Detailed Capital Outturn Review 2008/09

Report: 8
Date: 30 July 2009
By: Director of Resources on behalf of the Commissioner

Summary

This report provides analysis of the provisional capital outturn for 2008/09 and proposals for rephasing of capital projects into 2009/10.

A. Recommendation

Members are invited to:

1. Note the provisional outturn position as agreed at the Finance & Resources Committee meeting on 18 June 2009.
2. Approve amendments to the capital programme and budget for 2009/10 and future years to reflect rephasing of 2008/09 projects and in-year changes (paragraphs B25 and B26 refer).
3. Agree that officers progress all projects in the approved programme and that financing of the Capital Programme 2009/10 be kept under regular review during the course of the financial year to ensure resources are properly matched to spend.

B. Supporting information

Background

1. This report provides information resulting from a detailed outturn review that has been undertaken into the Capital Programme for 2008/09. Programme managers have analysed individual schemes of work to ascertain whether projects were properly authorised, the reasons for any under or overspends, and how projects that were not completed in 2008/09 should be rephased into 2009/10 and beyond.

Provisional Outturn Position

2. The provisional outturn for the Capital Programme (excluding the purchase of New Scotland Yard) was £168.7m against a revised budget of £214.9m, resulting in an underspend of £46.2m. Table 1 below summarises the 2008/09 provisional outturn position.

Table 1 - 2008/09 Capital Programme

3. The MPS is seeking approval from the MPA to rephase £29.7m of the underspend into 2009/10. The rephased amounts are to be funded by (a) drawing down from capital reserves not required in 2008/09; and (b) utilising unsupported borrowing that proved unnecessary in 2008/09. Table 2 below shows the requested sums for rephasing across Capital Programmes. Also noted are sums that are required to be rephased into 2010/11 and future years. This rephasing links into the capital planning process and will be subsequently reflected in the revised 7-year Capital Programme to be prepared over the coming months. Further details are provided in paragraphs B4 - B16 below. Members are asked to approve these budget amendments to the Capital Programme. Appendix 1 provides a more detailed list of the projects involved.

Table 2 - Rephased sums from 2008/09

2008/09 Provisional Outturn Analysis by Programmes

4. The total sum to be rephased from 2008/09 is £49.2m. This exceeds the recorded underspend for 2008/09 of £46.2m by £3m. The discrepancy is accounted for by management of the DoI element of the Safer Neighbourhoods Programme. A full explanation is provided at paragraph B6 below.

Property Based Programme

5. The provisional outturn for the Property Based Programme was an underspend of £10.4m against the revised annual budget of £39.7m. The main reasons for the underspend were the deferral of Greenwich Patrol Base into 2009/10 and various operational delays with Cobalt Square, Kirkland House and Merton Custody projects. The Property Based Programme is requesting approval to rephase £7.7m of its 2008/09 provisional underspend into 2009/10 and the remainder into future years.

Information Based Programme

6. The provisional outturn for the Information Based Programme was an overspend of £0.2m against a revised annual budget of £88.7m. However, within that outturn figure there was an underspend of approximately £4.7m against the NPIA grant for the purchase of Personal Digital Assistants (PDAs) for frontline officers and an underspend of £0.8m against the Office of Criminal Justice Reform grant to fund the Virtual Courts project. The Information Based Programme is requesting to rephase the underspend of £5.5m into 2009/10. It should be noted that the budget for the Information Based Programme was reduced by £16.1m at the start of the year to correct an oversight that occurred when setting the budget for the DoI element of the Safer Neighbourhood Programme. The Information Based Programme has in its 2009/10 capital programme an in-year management requirement of £11m, of which £9.4m represents contracted commitments.

7. The Information Based Programme’s overprogramming element needs to be managed in year. DoI is currently reviewing the listed projects to identify those which can be terminated or postponed in order to bring expenditure in line with set budgets. The opportunity is also being explored of whether additional funds can be made available to the Information Based Programme to ease the overprogramming problem - paragraph B24 refers.

MPA Information Technology

8. The projects within this Programme are now completed and there are no rephasing requirements.

Transport Based Programme

9. The provisional outturn for the Transport Based Programme was an underspend of £5.3m against the revised annual budget of £23.5m. Of the reported underspend, £2m relates to the main core Programme and £3.3m relates to the non-core Programme. There is a request to rephase £2m into 2009/10, however the non-core budget underspend of £3.3m is not required for future years. The projects undertaken by the Transport Based Programme were formally approved.

Other Plant and Equipment

10. The provisional outturn for the Other Plant & Equipment Programme was an overspend of £2.7m against the revised annual budget of £0.5m. The overspend was primarily due to covert equipment and accessories being purchased which were not budgeted as the opportunity was being explored of these costs being met by a third party. There is a request to rephase an amount of £7k into 2009/10, which represents unused catering budget. The projects undertaken within this Programme were all formally approved.

C3i Programme

11. The provisional outturn for the C3i Programme was an underspend of £8m against the revised annual budget of £12m. This mainly related to the rephasing of activities associated with the Airwave Programme into future years. There is a request to rephase approximately £4.6m into later years by utilising the NTL compensation revenue reserve. All of the projects undertaken by the C3i Programme were formally approved.

Safer Neighbourhoods (DoI & PSD)

12. The provisional outturn for the Safer Neighbourhood Programme was an underspend of £18m against the revised annual budget of £33m. The underspend was split £6.6m & £11.4m against the Directorate of Information (SN DoI) and Property Services (SN PSD) elements, respectively. The main reason for the underspend on this Programme relates to the rephasing of this programme over 3 years, rather than 2 years as originally planned. All the projects undertaken by the Safer Neighbourhood Programme were formally approved.

13.The SN DoI Programme was allocated a budget of £16.1m at the start of the 2008/09 financial year (which was the amount transferred from the Information Based Programme). The provisional outturn was an underspend of £13.1m against this budget. Of this amount, approximately £8.6m is required to be rephased into 2009/10 and £4.5m into later years.

14.The SN PSD Programme was allocated a budget of £15m at the start of the 2008/09 financial year and was granted MPA approval to accelerate part of the Programme from 2009/10 into 2008/09. This approval resulted in a revised budget position of £23.4m. The provisional outturn was an underspend of £11.4m against this revised budget mainly as a result of the rephasing of the Programme from 2 years to 3 years. Of this amount, £3.7m is required to be rephased into 2009/10 and £7.7m into later years.

Olympics/Paralympics

15.The provisional outturn for the Olympics/Paralympics Programme was an underspend of £1m against the revised annual budget of £5m. There are no rephasing requirements associated with this Programme which is covered by specific grant.

Counter Terrorism

16. The provisional outturn for the Counter Terrorism Programme was an underspend of £6.4m against the revised annual budget of £12m. This represents refurbishment delays at three sites. In addition, there were building work delays to the new Counter Terrorism custody suite cells at the Emerald site. There is a requirement to rephase £2.4m into 2009/10. Counter Terrorism receives funding directly from the Home Office and has received adequate funding to support the planned capital expenditure for 2009/10 and the projects rephased into 2009/10.

Capital Receipts

17. The original estimate for capital receipts in 2008/09 was £84.8m. However, this figure was revised very early in the financial year to recognise the downturn in the property market and the Management Board decision to defer or suspend the disposal of a number of key buildings. The working budget for the majority of the financial year was £20m and it is pleasing to note that this figure was surpassed. This was largely due to the sale of Yeomans Row. The final capital receipts figure was £27.6m. The £7.6m in excess of the working estimate assisted in reducing the forecast level of financing required from usable capital reserves.

Funding Envelope

18. The Policing London Business Plan 2009-12 assumes funding for the Capital Programme of £216.1m in 2009/10. The Capital Programme is prepared in accordance with the MPA’s Capital Strategy which provides a framework for considering investment proposals against key business priorities and the financial constraints that must apply as a result of internal and external market forces. The funding includes the use of Specific Capital Grants which are budgeted according to current knowledge. After adjustments to rephase relevant budgets from 2008/09 into 2009/10 and future years the revised capital budget for 2009/10 is £226.4m. The programme has subsequently been increased to £234.2m to reflect recent in-year approvals (paragraph B25 refers). The rephased amounts from 2008/09 are funded through drawing down from capital reserves not required in 2008/09 and the use of unsupported borrowing.

19. An integral element of the financing of the capital programme is capital receipts generated from the disposal of redundant or obsolete property, or other surplus tangible assets. The downturn in the property market has resulted in the decision to be more circumspect regarding property transaction; the Authority choosing to delay sales until prices recover to previous levels. This has resulted in only £20m in year capital receipts being forecast to finance the capital programme for 2009/10. However the recent agreement to dispose of Johnson House will result in the delivery of £23.6m receipts during 2009/10.

20. Due to the lower than usual level of capital receipts available to fund capital investment, the decision was taken when preparing the capital programme for 2009/10 to provide required financial support by allocating £22m from the 2008/09 revenue outturn. This sum has been placed in an earmarked revenue reserve and the Authority has agreed that £13m will be used in 2009/10 with £9m forecast to be utilised in 2010/11.

21. It is recognised that a far higher level of capital investment than that presently possible is desirable. With no certainty in securing the level of capital receipts currently forecast for coming financial years, a report was presented at MPA Finance and Resources Committee on 18 June dealing with the potential for additional financing to be made available by way of unsupported borrowing. The report was approved and it has been agreed that the potential for further borrowing of £30m in 2009/10, £20m in 2010/11, and £10m in 2011/12 will be held as a contingency. Funds will be used to cover any shortfall in capital receipts; however it is unlikely at this stage that new initiatives will be bought forward in 2009/10,

22. Table 3 below provides information on the revised annual budget and forecast annual spend as at Period 2.

23. Currently, the Directorate of Information is in the process of reviewing the Information Based Programme with a view to managing the in-year budget pressure of £11.0m (see Paragraph B7). Although the Property Based Programme is forecast to spend its revised annual budget, this is after rephasing £20.9m of the budget into future years. This requires the management of in-year budget pressures of some £4.1m.

24. Given the higher than anticipated receipts achieved in the current year, it is proposed the DoI budget is increased by £3.6m by reducing the level of over programming reflected in the currently approved programmes. It is also proposed that officers make every effort to deliver the currently approved programme on the basis that any overspend against the currently approved budget will be managed through the rephasing of the use of reserves and/or increased borrowing in line with the proposals agreed by Finance and Resources Committee on 16 June 2009.

25. The revisions to budgets as noted within Table 3 take account of rephasing of schemes from 2008/09 to 2009/10 and known changes resulting from project management and capacity issues. The revisions include the decision by Management Board to approve a scheme for Improving Police Information (IPI), £4m in 2009/10, an additional £166k in respect of Baby P Case recommendations from the HMIC, the proposed increase of £3.6m to the DoI budget referred to in Paragraph B24 and the revisions to the CT budget reflected in the Period 2 Monitoring Report considered elsewhere on this agenda.

Table 3 - 2009/10 Latest Position

Implications for 2010/11

26.A capital programme of £175.5m for 2010/11 was approved as part of the Policing London 2009-10 Business Plan. This programme is now under review as a result of the 2008-09 rephasing and other rephasing. The current position is shown at Table 4. The additional funding rephased from 2009/10 into 2010/11 is noted but further work is required to identify how much budget will need to be rephased from 2010/11 into future years.

Table 4: Current Position of 2010/11 Capital Programme

* Information Based Programme includes additional £2.5m approved for IPI.

27.The 2010/11 programme is still being developed as are the funding options. Financing of a programme of the magnitude of £219.1m, as shown at Table 4, remains feasible given the outturn position for 2008/09, the impact this has had on planned expenditure in 2009/10, and that financing not used in 2008/09 or 2009/10 in respect of rephased schemes will remain available to allow projects to proceed at a later date.

28.A major review of the capital plan and the setting of the seven year programme for 2010/11 to 2016/17 is currently underway and initial findings will be brought before Management Board shortly. As noted at paragraph B19, the MPA has approved the use of additional borrowing should it be prudent and affordable to do so. The use of the borrowing contingency will be explored recognising the pressure that will be placed on the revenue budget.

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

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