Contract Car Lease Scheme Review

Report Police and Fire Committee 5 January 2012

Chief Fire Officer C Scott, MIFireE

CONTRACT CAR LEASE SCHEME REVIEW

1. Purpose of Report This report was compiled following a request from Members to further scrutinise the budget in relation to the Contract Car Leasing Scheme.

2. Recommendations Members are asked to:

2.1 note the explanation provided for the perceived increase in the Contract Car Lease Scheme running costs as detailed at section 3.2 in the report; and

2.2 note the action plan to reduce the costs of the Scheme over the next 3 years as detailed at section 3.3.

3. Considerations 3.1 Background 3.1.1 The Contract Car Lease Scheme came into effect within Dumfries and Galloway Fire and Rescue Service on 1 April 2007. This Scheme was introduced to replace the “Essential Car Users Scheme.” The Car Leasing Scheme was intended to be cost neutral to the Service and to provide a degree of security and safety for the individual and the organisation. The paper presented to the Police and Fire Committee on 22 February 2007 detailed the rationale behind the movement from the Essential Car Users Scheme to the Car Leasing Scheme. In essence these points were:

 Health and Safety – as an Emergency Service it is important that vehicles and drivers are provided and trained to high safety standards. New legislation has increased the responsibilities placed on the Fire Authority in achieving these factors  Environmental Standards – each scheme was assessed against environmental impact features in relation to both emissions and costs  Flexibility – each option was assessed against service delivery requirements, in particular the relation to the new duties and responsibilities that have been set under the Fire (Scotland) Act 2005 and related orders

 Cost – each option was assessed against affordability criteria and benchmarked against the cost of the Service’s current Scheme.

3.1.2 Safety is paramount within any Organisation. To ensure that the vehicles used by operational flexi-duty Officers are of a suitable specification, maintained and available for these duties, the Organisation deemed it necessary for these members of the Service to be on the Contract Car Leasing Scheme. All users of the Scheme bar one have an operational commitment and their lease cars are fitted with covert

1 Report Police and Fire Committee 5 January 2012

blue lights and sirens. These members of staff are trained and continually assessed on emergency response (blue light) driving.

3.2 Car Lease Budget Issues 3.2.1 The overall cost per annum of running the current leasing Scheme is £84,700; this is in comparison to what it would have cost if the Essential Car Users Scheme had continued £75,750 (10.6% more efficient). These figures are based on the current lease agreements and using the average actual mileage for the same year.

3.2.2 The restructure and introduction of the 5 person flexi duty system to the Organisation has meant that the number of users on the Scheme has increased from 17 to19 then back to 18 users over the last 4 years. This has added between £4,500 and £9,000 costs per annum to the Scheme. However, it has also to be borne in mind that the management restructure realised savings of around £130k.

3.2.3 The Contract Car Lease Scheme is calculated by utilising the equivalent of the Essential Car User Scheme’s lump sum (£1,239) plus the individual’s ‘Business’ estimated mileage multiplied by the Essential Car User mileage rate (less 11.3p fuel allowance). This money is then put against the leasing cost of the vehicle, the deficit in payment being made up by the user’s personal contribution. A worked example demonstrating cost neutrality is detailed in Appendix A.

3.2.4 In the main there are three reasons for the Scheme appearing not to meet the perceived budget; firstly the costs of the Scheme are directly related to the NJC ‘Essential Car User Scheme’ rates, these are reviewed each year. However, the budget for the Contract Car Leasing Scheme has remained static and the NJC rate has kept with inflation (14.06% over 3 years), and therefore with the base calculation rate increasing will have the effect of showing an overall overspend.

3.2.5 Secondly the mileage used in the calculation is based on estimation and not actual mileage undertaken by the user. The average estimated user mileage within the organisation is 8500 miles and the average actual user mileage is 7000 miles. That differential makes up approximately 10% of the costs within the scheme.

3.2.6 Thirdly, on setting up the Scheme initially there was a two year lead in process where Officers moved from the Essential Car User Scheme to the Contract Car Leasing Scheme, both with separate budgets. As staff moved across the ‘Leasing’ budget increased and the ‘Car Allowances’ budget decreased, the overall effect was a static spend over the past 4 years. Business as usual (BAU) shows a prediction in line with inflation.

Fig.1 Chart showing the amalgamation of the budget outturns for 2008 - 2011 in relation to ‘Actual Costs’ and ‘BAU’ predictitions.

3.2.7 The Scheme is also front loaded with different individuals joining and leaving at different times therefore there can be some substantial variances from year to year, but generally this should average out over the duration of the scheme.

3.3 Action Plan 3.3.1 The challenge now for the Organisation is to provide a long term approach to making the Scheme more cost effective and to progressively reduce the financial burden on the Organisation while ensuring that individual Scheme members are not unfairly adversely affected by any measures or changes introduced.

3.3.2 Due to the significant reduction in actual mileage undertaken by some individuals for the reasons given above it may be more cost effective for the Service to reinstate the Essential Car User Scheme. Appendix B details the costs associated with reinstating the Essential Car User Scheme and where appropriate early termination of the current lease contract. The issues relating to health and safety of the individual using their own private car and the associated Corporate risk, as outlined in 3.1.1 above, were addressed by other Fire and Rescue Services carrying out a ‘Vehicle Capability’ inspection annually. This option will only be instigated in certain circumstances ie where the use of the Essential Car User Scheme significantly reduces the costs to the Organisation or where an individual is required to use a vehicle for a short period of time (less than the lease car contract period).

3.3.3 The Service plans to reduce the Organisational costs by introducing a base mileage per user across the board. Figure 2 shows the cost related savings that could be achieved with a varying degree of impact on the Scheme user dependant on the level set.

Mileage Cost Savings Percentage 8500 Miles £ 84,707 8000 Miles £ 83,125 £ 1,582 1.87% 7500 Miles £ 79,401 £ 5,306 6.26% 7000 Miles £ 75,751 £ 8,956 10.57% 6500 Miles £ 71,953 £ 12,754 15.06% 6000 Miles £ 68,229 £ 16,478 19.45%

Fig. 2 Set mileage allocation against associated savings

3.3.4 During budget setting the budget requires to take account of inflation and any new NJC rates as this has not been the case in the past.

3.4 Car Schemes A car leasing scheme exists in each of the other seven Scottish Fire and Rescue Services with a number of Services still providing an option of the ‘Essential Car User’ Scheme. Other alternatives considered were a ‘provided’ car scheme or ‘pool car’ provision. There are financial benefits to the Service from the alternatives, however, the implementation of these schemes at this time would seem undesirable in the light of the move to a single Scottish Fire Service where it is more than likely that there will be a Car Leasing Scheme and an Essential Car User Scheme for flexi duty staff with pool cars for day duty staff. Provided cars have been issued to some Principal Officers in the larger Scottish Fire Services. 3 Report Police and Fire Committee 5 January 2012

4. Governance Assurance The Principal Officer Team were consulted during the formation of this report.

5. Impact Assessment An impact assessment has been carried out with no diversity issues relating from this report. However, there are some areas of equity and fairness that may impact on individuals and a further assessment may be required pending the recommendations arising from this report.

Author(s)

NAME DESIGNATION CONTACT DETAILS

Neville Wright Head of Service Service HQ: 64994 Support

Approved by

NAME DESIGNATION SIGNATURE

Colin Scott Chief Fire Officer

Appendices 2

Background papers 0

APPENDIX A

Worked Payment Calculation

Lease invoice total £ 5,198.64 Add 50% VAT restriction on finance element £ 335.53 £ 5,534.17 £ 16,602.51

Accessories/ extras £ 453.94 (repaying over 3 years + 15% interest) £ 68.09 £ 522.03 £ 522.03

Edinburgh City Council Administration Fee £ 350.00 £ 1,050.00

Total expenditure £18,174.54

Employee Contributions

Monthly deductions £ 140.27 £ 5,049.72

Employers Contributions

Based on estimate business miles of 8000 per annum 3 years

Lump Sum £ 1,239.00 Mileage rate @ 50.5 (less 11.3p petrol element) for 8500 miles £ 3,136.00

£ 4,375.00 £ 13,125.00

Total Contributions £18,174.72

BALANCE -£ 0.18

APPENDIX B

Early Termination and Reinstatement of Essential Car User Scheme

8,000 Estimate cost to organisation £ 4,375.00

If the User only actually does 5,000 miles £ 3,199.00 £ 9,597.00

Over payment versus Essential Car User Scheme £ 1,176.00 £ 3,528.00

Early Termination (2 month penalty) £ 1,009.70

Savings on first year £ 166.30