Overall financial position 2001/02

Report: Supplementary b
Date: 25 October 2001
By: Treasurer

Summary

The report sets out arrangements for managing current pressures on the Authority's financial resources.

A. Recommendations

That the Authority:

1. Note that the actions proposed by the Commissioner in his separate report will free up the general reserve to provide contingency funding for the exceptional security expenditure pending the Government's decision on special funding; and
2. Agree that the MPA contingency be frozen in 2001/02 to provide further cover against the security expenditure.

B. Supporting information

Introduction

1. This report reviews the Authority's overall financial position for 2001/02 in the light of the management of the approved budget and the continuing unbudgeted costs arising from the current counter terrorism activity.

Management of the current year's budget

2. The Commissioner has reported separately on the latest forecast of expenditure against the approved budget for 2001/02 and the steps being taken to bring expenditure back within budget.

3. The potential overspending of £13-£14 million was of major significance because, without corrective action, it would have exhausted the Authority's general reserve which currently stands in the balance sheet at £13.5 million.

4. I have reviewed the work behind the revised forecast, which represents a corporate review of the latest forecasts reported to Finance Planning and Best Value Committee, and am satisfied that it is sufficiently robust to provide an appropriate basis for defining the need for recovery action to bring expenditure back to budget. However it must be appreciated that detailed forecasting is an ongoing process and further revised figures will be available shortly. Inevitably there will be further movement in the overall forecast.

5. I have also been briefed on the corrective action proposed by the Commissioner and am satisfied that it has the potential to bring final expenditure close to budget.

6. The Commissioner has agreed that I will in future attend the weekly budget review meetings (the 'star chamber') chaired by the Director of Resources so that I am fully informed on progress in achieving the recovery plan. The Chair of the MPA will also receive a weekly briefing.

Security expenditure

7. The forecasts of expenditure against budget do not include the effect of the exceptional security measures following the terrorist attacks in the USA on 11 September. The cost of those measures is running at approximately £1 million per week. By the time of the Authority meeting it will therefore have reached £6 million with costs continuing to accrue at a similar rate for at least the immediate future.

8. Representations have been made by the Chair of the Authority, supported by the Commissioner, to the Home Secretary for special funding for these exceptional costs arising from national requirements. Discussions are continuing at official level, but it is unlikely that we will receive a firm commitment before the Chancellor of the Exchequer makes his pre-Budget statement in November. At this stage there is no certainty about the extent to which the exceptional costs will be covered by special funding.

9. It is essential that the Authority should have resources available to meet some, or in the worst case all, of the security costs depending on the eventual decision by the Government. Given the position on the management of the budget generally there is no prospect of absorbing these costs through underspendings. Assuming that the Commissioner's plans to control expenditure are successful the general reserve will be available. It is proposed that the reserve be further supported by freezing the MPA contingency (£4 million) in 2001/02. This would provide some £17 million against the exceptional costs which ensures cover until the Chancellor's statement. The position will have to be reviewed in the light of the Government's announcement.

C Financial implications

As set out in the report.

D. Background papers

None.

E. Contact details

The author of this report is Peter Martin, MPA.

For information contact:

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

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