Agenda item

Joint report of the Treasurer and Chief Fire Officer

The Chair introduced the item and thanked the Finance and Resources Committee for its work and recommendation on Council Tax.

Mark Kimberley, Interim Treasurer, and Tracy Stevenson, Temporary Head of Finance, presented the report and amendments which had been circulated as a supplement to the agenda. It presents the proposals for Revenue and Capital budgets for 2024/25 to 2027/28 to enable Members to determine the level of Council Tax for 2024/25, sets out fees and charges for 2024/25 for Members’ approval. It also seeks Members approval of the Independent Remuneration Panel’s recommendation regarding the inflator to be applied to Members Allowances from 1 April 2023, and to continue payment of Members Allowances for 2024/25 in accordance with the approved scheme, and highlighted the following points:

(a)  The budget is robust and meets all requirements. It is being balanced using a small amount of reserves, which is sustainable and, although there is a deficit in the budget over the next 4 years, there is confidence that it can be addressed appropriately.

(b)  The Finance and Resources Committee unanimously voted for the 2.95% Council Tax increase to be put forward to the Fire Authority for approval.

(c)  The 2024/25 Capital Programme totals £8.228m, which does not include slippage from 2023/24 which will be reported in the outturn report. If approved, the slippage from the 2023/24 programme will increase the 2024/25 programme accordingly.

(d)  The £3.117m Transport Capital Programme includes significant investment in the Service’s appliances and special appliances in line with the Renewal Programme. There has been a purposeful 2 year delay in the appliances programme to manage minimum revenue provision (MRP) which is the Service’s debt costs. This will be reviewed once the Futures 25 efficiency strategy is further developed and the impact on services is known.

(e)  The ICT programme has been developed in line with the Community Risk Management Plan (CRMP) commitments. Alongside the ongoing replacement and updating of equipment and software, the programme includes plans to replace the Tri Service Control and Mobilising system, which is a joint procurement exercise with Derbyshire Fire and Rescue Service. The £1m (2025/26) budget for the replacement system is indicative only at this stage and may require revising once the procurement exercise is finalised.

(f)  The revenue budget requirement for 2023/24 to 2027/28 can be summarised as:

(g)  The current economic climate remains uncertain with many external influences affecting it. Local Government has received a one-year funding settlement for 2024/25. With a general election due to be held in 2024 there remains significant uncertainty around Local Government funding beyond 2024/25.

(h)  Inflation has continued to reduce so far during 2023/24, decreasing from 8.7% in April to 4.6% in October, and then again to 3.9% in November. The bank rate has increased from 0.75% in April 2022 to 5.25% in September 2023, which is its highest level since February 2008. Interest rates are expected to peak at either the current rate or possibly at 5.5% in 2024. The increase in base rates has a significant impact on the Authority's ability to borrow to fund the Capital Programme.

(i)  The 2022-2025 CRMP was approved by Fire Authority on 25 February 2022. The delivery of the CRMP is linked closely to the Medium Term Financial Strategy (MTFS) to ensure that resources are matched to key workstreams. The Annual Delivery Plan, which sits behind the CRMP, identifies priority areas where investment is needed. An additional £159k has been included in the 2024/25 proposed revenue budget to support areas such as additional investment in operational training (£124k), and organisational development and inclusion (£21k).

(j)  The Service identified £1.1m of savings that were either reinvested in CRMP projects or contributed towards reducing the deficit. This is well in excess of the 2% target set by the Home Office, although it is noted that these savings include pay related savings, some of which are one-off in nature.

(k)  The firefighter pay award was agreed at 5% for 2023/24. Negotiations for 2024/25 are in their early stages. A 5% planning assumption has been included for 2024/25, followed by 3% for 2025/26 and 2% thereafter. Any increases above these assumptions will create an additional cost pressure, with a 1% increase relating to approximately £320k ongoing costs per year.

(l)  It is expected that the majority of additional pension costs will be met from the pension top up grant, however, the Service has a £200k earmarked reserve to mitigate against any costs that have to be met internally.

(m)  The council tax base is calculated on the estimated full year equivalent number of chargeable dwellings. This is expressed as the equivalent number of Band D dwellings in the council’s area, after allowing for adjustments due to dwelling demolitions and completions during the year, council tax exemptions, discounts, disabled reliefs and premiums, and the estimated collection rate. The council tax base has increased in line with that expected in the MTFS.

(n)  The Budget Monitoring report presented to Finance and Resources Committee in January 2024 estimated that the general fund reserve would be £5.1m at 1 April 2024, which is above the minimum level set by the Fire Authority in December 2023 of £4.1m. This leaves potential scope for relying on the use of general fund reserves for balancing the budget in 2024/25.

(o)  Earmarked reserves are expected to be in the region of £5.25m by 31 March 2024. These reserves are earmarked for known projects or items of one-off expenditure. They include a budget pressure support reserve of £1.125m which is available to support the budget in 2024/25 and future years. Earmarked reserves are reviewed annually as part of the MTFS.

(p)  The final settlement figures were released by the Government on 6 February and the Revenue Support Grant, business rate income and Top Up Grant remain the same as the provisional settlement. The section 31 grant has been reduced by £81k, and there was an increase of £44k in core spending power. In addition, the employer’s pension contribution rate has increased from 28.8% to 37.6%, resulting in an overall increase to the budget of £1.8m. £1.6m of this increase is to be funded by a grant from the Home Office, leaving a £200k shortfall. The pension grant is currently confirmed for one year only, so a case will need to be made for the funding to continue into the next spending review. For the purposes of the budget for 2025/26 onwards it is assumed that this funding will continue.

(q)  Funding for 2025/26 and beyond will be determined in the autumn of 2024. A 6.7% inflationary increase has been assumed for 2024/25, 2.81% for 2025/26 and 1.7% for 2026/27. Pay awards have been assumed at 5%, 3% and 2% over the same period. There is a risk that funding will be increased at a lower rate than inflation and pay awards, which would then create additional budget pressures in these years.

(r)  With no increases in council tax levels there will be a deficit of £1.026m in 2024/25. This will rise to £3.764m in 2025/26. It increases further to £4.898m by 2027/28. Even with a 1.95% increase in council tax there would be a deficit of £438k in 2024/25, rising to £2.561m in 2025/26 and to £2.378m in 2027/28. The level of reserves available to support the budget would be sufficient to cover the 2024/25 deficit. A significant level of savings would need to be implemented in order to balance the budget over the coming years with a 1.95% increase in council tax. The estimated deficit position for 2024/25 would reduce to £139k should a 2.95% increase in council tax be approved, rising to £1.938m in 2025/26 and to £2.035m in 2027/28. The 2024/25 deficit can be met from the Budget Pressure Support Earmarked Reserve of £1.125m. However, efforts will be made during the year to identify savings where possible through robust budget monitoring or via the workforce review in order to minimise the use of reserves.

(s)  A council tax increase of 2.95% would generate additional funding of 887k in 2024/25. For Band D and Band A households, a 2.95% increase would see rises in council tax to £92.21 and £61.47 per annum respectively. This equates to approximate weekly increases of 5p for Band D and 3p for Band A. The majority of the homes in the city of Nottingham and county of Nottinghamshire fall into Bands A and B.

During the discussion that followed the following comments were made:

(t)  The work done to balance the budget is greatly appreciated and officers are thanked for their hard work.

(u)  Balancing the budget through only using a small amount of reserves is a good position to be in.

(v)  It is prudent to take a position on the pay award for future years.

(w)  It is always difficult to ask people to pay more Council Tax, but by paying a few pence more a week, means not reducing the service.

(x)  There is still the need to reduce the budget deficit in future years.

(y)  The increase represents excellent value for the service received.

(z)  There needs to be a Council Tax reform as students, etc don’t pay Council Tax.

(aa)  More communication needs to be done to highlight to residents where the money goes.

The Chair thanked everyone in the room for their work, engagement and contributions.

Resolved to

(1)  Unanimously agree the recommendation of the Finance and Resources Committee to the Fire Authority that there be a 2.95% Council Tax increase.

(2)  Unanimously approve the 2024/25 precept level to be notified to the Billing Authorities based on the information set out in Section 2 and Appendix C of the report as required by statute.

(3)  Approve the fees and charges for 2024/25, as set out in Appendix D of the report.

(4)  Approve that Members’ Basic and Special Responsibility Allowances be increased by 3.88% backdated to 1 April 2023 in line with the recommendation put forward by the Independent Remuneration Panel.

(5)  Approve the payment of Members Allowances for 2024/25 in accordance with the approved scheme.