To consider Report CFO/008/16 of the Treasurer, concerning the setting of a medium term capital and revenue financial plan, that allocates resources in line with the Authority’s strategic aims and ensure that the Authority delivers an efficient, value for money service. This will also allow the Authority to determine a budget for 2016/17 and a precept level, in line with statutory requirements.

Members considered report CFO/008/16 of the Treasurer, presenting information to allow Members to set a medium term capital and revenue financial plan that allocates resources in line with the Authority’s strategic aims and ensure the Authority delivers an efficient value for money service.  This will allow the Authority to determine a budget for 2016/17 and a precept level in line with statutory requirements.

 

Members were provided with an overview of the report, which detailed the financial strategy and precept level proposed in order to achieve a balanced financial plan up to 2019/20.

 

Information was provided regarding the financial challenge up to 2019/20 and options for meeting this challenge. Members were informed that savings of approximately £11m are required by the end 2019/20; and although a proportion of technical savings have been identified, there will still be a requirement to make savings of approximately £5.5m from employee costs.

 

Of that £5.5m, savings of approximately £1.5m are anticipated from support functions, leaving around £4m of savings required from frontline services. Work is currently underway to consider options for delivering those savings required from Operational Response, and these options will be included within the Integrated Risk Management Plan for consultation; and will be brought back to the Authority for approval. 

 

Members were advised that the technical savings identified, will provide the Authority with time to implement structural changes required to facilitate employee reductions.

 

Members commented on the difficult decisions that the Authority are facing and the crucial work undertaken by Fire and Rescue Services with regard to prevention measures.  They commented on the need to continue lobbying Government and local MPs and thanked Officers for their honesty and support.

 

The Chair of the Authority – Councillor Dave Hanratty confirmed that a proposed Budget Resolution, submitted by the Labour Group, had been circulated to all Members; and that no alternative budget proposals had been received by the Clerk to the Authority.

 

The Labour Group Budget Resolution was then formally moved by Cllr Maloney and seconded by Cllr Hanratty.  Members then voted on the motion:

 

15 Members voted in favour of the motion.

0 Members voted against the motion

0 Members abstained.

 

The Budget Resolution for 2016/17 was therefore unanimously approved.

 

Members resolved that:

 

a)    The 2016/17 service budgets set out in the report, be noted.

b)    The Treasurer’s recommendation on maintaining the current level of general fund balance at £2.000m, and maintaining the reserves as outlined in Paragraph 170 to 173 of this report be endorsed.

c)    The current plan to increase the precept by just below 2% for 2016/17, raising the Band D Council Tax from £71.47 to £72.89 and confirm the strategy for future precept rises (the plan assumes 2% in each year thereafter), be endorsed.

d)    The assumptions in developing a four year (2016/17 – 2019/20) Financial Plan outlined in the report and the Medium Term Financial Plan in Appendix C and the 2016/17 budget estimate of £61.507m be endorsed.

e)    The 2016/17 – 2019/20, £11.000m saving plan as outlined in the report and summarised in Appendix C, be approved.

f)     The offer a 4 year financial settlement as set out in the Final Local Government Finance Settlement on 9^th February 2016 in principle subject to the development of a robust efficiency plan and any other required Home Office documentation, be accepted.

g)    The capital strategy and investment strategy as summarised in Appendix B, be approved.

h)   The Minimum Revenue Payment (MRP) strategy for 2016/17 as outlined in Paragraph 79 of the report, be approved.

i)     The prudential indicators relating to the proposed capital programme, paragraph 90 to 92 of the report, be noted.

j)      The Treasury Management Strategy outlined in Section F and the Treasury Management indicators set out in paragraph 97 of the report for:-

·         External debt

·         Operational boundary for debt

·         Upper limits on fixed interest rate exposure

·         Upper limits on variable rate exposure

·         Limits on the maturity structure of debt

·         Limits on investments for more than 364 days

 

be approved.

k)    The recommendations within the report, be noted as providing an approved framework within which officers undertake the day to day capital and treasury activities.

l)     The proposed Labour Budget Resolution, be approved as follows:

LABOUR BUDGET RESOLUTION 2016/17

 

Merseyside Fire and Rescue Authority Budget and Medium Term Financial Plan Resolution 2016/17 - 2019/20

 

1.    Merseyside Fire and Rescue Authority (the Authority) suffered the largest cut in Government grant of any Fire and Rescue service in the country – over 35% between 2010/11 and 2015/16. The Government has announced further significant grant cuts over the next four years, 2016/17 to 2019/20, and the Authority faces a 50%, in real terms, reduction in its Revenue Support Grant.

 

2.    These drastic cuts from Government means that the Authority must make tough choices.

 

3.    The Authority has set a financial plan that delivers the £11m savings required as a result of government cuts over the next four years (2016/17 – 2019/20). The Authority has planned prudently to minimise the impact on frontline services and has planned significant efficiency savings of £6.0m by reducing management and support services costs. The Authority has benefitted from a known £1.0m increase in the council tax base and the approved plan assumes this increase is permanent. Despite these efficiencies identifying £7.0m of savings the Authority must approve an unavoidable reduction of £4.0m from the operational front line.

 

4.    The Authority has already seen the number of fire appliances in Merseyside reduce from 42 down to  28 since 2010, which equates to 33% overall reduction. A further £4.0m operational response is likely to see a further loss of up to 100 firefighter posts which equates to 4 wholetime appliances.

 

5.    The Authority is therefore extremely saddened to have to approve a financial plan which is based upon:-

 

(i)    The loss of up to a further 100 firefighter posts

(ii)  Leading to the loss of up to 4 fire appliances

(iii)Possibly lead to the closure of a number of fire stations

(iv)Further reductions in support services to the detriment of the service

 

6.    In order to minimise the impact on the Fire & Rescue Service the Authority has agreed a council tax increase of 2%.

 

7.    The effect of the budget on council tax will be a Band D Council Tax of £72.89, an increase of less than 3p per week, which equates to a total of £1.42 per week towards the Fire & Rescue Service.

 

8.    Most people in Merseyside will pay Band A Council Tax of £48.59 or 93p per week towards their Fire & Rescue Service.

 

9.    The Authority accepts the Government offer of a four year settlement in principle subject to the development of a robust efficiency plan and any other required Home Office documentation. A four year financial settlement would provide a degree of funding certainty and stability to enable effective planning for the future service provision.

 

10.The Authority will continue to lobby the Government against the level of cuts being proposed over the next four years and highlight the consequences that further cuts will have on effectively delivering an emergency service.  

 

11.The Authority recognises that the Fire & Rescue Service is emergency risk based and not demand led. During this period of austerity we urge this Government to reflect on the impact these cuts are having on the Fire & Rescue Service and properly review all risks facing the country in the light of emerging risks (for example a heightened terrorist threat or responding to increased flooding events through climate change) and would hope that resources are allocated in a way that allow Merseyside to continue to respond effectively to local and national threats.

 

The Financial Plan

 

12.In order to balance the financial plan the Authority will adopt the following strategy

 

·         Prepare a four year financial plan based on the final Local Government Finance Settlement figures announced on 9^th February 2016.

·         Set a council tax increases in line with its financial plan.

·         Assume that Central Government’s pay strategy for public sector staff can be achieved and therefore assume a 1% annual pay increase for its staff in line with that strategy for the 2016/17 – 2019/20 period.

·         The Authority will focus its search for efficiencies on collaboration, management, support services costs and other technical reviews and assume that savings of £7.000million can be generated from that area.

·         The current station merger programme delivers the outstanding £2.6m from the 2015/16 financial plan.

·         The Chief Fire Officer identifies the least worst operational response saving proposals to deliver £4.0m of savings.

 

13.Note that these savings options represent a 15% reduction in managerial and support service roles and a 15% reduction in wholetime firefighter roles – a total reduction of 140 posts

 

14.Noting that the reduction in firefighter numbers will be achieved by natural retirement rates and will therefore take until 2018/19 to deliver in full.

 

15.Noting that there is a considerable risk that the Authority’s aspiration to avoid compulsory redundancy may be compromised because of the reductions in non-uniformed staff. Therefore instruct the Chief Fire Officer to use voluntary severance and early retirement in line with Authority policy to as far as possible achieve savings through voluntary means

 

16.The Authority notes that to deliver any savings in relation to the number of staff it employs may take time. The Authority is committed to seeking to try and avoid compulsory redundancy. The Authority has established a cost smoothing reserve to be used in this regard.

 

17.The Authority requests that the Chief Fire Officer continue to bring back individual reports, including equality impact assessments, as soon as possible on specific business cases for operational savings and support service reviews as detailed information and costs become available.

 

18.The Authority recognises that the exact timing of new operational response structures may take time to finalise and implement. It therefore recognises that the Chief Fire Officer will need to continue to manage appliance availability on a dynamic basis using “whole-time retained” crewing where necessary under his delegated powers as the financial plan proceeds to delivery.

 

19.The Authority is fully committed to reducing its own costs as the organisation faces up to the government cuts and what that means for local services.  The Authority had already made reductions in its allowances of £24,000 and the Authority will again freeze all  member allowances for the eighth consecutive year

 

IRMP

 

20.The Authority agrees to reflect this financial plan in its 2017- 2020 Integrated Risk Management Plan (IRMP) and will consult with the local community and stakeholders on the IRMP and the impact current and future Government cuts will have upon them.

 

Implementation

 

21.The Authority recognises to fully deliver the staff savings (both Support and Firefighters) will take time as:-

 

·         The Service needs to finalise plans to re-engineer support services and consider blue light collaboration opportunities, and

·         In relation to Firefighter post reductions the Authority will seek to use natural turnover rates recognising this will take until at least 2018/19 to achieve the reduction in the establishment.

 

This approach will require the use of reserves (smoothing reserve) in the intervening period if compulsory redundancies are to be avoided. The proposed reserve strategy reflects this methodology.

 

22.The Authority requests the Chief Fire Officer to use every available measure and management tool to avoid compulsory redundancy and therefore it grants delegated power to utilise the Voluntary Severance / Voluntary Early Retirement Programme in line with the VS/VR framework agreed by the Authority previously.

 

23.The Authority believes that a fully wholetime professionally trained workforce is the most resilient and effective way of delivering a Fire & Rescue Service to its communities and is fully committed to maintaining this approach.

 

Council Tax

 

24.In identifying a financial deficit of £11m over the 2016/17 – 2019/20 period the Authority had already assumed a council tax increase at the maximum level allowed by the Government before a referendum of just below 2% in each year.

 

25.Because of the scale of the financial challenge the Authority has agreed, with a heavy heart, to stick to this plan and increase council  tax in 2016/17 by just below 2% to minimise the impact on the services to Merseyside in the future

 

26.The impact of the budget on council tax will be a Band D Council Tax of £72.89, an increase of less than 3p per week to a total of £1.42 per week towards the Fire & Rescue Service.

 

27.Most people in Merseyside will pay Band A Council Tax of £48.59 or 93p per week towards their Fire & Rescue Service.

 

Recruitment

 

28.Despite the need to reduce Firefighter numbers in the short term as part of the budget plan this Authority recognises that over the next decade that without any recruitment Firefighter numbers will reduce to just over 250 due to retirements. The loss of such experience and knowledge will bring major challenges for the Authority who will need to recruit between 250-400 firefighters by 2024.  Any recruitment will be undertaken in a manner so as to meet the demands placed on the Authority.

 

29.In order to meet this challenge in a prudent and structured fashion the Authority has set aside a strategic reserve of £1m to support limited firefighter recruitment to ensure the recruitment approach reflects the financial plan and the competency requirements placed on the Authority.

 

Interoperability with Blue Light Partners

 

30.This Authority is fully committed to closer collaboration with our emergency service colleagues across the county. Many collaborative successes have been achieved so far including:-

 

(i)    The delivery of the Joint Command and Control Centre with Merseyside Police

(ii)  Sharing 7 sites with north West Ambulance Service (NWAS) including NWAS HART working alongside the Search and Rescue team

(iii)Extensive joint planning and exercising

 

31.The Authority instructs the Chief Fire Officer to continue to build upon this success and in particular to actively seek out opportunities of working with NWAS and Merseyside Police around sharing buildings, and other assets and corporate service functions.

 

Working with other Partners

 

32.The Authority will continue to work in partnership with each District Council in order to explore opportunities in which will mutually benefit each Authority in dealing with these and future financial challenges.

 

33.The Authority will examine the impacts of the devolution agenda and how best we can understand and develop constructive dialogue with the Liverpool City Region Combined Authority.  

 

Reserves

 

34.The Authority has prudently planned to meet its financial challenges over the medium term. The plan the Authority proposes is based upon the key assumptions around changes to grant, pay, tax and pension costs.

 

35.The Authority recognises that there are substantial risks associated with these assumptions and that, particularly in light of the current economic climate; it is not unreasonable to expect a significant degree of financial uncertainty and risk which will vary across the life of the financial plan. The Authority will therefore set a medium term financial plan based upon these key assumptions recognising that it may need to vary that plan to cope with changes arising.

 

36.In light of the risks within the financial plan the Authority therefore agrees to maintain the reserves as set out in Appendix B to this resolution and in particular maintain a general revenue reserve of £2.0m.

 

Capital Programme

 

37.The Authority approves the Capital Programme as set out in CFO/008/16 which includes a total investment of over £38.156m over 2016/17 – 2020/21 period. The programme for 2016/17 shall be approved as £20.600m.

 

38.The Authority notes the prudential indicators that this programme produces and recognises that the proposed capital investment programme is prudent, sustainable and the borrowing affordable. This programme makes use of the freedoms available to the Authority under the prudential regime and proposes ‘prudential’ borrowing of £6.565m in 2016/17 as part of a total borrowing of £21.561m across the life of the plan.

 

39.In the light of the capital programme and the prudential indicators agree the Treasury Management Strategy and the indicators set out in that strategy for:-

(i)    External Debt

(ii)  Operational Boundary for Debt

(iii)Upper limits on fixed interest rate exposure

(iv)Upper limits on variable rate exposure

(v)  Limits on the maturity structure of debt

(vi)Limits on investments for more than 364 days

 

Basic calculations

 

40.Following consideration of the report of the Treasurer (CFO/007/16 & CFO/008/16) and having taken into account views expressed in consultations, and all other relevant matters, pursuant to the Local Government Finance Act 1992, as amended, (the “Act”), the Authority determines its budget requirement for the financial year 2016/17 as follows.

 

41.Approves the capital expenditure programme for the financial year 2016/17 for the total of £20.600m as set out in report CFO/008/16 and the five year programme totalling investment of £38.156m, and in this respect notes the advice of the Treasurer that the programme is prudent, sustainable and the borrowing affordable.

 

42.The Authority resolves as follows:

 

(a)  It be noted that on 25^th February 2016, the Authority calculated the Council Tax Base 2016/17 for the whole Authority area as 355,792.06 [Item T in the formula in Section 42B of the Local Government Finance Act 1992, as amended (the “Act”)].

 

(b)  That the following amounts be calculated for the year 2016/17 in accordance with sections 40 to 47 of the Act:

 

The Authority calculates the aggregate of: (A)

 

o   calculates the expenditure which it estimates it will incur in the financial year 2016/17 in performing its functions and will charge to the revenue account for the year in accordance with proper practices under S42A (2) (a) of the Act as £72.205m,

 

o   calculates the allowance as the Authority estimates will be appropriate for contingencies in relation to amounts to be charged or credited to the revenue account for the year 2016/17 in accordance with proper practices under S42A (2) (b) of the Act as £0.000m,

 

o   calculates the financial reserves which the Authority estimates it will be appropriate to raise in the year for meeting its estimated future expenditure for 2016/17 under S42A (2) (c) of the Act as £1.025m,

 

o   calculates the financial reserves as are sufficient to meet so much of the amount estimated by the Authority to be a revenue account deficit for any earlier financial year as has not been already provided for under S42A (2) (d) of the Act as £0.000m.

 

The Authority must also calculate the aggregate of: (B)

 

o   the income which it estimates will accrue to it in the year 2016/17 and which it will credit to a revenue account for the year in accordance with proper practices, other than income which it estimates will accrue to it in respect of any precept issued by it under S42A (3) (a) of the Act as £47.296m,

 

o   The amount of the financial reserves which the Authority estimates that it will use in order to provide for the items mentioned in S42 (2) (a and b) under S42A (3) (a) of the Act as £5.341m.

 

If the aggregate calculated under A above exceeds that calculated under B above, the Authority must calculate the amount equal to the difference; and the amount so calculated is to be its council tax requirement for the year under S42A (4) (Item R in the formula in S42B of the Act).

 

The Authority calculates the basic amount of its council tax by dividing the aggregate amount of S42A (4) (item R) divided by the council tax base (item T) above. The council tax requirement for 2016/17 is £25,933,684 and the council tax base is 355,792.06, which is equal to £72.89 precept for a Band D property. This calculation meets the requirements under S42B of the Act.

 

43.The Authority calculates the council tax sums pursuant to s 47 of the Act as follows:

 

 

44.The Authority calculates the precept amounts payable by each constituent district council pursuant to S48 of the Act as follows:-

 

 

45.The Authority requests the Treasurer to arrange for precepts to be issued to the constituent district councils  pursuant to S40 of the Act before 1^stMarch 2016, such sums to be payable by 10 equal instalments  on or before the following dates:

 

21^st April 2016

31^st May 2016

6^th July 2016

11^th August 2016

19^th September 2016

25^th October 2016

30^th November 2016

10^th January 2017

15^th February 2017

17^th March 2017

 

46.The Authority notes that The Treasurer has advised that the 2016/17 budget is based upon robust estimates.

 

 

 

Appendix A – 2016/17 Budget & Financial Plan to 2019/20

Appendix B- Reserves