Leicester, Leicestershire and Rutland Combined Fire Authority Budget Strategy 2017/18 to 19/20 CFA Meeting 8th February 2017

Purpose of Presentation To present the 2017/18 budget to the CFA. To explain the strategy in the context of the longer term outlook.

Key Points Three year budget is balanced. Longer term budget not self-sustaining Significant one off monies, which can be used for change/modernisation. One-off opportunity to invest to secure future sustainability. Notes: Can comment that one-off monies increased due to final rates figures from districts. £0.4m more than previously assumed, in 17/18 only.

Background Local government experiencing worst financial cuts ever experienced. Fire also affected, but not as severely as rest of sector. RSG to fall from £7.2m (16/17) to £4.3m (19/20), but 16/17 settlement not as bad as feared. Substantial savings already made, leaving us well placed (for now). We are still low tax (£61.62) – third lowest CFA. Notes: Lower tax – Berkshire/Bucks. RSG - £11.8m in 13/14.

Where did we Start? Budget Strategy 2016/17

Budget 16/17 £m Expenditure Employee costs 25.1 Other running costs 6.4 Capital financing 4.7 36.2 Income Council tax 18.7 Business rates 3.5 Revenue Support Grant 7.2 Business Rates top- up grant 4.9 Other grant 1.3 Fees and charges 0.4 Collection Fund 0.2 Notes: 70% of cost is employees.

Principles underlying Budget 16/17 Complementary to 2016 IRMP. Target establishment of 334. Financing of capital programme from revenue. Reviews of fleet, premises and management arrangements. Use of one off money to manage change: Capital fund Management of change reserve Notes: We have actually reached 334 much sooner than expected.

Other Features of 2016 Budget Strategy Four year grant certainty and efficiency plan (submitted in September). Introduction of TRVs and new whole time duty systems. Pending new statutory duty to collaborate with other emergency services.

Current Spending Forecasts

Spending Forecasts - Approach Three year budget to 19/20. Approved budget taken as starting point. Budget amended for:- Technical changes – will happen anyway Proposed growth and savings Continue to use revenue to fund the capital programme to reduce overall debt. Planning provision. Notes: Establishment fallen much more quickly than anticipated.

Current Forecast Spending 17/18 £m 18/19 19/20 Approved budget 16/17 33.8 33.4 32.7 Technical changes:- Inflation 0.4 0.8 1.4 Other (1.1) (1.3) (1.2) Proposed growth 0.9 Proposed savings (0.3) (0.4) Contribution to capital 1.1 Management of change 0.5 Planning provision 0.3 0.6 35.5 34.8 35.1 Notes: £457,000 management of change added, after final rates figures. It is the council tax collection fund surplus, which I had expected would be offset by a rates deficit (it wasn’t).

Spending Forecasts - Inflation 17/18 £000 18/19 19/20 Pay 271 545 821 Price 17 34 52 Pension contributions 46 92 438 Living Wage 18 Apprentice Levy 93 427 764 1,422

Inflation – Assumptions Pay rises at 1%. Price inflation on specific costs only. Increase in cost of local government pension scheme. Increase in firefighters’ pension contributions from 19/20. Apprentice levy – a new tax on pay. No provision for sterling devaluation – potential increased cost of procuring goods and services? Notes: Pay rises at 1% may be a risk if inflation takes off. Local government pension increases – 1.3% of employers’ contributions each year. IT contracts priced in dollars.

Spending Forecasts – Other Technical Changes (Savings) 17/18 £000 18/19 19/20 Operational staff savings (901) (850) (426) Capital financing (43) (203) (431) New pension scheme (150) (250) (350) (1,094) (1,303) (1,207)

Other Technical Changes – Assumptions and Issues Operational Staff Savings:- Based on approved target establishment Establishment reduced much faster than assumed Assumes retirement when full pension receivable Assumes all secondees return Capital Financing:- We no longer borrow or use leases This saves money as leases end, and when debt is repaid Savings as firefighters transfer to 2015 pension scheme. Notes

Proposed Growth 17/18 £000 18/19 19/20 Additional firefighters:- 12 at Loughborough 240 421 481 3 for day crewing 115 Training/recruitment 280 New apprentices 30 170 Operational resilience 100 Airwave 12 777 818 878 Notes:

Proposed Growth Already reached target establishment ahead of schedule. Recruitment of 25 trainees proposed. Exceeds immediate requirement, money in reserves covers short term over staffing (c.£0.4m). £280,000 for recruitment/training. Apprentices to meet longer term recruitment need. £100,000 to support operational resilience: will be met from additional savings. Notes

Proposed Savings (Mostly Achieved) 17/18 £000 18/19 19/20 Area manager (94) Directors’ pay review (64) Protective equipment contract (65) Administrative staff (70) Total achieved (293) Original Savings Requirement 250 350 Additional requirement 100 Balance still required (157)

Contribution to Capital £3.6m proposed over 3 years. Capital fund balance estimated at £2.7m on 01.04.17. Provides £6.3m to fund capital programme. Notes: Previously (16/17 budget) contribution to capital was back-ended. Now it is front-ended. More or less the same amount.

Proposed Capital Programme 17/18 £m 18/19 19/20 Total Vehicles and fleet 0.9 0.8 2.5 Premises 0.3 1.0 2.3 Firefighting equipment ICT 0.2 0.5 2.0 1.8 6.1

Proposed Capital Programme Links to further work on premises and fleet reviews. Money for fleet/premises in 18/19 and 19/20 will not be spent without further report.

Planning Provision A contingency built into future plans. A recognition of uncertainty. £0.3m per year, accumulating. Not a contribution to reserves – if not required, will be taken out.

Resource Forecasts

Resource Forecasts 17/18 £m 18/19 19/20 Business Rates Retention Scheme:- Business rates 3.6 3.7 Top up grant 5.0 5.1 5.3 Business rates total 8.6 8.8 9.1 Council tax 19.5 20.1 20.8 Revenue Support Grant 5.6 4.8 4.2 Other grants 1.1 0.7 Fire authority income 0.3 0.4 Collection Fund surplus Total Income 35.5 34.8 35.2 Notes: Assumes big fall out of New Dimensions Grant. Other grants:- 16/17 £000 17/18 18/19 19/20 S.31 286 253 261 New Dimensions 500 200 Firelink 275 278 287 1,061 731 748

Business Rates Retention Scheme 1% of district (and city) rates paid to Fire. Top up grant also received – needs related. Rates revaluation in 2017/18 has created additional risk. We will lose money if there are lots of successful appeals (from 18/19). 100% retention scheme “by 2020” Impact assumed neutral Fire may be taken out of the scheme completely

Council Tax Income 2% increases in tax assumed – in line with referendum limits. Tax is charged on properties (the “taxbase”) – numbers are increasing. 2.2% tax-base increase in 17/18. 1.25% assumed taxbase increase from 18/19 – likely to be conservative. 2% increases in 18/19 and 19/20 would raise £0.3m per year by 19/20. £0.4m surplus from previous years’ collection. Notes Taxbase increases in previous years:- 11/12 - 0.8% 12/13 0.7% 13/14 (CTRS started) 14/15 2.2% 15/16 2.1% 16/17 2.6%

Revenue Support Grant Government offered certainty from 17/18 to 19/20. Depended upon an efficiency plan – submitted in September. Plan approved by Home Office. Government will honour arrangement “barring exceptional circumstances”. Notes: Economic downturn may affect the certainty offer. (Brexit?).

Resource Forecasts – Other Grants New Dimension funding at risk:- £0.9m in 16/17 £0.5m assumed 17/18 £0.2m thereafter Firelink (£0.3m) will end in 2021.

Management of Change

Current Risks Income Council tax and RSG forecasts seem secure. Impact of business rate appeals. Specific grants. Expenditure Inflation, especially if feeds through to pay. New Home Office expectations, including systems modernisation. Notes: Overall the 2017/18 budget does not seem risky.

Long Term Outlook Government spending plans run to 19/20. Current government has extended deficit reduction programme. National budget expected to remain in deficit in 2020. Office of Budget Responsibility, January 2017: “Public finances are likely to come under significant pressure over the longer term”; “in the absence of off-setting tax rises or spending cuts this would …. put public sector net debt on an unsustainable upward trajectory”. Further cuts beyond 2020 seem inevitable.

Management of Change Reserve Created as part of 16/17 budget to facilitate change. Estimated balance on 01.04.17 - £4.6m. Notes: Report states balance is £4.2m. This can increase because of a collection fund surplus which (unexpectedly) was not offset by a rates deficit.

Overall 2017/18 budget does not seem high risk. Longer term, we need to continue to make savings. Goal should be to use one-off money to secure long term financial sustainability. This is a one-off opportunity we cannot afford to miss.

Approach Make careful use of management of change monies:- To secure long term efficiencies To modernise and improve operational resilience Fund capital investment without use of borrowing or leasing for as long as possible. Continue to deliver back office and front line efficiencies.