1. Purpose of Report
- To present to Fire Authority the Revenue Budget Monitoring 2022/23 (as at January 2023), to outline progress on the IRMP ‘Our Plan’ target savings, and to report on the forecast level of Reserves.
- That Members note the Revenue Budget Monitoring and Forecast Outturn for 2022/23 being an overspend of £247,680. A contribution of £322,665 from the Local Funding Risk Reserve was required to balance the Original Revenue Budget 2022/23, which brings the budget shortfall to over £0.5m. The balance of the Local Funding Risk Reserve was transferred to the Capital Development Reserve in arriving at the 2023/24 Medium Term Financial Plan.
- That Members note the overall position on Reserves, and the projected 2022/23 Closing Balance of £14.8m. Appendix 3 has been updated to illustrate all Member approved transfers as outlined in the Medium-Term Financial Plan 2023/24 to 2026/27.
- That Members approve budget virements which provide for the reversal of approved carry forwards, as outlined in paras 3.2 and 3.3.
3. Information and Analysis
- Appendix 1 summarises the Revenue Budget Forecast Outturn, being an overspend of £247,680.
Budget Virements 2022/23
- At the June 2022 Fire Authority Meeting, Members approved carry forwards totalling £349,000. Due to levels of resourcing coupled with Industrial Action preparations, these works have not progressed in their entirety. For this reason, the Updated Budget has been adjusted to reflect that associated transfers from the Strategic Risk Reserve will no longer take place.
- The affected budget for Equipment, Furniture and Materials £50,000, for the financing for a new mobile prevention unit, and Communications and Computing £299,000. Due to resourcing and supplier issues, projects to implement the replacement Occupational Health System, Fire Hydrant Management System solutions, and Body Worn Video Cameras have been delayed. Additionally, ICT infrastructure/system projects (PC refresh, Cloud solutions and Wide Area Network) have been delayed. The Contribution from Earmarked Reserve budget heading has been reduced accordingly.
- The 2022/23 base budget provided for pay inflation of 2%. This amounted to circa £500,000, being WDS, On Call, and Control pay £355,000, and £145,000 for Support pay. The salary budget forecast in Appendix 2 includes estimated pay inflation of some £1.3m for WDS, On Call and Control personnel at 7%, which has been amended to reflect the agreed NJC offer. This is around £0.9m above the DFRS budgeted provision. Pay inflation of £410,000 for Support pay is around £265,000 above budgeted provision. Pay awards for all staff are not directly supported by the government or with additional funding and therefore have to be funded by the Fire Authority.
- The effect of an additional inflationary pay burden is hidden to some extent by the significant number of vacancies currently being experienced throughout the Service (31.9 FTEs as at January). Whilst this creates a temporary in year saving the service is working to develop a new workforce plan to ensure vacancies are filled and teams are supported.
- The past two years have been marked by a period of rapidly rising inflation. In January 2023 the annual rate of inflation was 129% for electricity and 67% for gas. The Consumer Prices Index (CPI) rose by 10.1% in the 12 months to January 2023, marginally down from 10.5% in December 2022. It is anticipated that inflation will begin to fall over the coming 12 months, however this sharp spike has already introduced permanent pressures on Revenue and Capital budgets, and on our level of Reserves.
Revenue Budget Monitoring
- Appendix 1 summarises the Revenue Budget Monitoring as at 31st January, being an overspend of £247,680. This compares to a forecast overspend of £172,635 reported to Members in December 2022.
- 3.8 Adverse variances since that time include a Staffing Budget increase to reflect the agreed 7% pay award offer for operational employees (compared to the September forecast which was based on a 5% pay award).
- Clothing & Uniforms budget overspends have increased by £97,420, which are also reflective of new recruits and Reservist costs and are offset by an underspend of £20,000 on Uniforms & Protective Clothing Repairs.
- Favourable variances since the December Fire Authority Report include:
- Reduced Interest Payments related to Capital slippage £150,710;
- Removal of inflationary estimates (non-pay budgets) £86,000;
- Professional Fees budget underspend £65,000;
- Additional Rates budget underspends (due to rateable value challenge) £64,000;
- Additional Investment Income of £47,000;
- Service Development Training budget underspends £20,000;
- Hydrant Maintenance budget underspends of £30,000;
- Additional Secondment Income of £20,000 (linked in part to pay award inflation).
- Direct Employee Expenses – an overspend of £927,580 (£386,290, December 2022) is anticipated after taking account of pay award and grant funding supporting posts to be applied as appropriate at year end.
- Direct Employee Expenses – Admin, Professional, Technical and Clerical – a forecast underspend of £212,950 takes account of the Final NJC for Local Government Services (Green Book) Pay Offer. National Employers agreed to offer an increase of £1,925 on all pay scales with effect from 1 April 2022. After taking account of the additional effect this has on NI & Superannuation payments, this amounts to an annual cost of circa £2,530 per support FTE. The additional cost this represents amounts to some £265,000 above budgeted pay award provision, however this additional burden can be met through the significant number of support vacancies currently being experienced. This underspend highlights the Service’s continuing difficulty in recruiting to support posts and retaining key support personnel. There were 21.07 Support FTE vacancies as at January 2023 (a 12% vacancy rate). Agency costs of £78,600 have been incurred to date against a nil budget.
- Indirect Employee Expenses – Service Development Training – small budget underspends in the region of £20,000 are anticipated, alongside Employee Benefit Scheme underspends of £17,000, Allowances £8,200, and Firefighters Pension Scheme Sanction Charges £5,000. These underspends are offset in part by Recruitment Advertising overspends of circa £10,000 which reflect high levels of recruitment activity.
- Pensions – the net effect of DFRS Ill Health and Injury Allowance pension costs, which are not funded through Home Office grant, results in an adverse budget variance of £39,600.
- Premises Related – Energy Costs – throughout the financial year prices have risen sharply and this budget heading remains particularly volatile. An overspend of £141,000 is estimated at the current time, with the longer-term outlook for energy costs remaining unclear.
- Rates – significant underspends of £418,018 were achieved in year 2021/22 reflecting our successful challenge of the rateable value of DFRS sites. Further underspends of circa £168,910 are anticipated in the current financial year (after taking account of a saving of £50,000 applied upon setting the 2022/23 budget), with more recently savings arising from the former Littleover HQ valuation which dates back to 2017.
- Direct Transport Costs – Fuel - overspends of £80,000 reflect inflationary assumptions applied to this budget heading, which remains volatile despite recent price reductions experienced.
- Public Transport and Car Allowances – underspends of circa £30,375 are anticipated as travel continues to be lower than prior to the outbreak of the pandemic.
- Transport Insurance – underspends of £88,940 reflect the favourable outcome of the DFRS Insurance Budget contract re-tender undertaken during 2021/22. Other Insurance Budget underspends comprise of Premises Insurance £8,920, and Employers Liability and Public Liability underspends of circa £68,000 (shown under the Services budget heading).
- Supplies and Services – Equipment, Furniture and Materials – a small Smoke Alarm budget underspend of £20,000 is anticipated in 2022/23, alongside a Hydrant Maintenance budget underspend of £30,000. The implementation of a new Hydrant Maintenance system and additional resources in 2023/24 will enable increase activity in this area. General Equipment budget underspends of £10,000 are also apparent.
- Clothing, Uniforms and Laundry – An overspend in the region of £250,000 is forecast arising through our preparations for potential strike action (reservists), recent firefighter recruitment, and the necessary investment in PPE for our firefighters. The Service has also invested in personal issue moorland boots, with other pressures including the purchase of high-volume pump and bariatric kit. Pressures in this area will continue to be kept under scrutiny by the Fleet, Equipment and Protective Equipment group. The possibility of funding overspends (or part thereof) from the Joint PPE Reserve will be explored at year end. An underspend of £20,000 on Uniforms & Protective Clothing Repairs offsets in part.
- Printing, Stationery and General Office Expenses – includes Printing, Copy Charges and Stationery Budget, underspends of £51,215 are expected in year, arising primarily through the DFRS approach to agile working for support employees.
- Services – This budget head includes the major budgets for professional fees, consultancy and insurance. Variances within this budget category comprise of Insurance Budget underspends of £68,105 (specific to Employers Liability and Public Liability Insurance), and Professional Fees budget underspends of £65,000. The 2023/24 budget has been reduced accordingly.
- Expenses – budget underspends of £13,200 reflect reduced spend in the areas of Subsistence, Overnight Accommodation, and Hospitality.
- Interest Payments and MRP – underspends of £273,710 in borrowing costs reflect significant slippage on the Capital Programme together with decisions taken to delay some projects.
- Contribution to / from Earmarked Reserve – the budget has been updated for the removal of approved carry forwards.
- Other Government Grants and Other Income – Investment Income – of £190,000 above budgeted levels reflects Bank of England interest rate increases, alongside increased activity in the Treasury markets by the service.
- Other areas of additional income include Secondment Income £20,000, and Rent / Hire of Accommodation £16,000.
- The service has been preparing for the threat of industrial action over recent months and undertook to recruit and train reservist Firefighters. The additional direct costs incurred to provide firefighter resilience include the reservists' salaries, recruitment advertising, and the additional kit purchased. These direct cost totalled £140,000. However, the impact of the work undertaken has a far greater impact.
- A significant amount of work undertaken by departments was completed at the expense of business as usual as industrial action preparation took priority. Officers across the service have invested significant amounts of time in processes to recruit, train and deploy firefighters during potential industrial action. This includes the both the operational aspects of providing cover but also the non-operational considerations and support activities that have been vital to ensure the service had an appropriate contingency in place. The full impact/cost on the service will be far greater than the incremental costs incurred.
‘OUR PLAN’ (IRMP) 2020/23 - Planned Budget Savings 2022/23 - Year 3
- The latest ‘Our Plan’ (IRMP) can be found on the DFRS website (Development themes for our Plan are):
- Align Staffing Levels, Duty Systems and Ways of Work
- Community Safety and Partnership Working
- Collaboration and Shared Services
- Continuous Improvement
- The 2022/23 budget includes ongoing savings of £0.3m and one-off savings of £0.35m, as outlined below.
- Premises Related – Rates – Members will be aware of savings (refunds) in the order of £420,000 in the 2021/22 financial year, achieved by the successful challenge of the rateable values applied to fire stations. The amount of £50,000 is ongoing and the budget has been reduced accordingly.
- Transport Related – Contract Hire and Operating Leases – the 2021/22 Capital Programme provided for the replacement of two red fleet vehicles, three appliances, and seven appliances on the expiry of their lease agreements. This generated savings of £124,000 in 2021/22. Further savings of £89,400 will be achieved in 2022/23, and £33,500 in 2023/24 as the lease payments, which are charged to the Revenue Budget, come to an end.
- Other Government Grants and Other Income - Partnership Income - savings of £74,740 include the recovery of £42,000 from Nottinghamshire Fire and Rescue Service and Leicestershire Fire and Rescue Service, being their contribution towards the Pensions Remedy Project Team.
One-off Budget Saving
- Workforce Planning - a budget saving of £354,000 reflects the removal of a 2021/22 growth item which provided for the ‘up skilling’ of employees in the context of the potential skill loss associated with the McCloud Sargent judgement. This funding has been transferred to earmarked reserves and will be applied to the training and investment in our workforce. This saving is one off in nature and as such does not continue into years 2023/24 onwards.
- A Forecast Closing Balance of £14.8m reflects the favourable 2021/22 Outturn position, and that of previous years. A detailed analysis of Earmarked Reserves is included in Appendix 3.
- The requirement for financial Reserves is acknowledged in statute. Sections 31A, 32, 42A and 43 of the Local Government Finance Act 1992 require authorities in England and Wales to have regard to the level of Reserves needed to meet estimated future expenditure. The Authority has a General Fund Reserve of £1.9m
- The estimated closing position takes account of a transfer of £247,680 required to fund the estimated Revenue Budget overspend, and Members should consider this alongside a transfer of £322,665 required to balance the Original Revenue Budget. In addition, a transfer of £0.7m is required to finance the 2022/23 Capital Programme, resulting in a Closing Balance of £4.4m.
- Section 31 Grant Reserve – the amount of £294,100 will be applied to bridge business rates income shortfalls anticipated in year, with the balance of £557,302 having been transferred to the Capital Development Reserve as approved by Members in February 2023.
- Estimates around the use of Protection Grant funding have not been reflected in the Revenue Position at the current time (over and above budgeted levels), further Revenue Budget funding requirements will be considered at Outturn.
- The Service maintains a Joint PPE Reserve of £175,000. The application of this Reserve will be considered at Outturn and will be determined through consideration of any changes to our working rig, new recruits, reservist related costs, and similar.
- A Strategic Risk Reserve closing balance of £2.5m is considered to be of an appropriate level to safeguard the Service against the cost of unforeseeable events in the medium term, which extends to the funding of future budget deficits subject to the timely delivery of the Savings Programme.
- Capital Grant Unapplied Reserve of £0.1m is required to finance the 2022/23 Capital Programme alongside funding of £0.3m from the Capital Receipts Reserve. The Closing Balance of £1.1m and £1.8m respectively will be required to finance the Capital Programme in future.
- The Reserves position is subject to regular reviews. CIPFA guidance sets out the legal requirement that a revenue budget deficit is not permissible when it cannot be covered by revenue reserves, this applies to any future financial year and not just the current year. The Reserves Strategy forms part of the Authority’s Medium Term Financial Strategy which was last presented to Members for approval in December 2022.
This report has been consulted upon and approved by the following officers:
Strategic Leadership Team – 15.3.23
Contact Officer: Mark Nash Contact No: 01773 305415
- Revenue Budget Outturn 2021/22
- Capital and Prudential Outturn 2021/22 and Revised Capital Programme 2022/23
- Capital Programme 2023/24 to 2025/26, Prudential Code and Treasury Management Strategy
- Medium Term Financial Plan 2023/24 to 2026/27
- Medium Term Financial Strategy 2023/24 to 2026/27
Revenue Budget Monitoring Appendix 1
(pdf 71.20 KB)
Revenue Budget Monitoring Appendix 2
(pdf 74.01 KB)
Revenue Budget Monitoring Appendix 3
(pdf 13.37 KB)