Mid and West Wales Fire and Rescue Authority

Finance and General Purposes Committee - 20 January 2003

Joint Report of the Chief Fire Officer and Treasurer

1. Revenue Budget 2003/2004 Financial Year

2. Capital Programme - 2003/2004 - 2007/2008

1. Revenue Budget 2003/2004 Financial Year

Members will recall that at the special meeting of the Committee on the 16th December 2002, the indicative budget requirement for the forthcoming financial year, representing an increase of 4.99% over the current year’s budget, was approved as the basis of consultation with constituent unitary authorities.

The resolutions of the special meeting of the Committee are set out below, and a copy of our joint report, which was considered at that meeting, is attached as Appendix 1 to this report:

"That any decisions on the final budget for 2003/2004 be delayed as long as possible, but consistent with the necessary Committee/Authority cycle, pending the outcome of the current pay dispute, subject to compliance with the statutory requirement to issue the "levy notice" by the 15th February;
That the indicative budget requirement set out in Appendix A to the joint report of the Treasurer and Chief Fire Officer, requiring a reduction in the budget increase from 6.21% to 4.99% over the current year’s budget, be approved;
That the means of achieving the reduced increase in requirement, as set out in the joint report, be endorsed;
That the indicative requirement form the basis of consultation with the constituent authorities;
That a strongly worded letter be forwarded to the Employers’ Secretariat and the Local Government Association advising that any settlement of the current firefighters’ pay dispute that produces more than a 4% increase on pay for November 2003, and a similar amount in November 2004, will not be affordable unless the funding stream is clearly identified and/or provided;"

The decisions of the special meeting of the Committee were discussed with representatives of the six constituent authorities at a meeting at Fire Brigade Headquarters on the 23rd December 2002. It was accepted at that meeting that the budget increase of 4.99% was reasonable, in the circumstances facing the Brigade, and much debate took place in relation to the potential consequences arising of a settlement of the firefighters’ pay dispute, in the event that this produces a pay increase of more than 4%.

A copy of the letter to the Employers’ Secretariat and the Local Government Association, despatched following the resolution of the special meeting of the Finance and General Purposes Committee, a copy of which has been forwarded to all Members of the Fire Authority, was circulated at the meeting for information.

The position of the Fire Authority in relation to the on-going industrial dispute and the outcome of the Bain Report, as reflected in this report, and, as discussed in the Consultation Meeting with the Directors of Finance and Members who attended on behalf of the Unitary Authorities must be understood and for the purposes of clarity is outlined below.

The budget as presented at Appendix 2, which results in an increase of some 5% over the previous year includes the following provision for uniformed firefighters’ and control room pay-

4% from November 2002, that is a full years provision, and

4% from November 2003, that is for 5 months.

While this does not replicate the suggestions on pay for 2003/2004 made by Professor Sir George Bain in his recently published report it was felt that to include anything more at this rather sensitive stage in the negotiations would, or could be interpreted to send out entirely the wrong message to all parties concerned, both in the context of what this Authority was prepared to pay or its affordability by our funding Authorities.

At the time of writing no final decision is imminent with the meeting between the Employers the FBU and ACAS scheduled for the 14th January 2003 in some doubt.

The consequences for the Fire Authority budget therefore need to be spelt out clearly and are fairly stark. Either this Authority agrees a budget that is unlikely to fund our operational requirements for the coming year on the clear understanding that any pay settlement over and above the provision made will result in a supplementary "levy" during 2003/2004, or between now and the final budget setting date [10th February Authority meeting] of 15th February a calculation is made for inclusion in the Budget of the sum necessary to meet any agreement reached between Employers and Employees in excess of the 5% increase currently required.

Members must also be clear in their minds that any "efficiency or modernisation savings" will not materialise in any substantive manner for some 3 to 5 years. This is recognised by Professor Sir George Bain in his report and he calls upon the Government to make interim funding available to the Local Authorities in the meantime. However, Combined Fire Authorities are outside the main RSG arrangements and therefore cannot receive direct Government support which can only go to the funding Unitary Authorities. It is consequently a matter for our constituent Authorities to take up with the National Assembly Government and the Office of the Deputy Prime Minister, with our support, in relation to the "who pays" argument.

For Members information our best estimates of the implications of the Bain Report recommendations as they affect this authority are as shown below:

	£
Additional training for Retained Personnel [First Phase]	150,000
Rationalisation of payments to Retained Personnel	500,000
A 7% pay award from November 2003 [5 months effect]	250,000
	900,000

These additional sums would represent a further increase of some 2.64% to the budget recommendation already approved by this Committee making a total increase of some 7.63% for 2003/2004 over the Budget for this year.

In constructing the detailed budget, it became apparent that a number of budget headings, within the supplies and services sector, would have to be very severely curtailed in order to meet the requirement to limit the annual increase to 4.99%. Insurance premia, for example, are estimated to rise next year by some £200,000 over this year’s budget provision. (In the current year, the actual premium payments exceeded budget allocation by some £98,000, with the shortfall having to be met from within the global budget provision). Other inescapable cost increases will occur within the supplies and services budgets, including business rates, water and environmental charges applicable to the Authority’s properties. These alone are likely to amount to some £50,000, again having to be met by reductions elsewhere.

Committee is advised that the consequences of producing the budget with no provision for inflation on supplies and services, an area of expenditure already under great pressure and directly linked to operational activity levels, will have a significant impact upon many budget heads. In some cases across the board percentage reductions in activity levels have been imposed, whilst in other cases arbitrary expenditure allocation reductions have been imposed.

All of these will require the most robust management, and unpalatable decisions will have to be taken throughout the financial year. The 10% reduction in travelling and mileage allowances, for example, will create significant managerial challenges, but will have to be achieved if expenditure is to be contained within budget. Some relief will be provided in this regard by the recent introduction of video conferencing facilities at the Brigade’s principal business locations. Greater use of this system should be effective in reducing officers’ travelling. The new management structures should also deliver some opportunities for minimising travelling as service delivery staff will be located closer to their respective areas of operations than is currently the case.

A summary of the main budget heads which have been subjected to significant reductions next year is shown below, for Members’ information:

All mileage, fuel and travelling costs - 10% reduction

Audio Visual/Photographic expenditure - 15% reduction

Furniture - 15% reduction

Canteen Equipment - 25% reduction

Printing Costs - 20% reduction

Reference materials and photocopying charges - 20% reduction

Telephone costs - 10% reduction

Computer software - 20% reduction on current expenditure

Subsistence payments - 10% reduction

Conference and Seminars - 20% reduction on current expenditure

Premises Maintenance/Energy Costs - 6% reduction on all "controllable" expenditure

Members will note that these reductions have been imposed in order to preserve as far as possible expenditure on front line operational items, particularly in terms of firefighting equipment and protective clothing. The effect of the reductions will however be felt across all departments, as they represent a significant curtailment on business activity. With robust management and monitoring arrangements, however, they represent achievable targets.

Recommendations

That the revenue budget for the 2003/2004 financial year, amounting to £35,737,322, be approved, subject to the following provisions;
1. That the effect of any pay settlements made before the 10th February 2003, in excess of the 4% provisions contained within the budget, be incorporated in the final budget; and
2. That such effect, in the event that a settlement is not reached by the 10th February deadline, will be the subject of an in-year supplementary levy to the constituent authorities.

2. Capital Programme - 2003/2004 - 2007/2008

Attached at Appendix 3 is a revised five year capital programme, for Members’ consideration. This has been produced by allocating the Basic Credit Approval made available to the Fire Authority, in the sum of £904,000 million, towards those projects that feature within the current agreed programme for the 2003/2004 financial year. Committee will note that the Basic Credit Allocation, as always, is inadequate to meet all the Authority’s capital build requirements, and a narrative is provided against each project outlining the implications thereby arising, and projects have been re-phased in order to match planned expenditure next year to the level of BCA received.

It is anticipated that many of the projects included within the revised five-year programme will be reviewed during the coming year, and reports will be submitted to Committee should further amendments to project rationale, design or timing be required. In the meantime, Committee is asked to consider the proposed programmes, as attached to this report, and to approve the suggested allocation of the Basic Credit Allocation, for 2003/2004, in the sum of £1.050 million.

Recommendations

That Committee considers, and approves, the revised five-year capital programme for the 2003/2004 - 2007/2008 financial years, as set out at Appendix 2, and
That the allocation of the Basic Credit Allocation made available to the Authority for the 2003/2004 financial year, in the sum of £1.050 million, as set out in the programme, be approved.