Agenda item

The Director of Corporate Services presented the report that provided an update on 2019/20 budget in respect of pension costs and amended council tax collection fund surplus figures.  Dependent upon whether any additional funding was provided to meet the increased costs of the employer pension contributions, the Authority was potentially looking at an increase in its budget requirement of £0.4m, which it would have to meet from reserves.

Pension Costs

At the time of setting the 2019/20 budget the Treasurer highlighted that the Home Office had advised that the latest valuation of the Firefighter pension’s scheme had identified an average increase of 12.6% in employer contribution rate, moving from 17.6% to 30.2%. 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 to the Authority, and allowed for in the budget, was £0.7m.

At the time the Treasurer confirmed that the split by individual pension scheme 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.

The Home Office released the results of the valuation in March, providing details of the increase in employer contributions for each scheme as set out below:-

The lowest increase was 14.5% and whilst the actual increase for each Authority would be dependent upon their mix of personnel in each scheme it was clear that as a minimum the increase could not be lower than this, and definitely not the 12.6% quoted.

Having looked at this for ourselves, based on numbers of personnel in each scheme our actual average increase was 14.7% and our therefore our forecast cost increase was £0.5m higher than allowed for in the budget.

Contact had been made with the Home Office to identify where the 12.6% increase came from, as it was obviously too low, and we had been advised that this took account of the change in mix of personnel since the last valuation. This meant that as personnel transferred from the more expensive 92 Scheme to the 2015 Scheme, the average employer costs had fallen. Whilst this was factually correct, previous budgets had already been adjusted to account for this, taking out £0.6m over the last 3 years.  It was noted that the majority of Authorities were in similar positions.

At the time of publishing the average increase, the Home Office advised that the estimated total increased costs for the sector was £107m and that HM Treasury had indicated that they would provide additional funding in 2019/20 to mitigate most of the increase with public sector bodies standing only the additional costs announced at Budget 2016. This meant that Fire would only stand £10m of the additional cost with the remaining £97m being met by additional grant. They went on to say that costs in subsequent years would be considered as part of the next Spending Review. Given the fact that the basis of the additional costs was under-estimated the Sector had gone back to the Home Office asking them to review the actual position and seek additional funding to offset this, to ensure that the sector only stood the additional £10m costs referenced above. It was too early to say what the outcome of this would be, but if funding remained unchanged we were looking at an additional in-year cost pressure of £0.5m. If no funding was provided this would have to be met from reserves. An update would be provided at a future Committee once the final position became clear.

Council Tax Collection Fund

As part of the budget setting process billing authorities provided details of their overall council tax collection fund, and our share of that. After setting the budget we wrote out to each billing authority confirming the level of council tax, their share of the precept, the collection fund and business rates, so that they could arrange the relevant payments. As a result of this it had been identified that we had shown one of the Authorities as having a £28.5k deficit in the collection fund, whereas it was actually a £28.5k surplus. Therefore our share of the County wide collection fund was £59k higher than shown in the budget.

It should be noted that this would simply have reduced the funding gap shown in the budget report, reducing it from £495k to £436k, and we would therefore have identified a lower additional savings target of £136k.

Dependent upon whether additional funding was provided to meet the additional costs of the pension increase, the Authority was potentially looking at a net increase in its budget shortfall of £0.4m.  It was unrealistic to think this could be met form increasing the in-year savings target; as such it was proposed that any eventual additional costs should be met from reserves.

RESOLVED: - That the Committee noted the increased costs and endorsed the action taken.