Revenue and capital budget monitoring report 2008/09 – period 9

Report: 05
Date: 22 January 2009
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 8 (to the end of November). The revenue budget is forecast to underspend by £22.1m (approximately 0.7% of budget).

The capital programme as at Period 8 (to the end of November) shows year to date total expenditure of £78.4m. This total represents 36.5% of the revised annual budget of £214.9m. The forecast for the year of £201m is £13.9m below the revised annual budget. (£40.1m below the original annual budget of £241.1m).

A. Recommendations

That members 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 2008/09 based on the position at the end of November 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 8 is an underspend of £22.1m.

4. Table 1 provides a summary of the revenue forecast by Business Group. Table 2 compares the forecast outturn variances for Period 8 and Period 7 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 8

Table 2 - Comparison of Period 8 forecast outturn variance with Period 7 forecast outturn variance.

6. Territorial Policing – An underspend of £3.7m – 0.2% of budget.
A minor variation from that reported at Period 7.

7. Specialist Crime – An underspend of £0.6m– 0.2% of budget.
There has been an adverse movement of £0.3m in the forecast position from that reported at Period 7, principally within Police Staff Pay due to a reassessment of recruitment expectations.

8. Specialist Operations – An overspend of £0.4m– 0.2% of budget.
There has been a favourable movement of £1.2m in the forecast position from that reported at Period 7, principally within Police Officer and Police Staff pay following a review of recruitment expectations and additional income resulting from new courses run by the National Counter Terrorism Security Office (NaCTSO).

9. Central Operations – An overspend of £0.9m – 0.3% of budget.
There has been a favourable movement of £0.8m in the forecast position from that reported at Period 7, principally resulting from the use of an operational costs reserve relating to changes in responsibility for the management of policing of the Blackwall Tunnel.

10. Olympics Security – An overspend of £0.1m – 1.2% of budget.
A minor variation from that reported at Period 7.

11. Deputy Commissioner’s Portfolio – An underspend of £1.8m – 3.1% of budget.
A minor variation from that reported at Period 7.

12. Directorate of Public Affairs – An underspend of £0.6m – 8.4% of budget.
A minor variation from that reported at Period 7.

13. Directorate of Information – An underspend of £1.4m – 0.6% of budget.
A minor variation from that reported at Period 7.

14. Resources Directorate – An underspend of £8.5m – 3.1% of budget.
There has been an adverse movement of £1.7m in the forecast position from that reported at Period 7, principally following a reduction to the forecast for Interest Receipts of £2.5m. This is partially due to the global reduction in interest rates and the revised Treasury Management strategy (agreed by members) and partially due to the MPA Treasurer’s decision to finance the purchase of New Scotland Yard from internal cash reserves rather than external borrowing. There is also an adverse movement due to a reduction to the forecast for capitalisation of police staff pay costs. These adverse movements are offset by a reduction to rents payable following the freehold purchase of New Scotland Yard.

15. Human Resources – An underspend of £4.2m – 2.7% of budget. There has been a favourable movement of £1m from that reported at Period 7. This is principally due to an increase in forecast receipts for seconded officers.

16. Metropolitan Police Authority – An underspend of £0.2m – 1.2% of budget.
A minor variation from that reported at Period 7.

17. Centrally Held Budgets – An underspend of £2.6m – 0.1% of budget.
There has been an adverse movement of £0.5m from that reported at Period 7. This is principally due to recognition of the legal costs associated with the Stockwell Coroner’s Inquest into the death of Mr Jean Charles De Menezes. It is likely that these costs will be funded from the underspend in the Deputy Commissioner’s Portfolio budgets and a drawdown of earmarked reserves. This is offset by the additional cost of the Police Officer Pay award, previously shown as a pressure within Centrally Held but subsequently funded from non-pay inflation budgets held centrally.

18. Discretionary Pension Costs – An overspend of £0.2m – 0.7% of budget.
A minor variation from that reported at Period 7.

Revenue Forecast by expenditure/income type

19. Table 3 compares the forecast variance for Periods 8 and 7 by income/expense type.

Table 3 – Forecast outturn by Income/expense type

20. Police Officer Pay – Underspend of £20.4m – 1.2% of budget.
There has been a favourable movement in the forecast of £0.7m from that reported at Period 7 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 8 forecast is due to actual strength at the end of November 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 £7.5m – 1.3% of budget
There has been an adverse movement in the forecast of £1.6m from the position reported at Period 7. This principally relates to a reduction in the forecast for capitalisation of Police Staff Pay costs within Property Services and a reassessment of recruitment expectations within Specialist Crime Directorate.

22. PCSO Pay - Underspend of £3.8m – 2.7% of budget.
There has been a minor adverse movement in the forecast of £0.2m from the position reported at Period 7.

23. Traffic Warden Pay - Underspend of £0.1m – 1.3% of budget.
There has been a minor favourable movement in the forecast of £0.2m from the position reported at Period 7.

24. Police Officer Overtime – Overspend of £3.6m – 2.7% of budget.
There has been a minor adverse movement in the forecast of £0.2m from the position reported at Period 7. The overspend in this area should be considered in the context of the underspend on Police Officer Pay. Appendix 4 shows that £2.9m 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 8 forecast would show an overspend of £0.7m (0.5% of budget).

25. Police Staff Overtime – Overspend of £1.8m – 5.5% of budget.
There has been an adverse movement in the forecast of £0.5m from the position reported at Period 7, principally with Specialist Operations 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 £9m – 25.1% of budget.
There has been a favourable movement in the forecast of £1.4m from the position reported at Period 7, principally within Human Resources following a review of expenditure assumptions in this area.

28. Premises Costs – Overspend of £6.3m – 2.7% of budget.
There has been a favourable movement in the forecast of £1.5m from the position reported at Period 7. This is principally within Resources Directorate relating to the savings made on rent payments as a result of the freehold purchase of New Scotland Yard.

29. Transport Costs - Overspend of £4.9m – 7.3% of budget.
There has been an adverse movement in the forecast of £0.5m from the position reported at Period 7. There have been increases in several Business Groups as the actual costs of increased fuel prices from previous months are more accurately reflected in the forecasts.

30. Supplies and Services - Overspend of £3.6m – 0.8% of budget.
There has been an adverse movement in the forecast of £0.4m from the position reported at Period 7. The increase is principally due to the recognition of the legal costs associated with the Stockwell Coroner’s Inquest into the death of Mr Jean Charles De Menezes. This is offset by decreases in several Business Groups as expenditure assumptions in this area have been reviewed.

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

32. External Consultants – Overspend of £1.7m – 22% of budget.
This is mainly due to the need for community assessors required for the recruitment campaign for Officers, Special Constables and PCSOs and on consultants for the THR project, the cost of which is offset by savings in other areas of the project. Budget will be realigned to reflect this in period 9. Unbudgeted consultants have also been employed by SCD to help improve their management reporting and on Operation Paget.

33. Miscellaneous Fees & Charges – Overspend of £1.2m – 14% 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 £1.4m – 31% 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.
No variation from that reported at Period 7. The underspend is linked to a lower than anticipated Capital Financing requirement.

38. Discretionary Pension Costs – Overspend of £0.2m – 0.7% of budget.
A minor variation from that reported at Period 7.

39. Income - Interest Receipts – Forecast over-achievement of £0.7m – 5.7% of budget.
There has been an adverse movement in the forecast of £2.5m from that reported at Period 7. This is partially due to the global reduction in interest rates and the revised Treasury Management strategy (agreed by members) and partially due to the MPA Treasurer’s decision to finance the purchase of New Scotland Yard from internal cash reserves rather than external borrowing.

40. Income - Other - Forecast under-achievement of £2.9m – 0.8% of budget.
There has been a favourable movement in the forecast of £2.1m from the position reported at Period 7. This is principally within Central Operations relating to the allocation of the reserve for policing the Blackwall Tunnel, within Human Resources relating to additional income for secondees, and within Territorial Policing relating to Partnerships.

41. Specific Grant – A minor over-achievement.
A minor variation from that reported at Period 7.

Budget movements

42. The major budget movements undertaken in Period 8 are shown below in Table 5.

Table 5 – Major budget movements actioned in Period 8

Movements in reserves

43. The reserve movements carried out in Period 8 are shown in Table 6.

Table 6 – Reserve movements carried out in Period 8

Capital monitoring

44. As first 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.

45. Appendix 3 sets out the expenditure for the 2008/09 Capital Programme as at Period 8 (November) by programme. This shows year to date expenditure of £78.4m representing 36.5% of the annual budget of £214.9m (revised at Period 6). The forecast outturn of £201.0m is £13.9m below the revised annual budget. (£40.1m below the original budget of £241.1m).

46. Property Programme – An underspend of £3.4m – 8.9% of revised budget (£19.3m below the original budget).
As previously advised 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.

47. Information Programme – Excluding C3i – An underspend of £0.5m – 0.5% of revised budget (£6.2m above the original budget).
A minor variation.

48. MPA Information Technology – Nil variance.

49. Transport Projects – An underspend of £1.6m – 6.9% of revised budget (£2.0m above the original budget).
As previously advised 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.

50. Other Plant & Equipment Expenditure – A minor variance from the revised budget (£0.2m above the original budget).

51. Directorate of Information – C3i Programme – Nil variance from the revised budget (£4.1m above the original budget).

52. Safer Neighbourhoods Programme – An underspend of £5.4m – 16.2% of budget (£3.4m below the original budget).
The forecast underspend relates to the rephasing of expenditure to future years to ensure a smoother profile of expenditure moving forward.

53. Olympics/Paralympics – Nil variance from the revised budget (£19.9m below the original budget).

54. Counter Terrorism – An underspend of £3.0m – 25.4% of revised budget (£10.4m below the original budget).
The forecast underspend is mainly due to delays in projects. A report will be submitted to request approval to rephase the budget for these projects into future years.

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, Acting Director of Finance Services, MPS

For more information contact:

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

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