Agenda item

In order to determine the future budget requirement, the Authority had used the approved 2018/19 budget as a starting point and had uplifted this for inflation and other known changes and pressures to arrive at a draft budgetary requirement, prior to utilising any reserves as set out in the report.

The final proposed gross revenue budget for 2019/20 was £56.5m, an increase of 3.2%. This majority of the increase in costs related to forecast pay awards and revised pension contributions all of which was partly offset by the identification of £1.2m of efficiency savings/budget reductions.

As highlighted the budget allowed for a 2% pay award for grey book personnel in 19/20, whilst the current pay claim from the FBU was for 17%.  Each 1% pay award in excess of the assumption equated to an additional cost of £340k per year for grey book personnel, and if this was mirrored for green book personnel an additional £70k.  In order to give a flavour for the potential impact of this, a 5% pay award would add in a further £1.0m on an annual basis, compared with the budgeted allowance.  Clearly the outcome of pay discussions would have a significant impact on this and future years’ budgets.

The budget also allowed for an average increase of 12.6% in employer pension contributions for the Firefigher Pension Schemes (moving from 17.6% to 30.2%).  This was due to a combination of changing factors, the most significant of which was the revised discount rate used in unfunded public sector pension schemes would change.  It was noted that the split by individual pension schemes had not been provided, only the average, and hence the actual additional cost would vary according to the mix of personnel in each pension scheme.  This equated to an additional cost of £3.3m.  However, the Government had allowed an additional £2.6m of funding in 2019/20 to offset some of this pressure (hence the net additional cost of £0.7m shown in the report).  The additional cost pressure in future years would be considered as part of the next Spending Review, hence for medium?term planning it had been assumed that the additional £2.6m grant would continue.

The Local Government Finance Settlement confirmed funding was in line with the 4?year settlement figures, at £23.8m a reduction of £0.5m (2.0%), and that the council tax referendum level remained at 3.0%.

Based on the council tax referendum limit the Authority had a funding gap of £0.5m and would need to either identify additional savings or utilise reserves to set a balanced budget. Doing so would result in a net budget of £56.0m, and a council tax requirement of £69.48 per Band D property, an increase of 2.99% (£2.02 per annum, 4p per week). It was proposed that an unidentified saving target of £0.2m be agreed and that £0.3m of reserves were utilised to deliver a balanced budget in 19/20.

Until such time as the outcome of next year’s Spending review was published it was impossible to provide any meaningful funding forecast, however for the purpose of medium term financial planning it was assumed that funding was frozen in subsequent years. Assuming council tax was increased in line with current referendum principle of 3% in future years the Authority was still faced with a recurring funding gap of approx. £0.3m-£0.5m, if the referendum principle was set at 2% in future years the gap varied between £0.9m in 20/21 increasing to £1.7m in 23/24.

Looking at the medium-term plans it was clear that the key variables remained pay awards, pension costs and funding. Any significant increase in pay award over and above the 2%-2.5% built into the budget or in the increase in pension costs over and above the £0.7m budgeted (net of additional grant) would add in significant financial pressures. Similarly should the settlement in 2020/21 and beyond be worse than the cash freeze budgeted for then the level of deficit would increase accordingly.  As such a number of scenarios were presented in the report.

Currently the Authority remained in a good financial position with reserves able to offset the financial challenges next year. The position became more challenging thereafter however by that time the Authority should have greater certainty on future funding, pay awards and future referendum limits, which would enable it to deliver a more reliable medium term financial plan in order to address any funding gap that existed.

Members considered the report in detail.

It was noted that there had not been any responses to the budget consultation exercise.

In the professional opinion of the Treasurer, the budget had been prepared on a robust basis and the reasons for this opinion were set out in the report.

In response to a comment by County Councillor O’Toole the Director of Corporate Services confirmed that draw down from reserves only happened at year end.  In relation to the income generated from new build domestic and commercial property the Director of Corporate Services confirmed that billing authorities provided both the council tax base and the business rates figures at the end of January for inclusion in the report.  In terms of growth, the Director of Corporate Services confirmed that the Authority was part of a pilot for 75% business rates retention which would provide gross funding of £200k which was built in to the budget and this was partly offset by contributions to a Lancashire-wide risk resilience and investment reserve.

In response to a question by County Councillor Holgate on whether information on the banding of new properties was received from planning authorities to support budget predictions, the Director of Corporate Services confirmed that future forecast council tax bases and collection funds were based on a 5-year rolling average.

The Chief Fire Officer stated that all other Fire Authorities were facing the same uncertainties and very few would be in our position of having a fully funded capital programme and with the level of reserves able to offset the financial challenges for the following year.

The proposal based on a council tax increase of 2.99%, £2.02, resulting in a council tax of £69.48 for a Band D property was MOVED by County Councillor Frank De Molfetta and SECONDED by County Councillor Miles Parkinson. 

The Clerk held a recorded vote and the names of Members who voted for or against the Motion and those who abstained are set out below:

For (23)

L Beavers, S Blackburn, P Britcliffe, I Brown, S Clarke, F De Molfetta, J Eaton, N Hennessy, S Holgate, D Howarth, F Jackson, A Kay, M Khan, Z Khan, E Oades, D O’Toole, M Parkinson, M Perks, J Shedwick, D Smith, D Stansfield, M Tomlinson and G Wilkins.

Against (0)

No Members voted against the motion.

Abstained (0)

No Members abstained.

The motion was therefore unanimously CARRIED and it was:

RESOLVED: - That the Authority: -

1.    noted the Treasurer’s advice on the robustness of the budget

2.    noted the Treasurer’s advice on the appropriate level of reserves/balances

3.    agreed the revised budget requirement of £56.051m for 2019/20

4.    noted the section 31 grant of £1.602m due in respect of the business rate reliefs

5.    noted the level of Business Rates Retention Top Up Funding £17.657m

6.    noted the level of Local Business Rates Retention Funding £6.032m

7.    noted the business rate tax collection fund surplus of £0.008m

8.    noted the council tax collection fund surplus of £0.311m

9.    agreed the council tax requirement, calculated in accordance with Section 42A(4) of the Localism Act of £30.442m

10. noted the council tax base of 438,138 determined for the purposes of Section 42B of the Local Government Finance Act 1992

11. agreed a council tax band D equivalent of £69.48, an increase of £2.02 (2.99%), calculated by the Authority under Section 42B of the Local Government Finance Act 1992 agree, on the basis of the fixed ratios between valuation bands set by the Government, council tax for each band as follows:

12. agreed, based on each district and unitary councils share of the total band D equivalent tax base of 438,138, the share of the total LCFA precept of £30.442m levied on each council as follows: