AnyFire. The future funding outlook for fire and rescue authorities. Finance

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1 AnyFire The future funding outlook for fire and rescue authorities Finance

2 Foreword At the time of writing, fire and rescue authorities are preparing to start the 2014/15 financial year, with on average a third less in government funding than they had four years ago. A cut of another 10 per cent is expected for 2015/16. Authorities have responded by driving out inefficiency, pioneering innovative service delivery and income generation methods and, where there is no alternative, reducing or removing services altogether. All authorities have been hit hard and fire and rescue authorities have contributed their share to the deficit reduction programme, but their service planning is structured on the basis of risk. The very effective preventative work done by fire and rescue authorities has resulted in a steady fall in the number of fires. This preventative work is at risk as a result of the sustained cuts to fire authority budgets. The Local Government Association s (LGA) response has been to call for a rewiring of public services at a local level. Building on our previous work on fire funding, this document looks at the approach taken to date by a representative fire authority, AnyFire, and its potential options for the future. AnyFire is based on our modelling of a typical single purpose fire authority, facing the average level of cuts to its budget. AnyFire is on the brink of a crisis where it will no longer be able to provide even the minimum level of risk mitigation. Rewiring public services means more than just salami slicing. It means looking afresh at the level of service and the type of services provided, and the relationship of that service provision with the sources of funding available. It is clear from the AnyFire example that, in fire and rescue services as in other local services, the expected level of service provision and the mechanisms for funding it are becoming more and more misaligned. Fire and rescue authorities are being innovative in how they work across the blue light services but they need government to smooth the way across Whitehall for greater locally led collaboration. The LGA s Rewiring Public Services 1 has set out an ambitious plan for local service delivery and we will work with government to ensure that these principles are applied to the fire and rescue service. Councillor Kay Hammond Chairman, Fire Services Management Committee Councillor Sharon Taylor OBE Chair, Finance Panel AnyFire

3 Contents Introduction 4 Current expenditure in AnyFire Authority 6 Current funding in AnyFire Authority 8 What AnyFire has done so far to reduce expenditure 10 The likely path of funding and expenditure 12 Options to close the gap 14 Conclusions and recommendations 17 Technical appendix 20 AnyFire 3

4 Introduction In 2013, the Local Government Association (LGA) published a series of papers setting out the impact of funding cuts and expenditure pressures on a range of typical local authorities. This included an AnyCounty paper investigating the effect on an average county council. In some parts of the country, the county council runs fire and rescue services, but in most areas these functions come under the control of a separate single purpose fire authority. The majority of the issues addressed in this paper also impact on the fire services run by county councils. The paper does not reflect the position of fire and rescue services in Greater London, which are provided by London Fire Brigade (LFB), part of the Greater London Authority (GLA). LFB accounts for 20 per cent of all fire and rescue expenditure in England, and the size and unique nature of the GLA within local government means it cannot be represented in such an analysis as this. This paper concerns AnyFire, a typical single purpose fire and rescue authority (this group consists of metropolitan and combined fire and rescue authorities), how it is affected by spending cuts, how it has responded, and some predictions for what the future might hold for the authority. We have taken as our base an authority typical in the composition of its expenditure and funding, and used an amalgamation of strategies from different fire and rescue authorities to describe the savings proposals AnyFire has taken to date. It is worth pointing out, however, that there is a great range of difference between fire and rescue authorities, particularly in the structure of their funding. The proportion of funding fire and rescue authorities derive from council tax ranges from approximately 30 per cent to 70 per cent, with most in the 40 to 50 per cent range. However, all authorities will have seen similar changes to the makeup of their funding over the period of the current Parliament, as illustrated in the diagram below: Figure 1: Impact of council tax support localisation on AnyFire s funding breakdown AnyFire s proportion of funding from Council Tax, 2010/11 to 2015/ / /13 Council tax Council tax support funding Other 2013/ /16 0% 20% 40% 60% 80% 100% 4 AnyFire

5 Two years of grant reductions mean that the proportion of funding from council tax increased from 2010/11 to 2012/13. When funding for Council Tax Benefit was transferred into settlement funding assessment in 2013/14, all authorities saw their council tax yield reduce, with the amount of the reduction dependent on the claimant proportion of their taxbase. The following two years will see a further increase in the proportion of funding from council tax as government funding is reduced further, leaving AnyFire with more or less the same ratio as it had in 2010/11, although of course the absolute numbers are much smaller. The LGA s Future Funding Outlook 2 showed the scale of the growing gap between councils expenditure pressures and their ever-reducing resources, leading to a funding gap of over 14 billion by the end of the decade for the 353 principal authorities in England 3. Fire and rescue authorities are subject to the same distribution mechanism as all other local authorities, but because of the unique nature of the services they provide, they are impacted quite differently. Due to the risk-based planning of fire services they are not subject to the same cost drivers as other local authority services, nor can they necessarily achieve the same sorts of efficiency savings. Many fire and rescue authorities already share support services with other areas of local government. In addition to firefighting, a fire and rescue authority is responsible for: fire safety, promoting fire precautions and giving advice on fire prevention and escape; dealing with road traffic accidents and being on call for other emergencies, including flooding response and water rescue ensuring fire fighters have the right equipment and are properly trained. Firefighting and responding to other emergencies is about more than dealing with the incident; it is also concerned with protecting the general public while an incident is occurring. Fire and rescue authorities need to be readily contactable, so they need a modern and effective 24/7 command centre. Fire and rescue authorities are also required to be part of the national framework for emergency response, being ready to contribute if large scale or multiple incidents occur outside their designated area. An essential aspect of provision is therefore to be able to maintain appropriate cover and state of readiness in order to manage risks. AnyFire has made significant savings so far without a significant impact on critical services, but funding cuts are backing it into a corner from which it could be forced to make cuts that could increase the level of risk faced by local people and local businesses. 2 LGA Future Funding Outlook 2013: 3 Approximately one third of fire expenditure in England is already included in the chart, as it is incurred by county and unitary authorities. AnyFire 5

6 Current expenditure in AnyFire Authority According to the Government s standard revenue analysis, AnyFire s service expenditure is split between community fire safety, firefighting and rescue operations, and a handful of smaller items which are explained in the technical appendix to this paper. AnyFire Authority s net expenditure budget in 2013/14 was 70 million, and it accounts for approximately 3 per cent of total Fire and Rescue expenditure in England. A breakdown of its total expenditure is shown below: Figure 2: Breakdown of total expenditure in AnyFire Authority Breakdown of total 2013/14 expenditure in AnyFire Authority 76% Fire fighting and rescue operations 11% Community fire safety 1% Central Services 3% Capital expenditure charged to the GF Revenue Account (CERA) 5% Provision for repayment of principal 4% Interest: external payments As might be expected, the largest proportion of expenditure is on direct service provision, particularly on fire fighting and rescue operations; this also applies in county council run fire and rescue services. If we dig deeper still we find that the vast majority of total expenditure is on the cost of employees in firefighting and rescue operations, which accounts for two thirds of all expenditure. The next largest quantum of spending is on community fire safety. This indicates that reductions in expenditure are likely to have an impact on frontline service provision either relating to direct response or precautionary work. Even those elements of expenditure that appear to be back office costs can have a significant impact on frontline service delivery for example interest: external payments relates largely to borrowing which finances the purchase and upgrade of fire stations, fire appliances and control room computer systems, all of which directly contribute to service delivery. 6 AnyFire

7 The sort of work carried out by AnyFire has been changing. While the number of fires has been steadily decreasing 4, the amount of preventative work has at the same time increased 5. AnyFire has moved towards a smarter, more efficient way of working, investing in preventative work while still delivering an adequate level of coverage to manage the risk of fires. Figure 3: Falling numbers of fires Total fires in AnyFire 30,000 25,000 20,000 15,000 10,000 Total fires in AnyFire 5, / / / / / / / / / / / / increased capacity for other services, such as responding to road traffic collisions and flooding and co-responder activity, that, along with increased fire prevention and protection work, has helped what were fire response organisations become more rounded safety and rescue organisations. Knight Review of the Fire and Rescue authorities in England, 2013 AnyFire 7

8 Current funding in AnyFire Authority It is not possible to say how much of fire service expenditure across the country as a whole is funded from the various resources available, because a significant proportion is funded from multi-purpose county and unitary council budgets. But it is possible to break down funding in AnyFire which is a single purpose authority: Figure 4: Breakdown of total funding in AnyFire Authority Breakdown of total 2013/14 funding in AnyFire Authority 2% Specific and special grants 3% Appropriations from earmarked financial reserves 38% Revenue Support Grant 25% Retained income from Rate Retention Scheme 32% Council Tax Requirement The largest single funding stream is the one over which AnyFire has the least control, Revenue Support Grant (RSG). This is not the case in all combined fire and rescue authorities but it is representative of the aggregate national position. AnyFire has some capacity to increase revenue from council tax subject to referendum limits, and arguably from business rates and investment income, and it could decide to increase or reduce the amount it takes from reserves (assuming for now there is some money in reserve left to take). But the distribution of RSG is in the hands of central government, and the indications are that this will continue to reduce each year. 8 AnyFire

9 The chart below 6 shows the real-terms reductions in AnyFire s external funding over five years. Figure 5: AnyFire s government funding over the last five years AnyFire s government funding in real terms Level of Government funding in real terms (2010/11=100) / / / / / /16 The chart tells a worrying story but it is not the whole story. Revenue funding is falling in AnyFire but capital investment, and investment in the condition of fire appliances in particular, is also critical in providing an adequate level of risk protection. Since the introduction of the bid-based process for fire capital grant in 2013/14, AnyFire has faced uncertainty in the funding of its capital programme, making forward planning difficult. It has also incurred a workload and costs in the bidding process disproportionate to the funding received. The process is based on assessing the value for money of capital investments, but research by the Chief Fire Officers Association indicates that the total of capital grants in England provides less than 65 per cent of the investment required just to maintain the current asset base in AnyFire this is estimated at 3 million per annum just to maintain the fleet of appliances and estate of fire stations. This is not an added extra but a core requirement. 6 This comprises the equivalent of retained business rates and Revenue Support Grant (now known collectively as Settlement Funding Allocation) and specific and special grants. Because of the changes in the local government finance system, presenting total funding amounts would be misleading, so we have instead set 2010/11 as the baseline and applied the real-terms cut for the median single-purpose fire authority in each year. AnyFire 9

10 What AnyFire has done so far to reduce expenditure AnyFire has set its budget for 2014/15 and agreed a provisional budget for 2015/16. Since the 2010 Spending Review, AnyFire has already made or has agreed revenue savings totalling 15 million. AnyFire is permanently conscious of the need to balance its budget, to invest in equipment and training to ensure it can provide a sustainable service and also to assess the impact of the savings it implements against its statutory duty to protect the public. Some difficult decisions have had to be taken. Some of the key savings measures are outlined below. Working patterns and shift arrangements In three of its low-activity fire stations, AnyFire has moved to a Day Crewing Plus system. This approach involves firefighters working an average of 42 hours per week but attending for shift periods of 24 hours, with 12 hours at work and 12 hours on standby. To achieve this, living accommodation is required on site and there was a capital cost of 1 million, but this has achieved annual revenue savings of 600, Recruitment freeze and productivity improvements There has been a freeze on the recruitment of new firefighters in AnyFire since 2012, and except in exceptional circumstances the authority has left vacancies unfilled. It has managed to cope with reduced staffing levels by improving productivity among existing staff for example the sick leave absence rate reduced by 10 per cent between 2010/11 and 2012/13 after the introduction of a new absence reporting and management procedure with trigger points and patterns more easily identified 8. Together these two measures have saved approximately 2 million. Back office and support service savings and efficiencies AnyFire has reduced the specifications for its cleaning and grounds maintenance contracts. It has stopped providing its emergency catering van service- which provided sustenance to firefighters on lengthy calls -instead equipping appliances with water heating equipment9. These measures together deliver 0.3 million of savings. They may have some impact on the level of services delivered. AnyFire has also sought to reduce its energy consumption and will continue to seek reductions in energy use through effective asset management. It has stopped increasing non-pay budgets for inflation each year, instead challenging budget managers to manage inflationary pressures within existing budgets AnyFire

11 IT innovations have reduced the amount of manual administration required and therefore reductions in the number of support staff have been possible. These efficiencies all together deliver 2 million of savings with little or no impact on the level of services. 10 AnyFire has started sharing a shared blue-light services command and control centre with local police and ambulance services. As well as the saving on overheads, estimated at around 300,000 for AnyFire alone, there are benefits too in the closer working arrangements and collaboration between the emergency services. 11 Income generation There are some opportunities for generating new income and increasing existing income streams. AnyFire increased its income from charging by 500,000 in 2013/14, most of which came from the sharing of fire station premises with the local ambulance service 12. AnyFire has explored other options for further income generation such as the provision of environmental decontamination services and dry riser testing to businesses, and the commercialisation of the provision of fire safety services to film production companies 13, but these are limited and some come with their own risks. Capital financing, debt costs and technical adjustments AnyFire has made additional savings of 50,000 through prudent management of its debt portfolio. 14 It is not possible for all fire and rescue authorities to make substantial savings on borrowing, as some have had to increase borrowing to compensate for a reduction in their capital grant. Overall the picture is one of an organisation making substantial savings under difficult circumstances, without significant deterioration in the service provided. But a tipping point is fast approaching; fire and rescue authorities will need to be ever more creative and innovative if they are to make further reductions whilst simultaneously meeting the public s expectations about levels of service AnyFire 11

12 The likely path of funding and expenditure From the current (2013/14) net expenditure of 70 million, our model projects a dip in spending in 2014/15 to 68 million, as capital financing from revenue is expected to stop completely, and then a gradual rise in annual costs to a level of 74 million by the end of the decade. This is due purely to inflationary pressures including the growing cost of firefighters pensions; it shows the steady-state scenario where the current level of fire coverage is deemed to be sufficient. It recognises that true efficiencies (that is, reducing costs while delivering the same level of service) can only be made in non-staff costs, because any reduction in staff costs will lead to lower staffing levels and therefore a potential higher level of risk. Nevertheless, due to the large savings already achieved, net expenditure at the end of the decade is still lower in cash terms than the 75 million AnyFire spent in 2010/11. We have forecast grant reductions to continue on their current trajectory. While this level of cuts might be unprecedented, it does not seem far-fetched given the pronouncements from all main parties on their plans to continue fiscal consolidation and austerity measures during the next Parliament and beyond 15. On the other hand, we have modelled relatively optimistic increases in other funding streams, but as we will see, they do little to offset the huge cuts in grant funding. The funding gap increases at an average of 3 million per year, to 17.5 million by the end of the decade. In other words, AnyFire s projected funding will cover just 76 per cent of the expenditure, required to deliver the same level of service. The projected path of income and expenditure for AnyFire Authority looks like this: Figure 6: AnyFire s growing funding gap The growing funding gap in AnyFire Authority Total expenditure m Total funding m / / / / / / / / / / AnyFire

13 The majority of the gap is due to the continuing reduction in grant funding, and even optimistic projections of council tax and business rates growth are not enough to halt the downward trend. Other factors and risks The cost of pensions is a concern across local government, but particularly in the fire service where pension funds must cope with a high number of retired members. AnyFire s pension fund, for example, has 2.5 retired members for every member currently contributing to the fund. While the proposed new pension scheme will reduce employers contribution rates in the long-term, it is likely be many years before this benefit is felt by fire and rescue authorities. In fact AnyFire anticipates an increase of 3 per cent in the employer s contribution rate after the 2016 valuation, but as this is inherently uncertain we have not modelled any change to pension contributions. AnyFire also faces increased employer s National Insurance contributions resulting from the introduction of the single state pension from We have not modelled the impact of this at a local level but it will undoubtedly increase the gap further. Fire and rescue authorities plan their services on the basis of anticipated risks in the local area. But the fire services also contribute to national resilience against major incidents such as the recent extreme weather events. Every fire and rescue service provides services and runs its operations through its local Integrated Risk Management Plan, published and consulted on annually. As it stands, there is no legal requirement for fire and rescue authorities to provide a service beyond this level other than to have regard to the National Framework in carrying out their functions 16 the level of contribution to national resilience required from each authority is not specified. The likely path of funding means that AnyFire will need to be more creative and innovative in how it delivers its services. 16 Fire and Rescue Services Act 2004 Section 21(7) AnyFire 13

14 Options to close the gap and their impact on AnyFire s residents and businesses If funding reductions continue then AnyFire will need to continue to be innovative in how it manages its resources to deliver firefighting and rescue operations and community fire safety. A number of fire and rescue authorities are already on this path, working collaboratively with other emergency services and also establishing commercial arms to provide business safety solutions, operational support and training services to other organisations. However, these initiatives will take time to mature and it is important for AnyFire to examine all options to increase income. Use of reserves AnyFire holds approximately 2 million in unallocated reserves, and 12 million in other reserves. Most of these other reserves are earmarked for specific purposes such as the investment in specific capital projects, or to safeguard against specific risks such as inflation. AnyFire could use its unallocated reserves in full to close the gap for one year. This would do little more than postponing the inevitable: reserves can only be used once, the gap the following year would be no different. In the hypothetical situation where AnyFire could use all of its other reserves (ie those that are allocated to a specific purpose) of 12 million, it could close the gap for, at best, two more years. This is not a realistic option. Firstly there are legal and technical barriers to using all reserves, but also running reserves to zero would leave AnyFire in a time of funding uncertainty without any buffer against fluctuations in funding, or other costs, for example large sudden cost requirements due to flooding or other environmental issues. Even if such a strategy were possible it does nothing to close the long-term gap, it just postpones it. Increase council tax revenues We have already modelled an increase in council tax rates of 2 per cent per annum. This is based on our estimate of the maximum rise permissible without triggering a referendum. Under our assumptions about grant reductions, AnyFire would have to raise its council tax precept by just over 10 per cent every year until the end of the decade just to maintain the same funding level in cash terms. If AnyFire were to increase its precept by more than 2 per cent it would have to bear the costs of a referendum in each of the authorities where it charges a precept and there would be no guarantee that the electorate would be in favour. 14 AnyFire

15 Increase business rates revenues We have already modelled an annual increase in AnyFire s local share of business rates by 1 per cent in real terms. This is dependent upon growth in the local economy resulting in an increase in the business rates base. It is extremely unrealistic that AnyFire could expect growth to be any greater than this, and if all other assumptions were held constant, a sustained annual growth rate of around 20 per cent would be required to bring AnyFire back to a balanced budget by Collaboration and commercialisation Any fire will need to work closely with partners locally to maximise the benefits of collaboration and greater commercialisation. In doing so it will recognise and take advantage of the opportunities there are to be more creative across the whole of the public sector in designing and delivering emergency and community safety services. However, AnyFire will also need to address reductions in funding, by managing expenditure. Make further back-office savings As in most other fire and rescue authorities, and in most councils, the well of efficiencies is running dry. While AnyFire is keen to get the best Value for Money possible from its back office services, and to stop doing those activities that do not contribute anything to its objectives, it is almost inevitable that further cuts will have an impact on the level of service offered to residents. If the recruitment freeze continues the amount of preventative work is likely to fall as the amount of firefighters available for frontline work diminishes. Reduce salaries of existing frontline staff further AnyFire staff have been subject to pay restraint for the last three years, in effect suffering a pay cut in real terms. If the 2020 budget gap is to be closed purely by a reduction in salaries, staffing costs must be reduced by some per cent from 2013/14 levels. AnyFire will consider its approach to pay, weighing up the possible impacts on staff morale, service levels and recruitment against the possible savings, but it is unrealistic to expect that pay restraint alone will deliver the scale of savings required. AnyFire 15

16 Reduce staffing and appliances From 2010 to 2014 AnyFire has reduced its fleet from 40 to 30 engines, with an associated reduction in staffing levels. Preventative action has become more sophisticated and targeted rather than universal and it is too early to say what the impact of this will be on the amount of fire incidents. AnyFire s average response time has increased to eight minutes. Nationally response time has increased by 25 per cent in the ten years to 2012/13 and further reductions will inevitably result in further increases in response time. These headline statistics mask some variation across the area covered by AnyFire; the neighbourhoods that have seen local fire stations close have seen a much greater increase in average response time. 17 By 2015 AnyFire will have 22 per cent fewer frontline staff than it had in 2010, a loss of approximately 100 firefighter posts. 18 Three fire stations will have closed or merged with others, and the same number will have to close again by There are now only two stations out of 28 that have more than one fire engine. Cuts have not to date impacted on community risk, but they could reduce the ability to contribute to national resilience in the event of major or catastrophic incidents. Although fire frequency has steadily reduced in recent years, this has been in large part due to the actions of AnyFire in taking preventative actions such as the Home Fire Safety Check. The work of AnyFire in commercial fires saved businesses 37 million in rebuilding and insurance costs in 2010 alone. 19 The financial challenges for AnyFire are increasing. AnyFire will continue to meet its statutory duties, but it is becoming more difficult to manage these alongside its preventative work Chief Fire Officers Association (CFOA) AnyFire

17 Conclusions 1. Fire and rescue authorities do much more than fight fires Much of their work is preventative, and they also respond to road traffic accidents, water safety and other rescue operations. Perhaps most importantly they contribute to the national resilience strategy in the event of major incidents. While fire and rescue authorities have so far maintained a service based on the management of risk locally, their contribution to the national resilience strategy is at risk if funding cuts continue. A review of the contribution to national resilience required from fire and rescue authorities must be undertaken and government should ensure that they are funded accordingly. 2. Fire and rescue authorities have already played their part in deficit reduction, but more certainty over future funding levels would give some scope to make further savings While services are approaching a critical level, fire and rescue authorities accept that this is part of the deficit reduction programme and all public services must play their part in this. Long-term funding settlements covering the length of a Parliament would at least allow managed reductions, strategic budget planning, and invest to save projects, in keeping with the principle that fire and rescue authorities plan on the basis of risk. The LGA welcomes the Chancellor s announcement in the 2013 Autumn Statement that local government would be given some indication of their settlements in advance. Local government should be provided with indicative settlements covering the life of a Parliament. AnyFire 17

18 3. Incentivising growth does not work for fire and rescue authorities in the same way it does in other local authorities Three major reforms have been introduced since 2010 with the aim of incentivising certain types of behaviour in local authorities: the replacement of Council Tax Benefit with localised council tax support schemes, the retention of 50 per cent of business rates, and the payment of the New Homes Bonus to reward the expansion of the council tax base. Arguably these incentives are weak even in upper and lower tier authorities, but they are particularly weak, or non-existent, in fire and rescue authorities. Fire and rescue authorities do not have the levers to influence claimant count that billing authorities have, nor can they directly influence growth in the business rates base. Fire and rescue authorities do not receive any New Homes Bonus payments. It could even be argued that incentivisation of housing growth actually disadvantages fire and rescue authorities upper and lower tier authorities experience additional service pressures with each new home, but receive a grant, while fire and rescue authorities must cope with the additional pressure with no compensating grant. With all of these incentives there is scope for greater joint working between fire and rescue authorities and other local authorities. However, the Government should reconsider the incentive-based aspects of the current system of local government finance in relation to fire and rescue authorities. 4. While stand alone fire and rescue authorities do not face the same demand pressures as upper and lower tier authorities due to their risk-based planning, their services are nevertheless impacted by reductions in local authority funding If anything, the demand for fire and rescue services is gradually reducing as the number of fire incidents drops. This is partly as a result of the fire service s preventative work in helping buildings become safer and the population more knowledgeable about fire safety. But the current level of fire service provision is under pressure as a result of funding reductions. The Government should publish its analysis of the cumulative impact of all funding reforms at local authority level, including the increased risk caused by reductions in funding for fire and rescue authorities. 18 AnyFire

19 5. Fire precepts as a proportion of total council tax are small and fire services provide good value to the taxpayer The LGA has long argued that local authorities should have freedom to set their council tax levels free of the constraints of referenda. If anything this is more pronounced in fire and rescue authorities, where the fire precept comprises on average 6 per cent of the total council tax bill an annual increase of just 1.32 in the average precept would be enough to trigger a referendum, and most fire and rescue authorities would need to raise their precept by over 5 per cent just to cover the cost of the referendum. All restrictions on the setting of council tax levels should be removed. 6. There is scope for delivering further savings while improving service levels through mergers and shared services arrangements across the blue light services Shared control centres for blue light services such as the one in AnyFire can deliver savings and offer a more joined-up coherent set of services for the user. The focus does not need to be on governance reform, but rather on the behavioural change that is required across the emergency services to ensure that greater collaboration delivers new and more efficient ways of working. Mergers, cross-border arrangements, and greater collaboration across blue light services can also give some savings but these should be a matter for local decisions based on local circumstances, and should not be imposed from above. The Government should support fire and rescue authorities who wish to pursue these options, including providing one-off transitional funding. AnyFire 19

20 Technical appendix Background to the construction of the model: It is not possible to match funding to expenditure for those fire and rescue authorities that also provide other services. That is to say, we can say with some certainty what was spent on fire and rescue services, but we cannot give a breakdown of how this was funded councils are free to spend RSG, income from the retention of business rates, and council tax revenues as they wish, so we cannot say what proportion of local council tax is spent on fire and rescue services and how much on other services. A further complication arises in the treatment of support services, such as the provision of the corporate and democratic core, which must be somehow apportioned between fire and non-fire services. The provision of fire and rescue services is subject to inflationary pressures similar to those experienced by all local authorities. But it is not subject to demand pressures in the same way, as fire and rescue services are provided based on an assessment of risk. That is to say, fire and rescue authorities plan and provide their services on the basis of what would be an acceptable minimum level of coverage. For these reasons it is difficult if not impossible to present an accurate graph as per figure 1 for just the provision of the fire and rescue service in all England we cannot easily give the overall fire funding gap. What we have done is extend the LGA s AnyCouncil analysis to look at a typical single purpose fire authority whose funding is used solely for fire and rescue services. Assumptions used in projections: We used the following assumptions to project expenditure forward: paydrift of 1.8 per cent per annum projected consumer prices index (CPI) inflation on supplies and services no change in level of staffing efficiencies in supplies and services spend of 1 per cent per annum no change in demand for charged-for services fees and other income increasing in line with projected CPI Capital Expenditure from the Revenue Account (CERA) reduced to zero. 20 AnyFire

21 We used the following assumptions to project funding forward: reductions in Settlement Funding Assessment of 8 per cent in 2016/17 and 7 per cent each year thereafter council tax increases of 2 per cent per annum, and increase in taxbase of 0.5 per cent per annum growth in the local share of business rates by projected increases in the Retail Price Index plus 1 per cent. Explanation of items of expenditure: Central services comprises services which cannot easily be apportioned to frontline services, such as the cost of external audit and the maintenance of statutory registers) and a handful of items which are not directly attributable to the provision of services. 20 Capital Expenditure from the Revenue Account (CERA) is a method of financing capital expenditure where the expenditure is financed directly from the revenue account in the year it is incurred. Our model assumes that AnyFire is able to reduce this to zero without any impact on the level of service delivered. Provision for the repayment of principal is an accounting entry relating to any charge made to the revenue account in respect of past years capital expenditure. 20 For full explanation please see the guidance notes: AnyFire 21

22 Local Government Association Local Government House Smith Square London SW1P 3HZ Telephone Fax Local Government Association, March 2014 For a copy in Braille, larger print or audio, please contact us on We consider requests on an individual basis. L14-96