To consider report CFO/076/17 of the Chief Fire Officer, informing Members that the Home Office have agreed to a variation in the use of Fire Transformation Grant funding for the station merger programme.

Members considered Report CFO/076/17 of the Chief Fire Officer, concerning a review of the financial position, revenue and capital, for the Authority for 2017/18, covering the period April to September 2017. 

Members were provided with an overview of the report, which covers the revenue and capital position, reserves; and treasury management performance.

Members were advised that with regards to the implementation of budget savings, all savings options had been delivered as expected, with the exception of the firefighters pay award. It is anticipated that any award will be higher than the 1% budgeted for, in which case further permanent savings will be required. Members were informed that if the firefighters award is settled before the end of the financial year then any additional pay award above the budgeted 1% will be funded from the inflation reserve in 2017/18, however new permanent savings options will need to be identified  during the 2018/19 budget setting process to fund the additional award on a permanent basis.

Members were informed of the potential £900k favourable revenue position identified within the report; and the recommendation that this be utilised to increase the smoothing reserve.

Members were also advised of amendments to the capital programme, which includes the work on  the new Emergency Services Mobile Communications Programme (ESMCP), which is fully funded by Home Office grant. The Authority’s investments have all been in line with its Treasury Management Strategy and no new loans had been taken out by the Authority during the period.

Questions were raised regarding the Authority’s Treasury Management Strategy and investment in lower than AAA rated institutions. Members were assured that Liverpool City Council provide the Authority’s Treasury Management and that although there is always an element of risk, investments are always made wisely, ensuring that security is paramount.

Further comments were made, highlighting that Liverpool City Council utilise B rated institutions for its own investments, and therefore MFRA are more prudent.

Members requested that a breakdown of the Authority’s return on investment be provided and were advised that a thorough Treasury Management Report would be taken to the Authority’s Audit and Scrutiny Committee in February; and that this information would be incorporated within that report.

A further question was raised regarding the increase in the Bank of England base rate and whether this may have an impact on the Public Work Loans Board (PWLB) rates. Members were advised that future PWLB rates are likely to rise if interest rates are increased, however at present it was cheaper to use internal cash to invest, although there will be  a point in time when new loans will be required. They were advised that officers would continue to monitor the situation and consider the overall cashflow position when determining when the Authority should look to take out new loans.

The PCC fully endorsed the way in which the Authority’s finances were managed, however a question was raised regarding the Authority’s level of reserves and how these are justified.

Members were advised that all the earmarked reserves had been established to meet existing or future planned spend, and as an example the capital reserve was being used to contribute to the station mergers initiative and avoid the Authority having to borrow to fund this significant capital investment.

Assurance was provided to Members that all reserves could be justified and explained.

Further comments were made regarding the firefighter pay negotiations and how this highlights the uncertainties around the budget setting process.

Members also requested that their thanks be placed on record to the Treasurer and his staff for all their hard work.

Members resolved that:

a)    the potential £0.900m favourable revenue position identified within this report, be noted;

b)    the utilisation of the £0.900m favourable revenue position to increase the Smoothing Reserve in order to enable the Authority to have the time to identify permanent additional savings should future pay awards exceed the assumption in the current financial plan, be approved;

c)    the Treasurer be instructed to continue to work with budget managers to maximise savings in 2017/18;

d)    Further information be incorporated within the Treasury Management Report submitted to the next meeting of the Audit and Scrutiny Committee, providing a breakdown of the Authority’s return on its investments.