2002/03 revenue budget - supplementary

Supplementary Report: 07b
Date: 28 February 2002
By: Treasurer

Summary

The report supplements the main report on the 2002/03 revenue budget on the Committee's agenda by addressing the implications of the motion passed by the GLA Assembly after the approval of the Mayor's budget proposals.

A. Recommendations

The Committee is recommended:

1. to note the motion passed by the GLA Assembly;
2. to agree that the motion does not identify further options for budget holdback;
3. to agree that the balance of the savings on the civil staff pensions budget, as reported to the last meeting of the Committee, be retained by the Authority;
4. to agree that the proposals for holdback in the main report, together with other proposals to strengthen budgetary control, represent an adequate safeguard against potential overspending without undermining budget delivery; and
5. to agree that these conclusions are reported to the full Authority meeting on 28 February 2002.

B. Supporting information

Introduction

1. The main report circulated with the agenda informs the Committee of the motion passed by the GLA Assembly following approval of the Mayor's proposed budget for 2002/03 (paragraph 17). The relevant portion is reproduced below:

'To request the Metropolitan Police Authority to withhold from the total sum delegated to the Metropolitan Police Service at the start of the next financial year a substantial sum to mark concern that the MPS make significant progress towards financial efficiency and effectiveness, having particular regard to the centrally held budgets (which include provision for new initiatives, savings and inflation not yet allocated); to the budget item for additional officers (pending its becoming clear whether the planned number of officers can be recruited); and to the general reserve.'

2. This supplementary report sets out a suggested response.

General comments

3. The Assembly's motion is advisory only since it remains the MPA's responsibility to secure proper financial management of the Metropolitan Police Service and to manage the budget once it has been approved. The Authority's policy is to delegate day-to-day responsibility for managing the budget to the Commissioner. However the Authority has already agreed that a proportion of the budget for 2002/03 will be held back from delegation initially as a safeguard against potential overspending. This position is set out in the main report (paragraphs 14-15).

4. The motion effectively proposes that the Authority review that approach and identifies three areas for consideration: centrally held budgets, provision for additional officers, and the general reserve. These are addressed in turn in the following paragraphs.

Centrally held budgets

5. The line 'centrally held budgets' is essentially a means of retaining budgets temporarily before they can be allocated to specific budget holders. The amount in this line will change over time; in particular it will decrease as individual items are allocated. The presentation in the Mayor's budget reflected the position at the beginning of January when a sum of £110.2 million was still 'held centrally'. Over half of this has now been allocated so that the 'centrally held budgets' at present amount to just £34.6 million.

6. The reduced sum includes the balance of the provision for additional police officers (£17.2 million) after allocating sufficient to support the increased officer numbers required to implement the revised resource allocation formula (RAF) (see paragraph 5 of the main report). The Assembly motion itemises the provision for additional officers separately so that the remaining 'centrally held budgets' relevant to the motion actually amount to £17.5 million only. This comprises three items:

7. The additional cost next year of the Hay award is already committed. The inflation allowance will depend on contractual requirements. 20% of the police overtime growth has already been held back in the proposals in paragraph 14 of the main report. In practice there is nothing left in this budget line which would sensibly be held back. Most of the £10 million holdback set out in the main report was included in the 'centrally held budgets' at the time that the Mayor's budget report was prepared.

Provision for additional officers

8. Provision for new officers, in excess of that required to implement the revised (RAF), will be retained until the Government decides the future funding for counter-terrorism. An assessment will then be made of the numbers which can practically be recruited against the budget provision for new officers. The balance of the provision will be placed in a reserve for officer recruitment in 2003/04 in accordance with the requirements of the Mayor. This would appear to conform with the suggestion in the motion in this regard.

General reserve

9. There is no question of the general reserve being delegated to the MPS. On the basis of the current monitoring this should be at least £17.5 million at the start of the budget year and will be retained at the authority's discretion.

Further steps

10. In relation to the Assembly motion the policy on virement is also relevant. Budget virement rules have been set such that any flexibility in excess of £1 million will be subject to MPA approval and any amount over £0.5 million will have to be notified to the Treasurer so that the Authority could intervene at that level.

11. It is also proposed that the budget reduction against civil staff pension costs (net £3.6 million) as reported to the last meeting of the Committee should be retained at the Authority's discretion to support budget management and/or add to reserves. This saving has arisen from the Authority's policy decision in relation to the funding of pensions.

Conclusion

12. An examination of the specific areas of the budget identified in the Assembly motion does not suggest further obvious options for budget holdback. In the context of the other steps set out in the main report to strengthen budgetary control, it is suggested that a £10 million holdback, together with £3.6 million in respect of civil staff pension costs and an improving general reserve position, is adequate to provide a safeguard against potential overspending without undermining budget delivery.

C. Financial implications

As set out in the report.

D. Background papers

None.

E. Contact details

Report author: Peter Martin, MPA.

For information contact:

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

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