Audit Scotland has published a report on the creation of a single fire and rescue service for Scotland. They conclude that the process was managed effectively, and its performance is improving. However, a long-term financial strategy is now urgently needed to address a significant potential funding gap.
The key financial concerns are:
“Reported savings of £16.1 million in 2013/14 and planned savings of £6.6 million in 2014/15 puts the Scottish Fire and Rescue Service on track to exceed expected savings of £328 million by 2027/28. However, as a result of future cost pressures and likely reductions in funding, we estimate a potential funding gap of £42.7 million in 2019/20. The Scottish Fire and Rescue Service does not yet have a long-term (five to ten year) financial strategy. It is developing the necessary underpinning strategies.”
Staff costs amount to 79% (£207 million) of budgeted gross expenditure. The support staff represented by UNISON Scotland makes up only 9%.
On future savings, Audit Scotland calculates gross savings of £55.3 million by 31 March 2020. However these will be offset by cost increases (inflation, increase in employers' national insurance costs etc) of £32.4 million, resulting in net savings of £22.9 million. The SFRS cost plan assumes that budgets will remain at the same level as 2015/16 until 2019/20, while recognising that a decrease in funding of 5% by 2019/20 would result in a funding gap exceeding £21 million.
Audit Scotland believes that this is an optimistic assumption. Our analysis uses forecasts of UK public sector spending from the OBR to estimate future funding. They calculate a potential funding gap of £42.7 million (in cash terms) in 2019/20. A potential funding gap of £42.7 million in 2019/20 assumes that budget reductions are spread evenly across the public sector, with no protected areas. If some areas are protected, the SFRS's funding gap could exceed £42.7 million.
In this context they recommend a long-term financial strategy is needed for the SFRS, to show how it will close the funding gap and achieve savings by 2019/20 and beyond.
The funding shortfall is exacerbated by the SFRS’s liability for VAT. UNISON Scotland warned the Scottish Government of this risk and they were explicitly warned by the Treasury that if they chose to organise Fire and Rescue services in this way they would lose the previous VAT exemption. Sadly, Scottish Ministers ignored this warning and scarce resources are now going to the Treasury.