the Council will have sufficient funds for the transaction, and this is reflected in the conditional nature of the recommendation. This proposal is consistent with the adopted procedure and shared equity investments previously approved by Cabinet. However, Legal Services will review the contract pack used on these transactions to ensure the agreements meet current legislative requirements. The scheme details contained within the Exempt Appendix will need to be added to the existing umbrella agreement between the Council and Merlion. This procedure was approved by Cabinet 25th May 2017 minuted item 28. Equity Mortgages will be used to secure each charge in the format used on previous transactions. Legal and financial risks, including contractor or Housing Association insolvency have been mitigated through the established legal agreements. The AHDC funds are collected through s106 agreements and so their use is time limited. Failure to spend AHDC within the time limit, may trigger a requirement for them to be paid back to the original developer, with interest. There is a risk that if initiatives of this type are no longer supported by Cabinet, that the Council will have to return all unspent sums. Investment in residential property is subject to the risk of falling prices, but mitigation measures have been taken to insulate the Council as far as is practicable. These include an enhanced equity award, gifted to the Council by MHA, and all valuations are compliant with Royal Institute for Chartered Surveyors (RICs) Global Standards (Red Book). The investment is not considered to be short-term, as the objective is to provide affordable homes for as long as the purchasers require them. Being that these are two and three-bedroom family homes it is likely that the Council will redeem the equity mortgages over an estimated timeframe of 5 – 10 years, where house price inflation would typically be positive over this period. All equity mortgages are required to be redeemed by the Council at 29 years after initial purchase. These properties will be constructed to the prevailing standards of the Building Regulations. There is no opportunity to improve upon the sustainability features of these dwellings. Public consultation for a transaction such as this is not required, as that has already taken place as part of the planning process. The proposal has been presented to and approved by the Portfolio Holder for Community Engagement and Development and the Executive Director of Community.