Revenue and capital budget monitoring report 2008/09 – period 7

Report: 04
Date: 18 December 2008
By: Director of Resources on behalf of the Commissioner

Summary

This report provides an update on the revenue and capital budget monitoring position for 2008/09 at Period 7 (to the end of October). The revenue budget is forecast to underspend by £22m (approximately 0.7% of budget).

The Capital Programme as at Period 7 (to the end of October) shows year to date total expenditure of £66.9m. This total represents 31.1% of the revised annual budget of £214.9m. The forecast for the year of £210m is £4.9m below the revised annual budget.

A. Recommendations

That

1. members note the year to date and forecast position for revenue and capital budget; and
2. approve revenue budget changes as set out in paragraphs 37-41.

B. Supporting information

Background

1. This report provides an update on the forecast against the revenue and capital budgets for the MPA/MPS in 2008/09 based on the position at the end of October 2008.

2. Current issues that may affect the forecast outturn relate to the deposit of MPA/MPS funds with the Icelandic bank Landsbanki, the inquest into the death of Mr Jean Charles De Menezes and on-going negotiations around Police Staff pay awards.

Revenue forecast by Business Group

3. The forecast outturn variance at Period 7 is an underspend of £22m.

4. Table 1 provides a summary of the revenue forecast by Business Group. Table 2 compares the forecast outturn variances for Period 7 and Period 6 by Business Group.

5. The subjective position by Business Group is at Appendix 1. The overall position for the MPS is at Appendix 2.

Table 1 – Summary of revenue forecast against budget at Period 7

Table 2 - Comparison of Period 7 forecast outturn variance with Period 6 forecast outturn variance.

6. Territorial Policing – An underspend of £3.9m – 0.3% of budget.
A minor variation from that reported at Period 6.

7. Specialist Crime – An underspend of £1m– 0.2% of budget.
There has been a favourable movement of £1.2m in the forecast position from that reported at Period 6, principally within Police Officer and Police Staff Pay due to a reassessment of recruitment expectations. There has also been a reduction in the Police Officer Overtime variance due to a decrease in operational activity and within Supplies and Services relating to a reduction in forensic activity.

8. Specialist Operations – An overspend of £1.6m– 0.8% of budget.
There has been an adverse movement of £0.8m in the forecast position from that reported at Period 6, principally within Police Officer and Police Staff Overtime due to the continuing need to provide cover for vacancies and increased operational demand.

9. Central Operations – An overspend of £1.7m – 0.6% of budget.
There has been a favourable movement of £0.4m in the forecast position from that reported at Period 6, principally within Police Officer overtime due to lower than anticipated Public Order costs resulting from improved planning and efficient use of resources.

10. Olympics Security – An underspend of £0.1m – 1.3% of budget.
A minor variation from that reported at Period 6.

11. Deputy Commissioner’s Portfolio – An underspend of £1.8m – 3.2% of budget.
There has been a favourable movement of £0.7m in the forecast position from that reported at Period 6, principally within Police Officer Pay due to the level of vacancies compared with the original deployment plan.

12. Directorate of Public Affairs – An underspend of £0.6m – 8.3% of budget.
A minor variation from that reported at Period 6.

13. Directorate of Information – An underspend of £1.4m – 0.6% of budget.
A minor variation from that reported at Period 6.

14. Resources Directorate – An underspend of £10.2m – 3.7% of budget.
There has been an adverse movement of £6.1m in the forecast position from that reported at Period 6, principally within Premises Costs to recognise increasing utility costs for gas and electricity. This increase has been offset by a reduction in the forecast for Capital Financing costs which is linked to a lower than anticipated Capital Financing requirement.

15. Human Resources – An underspend of £3.3m – 2.1% of budget.
A minor variation from that reported at Period 6.

16. Metropolitan Police Authority – An underspend of £0.1m – 0.8% of budget.
A minor variation from that reported at Period 6.

17. Centrally Held Budgets – An underspend of £3.1m – 0.1% of budget.
There has been a favourable movement of £4.9m from that reported at Period 6. This is principally due to a refund of VAT payments and a reduction in the amount required this year to fund the London Living Wage initiative.

18. Discretionary Pension Costs – An overspend of £0.1m – 0.4% of budget.
A minor variation from that reported at Period 6.

Revenue Forecast by expenditure/income type

19. Table 3 compares the forecast variance for Periods 7 and 6 by income/expense type.

Table 3 – Forecast outturn by Income/expense type

20. Police Officer Pay – Underspend of £19.7m – 1.1% of budget.
There has been a favourable movement in the forecast of £3.6m from that reported at Period 6 as Business Groups have reduced their forecasts in line with current vacancy levels. As indicated in Table 4, the current forecast indicates that the original target strength at 31 March 2009 of 32,930 will be under-achieved by 300 posts. Sufficient candidates will have been selected but 300 officers will now join in April 2009. The intakes have been managed to ensure numbers do not exceed the maximum that can be supported by Territorial Policing for street duties training. The underspend indicated in the Period 7 forecast is due to actual strength at the end of October and forecast strength for the remainder of the year being below the levels assumed in the original budget.

Table 4 – Police Officer Actual Strength v Target

21. Police Staff Pay - Underspend of £9.1m – 1.6% of budget
There has been an adverse movement in the forecast of £1.4m from the position reported at Period 6. This principally relates to a reduction in expected vacancies within Human Resources Directorate.

22. PCSO Pay - Underspend of £4.0m – 2.9% of budget.
There has been a minor adverse movement in the forecast of £0.2m from the position reported at Period 6.

23. Traffic Warden Pay - Overspend of £0.1m – 0.6% of budget.
There has been a minor adverse movement in the forecast of £0.2m from the position reported at Period 6.

24. Police Officer Overtime – Overspend of £3.4m – 2.4% of budget.
There has been a favourable movement in the forecast of £0.7m from the position reported at Period 6, principally within Specialist Crime Directorate resulting from a decrease in operational activity. The overspend in this area should be considered in the context of the underspend on Police Officer Pay. Appendix 4 shows that £2.3m of the forecast overtime cost relates to major operations for which no budget provision exists. If the costs for these major operations are excluded then the Period 7 forecast would show an overspend of £1.1m (0.8% of budget).

25. Police Staff Overtime – Overspend of £1.2m – 3.9% of budget.
There has been an adverse movement in the forecast of £0.4m from the position reported at Period 6, with increases in several Business Groups reflecting additional cover required for Police Staff vacancies. The overspend in this area should be considered in the context of the underspend on Police Staff Pay.

26. PCSO and Traffic Warden Overtime – A minor overspend.

27. Employee Related Expenditure – Underspend of £7.7m – 21.3% of budget.
There has been an adverse movement in the forecast of £1m from the position reported at Period 6, principally within Human Resources relating to additional recruitment campaign costs.

28. Premises Costs – Overspend of £7.8m – 3.3% of budget.
There has been an adverse movement in the forecast of £10.7m from the position reported at Period 6. This is principally within Resources Directorate and relates to increasing utility costs for gas and electricity and is based on the recent high increases to the price, which remain volatile.

29. Transport Costs - Overspend of £4.4m – 6.5% of budget.
There has been an adverse movement in the forecast of £0.5m from the position reported at Period 6. This is principally within Specialist Operations and results from additional travel costs associated with the Beijing Olympics.

30. Supplies and Services - Overspend of £3.8m – 0.8% of budget.
There has been a favourable movement in the forecast of £3.2m from the position reported at Period 6. This is principally within Specialist Crime Directorate relating to a forecast reduction in forensic activity and within Centrally Held where it has been recognised that part of the funding held to pay contractors in regard to the London Living Wage initiative is not required this year.

Brief explanations are stated below for the most significant variances within Supplies and Services

31. Development Charges – Overspend of £2.3m – 16% of budget.
This mainly relates to the ICT outsource contract and reflects delays in implementation of the transition 2 activities resulting in additional costs being carried forward to this financial year. In particular the Active Directory, Server/Application Growth and Damovo TUPE impacts.

32. External Consultants – Overspend of £1.6m – 22% of budget.
This is mainly due to employing consultants on the THR project, the cost of which is offset by savings in other areas of the project. Unbudgeted consultants have also been employed by SCD to help improve their management reporting and on Operation Paget.

33. Miscellaneous Fees & Charges – Overspend of £2.3m – 35% of budget.
This is mainly due to the unfunded costs for accommodation and subsistence for officers seconded to the MPS on mutual aid primarily on Operations Theseus and Overt.

34. Dangerous Dogs Act – Overspend of £1.2m – 800% of budget.
This relates to the costs of kennelling, veterinary care, and associated expenses for dogs seized by police officers under the Dangerous Dogs Act 1991. Expenditure in this area has increased over recent years due to increased ownership and use of such dogs in criminal activity.

35. Technical Specialists - Overspend of £1.2m – 26% of budget.
These are mainly in the Directorate of Information and are used to cover vacancies in areas where specialist knowledge is required. This overspend is funded by an underspend in Police Staff Pay.

36. DNA Testing - Underspend of £4.1m – 33% of budget.
This is mainly due to changes to working practices resulting in fewer tests being requested and a negotiated reduction in the contract price.

37. Capital Financing Costs – Underspend of £3.8m – 17.4% of budget.
There has been a favourable movement in the forecast of £3.8m from the position reported at Period 6. This is linked to a lower than anticipated Capital Financing requirement.

38. Discretionary Pension Costs – Overspend of £0.1m – 0.4% of budget.
A minor variation from that reported at Period 6.

39. Income - Interest Receipts – Forecast over-achievement of £3.2m – 26.9% of budget.
A minor change from that reported at Period 6. The forecast over-achievement relates to higher than anticipated cash balances and increased interest rates in the early part of 2008/09. The situation with the deposit of funds with Landsbanki bank in Iceland is still being monitored.

40. Income - Other - Forecast under-achievement of £5m – 1.4% of budget.
There has been a favourable movement in the forecast of £2.8m from the position reported at Period 6. This is principally within Centrally Held and is due to receipt of a refund for overpayments of VAT.

41. Specific Grant – A minor under-achievement.
A minor variation from that reported at Period 6.

42. Transfers from Earmarked Reserves to General Reserves – Nil variance.
At the Finance and Resources Committee on 20 November 2008 it was agreed to release some earmarked reserves that are no longer required and transfer these funds to the General Reserves (see Table 6).

Budget movements

43. The major budget movements undertaken in Period 7 are shown below in Table 5 which members are asked to approve.

Table 5 – Major budget movements actioned in Period 7

43. An allocation of budget from centrally held has been made to the Directorate of Information (£4m) and Transport Services (£0.7m) to recognise the inflationary increases in their outsourced contracts for 2008/09. These have not been actioned as permanent budget moves and will therefore be a pressure on the Business Groups in 2009/10 and beyond. However, this has been recognised and sufficient budget has been programmed into centrally held to help address this issue in 2009/10.

44. Within Specialist Operations, an initial budget allocation for a Counter Terrorism project was placed within the category of Supplies and Services. The expenditure incurred relates to rent payable on premises and the relevant budget (£1.7m) has been permanently vired from Supplies and Services to Premises.

45. Following agreement for the MPS Facility Management contractors to bring the pay of all maintenance staff employed on MPS projects up to the rate of the new London Living Wage, a budget allocation from centrally held has been made to cover the MPS share of meeting these additional costs.

46. A permanent budget virement of £0.5m has been made within Territorial Policing from Police Staff Pay to PCSO Pay to recognise the continuing replacement of Station Reception Officers (Police Staff) by PCSOs.

Movements in reserves

47. The reserve movements carried out in Period 7 are shown in Table 6.

Table 6 – Reserve movements carried out in Period 7

Capital monitoring

8. As advised in Period 6, the general position of the property and financial markets has continued to have a significant and adverse impact on the Service’s ability to generate capital receipts. In what has continued to be a very volatile environment, current estimates indicate a fall in capital receipts from the budgeted level of £84.8m to £20m, i.e. a shortfall of £64.8m. The year-to-date actual capital receipts being only £3.1m support this. For 2008/09 existing capital reserves will be sufficient to offset the loss of receipts required to support expenditure. Of the £104.3m capital reserves that were available (not earmarked for existing projects) members approved in Period 6 the use of £58.7m of capital reserves to help fund the level of expenditure planned for 2008/09. Members also approved a revision to the 2008/09 budget at Period 6 in line with the Period 6 forecast.

49. Appendix 3 sets out the expenditure for the 2008/09 Capital Programme as at Period 7 (October) by programme. This shows year to date expenditure of £66.9m representing 31.1% of the annual budget of £214.9m (revised at Period 6). The forecast outturn of £210.0m is £4.9m below the annual budget.

50. Property Programme – An underspend of £2.6m – 6.8% of revised budget
The main reasons for the forecast underspend are that the Greenwich patrol base project has now been deferred to next year and planning issues surrounding Cobalt Square have resulted in delays. Also, the majority of works associated with the Climate Change Action Plan are also experiencing delays.

51. Information Programme – Excluding C3i – An underspend of £0.5m – 0.5% of revised budget.
A minor variation.

52. MPA Information Technology – Nil variance.

53. Transport Projects – An underspend of £1.7m – 7.1% of revised budget.
The forecast underspend is mainly due to an additional 10% discount being negotiated with suppliers of motor vehicles and a reduction in the number of motor vehicles needing to be replaced.

54. Other Plant & Equipment Expenditure – An underspend of £0.1m – 16.9% of budget.
A minor variation.

55. Directorate of Information – C3i Programme – Nil variance.

56. Safer Neighbourhoods Programme – Nil variance.

57. Olympics/Paralympics – Nil variance.

58. Counter Terrorism – Nil variance.

C. Race and equality impact

There are none specific to this report.

D. Financial implications

The financial implications are those set out in this report.

E. Background papers

• Policing London 2008-11 Business Plan

F. Contact details

Report author(s): Simon Hart, A/Director of Finance Services, MPS

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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