Agenda and minutes

Apologies were received from County Councillors Nikki Hennessy, Tony Martin, David Stansfield and George Wilkins and from Councillor Fred Jackson.

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 28 March 2018 be confirmed as a correct record and signed by the Chairman.

The report set out the Authority’s borrowing and lending activities during 2017/18. 

All borrowing and investment activities undertaken throughout the year were in accordance with the Treasury Management Strategy 2017/18, and were based on anticipated spending and interest rates prevailing at the time. 

In accordance with the updated CIPFA Treasury Management code of practice and to strengthen Members’ oversight of the Authority’s treasury management activities, the Resources Committee received regular updates on treasury management issues including a 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 Director of Corporate Services and the content of these reports was used as a basis for this report to the Committee.

Economic Overview

The Director of Corporate Services confirmed that the UK economy showed signs of slowing economic growth with latest estimates showing GDP grew by 1.8% in calendar 2017, the same level as 2016.  Although this was a far better outcome than the majority of forecasts following the EU Referendum in June 2016, it reflected the impact of the international growth momentum generated by the increasingly buoyant US economy and the re-emergence of the Eurozone economies.

The year saw an increase in inflation with the Consumer Prices Index (CPI) rising to 3.1% in November partly due to the impact of the falling exchange rate before falling back to 2.7% in February 2018.  There was a weakness in UK business investment which was not helped by political uncertainty following the surprise General Election in June and by the lack of clarity on Brexit. Although the UK and the EU reached an agreement in March 2018 on a transition which would go up to Q4 2020 there was still significant uncertainty over the long term trade arrangements.

With concerns over inflation being above its target The Bank of England’s Monetary Policy Committee (MPC) increased the Bank Rate by 0.25% in November 2017. This was the first rate hike in ten years, although in essence the MPC reversed its August 2016 cut following the referendum result. The February Inflation Report indicated the MPC was keen to return inflation to the 2% target over a more conventional (18-24 months) horizon and indicated there would be ‘gradual’ and ‘limited’ increases in rates.

Credit background

The rules for UK banks’ ring-fencing were finalised by the Prudential Regulation Authority and banks began the complex implementation process ahead of the statutory deadline of 1st January 2019. Under these rules the largest UK banks would be required to separate their retail banking services to individuals and small businesses from their investment banking activities with the retail bank being referred to as the ring fenced bank.  As there was some uncertainty surrounding which banking entities the Authority would  be dealing with once ring-fencing was implemented and what the balance sheets of the ring-fenced and non ring-fenced entities would actually look like, in May 2017 Arlingclose advised adjusting downwards the maturity limit for unsecured investments to a  ...  view the full minutes text for item 64/17

The report presented the year end position for the Authority’s capital programme including how this had been financed.  The final outturn position was spend of £4.6m compared with a total budget of £12.7m with a slippage therefore being £8.1m.  The position was broadly consistent with forecasts.  It was noted that slippage was a timing issue dependent on the progress of capital schemes and not an indication of future underspends.

The Director of Corporate Services highlighted:

Other Vehicles – spend related to the purchase of the Water Tower Vehicle and various operational support vehicles during the year.  In addition, this budget also allowed for the replacement of one of the Command Support Units, requirements were still being finalised therefore this would slip over into 2018/19, along with the budget for any support vehicles not received.  The budget also included the replacement of two Driver Training Vehicles. Following a review it was proposed that these were replaced with pumping appliances, thus providing more realistic driver training, as well as increasing the reserve fleet, and also recognising that over the 8 year life of Driver Training vehicles pumping appliance design would change and hence a policy for providing training on actual pumping appliances would ensure that vehicles used for training purposes kept pace with design developments. The cost of a pumping appliance was currently £205k compared with the budget for two driver training vehicles of £190k, hence an additional drawdown of £15k from the capital funding reserve would be required in 2018/19.

Buildings - Committed spend to date related to completion of the replacement water main and the completion of the Multi Compartment Fire Fighting prop at Service Training Centre, purchase of the land adjacent to Preston Fire Station in preparation for redevelopment, and sums paid to date in respect of the redevelopment of the Lancaster Fire & Ambulance facility, which was expected to complete during the first quarter of 2018/19.

The slippage figure related to:

·        Carry forward of outstanding STC redevelopment works;

·        The balance of costs associated with the completion of Lancaster Station;

·        The redevelopment of Preston Fire and Ambulance Station;

·        The replacement Fleet workshop.

ICT Systems - The majority of the capital budget related to the national Emergency Services Mobile Communications Project (ESMCP), to replace the Airwave wide area radio system and the replacement of the station end mobilising system. The ESMCP project budget, £1.0m, was offset by anticipated grant; however the timing of both expenditure and grant was dependent upon progress against the national project. Costs would not be incurred in the current year and an updated project timeframe was still awaited from the National project team.  Given the delay on the ESMCP project, the replacement station end project had also been delayed, however options were currently being reviewed to enhance resilience and ensure that any solution was compatible with the eventual ESMCP solution.

The budget also allowed for the replacement of the Services wide area network (WAN) providing an enhanced network and improving speed of use across the Service.  ...  view the full minutes text for item 65/17

The report presented the revenue outturn position and the impact of this on the Authority’s usable reserves.  The overall outturn position showed a slight overspend of £7k which was slightly lower than the £100k overspend previously forecast.

The annual budget for the year had been amended to reflect a slight increase in the overall business rates being retained (comprising Section 31 grant from the Government and local rates paid over by billing authorities).  This had resulted in an additional £35k of income being received in 2017/18, and as a result the overall revenue budget had increased to £53.968m.  After allowing for net transfer from earmarked reserves of £50k the final outturn position showed net expenditure of £53.975m, giving a total overspend for the financial year of £7k.

The final position within individual departments was largely consistent with that reported throughout the year, and specifically the forecast presented to the March Resources Committee.  As previously reported, the majority of underspends during 2017/18 had already been reflected in 2018/19 budgets.  The detailed final revenue position was set out in Appendix 1 as now considered by Members, with major variances being summarised in the report.

It was noted that performance exceeded the efficiency target largely as a result of staffing savings made and procurement savings in respect of contracts let during the year.  The shortfall on property was due to specific additional property works undertaken in year.

Any relevant under/over spend on the revenue budget was transferred to the DFM reserve, held within earmarked reserves, as set out below, with any remaining balance either being a contribution to, or a drawdown from, the General Reserve.

The DFM reserve enabled budget holders to carry forward any surplus or deficit from one financial year to the next, giving greater flexibility in managing budgets thereby optimising the use of available financial resources and facilitating better value for money.  The principles being that any overspends and 50% of any underspends were carried forward into the new financial year, subject to a £25k maximum, other than where a specific business case could be made. The remaining 50% of any underspend was transferred to the authority’s general reserve. As a result of this £17k was drawn down from the DFM reserve, leaving a balance of £10k to transfer to the General Reserve.  A further review of the levels of individual DFM reserves was undertaken to ensure that they were reasonable and that budget holders were not building up excessive reserves. The latest such review had identified a reduction of £113k, with this amount contributing to the creation of an innovations reserve.

In response to Member questions regarding increases to the number of domestic and commercial premises being built in Lancashire, the Director of Corporate Services confirmed that details of increases to the tax base were included in the budget report presented to Members in February.  It was noted that details of the numbers and costs of new hydrants purchased over the last 2 – 3 years would be brought  ...  view the full minutes text for item 66/17

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, and as such the balance of the surplus on the revenue budget, £10k, had been transferred into this reserve.  As agreed as part of the budget setting process a further £2.6m of general fund had been used to fund the capital programme in 2017/18, with a further £28k being transferred to earmarked reserves to meet requirements.  After allowing for transfers the Authority held a General fund balance of £7.8m. This was within the target range agreed by the Authority at its February meeting, £2.5m to £10.0m.

Earmarked Reserves

The reserve covered all funds, which had been identified for a specific purpose. The overall reserves level increased slightly from £7.5m to £7.9m, 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 was used 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, which were higher than previously allowed. This resulted in an increase of £0.8m in 2017/18, giving a revised balance of £4.3m.

Apprentices / Graduates - This reserve was created from the in-year underspend relating to the appointment of apprentices, which was delayed awaiting national developments.  As such the reserve has been set up to offset some of the pay costs that would be incurred in 2018/19, with the balance being met direct from the revenue budget. The flexibility this created contributed to addressing apprenticeship targets, set by the Government, as well as addressing capacity issues within departments.

Innovation Fund (incorporating non-specific ICT & Equipment reserves) - The Authority previously created a Future Fire Fighting capital budget which  ...  view the full minutes text for item 67/17

This report presented the Core Financial Statements, which formed part of the Statement of Accounts for the Combined Fire Authority for the financial year ended 31 March 2018.  The Statements took account of the information presented in the Year End Revenue Outturn, Year End Capital Outturn, Year End Treasury Management Outturn and Year End Usable Reserves and Provisions Outturn reports and were prepared in line with recommended accounting practice which was not accounted for on the same basis as we accounted for council tax.  As such this meant they did not match the details in the Outturn reports, and hence the sections provided an overview of each statement and a reconciliation between Outturn reports and the Core Financial statements where appropriate.

Members considered the appendices:

Narrative Report

This set out the financial context in which the Combined Fire Authority operated, and provided an overview of the financial year 2017/18 as well as details of future plans.

Comprehensive income and expenditure account

This showed the accounting cost in the year of providing services. It was a summary of the resources that had been generated and consumed in providing services and managing the Authority during the last year. It included all day-to-day expenses and related income on an accruals basis, as well as transactions measuring the value of fixed assets actually consumed and the real projected value of retirement benefits earned by employees in the year.  

Movement in reserves statement

This showed the movement in the year on the different reserves held by the Authority, analysed into i) Usable Reserves (those that the Authority may use to provide services or reduce local taxation, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use) and ii) Unusable Reserves (which include reserves that hold unrealised gains and losses where amounts would only become available to provide services if the assets were sold; and reserves that hold timing differences ‘between accounting basis and funding basis under regulations’).

Balance Sheet

This showed the value as at the date of the assets and liabilities recognised by the Authority.  The net assets of the Authority (assets less liabilities) were matched by the reserves held by the Authority.

Cash flow statement

This showed the changes in cash and cash equivalents of the Authority during the reporting period.  The statement showed how the Authority generated and used cash and cash equivalents by classifying cash flows as operating, investing and financing activities.

The unaudited Statement of Accounts would be signed by the Treasurer to certify that it presented a true and fair view of the financial position of the Authority as at 31 March 2018.  This would be subject to review by the Authority’s external auditors, Grant Thornton which was scheduled to take place in June and July.  A further report will be presented to the Audit Committee in July, following completion of the external audit. At this meeting the Chair of the Audit Committee will be asked to sign the final statement  ...  view the full minutes text for item 68/17

The report set out the current budget position in respect of the 2018/19 pay budget.  Due to the timing of this reporting cycle, we were only able to report on the pay position for the first month of the financial year.  However to put this into context pay was by far the biggest cost within the service accounting for over 75% of the total budget. 

April’s pay budget and spend were broadly in line at £3.15m budget compared with £3.10m spend, resulting in a slight underspend of £51k as shown below:-

We continued to monitor the pay budget closely, to identify any vacancy trends that develop to ensure that they were reflected in future year’s budgets, as well as being reported to Committee.

Future reports would include full details of all spend against the revenue and capital budgets, in addition to the progress against the annual savings targets.

RESOLVED: - That the Committee noted and endorsed the financial position.

A new 3 year Procurement Strategy had been developed, taking account of best practice aligned with national, regional and local considerations for the period 2018?2021.

Effective procurement of goods, services and/or works to support front line service provision was vital for the Authority in order to meet its core objectives, reduce risk and demonstrate probity and accountability.  Purchasing of goods, services and/or works represented a significant interface with the economic community on a local, regional and national level via contractual relationships developed with suppliers. 

The Procurement Strategy set a clear framework to achieve compliant procurement throughout the Authority and reflected the Home Office Agenda, the Authority’s Corporate Plan, adherence to internal Contract Standing Orders and Financial regulations, adherence and compliance with all appropriate legislative requirements whilst upholding a professional service that encouraged collaboration. 

The Strategy also defined the role of the Procurement function in the delivery of the Authority’s commitment to providing best value for money identifying Procurement’s priorities over the next 3 years aligning with local, regional and national Procurement Policy with critical actions required to deliver the strategy.

RESOLVED: - That the Procurement Strategy be approved.

Members considered the efficiency plan which updated that approved in 2016/17 as part of the four year funding settlement. The update was based on the approved 2018/19 budget.  Included within the update were revised savings figures, showing total savings of £18.5m being delivered since April 2011. With further savings of £1.1m already identified.

The budget report set out funding shortfalls still faced in future years. We would continue to identify savings opportunities, and explore collaborative opportunities to deliver savings in order to contribute to this position; however the on-going use of reserves would remain a key component of our Medium Term Financial Strategy.

Overall the Authority was well placed to meet the financial challenges that it faced in the medium term, and would continue to balance future council tax levels and the need for investment whilst maintaining effective service delivery.

RESOLVED: - That the Committee noted and endorsed the Efficiency Plan.

The next scheduled meeting of the Committee has been agreed for 10:00 hours on 26 September 2018 in the Main Conference Room, at Lancashire Fire & Rescue Service Headquarters, Fulwood.

Further meetings are:           scheduled for 28 November 2018

                                                proposed for  27 March 2019

The next meeting of the Committee would be held on Wednesday 26 September 2018 at 1000 hours in the Main Conference Room at Lancashire Fire and Rescue Service Headquarters, Fulwood.

Further meeting dates were noted for 28 November 2018 and agreed for 27 March 2019.

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.

(Paragraph 3)

Members considered a report that provided an update on all high value procurement projects/contracts for one-off purchases.

RESOLVED:  That the Committee noted and endorsed the report.

(Paragraph 3)

It was reported for information that, in pursuance of the arrangements approved by the Authority, the following matters, which could not await the next meeting had been authorised by the appropriate Chief Officer following consultation with the Chairman and Vice-Chairman.

Approval to bring forward capital expenditure from 2019/2020 into this financial year for the purchase of a new Ariel Ladder Platform; with costs to be met from the capital funding reserve.

RESOLVED: - That the Committee noted and endorsed the report.