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

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

3. 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.

4. 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.

5. Where did we Start? Budget Strategy 2016/17

6. 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.

7. 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.

8. 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.

9. Current Spending Forecasts

10. 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.

11. 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).

12. 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

13. 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.

14. 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)

15. 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

16. 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:

17. 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

18. 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)

19. Contribution to Capital
£3.6m proposed over 3 years. Capital fund balance estimated at £2.7m on 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.

20. 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

21. 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.

22. 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.

23. Resource Forecasts

24. 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

25. 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

26. 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/ % 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%

27. 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?).

28. 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.

29. Management of Change

30. 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.

31. 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.

32. Management of Change Reserve
Created as part of 16/17 budget to facilitate change. Estimated balance on £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.

33. 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.

34. 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.