VFM conclusion guidance for auditors 2012/13 v3 issued 13 May 2013
This section covers:
background information;
fire and rescue national framework for England;
resilience and efficiency of local fire and rescue control rooms;
comparative information;
outcomes and impact of the 2010 Spending Review, and the impact on formula grant and council tax income;
impact of the Localism Act 2011;
potential changes to FRA finances from 2013/14, arising from the Local Government Finance Act 2012; and
sector self-regulation and improvement.
Forty-six FRAs of differing sizes and structure deliver fire and rescue services in England. Thirty-one of the English fire and rescue services are metropolitan or combined fire and rescue services, funded through a combination of central grants and council tax precepts. County councils deliver the remaining 15 services, funded by the general council budget.
The 15 county fire and rescue services do not require a separate VFM conclusion – the work is covered by the auditor’s VFM work for the county council. When undertaking the risk assessment county council auditors may wish to consider the relevance and significance of the risk indicators to the fire and rescue service of the county and whether any specific local work is required as a 'result.
A new fire and rescue national framework for England was published in July 2012. It replaces the Fire and Rescue Service National Framework 2008-11. The framework provides an overall strategic direction to FRAs and sets out the government’s expectations and requirements but does not prescribe operational matters. FRAs must have regard to the framework in carrying out their duties.
Key priorities for FRAs in the new framework include:
identifying and assessing the full range of foreseeable fire and rescue related risks their area faces;
making provision for prevention and protection activities and responding to incidents appropriately;
work in partnership with their communities and a wide range of partners locally and nationally to deliver their services; and
being accountable to communities for the services they provide.
The Ministerial foreword to the new framework states that ‘They [FRAs] are free to operate in a way that enables the most efficient delivery of their services’. However, the framework does include requirements to:
produce an IRMP;
working in partnership;
make communities aware of how they can access data and information on performance;
have arrangements to ensure that decisions are open to scrutiny; and
publish an annual statement of assurance (the government will publish guidance on the nature of the assurance statements).
FRAs plan their resources based on the foreseeable fire and rescue related risks their communities face. Risks and the means of managing these risks must be set out in an IRMP. The IRMP must cover at least a three-year time-span and be reviewed and revised as often as necessary to ensure that FRAs are able to deliver the requirements set out in the national framework.
On 1 March 2012 the government announced funding of £74 million to support locally led projects to improve the resilience and efficiency of local fire and rescue control rooms across England. This followed the government’s decision to terminate the national FiReControl project in December 2010. All authorities were allocated funding, except for London where alternative arrangements had previously been agreed.
The summary of successful bids for the government funding shows the variety of local projects that FRAs plan to implement. They include:
merging the provision of control room services with other FRAs;
partnership working, for example networked systems to serve several FRAs and common operating procedures; and
upgrading ‘command and control’ technology, for example call handling systems.
To secure financial resilience, FRAs will need to consider the impact of partnership working on the developing and delivering of local financial plans. They will also need to consider how they will fund investment in their existing control room systems and staff capacity in the future.
Less comparative information is now available for FRAs, as all national indicators for fire and rescue services were discontinued on 1 April 2010. Statistics on fires and other incidents attended by fire and rescue services are available from the fire and emergencies section of the DCLG website. The Commission’s fire VFM profiles tool provides a range of information that auditors may find useful as background. The Commission’s financial ratios analysis tool includes data for standalone FRAs. Further information on these tools is provided at section 5.5 of this guidance.
On 20 October 2010 the coalition government published the Spending Review 2010, setting out government department budgets for the period 2011/12 to 2014/15.
The Spending Review included plans to reduce fire resource expenditure by 13 per cent in real terms over the Spending Review period. Within this, central government grants to local authorities will reduce by 25 per cent over the period (although for fire authorities this reduction is back-loaded to 2013/14 and 2014/15).
The Chancellor of the Exchequer is expected to announce the results of the latest spending review, for 2015/16 and beyond, on 26 June 2013.
In 2011/12, formula grant decreased by, on average, 5.8 per cent for single purpose FRAs. In 2012/13, on average, formula grant increased by 1.9 per cent for fire authorities (including the 2012/13 council tax freeze grant of £652.2 million which not all local authorities received). This did not impact equally across the country however, with some fire authorities experiencing decreases in formula grant. To understand the decrease in revenue funding, auditors would need to check specific and formula grant income with individual FRAs. Auditors will need to consider the level of funding a fire authority receives from other sources to determine the likely impact of the grant reduction on the fire authority’s revenue budget as a whole.
Details of the 2012/13 settlement are available on the DCLG website.
On 4 February 2013, the Secretary of State published the final local government settlement for 2013/14. While the average spending power by English local authorities has reduced by 1.7 per cent in 2013/14 compared to 2012/13, for fire authorities the decrease is significantly larger, reflecting the back loading of spending reductions in the spending review period. Metropolitan fire authorities have had a spending power reduction of 4.9 per cent, while combined fire authorities have seen their spending power reduce by 4.1 per cent on average for 2013/14.
The provisional settlement for 2014/15 shows a further 3.8 per cent spending power reduction for metropolitan fire authorities and 2.7 per cent for combined fire authorities.
In 2011/12, the government offered FRAs funding equivalent to a 2.5 per cent increase in their council tax precept if they froze or lowered their element of council tax.
All fire authorities set their council tax precept for 2011/12 at or below that of 2010/11 levels and therefore received the council tax freeze grant. The government also made available funding for the rest of the spending review period to reflect the income forgone in those years. There are no guarantees about income forgone in years beyond the Spending Review period for a freeze in the council tax precept in 2011/12.
The government offered ‘one-off’ funding, equivalent to an increase of 3 per cent of council tax, to single purpose FRAs if they froze or reduced their council tax precept in 2012/13. Twenty-one of the single purpose fire authorities did not increase their council tax precept in 2012/13 and so are eligible for the grant. No funding is available in future years for revenue forgone arising from a council tax precept freeze in 2012/13.
The Localism Act 2011 requires a precepting body, such as a single purpose FRA, to hold a referendum if it proposes an increase in its ‘relevant basic amount of council tax’ that exceeds the level set each year by the Secretary of State and endorsed by the House of Commons. In 2012/13, increases above 4.0 per cent would trigger a referendum. No FRA exceeded this limit.
In October 2012 the government announced that a further council tax freeze grant would be payable to local authorities that freeze or reduce council tax in 2013/14. The grant is equivalent to a 1 per cent council tax increase payable in both 2013/14 and 2014/15. The trigger for a referendum in 2013/14 is a council tax increase of more than 2 per cent.
The Localism Act 2011, which received Royal Assent in November 2011, contains a wide range of measures to devolve more powers to FRAs and neighbourhoods and introduces changes to governance and scrutiny arrangements. Key provisions in the Localism Act 2011 include:
introducing a new general power of competence, enabling FRAs to do anything which an individual may do, unless other legislation specifically prevents it; and
abolition of the Standards Board regime and the introduction of requirements for authorities to promote and maintain high standards of conduct.
The general power of competence enables FRAs to do anything which an individual may do, unless other legislation specifically prevents it. FRAs may use the power to do things for a commercial purpose, although they must do them through a company. The power cannot be used as a way round the other restrictions and limits in the Localism Act 2011. The Localism Act 2011 does not authorise FRAs to borrow money.
The general powers are subject to restrictions, limitations and prohibitions in the Localism Act 2011, and the courts’ jurisdiction. Applying the new powers is therefore still subject to legal interpretation and advice. When exercising the power, FRAs must ensure that they act reasonably and responsibly. This includes ensuring that the exercise of this power supports the achievement of economy, efficiency and effectiveness in the delivery of services.
The Localism Act 2011 has introduced a new standards framework for authorities which came into force on 1 July 2012. It abolishes the requirement for authorities to adopt the national code of conduct and to have a standards committee to oversee the behaviour of their members and receive complaints. It also abolished, on 31 March 2012, the Standards Board for England, the central body set up to regulate standards committees.
All FRAs now have a duty to ‘promote and maintain high standards of conduct’. Each FRA must:
develop a local code of conduct dealing with the conduct of members and co-opted members of the authority;
maintain and publish a register of interests; and
appoint at least one independent person to act as an adviser to the FRA on any allegations it may be considering and to members who may be the subject of the allegation(s).
The LGA has published a template code of conduct which FRAs may wish to use. DCLG has published illustrative text for a local code of conduct.
A FRA will need to consider how any changes to governance structures would affect the arrangements for the scrutiny and challenge of financial plans and securing economy efficiency and 'effectiveness.
Until 31 March 2013 district councils or single tier authorities collect business rates (non-domestic rates) and pass them to central government. Business rate income is distributed to local government and FRAs through formula grant.
In June 2012 the government issued a revised Business rates retention scheme: The central and local shares of business rates – A Statement of Intent. From 2013/14 the government intends that councils will keep 50 per cent of business rates (local share). The remaining 50 per cent (central share) will be paid into a central pool, to be redirected to the local government sector through other grants. By keeping a share of business rates, the government hopes that authorities will be incentivised to promote local growth.
The government will be able to alter the size of the local share in future years, but does not intend to do so until 2020.
From 1 April 2013, local authorities that collect business rates will retain a similar level of business rates to the amount they would have received under the previous system. Authorities expected to raise more than this will pay the difference to central government as a tariff, to top up those authorities that are not expected to raise enough business rates. These tariffs and top-ups will increase by inflation each year.
Authorities will be able to keep a proportion of any growth in business rates, although the government is planning to recoup a share of disproportionate growth through a levy. This will be redistributed to other authorities experiencing decreases in their business rate income below a certain level. The government is proposing that fire authorities will be funded through business rates retention. This means that a fire authority’s income may change if the amount of business rates collected in their area goes up or down.
Business rates were included in the final local government settlement published on 4 February 2013.
On 14 December 2012 the Minister of State announced an expert led review into the operational efficiency of the services delivered by fire and rescue authorities in England. The review, led by out-going government Chief Fire and Rescue Adviser Sir Ken Knight, will seek to identify ways FRAs can pinpoint savings and improvements without reducing service.
The review will examine both short and long term saving options, and include:
The work will take place early in 2013, with Sir Ken Knight engaging with the LGA, the Chief Fire Officers Association, the Fire Brigades Union, the Fire Sector Federation, individual fire and rescue authorities and other relevant partners. The report is expected in Spring 2013.
The LGA is leading work to enable the local government sector to put in place arrangements for councils to work together to deal with the scale of the challenge following the Spending Review.
The LGA, in partnership with the Chief Fire Officers Association, has developed a similar approach to sector-led improvement in the fire and rescue service sector. The approach is intended to help fire and rescue services strengthen their accountability and evaluate and improve services. The approach is set out in the Fire Peer Challenge Offer, published in February 2012. This includes the opportunity for all fire and rescue services to request a fire peer challenge to be carried out between February 2012 and March 2014.
The Commission published a national report Rising to the Challenge, on fire and rescue services in 2008, identifying areas that could produce savings of £200 million without compromising safety. These areas include:
more effective deployment of staff;
reductions in false alarms and sickness absence;
greater collaborative procurement; and
delivering community fire safety in partnership.
Fire and rescue services in England are no longer required to submit Annual Efficiency Statements to report their progress on achieving efficiency gains. The total confirmed annual cashable efficiency savings reported by English FRAs from 2005/06 to 2008/09, and the forecasted savings for 2009/10, are available from the archived DCLG website.
According to the HSE, the injury and ill-health rates for the fire and rescue service are above average and there remains scope for improvement through better management of health and safety as part of good management practice. Auditors may find this information helpful in undertaking the risk assessment. The HSE carried out eight inspections last year, six of which were in England. A national report is available, as well as local reports of HSE Health and Safety Management Inspections of fire and rescue services in 2009/10.
The Commission’s fire VFM profiles tool provides information which auditors may find useful as background. The financial ratios analysis tool includes data for stand alone fire authorities for the 2009/10 to 2011/12 financial years. Further information on these tools is provided in section 5.5 of this guidance.