Revenue and capital budget monitoring report 2008/09 – period 11

Report: 05
Date: 23 April 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 11 (to the end of February). The revenue budget is forecast to underspend by £29.1m (0.9% of budget).

The Capital Programme as at Period 11 (to the end of February) shows year to date total expenditure of £256.6m (including the purchase of New Scotland Yard (£129m)). This total represents 74.6% of the revised annual budget of £344m. The forecast for the year of £293.9m is £50.1m below the revised annual budget.

A. Recommendations

That

1. 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 February 2009.

2. Continuing issues that may affect the forecast outturn relate to the deposit of MPA/MPS funds with the Icelandic bank Landsbanki, the recent demonstrations arising from the Israeli conflict in Gaza and planning for the forthcoming G20 summit to be held in London on 2 April (Operation Glencoe).

Revenue Forecast by Business Group

3. The forecast outturn variance at Period 11 is an underspend of £29.1m. The forecast underspend has increased by £6.9m from that reported at period 10, principally within the category of Supplies and Services. The key reductions in the forecast relate to legal costs incurred on the Stockwell enquiry which, following successful negotiations with the Home Office, are now able to be met from within Counter Terrorism funding; Forensics and DNA testing forecasts which continue to reduce following improved working practices and a reduction in major incidents compared to previous years; the rephasing of technology project development costs; and reductions in anticipated mutual aid costs.

4. Table 1 provides a summary of the revenue forecast by Business Group. Table 2 compares the forecast outturn variances for Period 11 and Period 10 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 11

Table 2 - Comparison of Period 11 forecast outturn variance with Period 10 forecast outturn variance.

6. Territorial Policing – An underspend of £3.1m – 0.2% of budget.
A minor variation from the position reported at Period 10. 

7. Specialist Crime – An underspend of £7.3m– 1.8% of budget.
There has been a favourable movement of £2.3m in the forecast position from that reported at Period 10. This is principally within the Supplies and Services category following a review of likely expenditure in this area particularly in respect of forensics spend. Additionally there has been a reduction in the forecast for Police Overtime due to a reassessment of anticipated activity.

8. Specialist Operations – An underspend of £3.9m– 1.9% of budget.
There has been a favourable movement of £2.1m in the forecast position from that reported at Period 10. This is principally due to a reduction in the forecast for Mutual Aid expenditure within Supplies and Services and Employee Expenditure as claims from other Forces for the aid provided on some major operations (e.g. Theseus) have now ceased.

9. Central Operations – An overspend of £1.2m – 0.4% of budget.
A minor variation from the position reported at Period 10.

10. Olympics Security – A minor overspend.
A minor variation from the position reported at Period 10.

11. Deputy Commissioner’s Portfolio – An underspend of £1.3m – 2.3% of budget.
A minor variation from the position reported at Period 10.

12. Directorate of Public Affairs – An underspend of £0.5m – 7.8% of budget.
A minor variation from the position reported at Period 10.

13. Directorate of Information – An underspend of £3.0m – 1.4% of budget.
There has been a favourable movement of £2m in the forecast position from that reported at Period 10. This is principally within the Supplies and Services category and relates to the revenue impact of rephasing some projects within the DoI Capital Programme. Principally the project development costs associated with the Eagle Data Centre and Virtual Courts projects.

14. Resources Directorate – An underspend of £9.1m – 3.3% of budget.
There has been an adverse movement of £0.7m in the forecast position from that reported at Period 10. This is principally within Premises costs and relates to the write-off of costs incurred on property projects that have not taken place as originally planned. This has been offset to some extent by a reduction in Police Staff Pay following a review of forecast assumptions within Property Services Directorate.

15. Human Resources – An underspend of £2.9m – 1.9% of budget.
There has been a favourable movement of £0.3m in the forecast position from that reported at Period 10. This is principally within Employee Expenditure following continued delivery of efficiencies relating to external training.

16. Metropolitan Police Authority – A minor underspend.
A minor variation from the position reported at Period 10.

17. Centrally Held Budgets – An overspend of £0.7m – 0.1% of budget.
There has been a favourable movement of £1.1m in the forecast position from that reported at Period 10. This principally relates to legal costs incurred on the Stockwell enquiry which, following successful negotiations with the Home Office, are now able to be met from within Counter Terrorism funding. This reduction has been offset by an increase in the forecast for Police Staff Pay following settlement of the pay award at a level higher than that which had been budgeted.

18. Discretionary Pension Costs – An overspend of £0.3m – 1.1% of budget.
No movement from the position reported at Period 10.

Revenue Forecast by expenditure/income type

19. Table 3 compares the forecast variance for Periods 11 and 10 by income/expense type.

Table 3 – Forecast outturn by Income/expense type

20. Police Officer Pay – Underspend of £21.9m – 1.2% of budget.
A minor variation from the position reported at Period 10.
As indicated in Table 4, the current forecast indicates that the end of year strength will be 32,500. Sufficient candidates will have been recruited and selected to meet the original target of 32,930 but 430 officers will now join in April and May 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. Some candidates who are existing PCSOs have also been deferred to ensure a replacement PCSO is available before they are released to safeguard Safer Neighbourhood Teams and facilitate the Tyrol rollout. There is sufficient capacity available next year to train these deferred recruits as well as the originally planned intakes for next year. The underspend indicated in the Period 11 forecast is due to the profile of actual strength throughout the year and the forecast strength for March being below the levels assumed in the original budget.

Table 4 – Police Officer Actual Strength v Target

21. Police Staff Pay - Underspend of £8.6m – 1.5% of budget
Overall there has been a minor movement in the forecast from the position reported at Period 10. However, an increase within Centrally Held, following settlement of the pay award at a level higher than that which had been budgeted, has been offset by a reduction within Property Services Directorate, following a review of forecast assumptions in this area.

22. PCSO Pay - Underspend of £3.2m – 2.3% of budget.
There has been an adverse movement in the forecast of £0.3m from the position reported at Period 10. This is principally due to an increase in PCSO numbers in the Transport OCU which is matched by increased income.

23. Traffic Warden Pay - Underspend of £0.1m – 0.5% of budget.
A minor variation from the position reported at Period 10.

24. Police Officer Overtime – Overspend of £1.8m – 1.4% of budget.
There has been a favourable movement in the forecast of £0.3m from the position reported at Period 10, which is principally due to a reassessment of anticipated activities within Specialist Crime.
The overspend in this area should be considered in the context of the underspend on Police Officer Pay. Additionally, Appendix 4 shows that £4.3m 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 Period 11 forecast would show an underspend of £2.5m (1.9% 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 10. This is principally within Territorial Policing, Specialist Operations and Specialist Crime Directorates as vacancies continue to be covered by use of overtime. 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.
A minor variation from the position reported at Period 10.

27. Employee Related Expenditure – Underspend of £8m – 22.7% of budget.
There has been a favourable movement in the forecast of £0.4m from the position reported at Period 10. This is principally due to reductions in forecast Mutual Aid costs within Specialist Operations.

28. Premises Costs – Overspend of £8.5m – 3.6% of budget.
There has been an adverse movement in the forecast of £1.6m from the position reported at Period 10. This is principally due to the write-off of costs incurred on property projects that have not taken place as originally planned within Property Services Directorate.

29. Transport Costs - Overspend of £5m – 7.4% of budget.
A minor variation from the position reported at Period 10.

30. Supplies and Services - Underspend of £5m – 1.1% of budget.
There has been a favourable movement in the forecast of £6.4m from the position reported at Period 10. This is principally due to reductions in Forensics and DNA testing forecasts, which, following a review of expected costs based on current levels of expenditure, continue to reduce due to improved working practices and a reduction in major incidents compared to previous years. There have also been reductions in forecasts relating to Mutual Aid costs within Specialist Operations, delays in project developments within the Directorate of Information and legal costs incurred on the Stockwell enquiry which, following successful negotiations with the Home Office, are now able to be met from within Counter Terrorism funding.

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

• Forensics and DNA Testing - Underspend of £10m – 20% of budget.
  The underspend is mainly due to changes to working practices resulting in fewer tests being requested and a negotiated reduction in the contract price as well as a reduction in major operations compared to recent years.
• 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.
• Technical Specialists - Overspend of £1.8m – 41% 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.
• Evidential Analysis and Processing - Overspend of £3.0m – 42% of budget
  These costs are to be found in the Directorate of Information and the overspend is due to increased demand for Evidential Processing and Analysis by operational policing units on the Operational Technical Support Unit (OTSU).

31. Capital Financing Costs – Underspend of £4.8m – 22.3% of budget.
A minor variation from the position reported at Period 10.

32. Discretionary Pension Costs – Overspend of £0.3m – 1.1% of budget.
No movement from the position reported at Period 10.

33. Income - Interest Receipts – Forecast over-achievement of £0.4m – 3.2% of budget.
A minor variation from the position reported at Period 10.

34. Income - Other - Forecast under-achievement of £2.5m – 0.7% of budget.
There has been a favourable movement in the forecast of £0.4m from the position reported at Period 10. This is principally within Central Operations relating to the additional PCSOs for the Transport OCU, matched by an increase in forecast costs in PCSO Pay.

35. Specific Grant – Forecast under-achievement of £3.1m – 0.1% of budget.
A minor variation from the position reported at Period 10.

Budget movements

36. The major budget movements undertaken in Period 11 are shown below in Table 5.

Table 5 – Major budget movements actioned in Period 11

Movements in reserves

37. The reserve movements carried out in Period 11 are shown in Table 6.

Table 6 – Reserve movements carried out in Period 11

Capital monitoring

38. As previously advised in December the freehold purchase of New Scotland Yard was completed at a cost of £129m (including Stamp Duty and other fees payable). The purchase has been funded by use of internal cash balances. The MPA Treasurer has arranged a £10m external loan to replenish cash balances and is also considering whether any further external borrowing is necessary.

39. 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 £27.9m, i.e. a shortfall of £56.9m. The year-to-date actual capital receipts being only £10.4m 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. It is now forecast that £36.6m of capital reserves will be required. Members also approved a revision to the 2008/09 budget at Period 6 in line with the Period 6 forecast.

40. Appendix 3 sets out the expenditure for the 2008/09 Capital Programme as at Period 11 (February) by programme. This shows year to date expenditure of £256.6m (including the purchase of New Scotland Yard) representing 74.6% of the revised annual budget of £344m. The forecast outturn of £293.9m is £50.1m below the revised annual budget.

41. Property Programme – An underspend of £7.9m – 20.2% of revised budget (£23.8m below the original budget).
As previously advised the main reasons for the forecast underspend are the deferral of the Greenwich patrol base project into 2009/10 (although construction is now underway) and delays to the Cobalt Square project. Additionally there have been delays experienced to the Fishmongers Arms Safer Neighbourhood project due to complications around negotiations on the lease. A reassessment of the value of the work completed at the Kirkland House site has also contributed to the reduction in the forecast.

42. Information Programme – Excluding C3i – An underspend of £6.0m – 6.7% of revised budget (£0.7m above the original budget).
The forecast underspend relates to the rephasing of activities related to the provision of PDA devices which is now expected to take place in future years.

43. MPA Information Technology – A minor variation.

44. Transport Projects – An underspend of £5.4m – 22.7% of revised budget (£1.7m below 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. Additionally there has been a reduction in the forecast for other items such as purchases for projects within Specialist Crime and Safer Streets as requirements are being reviewed.

45. Other Plant & Equipment Expenditure – The forecast is expected to match the revised budget (£0.2m above the original budget).

46. Directorate of Information – C3i Programme – An underspend of £7.7m – 64.1% of revised budget (£3.6m below the original budget).
As previously advised the forecast underspend relates to the rephasing of activities associated with the Airwave programme which are now expected to take place in future years.

47. Safer Neighbourhoods Programme – An underspend of £17.6m – 53.4% of budget (£15.7m below the original budget).
As previously advised the forecast underspend relates to the rephasing of expenditure for this programme over three years rather than two years as originally planned.

48. Olympics/Paralympics – An underspend of £1.4m – 27.6% of budget (£21.3m below the original budget).
As previously advised the forecast underspend relates to the rephasing of activities associated with the Airwave programme which are now expected to take place in future years. A request to rephase the budget into future years will be submitted as part of the year-end review process.

49. Counter Terrorism – An underspend of £4.2m – 34.8% of revised budget (£11.6m below the original budget).
As previously advised the forecast underspend is mainly due to delays in a number of projects. Approval will be sought 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, 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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