HFRA 17 9 08 Budget Monitoring Report Appendix 1

Contact: Paul Carey Kent, Deputy Treasurer 01962 847525;
[email protected]
David Howells, Director of Corporate Services, 023 8062 6835,
[email protected]

1 Introduction

1.1 As the July meeting of the Finance and General Purposes Committee was cancelled owing to insufficient business, it was agreed that this regular monitoring report should nevertheless be circulated to members of the Committee and also to members of the Corporate Management Team. It sets out the latest budget predictions for the year.

1.2 Costs have increased by £373,000 (0.6%) since the budget was set, and this assumes that the pressures currently being felt on the staffing budgets will be dealt with over the course of the year by adjusting recruitment patterns. However, the Authority has provisions and reserves available along with further plans to deliver savings. Those are being held mainly to meet Service objectives agreed as part of the Fire and Rescue Service Plan 2008 - 2011, but may need to be used to deal with these pressures. At this stage, the following approach is thought likely:

· Use of modernisation reserve: £73,000

· the first call on further savings achieved: £300,000

1.3 The position will be further reviewed and appropriate virements made to deal with these increased cost pressures in the next monitoring report to the Finance and General Purposes Committee.

2 Revenue

2.1 The latest position is given in Appendix A. Details of the main variances are as follows.

2.2 Wholetime firefighters pay and allowances (+£28,000 0.08%)

2.3 The increased cost of £28,000 relates to extending the contract for the Automatic Fire Alarm (AFA) Reduction Strategy Manager post to September 2008 and is being met from the modernisation reserve.

2.4 If current spend continued throughout the year, the wholetime firefighters' pay and allowances budget would be overspent by £250,000 (less than 1%). This is mainly due to fewer firefighters leaving or retiring than predicted and Continuous Professional Development (CPD) payments being higher than originally estimated. However, it is planned to adjust recruitment activity during the year until this pressure is reduced and to continue to monitor the budget closely and review the situation at the second quarter.

Support Staff (+£27,000 0.3%)

2.5 The increased cost of £27,000 relates to the temporary Staff Suggestion Scheme Manager post - created for a 12 months and to be funded from the modernisation reserve.

2.6 A zero-based budget exercise was recently undertaken for all pay budgets which showed that the support staff budget required turnover savings of £450,000 (4.5%) to fund the approved establishment. This equates to the equivalent of 18 posts (using `Grade E' as the basis for estimating). Current projections suggest this budget may overspend by £100,000 (1%) due to a lower level of turnover. Again, it is proposed to monitor the budget closely and review the situation at the second quarter.

Firefighters pay award (-£12,000)

2.7 The July 2008 pay award for uniformed staff is 2.45%, (just 0.05% less than planned for in the budget). The saving this year is estimated at £12,000 (£16,000 in 2009/10).

Support staff pay award

2.8 The April 2008 pay award has not yet been agreed, but the current offer of 2.475% is close to the 2.5% provided for.

2.9 Transport expenditure (+£302,000 18.6%)

2.10 The staff car allowances budget is projected to overspend by at least £100,000 - which is in line with last year's expenditure. This is due mainly to the cost of relocation of firefighters to Andover, Winchester and Havant fire stations following the changes to crewing arrangements - extra costs which ran/ will run for one year from the change at each station: Andover to March 2008, Winchester to September 2008, Havant from October 2008 to September 2009).

2.11 The budget for vehicle fuel is currently forecast to overspend by £200,000 (based on June 2008 prices compared with the inflated November 2007 prices on which the budget was set). If prices rise to £1.50 per litre (£1.28 net) by September, then the forecast overspend increases to £260,000.

2.12 A best value review is currently being undertaken by our internal auditors to investigate options to reduce future staff travel costs and also to reduce the impact on the environment.

Other supplies (+£14,000)

2.13 Under the staff suggestion scheme rewards of up to 10% of savings in the first year or up to £250 if the suggestion is implemented may be given. A provision of £14,000 has been made for these rewards, which should be offset by on-going savings.

3 Pensions (-£0)

3.1 There are no significant variances to report on at this stage in the financial year.

4 Modernisation Reserve

4.1 The balance on the modernisation reserve currently stands at £362,000. It is proposed to fund the following projects included in the projected outturn from this fund if there are insufficient underspendings elsewhere in the budget at outturn:

4.2 At present the projected outturn would require a contribution of £73,500 as nothing has been met from elsewhere in the budget. This would reduce the original planned contribution to the reserve to £267,500 with a year-end balance of £629,500.

5 Cashable Efficiency Gains

5.1 The Government's Comprehensive Spending Review (CSR07) requires the Authority to identify cashable efficiency gains of £1,055,000 in each of the next three years. Efficiency gains implemented to date and reflected in the latest budget are as follows:

5.2 The total cashable efficiency gains identified to date total £543,000, of which £446,000 has been reinvested leaving an unallocated balance of £97,000. Reinvestments to date are:

6 The Annual Efficiency Statement forward look 2008/09

6.1 Achieving efficiencies through procurement, collaboration with others or introducing new ways of working is key to the HFRA's approach to delivering its services and the Authority has a proven track record in achieving efficiency savings having delivered just under £5m of savings against a target of £3.3m over the last 3 years. These significant cashable savings have been used to resource new responsibilities (such as the new duties that have arisen from the Fire and Rescue Services Act 2004) and to drive forward the improvement agenda so as to achieve the expectations laid down within the National Framework. Not least they have enabled this Authority to continue to keep council tax increases low, despite having to fund higher than inflation pay increases.

6.2 There is an ongoing determination on the part of Members and Officers to build on past successes, to secure continued value for money and to focus on areas for improvement to deliver quality services.

6.3 Through the Comprehensive Spending Review 2007 (CSR07) the government has set a target for English Fire and Rescue Services to achieve a cashable net annual efficiency saving of £110m a year by the end of the CSR07 period. Our target is to deliver a total of £3.2m or 5% by 2010/11.

6.4 The Annual Efficiency Statement for 2008/09 showing that we plan to deliver £2.3m of efficiency gains through changes in crewing arrangements, procurement and other value for money reviews is attached as Appendix C.

6.5 Progress in achieving these efficiencies will be shown in regular budget monitoring reports. Where gains can be made without a commitment to reinvest as part of the business logic behind the improvement, there may be scope to use some of these gains to assist in the overall financial position towards the end of 2008/09.

7 Capital

7.1 Appendix B sets out in detail the latest estimates of expenditure and funding against approved schemes with significant variances highlighted below.

Changes from Day-Crewing to Shift-Crewing (+£193,000)

7.2 It was pleasing to be able to report as part of final accounts that the works at Winchester Fire Station came in below budget and those at Andover on budget. The works being undertaken at Havant are likely to be £260,000 above the original estimate, resulting in the overall cost for the three schemes being £193,000 above the provisional capital programme estimate of £650,000.

7.3 The nature of the works required at Havant has been particularly challenging and complex. At one stage it seemed likely that there would be a need to acquire additional land by extending the site (potentially using the neighbouring Authority-owned house which had previously been declared surplus to operational requirements). However, the project architect eventually managed to provide three options to completely remodel the accommodation and provide a workable solution. The opportunity was also taken to rectify a number of existing building problems which will reduce the call on revenue maintenance budgets over the short- to medium-term.

Vehicles 2006/07 and 2007/08 (-£138,000)

7.4 This reduction has arisen as a result of vehicles being obtained cheaper than original estimates.

Winchester Fire Station

7.5 Work has commenced on the design for the new Winchester Fire Station (at Winnall, Winchester). Expenditure to date has largely been on professional fees and archaeological surveys associated with the marketing and disposal of the current site (North Walls, Winchester). The original capital programme provision for the new-build was a total of £3.5m.

7.6 As work progresses on the scheme, members of the Asset Management Working Group/Finance and General Purposes Committee will be alerted if it looks likely that the original provision is now considered insufficient. This might arise in complying with new central government guidelines on the design of new fire stations and the endeavour to achieve a building solution with a carbon-footprint and low longer-term energy/running costs (but for which the construction costs might be higher).

Works required following closure of the Copnor Fire Station building

7.7 As a result of the Authority's decision to close the Copnor Fire Station building, accommodation works are required at both Cosham and Southsea Fire Stations to ensure that both buildings are fit for purpose. In the case of Cosham the works are estimated to cost £88,000. These are being kept to the absolute minimum in view of the Authority's aim to rebuild the station in the medium-term.

7.8 The works, particularly at Southsea, will be more significant because the opportunity will be taken to provide accommodation not only for the vehicle and crew, but also for some of the support staff currently located at the Copnor building. The scheme will make more efficient use of the accommodation and facilitate better community use of the building. Further, it makes sense to remedy other, existing, building maintenance and accommodation issues at the same time. There is a level of understandable urgency to carry out these works so as to: (a) reduce as soon as possible running costs (including staffing) through the redeployment of the vehicle and crew from Copnor; (b) avoid the need to carry out any major maintenance works at the Copnor building; (c) to vacate and dispose of the building as surplus to operational requirements as soon as practicable. For these reasons, tenders are currently being invited for the full extent of the works identified as necessary. Preliminary assessments suggest that this is unlikely to exceed £330,000.

7.9 There is a capital payments reserve of £500,000 in the Authority's budget (originally earmarked for preliminary costs associated with the Cosham project and any other high priority capital scheme). It is recommended that this reserve be used to fund the cost of the works at Southsea and also to offset the higher than anticipated cost of works associated with changes at Andover, Winchester and Havant (see paragraphs 7.2 and 7.3 above).

7.10 The up-to-date position will be reported to the Authority's meeting in September with recommendations on how any shortfall for funding these works can be dealt with.

7.11 Capital receipts

7.12 The estimated value and timing of receipt of housing capital receipts have been updated. The reduction in the overall estimated receipt and the slippage in the expected timing of the housing sales reflects both the current housing market and also some difficulties with the `flying freehold' status of some of the properties in Winchester.

7.13 As indicated above, substantial receipts will be received by the Authority when the sales of Winchester and Copnor Fire Stations are completed as well as the receipt from the sale of land at Carpenters Down, Basingstoke. At this stage their values have not been incorporated, when the sums involved become firmer and the timing clearer they will be built into the financing plans. They will be able to be applied to reduce the reliance the Authority has had to place on unsupported borrowing in the forward plan.

Additional resources

7.14 Two additional sources of capital finance have recently been announced by the Government:

· £130m nationally for PFI projects - In principle, it makes sense to bid for a Private Finance Initiative (PFI) scheme where this comes with capital grant enhancing the Authority's spending power. Officers will assess the options with a view to bringing proposals to the Committee's meeting in October.

· A minimum of £42,000 capital grant for this Authority if they agree to `stretch' targets for recruitment of women and BME firefighters. This has the support of the Human Resources Committee and is to be considered by the Performance Review and Scrutiny Committee next month before being presented (as part of the national Equality and Diversity Strategy) to the Authority also next month.

8 Equality impact assessment

8.1 An impact assessment has been made on the proposals in the paper and shown that they are not discriminatory. They are considered compatible with the provisions of the European Convention on Human Rights, the Human Rights Act 1998 and the Race Relations (Amendment Act 2000).

9 Conclusion

9.1 Overall the revenue budget is under considerable pressure and significant savings still have to be identified.

Recommendations

1 That the latest budget position be noted.

2 That a further update (together with proposals for how to deal with the pressures emerging) be brought to the next meting of the F&GP Committee.

3 That the officers be asked to investigate the potential benefits of making a bid for a PFI scheme covering a number of building projects and present options to the meeting of the Committee in October 2008.

Section 100 D - Local Government Act 1972 - background documents

The following documents discuss facts or matters on which this report, or an important part of it, is based and have 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.

Secretarial/WP/Corporate/HFRA 2008 HFRA 17 9 08 Budget Monitoring Appx A JL/JMW/8/9/08