Motion - The Impact of Inflation on Merseyside Fire and Rescue Authority
- Meeting of Council, Monday, 10th October 2022 6.00 p.m. (Item 53.)
- View the declarations of interest for item 53.
Councillor Brian Kenny moved and Councillor Gill Wood seconded a motion submitted in accordance with Standing Order 13.
Having applied the guillotine in accordance with Standing Order 9.1, the Council did not debate this matter, and it was –
Resolved (unanimously) – That
Wirral Council notes that the Home Office and His Majesty’s Inspectorate of Constabulary and Fire and Rescue Services (HMICFRS)have recognised the magnificent work Merseyside Fire and Rescue Authority (MFRA) carried out to support the country’s response to the COVID-19 and the work it does to protect the local community and businesses from fire risk.
That challenge has been made all the more difficult by the impact of global and national economic factors in recent months that have far exceeded the inflationary assumptions within the current Budget and Financial Plan approved in February 2022.
Council notes that the MFRA is committed to facing these challenges positively and constructively. However, Council recognises the real current impact of inflation on their ability to deliver much-needed services for local people and businesses, including in Wirral.
The highest levels of inflation for four decades are now driving up the costs of the raw materials, labour, energy and other costs which the Authority must pay for in order to provide essential public services and capital investment in the Service.
The Authority’s budget for 2022/23 was set in February 2022 based on estimates that price inflation and wage growth would both be in the region of 2% to 3% in 2022/23. These were not unrealistic assumptions as they reflected the Government’s own forecasts for inflation in 2022 and 2023, specifically:-
- In October 2021, the Autumn Budget and Spending Review 2021 Statement set out forecasts that the Consumer Price Index could reach 4% in 2022, but would fall to 2.6% by 2023;
- In December 2021, the provisional Local Government Finance Settlement uprated grant funding for 2022/23 by the actual Consumer Price Index as at September 2021 (3.1%); and,
- In February 2022 (when MFRA budgets were being finalised), the Office of Budget Responsibility forecast that the Consumer Price Index could reach 4.7% in 2022, but would fall to 2.3% by 2023.
Council notes that, since then, there has since been a dramatic shift in these expectations. The latest estimates from the Office of Budget Responsibility are that the Consumer Price Index will reach over 10.% this year – significantly higher than both the inflationary increase in funding which the Authority received and the forecast increases which informed the MFRA budget for 2022/23.
Coupled with continuing growth in demand for Protection services and meeting increasing risks such as flooding, Council recognises that the MFRA is now facing enormous financial difficulties.
Council notes that the Institute for Government recently estimated that local authorities in England will be facing unbudgeted costs of up to £2bn as a result of inflation being significantly higher than was forecast in the Chancellor of the Exchequer’s Autumn Budget and Spending Review announcements. The Authority has estimated that this impact could exceed the revenue provision by £2m in 2022/23 and the expected increase in capital expenditure is potentially +£10m;
· The Authority had a fixed price electricity contract that ended in March 2022. The new contract has increased prices by +200%. Gas prices have had a similar increase. The additional cost in 2022/23 is estimated at £1.6m;
· Capital projects – many of which are essential in providing firefighters with the relevant training, PPE and equipment to provide an effective and safe fire response, have also been hit. The Authority is facing significant extra costs due to increases in the price of raw materials and labour. The proposed new Training and Development Academy / fire station, fundamental to keeping our firefighters safe and able to respond quickly and effectively, has seen its costs increased from £25m to £39m, of which a significant element relates to increased raw material and labour costs;
· The local government and firefighter pay award for 2022/23 have yet to be resolved –with inflation forecast to exceed 10% this year, pay disputes are inevitable if pay offers represent significant real-terms pay cuts. While removing any “cap” on pay increases, the Government has previously stated that any pay award must be funded from the Authority budget. This was already going to be difficult when pay was forecast to rise by around 2.5%, pay awards above those levels will add significant pressure on Authority finances if they are not resourced from additional funding provided by the Government. Each additional 1% = £0.5m; and,
· Operational revenue budgets across the full range of Authority services are being impacted by increases in the costs of materials, fuel, labour and a higher indexation ratio being applied to outsourced contracts.
Council recognises that the financial challenge of inflation comes on top of the enormous pressures faced by the Authority after a decade of austerity when the biggest cuts in local authority funding impacted on the authorities in the most deprived areas of the country because they relied more heavily on the Government grants which were cut so severely. The Authority is also less able to raise income from increases in Council Tax and Business Rates.
Council is concerned that, without extra support, the Authority may have to once again balance the books by cutting more essential services to our vulnerable residents, including those in Wirral.
Council notes that, over the last decade or so, the MFRA have prioritised every possible option to achieve greater efficiency and minimise the need to cut budgets for essential services. It is clearly not realistic to expect financial pressures of this magnitude to be addressed through further efficiencies.
Council notes that, in effect, the Local Government Finance Settlement was determined on the basis of a set of assumptions which has since been proven to be significantly inaccurate. Council appreciates that those assumptions were legitimate at the time, but global and national events since then have created a wholly different set of circumstances. It would be unfair and unrealistic to expect the Authority to be able to cope with the scale of those changes. Wirral Council therefore urges the Government to ensure that the inflationary pressures facing fire and rescue authorities in 2022/23 are properly and fully funded.
Council asserts that, in the longer-term, for Levelling Up to be effective, it is essential that inequalities in local government funding are addressed. This must be reflected in both the forthcoming “Fair Funding” Review and the 2023/24 Local Government Finance Settlement – which should ensure that local authority funding is fairly distributed on the basis of local levels of deprivation and properly reflects the prevailing rates of price inflation and wage inflation which affect the services that the Authority delivers.
Council urges the Government to appreciate that the fire and rescue sector cannot resolve the current difficulties without national Government support.
The Council Leader is therefore requested to write to the appropriate Government Minister, to seek such financial support, as a matter of urgency.