2005/06 revenue budget

Report: 7
Date: 31 March 2005
By: Commissioner and Treasurer

Summary

The report sets out further information on the 2005/06 revenue budget, since approval of the Mayor’s budget in February 2005, including allocation of some centrally held budgets, and other budget changes by business groups. The final MPA/MPS Budget is now presented for approval.

A. Recommendation

Members are asked to

1. Note the latest information contained in the report,
2. Approve the final MPA/MPS revenue budget for 2005/06
3. Approve the use of the MPA Efficiency and Effectiveness Reserve to support the Service Review

B. Supporting information

Introduction

1. The full Authority approved final amendments to the 2005/06 revenue budget submission to the Mayor at its meeting on 16 December 2004. The Mayor incorporated the Authority’s revised submission unchanged in his draft budget proposals presented initially to the London Assembly on 26 January 2005. The Assembly did not agree any amendments to the Mayor’s budget at that stage.

2. Following approval of the budget submission in December there were only two minor changes, which had a small effect on the Authority’s funding. These relate to the final revenue grant settlement for 2005/06 and a small increase in the council tax base and these were reflected in the Mayor’s final budget proposals to the London Assembly on 14 February 2005. There was no change to the MPA net budget requirement of £2,488.3m.

3. The final budget position, which was approved as part of the Mayor’s budget at the Assembly meeting on 14 February 2005, is set out below.

4. The increase in the MPA/MPS element of the council tax precept was reduced to 6.6% with the Mayor’s overall precept set at 5.5%.

5. The Mayor’s Final Budget proposals did include reference to the inclusion of the decriminalisation of parking enforcement on red routes within the MPA budget submission. This is a special services agreement with TfL under which the MPS traffic wardens enforce parking restrictions. The estimated income to the MPS included within the 2005/06 budget is £16m.In the medium term, there is an expectation that additional net revenues will be generated from this enforcement activity. The Mayor has agreed, in an open letter to Green Party members of the London Assembly, that the first call on such additional resources would be funding for an increase in road safety policing. This would be effected through an extension of the agreement between TfL and the MPA.

Budget allocation process

6. The attribution, to business groups and subjective headings, of the budget submitted to and approved by the Mayor was based on information available up to October 2004. To establish the appropriate distribution of the approved overall budget for management purposes during 2005/06 the MPS has updated the allocation to each business group (including allocation of a number of centrally held budgets) and carried out a detailed budget build exercise by units and cost centres. All units have been requested to review their initial budget allocations and to set realistic budgets within overall resource allocations-taking into account, in particular overspends and under-spends occurring in 2004/05 financial year. In addition, during the early part of 2005/06 the Service Review team will also be examining historical variations in budget spend (and income) and seeking to identify areas of excess budgets in order to re-direct such resources to areas of pressure elsewhere in the budget.

7. The Finance Committee has expressed particular concern about the potential for overspendings in 2004/05 to be continued into next year and thus undermine the management of the 2005/06 budget. Although the 2004/05 budget is forecast to underspend overall, this result depends on underspendings on police pensions and an over-estimate of average police pay both of which situations have been largely corrected in the 2005/06 budget. There are significant overspendings on police overtime and also on a range of non-pay running expenses, partly offset by underspending on police staff pay and additional income. The Committee has arranged a meeting of its Budget Group to review this report and any comments will be reported orally to the Authority.

8. The budget allocations have also taken account of revised projections of police officers at April 2005, the final police officer deployment plan, the further devolvement of police pay budgets to all OCUs and transfers of budgets between, and within, business groups. None of these changes affect the final budget requirement or precept level already approved by the Mayor.

Budget management and monitoring

9. The final budget now presented for approval represents a further improvement in financial process over previous years, providing formal approval, for the second year, of the final MPS/MPA budget allocations before the start of the financial year, and will also provide a sound basis for budget monitoring in 2005/06. These final budgets will now be formally notified to all Unit Heads and Business Managers and will form the basis of regular monthly budget monitoring reports to

• All Finance and Resource Managers, and Unit managers
• MPS Management Board,
• MPS Resource Approval Committee
• The Treasurer and MPA finance staff
• MPA Budget Group
• MPA Finance Committee.
• The Mayor and GLA Budget Committee (every quarter)

Where appropriate, separate reports on budget over-spends, or other problem areas will be produced, as required, e.g. for MPS Management Board, MPA Budget Group etc. The Finance Committee has also specifically requested a report on the management controls operating in relation to the budget.

It should be noted that NO allowance has been made for the likely additional costs arising from Operation Bracknell (tsunami) within the budget –on the basis that government will meet such costs.

Police Officer Deployment Plan

10. Since the MPS budget submission was approved, there have been changes in the projected officer wastage, transferees and pass out rates from Hendon, as well as approval to Step Change Year 2 growth, changes to RAF formula (see below) and other changes. On 1 March 2005, the MPS Management Board approved the final Deployment Plan for 2005/06 incorporating all the changes. In summary, the plan assumes a strength of 31,170 at April 2005 (including circa. 369 posts over-strength) -although most of these will only enter Hendon in late March 2005, and a projected strength of 31,284 at March 2006.

11. The police pay allocations to all business groups have recently been revised to reflect the final Deployment Plan, and are now included in the final detailed budget.

Step Change Programme

12. The original Budget submission assumed the roll out of an additional five Neighbourhood teams in each borough from April 2005 as Phase 2 of the programme. However, the current police officer over-strength position has allowed the early rollout of these teams earlier than planned over the last three months of 2004/05 year, as agreed by the MPA in December 2004. In addition, the budget submission assumed additional resources for both SO and SCD from 1 December 2005 but this has now been brought forward to I October 2005 (see paragraph below). All of the additional costs of this growth have now been fully allocated to business groups in the budget build process.

Funding of Resource Allocation Formula (RAF)

13. The Co-ordination and Policing Committee on 11 February approved a revised RAF formula for 2005/06, which required funding (£4m) for an additional 106 police officers in order to ensure that no boroughs would lose officers under the new formula. In addition the committee also approved the SO and SCD growth under Step Change being brought forward to 1 October at an additional cost of £1.02m.

14. The Finance Committee on 17 February approved the funding of this additional £5.02m by deferring some growth initiatives pending the Service Review and by a one off saving in computer workstation costs as follows

15. The additional costs and reductions have now been incorporated in detailed budgets. The deferred growth will be reconsidered when resources become available as a result of the service review. All other individual growth and savings items have been included within the detailed business group budgets.

Central Operations Command

16. Members will be aware that the Central Operations Command will form a new part of the MPS structure from April 2005 and will implement a new tasking and co-ordinating procedure across the MPS. A number of Units will move immediately to the new command including Traffic and Traffic Criminal Justice Unit, Transport OCU, Territorial Support Group, Air Support, Dogs and Marine Support Units, Clubs and Vice, National Identification Service, Firearms, and Mounted branch.

17. At this stage, the attached detailed budget is based on the MPS existing budget group structure as work is continuing to set up the new Command, to establish all relevant budgets which will need to be transferred to the new Command and to make changes to computer system and reporting arrangements. This work is running parallel to the detailed budget exercise and will be concluded shortly. All required budget transfers will be reported to Finance Committee for approval in the first Budget monitoring report for 2005/06.

Service Review

18. Members will also be aware that the Service Review has recently commenced, which is being undertaken by a team led by AC Brown. This is the subject of a separate report on the Authority’s agenda. Estimated costs of the review are currently being finalised and funding sources agreed. It is proposed that the MPA Efficiency and Effectiveness reserve (current balance of £506k) should be earmarked as available to support the service review subject to approvals under the service review governance arrangements. Additional service review costs have not been included in the detailed budgets at this stage.

Inter-group Budget changes

19. A number of budget transfers have occurred from Centrally held budgets or between business groups which are summarised as follows

• £2.0m has been allocated from Centrally Held budgets to SCD for forensics inflation and £1.5m to various business groups to fund competency payments to police officers. Provision for the 2005/06 pay awards and price inflation remains centrally held.
• £4.3m for police pay has been reallocated between business groups to reflect changes in the final police officer deployment plan (paragraphs 10 and 11 refer)
• £3.7m to reduce Human Resources income to reflect the reduction in police officer secondments in the final deployment plan
• £3m in respect of Diversity Directorate restructure from DCC to SCD (including £2.1m for police officer pay)
• £2.2m for police officer pay has been transferred from Territorial Policing to DOI in respect of Metcall/C3i.
• £2.8m re-alignment of several non-pay budgets between business groups.

Intra-group Budget changes

Within individual business groups, a number of further changes have occurred during the detailed budget build process within devolved budgets managed by Unit Heads, (which now includes the significant step of devolution of police pay for all B/OCUs), in accordance with the scheme of devolved financial management-and within each business group’s individual budget control total. A summary of the main further changes is as follows

• Territorial Policing- an increase in police staff pay (£2.9m) to ensure sufficient resources for Victim and Witness focus desks, IBOs and TIBs, an increase in Police overtime (0.7m), -offset by a reduction in traffic wardens pay (£1.9m), PCSO pay (£0.8m), other overtime categories (£0.6m) and a net reduction in running expenses budgets of £2.3m
• Specialist Operations- Additional income of £7.3m (PoW £2.6m, additional grants £2.6m and NPIOU funding £2.1m) reflected by additional expenditure on police pay (£1m), Police staff pay (£1.6m), Police overtime (£0.4m), Police staff overtime (£1.3m) other employee costs (£1.4m) and Supplies and Services (£1.6m).
• Specialist Crime Directorate- an increase in police staff pay partially for Crime Scene managers (£4.0), Police overtime (£1.0m) and other costs (£0.7m), offset by a reduction in running expense budgets (£4.0m) and net increased income of £2.0m.
• Deputy Commissioners Command- a decrease in police overtime £0.8m, a transfer of £0.7m from supplies and services to staff training in respect of the Airwave project, and an increase income of £0.8m from PITO for NSPIS case and custody project.
• Resources Directorate-an increase in police staff pay (£1.3m) and in running expenses (£1.7m) offset by a reduction in capital financing costs (£4.6m) and a net reduction (£1.5m) in income budgets.
• Human Resources- an increase in police staff pay (£1.5m), offset by a reduction in police officer overtime (£1.2m) due to reduced number of seconded police officers.

Budget managers are aware that they are expected to manage their expenditure and income in accordance with the budget analysis, which they have determined, and be prepared to account for variations, which must in any case be contained within their total allocation. The MPS Resource Allocation Committee has also considered this report, and the new MPS Management Board has given a commitment to manage within the final 2005/06 budget.

Summary

20. The proposed final budgets for each business group are enclosed at Appendix One showing a comparison between the submission to the Mayor and variance. A detailed analysis by subjective heading is shown in Appendix Two.

21. Members are requested to note the above budget changes and to formally approve the final MPA/MPS Revenue Budget for 2005/06.

C. Equality and diversity implications

There are no specific implications arising from information set out in this report.

D. Financial implications

The financial implications are set out elsewhere in this report.

E. Background papers

• 2005/06 Revenue Budget report to MPA –7 December 2004
• The GLA Consolidated Budget 2005/06 –February 2005

F. Contact details

Report author: Sharon Burd/Terry Price/Peter Martin

For more information contact:

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

Appendix 1

Appendix 2

TP

SCD

SO

DCC

Resources

HR

MPA

Pensions

Not yet allocated

Total MPS

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