Contact: Paul Carey-Kent, Deputy Treasurer - 01962 847525
David Howells, Director of Corporate Services - 02380 64000 ext 203

1 Summary

1.1 Previous monitoring reports have predicted that cash limited expenditure would be overspent. In the last report in October the estimated overspending was £155,000, mainly on insurance due to the insolvency of one of the Authority's insurers (the Independent Insurance Company), less savings on the maintenance of the Command and Control system due to delays in implementing price increases in the maintenance contract. The overspending is now estimated to be £395,000 principally because of further increases in insurance costs, a higher pay award to firefighters than had been budgeted for and a forecast overspending on retained firefighters due to the increase in the number of incidents attended.

1.2 The pensions' budget which is not part of the cash limit is now projected to underspend by £415,000. It is recommended that these savings be used to increase the cash limited budgets by £395,000 for the net overspendings caused by uncontrollable events. This includes £120,000 provisionally allocated for retained firefighters' pay due to the high number of incidents so far this year. The final allocation for this will be made at the end of the year when the actual figures are known. It is further recommended that the balance of £20,000 be held to cover further increased costs should incidents remain at this higher level.

1.3 The revised budget, which amounts to £45.247m and is equal to the total of the original budget.

2 Revenue

2.1 The budget has been managed during the year on the basis that:

· following the closure of last year's accounts, £350,000 of savings would be made in cash limited budgets to offset overspendings in 2000/01 and used to meet £275,000 of pension costs and £75,000 of revenue contributions to capital which were underspent in 2000/01 and which are being incurred instead in 2001/02

· there will be sufficient savings in the pensions' budget to meet uncontrollable increases in cash limit budgets

· other increases in cash limited budgets would be met from savings.

2.2 The revised budget has been prepared within these parameters as shown in the following table:

2.3 Details are given in the following paragraphs on:

2.4 Major variations are shown in Appendix 1. The overall revised budget is summarised in Appendix 2.

3 Pensions

3.1 The pensions' budget is always volatile and hard to predict; but on the basis of the current level of retirements and the amounts of transfer values paid and received, an underspending of £415,000 is now estimated. The main saving is on lump sum payments (£419,000) due to a prediction of 13 fewer retirements than the 58 allowed for in the budget. Pension costs are also lower due to fewer retirements both in this year and last (£112,000); but this is partly offset by fewer net transfer values (£107,000) because of fewer transfers both to and from other employers.

4 Capital financing and leasing costs

4.1 These costs are a net £25,000 below the budget, mainly due to a later than expected leasing drawdown. The cash limit is adjusted for variations on these budgets.

5 Number of incidents

5.1 The number of incidents in the current year is at a record level. By 31 October 2001 the number was 16,571 compared with 14,283 at the same time last year. Even if the number of incidents decline in the remainder of the year to the budgeted level, the total number in the year will be 26,049 compared with the 22,747 allowed for in the budget. This would most likely trigger the contingency arrangements agreed by the constituent authorities for increasing the cash limit when the number of incidents is significantly above the budgeted numbers. It is implemented when the number of incidents exceeds the budgeted number by more than 5% and when it causes an overspending on both the retained firefighters' pay budget and the total budget.

5.2 An overspending of £120,000 is currently predicted on retained firefighters' pay which would be covered by the contingency arrangements. This is not equivalent to the 25% increase in the number of incidents as many of the additional incidents have been attended by wholetime stations. The amount to be added to the cash limit will be calculated at the end of the year when the actual position is known. In the meantime, the estimated £120,000 overspending has been included in the revised budget and a provisional adjustment made to the cash limit. This will be reviewed at the end of the year.

5.3 If the number of incidents continues at a high level, the cost could be greater. Because of the uncertainty it is recommended that the £20,000 balance in the budget remaining after all of the changes have been made should be held to help meet a potentially higher cost.

6 Uncontrollable costs

6.1 Insurance costs have continued to increase as a result of the insolvency of one of the Authority's insurers (the Independent Insurance Company). The latest estimate is £400,000 over budget compared with £292,000 previously reported to the Finance and General Purposes Committee. This follows the decision to take out insurance cover against future claims for the period when the Independent Insurance Company would have been liable and reflects the latest view on the cost of notified claims which may, in due course, fall on the Authority if cases are lost. As the whole of the extra £400,000 is beyond the Authority's direct control, it is recommended that the insurance budget be increased by this sum.

6.2 On the other hand there are savings of £210,000 on the maintenance of the Command and Control system. These arise from the delay in commencing, in full, the revised maintenance contract because some elements of the system have not yet been fully installed.

6.3 Pay awards have been settled at a higher level than was allowed for in the contingency for inflation. An allowance of 3% was made, but the firefighters' award was 3.9% and support staff 3.5%. The shortfall is £110,000 which it is recommended should be added to the cash limit from the available savings.

7 Growth proposals agreed from 2001/02

7.1 Good progress has been made on implementing the various proposals for improvements in the service. In particular, the additional support staff to meet increased demands in the areas of information and communications technology and training delivery have been most welcome.

7.2 Members will recall that several of the proposals were to be phased in during the year (some from October 2001 and some from January 2002). These will be progressively implemented during the remainder of the year.

7.3 As indicated above, the additional provision for maintenance of the Command, Control and Communications system will now not be required in full until April 2002 and the saving will be used to offset increased costs elsewhere in the budget.

8 Capital

8.1 Changes in the capital programme have been reported during the year and are broadly in line with the original budget. Appendix 3 sets out the details of the latest estimate of capital payments of existing schemes.

9 European Convention on Human Rights and the Human Rights Act 1998

9.1 The proposals within this report are compatible with the provision of the European Convention on Human Rights and the Human Rights Act 1998.

Recommendations

1 That the revised budget be approved.

2 That, from the savings on pensions, the cash limit be varied for:

3 That the balance of £20,000 savings on the costs of pensions be held in reserve to meet an overspending on retained firefighters' pay in accordance with the contingency arrangements agreed with the constituent authorities.

4 That the revised capital programme as set out in Appendix 3 be approved.

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1. Published works.

2. Documents which disclose exempt or confidential information as defined in the Act.

TITLE

Fire Budget 2001/02 revised, 2002/03 forward - general papers

Fire Pensions 2001/02 revised, 2002/03 forward.

Appendix 1

Revised budget 2001/02

Major variations in cash limited expenditure

Major variations between the cash limit budget adjusted for overspendings and underspendings in 2001/02 and the revised budget for 2001/02 amounting to £395,000 (1.0%) are set out below

			Adjusted cash limit budget	Variations against adjusted cash limit budget
			£'000	£'000	%
Retained firefighters			3,751	120	3
Increase in retained firefighters' pay from the higher number of incidents attended by retained firefighters (excludes £13,000 shortfall of inflation included below)
Staff advertising			14	42	300
Retained firefighters' recruitment initiative combined with recruiting for a number of new posts
Legal expenses			9	66	733
Cost of employment appeal tribunals, defending injury award claims, employment tribunals (including cost of barrister), personal injury and civil claims for compensation
Insurance			464	400	86
Additional costs resulting from the liquidation of the Independent Insurance Company
Hired and contracted services			150	-66	-44
Geographical Information System replacement not undertaken in 2001/02
Sewerage and environmental charges			65	-20	-31
Overstated budget
Gas			78	-46	-59
Gradual reduction in usage and overstated budget
Business rates			639	30	5
Effect of transitional relief tapering off
IT/communication			1,063	-210	-20
Command and Control communications system maintenance contract delayed
Consumable materials			129	-129	-100
Budget not allocated
Operational leasing			659	-36	-5
Savings resulting from operational leases entered into later
Fixtures and fittings			30	25	83
Required for Copnor station and division transfer
Income			-909	62	7
Additional income target to offset overspendings in 2000/01 not achieved
Shortfall in contingency for inflation for pay awards (£110,000) and prices (£49,000)			802	159	20
Other minor variations totalling				-2
Total				395