Revenue and capital budget monitoring report 2011/12 - period 4

Report: 5
Date: 22 September 2011
By: Director of Resources on behalf of the Commissioner

Summary

This report is the second monitoring report on the MPS/MPS finances for 2011/12 and shows the revenue and capital position at Period 4 (July 2011). The revenue budget is forecast to overspend by £6.2m (0.2% of budget) before any account is taken of the budget resilience provision or the costs of Operations Kirkin and Withern (see paragraph B5). The Capital Programme as at the end of Period 4 shows year to date expenditure of £45.6m. This represents 24.5% of the annual programme budget of £186.3m.

The major issues are:

• The budget pressures arising from the policing response to recent public disorder within London (Operation Kirkin), the ongoing police investigation (Operation Withern) and potential riot damage costs falling to be met by the MPA/MPS. The forecast information contained in this paper does not yet reflect the additional costs relating to these operations.
• A reorganisation of the MPS Business Group structure has taken place with functions from within the Human Resources and Logistical Services Directorate moving to form new departments within Resources Directorate (People Services and Customer & Commercial Services) and the remaining functions transferring to form a Professionalism and Performance function within the Deputy Commissioner’s Portfolio. In addition, the Strategy & Improvement Department has been disestablished, with the Strategy & Police Performance area moving from Resources to Deputy Commissioner’s Command with the other S&ID functions moving to other areas within Resources. The information contained in this report is structured to reflect the new organisational model. For comparison purposes, figures for previous periods have also been recast to reflect the new structure.
• Business Groups are forecasting a year-end Police Officer strength of 32,128.
• A continuing over-strength position within Territorial Policing and the management of reductions driven through the TP Development Programme.
• Later than planned finalisation of match-funding agreements and other cost-sharing posts resulting in reduced income.
• In-year budget pressures on the delivery of a number of major change programmes.
• A potential budget pressure between the estimated cost of the early departure programme and the earmarked reserves available.

A. Recommendations

That members

1. Note the year to date and forecast position for revenue and capital budgets.
2. Approve the transfer of further £4m of existing earmarked reserves to fund voluntary exit costs (Paragraph 46 refers).
3. Approve two budget virements (Paragraph 69 refers).
4. Note two budget virements approved by MPS Management Board (Paragraph 70 refers)

B. Supporting information

Background

1. The Commissioner has outlined our vision of a balanced policing model with safety, confidence and value for money at its core. Within that vision the MPS is committed to delivering excellent policing from tackling Anti-Social Behaviour and other crime in neighbourhoods through to dealing with terrorists and the most serious criminals often ‘behind the scenes’. However, it is doing that within a financial climate of an expected reduction in spending (compared to its 2010/11 budget) of some £600m by 2014/15. For 2011/12 the Service has identified savings to be delivered this year of £163m (see paragraphs 47-62).

2. This paper provides a forecast against the revenue and capital budgets for the MPA/MPS in 2011/12 based on the position at the end of July 2011. It includes information on the major change programmes and the forecast savings arising from them. It also includes an update on the Service Improvement Plan and information on the changes to the deployment plan and budget allocations from those approved by the MPA Full Authority meeting on 31 March 2011. It does not include the budget pressures arising from the policing response to recent public disorder within London (Operation Kirkin), the ongoing police investigation (Operation Withern) or the potential riot damage costs falling to be met by the MPA/MPS for which further information is given at paragraph 5.

Revenue Forecast by expenditure/income type

3. Table 1 compares the forecast outturn variances for Period 4 and Period 2 by expenditure/income type

Table 1 - Subjective comparison of forecast outturn variance

4. The overall Period 4 revenue forecast outturn is an anticipated overspend of £6.2m before any account is taken of the resilience (£25.1m) which is built into the 2011/12 budget (further detail is provided at paragraphs 65 to 67). This represents a reduction in the forecast overspend of £19m from that reported at Period 2, due in the main to a reassessment of Police Officer and Police Staff Pay, Supplies and Services and Income forecasts. As was noted in the first report of the year, Business Groups tend to be very prudent in early assessments of the forecast position and this was the case at Period 2.

5. However, as stated, the forecast does not yet account for the budget pressures arising from the policing response to recent public disorder within London (Operation Kirkin), the ongoing police investigation (Operation Withern) and the potential riot damage costs falling to be met by the MPA/MPS. At the time of writing this report, it is estimated that the additional costs incurred (between 6 to 26 August) are in the region of £35.5m (£23m on overtime, £10.5m on mutual aid and £2m on support costs). It is anticipated that additional costs will continue to be incurred as the investigations continue. In addition, there may be liabilities arising from the Riot Damages Act (RDA) of anywhere between £50m and £200m, depending on any court ruling relating to the inclusion of consequential losses. The Home Office have indicated that applications for support from Police Authorities will be considered as special grant applications and Authorities will need to demonstrate the impact on the overall financial position of the Force. This potential liability relates to the value of claims paid to insured businesses by insurers. The cost of claims from uninsured and under-insured businesses and individuals will be reimbursed to the MPA by the Home Office in full. In order that the core MPS financial position can be clearly identified, future monitoring reports will provide information on the MPS financial position both including and excluding Operations Kirkin and Withern.

6. With gross expenditure in the region of £3.5bn there are many variances and explanations within the headline figure but in broad terms the forecast overspend results from expenditure on overtime and running costs.

7. As reported at Period 2, a number of major change programmes are underway with a target of delivering £139.8m of savings in this financial year. At Period 4 the majority (£121.1m) of the savings are forecast to be delivered. Work, continues to maximise savings on these programmes in the current year. Further detail is provided at paragraphs 47 to 61 and at Appendix 3 (Exempt).

8. The 2011/12 budget, as finally approved, reflected a complex picture in terms of officer and staff strengths and movement between different categories as the Service moved to a new operating model with significantly fewer traffic wardens and PCSOs. The Service is working hard to avoid, as far as is practically possible, redundancies. This has involved internal:

• recruitment of PCSOs to officer training posts and
•  redeployment opportunities for Traffic Wardens, primarily to PCSO posts

The current forecast against officer and staff budgets can be summarised as follows:

Table 2 - Summary of Pay forecast variances at Period 4

9. Police Officer Pay - An underspend of £2.2m - 0.1% of budget.
As previously reported, the actual strength on 1 April 2011 was 32,459. Following wastage, the actual strength at 31 July had fallen by 456 to 32,003 but is forecast by Business Groups to increase by 125 through the year to 32,128 by the end of March 2012. This is 51 under the revised year end target of 32,179. The position is being monitored but further recruitment is subject to the discussions taking place around future years’ budgets. Further information on the deployment plan is given at paragraphs 40 - 44.

10. Within the overall underspend of £2.2m there are some significant intra-business group variances. In particular, Territorial Policing is estimating:

1. an overstrength position throughout the year due to a continuing slow movement of officers to specialist commands, with a year-end position estimated at 169 officers overstrength.
2. a year-end understrength position of 166 specifically funded posts which is matched by a reduction in income (also see Other Income at paragraph 32)
3. revisions to a number of major change programmes - see paragraphs 47 to 61 and Appendix 3 (exempt).

Specialist Crime has a forecast underspend of £3.1m. This relates to forecast Police Officer vacancies throughout the year (the Business Group is predicting that at year-end there will be approximately 110 vacant posts).

The Olympics Programme also has an underspend of £2.3m as some projects are experiencing issues in recruiting officers and staff due to the contracts being short term. This is matched by a reduction in the specific grant funding for the Olympics.

Work is continuing to speed up postings to specialist and specifically funded posts.

11. As reported at Period 2, there is also a potential budget pressure relating to Special Priority Payments where the full savings are currently forecast to be achieved but there could be a requirement to make unbudgeted payments in 2011. Final decisions will be subject to further reports to both MPS Management Board and the MPA.

12. A Public Inquiry Support Team is being set up to manage Operation Appleton (telephone hacking). It is estimated that this will require 29 detectives with pay costs of £1.3m in 2011-12. As officers will need to be seconded from other Business Groups, and our ability to backfill the posts is limited, options for funding these costs are being considered and will be reflected in future reports once the position is firmer. This report does not yet include any forecast costs for Operation Appleton.

13. Police Staff Pay - An underspend of £5.8m - 1% of budget.
In order to manage reductions as efficiently as possible a star chamber was established last year and continues to operate. As a result, the number of staff in post in July (including temporary staff) was 14,186 compared to the planned year end strength of 14,801 reflected in the Policing London Business Plan. The forecast position for 31 March 2012 (including temporary staff) is 14,163.

14. In general there are underspends forecast within police staff pay in all Business Groups, other than the Directorate of Information due to the delays in realising reductions from the Lean Programme. As reported at Period 2, it is now thought that the estimated savings from the review of Police Staff terms and conditions are unlikely to be delivered in full in 2011/12, thus placing pressure on police staff pay budgets.

15. However, there has been a favourable movement of £11.2m from the position reported in Period 2 as acceptance of more realistic recruitment expectations have led to a reduction in forecast in many Business Groups.

16. In order to improve corporate financial resilience, Management Board have agreed additional constraints on the use of staff (including PCSOs) underspends in budgeted initiatives.

17. PCSO Pay - An underspend of £4.6m - 3.2% of budget.
The actual strength in July was 3,887 PCSOs and the forecast underspend reflects the current expectation of Boroughs who are showing an understrength position against budgeted FTEs. The year end forecast by Business Groups assumes a strength of 3,670 against the planned year end strength of 3,825 reflected in the Policing London Business Plan.

18. Traffic Warden Pay - An overspend of £0.2m - 5.7% of budget.
A new model for delivery of the Safer Transport function has been agreed between the MPS and Transport for London (TfL). The new model involves less reliance on Traffic Wardens with the disbandment of the Traffic Warden Service during the year. At the start of the year there were 184 traffic wardens in post who have been offered early departure terms and opportunities for redeployment where practical. The July strength for Traffic Wardens remained at 184, and the current forecast position for year end is 5, in line with the target strength.

19. Following finalisation of the new operating model with TfL and agreement to the proposed transition arrangements, some realignment of budgets and forecasts has occurred and there has been a favourable movement of £0.6m from the overspend position reported in Period 2. It should also be noted that this report includes a budget virement of £1.1m from Traffic warden Pay (see paragraph 69). The forecast costs have moved in line with the budget virement so have no bearing on the favourable movement in variance.

20. Police Officer Overtime – An overspend of £4.2m - 4.1% of budget.
The current forecast overspend is mainly due to a number of increased demands on the MPS, such as the Royal Wedding, the visit to the UK by the US President and costs relating to increased protection of foreign embassies. As the Royal Wedding took place on a bank holiday, officers were entitled to claim double time and it is estimated to have cost an additional £2.7m in Police Officer overtime. Discussions are underway with the Home Office around additional funding to cover the Royal Wedding costs.

21. The high profile events mentioned above have impacted considerably on expenditure to date but the overall forecast expenditure is still £3.4m lower than that incurred during 2010/11. However, the forecast does not yet include the additional costs arising from Operations Kirkin and Withern which will have a significant impact on the position reported (see paragraph 5).

22. Police Staff Overtime - An overspend of £2.3m– 8.4% of budget.
The forecast overspend is primarily within Territorial Policing relating to managing vacancies within the Central Communications Command and the need to backfill staff involved in training relating to TP Development programmes (enhance CCC resources). This is a temporary issue whilst staff are moved into the new roles.

23. PCSO and Traffic Warden overtime - a minor underspend

24. Employee Related Expenditure – An overspend of £0.6m - 0.9% of budget.
The overspend relates to additional seconded officer costs within Specialist Operations and the Olympics Directorates. The forecast includes £37m for costs relating to the early departure programme which is funded by a matching transfer from reserves (see paragraphs 45 - 46).

25. There has been a minor adverse movement from the position reported in Period 2. However, the forecast does not yet include the additional costs of mutual aid arising from Operations Kirkin and Withern which will have a significant impact on the position reported (see paragraph 5).

26. Premises Costs – A minor overspend.

27. There is a potential cost pressure of £1.8m on the Corporate Real Estate Programme as a result of slippage on other programmes that is not currently reflected in these figures.

28. Transport Costs - an underspend of £0.4m - 0.7% of budget.
The underspend relates principally to overseas travel savings within Specialist Crime and Police Staff travel and subsistence savings within Territorial Policing. These are partly offset by increased helicopter fuel bills at the Air Support Unit within Central Operations.

29. Supplies and Services - An overspend of £7.7m - 1.8% of budget.
This primarily relates to expenditure on the TP Development Programme front counters projects and Crime Recording and Investigation Bureau (CRIB) project; Other areas of overspend involve PDA support and maintenance; Counter Terrorism expenditure (where the budget provision is in other subjective areas for which budget changes are being processed); inflationary increases on PNC charges; fingerprint bureau refurbishment at NSY; one-off purchases of camera equipment; work on the replacement forensic submission system; increased Crimestopper costs and a breach of license contract cost. These are partially offset by an underspend of £1.2m relating to the Eagle Data Centre.

30. There has been a favourable movement of £3m from the position reported in Period 2 due to: a reduction in the central CT forecast; a reduced forecast relating to the Eagle Data Centre; a reduction in forecast goods for resale in Catering Services due to closure of Catering Units (this also results in an under-recovery of income); lower than anticipated vehicle recovery activity (which also has a knock-on effect on income recovery). These have been partially offset by an adverse movement in additional TP Development costs for publicity concerning the closure of front counters.

31. Capital Financing Costs – an underspend of £5.6m -10.4% of budget.
As reported at Period 2, the underspend relates to a reduction in the minimum revenue provision (MRP) linked to a decision to fund capital expenditure in 2010/11 from capital reserves rather then borrowing. Also, there is an underspend forecast in relation to interest on external loans reflecting the decision to take out short term variable rate loans (2 years) that currently attract a lower rate of interest than those used in calculating the budget requirement.

32. Other Income - An under-achievement of £4.7m – 1.6% of budget.
This primarily relates to an under-recovery of funding from partner organisations for Police Officer and PCSO posts. This relates to the match-funding scheme (£3.1m) for which the budget assumed funding for 115 police officers for a full year where as the forecast assumes that these agreements will not be finalised until later in the financial year. Match funding income is now forecast to start providing returns only from September 2011, with only 1 agreement signed and 14 others pending. Funding for 92.5 posts has been included in this forecast. Also, there is a further under-recovery against planned Income targets within the cost sharing initiatives, where there are a number of unsold posts, an under-recovery of £1.4m being forecast. There is also an under-recovery of £1m against budget for Cabinet Office funding for the Government Security Zone as the agreement ended unexpectedly on 31st March 2011 (however, following further discussions with Cabinet Office it is hoped that the income stream will be reinstated). These are partly offset by an over-recovery of Income of £1.8m, relating mainly to funds received to assist with the McCann investigation.

33. There has been a favourable movement of £3m from the position reported at Period 2. This principally relates to the receipt of funds to assist with the McCann investigation, and the removal of income budgets relating to Operation Swale and Operation Maxim (immigration crime and exploitation) matched by reduced expenditure, as well as a general increase in year-to-date income received. These favourable movements have been partially offset following the reduction in the forecast for funding of the Government Security Zone (£1m) although, as stated above, it is hoped that the income stream will be reinstated.

34. Discretionary Pension Costs - no variation to budget.
As stated in the provisional outturn report considered by the MPA Finance and Resources Committee on 23 June, a challenge has been made to the way the MPS calculates injury pensions resulting in a potential budget pressure and this is being kept under review.

35. Specific Grant – an under-achievement of £4.9m – 1% of budget.
The underachievement is primarily within the Olympics Security Directorate (£3.5m), where the grant level matches reductions in forecast expenditure, principally within Police Officer and Police Staff Pay. There is also an under-recovery of £2m forecast within the TP MSC grant to ensure that the grant forecast is matched against lower than previously budgeted expenditure levels. These are partly offset by an overachievement (£1m) of Loan Charges Grant which is calculated on the estimated levels of useable capital receipts. Low levels of useable capital receipts result in higher grant with high levels resulting in lower grant. In 2011/12 lower levels of useable capital receipts are expected than originally estimated due to the need to use significant levels of usable capital receipts to finance the Capital Programme, increasing the Loan Charges Grant accordingly.

36. New Development
TP have obtained approval to develop Multi-Agency Safeguarding Hubs (MASH) with partner agencies and have identified initial funding of £1m in 2011/12 within existing budgets to allow the implementation of the first phase of six boroughs on a pilot basis. MASH is a partnership project for London which aims to bring together key professionals from different agencies into one secure room, to join up information and spot where vulnerable people, both young and adult, may be at risk. This full picture allows risks to be identified early, which may not be highlighted by agencies individually. Better, more efficient interventions can then be made by the most appropriate agency and through better understanding of the problem, a joined up, cost effective and streamlined solution can be implemented. The secure room allows all the information on a vulnerable person to be seen and assessed, but not passed outside without the consent of the agency which owns the information. Approval for the in-year budget virement is sought (paragraph 69 refers) but is already reflected in the figures presented in this paper.

37. Diamond Jubilee
At this stage, no additional in-year budget pressures have been identified for planning costs arising from the Queen’s Diamond Jubilee in June 2012. It is currently expected that any in-year costs arising will be managed within existing budgets. The position will, however, be kept under review. The additional costs expected to arise in 2012/13 are being included in the 2012-15 budget planning assumptions.

38. Terrorism Prevention and Investigation Measures (TPIMs)
Due to impending legislation changes relating to TPIMs, the Home Office have agreed additional specific Counter Terrorism grant funding of £2.8m for revenue costs and £3.0m for capital costs for 2011/12. It is anticipated that the funding will be sufficient to cover the anticipated costs in 2011/12 and no additional budget pressures are anticipated at this stage. This report does not yet include forecast expenditure or funding for TPIMs.

39. Appendix 2 sets out the revenue forecast by business group. The main variances are explained above.

Deployment Plan

40. The Policing London Business Plan 2011-14 reflected a planned strength of 32,320 at March 2012. The plan has now been revised to 32,179 (-141) to reflect the latest information on the phased implementation of the Training Change Programme and other required movements for which budget changes have been processed up to Period 4. Future increases to the target strength are expected to reflect a planned increase of 70 posts within Territorial Policing, funded by a reduction of 100 PCSOs from within the Government Security Zone, changes resulting from TPIMS (see paragraph 45) and to reflect any measures undertaken to deliver the year end Business Plan target of 32,320. The changes are:

41. Table 3 provides details of police officer numbers compared to target strength by Business Group. The Business Groups’ forecast is for a year end position of 32,128 which is 51 lower than the planned year-end figure of 32,179.

Table 3 – Police Officer Actual Strength v Target Strength

42. As advised at Period 2, the variance in target strength between the Business Groups remains an issue as the forecast overstrength position within Territorial Policing is offset by vacancies held within the specialist groups. The challenge will be to manage the reductions, which will arise from the TP Development Programme, and re-deploy those officers into budgeted posts. The impact is expected to be felt particularly at sergeant level, where the Training Service Improvement Plan has already delivered a reduction in the region of 50 posts together with the 150 sergeant posts removed from the Safer Neighbourhoods model this financial year, although the planned Inspector promotion process later this year will draw from this pool and therefore significantly reduce the pressure.

43. The vacancies within the specialist business groups do not match the displaced officers in terms of rank and skill set. There is a considerable volume of internal selection activity being driven by Specialist Crime Directorate and Specialist Operations which aim to fill current and forecast vacancies. However, there are barriers to success as the level of experience within Territorial Policing cannot always provide suitably skilled officers to meet the demands within the specialist business groups. One of the advantages of considering a transferee campaign would be an ability to bring in skilled officers who can be directly posted into the vacancies within the specialist units.

44. The strength for Metropolitan Special Constables (MSCs) as at 1 April 2011 was 4,946. The current actual position at Period 4 is 5,232. The target strength for 31 March 2012 is 6,667 which will be challenging and is predicated on Training School delivering large intakes towards the end of 2011/12.

Early Departure Scheme

45. As indicated, the savings reflected in the 2011/12 budget are dependent on a significant reduction in staff posts. To facilitate this process, the Authority has allowed access to earmarked reserves of £53.2m to support the Service’s early departure scheme. A separate (exempt) paper to this Committee outlines the process to date and estimates that the overall costs of voluntary exits and redundancies for the approved phases will, based on 100% take up, amount to £63m. However, £2.7m of the Phase 1 costs relate to future years and will be managed within existing budgets. In addition, experience indicates that take up will be less than 100% and costs are expected to be managed within £57.2m.

46. In view of the latest estimate of costs (which is still subject to change as assumptions become firmer), members are asked to approve the transfer of a further £4m of existing earmarked reserves to fund the voluntary exit costs, taking the approved reserve funding to £57.2m. The reserves that are to be transferred are £2.8m of funding originally set aside for IT costs relating to Safer Neighbourhoods and £1.2m of funding originally set aside for MetTime. Should there be 100% take up of Phases 2D and 2E, then further funding of £3.1m would be required and will have to be identified. The position will continue to be reviewed and reported to this committee. Staff savings agreed as part of the ongoing 2012-15 budget process are expected to involve more voluntary departures and increasing the requirement for additional funding.

Revenue Forecast - Major Change Programmes

47. Appendix 3 (Exempt) provides a summary of the budgeted savings and the current forecast savings in 2011/12 for the major change programmes together with emerging risks which have not yet been reflected in the forecast. The budgeted savings are those included as part of the 2011-14 budget process plus any savings agreed as part of any previous budget process. The overall position can be summarised as follows:

Table 4 - Revenue Forecast Against Major Change Programmes

* Note: Budgeted savings target has increased by £1m, due to a reclassification of savings from Core TP to TP Development, relating to Public Access.

48. It is inevitable given the scale of reductions required and the timescale for developing the 2011-14 budget that there would be variations on the budget assumptions for these programmes as:

• business cases were developed
•  interdependencies and overlaps between programmes were identified
•  the timetable for delivery was tested

49. Table 4 above shows that there is currently £18.7m of potential under-achievement of savings in the forecast position for 2011/12. In addition to the £18.7m forecast under-achievement, there is a further risk of £9.8m for which explanations are provided in Appendix 3 (Exempt).

50. The following paragraphs provide a more detailed update on the current position of each of the major change programmes.

51. Future monitoring reports will need to assess the impact of Operations Kirkin and Withern on the delivery of these programmes given the significant diversion of resources to support those operations.

52. Rationalisation of property estate (Overall status: Amber)
Good progress has been made on the Corporate Real Estate (CRE) programme over the summer:

• The Finance and Resources Committee gave final approval for the sale of Penrhyn Road (office), Sunbury training centre and Ponders End police station.
•  Wallington police station has been fully vacated and is being marketed for sale.
•  Occupants of Ponders End police station and Old Ilford (offices) have been relocated. Both buildings are now empty and full decommission is underway, due to conclude in mid September.
•  A number of units relocated to Empress State Building, marking the successful conclusion of a major CRE receiving site project. Further moves will take place over coming months, again improving the usage of one of the MPS’ major headquarters buildings.
•  Work has taken place at Euston Traffic Garage that will allow the move of SO15 from Canon Row in early September 2011.
•  Work continues in Property Services in preparation for Hendon Modernisation plans being re-submitted to the MPA in October. On-site at Hendon good progress has been made with buildings 37 and 38 now decanted.

CRE project management, planning and reporting arrangements have been revised, informed by “lessons learned” activity that took place over the summer. New products and ways of working will need to embed over the coming months but are already delivering improvements in the management of CRE:

•  Groups and meetings have been restructured to give a clear focus and purpose, split between strategic and tactical
•  CRE Governance Group and other stakeholders will now receive improved qualitative and quantitative CRE performance information through the new CRE milestone map, highlight report and performance dashboard.

After much scoping work with CRE change leaders, the September CRE Governance Group will assess the position for 2012/13 before presentation to MPS Management Board.

There is a risk of non-achievement of £1.8m where delays could occur due to the dependency on other programmes such as TP Development.

53. Property Services modernisation and contract rationalisation (Overall status: Amber)

This programme continues to achieve savings for reinvestment into front line policing through its review and renegotiation of contracts. Highlights to date are:

•  The collaborative procurement approach to the MPS energy contract which transferred to the Buying Solutions Framework in April of this year. A benchmarking methodology is currently being established to monitor performance following contract go live with efficiencies plotted against the previous energy buying modal, anticipated savings are in the region of £1m.
•  The MPA have recently agreed that further work can be undertaken to review the FM / MPIC contracts with a view to securing savings on existing contracts and introducing fixed management fees. The Facilities Management team will continue to work with suppliers to identify opportunities. So far this financial year, this particular workstream has secured £5.5m savings.
•  Opportunities to enhance the value for money of PFI contracts are being analysed, however achievement of the required savings against target may not be reached hence the amber status of the programme.
•  Efficiencies within the Security Guarding and In-house cleaning workstreams continue to make good progress.
•  MPA approval has been given to various contractual arrangements in regard to the lease for ESB which will achieve further reductions in on-going running costs.

54. Finance and Resources Modernisation 2 (Overall status: Amber)
In June 2010 MPS Corporate Governance Board agreed that the project should aim to reduce Finance costs through integrating finance across the organisation and also charged the project with maximising savings in the Resource function.

On the 13 July 2011, following extensive scoping and preparatory work, the detailed Finance proposals were approved by MPS Management Board. The detailed proposals on the Resources functions are scheduled to be considered by MPS Management Board on 21 September 2011.

The target implementation date is scheduled for January to March 2012.

55. Catering modernisation (Overall status: Green)
Catering modernisation will rationalise operations and drive an improvement in patronage to generate savings. Cobalt Square, Edmonton and Limehouse are next in line to receive fit-for-purpose catering facilities. In addition, work continues to rebrand and improve the facilities at sites across the estate. Review of staffing requirements has led to new staff rosters and identified a need to amend staffing levels. Voluntary early departure has resulted in 91 staff leaving the MPS in quarter one of this year. A further voluntary exit scheme in May 2011 has led to 64 further staff reductions, due to leave by November.

Other projects in progress include introduction of Electric Point of Sale across the estate, Small Unit Solutions, Olympics preparation, Calorific Values on Menus, and achievement of ISO9001 quality standard, these are all due to complete within 2011/12. Operational units have reduced from 80 to 54 so far with a £5m budget saving having been achieved.

56. Training modernisation (Overall status: Green)
Phase two is now underway to embed the Learning Operations model, delivered during phase one, and undertake an independent evidenced based review of specialist training. Review recommendations, going to Management Board in October, will outline the scale of potential efficiencies. The saving plan for 2012/13 is currently being constructed and will include efficiencies from the external training budget (and Corporate Training Budget) as well as further efficiencies from the new model.

57. Transport rationalisation (Overall status: Green)
Work continues on the delivery of Transport modernisation which includes fleet standardisation, procurement, equipping, maintaining and disposing. Progress has been made on Daily vehicle hire which was 524 at the end of July 2011, down from a peak of 1,200 a year ago. Budget centralisation and a new daily hire model should reduce this further. A key challenge for the Fleet review is the ongoing restructuring within some business groups, in particular Territorial Policing.

58. ICT efficiencies and contract rationalisation (Overall status: Amber)
The Lean Programme has been accelerated to maximise the potential for savings this financial year and is on track with the schedule of events. A £6m reduction in revenue budget was planned for this financial year and the voluntary exit process has removed 150 posts from the Directorate of Information. The programme has been delayed by early procurement issues and the voluntary exit/redundancy process which mean that £2.5m of in-year savings are not expected to be achieved for 2011/12. Tracking and reporting mechanisms are in place to maintain close monitoring of progress and savings.

59. Terms and Conditions (Overall status: Amber)
For the last three years (and before the current 3-year pay deal was agreed) management have engaged in talks with the trade unions regarding changes to terms and condition for police staff. Unions throughout this period were willing to discuss options against the backdrop of generous pay rises and buoyant economy. However, changes to the economic environment in which the MPS was working when it proposed these savings has now made it unlikely that the savings will be achieved this year.

Therefore the MPS has agreed to take a take a longer term view, accepting that the current MPS staff pay structure is in need of modernisation, and will pursue in the medium term new approaches to pay, terms and conditions with a view to introducing new terms, perhaps targeted for specific groups, which could generate savings. These savings will be achieved across a mixture of staff groups, including those affected by Major Change Programmes already in place and in new areas to contribute to achievement of reform and savings.

60. Withdrawal of Special Priority Payments to officers (Overall status: Amber)
Full savings of £8m are currently forecast to be achieved. However, there is a risk that there could be a requirement to make Special Priority Payments to officers in 2011 and this is the subject of discussions with the Police Negotiating Board. Final decisions on the payments of SPPs will be subject to further reports to Management Board and the Authority.

61. TP Development (Overall status: Amber)
Six of the projects in the programme have begun to implement, launching early departure schemes for staff and selection processes for police officers, as functions are reorganised on borough and at TPHQ. The programme has developed a business change strategy and tools to work with borough change teams to analyse the impact of each project on Borough and to develop local business change plans. Operation Kirkin has drawn heavily on project and programme resources, resulting in a delay to the programme of approximately one month. The financial impact of revisions to implementation schedules or rescheduling approvals of business cases is being assessed. Operation Kirkin has nevertheless provided opportunities for the programme to bring forward some of the new ways of working and to assess the resilience of the proposed operating model (pan - London services in particular). A custody allocation pod has been established in Lambeth CCC. Other innovations have been trialled, and there is wider acceptance of cultural changes required, including the need for officers to book on and off and be available for deployment. The forecast savings on TP development have reduced by £0.5m since Period 2 (£0.2m relating to Public Access and £0.3m relating to the centralisation of Telephone Investigation) Key risks for the programme are:

• Unrecognised dependencies with other change programmes. This is being mitigated through representation of other programmes on TP Development boards, creation of joint project teams, and agreed processes to identify and assess impacts on boroughs of specific project proposals from other business groups.
• Workforce planning risk. The risk that planned savings cannot be realised if police cannot be posted to vacancies in other parts of MPS (see paragraphs 42 - 43) is partially mitigated by the establishment of workforce planning meetings to tackle this problem.
• MPS terms and conditions may constrain MPS ability to post staff and therefore put at risk planned savings. This is mitigated by work in HR to review future MPS terms and conditions (see paragraph 59).

The underachievement of £6.2m for the Territorial Policing Development programme represents variations against the original planned savings for a number of projects, reasons for which are provided in the notes to Appendix 3. Reports have been considered by the MPS Governance Board which identified the revised profile of savings and these changes which will be reflected in the developing 2012-15 budget. Whilst there is an overall forecast overspend against the total Territorial Policing budget in 2011/12, this is largely due to the current overstrength position within the Business Group and the underachievement on the Development programme is being managed by underspends elsewhere within the TP budget.

Other savings

62. As previously indicated, the 2011/12 budget reflected the delivery of £163m of savings. In addition to the major change programmes the other main savings that are currently forecast to be delivered in full, can be summarised as follows:

• Officer and Staff Pay Freeze (£14.6m)
•  ATOC agreement - tax passed on to officers (£4m)
•  Reduced non-pay budgets in SCD (£3.7m)
•  NSY Rates Rebate (£2.5m)
•  Residential Rent Income (£2m)
•  Reduced Forensics and Intelligence staff (£2m)
•  Additional Income - City Airport (£1m)

In addition, there are the following savings that are currently at risk of delivery:

•  Police Officer Overtime in Territorial Policing (£2.3m) - there is currently a £1.3m overspend forecast within Territorial Policing within police overtime (see paragraphs 20-21) before the effects of Operations Kirkin and Withern. Management intervention could still result in the saving being fully achieved.
•  Reduction in third party legal provision (£2m) - a detailed review of the provision will be undertaken in the near future to establish whether the budget is sufficient given the likely amount of outstanding claims.

Service Improvement Plan Fund

63. Within 2011/12 funding of £39.5m is available to support the Service Improvement Plan. Current estimates of revenue and capital commitments in 2011/12 suggest an overall additional pressure on the available funding of £1.6m. However, the pressure is dependent on all projects achieving full spend in-year which is considered unlikely. At Period 4, £0.3m of funding had been requested by Business Groups. Updates will be provided to members each month.

64. Table 5 shows the approved annual base budget funding for the Service Improvement Plan of £15m plus or minus any carry forward of previous year under/over commitment, and current estimated spend for future years:

Table 5 - Service Improvement Plan funding and estimated spend

Budget Resilience

65. Given the uncertainties relating to the delivery of planned savings, resilience of £25.1m was built into the budget. This provision is being held centrally and not allocated to Business Groups even when budget pressures emerge. Every effort is being made to manage such pressures within existing budgets.

66. As reflected in this report, however, the forecast overspend at year end is £6.2m before account is taken of the budget resilience provision. In addition, as previously indicated, there are a number of other potential pressures to be managed which have not been included in the forecast, i.e.:

• Operations Kirkin and Withern
•  early departures
•  discretionary pension costs
•  change programmes
•  Other Public Order events

67. The Service’s aim remains, if possible, to retain the budget resilience provision in order to support the delivery of major change programmes in 2012/13 and beyond.

68. Budget movements
The MPA/MPS Business Plan was approved by MPA Full Authority on 31 March 2011. Since that time, budget amendments have been made for a number of reasons. Appendix 1 shows the subjective budget movements that have been made since the approval of the original budget submission and the presentation of this report. The major budget movements undertaken since Period 2 are shown below in Table 6

Table 6 - Major budget movements actioned since Period 2

69. Members are asked to approve the following budget virements (permanent budget movements) in excess of £1m:

• Within Territorial Policing, a movement of £5m from Police Officer Pay and £1.1m from Traffic Warden Pay to Supplies and Services (£2.6m), PCSO Pay (£2.5m) and Police Officer Overtime (£1m) to realign the Safer Transport Command budget load to reflect current expenditure expectations following finalisation of the new operating model with Transport for London and agreement to the proposed transition arrangements.
• Within Territorial Policing, a movement of £1.1m from Police Officer Pay to Supplies and Services. This relates to a transfer of funding to the Multi-Agency Safeguarding Hub (MASH) initiative (see paragraph 36).

70. In addition, members are asked to note the following budget virements which were approved by Management Board in Period 3:

• Within the Specialist Crime Directorate, a movement of £287k: from Supplies and Services to Police Officer Pay (£40k), Employee Expenditure (£129k), Business Group Income (£107k) and Police Staff Pay (£11k). This is to support the required structure of the Ecrime unit.
• Within Human Resources (relating to Leadership & Learning which is now part of Deputy Commissioner’s Command), a movement from Supplies and Services (£289k) to Police Officer Overtime (£173k), Corporate Supplies and Services (£64k), Police Staff Overtime (£33k), Transport Costs (£13k) and Premises Costs (£6k) for costs relating to the Developing Training Programme.

71. Movements in Reserves

Following approval of transfers to reserves at the MPA F&RC meeting on 23 June, the opening balance on MPS reserves for 2011/12 is £269.6m. The reserve movements undertaken since Period 2 are shown below in Table 7.

Table 7 – Reserve movements carried out since Period 2

Capital Monitoring overview

72. This report is based on the revised Capital Programme 2011/12 gross budget of £227.2m. Over-programming of £40.9m has been allowed for giving a net funded budget of £186.3m as agreed by Finance & Resources Committee on 22nd July 2011.

Period 4 (as at end of July 2011) - Summary Position (Appendix 4)

73. Year-to-date expenditure is £45.6m, representing 24.5% of the 2011/12 net programme budget of £186.3m. The comparable expenditure in July 2010 (period 4) was £16.1m or 8.6% of the programme budget. This also marks an increase in the reported rate of capital expenditure compared to the previous two months. Actual expenditure, commitment and forecast is monitored throughout the financial year to ensure the outturn is contained within available capital funding.

The overall forecast outturn is £186.3m

74. Appendix 4 gives a more detailed report by provisioning department of capital budgets; expenditure and forecasting.

Period 4 Provisioning Department / Business Group Analysis

75. Property Based Programme - forecast of £95.3m, a net outturn forecast under-spend of £0.2m - 0.2% of Programme Budget

Whilst the net forecast change is minimal, there are a number of significant movements in the month.

The main reductions are:

• Corporate Real Estate; a delay in confirming business group occupancy (£1.8m)
•  Hendon; rationalisation has been held up due to a delay in planning approvals (£3.4m)

The main increases are:

• New Scotland Yard operational facilities now includes additional statutory air conditioning requirements (£0.6m)
•  Climate Change action plan; additional sites are possible (£0.5m)
•  Lambeth HQ/Forensic Science Service now includes the need to upgrade switchgear (£0.5m)

76. Information Based Programme - a forecast of £90.9m representing an outturn forecast under-spend of £19.5m -17.6% of the programme budget, the same forecast performance as last month. The Directorate of Information component of the budget will need to be reset at the Q2 review to recognise some permanent changes in the 2011/12 portfolio;

The main under spends are:

•  Cancellation of the Improving Police Information (IPI) project (£5.2m)
• Messaging Programme is adopting a revenue charging solution (£10.4m)
•  Identity and Access Management project has been de-scoped and rephrased (£1.4m)
•  C3i Residuals project is reflecting works funded from C3i (£4.8m)
•  Bibliograhical Retrieval System is seeking funding confirmation (£1.0m)
•  Command & Control Futures project has been re-profiled following approved business case (£1.1m)

The above is offset by forecast overspends within:

•  Transforming HR contractual settlement value, which is to be funded from revenue reserves (£4.6m)
•  Pyxis project; the scope is increasing with a project review aiming to refocus and recover (£1.8m)
•  Corporate Print Management is accelerating delivery, bringing forward expenditure from 2012/13 (£1.3m)

As previously reported, the review of staffing levels and the voluntary exit programme are being managed to protect the 2011/12 programme capacity.

77. Transport Based Expenditure - an outturn forecast over-spend of £3.9m, 18.4% of Programme Budget

This is mainly due to the purchase of vehicles from partnership funding arrangements such as British Airports Authority (BAA) and counter terrorism operations. These purchases are fully funded and the Quarter 2 budget review will reflect the increased funds available.

78. Other Programme - an outturn forecast of £815k, an overspend of £473k (138% of programme budget).

This is due to the late notification of a counter terrorism funded project. The budget will be adjusted as part of the Quarter 2 review.

79. Olympics/Paralympics - an outturn forecast under-spend of £0.2m (2.9% of programme budget).

The Olympics/Paralympics Programme is funded by specific grant and each project is subject to Home Office approval following the submission of individual business cases.

80. Counter terrorism /ACPO Projects - an outturn forecast under-spend of £0.8m (7% of programme budget)

The counter terrorism/ACPO Programme is funded by specific grant and monitoring is often skewed by late notification of Home Office approvals.

81. TP Development

TP Development is a collection of projects from across the capital programme and therefore does not have its own programme budget. These projects form part of the wider TP Development change programme across the MPS borough policing network. Major projects include C3i, the Custody Improvement Programme, TP Development Criminal Recording Investigation Bureau , Mobile Data Terminal Replacement and the Virtual Courts Project.

82. Service Improvement Programme Funded

This is a group of projects funded by the Service Improvement Programme Fund which aims to increase productivity across the MPS. The group includes the Developing Resource Management projects, the Language Programme and the Corporate Print Management Solution.

C. Other organisational and community implications

Equality and Diversity Impact

1. Equality Impact Assessments are completed on business group activities undertaken where there is deemed to be an impact. The equality and diversity implications are identified in business cases and reports on individual proposals through our normal decision making process.

Consideration of MET Forward

2. Met Forward recognises that the MPS has to make challenging financial decisions whilst minimising the impact on front line policing. This report outlines the current financial position against the budget approved by the Authority (Policing London Business Plan, 2011-14).

Financial implications

3. The financial implications are those set out in this report.

Legal implications

4. Any legal issues arising in respect of MPS early departure programme and the Riot Damages Act will be dealt with through DLS as appropriate. There are no further legal issues arising. This report provides financial management information relating to the capital programme, which is delegated on a day to day basis to the Director of Resources on behalf of the Commissioner.

The report recommends Members note the budget virements approved by the MPS and also seeks approval from the MPA for two budget virements. The Financial Regulations (Part E of the MPA’s Standing Orders) confirms the Commissioner may commit expenditure or vire between budget headings within the overall approved budget to meet the policies and objectives agreed with the Authority, and that the MPA Finance Committee shall approve all budgets virements over £1m. Virements between £0.1m and £1m will be reported to Members through the budget monitoring mechanism. On the basis of the above, Members may approve the recommendations set out in the report.

Environmental implications

5. There are none specific to this report.

Risk Implications

6. Risk management is integrated into the Service’s budget, business planning and performance management processes. Business Groups and Management Board monitor risks on a regular basis. This report sets out the financial risks and pressures currently being managed by the Service.

D. Background papers

Policing London 2011-14 Budget & Business Plan

E. Contact details

Report authors: Nick Rogers, Director of Finance Services, MPS

For more information contact:

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

Appendices

• Appendix 1 - Summary of MPS revenue expenditure and budget movements
• Appendix 2 - Subjective Analysis of revenue expenditure by Business Group
• Appendix 3 - Summary of Revenue Forecast against Major Change Programmes at Period 4 (Exempt)
• Appendix 4 - Summary of Capital expenditure and funding against budget

Send an e-mail linking to this page

Feedback