BSL Used Here BSL Used Here

Medium Term Financial Strategy 2020/23 and Budget 2020/21

Purpose of Report

To present to Members the Medium Term Financial Strategy 2020/23 and the draft revenue and capital budgets for 2020/21.

Executive Summary

The Fire and Rescue Authority (the Authority) is required to set a balanced budget in December each year. This report sets out the draft revenue and capital budget for 2020/21 and the Medium Term Financial Strategy (MTFS).

This report outlines the key assumptions, risks and uncertainties identified during the budget planning process. The report confirms the funding required from each constituent local authority.

Recommendations

Members are asked to:

  • approve the capital and revenue budgets for 2020/21 based on an increase in contributions from constituent local authorities of £0.7m;
  • note the key risks and uncertainties identified during the budget planning process; and
  • endorse the Medium Term Financial Strategy.

Observations From Executive Panel

The planning assumptions were considered and noted by the Executive Panel at its meeting of 21 October 2019.

Background

An effective organisation needs to have a number of corporate plans in place to ensure its overall strategic objectives are achieved. The wellbeing statement confirms the Authority’s long term well-being objectives:

  • To support people to prevent accidental dwelling fires and stay safe if they do occur; and
  • To facilitate high quality, responsive and better integrated fire and rescue services so that prevention activity and emergency response can continue to be available when and where required, affordably, equitably and on the basis of risk.

The development and approval of the MTFS supports these objectives and ensures that a strategic approach is taken towards financial planning and funding.

The Authority recognised the austerity measures necessary across the public sector and between 2010 and 2017 identified savings of £3m (10% of its budget) and reduced the workforce by 9% across all staff groups.

When considering the financial plans for 2017/18, Members realised that it was becoming unsustainable to continue to try to freeze the Authority’s budget. Members, therefore, adopted a financial strategy for the period 2017/20 that sought to secure financial sustainability through utilising reserves, increased financial contributions and consideration of Service reductions.

The Authority is supported by a member led Planning Working Group. This group met on three occasions between January and March 2019 to develop recommendations for the annual Improvement and Well-being Plan for 2020/21 and the MTFS. The recommendation of the Group was for the Authority to maintain existing service delivery models and for the consultation to focus on the development and adoption of an Environmental Strategy for delivery from April 2020 onwards. The Authority accepted this recommendation and the public consultation commenced during September 2019.

Draft Revenue And Capital Budget 2020/21

Detailed budget planning work has been undertaken and the key planning assumptions, risks and uncertainties are outlined in appendix 1.

The planning process has confirmed a net expenditure requirement for 2020/21 of £35.9m which is a year on year increase of 2%. A summary by budget heading is provided within appendix 2.

The budget proposal for 2020/21 increases contributions from constituent local authorities by £0.7m. Appendix 4 provides a summary by local authority.

Employee costs account for 72% of total expenditure and the draft budget for 2020/21 is £27.7m, which assumes a pay award of 2% for all staff. As national pay awards have not yet been finalised this remains a significant planning risk. Work continues to ensure the careful management of employee costs including the implementation of improvements for the management of variable pay.

The employer contributions for the Local Government Pension Scheme has been reassessed following receipt of the tri-annual actuarial valuation. This has confirmed an annual increase of £0.3m.

Employer pension contributions for firefighters increased during 2019/20 following a revaluation by the Government Actuary’s Department. The Welsh Government provided initial support and a decision on the longer term position was expected in the Spending Review in September 2019. The position for 2020/21 onwards has not yet been announced and this represents a risk of £1.3m. At this time, the budget assumption is that funding will be received.

An inflationary increase has not been applied to non-pay budgets for a number of years. As part of the budget setting process the specific risks within each budget heading were considered resulting in a proposed increase of £0.4m to £8.2m. This is a 5% increase year on year and reflects the significant and unavoidable cost pressures that are being experienced in relation to utility costs, backlog maintenance, fuel costs and ICT costs including software licences and maintenance contracts.

Capital financing costs include the costs of borrowing and revenue charges for using capital assets. A rise in Bank of England base rates is anticipated during 2020/21 and this has been factored into the budget. The capital financing budget for 2020/21 has been reduced reflecting the action taken over the last two financial years to reduce the capital programme.

The draft capital plan is outlined within appendix 3 which confirms a capital requirement of £4.1m for 2020/21. This includes essential investment in new fire appliances and personal protective equipment. This capital expenditure will have a consequential impact on the capital financing charges in future financial years as set out in the MTFS.

Medium Term Financial Strategy 2020/23 (MTFS)

The draft MTFS is provided within appendix 2 and is an assessment of the costs associated with maintaining the current level of service provision. Employee related expenditure remains the main cost driver and the medium term financial strategy is based on a planning assumption of a 2% pay award.

The key risks and uncertainties relating to the MTFS are outlined in appendix 1. The current planning assumption for the MTFS is that additional grant funding for the Airwave projective, pay awards in excess of 2% and the additional pension costs arising from the GAD valuation will be centrally funded.

Implications

Wellbeing Objectives

The budget enables the Authority to achieve its long-term well-being objectives which are:

To support people to prevent accidental dwelling fires and stay safe if they do occur;

To facilitate high quality, responsive and better integrated fire and rescue services so that prevention activity and emergency response can continue to be available when and where required, affordably, equitably and on the basis of risk.

Budget

The current estimate as to the difference between the existing budget and the requirement for 2020/21 is £0.7m.

Legal

The Fire and Rescue Authority has a legal duty to set a balanced revenue budget.

Staffing

None

Equalities/Human Rights/
Welsh Language

None

Risks and Uncertainties

The draft budget has been risk assessed and the following key risks noted:

The budget is based on an assumption that pay awards will be 2%. National agreements have not yet been reached;

The planning assumption is that Welsh Government support for the increase in firefighters pensions will continue. If this is not supported there is a risk of £1.3m;

The planning assumption is that Welsh Government funding of £0.4m will continue in respect of the national emergency service network (Airwave grant);

The Authority plans to develop an Environmental Strategy during 2020/21. An assessment of costs has not yet been made; and

The uncertainty over the EU Exit remains and no additional costs have been factored into the 2020/21 budget.

Appendices

Twitter Facebook YouTube Instagram

Thank you for your email address

We will shortly provide you with the appropriate information.

Done

Thank you for your request

Done