Revenue and capital budget monitoring report 2009/10 – Period 9

Report: 05
Date: 11 February 2010
By: Director of Resources on behalf of the Commissioner

Summary

This report provides an update on the revenue and capital budget monitoring position for 2009/10 at Period 9 (to the end of December). The revenue budget is forecast to overspend by £10.3m (approximately 0.4% of budget).

The Capital Programme as at Period 9 (to the end of December) shows year to date total expenditure of £104.3m. This total represents 48.7% of the revised annual budget of £214m. The forecast for the year of £206.2m is £7.8m below the revised annual budget.

A. Recommendations

Members are invited to: Note the year to date and forecast position for revenue and capital budgets.

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 December 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 9 and Period 8 by Business Group.

Table 1 – Summary of revenue forecast against budget at Period 9

*% of net expenditure budget

Table 2 - Comparison of Period 9 forecast outturn variance with Period 8 forecast outturn variance.

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

4. Territorial Policing – An overspend of £27.8m – 2% of Budget.
The forecast overspend relates principally to: Police Officer Pay as a result of the current strength being higher than anticipated due to Police Officers not moving to other Business Groups as originally planned (despite them holding vacancies and reporting underspends in this area) and shortages in some units, ranks and roles in Territorial Policing which also limit movement; Police Officer Overtime caused by the policing of the G20 and Tamil demonstrations; PCSO Pay where the movement of PCSOs into other roles is being managed to avoid vacancies; Police Staff Pay caused by delays to the implementation of Integrated Prosecution Teams (IPT) and delays to Finance & Resource Manager modernisation; and Traffic Warden Pay where strength is above target in the Transport OCU (matched by income).

5. There has been an overall favourable movement of £0.1m in the forecast position from that reported at Period 8, an adverse movement in Police Officer Pay relating to a reassessment of the over-strength position being offset by a favourable movement within Supplies and Services relating to lower than anticipated expenditure within the Metropolitan Special Constabulary.

6. Specialist Crime – An underspend of £1.3m – 0.3% of Budget.
The forecast underspend is principally within Police Officer Pay where strength is below target. This is partially offset by a forecast overspend on Police Staff Pay primarily caused by forensic services recruiting ahead of their original plans. There are also overspends within Police Officer and Police Staff Overtime principally relating to covering for vacancies as well as an increase in gun related crimes.

7. There has been an adverse movement of £0.6m in the forecast position from that reported at Period 8. This is principally within Income as proceeds from Operation Rize (the concealment of criminal property within safe depository centres) are unlikely to be received this year following delays to confiscation Court hearings.

8. 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 and additional Protection requirements. There are underspends within Police Staff Pay and PCSO Pay relating principally to the provision of policing at Heathrow Airport and the Palace of Westminster, where strength is lower than budgeted. The resulting underspends are matched by lower receipts reported within Other Income. There is also an underspend within Transport costs which relates to reduced spending on overseas travel.

9. There has been a minor adverse movement from that reported at Period 8.

10. Central Operations – An overspend of £3.7m – 1.8% 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. 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 demonstrations, increasing fuel costs and unfavourable exchange rates relating to services purchased by the Air Support Unit (helicopter maintenance). There is an overspend within Supplies and Services relating to increased firearms and Taser training as well as additional equine costs. There is an under-recovery of income forecast for sporting events. These overspends are partially offset by an underspend on Police Officer Pay as officer numbers are below target strength.

11. There has been an favourable movement of £1m in the forecast position from that reported at Period 8 following confirmation of full funding for the London Safety Camera Partnership for this year.

12. Olympics Security – Nil variance.

13. Deputy Commissioner’s Portfolio – An underspend of £1.5m – 2.8% of budget.
The forecast underspend relates principally to Police Officer Pay due to officer numbers being below target strength. An over recovery of income is also forecast relating to work carried out by MPS staff on behalf of the Cayman Islands. The ability of the Service to recover these costs is, however, being kept under review.

14. There has been a minor adverse movement in the forecast position from that reported at Period 8.

15. Directorate of Public Affairs – An underspend of £0.2m - 3.3% of budget.
A minor underspend.

16. Directorate of Information – An overspend of £0.2m – 0.1% of budget.
A minor overspend. There has been an adverse movement of £0.9m in the forecast position from that reported at Period 8. This relates principally to Airwave costs incurred during the Notting Hill Carnival and New Years Eve (£0.6m). These costs had been excluded from previous forecasts as it was believed they would be funded from within the Airwave Grant, but this will not be the case. There are also additional costs expected for the Afghan summit and additional workstation costs.

17. Resources Directorate – An overspend of £0.5m – 0.2% of budget.
Whilst the overall position forecasts a small overspend, there are a number of subjective variances. Police Staff Pay forecasts an underspend of £1.5m 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 £2.7m principally resulting from a reduced tax liability on free rail travel; Premises costs forecasts an overspend of £4.5m relating to additional facilities management costs; Capital Financing forecasts an underspend of £1.2m linked to a lower than budgeted Capital Financing requirement; Interest Receipts forecasts an under-recovery of £3.3m following inclusion of an anticipated £2m write-off of penalty interest relating to Landsbanki investments that had previously been accrued in 2008/09 on the advice of Cipfa. Additionally, there has been 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 2008/09).

18. There has been no overall movement in the forecast position from that reported at Period 8.

19. Human Resources – An underspend of £3.5m – 2.2% of budget.
The forecast underspend is principally within Police Staff Pay relating to existing vacancies within the Transforming HR Programme.

20. There has been a favourable movement of £0.9m in the forecast position from that reported at Period 8. This principally relates to sales of additional training and materials. In line with MPA approval, these forecasts reflect the requirement to carry forward resources to cover the increased costs of THR in 2010/11.

21. Metropolitan Police Authority – An overspend of £0.7m – 5.1% of budget.
The overspend is principally within Employee Related Expenditure relating to additional legal expenses, early retirement costs, secondment costs and recruitment drives to fill vacancies. This is partly offset by an underspend within Police Staff Pay which reflects savings made in respect of the reorganisation of the MPA. The additional costs incurred are intended to be met from within MPA Reserves but this is not yet included within the forecast, pending internal approval. There has been an adverse movement of £0.1m in the forecast position from that reported at Period 8.

22. Centrally Held Budgets – An underspend of £17m
The underspend principally relates to Police Officer Pay where the decision taken at the MPA Remuneration Sub-Committee on 21 December with regard to Special Priority Payments (SPPs) has been recognised. The expected budget savings have been moved from Business Groups to Centrally Held and reduced forecasts have been entered by the affected Business Groups. The underspend also relates to accounting adjustments to write off unmatched goods receipts in respect of previous financial years. Also, the forecast includes a grant payment of £3.6m from Home Office relating to reimbursement of additional costs incurred as a result of the G20 summit. The MPS has now had written confirmation of the grant payment from the Home Office.

23. There has been a favourable movement of £1m from the position reported at Period 8 relating to anticipated costs of the Afghan summit, previously forecast within Centrally Held but now included within individual Business Group forecasts.

24. Discretionary Pension Costs – An overspend of £0.2m – 0.6% of budget. There has been no movement in the forecast position from that reported at Period 8.

Revenue Forecast variance by expenditure/income type

25. Table 3 compares the forecast outturn variances for Period 9 and Period 8 by expenditure/income type.

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

26. Police Officer Pay – An underspend of £17.8m – 0.6% of budget.
The forecast underspend relates generally to actual and anticipated vacancies across a number of Business Groups, except for Territorial Policing where the current and forecast strength are higher than anticipated due to reduced opportunities for officers to move to other Business Groups. Elsewhere, average strengths throughout the year have been below target, principally caused by the ongoing impact of the deferment of recruits planned for March 2009 into April. The forecast also recognises the decision taken at the MPA Remuneration Sub-Committee on 21 December with regard to reducing the cost of Special Priority Payments. Table 4 provides details of the target and forecast Police Officer strengths. 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 an adverse movement of £1.9m in the forecast from the position reported at Period 8. This is within Territorial Policing and relates to a re-assessment of the likely strength figures within the Business Group for the remainder of the year.

Table 4 – Police Officer Actual Strength v Target Strength

28. Police Staff Pay - An underspend of £2.2m – 0.4% of budget
The forecast underspend is principally within Human Resources relating to existing vacancies within the Transforming HR Programme. There is also an underspend within Resources reflecting a reduction in the use of agency staff and preparations for restructuring which will yield permanent savings. This is partly offset by an overspend within Specialist Crime Directorate primarily caused by forensic services recruiting ahead of their original plans and an overspend within Territorial Policing following delays to the implementation of Integrated Prosecution Teams (IPT) and delays to Finance & Resource modernisation.

29. There has been a minor favourable movement of £0.3m in the forecast from the position reported at Period 8.

30. PCSO Pay - An overspend of £3.7m – 2.4% of budget.
The forecast overspend is within Territorial Policing where there has been lower than expected wastage and where the movement of PCSOs into other roles is being managed to avoid vacancies. There has been a minor adverse movement in the forecast of £0.3m from that reported at Period 8.

31. Traffic Warden Pay - An overspend of £0.9m – 10.6% of budget.
The forecast overspend is within Territorial Policing 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 8.

32. Police Officer Overtime – An overspend of £15.6m – 12.4% of budget.
The forecast overspend relates principally to the policing of the G20, Tamil and Climate Camp demonstrations. Appendix 4 shows that £10.9m 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 £4.7m (3.7% 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. Funding of the additional costs incurred as a result of the G20 demonstrations is forecast to be received from the Home Office and the MPA has agreed that reserves may be used to offset the cost of the Tamil demonstrations if the year-end financial position is an overall overspend.

33. There has been a favourable movement of £0.5m from that reported at Period 8.

34. Police Staff Overtime – An overspend of £1.4m – 4.2% of budget.
The forecast overspend relates principally to Specialist Crime Directorate for increased activity within forensic services department and covering vacancies within the Intelligence Bureau.

35. There has been a minor adverse movement from that reported at Period 8.

36. PCSO and Traffic Warden Overtime – An overspend of £0.4m - 24.6% of budget.
The forecast overspend is within Territorial Policing relating to operational requirements, where activities such as Operation Winter Nights (a Safer Neighbourhoods initiative to reassure the public via a high visibility police presence) have required the support of PCSOs to increase visibility. There has been an adverse movement of £0.2m from that reported at Period 8, principally resulting from the above operation.

37. Employee Related Expenditure – An overspend of £3m – 8.3% of budget.
The overspend forecast is principally within Human Resources and relates to the forecast cost of delays to the Transforming HR Programme. There are also 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 and the MPA relating to additional legal expenses, early retirement costs, secondment costs and recruitment drives to fill vacancies. These are partially offset by an underspend within Resources Directorate in respect of reduced tax liability for free rail travel.

38. There has been an adverse movement in the forecast of £0.8m from the position reported at Period 8. This is principally within Human Resources relating to additional costs associated with THR, and within the MPA relating to early retirement costs which are expected to be met from MPA Reserves.

39. Premises Costs – An overspend of £4.3m – 1.9% of budget.
The forecast overspend is principally within Resources relating to 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 for parking facilities at Bishopsgate Firearms training centre.

40. There has been a favourable movement in the forecast of £0.6m from the position reported at Period 8, principally within Territorial Policing as some planned activities relating to Operation Tyrol (improving safety and security on public transport) will not now be undertaken this year.

41. Transport Costs - An overspend of £2.2m – 3.2% 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.

42. There has been a minor favourable movement of £0.4m in the forecast from the position reported at Period 8.

43. Supplies and Services - An overspend of £0.3m – 0.2% of budget.
There has been a favourable movement of £1.1m in the forecast from the position reported at Period 8, principally within Territorial Policing relating to lower than anticipated expenditure within the Metropolitan Special Constabulary. The material variances within this category are:

• DNA Testing - An underspend of £3.5m – 47% of budget. This reflects changes to working practices resulting in a forecast for fewer tests being requested.
• Forensics - An underspend of £1.1m - 3.1% of budget. This reflects a reduction in forecast activity in this area following the introduction of strict criteria for forensic submissions.
• Dangerous Dogs Act – An overspend of £1.2m - 89% 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 has increased considerably compared to last year due to greater ownership and use in criminal activity, both as a weapon and as a status symbol. A budget increase of £1.5m per annum has been included as part of the 2010-13 Planning process.
• External Consultants - An overspend of £0.6m - 11.2% of budget. This is principally due to employing consultants in Human Resources as a result of delays caused by the THR Programme and Territorial Policing to support the MPS Youth Strategy.
• 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.
• Mobile telephones - An overspend of £1m - 26.9% of budget. This reflects increased usage and volume of wireless connections throughout the MPS.
• Revenue Contribution to Capital Outlay – An overspend of £0.8m. This relates to vehicle purchases in support of frontline proactive intelligence teams within the Specialist Crime Directorate.

44. Capital Financing Costs – An underspend of £1.2m – 5.2% 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 budgeted 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.

45. Interest Receipts – An adverse position of £3.3m – 157% of budget.
The principal cause of the adverse position is the inclusion of an anticipated write-off of penalty interest (£2m) relating to Landsbanki investments which had previously been accrued in 2008/09 on the advice of Cipfa. Additionally, the forecast recognises the latest advice regarding the reimbursement of Landsbanki investments, as it is now believed that the first repayment will not be received until 2010/11. There has been a minor adverse movement in the forecast from the position reported at Period 8.

45. Other Income - An over-achievement of £1m – 0.3% of budget.
There is an over-achievement of income within Centrally Held relating to accounting adjustments to write off unmatched goods receipts relating to previous financial years. This is mostly offset by a forecast under-achievement within Specialist Operations, Central Operations and Human Resources although 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 and a reduction in the number of officers seconded to other Forces. There is also lower than budgeted income from Immigration receipts and Wembley stadium events.

47. There has been a favourable movement of £2m from the position reported at Period 8. This principally relates to the confirmation of full funding for the London Safety Camera Partnership and sales of additional training and materials within Human Resources Directorate.

48. Specific Grant – An over-achievement of £2.7m.
The over-achievement relates 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 2008/09) and a grant payment of £3.6m from Home Office relating to reimbursement of additional costs incurred as a result of the G20 summit. These are partly offset by lower than expected grant funding within the Olympics Directorate, ACPO TAM and Counter Terrorism, where reductions in forecast expenditure are matched by reductions in specific grant. This also accounts for the adverse movement of £0.6m from the position reported at Period 8.

49. 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 £24.4m 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 9 are shown below in Table 5.

Table 5 – Major budget movements actioned in Period 9

Movements in Reserves

50. The reserve movements carried out in Period 9 are shown in Table 6.

Table 6 – Reserve movements carried out in Period 9

Capital Monitoring

51. 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.

52. On 19th November 2009, the MPA Finance and Resources Committee agreed a revised capital programme reflecting a rephasing of project expenditure into 2010/11 and beyond. This report provides forecast variations against the revised annual budget.

53. Appendix 3 sets out the expenditure for the 2009/10 Capital Programme as at Period 9 (December) by programme. Year to date expenditure is £104.3m, representing 48.7% of the revised annual budget of £214m. The forecast for the year of £206.2m is £7.8m below the revised annual budget.

54. Property Programme – An underspend of £4.8m - 9.5% of revised annual budget.
The main reasons for the forecast underspend are slippages in the implementation of the sustainable development projects associated with the Climate Change Action Plan; prolonged negotiations in obtaining licence agreement from the landlord to alter the Polar Park site at Heathrow and slippage in the implementation of projects associated with the Central London operational facilities at New Scotland Yard. It should be noted that the Climate Change Action Plan has its own dedicated funding source which allows for underspends to be rolled forward into future years.

55. Information Programme – Excluding C3i – A Nil variation against the revised annual budget.
In Period 6, MPA Members approved a budget increase of £2.8m which represented forecast expenditure on Automatic Number Plate Recognition related projects and expenditure on SAP upgrades for a capital budgeting and forecasting module. These projects are now reflected within the revised Capital Programme.

56. Transport Projects – A minor overspend against the revised annual budget.
In Period 6, MPA Members approved a budget increase of £0.5m which represented non-core Transport Services expenditure, funded entirely through the utilisation of revenue contributions to capital outlay by the commissioning departments.

57. Other Plant & Equipment Expenditure – A minor underspend against the revised annual budget.

58. Language Programme − An underspend of £1.7m - 46% of revised annual budget.
Minor delays in the procurement of language services for this Programme mean that contracts will not be awarded until approximately January 2010. Other procurement activities planned for the 2009/10 financial year will not be undertaken until the 2010/11 financial year. This programme has ring fenced funding from the Service Improvement Fund.

59. Directorate of Information – C3i Programme – An underspend of £0.5m - 12.1% of revised annual budget.
The main reason for the forecast underspend is slippage in the supply of equipment for the 999 CRS (999 Telephony Call Routing System) project. This project is an advanced contact centre system for the skills based routing of all MPS emergency, non emergency and internal operator calls.

60. Safer Neighbourhoods Programme – An overspend of £0.1m - 0.4% of revised annual budget.
A minor variation against the revised annual budget. In Period 6, MPA Members approved a budget rephasing of £5.2m into the 2010/11 financial year, £3.0m for the Property Services element and £2.2m for the Directorate of Information element. This was to take account of delays in sourcing suitable properties and the ultimate fit-out of these.

61. Olympics/Paralympics – An underspend of £0.7m – 56% 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. In Period 6, MPA Members approved a budget reduction of £25.9m to this Programme. 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; instead, options around enhancing existing estates are currently being reviewed. The current forecast is based on the latest expectations of the number of projects that will be approved for funding this year.

62. Counter Terrorism – An underspend of £0.2m - 1.3% of revised annual budget.
In Period 6, MPA Members approved a budget increase of £7.8m which represented the Association of Chief Police Officers Terrorism Allied Matters (ACPO TAM) projects not included in the original 2009/10 programme. This increase now forms part of the revised Capital Programme. There is a possibility that some of the ACPO TAM projects may not result in a MPS owned asset. This is under investigation to check whether they should be included within the MPS capital programme.

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(s): Paul James, Director of Finance Services

For more information contact:

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

Send an e-mail linking to this page

Feedback