Revenue and capital budget monitoring 2009/10 – period 5

Report: 5
Date: 22 October 2009
By: Director of Resources

Summary

This report provides an update on the revenue and capital budget monitoring position for 2009/10 at Period 5 (to the end of August). The revenue budget is forecast to overspend by £16.1m (approximately 0.5% of budget).

The Capital Programme as at Period 5 (to the end of August) shows year to date total expenditure of £44.5m. This total represents 19% of the revised annual budget of £234.2m. The forecast for the year of £218m is £16.2m below the revised annual budget.

A. Recommendation

That

1. Note the year to date and forecast position for revenue and capital budgets.
2. Approve the transfer to Reserves of £2.4m of Proceeds of Crime Act income (Paragraph 46 refers)

B. Supporting information

Background

1. This report provides an update on the forecast against the revenue and capital budgets for the MPA/MPS in 2009/10 based on the position at the end of August 2009.

Revenue Forecast by Business Group

2. Table 1 provides a summary of the revenue forecast by Business Group. Table 2 compares the forecast outturn variances for Period 5 and Period 4 by Business Group.

Table 1 – Summary of revenue forecast against budget at Period 5

Table 2 - Comparison of Period 5 forecast outturn variance with Period 4 forecast outturn variance.

3. The forecast outturn variance at Period 5 is an overspend of £16.1m.

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

5. Territorial Policing – An overspend of £14.4m – 1% of Budget.
As previously advised, the forecast overspend relates principally to Police Staff Pay caused by delays to the implementation of Integrated Prosecution Teams (IPT) and delays to Finance & Resource Manager modernisation; PCSO Pay where the movement of PCSOs into other roles is being managed to avoid vacancies; Traffic Warden Pay where strength is above target in the Transport OCU (matched by income); Police Officer Overtime caused by the policing of the G20 and Tamil demonstrations; and a number of different areas within Supplies and Services such as external consultants and office equipment; An under-recovery of forecast Income relating to Operation Reclaim (seizure of vehicles from unlicensed or uninsured drivers) and the custody of Immigration detainees, following reduced activity in these areas, has been offset by other additional income.

6. There has been a favourable movement of £3.4m in the forecast position from that reported at Period 4. This principally relates to additional Income following an agreement with TfL to use a further 100 officers for a six month period within the Transport OCU. These will come from the current overstrength numbers on BOCUs but do not affect the planned reductions in Transport OCU strength for 2010/11. There have also been reductions within Police Staff Pay following a review of expected staffing levels and within Supplies and Services following a review of the Forensic Medical Examiners and IT purchases forecasts.

7. Specialist Crime – An underspend of £2.1m – 0.6% of Budget.
As previously advised, the forecast underspend is principally within Police Officer Pay where strength is below target. This is partially offset by an overspend forecast on Police Staff Pay principally relating to costs of Financial Investigators and other specialist temporary staff in unfunded units (Operations Gestalt and Tappert relating to an investigation of HM Customs & Excise prosecutions and Operation Maxim relating to human trafficking investigations which were due to wind down this year).

8. Whilst there is a minor favourable movement in the overall position to that reported at Period 4, there have been favourable movements of £1m in Police Officer Pay following a review of forecast expectations and of £2.4m in Income related to Proceeds of Crime Act following Operation Rize (safety deposit box investigations). However, the favourable movements have been mostly offset by adverse movements of £1.2m in Police Staff Pay following recruitment taking place earlier than originally anticipated, within Supplies and Services relating to a Revenue Contribution to Capital Outlay (RCCO) for vehicle purchases in support of frontline proactive intelligence teams (£1m) and other running expenses (£0.8m) such as increased forecast for fuel costs, vehicle hire, training and property works at Eric Street and Catford Hill.

9. Specialist Operations – An overspend of £0.9m – 0.3% of Net Expenditure Budget.
The overspend is principally within Police Officer Overtime due to covering vacancies (where there is a corresponding underspend within Police Officer pay) and additional Protection requirements. An under recovery of income of £3.6m relates principally to the provision of policing at Heathrow Airport and the Palace of Westminster, where officer numbers are lower than budgeted. The resulting underspend within Police Officer Pay is matched by lower receipts.

10. There has been a minor favourable movement in the overall position to that reported at Period 4.

11. Central Operations – An overspend of £6.6m – 3.3% of budget.
As previously advised, the forecast overspend relates principally to Police Officer Overtime caused by the policing of the G20, Tamil and Climate Camp demonstrations. There is also an under-recovery of income from Transport for London (TfL) relating to the London Safety Camera Partnership (LSCP). This has arisen as TfL have reduced the level of funding they are prepared to commit to the LSCP. There is also an under-recovery of income forecast for Wembley events. Additionally, Employee Related Expenditure shows an overspend relating to seconded officers used for Public Order aid. There is also an overspend forecast within Transport Costs relating to additional public order vehicle hire resulting from the G20, Tamil and Climate Camp demonstrations, increasing fuel costs and unfavourable exchange rates relating to services purchased by the Air Support Unit (helicopter maintenance). Additionally, there is an overspend within Supplies and Services relating to increased firearms and Taser training as well as additional equine costs.

12. There has been a favourable movement of £0.4m in the forecast position from that reported at Period 4. This is principally within Police Staff Pay following an allocation of budget for Operation Reclaim relating to the Centralised Traffic Criminal Justice Unit.

13. Olympics Security – No overall variance to budget.

14. Deputy Commissioner’s Portfolio – An underspend of £1.7m – 3.1% of budget.
The forecast underspend relates principally to Police Officer Pay due to officer numbers being below target strength. Additional income is also forecast relating to work carried out by MPS staff on behalf of the Cayman Islands.

15. There has been a favourable movement of £0.5m in the forecast position from that reported at Period 4 following a review of the Police Officer Pay forecast.

16. Directorate of Public Affairs – A minor underspend.

17. Directorate of Information – An overspend of £0.7m – 0.3% of budget.
The main subjective variances are principally within Police Staff Pay (£0.3m) relating to Temporary Staff costs filling specialist vacancies; Premises costs (0.4m) relating principally to increased costs of refurbishment at Denmark Hill and Newlands Park (which are planned to be funded from within the Accommodation Strategy Reserve) and within Employee Related Expenditure (£0.3m) for increased advertising costs to address staff recruitment issues. There is an underspend of £0.5m within Supplies and Services following revised development costs and capitalisation of architecture consultant costs. There has been a favourable movement of £0.3m in the forecast position from that reported at Period 4, principally within Supplies and Services for the reasons given above.

18. Resources Directorate – An underspend of £0.4m – 0.2% of budget.
Whilst the overall position forecasts a small underspend, there are a number of subjective variances. Police Staff Pay forecasts an underspend of £1.1m principally within Property Services reflecting a reduction in the use of agency staff and preparations for restructuring which will yield permanent savings; Employee Related Expenditure forecasts an underspend of £1.8m principally resulting from a reduced tax liability on free rail travel (offset by the additional cost of free rail travel - see Human resources below); Premises costs forecasts an overspend of £4.4m relating to additional utilities and facilities management costs; Capital Financing forecasts an underspend of £1.2m linked to a lower than anticipated Capital Financing requirement; Interest Receipts forecasts an under-recovery of £1.3m following a reduction in the level of interest rates achievable on investments reflecting changes to the Authority’s Treasury Management policy; Specific Grant forecasts an over-achievement of £1.7m relating to additional Loan Charges grant resulting from a lower balance of useable capital receipts (due to the need to use significant levels of usable capital receipts to finance the Capital Programme in 2009/10). The increase in Loan Charges grant helps to offset reductions in interest earned on investments due to lower cash balances from capital receipts.

19. Although there has been a minor favourable movement in the overall forecast position from that reported at Period 4 there have been subjective changes in some areas. There has been a favourable movement of £0.9m in the forecast position of Police Staff Pay relating to a reduction in agency staff costs within Property Services and an allocation of budget (matched within Income) relating to staff costs for the Central Council of Probation Committees which are managed via the MPS payroll. Premises costs have increased by £4.3m following a review of expected utilities and facilities management costs. Capital Financing costs have reduced by £1m and income from Specific Grants has increased by £1.7m as per the information given above.

20. Human Resources – An underspend of £0.6m – 0.4% of budget.
The forecast underspend is principally within Police Officer Overtime and Police Staff Overtime, where costs are being managed downwards, particularly in relation to seconded officers and catering staff. Some of the underspend within Supplies and Services is offset by additional expenditure on dangerous dogs and for providing free rail travel for Police Officers, the latter being offset by the reduced tax liability (see Resources Directorate above). At the Finance & Resources Committee on 17 September, it was agreed that HR would identify £3m savings within core budgets to fund additional costs associated with THR. The savings and additional costs (net nil impact) are reflected in the Period 5 figures.

21. There has been a favourable movement of £1.2m in the forecast position from that reported at Period 4. This is principally due to reduced Police Officer Overtime and Police Staff Overtime forecasts as advised above, as well as a review of Police Staff Pay forecasts particularly within Catering Services. There have been matching changes to the forecasts for Police Officer Pay and Income relating to reduced secondment activity.

22. Metropolitan Police Authority – An overspend of £0.3m – 2.1% of budget.
The overspend is principally within Supplies & Services relating to additional legal expenses and external consultant costs. There has been a minor favourable movement in the forecast position from that reported at Period 4, principally within Police Staff Pay following a review of vacancy levels.

23. Centrally Held Budgets – An underspend of £1.8m
There has been a minor adverse movement in the forecast position from that reported at Period 4.

24. Discretionary Pension Costs – Nil variation.

Revenue Forecast variance by expenditure/income type

25. Table 3 compares the forecast outturn variances for Period 5 and Period 4 by expenditure/income type.

Table 3 - Comparison of forecast outturn variance by expenditure/income type

26. Police Officer Pay – An underspend of £19.5m – 1% of budget.
The forecast underspend relates generally to anticipated vacancies across a number of Business Groups. Whilst the strength as at 31 August is above target, average strengths throughout the year have been below target. This has been principally caused by the ongoing impact of the deferment of recruits planned for March 2009 into April. However, as indicated in Table 4, the current forecast anticipates that the revised target strength at 31 March 2010 of 33,393 will be achieved by year-end. It should also be noted that some officers included within the strength figures are off-pay or on reduced pay for a number of reasons such as maternity leave, special leave and suspension from duty and these contribute to the underspend position.

27. There has been a favourable movement in the forecast of £3.9m from the position reported at Period 4, principally within Human Resources following a review of their planned secondment activity.

Table 4 – Police Officer Actual Strength v Target Strength

28. Police Staff Pay - An overspend of £3.7m – 0.6% of budget
The forecast overspend is principally within Territorial Policing following delays to the implementation of Integrated Prosecution Teams (IPT) and delays to Finance & Resource Manager modernisation. The forecast has changed favourably by £3.4m from the position reported at period 4 principally within Territorial Policing and Human Resources following reviews of expected staffing levels and within Resources relating to a reduction in agency staff costs within Property Services and an allocation of budget (matched within Income) relating to staff costs for the Central Council of Probation Committees which are managed via the MPS payroll.

29. PCSO Pay - An overspend of £2.9m – 2% of budget.
The forecast overspend is within Territorial Policing where an average of 60 PCSOs over strength is being forecast following lower than expected wastage and where the movement of PCSOs into other roles is being managed to avoid vacancies. There has been a minor favourable movement from that reported at period 4.

30. Traffic Warden Pay - An overspend of £1.1m – 12.7% of budget.
The forecast overspend is within Territorial Policing where an average of 45 Traffic Wardens over strength is being forecast following delays in anticipated transfers to PCSO roles. This is principally within the Transport OCU and whilst the overspend is being managed within the overall “bottom-line” TOCU budget, the position is under review as part of the Safer Transport initiative. There has been a minor favourable movement from that reported at period 4.

31. Police Officer Overtime – An overspend of £12.3m – 10% of budget.
The forecast overspend relates principally to the policing of the G20, Tamil and Climate Camp demonstrations. Appendix 4 shows that £9.4m of the forecast overtime cost relates to major operations for which no specific budget provision exists. If the costs for these major operations are excluded then the forecast would show an overspend of £2.9m (2.3% of budget). The remaining overspend results from covering vacancies (and should be viewed alongside the forecast underspend for Police Officer Pay) and additional Royalty and Diplomatic protection. Discussions regarding potential funding of the additional costs incurred as a result of the G20 demonstrations are still being held with the Home Office and the MPA has agreed that reserves may be used to offset the cost of the Tamil demonstrations once the year-end financial position has been established. There has been a minor favourable movement from that reported at period 4.

32. Police Staff Overtime – An overspend of £0.3m – 0.8% of budget.
The forecast overspend is principally within Specialist Crime relating to increased activity within Forensic Services and Operational Information Services. There has been a favourable movement of £0.8m from that reported at period 4, principally within Human Resources reflecting management action to use casual Catering Staff in place of overtime.

33. PCSO and Traffic Warden Overtime – An overspend of £0.3m.
The overspend results principally from support provided in policing the Tamil demonstrations and other demonstrations. There has been a minor adverse movement in the forecast position from that reported at Period 4.

34. Employee Related Expenditure – An overspend of £0.3m – 0.8% of budget.
The underspend forecast within Resources in respect of reduced tax liability for free rail travel is offset by overspends forecast within: Specialist Crime principally relating to external training costs; Central Operations relating to seconded officers used for Public Order aid; Directorate of Information for increased advertising costs to address staff recruitment issues. There has been an adverse movement in the forecast of £0.5m from the position reported at Period 4 mainly within Specialist Crime and Specialist Operations.

35. Premises Costs – An overspend of £5.7m – 2.5% of budget.
The forecast overspend is principally within Resources relating to additional utility and Facilities Management costs with additional overspends forecast in Specialist Crime relating to the refurbishment of the fingerprint bureau at New Scotland Yard and within Central Operations due to additional costs at Marlow House and Bishopsgate Firearms training centre.

36. There has been an adverse movement in the forecast of £4.5m from the position reported at Period 4, principally resulting from a review of expected utility and Facilities Management costs.

37. Transport Costs - An overspend of £1.2m – 1.8% of budget.
The forecast overspend is principally within Central Operations and relates to additional public order vehicle hire resulting from the G20 and Tamil demonstrations, increasing fuel costs and unfavourable exchange rates relating to helicopter maintenance within the Air Support Unit (the budget was set when exchange rates were approximately £1 to €1.50 - rates are now around €1.13 resulting in an exposure of approximately £0.5m).

38. There has been an adverse movement in the forecast of £0.9m from the position reported at Period 4 in a number of Business Groups, principally resulting from increased fuel forecasts.

39. Supplies and Services - An underspend of £0.4m – 0.1% of budget.
There has been a favourable movement in the forecast of £0.7m from the position reported at Period 4, principally within Territorial Policing following a review of the Forensic Medical Examiners and IT purchases forecasts. The material variances within this category are:

• Forensics - An underspend of £2.7m - 7.5% of budget. This reflects a continuing reduction in forecast activity in this area following the introduction of strict criteria for forensic submissions.
• DNA Testing - An underspend of £2.9m – 39% of budget. This reflects changes to working practices resulting in a forecast for fewer tests being requested.
• Forensic Medical Examiner Fees - An underspend of £2m - 15.2% of budget. This reflects savings resulting from revised working practices arising from the Herald project.
• Payments to Association of Train Operating Companies - An overspend of £0.6m - 3.7% of budget. This results from an increase to the contract price for the provision of free rail travel to Police Officers. This cost is offset by an overall underspend in total Running Expenses within the Resources Directorate in respect of the tax liability on the ATOC agreement.
• Dangerous Dogs Act – An overspend of £1.2m - 88.1% 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. The number of dogs seized is expected to increase by 66% compared to last year due to increased ownership and use in criminal activity, both as a weapon and as a status symbol.
• External Consultants - An overspend of £1m - 22.1% of budget. This is principally due to employing consultants in TP to support the MPS Youth Strategy and in DoI to support the Improvement and Rationalisation programmes.
• Scene of Crime Equipment - An overspend of £0.3m - 15.8% of budget. The level of expenditure forecast is consistent with spend during 2008/09. Specialist Crime are examining the budget allocation in this area.
• Clothing and Accessories - An overspend £0.3m - 3.5% of budget. This relates to forecast spend on Multi-Agency Initial Assessment Team hazardous substance clothing.

40. Capital Financing Costs – An underspend of £1.2m – 5.3% of budget.
As previously advised, the forecast underspend is principally due to a lower than budgeted forecast for the Minimum Revenue Provision (MRP). This is due to a lower than anticipated 2008/09 capital outturn and hence a lower than expected capital financing requirement. This is partly offset by additional interest payable on new external loans arranged by the Authority in 2008/09.

41. Interest Receipts – An under-achievement of £1.3m – 64.2% of budget.
As previously advised, the forecast under-achievement relates to a reduction in the level of interest rates achievable on investments. There has been no change from the position reported at Period 4.

42. Other Income - An under-achievement of £9m – 2.5% of budget.
The forecast under-achievement is within a number of business groups and much of it relates to areas where expenditure has also reduced such as for the provision of policing at Heathrow Airport and the Palace of Westminster. There has also been a reduction in funding from TfL for the London Safety Camera Partnership, lower than budgeted income from Immigration receipts and from Wembley stadium events as well as historical income targets set for operational receipts within Specialist Crime Directorate which are not forecast to be achieved.

43. There has been a small favourable movement of £0.4m from the position reported at Period 4. Increases within Territorial Policing following an agreement with TfL to use a further 100 officers for a six month period within the Transport OCU and within Specialist Crime related to Proceeds of Crime Act following Operation Rize (safety deposit box investigations) have been mostly offset by reduced income forecast within Human Resources relating to reduced secondment activity and within Resources following the allocation of an Income budget relating to staff costs for the Central Council of Probation Committees which are managed via the MPS payroll.

44. Specific Grant – An over-achievement of £0.8m – 0.1% of budget.
The over-achievement relates principally to Loan Charges Grant where a lower than expected level of useable capital receipts result in a higher grant . The increase in grant helps to offset reductions in interest earned on investments due to lower cash balances from capital receipts.

45. Budget movements
As previously advised, the MPA/MPS Business Plan was approved by MPA Full Authority on 26th March 2009. Since that time budget amendments have been made relating to changes in the funding stream for Counter Terrorism (at the time of the budget submission, funding levels had not been finalised with the Home Office). Funding streams relating to PCSOs have also required changes to the subjective allocation of budgets. Allowing for these issues and other in-year budget movements, funding budgets (income, specific grant and transfers from Reserves) have increased by £24m since the budget submission and corresponding expenditure budgets have been set accordingly. Appendix 2 shows the subjective budget movements that have been required in the time between the original budget submission and the presentation of this report. The major budget movements undertaken in Period 5 are shown below in Table 5.

Table 5 – Major budget movements actioned in Period 5

46. Movements in Reserves
Members are asked to approve the transfer to reserves of £2.4m of Proceeds of Crime Act income which relates to income received in respect of cases completed in 2008/09. The income is to be ring-fenced to fund future investment in POCA related work. The movement to Reserves was agreed by MPS Management Board at Period 3 and is therefore reflected in the figures presented both in this report and within the period 4 report seen by members on 17 September. There have been no other reserve movements carried out in Period 5.

Capital Monitoring

47. Despite the downturn in the economy adversely affecting the expected level of capital receipts available in 2009/10 to support the capital programme, an ambitious level of investment is still proposed. This has proved possible thanks to the judicious use of (a) unsupported borrowing; (b) capital reserves; (c) revenue underspend from 2008/09; and (d) Service Improvement Programme funds. This financing situation will be closely monitored to ensure all funding sources remain available and the capital programme continues to be affordable and sustainable in accordance with the requirements of the Prudential Code. This is critical when considering the projects that have been rephased from 2008/09 and the capacity issues that arise from this.

48. On 30 July 2009, the MPA Finance and Resources Committee agreed a revised capital programme reflecting a rephasing of project spend from 2008/09. This report provides forecast variations against the revised annual budget.

49. Appendix 3 sets out the expenditure for the 2009/10 Capital Programme as at Period 5 (August) by programme. Year to date expenditure is £44.5m, representing 19% of the revised annual budget of £234.2m. The forecast for the year of £218.0m is £16.2m below the revised annual budget.

50. Property Programme – A minor variation against the revised budget.

51. Information Programme – Excluding C3i – An overspend of £1.9m - 2.0% of revised annual budget.
As previously advised the main reason for the forecast overspend is the inclusion of expenditure on Automatic Number Plate Recognition related projects, the funding for which is currently within Capital Reserves. When the level of funding is confirmed, this will then be incorporated within the Information Programme budget when the capital programme is reassessed at the half way stage in period 6.

52. Transport Projects – An overspend of 0.8m - 5.2% of revised budget.
As previously advised the overspend being reported by Transport Services represents non-core Transport Services expenditure which will be funded entirely through revenue contributions to capital outlay by the commissioning departments. The mid-year review of capital budgets will include intended revenue contributions to capital outlay.

53. Other Plant & Equipment Expenditure – A minor variation against the revised budget.

54. Language Programme ¬− A Nil variation against the revised budget.

55. Directorate of Information – C3i Programme – A Nil variation against the revised budget.

56. Safer Neighbourhoods Programme – A minor variation against the revised budget.

57. Olympics/Paralympics – An underspend of £18.6m – 68.7% of revised annual budget.
The Olympics/Paralympics Programme is funded by specific grant and each project is subject to Home Office approval following the submission of individual business cases. The current forecast is based on the latest expectations of the number of projects that will be approved for funding this year. The initial Olympics/Paralympics Programme budget assumed a high level of Intelligence staff personnel, which will not materialise this year. The effect of this is a significant reduction in proposed building works (and the associated IT fit-out costs) to house these personnel will not be undertaken this year; instead, options around enhancing existing estates is currently being reviewed.

58. Counter Terrorism – A Nil variation against the revised budget.

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 2009-12 Business Plan.

F. Contact details

Report author: Paul James, Director of Finance Services

For information contact:

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

Send an e-mail linking to this page

Feedback