Revenue and Capital Budget Monitoring Report 2009/10 – Period 2

Report: 7
Date: 30 July 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 2009/10 at Period 2 (to the end of May). The revenue budget is forecast to overspend by £17.8m (approximately 0.6% of budget).

The Capital Programme as at Period 2 (to the end of May) shows year to date total expenditure of £9.8m. This total represents 4.2% of the revised annual budget of £234.2m. The forecast for the year of £234.2m is equal to the revised annual budget.

A. Recommendation

Members are invited to:

1. Note the year to date and forecast position for revenue and capital budgets.
2. Note budget changes that have taken place since the submission of the 2009/12 MPA/MPS Policing London Business Plan (paragraph B35 refers).
3. Note the revised capital programme and budget.

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 May 2009.

Revenue Forecast by Business Group

2. Table 1 provides a summary of the revenue forecast by Business Group.

Table 1 – Summary of revenue forecast against budget at Period 2

3. The forecast outturn variance at Period 2 is an overspend of £17.8m.

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 £7.5m – 0.5% of Net Expenditure Budget.
The forecast overspend relates principally to Police Officer Overtime caused by the policing of the G20 and Tamil demonstrations and also to Police Staff Pay, following delays to the roll-out of Integrated Prosecution Teams and the introduction of a flexible working allowance in the Central Communications Command. The flexible working allowance has replaced overtime premium payments and as a consequence Police Staff Overtime is forecasting an underspend. It is planned to vire budget from Police Staff Overtime to Police Staff Pay in due course.

6. Specialist Crime – A minor variation.
Although the overall position shows a minor variation, there are material variances in a number of areas. An underspend of £4.3m is forecast within Police Officer Pay due to officer numbers being below target strength, although the target is expected to be achieved by the end of the year. An under-recovery of income of £4.3m is principally due to historical income targets set for operational receipts which are not forecast to be achieved. Additionally, no funding is being received for Operation Maxim (Organised Immigration Crime and Human Trafficking), which had previously been funded by the Home Office. In the short term it is planned to offset this under recovery of income by underspends in other areas within the SCD budget. These funding issues are being addressed in the 2010-2013 Medium Term Financial Plan.

7. SCD is fully committed to implementing the recommendations from Her Majesty’s Inspectorate of Constabularies (HMIC) and the Joint Area Review (JAR) following the tragic death of ‘Baby P’. It has been agreed that an additional £2.4m budget will be transferred (£1m from Centrally Held and £1.4m from within SCD in Period 3) to the Child Abuse Investigation Command (SCD5) to fund the additional resources required. In addition SCD will create a new Command, SCD2 Sapphire, in September 2009, which will investigate serious sexual offences across London. This new unit will encompass the existing Sapphire Units currently within Territorial Policing which will be transferred to SCD.

8. Specialist Operations – An overspend of £0.4m – 0.1% of Net Expenditure Budget.
Although the bottom line position shows a minor variation, there are material subjective variances in a number of areas. An underspend of £3.5m is forecast within Police Officer Pay due to officer numbers being below target strength, although the target is expected to be achieved by the end of the year. An underspend of £1.8m is forecast within Police Staff Pay due to vacant posts which are not expected to be filled. An overspend of £1.8m is forecast within Police Officer Overtime due to covering vacancies and additional Royalty Protection requirements. An underspend of £3.2m is forecast within Running Expenses due to a reduction in the expected number of seconded officers, reduced IT expenditure and reduced telephony costs. An under recovery of income of £6.7m relates principally to the provision of policing at Heathrow Airport and the Palace of Westminster, where officer numbers are lower than budgeted and these are offset by corresponding expenditure underspends.

9. Central Operations – An overspend of £10.7m – 5.3% of Net Expenditure Budget.
The forecast overspend relates principally to Police Officer Overtime caused by the policing of the G20 and Tamil demonstrations and for the planned Climate Camp demonstration in August. There is also an overspend forecast within transport costs relating to additional public order vehicle hire resulting from the G20 and Tamil demonstrations, increasing fuel costs and unfavourable exchange rates relating to services purchased by the Air Support Unit. There is also an under-recovery of income following a reduction in funding from Transport for London relating to the London Safety Camera Partnership. Discussions are underway to try and resolve this funding issue.

10. Olympics Security – An overspend of £0.3m – 3.0% of Net Expenditure Budget.
A minor overspend relating to posts for which funding is still being discussed with Home Office.

11. Deputy Commissioner’s Portfolio – An underspend of £1m – 1.9% of Net Expenditure Budget.
The forecast underspend relates principally to Police Officer Pay due to officer numbers being below target strength.

12. Directorate of Public Affairs – A minor variation.

13. Directorate of Information – A minor variation.
Although the overall position shows a minor variation, there is a forecast underspend of £0.6m on Police Staff pay due to vacancies offset by an overspend in Running Expenses of £0.7m relating to increased demand for evidential analysis and staff recruitment campaign costs.

14. Resources Directorate – A minor variation.
Although the overall position shows a minor variation, there is a forecast underspend of £1.6m on Employee Related Expenses relating to a reduced tax liability on free rail travel for police officers. This is offset by a forecast overspend of £0.6m on Capital Financing Costs as a result of increased borrowing undertaken by the MPA Treasurer and an under-recovery of £1.3m on Interest Receipts, in accordance with the Authority’s approved Treasury Management strategy.

15. Human Resources – A minor variation.
Although the bottom line position shows a minor variation, there are material subjective variances in a number of areas. Police Officer Pay is forecast to underspend by £5.9m following a reduction in the number of officers planned to be on secondment to other forces. This is matched by corresponding variance in the income forecast for seconded officers.

16. Metropolitan Police Authority – A minor variation.

17. Centrally Held Budgets – Nil variation.

18. Discretionary Pension Costs – Nil variation.

Revenue Forecast by expenditure/income type

19. Table 2 provides a summary of the Full Year Budget against Forecast by income/expense category.

Table 2 - Summary of Full Year Budget and Forecast at Period 2

The main forecast variances from budget are set out below.

20. Police Officer Pay – Underspend of £17.4m – 0.9% of budget.
The forecast underspend relates generally to anticipated vacancies across a number of Business Groups. As indicated in Table 3, the current forecast anticipates that the original target strength at 31 March 2010 of 33,353 will be achieved. However, the forecast underspend is principally due to less than budgeted number of officers being seconded to other organisations which is matched by a corresponding under recovery of income. Specialist Operations is currently under strength but is expected to be at target strength by 31 March 2010. Overall, the target strength of 33,353 will be achieved by the end of 2009/10 but the growth profile will be different to that assumed in the original budget.

Table 3 – Police Officer Actual Strength v Target Strength

21. Police Staff Pay - Overspend of £0.7m – 0.1% of budget
The forecast overspend relates principally to delays in the roll-out of Integrated Prosecution Teams and the introduction of a flexible working allowance in the Central Communications Command. The flexible working allowance has replaced overtime premium payments and as a consequence Police Staff Overtime is forecasting an underspend. It is planned to vire budget from Police Staff Overtime to Police Staff Pay in due course.

22. PCSO Pay - Overspend of £0.8m – 0.6% of budget.
The forecast overspend relates to PCSO numbers being above those budgeted for. It is anticipated that transfers into the ranks of federated Police Officers and natural wastage will mitigate the forecast overspend.

23. Traffic Warden Pay - Overspend of £1.1m – 10.9% of budget.
The forecast overspend relates to Traffic Warden numbers being above those budgeted for within the Transport Operational Command Unit, following delays in anticipated transfers to PCSO roles.

24. Police Officer Overtime – Overspend of £11.8m – 9.8% of budget.
The forecast overspend relates principally to the policing of the G20 and Tamil demonstrations and for the planned Climate Camp demonstration in August. Appendix 4 shows that £9.9m 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 forecast would show an overspend of £1.9m (1.5% of budget). Discussions regarding potential funding of the additional costs incurred as a result of the G20 demonstrations are being held with the Home Office.

25. Police Staff Overtime – Underspend of £0.4m – 1.3% of budget.
The forecast underspend is principally within the Human Resources Directorate, following use of casual staff within Catering Services rather than the use of overtime. The forecast underspend also relates to delays in the roll-out of Integrated Prosecution Teams and the introduction of a flexible working allowance in the Central Communications Command. This allowance has replaced overtime premium payments.

26. PCSO and Traffic Warden Overtime – Minor overspend.

27. Employee Related Expenditure – Underspend of £2.7m – 8.1% of budget.
The forecast underspend relates principally to a reduction in the number of seconded officers within Specialist Operations and a reduced tax liability on free rail travel.

28. Premises Costs – Overspend of £0.8m – 0.4% of budget.
The forecast overspend is principally within the Specialist Crime Directorate relating to the refurbishment of the fingerprint bureau at New Scotland Yard.

29. Transport Costs - Overspend of £0.7m – 1.1% 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 services purchased by the Air Support Unit.

30. Supplies and Services - A minor underspend.
Although the bottom line position shows a minor variation, there are some material variances within this category; the main variances are:

• Forensics - forecast underspend of £2.6m - 7.2% of budget. This reflects a continuing reduction in forecast activity in this area following the introduction of strict criteria for forensic submissions.
• DNA Testing - Underspend of £0.7m – 10.3% of budget. This reflects changes to working practices resulting in a forecast for fewer tests being requested.
• Payments to Association of Train Operating Companies - forecast overspend of £0.6m - 3.7% of budget. This results from an increase to the contract price for the provision of free rail travel.
• Dangerous Dogs Act – forecast overspend of £1m - 68.1% 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. Although additional budget was allocated this year to match the spend for 2008/09 expenditure in this area continues to increase due to increased ownership and use of such dogs in criminal activity both as a weapon and as a status symbol. The number of dogs seized is expected to increase by 66% compared to last year which is causing an increase to the time taken for the Courts to process each case. The average number of days kennelling required for each dog is now 150 compared to 111 last year.
• External Consultants - forecast overspend of £0.5m - 12.2% of budget. This relates principally to expenditure in support of the Youth programme within Territorial Policing.
• Scene of Crime Equipment - forecast overspend £0.5m - 29% of budget. The level of expenditure forecast is consistent with the level of expenditure during 2008/09. Specialist Crime is examining the budget allocation in this area.
• Clothing and Accessories - forecast overspend £0.5m - 6.4% of budget. This relates to forecast spend on Multi-Agency Initial Assessment Team hazardous substance clothing. However, income to cover this expenditure is also forecast and budgets will be adjusted to reflect both increased spend and income.

31. Capital Financing Costs – forecast overspend of £0.6m – 2.5% of budget.
The forecast overspend relates principally to increased borrowing which has recently been undertaken by the MPA Treasurer.

32. Interest Receipts – forecast under-achievement of £1.3m – 64.2% of budget
The forecast under-achievement relates to a reduction in the level of interest rates achievable on investments in accordance with the Authority’s approved Treasury Management strategy.

33. Other Income - forecast under-achievement of £19.7m – 5.5% of budget.
The forecast under-achievement is within a number of business groups and relates to a reduction in funding from Transport for London associated with the London Safety Camera Partnership, a reduction in the number of officers planned to be on secondment to other organisations, reduced income for the provision of policing at Heathrow Airport and the Palace of Westminster, where officer numbers are lower than budgeted, and also to historical income targets set for operational receipts within Specialist Crime Directorate which are not forecast to be achieved. The majority of the under-recovery of budgeted income is offset by reduced expenditure.

34. Specific Grant – forecast under-achievement of £0.7m – 0.02% of budget.
The forecast under-recovery is principally within Specialist Operations and relates to ACPO Current Grant and is matched by an underspend on a number of expenditure lines.

35. Budget movements
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. Essentially, budget for Specific Grants and other income has increased by £9.3m since the budget submission and expenditure budgets have been amended 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.

Aside from the budget movements required to reflect changes in funding streams, the major budget movements undertaken in Period 2 are shown below in Table 4.

Table 4 – Major budget movements actioned in Period 2

In addition Members should note that the following budget virements (permanent budget moves between different categories of expenditure), approved by Management Board on 6 July 2009, have been actioned:

• Movement of £926k from Supplies and Services to Police Staff Pay within the Directorate of Information. This relates to the funding of staff growth required for the Improving Police Information (IPI) programme, which had initially been expected to be required for technology and other costs associated with the delivery of the IPI programme.
• Movement of £333k from Police Officer Pay to Police Staff Pay within Central Operations which relates to the civilianisation of 6 posts within the Firearms Training Unit.

36. Movements in Reserves
There have been no reserve movements carried out in Period 2.

Capital Monitoring

37. Despite the downturn in the economy adversely affecting the expected level of capital receipts available in 2008/09 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 ‘slipped’ from 2008/09 and the capacity issues that arise from this.

38. Appendix 3 sets out the expenditure for the 2009/10 Capital Programme as at Period 2 (May) by programme. It includes requests for (a) rephasing of unused budgets from 2008/09; and (b) rephasing of expenditure to future financial years due to capacity issues. Appendix 3 shows year to date expenditure of £9.8m, representing 4.2% of the revised annual budget of £234.2m. The forecast for the year of £234.2m is equal to the revised annual budget. The year to date expenditure of £9.8m is £4.9m below that incurred at Period 2 last year.

39. The detailed 2008/09 capital programme outturn position and rephasing of underspends into 2009/10 and future financial years is the subject of another report (Detailed Capital Outturn Review 2008/09) which is considered elsewhere on this agenda.

40. Property Programme – A Nil variation
The Property Programme is requesting formal approval to rephase £7.7m from 2008/09 into 2009/10 and £2.7m into latter years. In addition, the Property Programme is also requesting approval to rephase £18.1m from 2009/10 into future years. This is mainly as a result of the reprofiling of phase 2 works at Cobalt Square and design review of the construction of the Greenwich Patrol Base project.

41. Information Programme – Excluding C3i – A Nil variation
The Directorate of Information Programme is requesting formal approval to rephase £5.5m of unused grant from the 2008/09 financial year into 2009/10 (ring-fenced for the purchase of Personal Digital Assistants for operational use by frontline officers [£4.7m] and to support the Virtual Courts project [£0.8m]). The Directorate has in its 2009/10 capital programme an in-year management requirement of £11m, of which £9.4m represents contracted commitments. However it is proposed to increase the DoI budget by £3.6m to reduce the level of over-programming reflected in the original approved Programme. This is to be funded from identified capital receipts in excess of the original budget. The revised budget of £99.6m includes an additional £4m to fund a Management Board approved scheme for Improving Police Information (IPI). The Directorate is currently undertaking an urgent review of its capital programme to identify projects which can be terminated or postponed in order to bring its programme in line with set budgets. The Directorate is expected to achieve its budgeted spending target once this review is completed.

42. Transport Projects – A Nil variation.
The Transport Services Programme is requesting formal approval to rephase £2m from 2008/09 into 2009/10. An additional £166k has been allocated to the budget to fund additional cars required by the Child Abuse Investigation OCU (SCD) in respect of Baby P Case recommendations from the HMIC. This programme is expected to achieve its budgeted spending target.

43. Other Plant & Equipment Expenditure – A Nil variation.
The Other Plant & Equipment Programme is requesting formal approval to rephase a minor unused budget of £7k from 2008/09 into 2009/10. This programme is expected to achieve its budgeted spending target.

44. Directorate of Information – C3i Programme – A Nil variation.
The C3i Programme is seeking formal approval to formally rephase £4.5m from 2008/9 into 2010/11. The programme for 2009/10 will be partly funded by a transfer of £2.1m unused budget rephased from 2008/09 into 2009/10 by the Safer Neighbourhood Directorate of Information Programme. This C3i programme is expected to achieve its budgeted spending target.

45. Safer Neighbourhoods Programme – A Nil variation.
The Safer Neighbourhood Programme is requesting formal approval to rephase £12.5m from 20080/09 into 2009/10 and £5.4m into future years. A proportion of the £12.5m rephased will be used to part-fund the C3i/Airwave Programme.

46. Olympics/Paralympics – A Nil variation
The Olympics/Paralympics Programme is to be fully funded by Home Office grant subject to approval of business cases for each individual project. The current forecast assumes that all the budgeted projects will be granted Home Office approval.

47. Counter Terrorism – A Nil variation
The Counter Terrorism Programme is requesting formal approval to rephase £2.4m from 2008/09 into 2009/10. Building works on the Terrorism Act (TACT) cells at Southwark is not expected to start in 2009/10 and as a result Counter Terrorism is requesting formal approval to rephase £3.5m into 2010/11. Investment Board granted approval for an extra £2.0m funding to be spent on the Sky Project after the 2009/12 Business Plan was finalised.

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