To consider Report CFO/004/18 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 2018/19 and a precept level in line with statutory requirements.

 

 

Members considered report CFO/004/18 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 ensures that MFRA delivers an efficient, value for money service. This will also allow MFRA to determine a budget for 2018/19 and a precept level in line with statutory requirements.

 

The proposed Capital Programme for 2018/19 to 2022/23 would see a total investment of £31.946m.  This would represent an overall increase in capital expenditure above that in the current programme of £5.536m.  Of this £4.665m relates to the addition of an extra year (2022/23). After taking into account the non-borrowing funding the impact of the net additions to the expenditure programme on the Authority’s borrowing requirement is a net increase of £5.146m. Members were requested to consider the revenue impacts of the proposed capital investment and borrowing requirement as part of revenue budget and council tax considerations.   

 

Members were advised that under the Local Authorities and Accounting Regulations, MFRA is required to set aside a sum of money each year to reduce the overall level of debt, known as the Minimum Revenue Provision (MRP).  Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations were updated in 2008 and now require each Authority to repay debt at a rate it considers prudent and to set out in an annual statement the Authority’s policy on making MRP in respect of the forthcoming year. The report sets out the Authority’s MRP policy for 2018/19 and Members were asked to approve the policy.

 

The report set out for Members the proposed options for balancing the 2018/19 – 2019/20 revenue budget based on certain assumptions in the MTFP..  The report also outlined the Authority’s reserve strategy and outlined how the Authority had set aside specific reserves to meet potential significant risks or future one-off projects and investments. Therefore, as the significant risks are known and are being managed or have a specific reserve, the Treasurer recommends maintaining the general reserve at its current £2.000m level that equates to 3% of the revenue budget, below the 5% recommended by Audit. 

 

The CFO reminded Members that the current plan assumes a £1.9m operational response saving that would see a loss of up to 49 firefighter posts. Since Members approved this option a number of major fire incidents have occurred, particularly the Grenfell incident.  The CFO is reviewing the current operational model to assess any additional operational investment requirements in light of the guidance that may come out once the Grenfell review has been completed.  At this point the plan assumes no further savings can be taken from the operational budget and any additional investment will have to be met from other budget heads.  No additional investment in the operational front line has been built into the proposed financial plan.  Any changes to the staffing model deemed necessary by the CFO will be within the existing 620 whole time equivalent post allocation and will be broadly cost neutral.

 

The Chair asked representatives of the Unions if they wished to add anything:

·         A member of the Fire Brigades Union (FBU) commented that the FBU agreed with the report and recognise the financial constraints.  However, they also commented that any more cuts to Operational Staff would not be tolerated and Councillors were requested to continue lobbying on behalf of MFRS.  

·         A member of the Fire Officers Association (FOA) agreed with comments made by the FBU, but stated that the view of FOA is that Emergency Services should not take strike action. They also praised the response to the Echo Arena car park fire. 

 

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

 

Members place on record their thanks to Finance staff for the production of a viable budget and stated that they will continue to lobby the Government. 

 

Cllr Rennie commented that she would support the budget, as there was no viable alternative strategy.  She praised firefighters and staff for doing a wonderful job. 

 

The Police & Crime Commissioner - Jane Kennedy raised a question regarding a previous MFRA vote in favour of reforming of the Authority, and asked if MFRA were continuing to pursue this option in an effort to save costs.  The Chair of the Authority responded that work around the reform was on hold at present, pending the outcome of considerations regarding the Metro Mayor and Liverpool City Region.  He commented that despite Halton being part of the Liverpool City Region, it is currently within the boundary of Cheshire Fire & Rescue Authority, which creates complications in terms of governance, which would need to be resolved. 

 

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 2018/19 was therefore unanimously approved.

 

Members resolved that:

 

a.    the 2018/19 service budget 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 141 to 146 of this report, be endorsed.

 

c.    the current plan to increase the precept by just below 3% for 2018/19, raising the Band D Council Tax from £74.34 to £76.56 and confirm the strategy for future precept rises (the plan assumes a further increase of just under 3% in 2019/20 and then just under 2% in each year thereafter), be endorsed.

 

d.    the assumptions in developing a five year (2018/19 – 2022/23) Financial Plan outlined in the report and approve the Medium Term Financial Plan in Appendix C and the 2018/19 budget estimate of £59.701m, be endorsed.

 

e.    the 2018/19 – 2022/23 amended saving plan 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 2018/19 as outlined in Paragraph 77 to 78 of this report, be approved.

 

h.    the prudential indicators relating to the proposed capital programme, paragraph 89 to 91 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 96(d) of this 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 agreed. 

 

j.      The Budget Resolution 2018/19, be agreed as follows:

 

BUDGET RESOLUTION 2018/19

 

Merseyside Fire and Rescue Authority Budget and Medium Term Financial Plan Resolution 2018/19 – 2022/23

 

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 £59.9m or £13.7m 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 £11m 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 identified significant efficiency savings of £9.1m by reducing management, support services costs and other technical amendments. Despite these efficiencies unfortunately the Authority had no choice but to approve an unavoidable reduction of £1.9m from the operational front line.

 

5.    It is with extreme reluctance that the Authority has accepted the recommendation of the Chief Fire Officer to deliver the operational savings required as a result of the Government cuts up to and including 2019/20. The saving will be delivered through the transition from wholetime crewing to days and retaining crewing on 6 appliances as the least worst operational option. Compared to 2010/11 the number of fire appliances in Merseyside by 2019/20 will reduce from 42 wholetime pumps down to a budgeted 18 wholetime pumps; 6 day crewed appliances; and 2 fully wholetime retained appliances. This equates to a 57% reduction in wholetime pumps.

 

6.    The Authority is therefore saddened to have to approve a financial plan that is based upon a significant reduction in the operational cover provided to the Merseyside community at a time when incidents such as that at Grenfell highlight the need to maintain a suitably resourced Fire and Rescue Service.

 

7.    In order to minimise the impact on the Fire and Rescue Service the Authority has agreed a council tax increase of just under 3%.

 

8.    The effect of the budget on the council tax will be a Band D Council Tax of £76.56 (which equates to £1.47 per week) an increase of less than 5p per week on the 2017/18 figure. 

 

9.    Most people in Merseyside will pay Band A Council Tax of £51.04 or 98p 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 and 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 and 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 6^th February 2018, that;

                                  i.    deals with the financial challenge arising from the known Government funding support up to 2019/20, and

                                ii.    although the financial plan has projected Authority spend and Government funding up to 2022/23, the 2020/21 and future years estimates are based on assumptions that are unpredictable as future Government funding for the Fire and Rescue Service is subject to a number of Government reviews and the national economic performance. Therefore the Authority has agreed to note the outstanding financial challenge from 2020/21 at this point and will deal with any saving requirement in future budget rounds.

·         To set council tax increases in line with its financial plan of just under 3% for 2018/19 and 2019/20 and just under 2% thereafter.

·         That assumes annual pay increases for its staff will be within the 2% limit set in the plan. This reflects the recent pay offers made by employers.

·         The Authority is of the view that no more savings can be taken from operational response, and if possible would wish to identify additional efficiencies to re-invest in the front line.

·         In order to set a balanced financial position for 2019/20, the Authority has instructed the Chief Fire Officer to review Support Services and deliver a minimum £0.426m saving in 2019/20 and future years.

·         Any changes to the operational staffing model deemed necessary by the Chief Fire Officer will be made within the existing budgeted 620 whole time equivalent (WTE) firefighter establishment and will be broadly cost neutral 

·         The Authority will continue to focus its search for efficiencies on collaboration, management, support services costs and other technical reviews and assume that the current approved savings of £9.053million (including the 2019/20 anticipated £0.426m saving) can be generated from that area.

·         The approved saving of £1.900m from operational response can be delivered.

 

13.Noting that the reduction in firefighter numbers will be achieved by natural retirement rates and will be delivered in full by the end of 2018.

 

14.Noting that there is a considerable risk that the Authority’s aspiration to avoid compulsory redundancy may be compromised because of the need for a reduction in non-uniformed staff. Therefore instruct the Chief Fire Officer to use voluntary severance and early voluntary retirement in line with Authority’s 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 Chief Fire Officer needs to consider any recommendations on future national fire and rescue practices that come out of the Grenfell review, Fire and Rescue National Framework guidelines and ongoing local challenges. It therefore recognises that the Chief Fire Officer will need to continue to manage operational crewing levels and appliance availability on a dynamic basis using a variety of response systems 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 tenth 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 and other 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 late 2018 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 and 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. The Government has announced that this threshold has been increased to just under 3% for 2018/19 and 2019/20.

 

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 to the maximum allowed before a referendum is required. In 2018/19 the Authority has approved an increase of just below 3% 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 £76.56 (which equates to £1.47 per week) an increase of less than 5p per week on the 2017/18 figure. 

 

26.Most people in Merseyside will pay Band A Council Tax of £51.04 or 98p 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 natural 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 £2.3m 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 Hazardous Area Response Team 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/004/18 which includes a total investment of over £31.946m over 2018/19 – 2022/23 period. The programme for 2018/19 shall be approved as £16.814m.

 

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 £6.814m in 2018/19 as part of a total borrowing of £20.446m 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/004/18) 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 2018/19 as follows.

 

40.Approves the capital expenditure programme for the financial year 2018/19 for the total of £16.814m as set out in report CFO/004/18 and the five year programme totalling investment of £31.946m, 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 22^nd February 2018, the Authority calculated the Council Tax Base 2018/19 for the whole Authority area as 365,022.43 [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 2018/19 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 2018/19 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 £75.269m,

 

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 2018/19 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 2018/19 under S42A (2) (c) of the Act as £0.030m,

 

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 2018/19 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 £47.353m,

 

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 £4.832m.

 

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 2018/19 is £27,946,117 and the council tax base is 365,022.43, which is equal to £76.56 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^stMarch 2018, such sums to be payable by 10 equal instalments on or before the following dates:

 

Friday	20th April 2018
Wednesday	30th May 2018
Thursday	5th July 2018
Friday	10th August 2018
Tuesday	18th September 2018
Wednesday	24th October 2018
Thursday	29th November 2018
Wednesday	9th January 2019
Thursday	14th February 2019
Friday	15th March 2019

 

45.The Authority notes that The Treasurer has advised that the 2018/19 budget is based upon robust estimates.

 

Appendix A – 2018/19 Budget & Financial Plan to 2022/23

 

 

Appendix B- Reserves