Agenda item

Joint report of the Chief Fire Officer and Treasurer to the Fire and Rescue Authority

Becky Smeathers, Head of Finance and Treasurer to the Authority, presented an update to the Medium-Term Financial Strategy (MTFS) which predicts a budget position for 2022/2023 and requests that the Authority set general guidelines within which the Finance and Resources Committee will develop a detailed budget proposal for 2022/2023.

Highlighted points included:

a)  it is proposed that once the Authority has confirmed the MTFS, which includes the Capital Strategy, Flexible Use of Capital Receipts Strategy, and the Reserves Strategy, the Finance and Resources Committee will scrutinise the budgets at their January meeting, prior to council tax consultation in February;

b)  inflation is proving an uncertain and challenging pressure on the general economy, particularly with regard to fuel and gas prices, some of which have increased by 28%, which impacts on every area of Service activity. An anticipated inflation increase of up to 5% for the Consumer Price Index, which will impact on pay inflation, which is significant to the budget as 80% of the service spend is on pay;

c)  the Service has budgeted for a 2% pay award, but there is potential that the award may be 3%. With just 1% increase equating to £330,000, as a worst case scenario, if a 5% increase were to be awarded this would have a significant impact on the budget and potentially substantially contribute to budget overspend;

d)  uncertainty remains regarding the impacts of pension issues. A memorandum of understanding between the Local Government Association and Trade Unions was adopted in November with guidelines issued by the Treasury. Although the Treasury has since withdrawn the guidance, in the absence of an alternative, both parties continue to work to the guidelines to ensure that progress is made. There is a risk that this may result in financial costs if a new process varies greatly from the previous guidance, but they are not believed to be significant;

e)  Central Government is only offering a one-off service grant of £740,000 settlement for one year and not providing grant information for a three-year period, which is the period for which the Service is expected to budget for. This  adds another layer of uncertainty for budget planning;

f)  the report sets out scenarios for a worst case, a likely case, and a best case scenario of external influences which will impact on the Service budget;

g)  Service investments are considered every year as part of the budget process.

h)  Reserves are reviewed every year and funds released from earmarked reserves which are no longer required. For 2022/2023 the review of earmarked reserves has identified £1.9 million of available reserves to provide budget pressure support and to support an efficiency programme.

Members of the Authority commented as follows:

i)  until fairly recently it appeared that the Service was in a secure financial position, however with the national impact of inflation and new uncertainty regarding pension issues, this may no longer be the case, although consideration by financial professionals and the Finance and Resources Committee may provide some solutions;

j)  it is acknowledged that the Secretary of State will be reviewing Local Government budgets, but it is disappointing that Central Government have opted to provide grant information only for a one-year settlement and not a three-year settlement period, as this does not assist with forward planning of budgets, particularly when the Service is expected to budget for three years with an un-known income. With cross-party support, it is requested that the Chair and Chief Fire Officer formally notify Central Government of this issue;

k)  the calm and considered approach to budget setting in difficult circumstances is welcomed and the work of Becky Smeathers, the Finance Team, and members of the Finance and Resources Committee is commended.

Resolved:

1)  to approve the MTFS as set out in Appendix A to the report;

2)  to approve the Capital Strategy and Flexible Use of Capital Receipts Strategy contained within the MTFS;

3)  to approve the Reserves Strategy contained within the MTFS;

4)  to approve the proposed minimum level of general fund reserves of £4.5m as set out in the Reserves Strategy;

5)  to approve the re-allocation of Earmarked Reserve as detailed in the Reserves strategy and set out in the table below:

6)  to task the Finance and Resources Committee with providing guidance to the Fire Authority in February in respect of:

a)  the options for Council Tax limited to either a Council Tax freeze or an increase in Council Tax within the referendum limit;

b)  the options for addressing any budget deficit to enable the Fire Authority to approve a balanced budget, as required by law;

7)  to include in the response to the Local Government Finance settlement consultation the Authority’s cross-party disappointment at only being informed of the value of current year’s settlement when the Service is expected to provide budgets for the next 3 years.