Resources Committee
Wednesday, 27 November 2024, at 10.00 amin the Main Conference Room, Service Headquarters, Fulwood.
Minutes
Present: |
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Councillors
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G Baker
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F De Molfetta
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T Hurn
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Z Khan MBE
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D O'Toole
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M Pattison (Vice-Chair)
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S Serridge (Chair)
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D Smith
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R Woollam
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B Yates
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Officers |
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S Brown, Director of Corporate Services (LFRS) E Sandiford, Director of People and Development (LFRS) B Warren, HR Lead - Pensions and North West Fire Control (LFRS) J Meadows, Head of Finance (LFRS) P Jones, Area Manager, Head of Service Delivery (LFRS) M Nolan, Clerk and Monitoring Officer to the Authority S Hunter, Member Services Manager (LFRS) L Barr, Member Services Officer (LFRS) |
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In attendance
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25/24 |
Apologies for Absence
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None received.
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26/24 |
Disclosure of Pecuniary and Non-Pecuniary Interests
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None received.
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27/24 |
Minutes of the Previous Meeting
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Resolved: That the Minutes of the last meeting held on 25 September 2024 be confirmed as a correct record and signed by the Chair.
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28/24 |
Financial Monitoring 2024/25
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The Director of Corporate Services (DoCS) advised that this report set out the current budget position in respect of the 2024/25 revenue and capital budgets.
Revenue Budget In February 2024 the Combined Fire Authority (CFA) agreed the Service’s 2024/25 revenue budget at £75.155m. This Financial Monitoring report was for the six-month period to the end of September 2024. The forecast outturn was £75.051m, which was a small underspend of (£0.103m). Of the forecast underspend, (£0.135m) related to non-pay costs, and £0.032m to pay costs.
The year-to-date and forecast positions within all departmental budgets were set out in Appendix 1, with the major variances of note shown separately in the table below.
Future Pressures Green book pay award negotiations concluded in late October. The national employers and trade unions agreed a pay award of £1,290 per annum (pro-rata for part-timers) on pay points 2 to 43, and an increase of 2.5% on locally determined pay points above 43. This would be paid in November and backdated to 1 April 2024. Current pay projections used the 3% budgeted rate. The revised forecast to include the new pay rate was not expected to change significantly.
The employer’s contribution rate to the 2015 Firefighters’ pension scheme as determined by the scheme actuary had been increased from 28.8% to 37.6%. Additional £2.5m grant funding had been received and added to the budget to offset this pressure, however, funding for 2025/26 was unknown at this stage.
Savings Targets A reduction in the Contribution to Capital of £1.5m was agreed in the medium-term Financial Strategy resulting in a revenue contribution in 2024/25 of £2.5m. The budget had been reduced to this effect.
General Fund The year end forecasted general fund position is summarised below:
Following the final outturn and audit of the financial statements, the opening general fund balance was updated from £4.918m to £4.987m.
Capital Budget The revised Capital Programme for 2024/25 approved by the Resources Committee was £12m. To date £1.652m had been spent predominantly on fleet and operational equipment. A summary of the programme is set out in the table below and in more detail in Appendix 2 of the report.
Potential Financial Risks There were several potential scenarios that had not been reflected in this monitoring report that, if they materialised, may give rise to an increase in revenue and capital expenditure. To provide some information about potential significant financial risks these had been quantified to provide an estimated worst case scenario, these were set out in Appendix 3 of the report. Taking all these risks overall and adjusted for the remainder of the year, a potential worst-case scenario would impact the Revenue Budget and Capital Budget accordingly:
The potential worst-case scenario could be funded from available budgets but would reduce the general fund balance to below the minimum acceptable level agreed by the CFA.
In response to a question from Councillor D Smith in relation to the unsuccessful drill tower tender process, the DoCS advised that the contract would be going back out to tender.
County Councillor D O’Toole remarked that it was pleasing to see a good level of reserves and it was important to consider the increasing cost of living when reviewing the precept.
Resolved: That the Committee;
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29/24 |
Treasury Management Mid-Year Report
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The Director of Corporate Services (DoCS) advised that the report set out the Authority's borrowing and lending activities during 2024/25. In accordance with the Chartered Institute of Public Finance and Accountancy (CIPFA) Treasury Management Code of Practice and to strengthen Members’ oversight of the Authority’s treasury management activities, the Resources Committee received a treasury management mid-year report and a final outturn report. Reports on treasury activity were discussed on a quarterly basis with Lancashire County Council Treasury Management Team and the Authority’s DoCS and the content of these reports were used as a basis for this report to the Committee.
Economic Overview Treasury management activity was taken within the context of prevailing and forecasted economic conditions. UK headline consumer price inflation remained around the Bank of England (BoE) target later in the period, falling from an annual rate of 3.2% in March to 2.0% in May and then rebounding marginally to June to 2.2% in July and August, as was expected, due to base effects from energy prices.
The UK economy continued to expand over the period, albeit slowing from the 0.7% gain in the first calendar quarter to 0.5% (downwardly revised from 0.6%) in the second. Of the monthly figures, the economy was estimated to have registered no growth in July.
Over the period, the 10-year UK benchmark gilt yield started at 3.94% and ended at 4.00% but hit a high of 4.41% in May and a low of 3.76% in mid-September. While the 20-year gilt started at 4.40% and ended at 4.51% but hit a high of 4.82% in May and a low of 4.27% in mid-September. The Sterling Overnight Rate (SONIA) averaged 5.12% over the period to 30th September.
The latest BoE Monetary Policy Report, published in August, showed policymakers expected GDP growth to continue expanding during 2024 before falling back and moderating from 2025 to 2027. Unemployment was forecast to stay around 4.5% while inflation was shown picking up in the latter part of 2024 as the previous years’ energy price declines fell out of the figures before slipping below the 2% target in 2025 and remaining there until early 2027.
Arlingclose, the authority’s treasury adviser, maintained its central view that Bank Rates would steadily fall from the 5.25% peak, with the first cut in August being followed by a series of further cuts, with November 2024 the likely next one, taking Bank Rate down to around 3% by the end of 2025. A table in the report showed the latest forecast for interest rates from Arlingclose.
Treasury Management position and policy The underlying need to borrow for capital purposes was measured by the Capital Financing Requirement (CFR), while usable reserves and working capital were the underlying resources available for investment. The treasury management activity was influenced both by the position at the beginning of the year and the plans in year. The position at the start of the financial year is summarised in the Table below:
The table showed that the level of loans was above the borrowing requirement. This was the result of the Authority adopting a policy of setting aside additional Minimum Revenue Provision (MRP) in order to generate the cash to repay loans either on maturity or as an early repayment. This had resulted in the CFR being reduced but due to early repayment charges it had not been financially beneficial to repay three loans.
It was not anticipated that the new capital expenditure would be funded from borrowing in the year while it was anticipated that there would be some reduction in the level of reserves held.
Borrowing There had been no new borrowing in the first six months of the financial year. This was consistent with the position that the current borrowing was already above the CFR and that the capital programme did not include any expenditure to be financed from borrowing.
The long-term debt outstanding of £2m had been borrowed from the Public Works Loan Board. A table in the report showed the maturity profile of the Authority's borrowings, along with an interest rate paid.
If the loans were to be repaid early there would be an early repayment (premium) charge. Previous reports on treasury management activities had reported that the premium and the potential loss of investment income had been greater than the savings made on the interest payments therefore it had not been considered financially beneficial to repay the loans especially with the potential for increased interest rates. However, on 30 September 2023 the estimated premium charge to repay the three loans was minimal although rates and the premium changed on a daily basis. To offset the net savings on repaying the loans it was estimated that future interest on investments over the remaining period of the loans would need to be 3.91%. If it was estimated that investment interest rates would be lower than this figure, then it may be beneficial to repay the loans.
Investments Both the CIPFA Code and government guidance required the Authority to invest its funds prudently, and to have regard to the security and liquidity of its investments before seeking the highest rate of return, or yield. The Authority’s objective when investing money was to strike an appropriate balance between risk and return, minimising the risk of incurring losses from defaults and the risk of receiving low investment returns and having the value of reserves eroded by inflation.
The Authority principally invested in a call account provided by Lancashire County Council (LCC) which paid the equivalent of the Debt Management Account Deposit Facility (DMADF) overnight facility. Each working day the balance on the Authority's Current Account was invested in this to ensure that interest was received on surplus balances within an acceptable risk framework. During the period all surplus balances were placed with the County Council via this arrangement. On 30 September this balance was transferred back to the authority to be managed internally. Therefore, on the 30 September this balance was invested in the DMADF overnight facility. At 30 September there was a balance of £29.875m invested in DMADF overnight facility while the average for the period for both LCC call account and DMADF deposits was £16.421m. The current rate for these investments was 4.94% in line with the current overnight rate for DMADF.
To increase the rate earned on current balances, the Authority had placed fixed term investments with other local authorities. To attract a higher rate of interest than was available on the call account these investments would need to be fixed for a longer period of time. The report identified the investments that had been in place during the year. At 30 September there was £23.5m fixed term investment in place, therefore the total investment held at 30 September was £53.375m.
The overall rate of interest earned during this period was 5.322% which was more favourable when compared with the Sterling Overnight Rate (SONIA) which averaged 5.12% over the same period.
All investments were made in accordance with the current Treasury Management Strategy and the CIPFA treasury management code of practice.
Current interest rates available for lending to other Local Authorities were: -
Prudential Indicators In order to control and monitor the Authority’s treasury management functions, a number of prudential indicators were determined against which performance may be measured. The indicators for 2024/25 were approved by the Authority on 19 February 2024 which were detailed in the report alongside the current actual.
Revenue Budget Implications The 2024/25 revenue budget for treasury management activity showed that anticipated income would exceed expenditure by £1.050m. Considering the activity for the first six months of the year and estimated cash-flow for the remainder of the year the latest forecast was as below:
The interest receivable was above budget as the balances and interest rates were higher than anticipated when setting the budget. The forecast assumed interest rates on the call account averaged 4.42% for the remainder of the financial year.
Resolved: That the Committee noted and endorsed the report.
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30/24 |
Productivity and Efficiency Plan 2024/25 - Mid-Year Update
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The DoCS presented the productivity and efficiency plan 2024/25 – midyear update to members.
As part of the Spending Review 2021, the National Fire Chiefs Council (NFCC) and the Local Government Association (LGA) agreed that between 2022/23-2024/25, fire and rescue services in England would increase wholetime firefighter productivity by 3% and create 2% of non-pay efficiency savings. Linked to these targets, the Minister of State for Crime, Policing and Fire asked that all standalone Fire and Rescue Authorities (FRAs) draft and publish Productivity and Efficiency Plans. A plan was produced for 2023/24, the information provided a strong evidence base for the next Spending Review and demonstrated positive leadership from the sector to engage with the productivity and efficiency agenda.
For 2024/25, the Minister had again requested that all FRAs, publish a Productivity and Efficiency Plan for 2024/25 to help the Home Office, NFCC and LGA to build a more comprehensive picture on the sector’s progress against the agreed targets and savings achieved.
Guidance was provided by the Home Office setting out the information that must be contained in the statements; providing primary information about the Authority, details of efficiencies and productivity measures achieved to date and planned. The guidance provided three examples from FRAs of well written plans from 2023/24 of which Lancashire was one of the good practice examples.
The 2024/25 plan follows the same format as the previous year. It showed that compared to the Government Spending Review non-pay efficiency savings target for fire authorities of 2%, the LCFA achieved 5.6% on average over the period.
The mid-year update of the Productivity and Efficiency Statement for 2024/25 was set out in Appendix B within the agenda pack and showed excellent progress against the agreed actions, with many of them achieved already.
To date the service had completed 12,138 Home Fire Safety Checks (HFSCs), which was greater than the 11,737 completed at the end of Q2 2023/24. Built environment training had been provided to all community safety advisors for them to identify areas of non-compliance with the fire safety order. This training provided community safety staff with the knowledge to support residents living in multiple occupation homes along with when onward referral was appropriate to the services protection department. The Service had completed 1,867 Business Fire Safety Checks (BFSCs) year to date, which was greater than the 1,719 completed at the end of Q2 2023/24.
The On-Call Improvement Programme (OCIP) was driving transformation across the service with several workstreams to improve productivity and efficiency. Incident Command trainers had reviewed the process for On-Call Incident Command Courses, which had resulted in 10 Courses and 58 staff being trained as Incident Commanders in 2024. This was a significant increase in course delivery from previous years.
On-Call Performance Management training for Station Managers and Unit Managers was completed in Q2, which included the roll-out of sector-leading innovative software for On-Call Availability, Recruitment and Skills (OARS). The software had improved the efficiency and effectiveness of workforce planning, development, and performance. OARS is the first of its kind nationally, and the service demonstrated the project and software as best practice at the NFCC On-Call Conference in September.
Resolved: That the Committee noted the report.
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31/24 |
Date and Time of Next Meeting
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The next meeting of the Committee would be held on Wednesday 26 March 2025 at 1000 hours in the Main Conference Room at Lancashire Fire and Rescue Service Headquarters, Fulwood.
Further meeting dates were noted for 2 July 2025 and 24 September 2025.
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32/24 |
Exclusion of Press and Public
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33/24 |
Update from Capital Projects Working Group
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(Paragraph 3)
The DoCS presented the proceedings of the Capital Projects Working Group held on 9 September 2024.
Resolved: That the proceedings of the Capital Projects Working Group be noted.
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34/24 |
Pensions Update (Standing Item)
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(Paragraphs 4 and 5)
Members considered a report that provided an update on the various issues which had arisen in respect of the changes to the pension schemes applying to the uniformed members of the Fire Sector.
Resolved: That the committee:
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35/24 |
High Value Procurement Projects
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(Paragraph 3)
Resolved: That the Committee noted and endorsed the report.
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36/24 |
Executive Board Succession Arrangements
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(Paragraph 1)
Members received an update from the Clerk to the Authority on the succession arrangements for the Assistant Chief Fire Officer (ACFO), with a recommendation on the arrangements, in accordance with convention.
Resolved: That the Committee approved the recommendation outlined in the report.
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37/24 |
Injury Pensions Sub-Committee
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(Paragraph 1)
The Clerk and Monitoring Officer provided a verbal update on the membership of the Injury Pensions Sub-Committee and reiterated that the Sub-Committee would be renamed to the Pensions Sub-Committee.
Resolved: That the Committee noted the verbal report.
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