Agenda item

Joint Report of the Chief Fire Officer and the Treasurer to the Fire Authority

Becky Smeathers, Head of Finance and Treasurer to the Authority, presented the report, which provides an update to the Medium-Term Financial Strategy (MTFS), informs Members of the likely budget position for 2023/24, and requests that the Fire Authority set general guidelines within which the Finance and Resources Committee will develop a detailed budget proposal for 2023/24.

 

It is noted that a revised page 54 of the agenda pack has been circulated within the agenda supplement, correcting some minor typographical errors.

 

The following points were highlighted and members’ questions responded to:

 

a)  since the report was published last week there have been several changes which will impact the MTFS including:

 

i.  Central Government issued a Local Government Finance Policy Statement which set out the government’s intentions for the local government finance settlement.  This included a £5 referendum principle on Band D Council Tax bills for all Fire and Rescue Authorities;

 

ii.  The Bank of England announced an interest rate increase yesterday to 3.5%.  CPI inflation has fallen from 11.1% in October to 10.7% in November;

 

b)  The budget deficit figure will be in the region of a £3.2 million with uncertainty remaining around pay. The Fire Brigades Union has approached its members regarding industrial action early next year, so it doesn’t seem likely that a settlement figure will be provided in the near future. It is a concern it could not be set before the Authority is required to set the budget at the February Fire Authority meeting, but it has been assumed that a 6% pay award may be achieved in this current year, and 5% in 2023/24. A 1% pay award accounts for approximately £350,000 expenditure for the Authority. In the papers, the assumed pay offer is that which is currently on the table, of 5%, and assumed for the most likely scenario dropping back to 4% for next year, but that too remains uncertain;

 

c)  There are a few areas waiting for further information, such as updates from business rates following a revised valuation. The costs to the Authority could be as much as £0.5 million;

 

d)  Fire authorities now have the ability to increase council tax by £5. If this is approved by the Authority, it would raise income by an additional £1.6 million  ;

 

e)  The worst-case scenario, most likely case scenario, and a best-case scenario are outlined in the report. If members approve the £5 council tax increase in February, the Service can avoid the worst case scenario position. The most likely case scenario, results in a deficit of £2.145 million;

 

f)  The Capital Strategy includes a 10 year capital plan. The debt cost ratio increases quite significantly as the years progress. There is currently a debt ratio maximum of 8% of income, as set by Fire Authority, and there is no recommendation to increase that percentage;

 

g)  Recent increases in interest rates will have a significant impact on costs. This year interest rates are increased significantly from assumptions that the budget was set on last year;

 

h)  Some capital expenditure, mostly around estates, has been delayed by two years to provide a little bit of flexibility, but depending on how interest rates may change, it may be possible to bring that work forward again. Some expenditure would be beneficial on the estates, but equipment and appliances were prioritised to make sure that firefighters have the most up-to-date equipment available to them;

 

i)  With regard to the Reserves Strategy, last year a minimum level of general fund reserves of £4.5 million was set. Members’ concerns that the levels of reserves are significantly higher than some other authorities are noted, but the general fund risk register identifies that there are a significant number of risks and economic uncertainty at the moment, including potential industrial action and the unknown increase of pay awards. As a result, it is proposed that minimum reserve levels remain the same;

 

j)  Earmarked reserves need to be reviewed annually. Last year £1.8 million of earmarked reserves were released to create two new reserves of £936,000 for budget deficit support and £900,000 to support the Future25 efficiency programme;

 

k)  This year, it is proposed to allocate some further funding to communications development around the control mobilising system. With new contract issues, it would be prudent to have an increased level of reserves;

 

l)  Not pay related budgetary pressures have increased, most significantly, pressures are around fuel, gas and electric, but also major increases in the business rates. However, the Service has managed to contain these increases within budgets. Any further increases that cannot be contained within current budgets will need to be funded from General Fund Reserves; 

 

m)  It is anticipated that Nottinghamshire will lose financially following the revised national business rate refresh which was originally anticipated for 2025/26.  There is now some uncertainty around this date and the impact is not reflected in the programme;

 

n)  The Service will receive Section 31 Grant relating to business rate reliefs which is included in the net expenditure. This  reached £1.9 million in 2022/23, and is expected to increase by CPI;

 

o)  The Home Office want the Pension grant to be moved into the base settlement, possibly with the support grant, and if so, it will then increse in line with the revenue support grant;

 

p)  The Home Office is undertaking a review of productivity and efficiency within the Fire sector and are developing a model to help compare performance;

 

q)  There will be some challenges ahead. The yearly settlement regarding the pay offer is unlikely to be resolved before January but the Service needs to set the budget before the new financial year and is dependent on the pay settlement confirmation;

 

r)  Members will be given further information as it emerges and informed of the impact on the Service.

 

Members of the Authority commented as follows:

 

s)  The proposed joint cadet scheme to be operated with the Police would be very welcome as a lovely collaboration idea, and is supported;

 

t)  When considering the financial need, demand also needs to be considered. In policing it’s probably clearer with regard to callouts and predicted crime rates, but it’s much harder when looking at prevention work. It would be interesting to examine patterns and areas where the Service is stretched;

 

u)  Knowing what the Central Government annual settlement would be for a three-year period would be helpful in helping to realistically plan budgets ahead. The year at a time approach isn’t helpful and makes it very difficult to effectively plan ahead with such an unknown element so a 3, 4 or 5 year settlement would be more realistic;

 

v)  The ability to charge £5 council tax precept is very welcome for the Service, but members are very much aware that this would be adding to the financial pressures on citizens resulting from high inflation and the rise in living costs, particularly when it’s likely that the councils will also increase their council tax precept by £5, and the Police by £15;

 

w)  More national level work is required to resolve some of the broader financial issues of the nation. We’re asking a lot from a lot of people – there needs to be a coalition where politics are put to one side to try and sort out this national mess, which is getting very serious;

 

x)  It is frustrating that Central Government is pushing the burden of additional charging to local authority level, whilst reducing direct funding. Some counties surrounding Nottinghamshire are far better placed with many more high-level council tax band properties which bring in greater income, but Nottinghamshire is not the same and although necessary to implement, the majority of properties are band A and B and so will contribute less, maybe £3, which doesn’t generate the same level of income;

 

y)  There are concerns that the top-up grant and even pension grant will reduce in future years, placing further financial burden on the Service in future;

 

z)  This Service is the 7^th worst financially positioned service in the country with regard to the drop in net core spending power, with a 5.26% decrease since 2010/11, when more affluent services have seen up to a 14.95% increase. Successful lobbying would result in this service improving that position;

 

aa)  The Service cannot be funded on local rates and council tax – Central Government needs to answer as to how they have put this Service in this position.

 

Resolved to

 

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

 

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

 

3)  approve the Reserves Strategy contained within the MTFS;

 

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

 

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

 

	Balance	Required	Required	To be
	31-Mar-22	2023/24	2024/25to	Reallocated
			2026/27
	£	£	£	£
ICTTelephonySoftware	53,000	0	0	(53,000)
Communicationsdevelopment	171,753			(171,753)
RescueGloves	50,000	(37,000)	0	(13,000)
TransformationandCollaboration	553,495	(103,276)	(223,155)	(123,789)
BudgetPressureSupport	936,287	(1,000,000)	(126,076)	189,789
Tri Service Control/ Mobilising System	178,083	(200,000)	149,836	171,753
Total				0

 

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

 

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

 

•   the options for addressing any budget deficit to enable the Fire Authority to approve a balanced budget, as required by law.