Agenda item

The Chair updated members that he along with the Chair of the Fire Authority, Vice-Chair of the Fire Authority, County Councillor M Clifford, Chief Fire Officer (CFO), Director of Corporate Services (DoCS) and Fire Brigades Union (FBU) had recently met with the Fire Minister, Samantha Dixon to discuss the fair funding review to ensure that Northern Fire Services were not overlooked. Additionally, they met and lobbied Lancashire MP’s.

The DoCS advised that this report set out the current budget position in respect of the 2025/26 revenue and capital budgets.

Revenue Budget

Lancashire Fire and Rescue Service’s (LFRS’s) 2025/26 revenue budget had been set at £77.511m. The budget profiled to the end of September 2025 was £37.475m and expenditure for the same period was £37.648m, which was essentially breaking even. Both pay and non-pay budgets were showing a small year to date overspend totalling £0.173m; £0.057m on pay budgets and £0.117m on non-pay budgets.

The budget included £0.5m of savings to be delivered through effective deployment of resources and effective management of overtime, whilst the profile of overtime was higher over the summer period, management information showed that overtime had been avoided and therefore the service was forecasting that these savings would be met.

Overall, a small overspend was forecast of £0.250m, which was just 0.3% of the net budget, this largely reflected the higher than budgeted pay awards of 3.2% for all staff compared to the 3% budgeted. The year-to-date and forecast positions within all departmental budgets were set out in Appendix 1 of the report, with the major variances of note shown separately in the table below.

Future Pressures

As previously outlined a pay award of 3.2% was agreed for both Grey Book and Green Book employees, this was above the 3% increase originally included in the budget.

As of September 2025, the UK Consumer Prices Index (CPI) inflation rate stood at 3.8%, continuing an upward trend from earlier in the year. This level of inflation was notably higher than the 2% general inflation assumption included in the budget and was placing pressure on both revenue and capital non-pay budgets.

Utility costs were also higher than the 2% inflation assumption at over 6% which was largely due to geopolitical instability. Longer-term projections suggested energy bills would remain at this high level into 2026 placing pressure this year and into the period of the next Budget.

Since January 2025, the Bank of England base rate had gradually declined from 4.75% to 4.00%, with forecasts suggesting a further drop to 3.75% by the end of 2026. £0.5m of additional investment returns were assumed to be transferred to the capital reserve due to higher cash balances, delays in the capital programme, and higher interest rates, this would assist towards inflationary pressures on the capital programme in future years.

At the last meeting the Committee received an update on the ‘Fair Funding 2.0 Consultation’ that potentially reduced future funding by an estimated £3.6m by the end of the spending review period in 2029. Whilst no further information had been received extensive lobbying had taken place with Government in recent weeks.

Savings Targets

Over the period of the Medium Term Financial Strategy (MTFS) £5m of savings were required to be delivered; £0.5m in 2025/26, £1.0m in 2026/27, £1.5m in 2027/28 and 2028/29 and £0.5m in 2029/30. The £0.5m required in 2025/26 to balance the budget would be delivered by using the Dynamic Cover Tool, for the effective deployment of resources and effective management of overtime.

To deliver the £0.5m savings required for 2025/26 the Dynamic Resource Management (DRM) policy came into effect on 1 July which provided steps which could be taken prior to using overtime to fill shortfalls, including using the fifth crew member from the Urban Search and Rescue (USAR) stations and redistributing the crew from second pumps at two pump wholetime stations where there was adequate fire cover in the area. The initial data showed that the policy so far had been effective in reducing overtime costs whilst maintaining response standards. This monitoring report assumed the success of this policy would be maintained for the year.

The Productivity and Efficiency Plan for 2025/26 included £0.572m of savings to be delivered in 2025/26; the delivery of £0.5m had been explained above. The balance of £0.072m was a balance of some smaller initiatives such as procurement savings, this would be reported through the update of progress against the plan later in the year.

General Reserve

The General Reserve existed to cover unforeseen risks and expenditure that may be incurred outside of planned budgets. In February the Authority approved the minimum level of General Reserve as advised by the Treasurer at £3.850m. The General Reserve at 31 March 2025 was £5.556m and with the forecast overspend this was set to reduce to £5.306, this remained above the minimum level of General Reserve set by the Authority.

Capital Budget

The revised Capital Programme for 2025/26 approved by the September’s Resources Committee was £12.652m and to date £2.280m had been spent. A summary of the programme was set out in the table below and in more detail in Appendix 2 of the report.

A detailed review of the Capital Programme had identified areas where expenditure would slip into 2026/27, the table below sets out the main item of slippage:

Potential Financial Risks

There were several potential scenarios that had not been reflected in this monitoring report that, if they materialised, may give rise to an increase in revenue and capital expenditure. To provide some information about potential significant financial risks these had been quantified to provide an estimated worst case scenario, these were set out in Appendix 3 of the agenda pack. Taking all these risks overall and adjusted for the remainder of the year, a potential worst-case scenario would impact the Revenue Budget and Capital Budget accordingly:

The potential worst-case scenario could be funded from available budgets but would reduce the general fund balance to below the minimum acceptable level agreed by the CFA.

In response to a question from County Councillor A Blake in relation to repairing the services fleet vehicles, the Head of Finance explained that the service had a service level agreement (SLA) with Lancashire County Council (LCC) and if they did not have the capacity or facilities to provide the service a local supplier would be utilised. The service was going out to tender for its fleet repairs and maintenance.

In response to a question from Councillor D Smith in relation to utility costs, the DoCS explained that the service collaborated with other fire and rescue services to get the best prices which were usually fixed for reasonable periods of time.

Resolved: That the Committee;

1.  Noted and endorsed the financial position; and
2. Approved slippage in the capital programme of £0.100m to 2026/27.