Budget Book and Medium Term Financial Plan 2014/15 to 2018/19. Appendix 1 to Item No: B2

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1 Budget Book and Medium Term Financial Plan 2014/15 to 2018/19 Appendix 1 to Item No: B2

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3 CONTENTS Page The Budget Strategy 2014/15 3 Building the Revenue Budget 2014/15 - Cost Drivers and Savings 4 & 5 - Functional and Employee Analysis 6 & 7 - Pay Analysis 8 & 9 - Pensions Analysis 10 & 11 Funding the Revenue Budget 2014/15 - Sources of Funding 12 & 13 - Council Tax 14 & 15 - Revenue Grant Funded Expenditure 16 & 17 Reserves 18 & 19 Infrastructure Plan 2014/15 - Expenditure 20 & 21 - Funding 22 & 23 Medium Term Financial Plan Revenue Assumptions 24-5 Year Revenue Budget 25-5 Year Infrastructure Plan 26 & 27 1

4 This Budget Book is a self contained technical document which explains the proposals contained within the Medium Term Financial Plan for the Authority. It underpins and reflects the initiatives discussed in the Safety Plan for 2014/15. 2

5 THE BUDGET STRATEGY 2014/15 The Government continues to be quite clear that the key to reducing the national debt is to drive further efficiencies, most notably across the public sector. Undoubtedly this will be the focus for several years to come until such time as the economy becomes rebalanced. The publication of Sir Ken Knight s Review in May 2013 Facing the Future: Findings from a Review of Efficiencies and Operations in Fire and Rescue Authorities in England made a strong case for opportunities for further reform within the Fire and Rescue Service. Many of the suggestions covered in his report have already been considered by this Authority and in certain cases have been underway for some time. However, it will be interesting to see the Government s response to this review. The Spending Round, announced on the 26 June, highlighted a range of measures that would make inroads into the delivery of further financial savings in 2014/15 and 2015/16, most notably for Fire and Rescue Authorities this would mean that, whilst Government funding would be cut by an average of 10% in 2015/16, there would be the opportunity to bid for one-off Transformation grant funding for 2015/16. The Chancellor s Autumn Statement, announced on 5 December 2013 emphasised the Government s commitment to the long-term economic plan set out in It highlighted that the economy is now growing faster than predicted, so as a result, borrowing will be lower. Consequently, it focused on the continuing need to reduce spending, therefore reinforcing the Government s commitment to tackle the deficit and help get the public finances back into balance. With the deficit and debt still at unsustainable levels, deviating from that plan now would be the biggest risk to recovery. This will inevitably mean that reductions in public sector funding will continue for some time to come. Since the Comprehensive Spending Review (CSR) in 2010 this Authority has seen annual reductions to its formula grant funding. The Government was clear at that time that, for the fire and rescue authorities (FRAs), these reductions would be back-loaded to the last two years of the CSR period. Consequently, this Authority has faced grant funding cuts of 3% in the first two years, a cut of 9.2% in 2013/14 and now a further cut of 7.4% in 2014/15. The next major funding review will be the Comprehensive Spending Review in 2015, which will set the way forward and the funding parameters across the public sector for the medium term. Early indications are that public sector funding will continue to be reduced year on year, probably on an average trajectory of the previous four year period. It is clear that the Authority will face challenging times for the foreseeable future. Despite the difficulties this presents, the Authority remains committed to a budget strategy which is Service-led, Business-focused and Sustainable over the medium term thus avoiding drastic changes to levels of service provision. 3

6 BUILDING THE REVENUE BUDGET 2014/15 Cost Drivers and Savings The Authority uses an incremental approach to the development of the budget. The existing 2013/14 base revenue budget has been adjusted to reflect the impact of pay and price increases, additional growth needed for new developments, proposed savings and financial efficiencies. Pay - The budgets for staff costs are adjusted each year to reflect estimates for inflationary pay increases, the movement of staff through grades (increments), changes to employer national insurance and pension contributions and assumptions about the impact of staff turnover. The main area for salary growth results from the application of estimates for nationally set pay awards. Reflecting these changes and incorporating provision for a 1% pay increase across all pay groups, the pay budget for 2014/15 has increased by 819k. In his Autumn Statement on 5 December 2013, the Chancellor announced that public sector pay awards would continue to be restricted and that these should average no more than 1% in 2013/14 and 2014/15. Prices - A figure of 3% has been allowed for unavoidable and contractual price increases unless there are known inflationary pressures to be applied. For areas of discretionary spend an increase is calculated, but instead of increasing the budgets the sum is taken as a saving so that any pressures are managed through existing budgets or efficiencies. Pensions - Following two years of no new ill health retirements, the number is expected to increase this year following the introduction of revised medical capability procedures, resulting in an additional cost in contributions to the Pension Fund. This, together with an increase in injury pension payments of 2.5%, has resulted in an additional cost ( 66k). The Local Government Pension Scheme (LGPS) sees a new Career Average Revalued Earnings scheme being implemented in April It is expected that this will cost an additional 43k in employer contributions. Growth - Growth of 1,441k has been added in 2014/15, supporting both the implementation of Control changes and the station build programme, whilst also recognising the removal of one-off grants received in 2013/14. Savings - The majority of the savings have been made through staff turnover, in both front line and back office functions. Savings in whole-time pay have come entirely from natural wastage, and the Service Support savings have been achieved through a combination of natural wastage, voluntary redundancies and the closure of catering and in-house occupational health facilities. Other savings come from a variety of headings arising from a review of devolved non-pay budgets. 4

7 BUILDING THE REVENUE BUDGET 2014/15 Total 000 Base Budget 2013/14 70,936 Pay Growth 819 Total Net Budget Employee Costs (78.0%) Supplies and Services (12.2%) Prices Growth 533 Pensions 109 4,346k 55,092k Premises Costs (6.1%) Transport Costs (3.7%) Pension Costs (2.2%) Growth 1,441 Capital Financing (10.0%) Savings -3,189 Transfers from Reserves (-6.0%) Net Budget 2014/15 70,649 Income (-6.2%) 5

8 BUILDING THE REVENUE BUDGET 2014/15 Functional and Employee Analysis Service Delivery - This includes operational response, covering the costs of the co-located control centre, crewing and running the fire stations, attending incidents, and community and technical fire safety. Operational Policy and Resilience - This includes the cost of the training centre, operational pre-planning, emergency planning, and dealing with major incidents, including the Technical Rescue Team and national resilience. HR, Comms and Executive Support - This includes the costs of Human Resources, Policy, Media and Communications, Members and Committee Services and the Corporate Management team. Finance and Corporate Services - This includes the costs of property services, procurement, engineering, finance, and insurance and information services. Within this area is a new budget to support further collaborative working arrangements which will provide a platform to explore and develop further opportunities for joint or partnership working with other organisations. Pensions, Financing and Other Costs - On a day to day basis these costs are reflected in the Finance and Corporate Services area. However, they have been presented separately in the table opposite to aid clarity to the budgets. Included here are those costs of the firefighter s pension scheme which are not paid for by the Government, capital charges, borrowing costs, interest earned on deposits and transfers to/from the earmarked reserves. 6

9 BUILDING THE REVENUE BUDGET 2014/15 Functional and Employee Analysis Service Delivery Operational Policy and Resilience HR, Comms and Executive Support Finance and Corporate Services Pensions, Financing and Other Costs Total Net Budget Employee Costs 39,263 8,837 3,912 3, ,092 Pension Costs ,555 1,555 Premises Costs , ,346 Transport Costs , ,659 Supplies and Services 667 2,331 1,484 3, ,612 Capital Financing ,062 7,062 Transfers to/from Reserves ,197-4,272 Income -6-3, ,405 Net Budget 2014/15 39,788 6,969 5,403 12,803 5,686 70,649 7

10 BUILDING THE REVENUE BUDGET 2014/15 Pay Analysis Whole-time pay Whilst whole-time pay savings have been achieved through natural wastage, the reduction in staff numbers is underpinned by the variable crewing project. The project includes a review of the whole-time and day crewed duty systems by exploring and developing crewing options in order to achieve efficiencies in service delivery on the frontline. Reviews are also being carried out across other functions within the service, including Community and Technical Fire Safety and Operational Policy and Resilience. On-call pay There are a number of vacancies at some on-call stations, and whilst recruitment is being done on an on-going basis and existing staff are being re-matched to better meet the cover required, it may not be possible to crew these stations to their full establishment during 2014/15. Therefore, other crewing options will be used, including the continuation of annualised hour s contracts into the first part of 2014/15 and the introduction of variable hour s contracts. Details within this year s Safety Plan, highlight the proposed removal of the resilience pump located at Medway Fire Station. Service Support pay There have been reviews across all back office functions, most of which have resulted in a reduction to the establishment and a consequent financial saving. This includes Finance, HR, Catering, Facility Management, Corporate Policy, Marketing and Communications, Property Management and Executive Support. Control Staff These are the staff that are co-located at the Fire and Police Control Centre and who manage all emergency call handling for the Authority. 8

11 PAY COSTS BY EMPLOYEE TYPE 9

12 BUILDING THE REVENUE BUDGET 2014/15 Pensions Analysis Firefighter Pension Scheme 1992 (FPS) A final salary scheme open to regular firefighters until April 2006 when it became closed to new members. New Firefighter Pension Scheme 2006 (NFPS) A final salary scheme, introduced in April 2006, open to regular firefighters. This scheme will be closed to new members upon the introduction of the new Firefighter Pension Scheme Firefighter Pension Scheme 2015 A new Career Average Revalued Earnings (CARE) scheme will be introduced for firefighters from April 2015, when it is expected that employer contributions will increase as more elements of pay are likely to become pensionable. Local Government Pension Scheme (LGPS) A final salary scheme open to all employees other than regular firefighters. Local Government Pension Scheme A new Career Average Revalued Earnings (CARE) scheme will be introduced for LGPS members from April 2014, when it is expected that employer contributions will increase as more elements of pay are likely to become pensionable. Norman v Cheshire FRA This recent legal case found that day crewed employees should have access to the FPS in relation to the retained elements of their contracts. Members agreed to set aside 700k in an earmarked reserve to meet the potential employer s liability cost that may arise as a result of allowing back-dated membership to the Scheme. Part-time workers case Settlement of the Part Time Workers (Prevention of Less Favourable Treatment) Regulations claim gave retained firefighters certain pension rights previously denied to them. It is proposed that access to pension rights will be achieved through the introduction of a modified section of the 2006 scheme, back-dated to 2000 when the Part Time Workers Regulations commenced. Whilst there will be no immediate budget implications in terms of employer contributions to the scheme, it is expected that additional liabilities will be picked up in a future Actuarial valuation of the scheme. Pension Auto-Enrolment Introduced under the Pension Act 2008, auto-enrolment applied to this Authority from August 2013, but advantage has been taken of transitional arrangements allowing deferral of the requirement to automatically enrol staff into pension schemes until 2017, therefore no additional employer costs are anticipated until 2017/18. 10

13 EMPLOYER PENSION CONTRIBUTIONS 11

14 FUNDING THE REVENUE BUDGET 2014/15 Sources of Funding The Authority receives funding from Council Tax and various Government grants, which for 2014/15 total 39,746k and 30,590k respectively. Council Tax This is the primary source of income for the Authority. The level of Council Tax raised is now impacted upon by the level of council tax discounts given to tax payers on low incomes and the level of exemptions granted. In 2014/15 the maximum level of discount available for those on low incomes has reduced in many Kent Authorities. As a consequence some claimants who were required to pay 8.5% of their Council tax bill in 2013/14 will now be required to pay up to 18.5% of the bill which may affect collection rates in the future. Business Rates - From April 2013 billing authorities will no longer pay all business rates they collect to the Government. Instead only 50% of the amount collected will be paid to the Government, with the remaining 50% being distributed locally. FRAs will receive 2% of this local share. Collection Fund Surplus/Deficit - Each year there can be either a surplus or a deficit on the Collection Fund for Council Tax and Business Rates. For 2014/15 there is a surplus of 313k on Council Tax collection funds, further details are shown on page 14. A zero balance on Business Rate collection funds is currently assumed. Revenue Support Grant As in previous years, the Government will continue to redistribute some funding on this basis. Council Tax Freeze Grant - This is the fourth year of a four year grant paid to those authorities who froze their Council Tax in 2011/12 and the second year of a two year grant paid for those that froze Council Tax in 2013/14. Both grants have now been included in the Authority s baseline funding. Council Tax Support Grant - This is paid to both billing and precepting authorities in recognition of the impact of the reduction to the Council Tax base caused by the changes to the benefit system. For this Authority, the grant for 2014/15 is expected to be 5,418k. Top-Up Grant - As the Authority s share of business rates collected locally will be less than the amount previously paid through formula grant, an additional top-up grant of 4,611k will be paid by the Government. Amounts redistributed The illustrative settlement for 2014/15 announced as part of the 2013/14 settlement, proposed to hold back some Revenue Support Grant for capitalisation. Not all of this money was allocated in 2013/14 therefore it has been redistributed to Local Authorities in 2014/15 based on their Settlement Funding Assessment base, so for this Authority the amount redistributed is 35k. 12

15 FUNDING THE REVENUE BUDGET 2014/15 Council Tax Support Grant 5,418k Sources of Funding Amounts Redistributed 35k Top Up Grant 4,611k Council Tax Freeze Grant 1,509k Council Tax 39,746k Revenue Support Grant 12,959k Collection Fund Surplus 313k Business Rates 6,058k Total Revenue Funding 2014/15 70,649k 13

16 FUNDING THE REVENUE BUDGET 2014/15 Council Tax for 2014/15 Council Tax Base - The Authority s tax base is the sum of the tax bases of the 12 Kent District Councils and Medway Council (billing authorities), and is expressed as the number of equivalent Band D properties. The tax base increased from 563,108 in 2013/14 to 573,539 in 2014/15 an increase of 1.85%. Collection Fund Surplus (or Deficits) - Each year Council Tax is calculated based on assumed levels of collection rates by the billing authorities. This means that, at the end of each year, an adjustment has to be made to reflect the actual collection rates. This can lead to a surplus or deficit on the fund which is accounted for within the calculation of the net budget requirement. The Authority has been advised that its share of the net surplus on Council Tax collection funds from Medway Council and Kent Districts is 313k. For the first time this year there could be a collection fund surplus or defict in relation to Business Rates income but at this time a zero balance has been assumed. Collection Rates - The changes to the benefits system means that some households with low incomes will, for the first time, be required to contribute directly towards the cost of their council tax, which may affect collection rates. The business rate retention scheme will also require an end of year adjustment for actual collection rates. It is likely therefore that the level of surplus/deficits on collection funds may become more volatile than has previously been the case. Council Tax Bands For the first time in four years the Authority is proposing to increase council tax by 1.99% in 2014/15. This equates to an annual increase of 1.35 (just over 2.5 pence per week), increasing the council tax for a Band D property to Household Council Tax - To arrive at the annual council tax charge that is made to each household, this Authority s council tax charge is added on to the charges set by Kent County Council or Medway Council, plus the charges set by the relevant District Council, Kent Police Authority and any Parish or Town Council. The total is then collected by the District Councils and Medway Council, on behalf of all the different precepting authorities. 14

17 FUNDING THE REVENUE BUDGET 2014/15 This Authority s Council Tax for 2014/ Council tax Band Annual Council tax Proportion of Band D Net Budget Requirement 2014/15 70,649 A /9 Financed from: B /9 Financed from Government C /9 Revenue Support Grant 12,959 D Baseline Funding 10,704 E /9 Council Tax Freeze Grant 1,509 F /9 Council Tax Support Grant 5,418 G /9 Sub-total Grant from Government 30,590 H /9 Financed from Council Tax Surplus on collection fund 313 Precept required from Council Tax 39,746 Total Funds available 70,649 Council Tax Base 573,539 Tax rate for Band D property 2014/ Increase in Band D charges 1.99% 15

18 FUNDING THE REVENUE BUDGET 2014/15 Revenue Grant Funded Expenditure Each year a proportion of the Authority s expenditure is funded from Government or other grants. These grants are usually provided to progress specific initiatives so spending plans are adjusted to reflect the additional expenditure that will be funded from these grants. Grant funds may be carried forward within earmarked reserves if they are not spent in the year in which they are allocated. Grant income is matched against the relevant grant related expenditure. Detailed below are the grants for 2014/15: National Resilience (formerly New Dimension) Grants Indicative Section 31 grant announced in the Local Government Finance Settlement for 2014/15 totals 1,117k for the National Resilience capabilities. This grant funds various resilience activities including the costs of running the Technical Rescue team and the associated training facility, Chemical, Biological, Radiological and Nuclear Explosive (CBRN(E)) training and Enhanced Logistics Support. Future Fire Control Centre In 2011/12 the Authority successfully bid for grant funding covering the co-location of fire control at the Kent Police control centre, and the implementation of a new mobilising system. The grant totalled 1,800k ( 900k capital and 900k revenue) to be utilised across several financial years. It is expected that the project will be completed in 2014/15 and the balance of grant utilised in full. FireLink - This is being paid to cover the difference between the annual charge for the FireLink managed service radio scheme and the legacy costs of the now decommissioned radio scheme. Fire Prevention Balance of grant held in reserves to fund fire prevention initiatives, such as sprinkler systems. Business Rate Initiative This grant is intended to compensate the Authority for its share of lost business rate income resulting from the Government s initiative to cap the increase in business rates for small businesses to 2% (instead of 3.2%). Marine Incident Response Group (MIRG) EU - The MIRG EU project forms part of the INTERREG programme, a European Union funding programme that supports cross-border projects. The Authority is a main partner on this project, leading on the arrangement of a large scale exercise planned to take place in June 2014, along with the development of associated Standard Operating Procedures (SOPS) and training programmes. The project budget for the Authority currently totals 354k (c. 280k) over a three year period, of which 50% is paid as a grant on a matched funding basis, and reclaimed on specified dates. It is estimated that 79k of European grant income will be received in 2014/15. Performance Reward Grant (PRG) Grant carried forward which is used to fund a range of community safety initiatives. 16

19 REVENUE FUNDED GRANT EXPENDITURE Grant Income Proposed Spend in 2014/15 Grant reserve balance Grant expected Total Funds available Employees Other expenditure Total expenditure Grant reserve balance 1/04/ /15 31/03/ Revenue Grants - Section 31 National Resilience 264 1,117 1, , Future Fire Control Centre FireLink Fire Prevention Business Rate Initiative Total Section 31 Grants 729 1,684 2, ,140 2, Revenue Grants - Other Marine Incident Response Group (EU) Performance Reward Grant

20 RESERVES General Reserves - These reserves provide a working balance to help cushion the impact of uneven cash flows, help avoid unnecessary temporary borrowing, and provide a contingency to cushion the impact of unexpected events or exceptional circumstances. The level of general reserves is set at approximately 6% of the Authority s net revenue budget. The appropriateness of the level of this reserve is assessed on an annual basis, through a detailed risk assessment. Earmarked Reserves These are sums that are set aside for a specific purpose to meet future known or predicted expenditure or liabilities. Their use and purpose is clearly defined, with regular reviews to ensure their continuing relevance and adequacy. Detailed below is a brief explanation of each earmarked reserve: Business Continuity - This supports the funding of any additional costs that might arise due to an unavoidable interruption to business continuity or service provision. Fire Control Meets additional costs arising from the implementation of the Fire Control project. Fire Museum A sum bequeathed to the Authority, the use of which must be agreed by the sole trustee. Government Grants This reserve is used to carry forward unspent government grants at the end of the financial year. Improvement and Efficiency This reserve will facilitate the pump priming of any new improvement and efficiency initiatives, including potential future redundancy costs. Local Government Resource Review This will fund any potential unforeseen loss in relation to the Authority s share of Medway Council and Kent District s collection funds on Council Tax and Business Rates. Insurance This reserve will assist in smoothing out the cost of insurance claim volatility between financial years. Pension Meets the cost of back-dated employer contributions arising from the Norman v Cheshire FRA legal case. Infrastructure This funds expenditure on infrastructure assets such as premises, IT and communications equipment, vehicles and operational equipment. Performance Reward Grant Resources that will be matched and utilised against defined areas of expenditure, usually in relation to Community Safety activity. Rolling Budgets This reserve is used to roll forward resources that are committed in one financial year but received in the next. 18

21 RESERVES General and Earmarked Reserves 1/04/14 Foecast Balance /15 Net Transfers /03/15 Balance 000 General Reserves 4, ,244 Earmarked Reserves Business Continuity Fire Control Fire Museum Government Grants Improvement and Efficiency Local Government Resource Review ,000 Insurance Pension Infrastructure 19,775-3,441 16,334 Performance Reward Grant Rolling Budgets Total Earmarked Reserves Capital Receipts Unapplied Capital Grants Total Reserves 24,447-4,272 20,175 4, ,617 1,501-1, ,409-5,122 29,287 19

22 INFRASTRUCTURE PLAN 2014/15 Expenditure The Infrastructure Plan reflects the management and funding of the Authority s assets and comprises new builds, property improvements/maintenance, information and communication systems, vehicles and operational equipment. The Plan contains projects that are funded from both revenue and capital resources. Premises - The largest part of premises expenditure is on the Station Build Programme. This programme of work covers the building of a new fire station and road safety centre at Rochester, a new fire station at Ramsgate and major works at Medway fire station. It is expected that construction will start on these sites during 2014/15. Resources have also been set aside to fund several other projects, the upgrade of the security system and the installation of solar panels at several sites. The programme of general estate maintenance includes works such as replacing boilers, resurfacing drill yards, replacing roofs and bay doors. Information and Communication Systems - The 2014/15 plan includes 1,730k to replace mobile data terminals, station end equipment, migration to the new control system and other control-related projects. In addition funding has been allocated for the new HR and payroll system, replacement administrative systems such as the workforce planning system, the premises risk management system, the asset management system, the finance system and the engineering system. Vehicles and Equipment The budget for appliances includes the first stage payment for three turntable ladders and funding for black boxes to be fitted on appliances. The plan also includes funding for the purchase of 7 vans including 2 operational support vans and one BA maintenance van. The budget for operational equipment includes replacement RTC equipment, the purchase of additional defibrillators, ladders and amounts for other equipment such as BA compressors, pumps, line rescue equipment and water safety equipment. There is a budget for research and development available for new initiatives such as multirole vehicles and fognail (water fogging system). 20

23 INFRASTRUCTURE PLAN 2014/15 Capital Budget 000 Revenue Budget 000 Total Budget 000 Premises Station Build Programme 5, ,291 Resilience Environmental Diversity and Equality Innovation and Learning General Estate Maintenance 200 1,457 1,657 Information and Communication Systems Mobilising and Control Systems 1, ,730 Administrative Systems Vehicles and Equipment Appliances Cars and Vans Operational Equipment Research and Development Total Infrastructure Expenditure 8,626 3,664 12,290 21

24 INFRASTRUCTURE PLAN 2014/15 Funding The Infrastructure Plan is funded from various sources each of which is explained below: Prudential Borrowing The Authority can use prudential borrowing to fund capital expenditure, for which there is no borrowing limit, other than it must be able to demonstrate that it is affordable and sustainable. Provision for the repayment of the loan is matched to the life of the asset that is being funded and as such it is unlikely that this form of borrowing would be used to fund assets with a short life. In the main, all other forms of capital funding are used before any prudential borrowing is undertaken. The Authority is not planning any prudential borrowing until 2017/18. Revenue Contributions The Authority has set aside some revenue resources to fund the infrastructure projects. Capital Grant General /15 is the second year of a two year grant allocation which awarded 187k for the purchase of response cars and 1.4m general capital grant in each of the two years 2013/14 and 2014/15. Capital Grant (Fire Control) - In 2011/12 the Authority was awarded a grant of 1.8m ( 900k capital and 900k revenue) to assist with the colocation of the control room to Police and the implementation of a new mobilising system. It is expected that 50k of the capital element will be used in 2013/14, with the remaining 850k being utilised in 2014/15. Capital Receipts The disposal of a number of the Authority s assets including redundant fire stations, land and unoccupied housing will be used to fund the station build programme. All disposals are governed by a number of regulations and as such any receipts can only be utilised against capital expenditure. As at 31 March 2014 there will unapplied capital receipts of 4,217k (as shown on page 19) with a further 400k expected during 2014/15. However, it will be 2015/16 before some of these receipts are likely to be utilised. Performance Reward Grant This capital grant does not have to be utilised within a prescribed timeframe, however it has been earmarked for use against several community safety projects. 22

25 FUNDING THE INFRASTRUCTURE PLAN 2014/15 Capital Budget Revenue Budget Total Budget Prudential Borrowing Revenue Contributions 5,757 3,664 9,421 Capital Grant General 1, ,619 Capital Grant Fire Control Capital Receipts Performance Reward Grant Total Funding 8,626 3,664 12,290 23

26 MEDIUM TERM FINANCIAL PLAN 2014/ /19 Revenue Assumptions The table opposite shows a summary of the proposed changes to the base budget, used in developing the estimated budgets for each of the subsequent financial years, The key points to note are as follows: (a) An assumption that Council tax increases will be 2% for the 5 year period ; (b) (c) (d) (e) An estimate of a 1% pay award for all staff groups has been used in each of the five financial years; Increments are applied to service support staff, up to the point where they reach the top of the scale; Price increases are based on an annual inflation rate of 3% in each year; An increase in employer contributions to both of the firefighter pension schemes is anticipated in 2016/17 ( 800k); (f) The contracted out National Insurance rate will be abolished in 2016/17 with a potential cost to the Authority of 949k; (g) (h) (i) The impact of changes to the firefighters pension scheme in 2014/15 ( 43k) and 2015/16 ( 150k); The back dating of pension contributions relating to the Norman v Cheshire FRA case in 2015/16 ( 90k); The cost of auto enrolment into the pension schemes will impact in 2017/18 ( 248k); (j) An assumption that the Council Tax base will increase by 0.5% in each financial year between 2015/16 and 2018/19; (k) (l) It is prudent to assume at this point in time that there will be no surplus or deficit on the collection funds in future years; Government Grant will reduce by 9.7% in 2015/16 with further average reductions of 6.5% in each of the next three years. 24

27 MEDIUM TERM FINANCIAL PLAN 2014/ /19 5 Year Revenue Budget / / / / /19 Budget Budget Budget Budget Budget Base budget brought forward 70,936 70,649 68,788 67,949 67,238 Pay, Prices and Pressures 2,902 1,496 2,876 1,906 1,554 Savings -3,189-3,357-3,715-2,617-2,093 Net budget 70,649 68,788 67,949 67,238 66,699 Net change , Net change % -0.4% -2.6% -1.2% -1.1% -0.8% Budget funded by: Revenue Support Grant 12,959 10,115 26,241 24,535 22,940 Share of Retained Business rates 2% 6,058 6,225 Council Tax Support Grant 5,418 5,418 Council Tax Freeze Grant 2011/12 1,075 1,075 Top-up 4,611 4,798 Council Tax Freeze grant 2013/ Amount redistributed 35 0 Council tax 39,746 40,723 41,708 42,703 43,759 Council tax surplus Total funding 70,649 68,788 67,949 67,238 66,699 Council tax base 573, , , , ,096 Band D council tax

28 MEDIUM TERM FINANCIAL PLAN 2014/ /19 5 Year Infrastructure Plan 2014/ /19 The medium term Infrastructure Plan has been developed in line with the proposals detailed in the Safety Plan, and supports and maintains the assets and infrastructure across the organisation. The detailed areas of spend within this Plan for 2014/15 are shown earlier in this budget book. However, detailed below are the proposed projects that are planned to take place in subsequent years. Station Development Programme - The Authority has planned to build five new fire stations over the course of the next few years, so this Plan details the funding that has been allocated to resource this programme of work. The first of these new builds, the fire station at Ash-cum- Ridley was successfully completed in October This new energy efficient and fit for purpose station is now operational and the decommissioning of Horton Kirby has begun ready for sale. New builds at Rochester and Ramsgate and major refurbishment at Medway fire stations will be progressed during 2014/15. A site is currently in the process of being purchased at Rochester, which will house a new fire station and road safety centre. The acquisition of an additional site is progressing at Ramsgate. Premises There is an annual programme of maintenance work on the Authority s premises to ensure that the buildings continue to remain in a good state of repair. There are also plans to upgrade the security system at various premises, install solar panels at several sites and complete various works at Service Headquarters. Information and Communication Systems Work will continue in developing and enhancing information systems across a variety of areas which will help ensure that processes become more streamlined and cost effective. In addition funding has been allocated for command and control technology in 2016/17 and for the refresh of various information and communication systems in 2017/18 and 2018/19. Vehicles and Equipment Funding has been set aside to resource the rolling replacement programme of the Authority s fleet of light and heavy vehicles. The outcome of the capability review will detail the type of appliances and vehicles that are purchased in future years. 26

29 MEDIUM TERM FINANCIAL PLAN 2014/ /19 5 Year Infrastructure Plan 2014/ /19 Medium Term Infrastructure Plan 2014/ / / / / Estimate Estimate Estimate Estimate Estimate Estimate Station Development Programme 5,291 7,366 6,900 4, ,580 Premises 2,576 2,429 2,339 2,397 2,456 12,197 Information and Communication Systems 2, ,000 5,499 Vehicles and Equipment 1,998 3,745 4,985 2,097 2,693 15,518 Total Expenditure 12,290 14,135 14,913 9,307 6,149 56,794 Funded By :- Prudential Borrowing ,311 2,373 5,684 Revenue Contributions 8,721 10,135 11,913 4,996 3,776 39,541 Revenue Contributions - Fire Control Grant Capital Grant Fire Control Capital Grant General 1, ,619 Performance Reward Grant Capital Receipts 0 4,000 3,000 1, ,000 Total Funding 12,290 14,135 14,913 9,307 6,149 56,794 27