Budget process

Report: 8
Date: 14 June 2001
By: Treasurer

Summary

The Mayor has provided information on the proposed process for developing the 2002/03 budget. There is an immediate requirement to submit medium term financial forecasts and it is proposed that these be approved by the Finance Planning and Best Value Committee.

A. Recommendations

1. That the Authority note the budget process for 2002/03 proposed by the Mayor and request the Finance Planning and Best Value Committee to assess its implications.
2. That the Authority agree that the Finance Planning and Best Value Committee approve the MPA's medium term financial forecasts for submission to the Mayor.

B. Supporting information

Introduction

1. The Mayor has written to the Chair of the MPA formally commencing the budget process for 2002/03. The Mayor's letter see Appendix 1 together with the accompanying paper setting out the detailed process proposed.

Overall process

2. The timetable for the budget process is set out in Annex C of the GLA paper. Key milestones are as follows:

• MPA to submit initial three year forecast in mid-June;
• Mayor to issue budget guidance, late June;
• MPA to submit detailed budget by 26 October 2001;
• MPA to refine budget submission by early December;
• MPA to confirm estimates in mid January after consultation and before Mayor submits draft budget to the Assembly;
• Mayor/Assembly approve budget mid-February.

3. It is proposed that the Finance, Planning and Best Value Committee should consider the implications of this timetable and agree a plan for providing the information as required. In practice the requirement for a detailed budget submission by the end of October will be challenging and the Committee will need to consider how that can be met and whether further clarification should be sought from the Mayor as to what is expected at that stage and the degree of flexibility in the remainder of the process.

Medium term financial forecast

4. The immediate requirement is to provide a medium term financial forecast by mid June to inform the Mayor's decision on budget guidance for 2002/03.

5. The budget is intended to reflect the Mayor's priorities. His overriding aim is 'to deliver improvements in the quality of public services (including securing efficiency savings to be reinvested in front line services).' Specifically this means the 'MPA increasing the overall number of police officers and the number engaged on front line crime fighting services, continuing the investment in crime fighting technologies and greater managerial efficiency.'

6. In order to achieve integration of the business planning, best value and budget processes a longer term planning process is required. The intention is therefore to prepare a financial forecast for the GLA group covering the three years 2002/03 to 2004/05. This forecast will reflect among other things:

• new obligations, Mayor's priorities and other service changes;
• demand for services;
• scope for efficiency savings from best value and other reviews (eg 3 year MPS efficiency and effectiveness review);
• expected government grants;
• council tax levels.

7. The forecasts will provide a basis for deciding on a strategy to deal with future financial issues and that strategy will be reflected in the detailed budget guidance that will be issued to the MPA and other functional bodies for the preparation of 2002/03 budget submissions. The forecasts will be maintained on a rolling three-year basis.

Proposed response

8. It has not proved possible to finalise the forecasts for presentation to this meeting of the Authority. The Authority is therefore asked to agree that the Finance, Planning and Best Value Committee approve the MPA's submission to the Mayor at its next meeting on 19 June 2001.

9. The Committee has already considered an initial report on medium term financial projections for the period 2001/06 at its April meeting. The Committee agreed a number of issues that should be reflected in the eventual submission to the Mayor. Accordingly the proposed submission, which will cover the three years 2002/03 to 2004/05, will include the following items:

• pay and price inflation;
• committed changes, including the full year cost of additional officers approved in the 2001/02 budget, the increasing cost of the London pay lead and other pay-related commitments, pensions growth, PFI-related costs, C3i, backlog maintenance and revenue implications of capital expenditure;
• cashable efficiency savings;
• developments, including a further increase in the number of police officers to 28,000 by 31 March 2004, the cost of implementing the Hay review of civil staff pay, creation of adequate reserves, and other priority developments.

10. Given the timing of the submission, particularly before lessons can be learned from a detailed review of last year's outturn, a substantial reservation will have to be placed on the submission. The forecasts will need to be revised on a regular basis and the detailed budget proposals for 2002/03 may differ significantly from the requirements identified at this stage.

11. Forecasts of government funding for the three year period will be made based on the Government's published plans to 2004, with an extrapolation for the final year. Assumptions will have to be made about special grants drawing on the latest available information. The risks in relation to the MPA's allocation of government grant will be spelt out.

12. The submission will indicate the resulting precept implications.

C. Financial implications

The implications of the medium term financial forecasts and the subsequent budget proposals will be considered by the Authority during the coming year.

D. Background papers

None.

E. Contact details

The author of this report is Peter Martin.

For information contact:

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

Appendix 1: Mayor's letter - GLA Group Budget Process 2002/03 and accompanying paper setting out the detailed process proposed

Available from the MPA.

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