To consider Report CFO/015/17 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 ensures that the Authority delivers an efficient, value for money service. This will also allow the Authority to determine a budget for 2017/18 and a precept level, in line with statutory requirements.

Members considered report CFO/015/17 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 ensures that the Authority delivers an efficient, value for money service.  This will also allow the Authority to determine a budget for 2017/18 and a precept level, in line with statutory requirements. 

 

The Chair confirmed that all members had been provided with a copy of the Labour Group Proposed Budget Resolution in line with statutory requirements and confirmed that no amendments had been received. 

 

Members were provided with an overview of the report, which provides the necessary financial information to set a balanced budget and precept level subject to a number of assumptions.

 

The report details the 5 year capital programme, including the capital expenditure & financing available up to 2021/22. 

 

Members were advised that the assumed £11m savings requirement identified within last year’s plan remains consistent and were advised of potential new cost pressures up to 2021/22. 

 

Members were informed of the proposed increase in Council Tax precept and possible options to deliver the required savings. 

 

The Chief Fire Officer informed Members that officers have managed to reduce the amount of savings required from operational response from £4m to £1.9m, to ensure that the Authority can continue to maintain its response standard.  However he advised that this would still require a reduction of 49 fire fighter posts and conversion of 5 appliances to 12 hour day crewing which would inevitably have an impact on operational response.  He stated the importance of understanding the structural changes which will be required, arising as a result of delivering these savings. 

 

Members commented on the need to continue lobbying the Government and promoting the excellent work of the Fire and Rescue Service.  These comments were fully supported by Cllr Rennie, who confirmed that she will continue to do all she can within her party. 

 

Members confirmed that the Authority will continue to do all that it can to avoid compulsory redundancies, however noting that in the current climate it is difficult to give any assurance.   

 

The Budget Resolution was then formally moved by Cllr Hanratty and seconded by Cllr Byrom. 

 

The Chair of the Authority commented that he was moving the Budget Resolution with a heavy heart, as no-one comes into politics to make cuts.  He explained that the perception of the public is that they expect a response as quickly as possible when required and all the Authority can do is try to ensure that this continues to occur, despite continuing cuts. 

 

Members then voted on the motion:

15 Members voted in favour of the motion (all Members in attendance)

0 Members voted against the motion

0 Members abstained.

 

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

 

Members resolved that:

 

a)    The 2017/18 service budgets set out in the report, were 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 146 to 148 of this report, be endorsed.

 

c)    The current plan to increase the precept by just below 2% for 2017/18, raising the Band D Council Tax from £72.89 to £74.34 and confirm the strategy for future precept rises (the plan assumes 2% in each year thereafter), be endorsed.

 

d)    The assumptions in developing a five year (2017/18 – 2021/22) Financial Plan outlined in the report, be endorsed and the Medium Term Financial Plan in Appendix C and the 2017/18 budget estimate of £59.490m, be approved.

 

e)    The 2017/18 – 2021/22 amended saving plan, as outlined in the report and summarised in Appendix C, be approved.

 

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

 

g)    The Minimum Revenue Payment (MRP) strategy for 2017/18 as outlined in Paragraph 76 to 77 of this report, be approved.

 

h)   The prudential indicators relating to the proposed capital programme, paragraph 88 to 90 of this report, be noted.

 

i)     The Treasury Management Strategy outlined in Section F, be approved and The Treasury Management indicators set out in paragraph 93 of this report, be agreed for the following:-

 

-       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

 

j)      The recommendations above which provide an approved framework within which officers undertake the day to day capital and treasury activities, be agreed. 

 

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

 

LABOUR BUDGET RESOLUTION 2017/18

 

Merseyside Fire and Rescue Authority Budget and Medium Term Financial Plan Resolution 2017/18 – 2021/22

 

1.    Merseyside Fire and Rescue Authority (the Authority) suffered one of the largest cuts in Government funding of any Fire and Rescue Service in the country between 2010/11 and 2015/16. The 2015 Government Spending Review announced further significant grant cuts for the Authority from 2016/17 up to 2019/20.

 

2.    Over the 2010/11 to 2019/20 period the Authority faces a 50%, in real terms, reduction in the grant support it receives from Government. Over the same period the Authority’s total revenue budget will reduce from £73.6m to £59.5m or £14.1m which represents a 19% cash or 40% real reduction.

 

3.    The Authority has set a financial plan that delivers the required savings needed as a result of government cuts up to 2019/20. These drastic cuts from the Government has forced the Authority to make tough choices.

 

4.    The impact of the 2015 Comprehensive Spending Review meant the Authority had to find £11.0m of savings from the forecast planned spend for 2016/17 to 2019/20. The Authority has planned prudently to minimise the impact on frontline services and has identified significant efficiency savings of £9.1m by reducing management, support services costs and other technical amendments. Despite these efficiencies the Authority must approve an unavoidable reduction of £1.9m from the operational front line.

 

5.    The Authority has already seen the number of fire appliances in Merseyside reduce from 42 wholetime pumps down to a budgeted 24 wholetime pumps and 4 retained pumps since 2010, which equates to 33% overall reduction. A further £1.9m operational response is likely to see a loss of up to 49 firefighter posts and result in 5 wholetime pumps converting to wholetime crewing during the day and retained crewing overnight.

 

6.    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 49 firefighter posts

(ii)  The conversion of 5 fire appliances from  24 hour wholetime crewing to 12 hour wholetime crewing during the day and with retained crewing overnight

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

 

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

 

8.    The effect of the budget on the council tax will be a Band D Council Tax of £74.34 (which equates to £1.43 per week) an increase of less than 3p per week on the 2016/17 figure. 

 

9.    Most people in Merseyside will pay Band A Council Tax of £49.56 or 95p per week towards their Fire & Rescue Service.

 

10.The Authority will continue to lobby the Government against the level of cuts being proposed 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 five year financial plan based on the final Local Government Finance Settlement figures announced on 20^th February 2017.

·         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 2017/18 – 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 £9.100million can be generated from that area.

·         A savings of £1.900m from operational response.

·         The financial plan has projected Authority spend and Government funding up to 2021/22, however as these figures are estimates the Authority at this point in time is noting the potential small saving requirement, £0.106m, for 2021/22 and will deal with any saving requirement in future budget rounds.

 

13.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.

 

14.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

 

15.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.

 

16.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.

 

17.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.

 

18.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 ninth consecutive year

 

IRMP

 

19.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

 

20.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.

 

21.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.

 

22.The Authority believes that a 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

 

23.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.

 

24.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 2017/18 by just below 2% to minimise the impact on the services to Merseyside in the future

 

25.The impact of the budget on the council tax will be a Band D Council Tax of £74.34 (which equates to £1.43 per week) an increase of less than 3p per week on the 2016/17 figure. 

 

26.Most people in Merseyside will pay Band A Council Tax of £49.56 or 95p per week towards their Fire & Rescue Service.

 

Recruitment

 

27.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 under 300 due to retirements. The loss of such experience and knowledge will bring major challenges for the Authority who will need to recruit between 250-300 firefighters by 2025.  Any recruitment will be undertaken in a manner so as to meet the demands placed on the Authority.

 

28.In order to meet this challenge in a prudent and structured fashion the Authority has set aside a strategic reserve of £3.1m 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

 

29.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

 

30.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

 

31.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.

 

32.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

 

33.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.

 

34.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.

 

35.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

 

36.The Authority approves the Capital Programme as set out in CFO/015/17 which includes a total investment of over £35.156m over 2017/18 – 2021/22 period. The programme for 2017/18 shall be approved as £20.683m.

 

37.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 £9.443m in 2017/18 as part of a total borrowing of £20.431m across the life of the plan.

 

38.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

 

39.Following consideration of the report of the Treasurer (CFO/015/17 & CFO/013/17) 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 2017/18 as follows.

 

40.Approves the capital expenditure programme for the financial year 2017/18 for the total of £20.683m as set out in report CFO/015/17 and the five year programme totalling investment of £35.156m, and in this respect notes the advice of the Treasurer that the programme is prudent, sustainable and the borrowing affordable.

 

41.The Authority resolves as follows:

 

(a)      It be noted that on 23^rd February 2017, the Authority calculated the Council Tax Base 2017/18 for the whole Authority area as 360,516.87 [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 2017/18 in accordance with sections 40 to 47 of the Act:

 

The Authority calculates the aggregate of: (A)

 

o   the expenditure which it estimates it will incur in the financial year 2017/18 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 £77.181m,

 

o   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 2017/18 in accordance with proper practices under S42A (2) (b) of the Act as £0.000m,

 

o   the financial reserves which the Authority estimates it will be appropriate to raise in the year for meeting its estimated future expenditure for 2017/18 under S42A (2) (c) of the Act as £0.048m,

 

o   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 2017/18 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 £50.428m,

 

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 £9.780m.

 

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 2017/18 is £26,800,824 and the council tax base is 360,516.87, which is equal to £74.34 precept for a Band D property. This calculation meets the requirements under S42B of the Act.

 

42.The Authority calculates the council tax sums pursuant to S47 of the Act as follows:

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

44.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^st March 2017, such sums to be payable by 10 equal instalments on or before the following dates:

 

Friday	21st April 2017
Wednesday	31st May 2017
Thursday	6th July 2017
Friday	11th August 2017
Tuesday	19th September 2017
Wednesday	25th October 2017
Thursday	30th November 2017
Wednesday	10th January 2018
Thursday	15th February 2018
Friday	16th March 2018

 

45.The Authority notes that The Treasurer has advised that the 2017/18 budget is based upon robust estimates.

 

Appendix A – 2017/18 Budget & Financial Plan to 2021/22

 

Appendix B- Reserves