Contact: Paul Carey-Kent, Deputy Treasurer, 01962 847525

David Howells, Director of Corporate Services, 02380 644000 ext 203

1 Introduction

1.1 Pressures on the 2003/04 budget have been severe, leading to an increase of £1.427m in the projected total spending of the Authority (excluding pensions) compared with the original budget. As explained in previous reports to this committee, the main factors are national developments, especially in pay, which could not be quantified at the time of setting the budget and increases in the number of operational incidents. There have also been additional staffing costs due to running at above the establishment level for firefighters.

1.2 There are four possible means to offset this additional spending:

· a supplementary levy in line with the decision of the Authority at its meeting on 10 December 2003, due to be finalised for payment in March. Combined Fire Authorities have been notified this is likely to be £784,000. Latest estimates show this to have increased marginally to £792,000.

· additional funding from constituent authorities under the formula arrangement to take account of the costs of extra operational activity. £194,000 is likely to be due.

· possible underspending on pensions. It is now late enough in the year to be more confident that fewer firefighters than budgeted will choose to retire in 2003/04, with a consequential reduction in lump sum payments to be made. An underspend of £441,000 is estimated.

· at this meeting on 10 December, the Authority agreed that the first £250,000 of any overspend be deducted from the balance transfers agreed in principle by the constituent authorities in order to reflect additional spending due to additional firefighters in post.

· further adjustments could be made at the year end as necessary.

1.3 In previous years under and over spends on pensions have been `ring-fenced' in recognition of the fluctuating nature of this budget head and the recognition that constituent authorities have been better placed to absorb such fluctuations within their larger overall budget. Clearly, such arrangements come to an end with the introduction of precepting in 2004/05, and so the logic of treating pensions separately in 2003/04 is less clear. The likely consequence of underspending on pensions this year will be to increase spending next year as retirements will have been deferred. That pressure will now fall on the Fire and Rescue Authority (and is reflected in the proposal to set up a £2m reserve) rather than on the constituent authorities.

1.4 It is therefore proposed that any underspend on pensions be used to offset overspends elsewhere for 2003/04. This should lead to a broadly balanced budget after taking account of the supplementary levy and the adjustment for operational incidents. The year end position might then be that:

· any remaining net overspend should be deducted from the balance transfers from constituent authorities in line with the previous decision and

· any remaining net underspend should be returned to constituent authorities in line with established practice at the year end.

2 Revenue

2.1 The reasons for the major variations are set out in the following paragraphs and in detail on Appendix A.

Wholetime firefighters pay and allowances (+£57,000 increase against last reported figure)

2.2 The budget continues to show a £250,000 projected overspend as a result of fewer firefighters retiring than expected. The January 2004 trainees course has been cancelled which has prevented any increase in the projected overspend. The instructors are now being used to help reduce the backlog of other training. In addition details of the November 2003 pay award have been issued which indicate the percentage increase for Hampshire Fire and Rescue Authority will be nearer 7.3% increasing the additional cost of the pay award by £57,000 (including special responsibility allowances) to £320,000 (part year) and £1,359,000 (full year).

Retained firefighters pay and allowances (+£34,000 increase against last reported figure)

2.3 Operational activity continues at above budgeted levels, up 27% to date. It is estimated costs will increase by a further £32,000 to £200,000, assuming activity returns to the current average for the remaining months of the year (contingency arrangements, if applied, will cover the impact of this overspend on the HFRA budget.) The estimated additional cost of the pay award has marginally increased to £223,000 (part year) and £692,000 (full year)

Non uniform pay (+£196,000 increase against last reported figure)

2.4 The latest estimated impact of the November 2003 pay award for control operators has increased by £21,000 from £63,000 to £84,000 (part year) and £98,000 (full year). In addition three unfunded control operator posts and the impact of above average yearly incremental costs, following the non uniform job evaluation review, have resulted in a projected overspend of £175,000. Growth bids for 2004/05 have been submitted for the control operator posts leaving a balance (if those bids are agreed) to be managed by leaving posts vacant longer, as required. In addition strict adherence to funding arrangements for temporary and agency staff will be operated.

Other Employee Expenses (-£20,000 reduction against last reported figture)

2.5 Savings of £35,000 in training expenses are as a result of the Fire Service College being unable to provide additional courses requested by the Authority. This has been partly offset by estimated additional costs for medical appeals of £15,000.

Building Maintenance (+£20,000 increase against last reported figure)

2.6 Additional essential repairs and maintenance works are estimated at £20,000 and funded from underspendings on hydrants (see other supplies).

Transport (+£10,000 increase against last reported figure)

2.7 Vehicle fuel costs are estimated to increase by a further £10,000 due to increased operational activity.

Other Supplies (-£35,000 reduction against last reported figure)

2.8 Savings of £80,000 on expenditure for hydrants, mainly as a result of water authorities charging developers for installing new hydrants, have been partly used to meet essential building repairs and maintenance (see above) and increased demand for office furniture (£20,000). The cost of members allowances has been increased by £21,000 to reflect the decisions made at the Authority's meeting on 10 December 2003 and £4,000 added for the cost of criminal records bureau checks.

Bought-in Support Services (-£50,000 reduction against last reported figure)

2.9 Recharges from the County Council's Central Support Departments and the Audit Commission are forecast to be less than budgeted reflecting the previous year's outturn.

Income (+£30,000, ie reduction in income against last reported figure)

2.10 Rental income is projected to be £10,000 less than budgeted, reflecting last year's actual. Income from secondees is also estimated to reduce by £20,000 as a result of an invoice having been raised in error.

3 Pensions (-£441,000 reduction against last reported figure)

3.1 The net cost of pensions is now predicted to be £441,000 lower than the original budget. This is in the main (£398,000) due to a reduction in lump sums due to fewer firefighters retiring than anticipated.

4 Capital

4.1 There are no changes to report against the figures reported to the Authority on 10 December 2003 as part of the draft budget report.

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

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

Recommendations

That this report be noted and the proposal to offset any pensions underspend against other pressures 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:

Published works.

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

TITLE FILE

Fire - Budget Monitoring 2003/04