To consider Report CFO/007/22 detailing the Merseyside Fire and Rescue Authority Budget and Financial Plan for 2022/3 to 2026/27.

 Members considered a report of the Director of Finance and Procurement, which provided the Members with the medium term capital and revenue financial plan to allocate resources in line with the Authority’s strategic aims.

 

The Chair thanked the Finance department for preparing the budget proposal and for the significant amount of work undertaken as highlighted in the recent inspection, which noted the outstanding nature of the Authority’s financial controls.

 

Members queried the ratio of financing cost to the net revenue stream as it was proposed that this would rise to 10% in 2026/27. Ian Cummins explained that historically 10% of the budget had been allotted to service debt but in recent years this had reduced to 5% as the level of debt had declined due to the additional debt payments that had been made. In terms of the sustainability of the committing of 10% of the budget to service debt,  then based on the proposed MTFP the servicing of 10% debt would be affordable and sustainable. However, ultimately, the Authority is dependent upon Government funding support and the outcome of future Government settlements may require a review of all of the current budget commitments.

 

Members were advised that the inflation provision in 2026/27 was a result of the plan being structured as a five-year rolling, medium term financial plan. It was explained that this provision was expected to cover the pay award and inflation increase in 2026/27.

 

The Police and Crime Commissioner (PCC) commented on how the government were funding public services including the Fire Service and the Police and cited the lack of a three-year settlement as detrimental and responsible for pushing the burden onto the local taxpayer. It was proposed that a joint approach to lobbying from public services in Merseyside would help to illustrate the issue to central government.

 

Councillors asked for clarity on the £1.25million refurbishment of Bromborough Station, which was included in the capital programme noting that the Asset Management Plan suggested it may be replaced. The CFO explained that the IRMP 2021-24 considered a proposal to merge Heswall and Bromborough stations but the land for a new site had not been available. As a result, of the station remaining in use, it required an upgrade to meet the Authority’s accessibility standards and to provide female facilities in line with the Authority’s ambitions for equality.  The service was also cognisant of the Wirral Local Plan, which sought to add 5000 properties to the area, further necessitating an upgrade of Bromborough station.

 

The Chair presented the Labour Budget Resolution noting that the Authority had a proven record of accomplishment in terms of maintaining financial affairs and making tough decisions to balance the budget. The reductions to grant support and revenue funding from central government made in previous years were stated and the efforts in recent years by management to move funding to the front line were commended.

 

Furthermore, the government’s intention to address the ingrained challenges of regional equality through the Levelling Up agenda were welcomed especially for areas that were under-invested in. The Chair shared the PCC’s concerns over shifting the cost of financing public services onto the council taxpayer.

 

The Chair explained that the proposal was to increase the precept by under 2% with most people (Band A) seeing an increase of £1.07. Reflecting on funding cuts, it was agreed that the Members would continue to lobby government to maintain and improve MFRA funding to prevent any loss of frontline services.

 

Vice-Chair Councillor Brian Kenny, seconded the budget proposal as presented by the Chair and commended that the investment that MFRA had made in the service over the last few years had ensured it remained the best service in the UK. Concerns were raised over the impact of previous reductions to the service and Councillor Kenny supported the Chair’s instruction to continue lobbying, especially for those deprived areas of Merseyside.

 

The Vice-Chair also commended on the morale and attitude of MFRA staff noting that on a recent Station Visit, a firefighter at Kirkdale Station had stated they had ‘the best job in the world’. The Members agreed that the people at the Authority were its best asset and their dedication and hard work was noted.

 

Opposition Spokesperson, Councillor Leslie Rennie, leant her support to the proposal to continue lobbying government and commended the Authority on how it had managed the budget in difficult circumstances. Councillor Rennie supported the budget resolution, noting that it was the best deal for residents and had the best chance of helping areas of deprivation.

 

The Chair conducted a vote for the budget resolution with unanimous agreement by the 17 councillors present.

 

Resolved that:

 

a)       the 2022/23 service budget set out in the report be noted;

 

b)       the Director of Finance and Procurement’s recommendation on maintaining the current level of general fund balance at £3.000m be endorsed, and reserved be maintained as outlined in paragraph 141 to 162 of this report;

 

c)        the current plan to increase the precept by just below 2% (1.96%) for 2022/23, raising the Band D Council Tax from £82.00 to £83.61 be approved and the strategy for future precept rises (the plan that assumes further increases of just under 2% in each year thereafter) be confirmed;

 

d)       the assumptions in developing a five-year financial plan outlined in the report be endorsed, and the 2022/23 budget estimate of £61.792m be approved;

 

e)       the 2022/23 – 2026/27 updated Medium Term Financial Plan (MTFP) outlined in the report and summarised in Appendix C be approved;

 

f)        the discretionary fees and charges uplift outlined in the report and summarised in Appendix E be approved;

 

g)       the capital strategy and investment strategy as summarised in Appendix B be approved;

 

h)       the Minimum Revenue Provision (MRP) strategy for 2022/23 as outlined in paragraphs 85 to 94 of this report be approved;

 

i)         the prudential indicators relating to the proposed capital programme, outlined in paragraphs 100 to 105 of the report be noted;

 

j)         the Treasury Management Strategy outlined in Section F be approved and the Treasury Management indicators be agreed as set out in the section 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; and

 

k)        the recommendations above provide an approved framework within which officers undertake day-to-day capital and treasury management activates be noted; and

 

l) the budget resolution be approved as follows:

 

Merseyside Fire and Rescue Authority Budget and Medium Term Financial Plan Resolution 2022/2023 – 2026/2027

 

1.          The Authority has a proven track record in managing its financial affairs well and making the tough choices to balance the budget. Over the 2010/2011 – 2019/2020 period 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. The Authority had a 50% real terms reduction in the grant support it received from Government, and its total revenue budget reduced by nearly 40% or £13m. The Authority faced-up to the Government funding cuts and had no choice over that period but to approve an unavoidable reduction in the operational front line, with reductions in: -

 

·       The firefighter establishment, that reduced from 1,000 full time equivalents (FTE) to potentially 620 FTEs, 38% lower,

 

·       The number of fire stations reduced from 26 full time stations to 22 maintained by a variety of demand led duty cover systems,

 

·       The number of appliances available reduced from 42 wholetime fire appliances immediately available and 1 retained (43 appliances in total) to 26.

 

2.          In 2019/2020 the Authority’s new Chair and Vice Chairs together with a new Principal Officer team undertook a review of the Service with the aim to re-invest £1m back into Operational Response and Protection services by:-

 

·       an increase the firefighter numbers on Merseyside by an additional 22 posts, to 642 and,

 

·       an increase in retained (on call) contract holders

 

·       increase fire engine/appliance availability from 26 to 29 (plus the specialist rescue appliance), and

 

·       the introduction of a new fire engineer post to work with partners ensuring the safety of residents in high-rise buildings.

 

3.          This bold plan was in response to emergent and foreseeable risk from fire and other emergencies, particularly the services ability to respond to large and/or protracted incidents, as well as the need to enhance protection functions in the light of the Grenfell Tower fire, the Manchester terror attack and other major incidents. This major investment has now been consolidated within the approved budget.

 

4.          The Authority’s IRMP for 2021 – 2024 sought to build on these foundations and included further enhancements to the operational and protection capabilities of the Service by:

 

·       increasing the number of fire engines the Service can deploy from 29 (plus the Special Rescue Appliance) to 31 (plus the Special Rescue Appliance) by expanding the Hybrid duty system,

 

·       introducing Specialist teams to deal with all foreseeable risk;

 

·       increasing investment in specialist appliances and other operational equipment.

 

·       proposed to build a new £35m Training and Development Academy and Hybrid Station with rescue capability.

 

5.          The investment the Authority has made in the Service since 2020/2021 has ensured Merseyside Fire and Rescue Service continues to be one of the best, if not the best fire and rescue services’ in the country. In the latest HMICFRS inspection the Service scored an unprecedented three ‘Outstanding’ judgements across the eleven sub themes for its work preventing fires and other emergencies, its response to major and multi-agency incidents and for making the best use of its resources.

 

6.          The Authority remains concerned that the impact of the previous service reductions due to Government funding cuts have gone too far and they are steadfast in their ambition to build back into the Service. The permanent investment it has managed to put into the Service since 2020/21 only delivers some of the additional resources it believes are required. The Authority also calls upon the Government to make the temporary 2020/21 Protection Services grants, that allowed a short-term investment in these services, permanent.

 

7.          The 2022/2023 Government funding settlement is another one-year settlement, the Authority urge the Government to reinstate the multi-year approach for 2023/24 and beyond. Alongside the lateness of funding notifications (a key example being the still to be announced FPS pension grant and possible Protection Services grants for 2022/2023), short-term funding is a major barrier to effective financial planning and fails to provide a permanent solution to the fundamental challenges facing the Authority.

 

8.          The 2022/2023 Government Funding settlement and increase in grants to cover the business freeze in 2022/2023 will see the Authority receive approximately a 4% increase on its 2021/2022 settlement and grants. The Government has also announced a one-year Services Grant of £1.388m, however £0.336m of this is to cover the increase in the employers NI rate from April 2022.  The Authority welcomes the new Services Grant but is disappointed that the announcement is only for one-year. While a 4% increase in Government funding would normally be welcomed the Country is facing a period of significant inflationary pressure particularly around energy, fuel and future tax increases that are likely to mean a large part of the Settlement increase will have to be used to for inflationary pressures rather than for improving services.

 

9.          The Authority welcomes the Government’s intention to address the engrained challenges that underpin regional inequality and this is essential for the success of the “levelling-up” agenda.  The most fundamental intervention is for the Government to reassess the quantum of funding available in the longer-term, and to ensure that key services are funded based on local levels of need and deprivation.  Failure to do this will put the rights of the most vulnerable in society at risk. There is a direct correlation between levels of deprivation and fire deaths.

 

10.       The Authority has always been opposed to the application of council tax referendum principles as they are bureaucratic, undemocratic and have no reference to underlying inflation or demand for local services.  The Authority would prefer to see the referendum principles abolished, allowing individual authorities to set their own levels of council tax.

 

11.       The Authority is concerned that inclusion of council tax in Core Spending Power means that the burden of paying for local services is being progressively passed on to local council taxpayers.  This means that funding increasingly fails to be matched to local need.  This is not “levelling-up” and is inherently unfair – as local authorities with a small council tax base only benefit financially in a very limited way. 

 

12.The Authority understands that the Government is looking atreforms to the local government funding formula and to determine an up-to-date assessment of the needs of each local / fire authority. The outcome of the fair funding review will feed into the future Government funding assessment for the Authority. The Authority would ask that the Government provide sufficient permanent funding, based on a fair funding system that properly reflects local levels of need and deprivation.

 

13.In order to protect the investment the Authority has made and plans to make in the Service, the Authority proposes a council tax increase of just under 2%.

 

14.       The effect of the budget on the council tax will be a Band D Council Tax of £83.61, which equates to an increase of £1.61 or 3p per week on the 2021/2022 figure.

 

15.       Most people in Merseyside will pay Band A Council Tax of £55.74, which equates to an increase of £1.07 or 2p per week on the 2021/2022 figure.

 

16.       The Authority recognises that the Fire and Rescue Service is required to resource on the basis of risk not demand. However, it also appreciates that Merseyside faces more demands than most other services due to the high levels of deprivation that its communities experience. We urge this Government to reflect on the impact the last 10+ years of 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). We would hope that resources are allocated in a way that allow Merseyside to continue to respond effectively to local and national threats.

 

17.       Future Government funding cuts may force the Authority to make further reductions in frontline services, therefore the Authority will continue to lobby the Government against the level of cuts in funding made since 2010/2011 and highlight the consequences that further cuts will have on the effective delivering of a vital emergency service.

 

18.       The Authority has undertaken a process of lobbying more extensively than any other Authority in the Country and we believe this may have avoided further and deeper cuts and our views on future funding have been heard at the highest levels of Government.  The Authority has said it will not allow these unsafe levels of cuts to just roll over us, but we will use every political device we can to improve funding so as to maintain the highest levels of public and staff safety here on Merseyside. Our position as a service delivery lead partner with the Home Office (HO), has put us as a super authority, we will develop this relationship as positively as possible.

 

 

The Financial Plan

 

19.       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 7^th February 2022, that;

 

                                        i.     deals with the financial challenge arising from the known Government funding support up to 2022/2023, and

 

                                       ii.     although the financial plan has projected Authority spend and Government funding up to 2026/2027, the 2022/2023 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 any financial challenge in future years at this point and will deal with any financial issues in future budget rounds.

 

·       To set council tax increases in line with its financial plan of just under 2% for 2022/2023 and just under 2% thereafter.

 

·       That assumes a 2022/2023 and future years annual pay award for all of its staff will be within the 2.5% limit set in the plan.

 

·       The Authority will continue if possible to identify additional efficiencies to re-invest in the front line.

 

·       The MTFP includes the proposal to build a new Training and Development Academy and fire station for £35m, and reflects the Service proposals included in the 2021 – 2024 IRMP.

 

·       The Authority will continue to focus its search for efficiencies on collaboration, management, support services costs and other technical reviews.

 

20.       Authority Members’ have been committed to reducing their own costs and following thirteen years of a freeze to allowances’, this has delivered an annual saving of £24,000. Given the current and forecast inflationary pressures facing the Country the reality is the freeze in allowances must end. The inflation provision within the budget now includes funding for an inflation indexation for members’ allowances from 2022/2023 based on the previous year’s firefighter pay award, and for future years would follow the NJC grey book recommendation. Members will consider the scheme of allowances for 2022/2023 at the AGM meeting in July 2022.

 

21.       Noting that there is risk in the Authority’s current plan, in particular around the assumptions over future pay increases and Government funding.

 

22.       The Authority recognises that the Chief Fire Officer needs to consider any recommendations on future national fire and rescue practices, Fire and Rescue National Framework guidelines, Fire Standards Board, 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.

 

 

IRMP

 

23.       The proposed 2022/2023 – 2026/2027 MTFP takes into account the proposals in the 2021 – 2024 Integrated Risk Management Plan (IRMP). The IRMP may need to consider at the relevant time the consequences of future Government funding settlements, if applicable.

 

 

Council Tax

 

24.       The Authority had already assumed a council tax increase at the maximum level allowed by the Government before a referendum was required. The Government has confirmed that the threshold for 2022/2023 is an increase of just under 2%.

 

25.       Because of the cuts in its frontline services, arising from previous Government funding reductions, the Authority must protect and invest in MFRS in order to maintain the safety and protection of the Merseyside community. It has therefore had no choice but to stick with its plan and increase council tax to the maximum allowed before a referendum is required. In 2022/2023, the Authority has approved an increase of just below 2% to minimise the impact on the services to Merseyside in the future.

 

26.       The impact of the budget on the council tax will be a Band D Council Tax of £83.61, an increase of 3p per week on the 2021/2022 figure. 

 

27.       Most people in Merseyside will pay Band A Council Tax of £55.74, an increase 2p per week on the 2021/2022 figure.

 

Interoperability with Blue Light Partners

 

28.       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)The creation of a Joint Police and Fire Station in Knowsley,

(iv)Extensive joint planning and exercising,

(v)   Support to Health partners throughout the period of the pandemic.

 

29.       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, demand management and corporate service functions.

 

 

Working with other Partners

 

30.       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.

 

31.       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

 

32.       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.

 

33.       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. To mitigate some of these risks specific reserves have been established such as Inflation (pay award risk) and Smoothing (McCloud compensation payments / future Government funding levels) reserves.

 

34.       The Authority seeks to provide its firefighters and other staff with the right equipment, personal protective equipment (PPE), vehicles, and training facilities to enable them to fulfil their role safely and at the best standard possible. As the Government does not make any capital funding available, the Authority has a strategy of building up the Capital Reserve to fund a significant proportion of this investment to maintain borrowing at an affordable and sustainable level. The proposed Budget and Financial Plan include the option to build a new Training & Development Academy and fire station at a cost of £35m, of which £19.8m will be funded from the Capital Reserve.

 

35.       The Authority established a £1.9m recruitment reserve to fund the recruitment of new firefighters in advance of the expected firefighter retirements, as it expects significant numbers of the current workforce to retire over the next five or so years. This will ensure the Chief Fire Officer has sufficient competent firefighters. The Authority believes that a wholetime (with retained) 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.

 

36.       The reinvestment in frontline provision made in 2019/20 – 2020/2021 has ensured the services response standard has been met throughout the period of the pandemic.

 

37.       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 maintain a general revenue reserve of £3.0m.

 

 

Capital Programme

 

38.       The Authority approves the Capital Programme as set out in CFO/007/22 which includes a total investment of over £63.380m over 2022/2023 – 2026/2027 period. The programme for 2022/2023 shall be approved as £42.605m.

 

39.       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 £21.592m in 2022/2023 as part of a total borrowing of £37.667m across the life of the plan.

 

40.       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

 

41.Following consideration of the report of the Director of Finance and Procurement (CFO/007/22) 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 2022/2023 as follows.

 

42.Approves the capital expenditure programme for the financial year 2022/2023 for the total of £42.605m as set out in report CFO/007/22 and the five-year programme totalling investment of £62.380m, and in this respect notes the advice of the Director of Finance and Procurement that the programme is prudent, sustainable and the borrowing affordable.

 

43.The Authority resolves as follows:

 

(a)  It be noted that on 24th February 2022, the Authority calculated the Council Tax Base 2022/2023 for the whole Authority area as 379,000.76 [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 2022/2023 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 2022/2023 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 £104.988m,

 

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 2022/2023 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 2022/2023 under S42A (2) (c) of the Act as £2.852m,

 

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 2022/2023 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 £54.987m,

 

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 £21.165m.

 

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 2022/2023 is £31,688,253 and the council tax base is 379,000.76, which is equal to £83.61 precept for a Band D property. This calculation meets the requirements under S42B of the Act.

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

46.The Authority requests the Director of Finance and Procurement to arrange for precepts to be issued to the constituent district councils pursuant to S40 of the Act before 1^stMarch 2022, such sums to be payable by 10 equal instalments on or before the following dates:

 

 

Thursday	21/04/2022
Monday	30/05/2022
Friday	08/07/2022
Monday	15/08/2022
Wednesday	21/09/2022
Thursday	27/10/2022
Monday	05/12/2022
Friday	13/01/2023
Monday	20/02/2023
Friday	17/03/2023

 

47.The Authority notes that the Director of Finance and Procurement has advised that the 2022/2023 budget is based upon robust estimates.