The cost-of-living crisis is affecting everyone with inflation hitting a forty year high. Food, fuel and mortgage costs have all increased over the last nine months, but what is the outcome for those running local authority fleet services?

The County Council Network (CCN) has found county authorities in England are facing £3.5bn in inflationary and demand costs this year and next, which is more than double the expected rise. Increasing costs of delivering day-to-day services due to inflation make up £2.86bn of this figure, while projected rises in demand for these services are set to add a further £647m to costs.

The local government pay offer amounts to around 5% across the pay range, but is disproportionately higher for transport employees on the lower end of grading spines, and while this is to be welcomed after many years of below inflation increases it still creates issues of cost in hard pressed services. The offer, accepted on 1 November, is:

• A £1,925 increase for all NJC pay points from 1 April 2022;

• An increase in annual leave of 1 day for all employees from 1 April 2023, and;

• The deletion of pay point 1 from the spine with effect from 1 April 2023.

The National Insurance increase has been reversed from November 2022, although, as a previous policy of PM Rishi Sunak, this may change on 17 November in the next budget statement.

In Summer 2022, APSE ran its annual state of the market report for local authority fleet services to determine the views of those managing the transport element of councils across the UK. One marked set of responses was on the ability to attract new fitters and retain existing staff: 82% experienced difficulty recruiting, and 37% retaining, their technical staff. Councils have high vacancy levels so while pay is set to rise steeply, many will also have to increase salaries to a level that will interest new employees against competition from the private sector.

The average age of fitters is forty-five which has fallen in recent years, possibly as more experienced staff have moved to employment elsewhere. Whatever the cause, the industry has a looming skills gap as people take retirement.

Fuel has risen due to the war in Ukraine. This has driven diesel prices up by around 45% from pre-pandemic levels. In April this year, the list of those able to use red diesel was restricted. This removed council gritters and most grounds maintenance equipment from the list forcing an increase of 80% in the cost of diesel as councils were forced to use white diesel. Combined with general fuel increases, local authorities are paying over 300% of their previous 2020 diesel price.

Depots are large buildings and not the most insulated. While most local authorities buy energy on long term contracts this will not hold in the longer term should prices surge further. Until the end of this financial year, the non-consumer price is capped as £211 per megawatt hour (MWh) for electricity and £75 per MWh for Gas. However, the wholesale cost of energy this winter is expected to rise to £600 per MWh for electricity and £180 per MWh for gas so, come April, increases could be substantial. For those with an increasingly electric fleet the cost of electricity risks wiping out the assumed fuel cost savings leaving business plan forecasts in tatters.

The pandemic had a profound effect on the automotive industry. Lockdowns and strict social distancing rules in many European countries slowed vehicle production down which culminated in many vehicle manufacturers increasing prices by at least 25% to offset rising input costs.

Many are struggling to return to pre-pandemic levels while demand has surged. Production issues have impacted the entire supply chain. Lead times for both vans and HGVs have stretched further into the future and previous discounts have all but evaporated. Councils wishing to retire older fleet are benefitting in some cases from better prices in the used vehicle market, but they are also having to bear the additional costs of maintaining aged fleet.

Central government has reportedly sought 10% budget reductions from all Government departments including local government. This will have a significant impact on budgets for 2023-24. Throw into the mix issues with recruitment, and local authority fleet managers may soon find they are running their services on empty.

This article first appeared in the winter issue of LAPV. To subscribe for free click here.