treasury management strategy 2014/2015 - west yorkshire fire

Purpose To present the Treasury Management Strategy 2014/2015

Recommendations Members are asked to recommend the attached investment strategy to the full Authority for approval.

Summary The Authority has formally adopted CIPFA’s Code of Practice on Treasury Management, and is thereby required to consider a treasury management strategy before the start of each financial year. This report sets out details of the proposed investment and borrowing strategy along with details of the policy for provision for repayment of debt. It also provides the treasury management indicators for 2014/15.

NOT PROTECTIVELY MARKED

Treasury Management Strategy 2014/2015 Finance & Resources Committee Date: 24 January 2014 Agenda Item: 5 Submitted By: Chief Finance Officer

Local Government (Access to information) Act 1972

Exemption Category: None

Contact Officer: Geoff Maren – Chief Finance Officer t: 01274 655711 e: [email protected]

Background papers open to inspection: None

Annexes: Annex A – list of investment institutions Annex B – Credit ratings Annex C – Statement of Policy on min revenue provision Annex D – Treasury Management indicators

mailto:[email protected]

1 Purpose of Report

1.1 The Authority has formally adopted CIPFA’s Code of Practice on Treasury Management, and is thereby required to consider a treasury management strategy before the start of each financial year. In addition, the Department for Communities and Local Government (DCLG) issued guidance on local authority investments in March 2010, which requires the Authority to approve an Investment Strategy before the start of each financial year.

1.2 This report meets the requirements of both the Code and the DCLG Guidance.

1.3 The Finance and Resources Committee undertake a scrutiny role with regard to treasury management. Training has been provided to members of that committee.

2 Key Points

2.1 Outlook for the economy, credit risk and interest rates

2.1.1 The Bank of England’s Monetary Policy Committee (MPC) is committed to keeping policy rates (Base Rate) low for an extended period, using an unemployment rate of 7% as a threshold for when it would consider raising rates, subject to certain caveats. Unemployment was 7.7% in August 2013 and is not forecast to fall below the threshold before 2016. However, stronger growth data in 2013 alongside a pick-up in property prices are starting to lead some market observers to price in earlier rate rises than allowed currently under the MPC policy.

2.1.2 The credit risk of banking failures has diminished, but not disappeared altogether. Regulatory changes are afoot in the UK, US and Europe to move away from bank bail-outs to regimes where shareholders, bondholders and unsecured creditors are “bailed-in” to participate in any recovery process. This is already manifested in relation to bondholders of the Co-Operative suffering a haircut in return for an equity stake in the bank. There are also proposals for EU regulatory reforms to Money Market Funds which will, in all probability, result in these funds moving to a variable net asset value basis and losing their “triple-A” credit rating wrapper. Diversification of investments between creditworthy counterparties to mitigate bail-in risk will become even more important in the light of these developments.

2.1.3 The Authority uses Kirklees Council to carry out its treasury management activities. The Council in turn, uses a specialist treasury management advisor (Arlingclose). Arlingclose forecast interest rates as follows:

Average Base Rate 20 Year PWLB Rate

2014/15 0.5% 4%

2015/16 0.5% 4.3%

2016/17 0.5% 4.8%

2.2 Borrowing and Investment – General Strategy for 2014/15

2.2.1 The policies for borrowing and investing are intrinsically linked. At one extreme, an authority might borrow externally at a level equivalent to its Capital Financing Requirement (CFR), that is, its underlying need to finance capital expenditure by borrowing or other long-term liability arrangements. If it chooses to have indebtedness to this level, it is likely that it would be investing externally an amount equivalent to its total reserves, balances and net creditors. At the other extreme, an authority can choose not to invest externally but instead use these balances to effectively “borrow internally” and minimise external borrowing. In between these two extremes, an authority may have a mixture of external and internal investments / external and internal borrowing.

2.2.1 Forecasts for CFR as at 31 March are as follows:

2014/15 £m

2015/16 £m

2016/17 £m

CFR 62.8 72.0 72.5

2.2.2 Prior to 2009/10 the Authority’s policy had been to borrow up to its CFR and investing externally the majority of its balances. With the onset of instabilities in the financial markets and the economic downturn, the policy changed to one of ensuring the security of the Authority’s balances. This coincided with dramatic falls in investment returns making the budgetary benefit of maximising external borrowing more marginal. The Authority has attempted to minimise monies externally invested and instead has used balances to offset new borrowing requirements. This practice is made more complicated by the Government’s method of funding pension contributions – the year’s funding plus any shortfall from the previous year, is paid as a lump sum in July each year. The grant in 2013/14 was £27 million.

2.2.3 To try and maintain investment balances at a reasonable level, the decision was made during 2013/14 to repay most of the Authority’s variable rate PWLB loans. Although these loans were at a relatively attractive interest rate, 0.57%, because of the counterparty limits in place within the strategy, significant funds were having to be invested with Central Government (DMADF) at only 0.25%.

2.2.5 As at 31 March 2014, the Authority is expected to have around £2 million invested externally, primarily in instant access accounts or short-term deposits, with the major British owned banks, building societies or Money Market Funds (MMFs). This figure includes the remainder of a £3.6m grant awarded jointly to West Yorkshire and South Yorkshire Fire Authorities to fun a joint control centre. The grant is being ring-fenced as an investment until it is required to fund expenditure.

2.3 Investment Strategy

2.3.1 Investment guidance issued by DCLG requires that an investment strategy, outlining the authority’s policies for managing investments in terms of risk, liquidity and yield, should be approved by full Authority or equivalent level, before the start of the financial year. This strategy can then only be varied during the year by the same executive body.

2.3.2 The guidance splits investments into two types – specified and non-specified.

• Specified investments are those offering high security and liquidity. All such investments should be in sterling with a maturity of no more than a year. Investments made with the Government (DMADF) and a local authority automatically count as specified investments, as do investments with bodies or investment schemes of “high credit quality”. It is for individual authorities to determine what they regard as “high credit quality”.

• Non-specified investments have greater potential risk, being investments with: bodies that have a credit rating below “high credit quality”; bodies that are not credit rated at all; and investments over a year.

2.3.3 It is estimated that the Authority could have up to £30 million to invest at times during the year, a combination of cash received in advance, reserves and creditors.

2.3.4 It is proposed to continue with a low-risk strategy in line with previous years and where possible to use the Authority’s balances to fund new capital expenditure, i.e. borrow internally. This will help in reducing the amount of money the authority has invested at any one time.

2.3.5 However, to ensure that the Authority is able to invest its surplus funds and obtain a reasonable investment return, it is proposed that counterparty limits for specified investments are increased to £6m. To reduce any risk, the maximum period of investment would be reduced to two months with the exception of investments with DMADF where the maximum period would remain at 6 months. A table providing a comparison with limits for the other metropolitan FRA’s is provided in Appendix E.

2.3.6 The Authority’s investment criteria has been slightly adapted over the years but is largely based on a strategy of when the Authority had relatively small investment balances. Since the pensions’ payments have increased and the Government has chosen to provide the Authority with an annual grant to cover the costs, the Authority has found itself with more significant levels of investment. Officers have carried out a thorough review of the criteria and have adapted it so that it is fit for purpose in terms of the current strategy of prioritising security and liquidity while enabling returns above that offered by Government to be achieved. The main changes to the criteria are: • Increasing the investment limit for individual local authorities and UK banks and

building societies with a “high to upper medium grade” credit rating to £6 million from £3 million.

• The Authority is able to invest up to £6 million on an instant access basis with foreign based banks with a “high to upper medium grade” credit rating

• Enabling the Authority to invest up to £6 million in individual MMFs (instant access or two day notice). MMFs are pooled investment vehicles, having the advantage of providing wide diversification of risk, coupled with the services of a professional fund manager. There will be an overall limit of £18 million for MMFs.

• Integrate a specified criterion for part nationalised UK banks/ building societies which allows a £6 million limit per counterparty at slightly lower credit ratings than applied to other institutions.

The above criteria would apply to the Authority’s specified investments. The limits on non-specified investments would not be changed

• The Authority is able to invest up to £1 million and up to two months with individual UK banks and building societies with a “medium grade” credit rating.

• The Authority is able to invest up to £1 million in an instant access account with its current account bankers as long as their credit rating is at least “lower medium grade”. This does not allow investment with the current provider.

• The Authority adopts an overall limit for non-specified investments of £2 million.

2.3.7 A maximum limit of £6 million applies to any one counterparty and this also applies to a banking group rather than each individual bank within a group.

2.3.8 For illustrative purposes, the end column of Appendix A lists which banks and building societies the Authority could invest with based on credit ratings as at the beginning of January 2014.

2.3.9 The Authority uses credit ratings from the three main rating agencies - Fitch, Moody’s and Standard & Poor’s to assess the risk of investment defaults (Appendix B). The lowest credit rating of an organisation will be used to determine credit quality. Long term ratings are expressed on a scale from AAA (the highest quality) through to D (indicating default). Ratings of BBB- and above are described as investment grade, while ratings of BB+ and below are described as speculative grade.

2.3.10 Where an entity has its credit rating downgraded so that it fails to meet the approved investment criteria:

• No new investments will be made; • Any existing investments that can be recalled at no cost will be recalled; • Full consideration will be given to the recall or sale of all other existing investments

with the affected counterparty.

2.3.11 Where a credit rating agency announces that a rating is on review for possible downgrade (“negative watch”) so that it is likely to fall below the required criteria, then no further investments will be made in that organisation until the outcome is announced. This policy will not apply to negative outlooks.

2.3.12 Full regard will be given to other available information on the credit quality of banks and building societies, including credit default swap prices, financial statements and rating agency reports. No investments will be made with an organisation if there are substantive doubts about its credit quality, even though it may meet the approved criteria.

2.3.13 Investments may be made using the following instruments:

• Interest paying bank accounts • Fixed term deposits • Call or notice deposits • Callable deposits • Shares in money market funds

2.3.14 Annual cash flow forecasts are prepared which are continuously updated. This helps determine the maximum period for which funds may be prudently committed.

2.3.15 Investment policy and performance will be monitored continuously and will be reported to Members during the year and as part of the annual report on Treasury Management.

2.4 Borrowing Requirement and Strategy 2.4.1 The Authority’s external borrowing requirement is estimated as follows:

2014/15 £m

2015/16 £m

2016/17 £m

Increase in CFR 1.4 7.2 0.8 Loans maturing 0.7 0.2 0.2 Total external borrowing requirement 2.1 7.4 1.0

2.4.2 When taking new borrowing, due attention will be paid to the authority’s debt maturity

profile. It is good practice to have a maturity profile for long-term debt which does not expose the Authority to a substantial borrowing requirement in years when interest rates may be at a relatively high level. In accordance with the requirements of the Code, the Authority sets out limits with respect to the maturity structure of its borrowing later in this report.

2.4.3 It is predicted that as at 31 March 2014, the Authority will have total external borrowing and other long-term liabilities of £53.3 million. This is analysed as follows:

Estimated Total debt as at 31 March 2014

£m

% PWLB fixed loans 44.8 84.1 PWLB variable loans 0.5 0.9 LOBOs 2.0 3.8 Temporary borrowing 6.0 11.2

TOTAL 53.3 100.0

2.4.4 Historically, the biggest source of borrowing for local authorities has been PWLB loans. These Government loans have offered value for money and also flexibilities to restructure and make possible savings. Although, the Government decided to raise rates for new PWLB loans in October 2010 by around 0.90%, it has now introduced a discounted rate for local authorities joining the new “certainty rate” scheme. The Authority has joined the scheme and now has access to loans discounted by 0.20%.

2.4.5 The Authority also has a LOBO (Lender’s Option, Borrower’s Option) loan. The way this loan works is that the Authority pays interest at a fixed rate for an initial period and then the lender has the option in the secondary period to increase the rate. If the option is exercised, the Authority can either accept the new rate or repay the loan. The Authority’s loan is in its secondary period with intervals of 5 years between options. At the last option date, May 2011, the lender did not exercise their option to amend the rate.

2.4.6 Other borrowing products are being developed by the commercial sector, including publicly listed and privately placed bond issues. These will be evaluated alongside all products.

2.4.7 In terms of meeting the Authority’s borrowing requirement over the next three years, as short-term rates are forecast to stay low, it may be opportune to take short-term loans either at fixed or variable rates. However, with long term rates forecast to rise in the coming years, any such short term savings will need to be balanced against potential longer term costs.

2.4.8 The PWLB allows authorities to repay loans before maturity and either pay a premium or receive a discount according to a set formula based on current interest rates. The Authority may take advantage of this and replace some of the higher rate loans with new loans at lower interest rates where this will lead to an overall saving or reduce risk.

2.4.9 Borrowing policy and performance will be continuously monitored throughout the year and will be reported to Members.

2.5 Statement of Policy on the Minimum Revenue Provision 2..1 The Local Authorities (Capital Finance and Accounting) (England) Regulations 2008,

which came into effect on 31 March 2008, replaced the former statutory rules for calculating MRP with a requirement for each local authority to determine a “prudent” provision. The regulations require authorities to draw up a statement of their policy on the calculation of MRP which requires approval by full Authority in advance of the year to which it applies. The recommended policy statement is detailed at Appendix C.

2.6 Policy on the Use of Financial Derivatives 2.6.1 Local authorities have in the past made use of financial derivatives embedded into loans

and investments both to reduce interest rate risk (e.g. interest rate collars and forward deals) and to reduce costs or increase income at the expense of greater risk (e.g. LOBO loans).

2.6.2 The Localism Bill 2011 includes a general power of competence that appears to remove the uncertain legal position over local authorities’ use of standalone financial derivatives (i.e. those that are not embedded into a loan or investment). The latest CIPFA Code requires authorities to clearly detail their policy on the use of derivatives in the annual strategy.

2.6.3 The Authority will only use standalone financial derivatives (such as swaps, forwards, futures and options) where it is confident it has the powers to enter into such transactions. They will only be used for the prudent management of its financial affairs and never for speculative purposes and where it can be clearly demonstrated to reduce the overall level of the financial risks that the Authority is exposed to. Additional risks presented, such as credit exposure to derivative counterparties, will be taken into account when determining the overall level of risk. Embedded derivatives will not be subject to this policy, although the risks they present will be managed in line with the overall treasury risk management strategy.

2.7 Other Matters 2.7.1 The DCLG Investment Guidance also requires the Authority to note the following matters

each year as part of the investment strategy:

(i) Investment Consultants The Council’s adviser is Arlingclose Limited. The services received include:

• Advice and guidance on relevant policies, strategies and reports; • Advice on investment decisions; • Notification of credit ratings and changes; • Other information on credit quality; • Advice on debt management decisions; • Accounting advice; • Reports on treasury performance; • Forecasts of interest rates; and • Training courses.

The quality of the service is monitored on a continuous basis by the Council’s treasury management team.

(ii) Investment Training

The needs of the Council’s treasury management staff for training in investment management are assessed on a continuous basis, and formally on a 6-monthly basis as part of the staff appraisal process. Additionally training requirements are assessed when the responsibilities of individual members of staff change. Staff attend training courses, seminars and conferences as appropriate.

(iii) Investment of money borrowed in advance of need

The Authority may, from time to time, borrow in advance of need, where this is expected to provide the best long term value for money. However, as this would involve externally investing such sums until required and thus increasing exposures to both interest rate and principal risks, it is not believed appropriate to undertake such a policy at this time.

2.7.2 Co-Operative Bank The Co-Operative Bank is contracted to provide current account banking facilities to the Authority until 2017. Following the bank’s recent financial problems and re-capitalisation, the bank has re-assessed its core business and decided that it is to withdraw from providing banking services to local authorities. Although the bank will fulfil existing contracts, it has also indicated that it will provide assistance to authorities wishing to transfer to another bank for these services before contracts expire. Officers are currently reviewing current account banking arrangements with a view to going out to tender in the near future or entering into a framework facility.

3 Implications to the Authority

3.1 The strategies outlined have been reflected in the treasury management budget.

4 Consultees and their opinions

4.1 This report has been prepared by the Chief Finance Officer.

5 Next Steps

5.1 This will be considered at the budget meeting of Full Authority and monitored in future reports submitted to Finance & Resources Committee as outlined within the report.

6 Officer recommendations and reasons

6.1 Members are asked to approve the following:

i. the investment strategy outlined in section 2.3 and Appendix A; ii. the borrowing strategy outlined in section 2.4; iii. the policy for provision of repayment of debt outline in Appendix C; iv. the treasury management indicators in Appendix D.

APPENDIX A Specified Short-term Credit Ratings /

Long-Term Credit Ratings

Investment Limits per Counterparty

Counterparties falling into category as at Jan 2014

Fitch Moody’s S & P £m Period (3)

UK Bank / Building Society

F1 P-1 A-1 6 <2mth HSBC Barclays

Lloyds Group Nationwide

AAA,AA+,AA,AA-,A+,A

Aaa,Aa1,Aa2, Aa3,A1,A2

AAA,AA+,AA,AA-,A+,A

Foreign Banks F1 P-1 A-1 6 Instant access Handelsbanken Santander UK AAA,AA+,AA,

AA-,A+,A Aaa,Aa1,Aa2,

Aa3,A1,A2 AAA,AA+,AA,

AA-,A+,A Part nationalised UK Bank / Building Society

F1,F2 P-1,P-2 A-1,A-2 6 <2mth Lloyds Group RBS Group Higher than

BBB Higher than

Baa2 Higher than

BBB MMF (2) - - - 6 Instant access/

2 day notice Various

DMADF - - - Unlimited <6mth Central UK Government UK local authorities - - - Unlimited <2mth All UK local authorities

Non-Specified (1) Short-term Credit Ratings /

Long-Term Credit Ratings Investment Limits per

Counterparty Counterparties falling into

category as at Jan 2014 Fitch Moody’s S & P £m Period (3)

UK Bank / Building Society

F1,F2 P-1,P-2 A-1,A-2 1 <2mth Coventry BS Leeds BS Higher than

BBB Higher than

Baa2 Higher than

BBB Current account bank F1,F2 P-1,P-2 A-1,A-2 1 Instant access Not the current provider

Higher than BBB-

Higher than Baa3

Higher than BBB-

(1) Overall limit of £2 million. (2) Overall limit for investments in MMFs of £9 million. (3) The investment period begins from the commitment to invest, rather than the date on which funds are paid over.

APPENDIX B

Credit ratings

Moody's S&P Fitch

Long-term Short-term Long-term Short-term Long-term Short-term

Aaa

P-1

AAA

A-1+

AAA

F1+

Prime

Aa1 AA+ AA+

High grade Aa2 AA AA

Aa3 AA- AA-

A1 A+ A-1

A+ F1

Upper medium grade A2 A A

A3 P-2

A- A-2

A- F2

Baa1 BBB+ BBB+

Lower medium grade Baa2 P-3

BBB A-3

BBB F3

Baa3 BBB- BBB-

Ba1

Not prime

BB+

B

BB+

B

Non-investment grade speculative Ba2 BB BB

Ba3 BB- BB-

B1 B+ B+

Highly speculative B2 B B

B3 B- B-

Caa1 CCC+

C CCC C

Substantial risks

Caa2 CCC Extremely speculative

Caa3 CCC-

In default with little prospect for recovery Ca

CC

C

C

D /

DDD

/ In default / DD

/

APPENDIX C

STATEMENT OF POLICY ON THE MINIMUM REVENUE PROVISION (REPAYMENT OF DEBT)

1. Background 1.1 The Local Authorities (Capital Finance and Accounting) (England) Regulations 2008

which came into force on 31 March 2008, replaced the detailed statutory rules for calculating MRP with a requirement to make an amount of MRP which the authority considers “prudent”.

2. Prudent Provision 2.1 The regulation does not itself define “prudent provision”. However, guidance issued

alongside the regulations makes recommendations on the interpretation of that term.

The guidance provides two basic criteria for prudent provision:-

• Borrowing not supported by government grant (prudential borrowing) – the provision for repayment of debt should be linked to the life of the asset.

• Borrowing previously supported by revenue support grant (supported borrowing) - the provision should be in line with the period implicit within the grant determination (4% reducing balance).

3. Proposed policy for 2014/15 3.1 The Authority has always been prudent when making provision for the repayment of

debt. In addition to the minimum revenue provision of 4% of debt outstanding previously required, the Authority had regularly made additional voluntary contributions. These voluntary contributions have been calculated to reflect asset life. Thus, for example, debt used to finance vehicles and many types of operational equipment has been fully provided for over a 10 year period and all new buildings over 50. These additional voluntary contributions covered all debt, not just unsupported, and have been calculated using an annuity method with reference to asset lives.

3.2 It is recommended that this policy is continued for 2014/15. The features of the policy can be summarised as follows:

• Provision to be made over the estimated life of the asset for which borrowing is undertaken

• To be applied to supported and unsupported borrowing • Provision will increase over the asset life using sinking fund tables • Provision will commence in the financial year following the one in which the

expenditure is incurred

3.3 The continuation of the existing policy is fully accounted for in the proposed three year treasury management budget.

APPENDIX D

TREASURY MANAGEMENT INDICATORS

Net and Gross Debt

The authority is required to set for forthcoming year and the following two years upper limits on the proportion of net debt compared to gross debt. This indicator is to highlight where an authority may be borrowing in advance of need. It is recommended to set a net debt limit of 100% of gross debt for all three years.

Interest Rate Exposures

While fixed rate borrowing can contribute significantly to reducing the uncertainty surrounding future interest rate scenarios, the pursuit of optimum performance justifies retaining a degree of flexibility through the use of variable interest rates on at least part of the treasury management portfolio. The Code requires the setting of upper limits for both variable rate and fixed interest rate exposure.

It is recommended that the Authority sets an upper limit on its fixed interest rate exposures for 2014/15, 2015/16 and 2016/17 of 100% of its net interest payments. It is further recommended that the Authority sets an upper limit on its variable interest rate exposures for 2014/15, 2015/16 and 2016/17 of 40% of its net interest payments.

This means that fixed interest rate exposures will be managed within the range 60% to 100%, and variable interest rate exposures within the range 0% to 40%.

Maturity Structure of Borrowing

This indicator is designed to prevent the Authority having large concentrations of fixed rate debt* needing to be replaced at times of uncertainty over interest rates. It is recommended that the Authority sets upper and lower limits for the maturity structure of its borrowings as follows:

Amount of projected borrowing that is fixed rate maturing in each period as percentage of total projected borrowing that is fixed rate

Upper Limit (%) Lower Limit (%)

Under 12 months 20 0

Between 1 and 2 years 20 0



More than 10 years 100 20

*LOBOs are classed as fixed rate debt unless it is considered probable that the loan option will be exercised.

Total principal sums invested for periods longer than 364 days

The Authority is not intending to invest sums for periods longer than 364 days.

APPENDIX E

TREASURY MANAGEMENT COMPARISON OF INVESTMENT LIMITS

INSTITUTIONS West Greater Merseyside South Tyne & WestYorkshire Manchester Yorks Wear Midlands

£m £m £m £m £m £m

UK Banks 6 10 2 5 90 10Miximum period 2 months 364 days 2 years 364 daysForeign Banks 6 2 5 40 10Maximum period instant access 364 days 364 daysPart nationalised banks 6 10 4 10 90 10Maximum period 2 months 364 days 2 years 364 daysMoney Market Funds 6 3 5 40 10Maximum period instant access instant access 364 daysDMADF unlimited unlimited 80Maximum period 6 monthsUK local authorities unlimited 5 unlimited 30Maximum period 2 months 364 days

Handelsbanken West Midlands have a limit of £30m

Purpose To present a Quarterly Review of the financial position of the Authority.

Recommendations A). That Members note the content of the report.

B). Approve the revised Revenue Budget

C). Approve the revised Capital Plan

Summary The purpose of this report is to present an overview of the financial performance of the Authority of the third quarter of the current financial year. The report deals with revenue and capital expenditure.


Quarterly Review Finance & Resources Committee Date: 24 January 2014 Agenda Item: 6Submitted By: Chief Finance & Procurement Officer


Exemption Category: Nil

Contact Officer: Geoff Maren – Chief Finance & Procurement Officer t: 01274 655711 e: [email protected]

Background papers open to inspection:

Annexes:

27


1 Background 1.1 The purpose of this report is to present an overview of the financial performance of the Authority

for the third quarter of the current financial year. The report only deals with revenue and capital expenditure monitoring with no information on Treasury management and debtors and creditors as explained below.

Treasury Management – this is subject of a separate detailed report on this agenda setting out the proposed treasury management strategy for 2014/2015.

Debtors and Creditors - As explained at the previous meeting Kirklees Council who provide the Authority’s financial ledger system are in the process of migrating to a new system. As part of this transition the information required to produce the debtor and creditor management information is not currently available. This information will be updated for the next meeting

28

SECTION 1 REVENUE EXPENDITURE MONITORING

1. INTRODUCTION

Expenditure is monitored throughout the year against the approved revenue budget withreports being considered by each meeting of the Management Board and each meetingof the Finance and Resources Committee. The purpose of the report is to monitorprogress against the approved revenue budget; provide an early forecast outturn for thefinancial year; provide an explanation of any major variations, and to show the impact ofany variations on the revenue balances of the Authority.

This is the third report of the financial year and is based on expenditure for the first 9months of the year. Forecasts are based on the current year’s expenditure usingexpenditure profiles and known commitments.

2. REVENUE BUDGET REVISION

When the revenue budget is approved an amount is included in contingencies for futurepay and price increases. There have been no allocations from contingencies in the lastquarter.

3. EXPENDITURE MONITORING

As explained in previous reports it is expected that the Authority will underspend itsbudget in the current financial year, principally as a result of the dispensation on preceptallowed in the Local Government Finance Settlement. The Authority was able toincrease its precept by £4.99 at band d generating additional precept in of £2.9m perannum. This allowed it to address some of the longer term financial issues which havebeen identified in the medium term financial plan. Despite this the Authority will stillhave to identify additional savings of over £10.0m by 2018 and consequently continuesto look for further efficiencies.

Based on current levels of expenditure and forecast leavers we are currently predictingan underspending of £2.7m for the current financial year an increase of £0.45m over theprevious forecast. A summary of the major variances is shown in the table below.

FORECAST

£000

APPROVED BUDGET

£000

VARIANCE

£000 Wholetime firefighters £53,726 £55,556 -£1,830 Support staff Transport costs Supplies and services Insurance costs

£7,542 £2,139 £4,630 £1,064

£7,853 £2,293 £5,009

£960

-£311 -£154 -£379 +£104

Capital financing charges £6,973 £6,823 +£150

29

3.2 Whole-time Firefighters -£1.83m

As explained in the previous report the underspending can be broken down into 3 areas

• Accounting adjustment relating to pension costs following the case of Norman VCheshire

• Additional fire fighter leavers• Reductions in overtime expenditure

The main change since the previous report relates to overtime expenditure where we are now forecasting an increased underspending.

Whilst there have been some increased costs as a result of the industrial action these have been met from within the existing budget through deductions from salary and savings in overtime as a result of the current dispute.

3.3 Support staff -£311k

As explained in the previous report there is currently a number of vacancies in the support staff establishment and there have been additional leavers in the last 3 months.

3.4 Transport Costs -£154k

The latest forecast has identified an underspending on transport related expenses with a significant underspending on fuel costs. This is partly as a result of the reduction in the size of the fleet and partly through a reduction in fuel costs

3.5 Supplies and services -£379k

Expenditure profiles indicated a significant reduction in expenditure on both operational and training equipment in the current year. This is now confirmed to be a genuine underspending linked to the replacement of protective equipment and breathing apparatus. The actual forecast underspending has increased by £150,000.

3.6 Insurance costs +£104k

As part of the winding up of Municipal Mutual insurance those Authorities with policies retained a liability against future claims this Authority had a total potential liability of £740,000. Under the terms of the arrangement the Authority is required to make a payment equivalent to 15% of the total liability of £104,000. Whilst the Authority has made provision for payments of upto £0.25m, it is considered prudent to maintain this provision to cover any future calls and to meet this payment from within the current year’s budget.

3.7 Capital Financing Charges +£150k

As part of the revenue budget process, the budget for capital financing charges was reduced by £385k to reflect the fall in interest rates and the extended use of short term variable rate loans. The current projection is for an overspending of £150k although this may change as the capital expenditure profile changes during the course of the financial year.

30

4. IMPACT ON REVENUE BALANCES

As explained above the balance brought forward has reduced by £0.375m to £10.46m

Description General Reserve Balance at 1 April 2013 + £10.46m Planned increase + £ 0.94m Impact of forecast + £ 2.70m Forecast balance at 31/3/2014

+£14.1m

The strategy for the use of balances forms part of the annual budget and medium term financial plan. A further report on this agenda looks at the prospects for the 2014/2015 and 2015/2016 revenue budget. Whilst it is unlikely the Authority will have to draw on these balances in these two years they will form a critical part of the longer term financial plan

31

2013/2014 REVENUE EXPENDITURE MONITORINGJANUARY 2014

EXPENDITURE PAYMENTS EXPEND APPROVED REVISED FORECAST

TO DATE FORECAST BUDGET VIREMENT BUDGET VARIANCE

£000 £000 £000 £000 £000

Wholtime fi refighters £29,855 £53,726 £55,556 £55,556 -£1,830

Reta ined fi refighters £1,042 £2,029 £2,345 £2,345 -£316

Firefighters pens ions £1,970 £1,970 £1,970 £0

Brigade control £980 £1,794 £1,853 £1,853 -£59

Support s taff £3,993 £7,542 £7,853 £7,853 -£311

Other employee expenses £279 £750 £710 £710 £40

Premises expenses £1,826 £3,040 £3,034 £3,034 £6

Transport costs £1,305 £2,139 £2,293 £2,293 -£154

Suppl ies and services £3,081 £4,630 £5,009 £5,009 -£379

Insurance £1,064 £960 £960 £104

Lead authori ty charges £288 £288 £288 £0

Capita l financing charges £6,973 £6,823 £6,823 £150

Provis ion for pay & prices £702 £702 £702 £0

Tota l Expenditure £86,647 £89,396 £0 £89,396 -£2,749

Grants £1,457 £1,481 £1,481 £1,481 £0

Other Income £775 £1,158 £1,196 £1,196 -£38

Tota l Income £2,639 £2,677 £0 £2,677 -£38

Net expenditure £84,008 £86,719 £0 £86,719 -£2,711

32

SECTION 2 CAPITAL EXPENDITURE MONITORING

1 INTRODUCTION

At its meeting on 21 February 2013, the Authority approved a five year capital programme of £45.4m which included schemes to the value of £13.709m for the current financial year.

2 SCHEMES SLIPPED BETWEEN FINANCIAL YEARS AND CAPITAL VIREMENT

The nature of major capital schemes means that expenditure often straddles a number of financial years, particularly the case in major building schemes and the development of major information systems. This is particularly relevant in the current position where the Authority is planning the construction of 8 new fire stations. Schemes totalling £4.066m which were not completed in 2012/2013. Other changes to the capital plan have revised the overall plan to £16.48m.

The report on the revenue budget and medium term financial plan which is also on this agenda includes a draft five year capital plan which includes the IRMP schemes which will have not been completed in the current financial year.

At the Authority AGM in 2010 the Management Board was given delegated power to approve individual virement between capital schemes of up to £100,000. Details of any approvals will be reported to committee throughout the year as part of this report. There have been no new virement since the last meeting of this committee.

3 CAPITAL PAYMENTS 2013/2014

The actual capital payments to date total £5.086m most of which is on schemes which commenced in the previous financial year. However the Authority has now purchased the sites for two replacement fire stations at Batley and Rastrick. Details of expenditure on individual schemes are included in Appendix 2.

4 3 APPROVALS UNDER FINANCIAL PROCEDURE 3.11

Under financial procedures 3.11 the Management Board can approve expenditure on schemes in the approved capital plan up to an amount of £100,000. This approval is subject to approvals being reported to the Finance and Resources Committee. There have been no new approvals since the last meeting of this Committee.

SECTION 3 TREASURY MANAGEMENT

This is the subject of a separate report also on this agenda

33

APPENDIX 1

CAPITAL BUDGET MONITORING 2013/14SUMMARY

Directorate 2013/14 Virement/ 2013/14 Expenditure BalanceCapital Slippage Revised Capital 2013/14 Uncommitted

Plan Plan

Property services £2,350,000 -£1,037,000 £1,313,000 £317,807 £995,193

IRMP £7,262,800 £1,833,200 £9,096,000 £1,224,382 £7,871,618

Information technology £1,286,000 £129,100 £1,415,100 £299,928 £1,115,172

Transport £2,337,359 £0 £2,196,559 £1,483,463 £712,246

Operations £1,083,000 £683,300 £1,766,300 £1,426,262 £340,038

Fire Safety & Community Relations

£700,000 £0 £700,000 £334,354 £365,646

£15,019,159 £1,608,600 £16,486,959 £5,086,197 £11,399,912

35

CORPORATE RESOURCESPROPERTY

Details of 2013/14 Virement/ 2013/14 TOTAL BalanceScheme Capital Slippage Revised Capital EXPT Uncommitted

Plan Plan

Supplies and TransportRefurbishment of building following fire damage £800,000 -£650,000 £150,000 £32,641 £117,359

£0Training Centre £0FSHQ Training Centre - Upgrade audio and visual systems in lecture theatre & Conference Room

£20,000 £20,000 £0 £20,000

£660,000 -£300,000 £360,000 £0 £360,000Oakroyd Hall £0General Specific Refurbishments £0Fire Stations (inc Illingworth, Odsal & Wetherby) Environmental and Energy Efficiency improvements

£40,000 £40,000 £0 £40,000

Slaithwaite Fire Station Refurbishment £100,000 £3,500 £103,500 £92,748 £10,752Huddersfield Fire Station Boiler replacement and solar panel domestic hot water system

£30,000 -£23,000 £7,000 £7,856 -£856

Keighley Fire Station internal accommodation refurbishment (inc washing & training facilities)

£50,000 £50,000 £0 £50,000

Cleckheaton Fire Station refurbishment of male washing facilities £50,000 £50,000 £0 £50,000

Wetherby Fire Station upgrade and refurbishment of heating system £20,000 -£19,000 £1,000 £325 £675

Odsal Fire Station upgrade and refurbishment of central heating and solar panel domestic hot water system

£100,000 -£93,000 £7,000 £7,187 -£187

General Strategic RefurbishmentsUpgrading of fire alarm systems £50,000 £50,000 £1,328 £48,672Replacement of old diesel tanks and interceptors £30,000 £30,000 £0 £30,000Refurbishment of vehicle pits £10,000 £10,000 £6,398 £3,602Health and Safety improvements £40,000 -£15,000 £25,000 £8,134 £16,866Electrical and heating refurbishment works £50,000 £50,000 £3,225 £46,775Training tower upgrades including lighteneing and power surge protection systems

£30,000 £30,000 £18,730 £11,270

Asbestos management and removal £30,000 -£23,000 £7,000 £1,460 £5,540Roof replacement and upgrades including thermal insulation £50,000 -£25,000 £25,000 £0 £25,000DDA access £10,000 £10,000 £0 £10,000

Internal fabric refurbishments to meet reorganisation requirements £50,000 £50,000 £22,865 £27,135

Upgrade appliance bay doors £10,000 £10,000 £3,400 £6,600External fabric refurbishment £30,000 £30,000 £0 £30,000Replacement and upgrading tarmac and surfaces to drill grounds £30,000 £30,000 £0 £30,000Fire station kitchen installations £10,000 £10,000 £4,936 £5,064Access control and security improvements £50,000 £50,000 £10,163 £39,837

TOTAL CAPITAL PLAN 2013/14 £2,350,000 -£1,144,500 £1,205,500 £221,395 £984,105

Oakroyd Hall Major refurbishment £1,800 £1,800 £300 £1,500Phased programme of washing & welfare refurbishments - Odsal & Cleckheaton

£2,300 £2,300 £1,500 £800

DDA access improvements (lift retention) £3,700 £3,700 £5,063 -£1,363Asbestos removal and major environmental improvements £3,700 £3,700 £0 £3,700Replacement of roof to old gym building £59,100 £59,100 £57,689 £1,411Health & Safety improvemments £16,900 £16,900 £14,873 £2,027Electrical, heating and other services equipement replacement £4,100 £4,100 £2,669 £1,431Lightening and power surge protection £0 £0 £0Asbestos management & removal £1,500 £1,500 £0 £1,500DDA access improvements £6,900 £6,900 £6,861 £39Access control & security improvements £7,500 £7,500 £7,456 £44

TOTAL SLIPPAGE £107,500 £107,500 £96,413 £11,088

TOTAL CAPITAL INCLUDING SLIPPED SCHEMES £2,350,000 -£1,037,000 £1,313,000 £317,807 £995,193

36

CAPITAL BUDGET MONITORING 2013/14IRMP

Details of 2013/14 Virement/ 2013/14 TOTAL BudgetScheme Capital Slippage Revised Capital EXPT Remaining

Plan Plan

IRMP South Kirkby £1,332,000 £200,000 £1,532,000 £0 £1,532,000South Kirkby close call block £315,000 £315,000 £0 £315,000Rastrick £1,580,800 £500,000 £2,080,800 £491,764 £1,589,037Menston £575,000 £575,000 £0 £575,000Menston Close call block £0Killingbeck £957,500 £340,000 £1,297,500 £18,879 £1,278,621Batley Carr £985,500 £625,000 £1,610,500 £619,815 £990,685Shipley / Idle £0 £0Wakefield / Ossett £0 £0Moortown / Cookridge £0 £0Fairweather Green £0Rothwell £1,517,000 £1,517,000 £42,557 £1,474,443HunsletCastleford Refurbishment £18,200 £18,200 £2,111 £16,089Pontefract Firestation New Build £50,000 £50,000 £24,699 £25,301 Build £100,000 £100,000 £7,732 £92,268Castleford close call £0 £16,825 -£16,825

TOTAL CAPITAL PLAN 2013/14 £7,262,800 £1,833,200 £9,096,000 £1,224,382 £7,871,618

37

CORPORATE RESOURCESIT


Plan Plan

Computer Hardware £90,000 3000 £93,000 £29,584 £63,416Software Licences £230,000 23500 £253,500 £188,141 £65,359Servers and Storage £110,000 £110,000 £5,300 £104,700Server room equipment £185,000 £185,000 £53,130 £131,871MDT replacement £611,000 £611,000 £0 £611,000HR training records £60,000 4000 £64,000 £4,364 £59,636Networking hardware £10,800 £10,800 £10,766 £35Mobile computing £7,800 £7,800 £7,794 £6Secure Internet - PSN £80,000 £80,000 £0 £80,000Web Development Programme £0 £850 -£850

TOTAL CAPITAL PLAN 2013/14 £1,286,000 £129,100 £1,415,100 £299,928 £1,115,172

CORPORATE RESOURCESTRANSPORT


Plan Plan

Vehicle replacement £1,215,000 £1,215,000 £1,231,020 -£16,020Young Firefighter £55,000 £55,000 £51,495 £3,505POD refurbishments £45,000 £45,000 £455 £44,545Traffic Light Management £20,000 £20,000 £0 £20,000Ladders £60,000 £60,000 £52,377 £7,623Silent Witness £110,000 £110,000 £4,650 £105,350Bradford CARP £3,475 -£3,475Huddersfield CARP £0 £140,800 £0 £140,842 -£140,842Leeds CARP £680,000 -£140,800 £539,200 £0 £539,200Command Unit Lite (Grant funded) £152,359 £152,359 £0 £152,359

TOTAL CAPITAL PLAN 2013/14 £2,337,359 £0 £2,196,559 £1,483,463 £712,246

38

OPERATIONS


Plan Plan

Lay Flat Hose £12,000 £12,000 £17,260 -£5,260Line Rescue Equipment £15,000 £15,000 £9,670 £5,330Stabfast £22,000 £22,000 £0 £22,000Thermal Image Cameras £25,000 £25,000 £26,160 -£1,160Water Rescue Equipment £15,000 £15,000 £22,573 -£7,573BA Wire Cutters £12,000 £12,000 £24,240 -£12,240Cold Cut Cobra £60,000 £60,000 £0 £60,000Intrinsic Radios £45,000 £45,000 £45,068 -£68Premises Risk Database £12,000 £12,000 £0 £12,000Hydrants £450,000 £450,000 £88,719 £361,281New Control Project (Premises costs) £0 £558,300 £558,300 £662,671 -£104,371New Control Project West Yorks £0 £0 £144,826 -£144,826New Control Project South Yorks Collaboration £0 £0 £267,001 -£267,001New Control Project Contingency £415,000 £415,000 £9,858 £405,143Equipment replacement

TOTAL CAPITAL PLAN 2013/14 £1,083,000 £558,300 £1,641,300 £1,318,044 £323,256

Command Units ICT Provision and Upgrade £0 £5,000 £5,000 £5,000 £0BA Equipment £0 £120,000 £120,000 £103,218 £16,782

TOTAL SLIPPAGE £0 £125,000 £125,000 £108,218 £16,782

TOTAL CAPITAL INCLUDING SLIPPED SCHEMES £1,083,000 £683,300 £1,766,300 £1,426,262 £340,038

FIRE SAFETY


Plan Plan

Home Fire Safety Checks £700,000 £0 £700,000 £334,354 £365,646

TOTAL CAPITAL INCLUDING SLIPPED SCHEMES £700,000 £0 £700,000 £334,354 £365,646

39

Appendix D

TREASURY MANAGEMENT INDICATORS

Net and Gross Debt

The authority is required to set for forthcoming year and the following two years upper limits on the proportion of net debt compared to gross debt. This indicator is to highlight where an authority may be borrowing in advance of need. It is recommended to set a net debt limit of 100% of gross debt for all three years.

Interest Rate Exposures

While fixed rate borrowing can contribute significantly to reducing the uncertainty surrounding future interest rate scenarios, the pursuit of optimum performance justifies retaining a degree of flexibility through the use of variable interest rates on at least part of the treasury management portfolio. The Code requires the setting of upper limits for both variable rate and fixed interest rate exposure.

It is recommended that the Authority sets an upper limit on its fixed interest rate exposures for 2014/15, 2015/16 and 2016/17 of 100% of its net interest payments. It is further recommended that the Authority sets an upper limit on its variable interest rate exposures for 2014/15, 2015/16 and 2016/17 of 40% of its net interest payments.

This means that fixed interest rate exposures will be managed within the range 60% to 100%, and variable interest rate exposures within the range 0% to 40%.

Maturity Structure of Borrowing

This indicator is designed to prevent the Authority having large concentrations of fixed rate debt* needing to be replaced at times of uncertainty over interest rates. It is recommended that the Authority sets upper and lower limits for the maturity structure of its borrowings as follows:

Amount of projected borrowing that is fixed rate maturing in each period as percentage of total projected borrowing that is fixed rate

Upper Limit (%) Lower Limit (%)

Under 12 months 20 0




More than 10 years 100 20

*LOBOs are classed as fixed rate debt unless it is considered probable that the loan optionwill be exercised.

Total principal sums invested for periods longer than 364 days

The Authority is not intending to invest sums for periods longer than 364 days.

40

Purpose To make Members of aware of the availability of grant funding from Government to support transformational change and to achieve efficient and effective service delivery.

Recommendations Members note the response to the consultation process on Fire and RescueAuthority Transformation Funds for 2015-16 Bidding Process

Summary In the recent 2013 Spending Round Government announced £30 million of resource funding to be made available to the fire sector for 2015-16 to support transformational change and deliver sensible savings, in particular opportunities identified by the Knight Review. A £45 million capital fire efficiency incentive fund was also announced to further assist fire and rescue authorities in achieving efficient and effective service delivery. In December 2013 DCLG issued a consultation document on the bidding process for the funding, which ran for six weeks, concluding on 14 January 2014. A response to the consultation has been submitted from West Yorkshire Fire and Rescue Authority.


Consultation on Transformation Funds for 2015-16 Bidding Process Finance & Resources Committee Date: 24 January 2014 Agenda Item: 7Submitted By: Director of Strategic Development and Chief Finance officer



Contact Officer: Director of Strategic Development and Chief Finance Officer

Background papers open to inspection: The Knight Review https://www.gov.uk/government/publications/facing-the-future

Annexes: Fire and Rescue Authority Transformation Funds for 2015-16 Bidding Process – Annex A Consultation, Annex B - Response

41

https://www.gov.uk/government/publications/facing-the-future

1 Introduction 1.1 As part of his spring 2013 budget statement, the Chancellor of the Exchequer announced £30

million of resource funding would be made available for return to the fire sector for 2015-16 to support transformational change and deliver sensible savings. In particular the funding would be targeted at opportunities identified by the Knight Review, such as creating more emergency centres to accommodate the three blue light services, sharing back office functions and running joint response systems.

1.2 In addition a £45 million capital fire efficiency incentive fund was also announced to further assist fire and rescue authorities in achieving efficient and effective service delivery by encouraging greater collaboration between the Fire Service and other emergency services and to encourage fire services to invest capital in ensuring that fire service assets such as fire stations are appropriately located to ensure efficient and effective service delivery.

1.3 Members will recall that a successful capital bid was submitted in 2012 to support implementation of its Integrated Risk Management Plan. Success in obtaining this funding, which was a competitive process, was due primarily to the significant return on investment and the fact that the Authority had already approved the ambitious change programme.

2 Information 2.1 Government once again intends for applications for the latest funding to be a competitive process

and in December 2013 DCLG published a consultation document (Annex A). This consultation aims to both familiarise fire and rescue authorities with the single bidding process being developed for these funds and to gather opinions and feedback to make sure the bidding process operates as smoothly and effectively as possible. In particular, DCLG was seeking views on the funds being allocated on a ‘lot based’ system (so that the funds do not all go to a few high-performing projects), and the proposed criteria to be used in assessing and weighting bids. DCLG also wanted to gather feedback on the forms and supporting documents associated with the bidding process.

2.2 The consultation process ran for six weeks, concluding on 14 January 2014. Due to the timescales and dates of Committee meetings, it has not been possible to produce a formal response in time to obtain Authority approval, therefore Officers have responded on behalf of the Authority (Annex B page 71)

2.3 In December 2012, the Fire Minister, Brandon Lewis MP, commissioned Sir Ken Knight to undertake a review of efficiencies and operations in fire and rescue authorities in England. The resultant report, “Findings of the review into efficiency and operations of fire and rescue authorities in England” was published in May 2013 and is the culmination of that work. In spite of the fact that Government is yet to issue any formal response to the Knight Review, the consultation document makes it clear that funding will be aligned to many of the conclusions contained in the report, in particular a strong reference to greater collaboration across the three blue light services of fire, police and ambulance. The Home Secretary has echoed the views of DCLG and the Fire Minister, encouraging greater blue light collaboration. However, the position of the Department of Health is less clear.

2.4 At a local level, relationships with the blue light services are strong and collaboration is taking place, generating efficiencies for all concerned. In particular, the relationship with West Yorkshire Police is delivering some excellent outcomes and the meetings which take place at a strategic level are identifying real potential for even closer working.

3 Financial Implications

3.1 It is important to note that these are not additional resources provided for the fire sector as they have been funded from cuts in the fire service expenditure totals. The purpose of this being to shift fire service expenditure into areas which will generate long term financial savings.

42

3.2 As mentioned in paragraph 1.3, this Authority was successful in the 2012 capital bidding round and will receive capital grants of £11m to assist in delivering its Integrated Risk Management Plan (IRMP). This capital grant will deliver long term savings of around £1m in capital financing charges.

3.3 Whilst the Authority cannot submit further bids in relation to the December 2011 IRMP which formed the basis of the previous capital bids, there remains flexibility in relation to the December 2012 IRMP and potential bids are currently being put together. Once again, these will relate to schemes which have already received Authority approval and meet the criteria set down in the consultation document.

4 Equality and Diversity Implications 4.1 There are no equality and diversity implications arising directly from this report and Government

have stated that the proposal does not require an impact assessment as part of the policy clearance process.

5 Health and Safety Implications

5.1 There are no health and safety implications arising directly from this report

6 Service Plan Links

6.1 The availability of grant funding can have a direct and positive impact on delivery of all Service Plan objectives.

7 Conclusions

7.1 As part of the ongoing challenges to deliver efficiency savings, Government is once again offering financial incentives to fire and rescue authorities who can demonstrate innovative and transformational change. The strong relationships between blue light partners at a local level, combined with clear plans for further modernisation across the Service, provide an opportunity for the Authority to attract grant funding in support of its ambitious change programme. The response submitted on behalf of the Authority is therefore generally positive, albeit there are concerns raised, particularly in relation to the complexity of the bidding process.

43

Appendix B

Response of West Yorkshire Fire and Rescue Authority to the Fire and Rescue Authority Transformation Funds for 2015-16 Bidding Process

Q1. The bidding process has been designed to support the transformation in the delivery of fire and rescue services. Taking that into account, is there anything further you think should be taken into consideration to help drive transformative change and greater efficiency?

Yes, the process should be far more explicit in relation to combination schemes (a merger), transfer of function’s (either in part or in full) and commissioning of services (for example a county council commissioning another fire and rescue authority to deliver its fire and rescue service or part of its service – being different to transfer of functions .

Bidding Authorities should be able to demonstrate their commitment to the scheme, this could be either in the form of joint funding or existing approvals. It is also important that there is evidence of commitment from third parties in the case of joint bids. We also believe that projects should stand on their own merits without being reliant on grant funding to make the business case.

Q2. Do you agree with the concept of a ‘lot based’ funding system, to ensure that projects bids get assessed on a like for like basis?

No. Whilst the principal of attempting to support a larger number of bids is sound, the lot based funding system is overly complex, would restrict innovation/ambition and also restricts flexibility for DCLG to select the bids which deliver the most efficiency and transformation. There is a real risk that some high quality bids in one pot could lose out on funding at the expense of poorer quality bids in another pot. We therefore believe that all bids should be judged on their own merit in a single pot.

Q3. Do you agree that the Government should be able to limit bids, depending on the quality and number of bids received?

No. The process should be based on the robustness of the business case. If an authority has more than one project and they are unrelated (for example a station merger proposal to rationalise emergency cover and a collaborative IT project) they should be able to bid for more than one set of funding.

Q4. Do you think an authority should be able to identify a preferred part of a large scale bid to fund?

No. The whole process is designed to encourage innovation and transformation based on sound strategic objectives, and coherent plans that the authority(s) are confident will deliver efficiencies. To have to identify which part of a large scale plan should receive funding would not make any sense because the funding should support the whole. It is for DCLG to determine what percentage they wish to contribute. If the Authority is serious about a project it will be prepared to fund part/all of it in any case and the additional grant from Government would simply offset capital charges or support revenue expenditure thereby ensuring more resources are available for service delivery.

Q5. Do you agree that a fire and rescue authority (or authorities) should be able to submit an additional bid that was potentially exempt from any bid limit per fire and rescue authority if more than two fire and rescue authorities have formally signed up to the proposal?

Our comments above in response to Question 2 already shows our preferred approach so this question is only applicable if the answer to question 2 is yes. If however DCLG do select the lot based funding then we believe the exemption should only apply to combination schemes or similar.

71

Q.6 Do you agree in principle with a weighting system that would help direct funds towards the more innovative transformative change projects?

Yes. The criteria of VFM, and good project management are sound and we generally agree with the policy objectives but greater clarity is required in relation to the objective of “improving local accountability”. It is difficult to see why major capital/resource investment is necessary to improve local accountability. We also repeat our view that the pot based funding system will restrict DCLG’s ability and flexibility to allocate funding based on the weighting system suggested.

Q7. If you disagree with a weighting system, please outline, in no more than 500 words, what your alternative would be.

N/A

Q8. Do you agree with the bidding process as set out above and on the attached draft application forms?

Yes. With the caveats associated with our comments above.

Q9. Do you have any suggestions to improve the draft forms/ application process?

No. With the caveats associated with our comments above.

Q10. Do you feel the proposed timetable is realistic to allow for the bidding process to be implemented?

Yes. However, the timescale between the deadline for submission of bids and the announcement of successful bidders should be shortened, with announcements in summer 2014. Our experience has shown that major transformation projects have long lead in times, for planning applications, design work, tenders, etc. which places significant pressure to spend funds within the year allocated. Early notification of success or otherwise will allow more time for implementation and/or identification of alternative funding or options for change.

Q11. If you have concerns about the timetable, what changes would you make to make it more realistic?

See response to question 10

72

Purpose To request the Finance and Resources Committee recommend the re-introduction of charging by West Yorkshire Fire and Rescue Service (WYFRS) for information requested by members of the public and private organisations.

Recommendations Further to Management Board consideration it is deemed appropriate thatWYFRS should charge for the supply of Fire Reports and Fire Investigation Reports. It is recommended that the Finance and Resources Committee should approve the re-introduction of charges for the supply of information at the level of fee for each information category based on the scale as detailed at paragraph 2.10 of this report.

Summary WYFRS has not charged a fee for information requests relating to Fire Reports and Fire Investigation Reports since 2005. Due to the current financial constraints WYFRS needs to consider the application of an appropriate fee.


WYFRS Information Charges Finance & Resources Committee Date: 24 January 2014 Agenda Item: 8Submitted By: Director of Corporate Resources



Contact Officer: Alison Davey, Corporate Services Manager E : [email protected] T : 01274 655801 Allan Darby, Information Management Officer E : [email protected] T: 01274 473787

Background papers open to inspection: None

Annexes: Annex A – Results of study of Fire Report charges by FRS

Annex B – Example Fire Report

73



1 Introduction 1.1 A decision was made by WYFRS in 2005 with the introduction of the Freedom of Information Act

that it would no longer charge for copies of Fire Reports (FDR1s/IRS) or Fire Investigation Reports as requested by members of the public, commercial organisations or other public authorities.

1.2 Due to the current financial constraints placed on public authorities, including WYFRS, it is now pertinent for WYFRS to consider the re-introduction of a charge for information requests relating to Fire Reports and Fire Investigation Reports made by both members of the public and private organisations such as insurance companies and solicitors.

1.3 The Localism Act 2011 amended the Fire and Rescue Services Act 2004 by repealing section 19 (Charging) and inserting new charging powers which authorise charges to be imposed for any action taken by the Fire and Rescue Authority (FRA) otherwise than for commercial purposes. Before beginning to charge for additional activities, a FRA must consult any person it considers appropriate. However, CLG advise that FRAs can still continue to charge for activities that they could already charge for prior to the Localism Act coming into force without the need for consultation. When setting charges a FRA must aim to secure that, taking one financial year with another, the overall income from charging does not exceed the cost of taking the action for which the charges are imposed.

1.4 The Information Commissioner’s Office (ICO) recognises that there are additional fees involved when Fire Services are requested to produce Fire Reports under the Freedom of Information Act 2000 (FOIA). In view of the additional fees involved to appropriately redact the report the ICO has stated that an administrative charge could be appropriate for this category of information as long as any charge did not act as an obstacle to its provision. This would not in any way interfere with the opportunity of the Fire Service to make a full copy of the report available to those who request it at a commercial charge (subject to safeguards about the personal and sensitive material) where the identity of the requestor is taken into account and, thereby, taking it outside of the provisions of the FOIA.

2 Information

2.1 A study has been undertaken covering every FRS in England and Wales to determine the scale of charges they apply (if applicable) to the different categories of information requests. Responses from every brigade have been received and the information collated. Annex 1 is a breakdown of the charges currently applied by each FRS, although it should be noted that the brigades did not specify the level of detail contained in the reports they produce.

2.2 As can be seen the range of charges for the supply of copies of Fire Reports (IRS Reports) varies considerably from £10.00 at the lowest end (for brigades that charge a fee) to £142.00. There are ten brigades that do not currently charge a fee for this category of information. The average charge (for those brigades that do charge a fee) is £63.66.

2.3 The details regarding the charges for Fire Investigation Reports was not obtained from all brigades. However, of those that have supplied the details of their charge, there is again a broad range from £78.00 at the lower end to £450.00. The average of the charges made is £226.77.

2.4 It should be noted that requests from individuals for information that constitutes their own personal information e.g. a request for a report on an incident at their property, would constitute a Subject Access Request under the Data Protection Act 1998 for which the maximum fee would be £10.00. However, the summary IRS report that is produced by WYFRS, and currently supplied in all cases except for requests from the police, is sanitised to remove all personal data as standard and would not constitute personal information in this regard.

WYFRS Information Charges Page 2 of 4 74

2.5 Requests from the police have historically been supplied free of charge. The police are supplied with the full version of the IRS report and are the only organisation issued with this version on request. It is recommended that this practice remains should the Finance and Resources Committee approve the re-introduction of fees for other third parties to receive copies of the full IRS report.

2.6 The total number of IRS reports provided by WYFRS following requests per calendar year is:

• 2010 = 464• 2011 = 510• 2012 = 573• 2013 = 508

Around 25% of these requests are from the police in line with paragraph 2.5 above.

Figures for Greater Manchester Fire and Rescue Service (GMFRS) since 2011 are;

• 2011/12 = 81 (15 not charged for),• 2012/13 = 355 (214 not charged for) and;• 2013/14 = 55 to date (20 not charged for).

2.7 Lancashire FRS (LFRS) charges £132.00 for what they refer to as an Extract Fire Report, which is basically a cut-down version of the full IRS Report. This amount has been determined by the amount of time taken to edit and quality assure the contents of the report. This then requires more stringent checks at the report production stage together with their process of interpreting the information into layman’s terms for the recipient. Due to inbuilt system metrics WYFRS is more able to rely on the raw data input and does not need to carry out the same level of time-consuming quality checks.

2.8 Due to modern online technologies and the expectations of the public, if the Finance and Resources Committee were to decide that it is appropriate to charge fees then the methods of payment would need to be considered. In the modern digital world there is a growing expectation that payments can be made by the use of various technologies and methods such as Debit/Credit Card, Contactless payment, online payments using secure portals or instant transfers using smartphone apps. The Finance department are currently reviewing appropriate methods of payment and the findings are anticipated.

2.9 In addition, WYFRS currently does charge for certain information related items including COMAH Exercises, Fire Safety related items, interviews with staff and visual services material. Details of these charges are available on the WYFRS intranet site.

2.10 The Authority is not able to make a surplus from charging for fire certificates but is able to recover the cost. Based on the current hourly rates and the average time for preparation it is recommended that the following charges are introduced:

• Basic IRS report £ 43.80 • Full copy of IRS report £118.00 • Full investigation report £259.00

3 Financial Implications

3.1 Based on the number of requests received by the Authority, the reintroduction of charging could provide additional income of between £30,000 and £140,000 per annum. However, it is highly likely that the number of requests will reduce significantly if charging is introduced and, therefore, estimated income is likely to be towards the lower end of the estimate.

75

4 Equality and Diversity Implications 4.1 The Authority may wish to consider whether there are any circumstances where a charge could

act as an obstacle to individuals or groups (see Section 1.4), such as: vulnerable/at risk people, people with protected characteristics e.g. disabled people, or those who represent their interests, e.g. from the third sector.

5 Health and Safety Implications

5.1 There are no health and safety implications associated with this report.

6 Service Plan Links 6.1 This report refers to the Service Plan priority “Provide effective ethical governance and achieve

value for money in managing resources”.

7 Conclusions

7.1 WYFRS has not charged a fee for information requests relating to Fire Reports and Fire Investigation Reports since 2005. Due to the current financial constraints WYFRS needs to consider the application of an appropriate fee in line with other FRS’. It is recommended that approval be given to the re-introduction of charges as detailed at 2.10 of this report.

76

Appendix 1 England and Wales FRS Information Charges

Note 1 - A request from an individual under Subject Access attracts a fee of £10.00Note 2 - A request from an individual under Subject Access attracts a fee of £10.00

Copy of Fire Report (IRS Report) (Inc VAT)

Copy of Fire Investigation Report (Inc VAT)

Avon £0.00Bedfordshire and Luton £55.00Royal Berkshire £0.00Buckinghamshire £52.00 £250.00Cambridgeshire £72.60Cheshire £10.00Cleveland £32.40Cornwall £97.00Cumbria £121.70Derbyshire £55.50 £206.50Devon and Somerset £55.00Dorset £56.00Durham and Darlington £58.00East Sussex £0.00Essex £49.00Gloucestershire £37.00Greater Manchester £120.00Hampshire £0.00 £450.00Hereford and Worcester £52.00 £255.00Hertfordshire £76.00Humberside £0.00Isles of Scilly £0.00Isle of Wight £0.00Lancashire (see note 1) £132.00 £210.00Kent £27.00Leicestershire £10.00Lincolnshire £60.00London £95.00Merseyside (see note 2) £142.00Norfolk £46.00 £78.00Northamptonshire £97.15Northumberland £117.00North Yorkshire £0.00North Wales £43.40Nottinghamshire £34.98Oxfordshire £37.00Shropshire £65.96South Yorkshire £0.00South Wales £45.00 £120.00Staffordshire £78.10Suffolk £56.00Surrey £64.07Tyne and Wear £85.50Warwickshire £37.00West Midlands £40.00 £275.00West Sussex £49.00West Yorkshire £0.00Wiltshire £57.60 £196.40Average (those that charge) £63.66 £226.77

77

2 .Incident Details at Call2.2 Origin of Call: Person (mobile)

2.3 Type when received: Fire - Fire in the open - small

2.4 Late Call: No

Timings2.1 Date/time of call: 08/07/2013 12:29:57

2.5 Date/time of stop message: 08/07/2013 13:40:13

2.6 Date/time closed: 08/07/2013 13:49:46

West Yorkshire Fire & Rescue ServiceIRS Incident Report

1. Incident IndentificationIncident Number: 25501131Incident Stage: Checked1.2 Responsible FRS: West Yorkshire1.3 Responsible Station Keighley1.5 Over the border: No1.8 Station Ground: Keighley

3. Attendence3.1 Incident category: Fire3.2 Type of property: --Property-Outdoor-Grassland, woodland and crops-Railway trackside

vegetation3.5 Victims Involved: No3.6 Evacuation Involved: No3.7 Number of appliances deployed: 13.8 Property derelict: No3.10 Attack on firefighters: No

4. Location4.1 Addressable location: No4.2a Building4.3a Incident Easting: 4042474.3b Incident Northing: 4384724.2k Addtional location description Railway embankment near Oakworth Train Station, Oakworth, Keighley,

BD22.

5. Additional Details5.15 Cause/motive: Accidental5.16 Outdoor fire damage (sq/m): 201 - 5005.17 Is national park: No5.18 Hazardous Materials Involved No

6. Resources6.1 Number of non-rider officers: 0

Page 1 of 2 Created On 10/07/2013 13:50:5679

8. DamageHow the fire started

Substance/explosions involved

Property information

West Yorkshire Fire & Rescue ServiceIRS Incident Report

VehiclesVEHICLE 16.2 Type: Water tender ladder6.3b FRS Callsign 46016.4 Number of crew: 56.5 Demounted Resource No6.6 Time mobilised: 08/07/2013 12:31:456.7 Time mobile: 08/07/2013 12:33:376.8 Time in attendance: 08/07/2013 12:46:356.9 Time available: 08/07/2013 13:49:46Deployed from:6.10 Home Station: Home Station6.11 Station Id: Keighley6.11 FRS Id: West Yorkshire

EquipmentEQUIPMENT 16.16 Type: Wild fire - Fire beaters6.17 Number used: 3

EQUIPMENT 26.16 Type: Wild fire - Knapsacks6.17 Number used: 1

7. Action

9. Involvement of Persons10. Summary10.4 Notes, general Railway embankment on fire.

Every effort has been made to ensure the information in this report is accurate at the time of report creation, but itcan be subject to change.This report is supplied in confidence and should not be used for any purpose other than that for which it wasprovided or be passed on to any other party.The text for some questions has been abbreviated in this report. Refer to official IRS help and guidancedocumentation for full details.

Page 2 of 2 Created On 10/07/2013 13:50:5680

Purpose To present a draft capital investment plan, a draft revenue budget and medium term financial plan.

Recommendations That the report be noted as the basis for the political groups to consider theirbudget proposals.

Summary This report presents details of the draft revenue budget for 2014/2015 along with the five year medium term financial plan and capital programme. Included within the report are details of the Draft Local Government Finance Settlement 2014/2015 and 2015/2015, a standstill budget, and a summary of activity in the 2013/2014 financial year.


Draft Capital Investment Plan/Draft Revenue Budget and Medium Term Financial Plan Finance & Resources Committee Date: 24 January 2014 Agenda Item: 9Submitted By: Chief Finance Officer


Exemption Category: Nil

Contact Officer: Geoff Maren – Chief Finance Officer t: 01274 655711 e: [email protected]

Background papers open to inspection: Budget working papers Local Government Finance Settlement CIPFA’s Code of Practice on Treasury Management in the Public Services; CIPFA’s Prudential Code for Capital Finance in Local Authorities; Local Government Act 2003.

Annexes:

81


1 Introduction This is a consolidated report which will present the Management Board's proposals for:-

(i) a Capital Investment Plan for the five years to 2018/2019, (ii) the Prudential Indicators to support the financing of the Capital Plan. (iii) a Revenue Budget and Medium Term Financial Plan for the same period.

2 Proposed Capital Investment

CAPITAL INVESTMENT

2.1 The Management Board are proposing a five year capital investment plan which will see the delivery of the majority of the station rationalisation which has been approved as part of the 2012 and 2013 Integrated Risk Management Plan. A detailed plan is attached at Appendix A to this report with a brief summary provided below.

2.2 The total cost of the plan is £43.23m over the five year period with over £26m being the building works to deliver the IRMP changes. The IRMP changes will deliver significant long term revenue savings enabling the Authority to maintain service standards with significantly reducing resources.

2.3 There has been some delay in the major construction schemes relating to the IRMP owing to problems purchasing the sites for the new build. However, the Authority has now purchased two sites and anticipates completion of a further two sites by 31 March 2014. Consequently it is anticipated that there will be significant expenditure on major building schemes in 2014/2015 and 2015/2016.

CAPITAL FINANCING

2.3 The capital plan will be financed through three main sources; capital grants, capital receipts, and borrowing as explained below.

2.4 Capital Grants

In 2013/2014 The Authority successfully bid for £11.25m of capital grants from central government to fund the majority of the construction for the phase 1 IRMP and the land purchase for phase 2.

DRAFT 5 YEAR CAPITAL INVESTMENT PLAN2014/15 2015/16 2016/17 2017/18 2018/19 5 YEAR

SERVICE SUPPORT PLANProperty £990,000 £710,000 £695,000 £210,000 £0 £2,605,000IT and Comms £672,000 £270,000 £50,000 £50,000 £50,000 £1,092,000Transport £1,508,000 £1,348,000 £1,338,000 £1,338,000 £1,338,000 £6,870,000

£3,170,000 £2,328,000 £2,083,000 £1,598,000 £1,388,000 £10,567,000SERVICE DELIVERYIRMP £12,520,000 £11,000,000 £2,660,000 £0 £0 £26,180,000Fire safety £785,500 £700,000 £700,000 £700,000 £700,000 £3,585,500Operations £1,103,000 £450,000 £450,000 £450,000 £450,000 £2,903,000

£14,408,500 £12,150,000 £3,810,000 £1,150,000 £1,150,000 £32,668,500DRAFT PROGRAMME £17,578,500 £14,478,000 £5,893,000 £2,748,000 £2,538,000 £43,235,500

FUNDINGCapital grants £11,000,000 £11,000,000Capital receipts £500,000 £500,000 £500,000 £500,000 £2,000,000Borrowing £6,578,500 £13,978,000 £5,393,000 £2,248,000 £2,038,000 £30,235,500

£17,578,500 £14,478,000 £5,893,000 £2,748,000 £2,538,000 £43,235,500

82

In addition, the Authority received a further £3.5m which was allocated on the basis of population providing total grant income of £14.7m. Delays in land purchase mean that the Authority has only committed £3.7m of this grant in the current year leaving £11.0m available for 2014/2015.

A further report on this agenda provides details of the next bidding round for capital funding.

2.5 Capital Receipts

The IRMP process, once fully implemented, will release up to 17 former fire station sites which will be available for disposal. These sites will not be available until each of the new stations is operational and the value will depend upon the size, location and planning approvals as well as the market condition. It is anticipated that the Authority should be able to realise the first of these capital receipts in 2015/2016.

2.6 Borrowing

The balance of the expenditure will be funded by borrowing, although the table shows a total borrowing requirement of £27.8m over the period; this does not take account of existing debt fall out and debt repayment. The next section of the report on prudential indicators includes details of the estimated borrowing requirement and forecast debt outstanding.

3 Prudential Indicators

3.1 The CIPFA Prudential Code requires that local authorities produce a number of prudential indicators before the beginning of each financial year and have them approved by the same executive body that approves the budget. The purpose of the indicators is to provide a framework for capital expenditure decision making, highlighting the level of capital expenditure, the impact on borrowing levels, and the overall controls in place to ensure the activity remains affordable, prudent and sustainable.

Some of the indicators are specific to the Authority’s treasury management activity and are set out in the treasury management report. The rest of the indicators are set out below.

3.2 Capital Expenditure, Capital Financing Requirement and External Debt

The Authority’s capital expenditure projections, detailed elsewhere in this report, are summarised below. Capital expenditure impacts directly on the Capital Financing Requirement (CFR) and the Authority’s debt position. The CFR reflects the Authority’s underlying need to borrow for a capital purpose. When external borrowing is below the CFR, this reveals that the Authority is using some internal balances, such as reserves/creditors, to temporarily finance capital expenditure.

Actual Estimate Estimate Estimate Estimate2012/13 2013/14 2014/15 2015/16 2016/17

Capital expenditure 7.075 6.800 17.578 14.478 5.893

Financed by borrowing 3.035 3.800 6.578 13.978 5.393Capital grants 2.577 3.000 11.000Capital receipts 1.463 0.500 0.500Internal borrowing

7.075 6.800 17.578 14.478 5.893CFR at 31 March 62.100 61.100 62.800 72.000 72.500External debt 31 MarchBorrowing 61.200 53.300 59.100 72.000 72.000Other LT liabilitiesTotal debt 61.200 53.300 59.100 72.000 72.000

83

3.3 Limits to Borrowing Activity

The first key control over the Authority’s borrowing activity is a Prudential Indicator to ensure that over the medium term, net borrowing will only be for a capital purpose. Net external borrowing should not, except in the short-term, exceed the total Capital Financing Requirement in the preceding year plus the estimates of any additional capital financing requirement for 2014/15 and the next two financial years. This allows some flexibility for limited early borrowing for future years.

Other than for short periods of time and to manage cash flow requirements, the Authority comfortably complied with the requirement to keep net borrowing below the relevant Capital Financing Requirement in 2012/13, and no difficulties are envisaged for the current or future years.

3.4 A further two Prudential Indicators control the overall level of borrowing. These are the Authorised Limit and the Operational Boundary. The Authorised Limit represents the limit beyond which borrowing is prohibited. It reflects the level of borrowing which, while not desired, could be afforded in the short-term, but is not sustainable. It is the expected maximum borrowing need with some headroom for unexpected movements. This is the statutory limit determined under section 3(1) of the Local Government Act 2003.

3.4.1 The operational boundary is based on the probable external debt during the course of the year. It is not a limit and actual borrowing could vary around this boundary for short times during this year.

The Authority is asked to approve the following limits for its total external debt, gross of any investments. These limits separately identify borrowing from other long term liabilities such as finance leases.

2013/2014 £m

2014/15 £m

2015/16 £m

2016/17 £m

Authorised limited for external debt 75 65 78 81

Operational boundary for external debt 70 60 72 76

3.5 Affordability Prudential Indicators

The previous sections cover the overall capital and control of borrowing prudential indicators but within this framework prudential indicators are required to assess the affordability of the capital investment plans. The following two indicators provide an indication of the capital investment plans on the overall finances of the Authority:

3.5.1 Ratio of financing costs to net revenue stream

This indicator identifies the trend in the cost of capital (borrowing costs net of investment income) against the net revenue stream (amounts met from Revenue Support Grant, local taxpayers and balances):

Actual Rev Est Estimate Estimate Estimate

2012/13 2013/14 2014/15 2015/16 2016/17

Ratio of financing costs to net

84

revenue stream 7.45 7.84 8.20 9.20 10.29

3.5.2 Effect on the Precept

This indicator estimates the incremental impact of capital investment decisions proposed in the budget report, over and above capital investment decisions that have been previously taken by the Authority:

Proposed Budget

Forward Projections

2014/15 2015/16 2016/17

Increase in expenditure (£000s) 77 712 1728

Increase in Precept (Band D) 0.13 1.18 2.84

The increase in the precept is a result of a forecast increase in the cost of borrowing over the next 3 years.

4 Revenue Budget and Medium Term Financial Plan Attached to the report (Appendix B) is a Draft Revenue Budget for 2014/2015 and a Medium Term Financial Plan covering the period to 2018/2019 to match the five year Capital Plan and IRMP implementation plan. Whilst the Authority will only be required to approve the precept for 2014/2015 it is important that the Authority consider the medium term impact of the decision.

This section is split into 3 key areas:-

1. review of the current year’s budget and financial performance2. the cost of a standstill budget for 2014/20153. revenue balances

4.1 Review of 2013/2014

4.1.1 National Context

Economic Outlook

As the year progressed there were the early signs of growth in economic activity in the UK leading to a more optimistic forecast for future economic activity.

Local Government Finance

2013/2014 saw the implementation of major changes in the way local authorities including fire authorities were funded particularly in the areas of business rates and council tax benefit.

In the area of business rates, a system of business rate retention was introduced which enabled Billing Authorities to benefit from any additional income generated through economic growth. On the flip side they would also have to stand any loss of income should the local economy contract.

85

In terms of council tax benefit the government required Billing Authorities to introduce a system of council tax discounts to replace the old nationally funded system of council tax benefits. At the same time the councils were expected to deliver an overall reduction in the cost of the scheme of 10% whilst at the same time protecting the most vulnerable residents.

Both of these changes presented significant challenges both in terms of forecasting future economic growth and collection rates for council tax payment, they also have a direct impact on the funding of the Fire Authority.

4.1.2 Impact on West Yorkshire FRA

In overall funding terms the Authority once again saw a significant reduction in government funding with a cut in formula funding grant of £4.1m. The Authority did receive additional funding of £5.7m in the form of benefit localisation grant but this was to compensate for the equivalent loss of precept income through localisation of council tax benefits as mentioned in the previous paragraph.

Once again the Secretary of State encouraged Authorities to freeze their precept by offering a grant equivalent to a 1% precept increase and set a general limit of 2% increase above which authorities would be required to hold a referendum. However, there was a specific dispensation for the 8 lowest precepting FRAs who were allowed to increase their precept by up to £5 at band d without the need for a referendum. This included West Yorkshire which had the second lowest precept at £52.41 at band d

The Authority considered its revenue budget and precept strategy on 21 February 2013 which identified that savings of £5.5m from the standstill budget would be required if the Authority was to freeze its precept for a third year.

Savings of £4.3m had already identified through continued non recruitment coupled with the fundamental review of support staff leaving a budget shortfall of £1.2m. However the medium term financial forecast identified a long term budget deficit of between £10m and £14m by the end of the next spending review period. The Authority took account of the underlying long term budget deficit and approved a precept increase of 9.52% (£4.99 at band D) which also provided an additional £0.98m revenue balances.

In terms of overall financial performance it was reported early in the financial year that the budget would be underspent principally as a result of savings in fire fighter salaries and capital financing charges. The latest forecast indicates an under spending of around £2.7m although the costs of the current industrial dispute may impact on this.

4.2 A Standstill Budget – Maintaining the current level of service

A standstill budget has been prepared for 2014/2015, for the purpose of providing a baseline from which to measure changes in the proposed budget. This is calculated by updating the 2013/2014 budget for increases in pay and prices, new financing charges and other adjustments. A standstill budget for 2014/2015 would amount to £87.905m. The changes from the 2013/2014 budget are explained in the table below.

86

£m 2013/2014 Approved budget £86.719Pay awards £0.653Price increases £0.096Injury pensions £0.059Capital financing charges £0.101Other adjustments £0.277

2014/2015 Standstill budget £87.905

87

4.3 Revenue Balances

4.3.1 Based on current expenditure patterns and the balances at the beginning of the financial year it is forecast that the Authority will general balances of around £14m at the beginning of 2014/2015 financial year

4.3.2 Minimum Revenue Balances

The Authority needs to maintain a level of General Fund Balances as a safety net to meet any unforeseen and unplanned expenditure. This would include changes in interest rates, greater than budgeted pay awards, legal challenges and increases in activity.

The minimum level of balances required is calculated using the Authority’s corporate risk register. This document identifies all the major risks to business continuity the Authority may face, evaluates the potential cost and looks at measures to control or limit the risk. The risk register is maintained by the Risk Management Group, which is chaired by the Deputy Chief Fire Officer and reports annually to the Audit Committee. The current risk matrix was approved by the Audit Committee in September 2013.

The current register identifies a requirement to maintain a minimum revenue balance of £2.5m.

4.3.3 Additional Pension Liability

In addition following resolution of a claim under the Part-Time Workers (prevention of Less Favourable Treatment) regulations, all existing and a significant number of former retained firefighters are now entitled to join the 2006 Firefighters Pension Scheme and back date their contributions to the date they commenced employment. The total cost of this liability will be in the region of £2.5m. Whilst this remains a national issue and there will be pressure on Central Government to pick up these costs this currently remains a significant liability for the Authority. It is therefore proposed to set aside a further £2.5m into a pension reserve until the funding of this is resolved.

The impact of this is to increase the minimum revenue balance to £5.0m leaving useable balances of £9.0m

4.3.4 Strategy for Use of Balances

The Authority has previously been unable to fund the full cost of the service through government grants and precept and has supported it by using revenue balances. The use of revenue balances to fund on-going expenditure is not sustainable and the strategy for the use of balances must reflect this.

As explained in Section 5 of the report, the government only announced a 2 year Revenue Support Grant Settlement with further more significant cuts to come in the next spending review period. It is therefore important that the Authority reserves significant balances for the next spending review period.

The report to the full Authority will provide recommendations for the use of balances in 2014/15 along with the budget options, however, it is unlikely to recommend the use of any balances to support the 2014/2015 revenue budget.

88

5 Local Government Finance Settlement

5.1 Provisional Local Government Finance Settlement 2014/2015 and 2015/2016

Provisional Settlement

5.1.1 A consultation paper on the Local Government Finance Settlement was published on 18 December 2013, including the provisional grant allocations for 2014/2015 and indicative grant figures for 2015/2016. The table below provides details of the provisional settlement for this Authority along with a comparison with the 2013/2014 settlement.

2014/2015

5.1.2 In total, the Authority will receive grant of £50.22m a reduction of £3.96m (7.32%) from the 2013/2014 settlement, this is in line with the amount notified in the Finance and Resources committee in September in response to the earlier consultation on changes to the grant mechanism. As yet the Authority has not received a breakdown of business rate income between the national top up grant and that paid direct from the district councils which can have an impact on the total amount received. This information will be included in the budget report to the full Authority.

2015/2016

5.1.3 The provisional settlement for 2015/2016 shows total income of £45.957m a further reduction of £4.26m.

5.2 Other Changes

5.2.1 As reported at the last Authority meeting there are a number of further changes to fire funding which formed part of the consultation paper which are explained below.

Precept Freeze Grant

5.2.2 The Government has in the last three years offered authorities that freeze their precept (council tax), a one off grant in lieu of a precept increase (the exception being 2010/2011 when the grant was guaranteed to the end of the spending review period).

5.2.3 As part of the 2014/2015 settlement, the Secretary of State will include the 2013/2014 and 2014/2015 freeze grant within future grant settlements which means in future they will be included in the base. This change will have no impact on this Authority’s 2014/2015 grant settlement as the Authority increased its precept in 2013/2014, It will however benefit the Authority in 2015/2016 should the Authority choose to freeze the precept in 2014/2015.

Comparison 2013/2014 2014/2015 2015/2016Settlement Provisional Provisional

Top up grant central pool £13,995,136Top up grant local £7,613,735Growth in business rates £93,753Base line funding £21,702,624 £22,029,824 £22,637,865Revenue support grant £32,481,227 £27,956,369 £23,085,682Precept freeze grantSettlement funding assesment adjustment £234,000 £234,000

£54,183,851 £50,220,193 £45,957,547

Grant Loss -£3,963,658 -£4,262,646

89

Expenditure Capping

5.2.4 As in the previous three years the Government will set a maximum precept increase limit for capping purposes. If authorities wish to exceed this limit they are required to hold a referendum of all council tax payers and are bound by the results.

5.2.5 This limit has not been included in the consultation papers and will not be set until January 2014, however, the Secretary of State has indicated strongly that it will not exceed 2% and may well be below. It is unlikely that there will be any further dispensation for Fire and Rescue Authorities as benefited this Authority in 2013/2014.

Increase in Business Rates

5.2.6 Under the Local Business Rates Retention Scheme, business rates should rise annually in line with inflation, which for 2014/2015 was 3.1%. In his autumn 2013 Statement the Chancellor announced that the multiplier for small businesses would be limited to 2% which results in a loss of business rates income. The impact on this FRA is a loss of business rate income of £234k which has been replaced by an additional grant income which is included within the figures in paragraph 1.1 above.

Overall Impact on Fire and Rescue Authorities

5.2.7 There is some variance in the level of grant cuts between different authorities in 2014/2015, with cuts of between 5.6% and 7.6%. However, it is likely that these variances are as a result of the inclusion of 2013/2014 freeze grant within revenue support grant and the impact of the 2% cap on small business rates. A comparison of the indicative figures for 2015/2016 shows a very narrow variance of between 8.2% and 8.5% which suggest that there has not been any re-running of the fire formula.

5.2.8 More detailed information on the final settlement including the impact of business rate income will be included in the report to the Full Authority.

5.3 Precept Income

5.3.1 As Members are aware, the Authority is also dependent upon precept income from the five districts which provides over £33.7m of its income. This income is dependent upon two factors:

• The precept set by the Authority

• The tax base tax base set by the five district councils. Whilst the districts will not approve theirrelative tax base until the middle of January 2014 the indications are that there will be somegrowth which will result in additional precept income.

6 Positive Assurance Statement 6.1 Under Section 25 of the Local Government Act (2003) the statutory Chief Financial Officer is

required to give positive assurance statements in the robustness of budget estimates and the adequacy of reserves and balances.

6.2 If Members approve the recommendations in this report on the level of specific reserves and the strategy for use of balances, I can give the Authority positive assurance on the adequacy of reserves and balances. This assurance is given having considered the following matters:-

a) This Authority has robust risk management arrangements and the Chief Finance Officeruses a Risk Management Matrix to calculate the minimum level of balances.

90

b) The Authority is single purpose and does not face a full a range of risks to manage as amulti-purpose authority.

c) The Authority's revenue reserves have not generally been consumed during the year byoverspendings but have been maintained throughout the year.

6.3 I can also give you positive assurance on the accuracy and robustness of all the forecasts and estimates in the budget proposals.

In giving these assurances I have considered the following matters:-

(i) The internal control environment and, in particular, the checks and balances within our budget process and our arrangements for budgetary control. In addition, I am satisfied that the Authority’s financial systems provide a sound basis for accurate financial information.

(ii) The detailed work on risk assessments.

(iii) The long-term tradition and track record of the Authority in managing its overall budget;

7 Medium Term Financial Planning

7.1 As mentioned in the introduction to the report, the Authority will be asked to approve a five year Medium Term Financial Plan, including the Revenue Budget for 2014/2015, to align with the Capital Plan and the implementation of the Integrated Risk Management Plan (IRMP). This is particularly important as the decisions taken on the IRMP will be delivered over the next five years.

7.2 The Medium Term Financial Plan will address the key issues of grant cuts, precept strategy, service delivery and use of balances. This will be discussed with political groups and presented to the Authority within the final budget report to the Authority in February.

7.3 A copy of the Medium Term Financial Plan is attached in Appendix B. Budget options will be presented to the political group meetings.

8 Proposed Revenue Budget

8.1 Recommendations on the budget strategy will be included in the report to the Full Authority.

9 Officer Recommendations and Reasons

9.1 Members are asked to note the contents of this report as the basis for the political groups to consider their budget proposals.

91

DRAFT CAPITAL PLAN 2014/2015 TO 2018/2019 Appendix A

DEPARTMENT DESCRIPTION 2014/15 2015/16 2016/17 2017/18 2018/19ESTIMATED

TOTAL CAPITAL COST

Oakroyd Hall £0 £20,000 £200,000 £10,000 £0 £230,000FSHQ £450,000 £10,000 £0 £0 £0 £460,000

PROPERTY Training centre £0 £20,000 £100,000 £200,000 £0 £320,000Strategic refurbishment £230,000 £350,000 £85,000 £0 £0 £665,000Specific refurbishment £310,000 £310,000 £310,000 £0 £0 £930,000

SUB TOTAL £990,000 £710,000 £695,000 £210,000 £0 £2,605,000INFORMATION TECHNOLOGYComputer Hardware £90,000 £0 £0 £0 £0 £90,000

IT Software Licences £220,000 £220,000 £0 £0 £0 £440,000Servers and Storage £80,000 £0 £0 £0 £0 £80,000New Data Network £50,000 £0 £0 £0 £0 £50,000COMMUNICATIONSAppliance CCTV £46,000 £0 £0 £0 £0 £46,000Retained Station Pager Replacement - Option A £0 £0 £0 £0 £0 £0Retained Station Pager Replacement - Option B £150,000 £50,000 £50,000 £50,000 £50,000 £350,000Fire Station Transmitting Infrastructure £36,000 £0 £0 £0 £0 £36,000

SUB TOTAL £672,000 £270,000 £50,000 £50,000 £50,000 £1,092,000TRANSPORT INCLUDING IRMPVehicle Replacements (excluding IRMP) £1,278,000 £1,278,000 £1,278,000 £1,278,000 £1,278,000 £6,390,000Vehicle Replacements - CARP £140,000 £0 £0 £0 £0 £140,000

TRANSPORT POD Refurbishments £40,000 £40,000 £40,000 £40,000 £40,000 £200,000Ladders £50,000 £30,000 £20,000 £20,000 £20,000 £140,000

SUB TOTAL £1,508,000 £1,348,000 £1,338,000 £1,338,000 £1,338,000 £6,870,000SERVICE SUPPORT DIRECTORATE TOTAL £3,170,000 £2,328,000 £2,083,000 £1,598,000 £1,388,000 £10,567,000

93

DEPARTMENT DESCRIPTION 2014/15 2015/16 2016/17 2017/18 2018/19ESTIMATED

TOTAL CAPITAL COST

IRMPIRMP IRMP Phase 1 £8,670,000 £4,130,000 £680,000 £0 £0 £13,480,000

IRMP Phase 2 £2,400,000 £6,720,000 £1,980,000 £0 £0 £11,100,000Rothwell £1,350,000 £150,000 £0 £0 £0 £1,500,000Morley Close call £100,000 £0 £0 £0 £0 £100,000

SUB TOTAL £12,520,000 £11,000,000 £2,660,000 £0 £0 £26,180,000

FIRE SAFETYSmoke Alarms £700,000 £700,000 £700,000 £700,000 £700,000 £3,500,000Premises Risk Database £12,000 £0 £0 £0 £0 £12,000Mobile IT Devices £63,000 £0 £0 £0 £0 £63,000Portable Sprinklers £10,500 £0 £0 £0 £0 £10,500

SUB TOTAL £785,500 £700,000 £700,000 £700,000 £700,000 £3,585,500OPERATIONSLay Flat Hose 89mm £13,000 £0 £0 £0 £0 £13,000Lay Flat Hose 45mm and 64mm £22,000 £0 £0 £0 £0 £22,000Line Rescue Equipment £15,000 £0 £0 £0 £0 £15,000Thermal Image Cameras £30,000 £0 £0 £0 £0 £30,000Water Rescue Equipment £15,000 £0 £0 £0 £0 £15,000

OPERATIONS Automatic Defibrillators £83,000 £0 £0 £0 £0 £83,000Gas Tight Suits £36,000 £0 £0 £0 £0 £36,000Impact Driver £19,000 £0 £0 £0 £0 £19,000LED Peli Handlamps £20,000 £0 £0 £0 £0 £20,000Hydrants £450,000 £450,000 £450,000 £450,000 £450,000 £2,250,000NCP Contingency £400,000 £0 £0 £0 £0 £400,000

£1,103,000 £450,000 £450,000 £450,000 £450,000 £2,903,000DIRECTORATE TOTAL £14,408,500 £12,150,000 £3,810,000 £1,150,000 £1,150,000 £32,668,500

GRAND TOTAL £17,578,500 £14,478,000 £5,893,000 £2,748,000 £2,538,000 £43,235,500

FIRE SAFETY

94

MEDIUM TERM FINANCIAL PLAN Appendix B

15/01/2014 16:14 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019Standstill Growth Standstill Growth Standstill Growth Standstill Growth Stanstill Growth Stanstill

REVENUE BUDGET £m £m £m £m £m £m £m £m £m £m £m

Firefighters £59.314 £59.888 £1.198 £61.086 £1.222 £62.307 £1.246 £63.554 £1.271 £64.825Support staff £7.779 £7.850 £0.157 £8.007 £0.160 £8.167 £0.163 £8.331 £0.167 £8.497Pensions £1.970 £2.029 £0.041 £2.070 £0.041 £2.111 £0.042 £2.153 £0.043 £2.196Other employees £0.803 £0.963 £0.019 £0.982 £0.020 £1.001 £0.020 £1.021 £0.020 £1.042Premises £3.158 £3.270 £0.065 £3.336 £0.067 £3.402 £0.068 £3.470 £0.069 £3.540Transport £2.757 £2.759 £0.055 £2.814 £0.056 £2.870 £0.057 £2.927 £0.059 £2.986Supplies and services £5.114 £5.116 £0.102 £5.218 £0.104 £5.322 £0.106 £5.429 £0.109 £5.537Lead authority charges £0.288 £0.288 £0.006 £0.293 £0.006 £0.299 £0.006 £0.305 £0.006 £0.311Capital financing £6.821 £6.923 £0.500 £7.423 £0.500 £7.923 £0.500 £8.423 £0.500 £8.923Contingency £1.392 £1.399 £1.399 £1.600 £2.999 £2.999 £2.999Gross expenditure £89.396 £0.000 £90.483 £2.143 £92.626 £3.776 £96.403 £2.210 £98.612 £2.244 £100.856Less income -£2.677 -£2.578 -£2.578 -£2.578 -£2.578 -£2.578Standstill budget £86.719 £1.187 £87.906 £2.143 £90.049 £3.776 £93.825 £2.210 £96.035 £2.244 £98.278FUNDINGBusiness rates £21.702 £0.562 £22.264 £0.445 £22.709 £0.454 £23.163 £0.463 £23.627 £0.473 £24.099Revenue support grant £32.481 £27.956 -£4.871 £23.085 -£3.847 £19.238 -£3.562 £15.677 -£3.301 £12.375Precept freeze grant £0.000 £0.000 £0.000 £0.000TOTAL GOVERNMENT FUNDING £54.183 -£3.963 £50.220 -£4.426 £45.794 -£3.393 £42.402 -£3.098 £39.303 -£2.829 £36.474Precept £33.710 £33.710 £34.219 £34.561 £34.907 £35.256Growth in tax base 1% £0.509 £0.342 £0.346 £0.349 £0.353TOTAL PRECEPT INCOME £33.710 £34.219 £34.561 £34.907 £35.256 £35.608Revenue balances -£0.970Loss \ surplus on collection fund -£0.204 £0.121TOTAL FUNDING £86.719 £84.560 £80.355 £77.309 £74.559 £72.083

Budget shortfall £0.000 -£3.346 -£9.693 -£16.516 -£21.475 -£26.196

95

treasury management strategy 2014/2015 - west yorkshire fire

Documents