Agenda and minutes

Apologies were received from Councillor Tony Williams and County Councillors: Lorraine Beavers, Jennifer Mein, Sean Serridge and Ron  Woollam.

Members are asked to consider any pecuniary and non-pecuniary interests they may have to disclose to the meeting in relation to matters under consideration on the agenda.

None received.

RESOLVED: - That the Minutes of the last meeting held on 30 March 2022 be confirmed as a correct record and signed by the Chairman.

The report set out the Authority’s borrowing and lending activities during 2021/22. All treasury activities undertaken throughout the year were in accordance with the Treasury Management Strategy 2021/22.

Economic Overview

There were a number of key economic issues in 2021/22.  Initially, the continuing economic recovery from coronavirus pandemic was a dominant feature but as the year progressed concerns about inflation, the potential for higher interest rates and possibility of a future recession were major issues.

The Bank rate was 0.1% at the beginning of the financial year.  Although April and May saw the economy gathering momentum as pandemic restrictions were eased, market expectations were that the Bank of England would delay rate rises until 2022.  However, the rise in inflation changed the position and saw the Bank Rate increase the rate late in 2021.

UK Consumer Prices Index (CPI) was 0.7% in March 2021 but thereafter began to steadily increase. Initially driven by energy price effects and by inflation in sectors such as retail and hospitality which were re-opening after the pandemic lockdowns, inflation then was believed to be temporary. However, a combination of rising global costs, strong demand and supply shortages saw large increases in inflation. CPI for February 2022 registered 6.2% year on year, up from 5.5% in the previous month.

As a response to the increase in inflation the Bank of England made the following increases in the Bank Rate: December 2021 increase to 0.25%; February 2022 increase to 0.5%; and March 2022 increase to 0.75%.  In its March interest rate announcement, the MPC noted that the invasion of Ukraine had caused further large increases in energy and other commodity prices, with the expectation that the conflict would worsen supply chain disruptions around the world and push CPI inflation to around 8% later in 2022.

The continuing uncertainty had seen gilt yields increase. The costs of authorities borrowing from the Public Loans Work Board were related to the bond yields and therefore the cost of borrowing had increased. For example, for a 10-year PWLB fixed rate loan taken on the 1 April 2021 interest was at a rate of 1.7%. An equivalent loan taken on 31 March 2022 was at 2.81%.

Borrowing

The borrowing of the Fire Authority had remained unchanged at £2m. The current capital programme had no requirement to be financed from borrowing until 2025/26 and the debt related to earlier years' capital programmes.  While the borrowing was above its Capital Financing Requirement (CFR), the underlying need to borrow for capital purposes, this was because the Fire Authority had a policy of setting aside monies in the form of statutory and voluntary minimum revenue provision (MRP) in order to repay debt as it matured or to make an early repayment.  Consideration had been given to repaying the £2m but the penalties incurred on repaying the loans early would incur significant costs estimated at £0.9m.  Also, any early repayment meant that cash balances available for investment would be reduced and hence interest receivable would also be  ...  view the full minutes text for item 4/22

The report presented the year end position for the Authority’s capital programme including how this had been financed and the impact of slippage from the 2021/22 capital programme into the 2022/23 programme. 

The final capital programme for 2021/22 was £4.451m.  Total capital expenditure for the year was £3.350m, reflecting £1.083m of slippage and an underspend of £18k, as set out in the report as now considered, and in appendix 1.  The programme had been financed in year, from a combination of revenue contributions (£2.373m) and a drawdown of capital reserves (£0.977m).

Prudential Indicators 2021/22

Under the prudential framework the Authority was required to identify various indicators to determine whether the capital programme was affordable, prudent and sustainable.

The revised indicators, after allowing for the various changes to the capital programme, were set out in the report alongside the actual outturn figures which confirmed that performance had been within approved limits.

The Impact of Slippage from the 2021/22 Capital Programme into the 2022/23 Programme

The original approved capital programme for 2022/23 was £8.9m. This had been updated for slippage as set out in the report.  In addition, a review of likely timing of capital schemes had been undertaken and as a result £0.9m of property and £0.2m of ICT schemes needed to be slipped into 2023/24.

As a result, the final proposed capital programme for 2022/23 was £9.0m, which was funded from capital grant, revenue contributions, earmarked reserves and capital reserves. The revised programme and its funding were considered by Members as set out in appendix 2.  It was noted that additional budget requirement for vehicles included 5 additional vehicles for flexi duty officers which reflected how many officers had chosen to move to a provided vehicle.  The Director of Corporate Services explained that as new Officers took up posts the vehicle requirement could change hence it was proposed that the Treasurer be able to agree an increase in vehicle provision up to a maximum of a further 3 vehicles per annum.

The report set out revised prudential indicators for 2022/23-2024/25, showing that the revised programme, despite requiring some borrowing in 2024/25 remained affordable, prudent and sustainable.

Capital Reserves

The capital programme over the next 5 financial years would use all the capital reserves and receipts.

In response to a question raised by County Councillor Steve Rigby the Director of Corporate Services advised that new vehicles were hybrid vehicles and a policy decision was taken many years ago to purchase vehicles outright (rather than lease) based on a view that this was marginally cheaper and it gave greater flexibility.

In response to a question raised by County Councillor O’Toole regarding the policy on vehicle usage, the Director of Corporate Services advised that the Service policy prohibited private use (unless staff were on 24?hour duty).

RESOLVED: - That the Committee: -

i)     Noted the capital outturn position and the financing of capital expenditure 2021/22;

ii)    Approved the revised 2022/23 capital programme, and the financing of this and the prudential  ...  view the full minutes text for item 5/22

This report presented the revenue outturn position and the impact of this on usable reserves.  The annual budget for the year was set at £58.175m.  The final outturn position showed net expenditure of £57.844m, giving a total underspend for the financial year of £0.331m which was broadly in line with previous forecasts. 

As set out in the Year End Usable Reserves and Provisions Outturn report (reported elsewhere on the agenda) it was proposed to transfer the full amount into capital funding reserve, reducing future borrowing requirement.

The detailed final revenue position was set out in Appendix 1, with major variances being summarised in the report.

The Director of Corporate Services highlighted:

Covid-19

Funding of £1.6m had been received since March 2020.  In addition, as previously reported £0.2m of travel/mileage budgets had been transferred into this reserve to reflect savings in respect of differing working practices, resulting in a total funding of £1.8m.  As at the end of January the budget had been fully utilised.

TOR

The year end underspend was consistent with previous reports largely reflecting the position with apprentice levy income for wholetime recruits, which had seen an increase due to an increase in the base funding level and the co-investment income received in respect of these apprentices, once our own levy pot had been exhausted.

Non DFM

Overall the final outturn position was broadly consistent with previous reports which reflected: i) the £0.3m funding gap identified at the time of setting the budget; ii) additional RCCO of £0.1m approved during the year; iii) the transfer of £0.5m into the PFI earmarked reserve, reflecting the confirmed inflation increase of 8%; iv) the PFI re-financing gain of £0.2m; and v) an additional £0.1m of section 31 grant reflecting the final position in respect of business rate reliefs and income tax guarantee scheme relating to 2020/21 collection fund shortfalls.

Support Staff

The final outturn position was consistent with previous reports, with the current vacancy factor being circa 12%-13%, far in excess of budget.  This was partly offset by the unfunded pay award for green book staff and by the use of agency staff to cover some posts.

Grant Funding

The Authority received specific grants from the Government in respect of various new initiatives.  These were included in the revenue budget position presented with any unspent funding being carried forward as an earmarked reserve.

Delivery against savings targets

It was noted that performance was ahead of the annual target, largely due to savings in respect of staffing vacancies and procurement savings on several vehicles. 

RESOLVED: - That the Committee noted and endorsed the outturn position on the 2021/22 and the associated transfer of this to the capital funding reserve.

The report presented the year end outturn position in respect of usable reserves and provisions based on the information reported in the Revenue Outturn, Capital Outturn and Treasury Management Outturn reports.

The Authority approved the reserves and balances policy as part of its budget setting process in February, with the year-end outturn position being reported to Resources committee and included in the statement of accounts.  The previously reported Revenue Outturn, Capital Outturn and Treasury Management Outturn all fed the Authority’s overall reserves position, which was considered by Members as summarised in the report.

General Reserve

These were non-specific reserves kept to meet short/medium term unforeseeable expenditure and to enable significant changes in resources or expenditure to be properly managed in the medium term.

The Authority needed to hold an adequate level of general reserves in order to provide:-

·         A working balance to help cushion the impact of uneven cash flows and avoid unnecessary temporary borrowing;

·         A contingency to cushion the impact of unexpected events;

·         A means of smoothing out large fluctuations in spending requirements and/or funding available.

As a precepting Authority any surpluses or deficits were transferred into/out of reserves in order to meet future potential commitments.  Given the Authority’s current general fund balance stood at £6.0m and the scale of the capital programme was proposed that the revenue underspend, £331k was transferred into the capital funding reserve, reducing future borrowing requirement, hence the year-end General fund balance would remain at £6.0m compared with the target range agreed by the Authority at its February meeting of £4.0m to £10.0m. 

Earmarked Reserves

The reserve covered all funds, which had been identified for a specific purpose. The overall reserves level had reduced from £10.8m to £9.8m, with the detailed position in respect of the various earmarked reserves considered by Members as set out in the report.

The Director of Corporate Services highlighted:

PFI Equalisation Reserve – This reserve was to smooth out the annual net cost to the Authority of both PFI schemes and would be required to meet future contract payments.  The level of reserve required to meet future contract payments had been updated to reflect current and forecast inflation levels. 

Insurance Aggregate Stop Loss – The Authority had aggregate stop losses (ASLs) on both its combined liability insurance policy (£0.4m) and its motor policy (£0.3m).  This meant that in any one year the Authority’s maximum liability for insurance clams was capped at the ASL.  As such the Authority could either meet these costs direct from its revenue budget or could set up an earmarked reserve to meet these.  Lancashire had chosen to meet the potential costs through a combination of the two.  Hence, the amount included in the revenue budget reflected charges in a typical year, with the reserve being set up to cover any excess.  As such, the reserve, combined with the amounts within the revenue budget, provided sufficient cover to meet 2 years’ worth of the maximum possible claims.  It was noted that the revenue budget allocation had  ...  view the full minutes text for item 7/22

The Director of Corporate Services advised that this report set out the current budget position in respect of the 2022/23 revenue and capital budgets.  The overall position at the end of May was an overspend of £0.1m, largely as a result of price increases associated with energy and fuel. 

The year-to-date positions within individual departments were set out in the report with major variances relating to non-pay spends and variances on the pay budget being shown separately in the table below: -

It was noted that the budget allowed for 2% pay awards for both grey and green book personnel. The pay claims for both groups were significantly higher than this and hence the budget may come under increasing pressure from this, as well as the general cost of living increase. 

Capital Budget

The Capital budget for 2022/23 stood at £9.0m.  There had been very little spend against the resultant programme, just £0.2m mainly against Support Vehicles.  The current position against the programme as set out below:

The next scheduled meeting of the Committee has been agreed for 10:00 hours on 28 September 2022 in the Main Conference Room, at Lancashire Fire & Rescue Service Headquarters, Fulwood.

Further meetings are:          scheduled for 30 November 2022, 29 March 2023

                                                proposed for  10 July 2023

The next meeting of the Committee would be held on 28 September 2022 at 1000 hours in the Main Conference Room at Lancashire Fire and Rescue Service Headquarters, Fulwood.

Further meeting dates were noted for 30 November 2022 and 29 March 2023 and agreed for 10 July 2023.

The Committee is asked to consider whether, under Section 100A(4) of the Local Government Act 1972, they consider that the public should be excluded from the meeting during consideration of the following items of business on the grounds that there would be a likely disclosure of exempt information as defined in the appropriate paragraph of Part 1 of Schedule 12A to the Local Government Act 1972, indicated under the heading to the item.

RESOLVED: - That the press and members of the public be excluded from the meeting during consideration of the following items of business on the grounds that there would be a likely disclosure of exempt information as defined in the appropriate paragraph of Part 1 of Schedule 12A to the Local Government Act 1972, indicated under the heading to the item.

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Verbal report.

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The Director of People and Development provided a verbal update on the positive steps the Service had taken to improve support staff sustainability. 

RESOLVED: - That the report be noted.

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Members considered an update report on the current position regarding pension schemes that applied to the uniformed members of the Fire Sector.

RESOLVED: - That the ongoing situation be noted.

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Members considered a report from the Director of People and Development regarding a number of Stage 2 applications under the Internal Disputes Resolution Procedure.  He explained the procedure to Members and the report outlined the facts of the cases presented.

RESOLVED: - That the Committee declined the applications presented.

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Members considered a report that provided an update on all contracts for one-off purchases valued in excess of £100,000 and high value procurement projects in excess of £100,000 including: new contract awards, progress of ongoing projects and details of new projects.

RESOLVED:  That the Committee noted and endorsed the report.