Agenda item

The report provided an update on 2019/20 budget in respect of increased pension costs and associated grant and revised Section 31 grant calculation in respect of business rate reliefs.  Dependent upon the outcome of discussions with MHCLG the Authority was potentially looking at a net shortfall on its revised budget of £94k, which could be met from an additional drawdown of reserves.

Pension Costs

As reported at the last Resources Committee the Home Office released the results of the valuation in March, providing details of the increase in employer contributions for the 1992, 2006 and 2015 schemes as set out in the report.  These increases were significantly higher than the 12.6% increase that had been quoted.  As a result of this all Fire Authorities suffered a significantly higher budgetary impact than initially calculated.

Representations had therefore been made to the Home Office stating that their additional national funding of £97m was not sufficient, as it was based on an incorrect calculation. This had been accepted by the Home Office and the Treasury, who have provided an additional £18m of grant to cover this.

In terms of Lancashire we had now had chance to fully work through the new rates, based on the actual mix of employees in each scheme. The total cost of the new employer pension contributions was £3.5m, some £0.4m higher than budgeted. However grant now stood at £3.1m, £0.5m higher than budgeted. Hence the net effect was actually a budget reduction of £0.1m.

It was emphasised that, as previously highlighted, no allowance had been made in the 2019/20 budget for any increased costs associated with the DCP crewing system and in particular any changes to the pensionability of the allowance. It was noted that the cost of moving to a 30% pensionable allowance, if it was agreed, would have increased from £150k to £300k as a result of the increased pension contributions.  The ongoing funding of this pressure would be considered as part of the Spending Review process.

Section 31 Grant in respect of Business Rates Relief

Part of the Authority’s funding came from business rates in the form of a locally retained share and a top-up grant.  At previous Autumn statements and Budget events, the Chancellor of the Exchequer announced various changes to the business rates system, such as small business relief. The Government had undertaken to compensate local authorities for the loss of income they suffered as a result of these changes. Compensation would be provided by means of a grant payment to authorities under section 31 of the Local Government Act 2003.

This grant was calculated based on information provided by billing authorities and on the level of top-up provided by the Government.  Using Government guidance and funding formula at the time of setting the budget we built £575k of section 31 grant from the Government in respect of our top-up share.

At the end of April MHCLG wrote to Authorities setting out the annual value of Section 31 Business Rate Relief grants for the year. This quoted a figure of £302k, some £273k less than our calculation. We immediately queried this with MHCLG assuming it was an error on their part. Having chased this a number of times we have now obtained a response explaining that our method of calculation was incorrect and that the correct calculation should have deducted the element of Revenue Support Grant that was rolled into the top up funding (in our case £8.4m) before applying the relevant indexation. Giving a revised calculation as follows:-

£17,656,850 (Top up) - £8,386,086 (RSG rolled in)=£9,270,76x16/491=£302,102.

We have queried this with Lancashire County Council, Blackburn with Darwen Council and Blackpool Council, all of whom are top-up authorities in the pilot pool, all of whom have applied the same formula and all of whom, according to MHCLG, have overstated their section 31 grant. None of the authorities were aware of any guidance explaining the revised formula for pilot pools, nor was Ribble Valley, as the lead authority. We have queried where and when this additional guidance was made available and at the time of writing the report are awaiting an answer.  Until such time as we receive a response to this query we are unable to say what the next steps will be, but a worst case scenario shows the Authority suffering a funding reduction of £0.3m.

RESOLVED: - That the Committee:

i)     note the final position re increased cost associated with changes to employer pension contributions, and the additional grant associated with this;

ii)    note the position in respect of Section 31 Grant for Business Rates Relief and endorse the action taken to date;

iii)   note the potential overall impact on the 2019/20 revenue budget and the potential need to drawdown an additional £94k of reserves;

iv)   approve a virement to action these changes, subject to the outcome of discussions relating to the Section 31 Grant re Business Rates Relief.