2004/05 budget

Report: 8
Date: 9 December 2003
By: Treasurer and Commissioner

Summary

The report provides an update on the provisional grant settlement for 2004/05 and presents an amended budget position reflecting this and revised estimates of costs of the Step Change programme. A response to the consultation on the settlement is proposed. A letter from the Mayor is attached and a supplementary report will be circulated addressing the matters raised.

A significant amendment to the medium term financial projections is proposed to reflect the notified increase in employers’ contributions to the civil service pension scheme. In view of the medium term position on expenditure and grant members are asked to agree that no budgetary commitment should be given to the Step Change programme beyond 2004/05 at this stage.

The key elements of the new prudential system for capital finance are outlined; prudential indicators will be presented for approval in the supplementary report.

Issues relating to potential council tax capping are also discussed.

A. Recommendations

Members are asked to:

1. Note the provisional grant settlement, including issues still requiring clarification, and agree the points to be addressed in response to the consultation.
2. Note the revised Step Change costs already reported to Finance Committee.
3. Note the amended budget position following the grant settlement and revisions to Step Change costs.
4. Note that a supplementary report will address the matters raised in the letter from the Mayor.
5. Agree amendments to the medium term financial projections to reflect increased employers pension contributions in respect of police staff.
6. Agree that no budgetary commitment should be given to the Step Change programme beyond 2004/05 subject to full review in advance of decisions on the 2005/06 budget.
7. Note that prudential indicators will be included for approval in the supplementary report.
8. Note the advice on the adequacy of reserves.
9. Note the advice on issues relating to capping.

B. Supporting information

Introduction

1. The Authority approved the budget submission for 2004/05 at its meeting on 30 October 2003. The submission was delivered to the Mayor by the deadline of 10 November.

Submission summary

2. The submission included Step Change proposals separately from the rest of the draft budget. The following table summarises the submission and shows the effect of incorporating the Step Change programme on the basis of providing three community-based teams per borough in 2004/05.

3. The expenditure increase of 6.4% is analysed as follows.

Subsequent developments

4. A number of developments have taken place since the submission was made which have an impact on the final budget draft. These include:

• The announcement of the provisional grant settlement for 2004/05.
• Completion of a review of the projected Step Change costs.
• A meeting with the Mayor to review the budget submission.
• Receipt of information about police staff pension costs from April 2005.

5. In addition we need to meet, as part of the budget process, new legislative requirements, which have only recently been clarified. These relate to the introduction of the prudential system for capital finance and a statutory requirement for the ‘chief finance officer’ to advise on the robustness of the estimates and the adequacy of the reserves.

Provisional grant settlement 2004/05

6. The provisional local government finance settlement for 2004/05 was announced on Wednesday 19 November 2003. This includes grant details for police authorities.

National position

7. Nationally total police resources are to rise by 4.2% next year. This compares with earlier statements that there would be an increase of at least 4% in 2004/05. In the ministerial statement accompanying the police settlement the Government has provided the following analysis of the national provision.

Police funding settlement for 2004/05 compared to 2003/04

8. It is immediately apparent that the proportion of specific grant funding has reduced. This is consistent with the ministerial statement that the Government has ‘transferred into general police grant provision amounting to £100m from existing and planned specific grants and central spending.’

MPA allocation

9. The attached Appendix A shows the latest assessment of the grant allocations to the MPA comparing in particular with the estimates included in the draft budget submitted to the Mayor. Figures in bold represent firm notifications, those in italics revised estimates based on national information only. The following paragraphs set out the detail as far as it is known at this stage.

General grant distribution

10. The ministerial statement says: ‘I have decided, exceptionally this year, to provide a standard general grant increase of 3.25% for each police authority in England and Wales.’

11. This is not strictly accurate. In fact, within the grant distribution model, the Government has set a floor of 3.25%. This means that no authority will receive less than a 3.25% increase next year. It also happens to be the level at which virtually, but not quite, all the gains above 3.25% are required to finance the floor. The result is a very narrow range of grant increases between 3.25%, for a number of authorities, and 3.35% (West Midlands). The MPA’s increase is 3.3%. The special payment, which is supposed to reflect the Metropolitan Police’s national and capital city functions, has been increased from £202 million to £207 million (an increase of just 2.5%) but this is subsumed within the general grant increase of 3.3%.

12. Within the general grant allocation there is reportedly an increase of 257 in the number of dedicated security posts in the MPS ‘taken into account’ in the formula. However the implied unit cost has been reduced and in any case the operation of the formula has been completely negated by the way in which the floor has been applied. In short there is no additional funding for the additional posts and, in effect, funding for the existing posts has not been fully provided by the Government in the proposed grant distribution. This will need to be considered when final decisions on the deployment of police officers are made.

13. The draft budget as submitted to the Mayor assumed that the formula distribution would be limited by a ceiling of 3.5%. The settlement provides an overall general grant entitlement of £1,822.25 million, a reduction of £2.5 million on our previous estimate.

14. If the grant formula had been allowed to operate unchecked the MPA would have received a further £56 million. In effect this sum has instead been distributed to other police authorities to help keep their council tax increases down.

Specific grants

15. The relatively small adverse variance in the MPA’s general grant entitlement is compounded by reductions in a number of specific grants largely resulting from the transfer from specific to general grants referred to in the ministerial statement. The increase in general grant is therefore deceptive to the extent that it has to be used to fund costs for which we were legitimately expecting specific grant.

16. Full details on all specific grants are still not available. Some grants reflect the continuation of existing arrangements which we do not expect to change and they are therefore retained at the submission estimate in Appendix A. These are loan charges grant, pay lead grant and free rail travel. The following paragraphs set out the latest position on the remaining specific grants.

Crime Fighting Fund (CFF)

17. We have been notified of our allocation of CFF funding in 2004/05 (£72.98 million). There is no provision for any additional officers in 2004/05 and the level of support for the additional officers funded in 2003/04 has been reduced from 75% to 60%. The 2004/05 allocation is £1.3 million less than we had previously estimated.

DNA expansion programme grant

18. National provision has been maintained and we have no reason to change our current estimate at this stage. Any significant reduction would have to be matched by reduced expenditure.

Airwave grant

19. The national provision has reduced from £58 million in 2003/04 to just £6.6 million in 2004/05. Virtually the whole of this grant has been incorporated into general police grant. Our original estimates assumed an allocation of £6.7 million. It is unlikely that we would get any allocation from the reduced national provision.

20. It is believed that this grant was effectively eliminated on the misunderstanding that the associated Airwave expenditure was not committed. In fact this expenditure, across all forces, is a necessary addition to the core service (which is funded directly by a top-slice of national police resources) in order to secure acceptable coverage and functionality from the new radio service to which all police authorities are contractually committed. Reducing expenditure to match the reduced funding is therefore not an option. The APA has protested to the Home Office which is apparently reviewing its decision but at this stage the revised position in Appendix A assumes no specific funding from this source.

Counter terrorism grant

21. Nationally provision has increased from £59 million to £65.5 million. The MPA receives the lion’s share of this funding. If we receive the same proportion as in 2003/04 our entitlement would be £52.2 million. This is £5.2 million more than assumed in the draft budget. We cannot rule out the possibility that there may be some requirement to incur specific additional expenditure.

PCSOs

22. There is specific information in the settlement that the MPA will receive £15 million grant funding for PCSOs in 2004/05. This is £1.25 million less than previously assumed.

Police reform

23. This grant relates specifically to special priority payments. Home Office sources have confirmed verbally that the specific funding has not been increased as much as had been expected. Assuming a same proportionate share of the national total produces an estimated allocation which is nearly £2.9 million lower than our original estimate. It is assumed that the PNB agreement remains unchanged so that expenditure could not be reduced to offset the reduction in grant.

Street crime

24. There is confirmation that there will be continuing specific funding for street crime initiatives. The draft budget excluded both expenditure and grant for this purpose. It is assumed that a similar amount of expenditure would have to be added to the budget to match whatever the grant allocation proves to be.

Basic command units

25. This grant is to continue. It is excluded from the attached assessment because the funding should be associated with specific partnership-related expenditure.

Overall grant position

26. Appendix A shows that the latest estimate of government grants is about £9.5 million lower than the figure included in the budget submission. The key remaining risk around the grant figure relates to counter terrorism grant since there is no confirmation of the potential increase. It is also possible that some Airwave grant might reappear following the Home Office review referred to above.

27. The provisional settlement is subject to consultation, which closes on 2 January 2004, and the Authority will want to input its views to the Home Office and ODPM. It is suggested that the response should cover the following points:

• Regretting the decision effectively to suspend the needs-based allocation formula thereby depriving London council taxpayers the benefit of £56 million grant.
• Pointing out that the headline grant allocations are undermined by the decisions taken to reduce specific grants.
• In particular, subject to the outcome of the Home Office review, deploring the decision to eliminate Airwave grant funding beyond the core service.
• Complaining at the tardiness with which significant detailed information on specific grants is provided.
• Dependent on the information eventually made available, regretting that the counter terrorism grant does not recognise increased requirements.
• Pointing out that, in the context of the overall settlement, it will not be possible to fund additional dedicated security posts even though these are nominally ‘taken into account’ in the grant settlement formula.

Revised Step Change costs

28. The executive summary of the Step Change programme business case was included with the budget submission. The submission focused on the option which would introduce three community-based teams in each borough in 2004/05 with the full programme following over the next three years.

29. A major review of the estimated costs of the Step Change programme has been carried out and reported to the Finance Committee. Appendix B sets out the revised costs.

30. The ongoing cost of the total programme is now estimated to be £341.4 million by 2010/11. This represents a reduction of £27.2 million on the previous estimate arising from revised inflation assumptions, amended assumptions on capital requirements, and more accurate quantification of infrastructure costs.

31. The total revenue costs of implementing Step Change in 2004/05 have been reduced by £5.3 million to £26.6 million. This largely results from a clearer view of the support requirements associated with the actual roll-out planned for 2004/05.

Amended budget position

32. The impact on the overall budget of the grant settlement and the revised Step Change costs is reflected in the following table.

33. The favourable movement in the Step Change costs has been more than offset by the deterioration in the grant position resulting in an increase in the projected precept to 20.8%.

Meeting with the Mayor

34. A further Budget Steering Group took place with the Mayor on 24 November at which the latest budget position was considered. The Mayor indicated that he wanted further reductions in the budget in order to reduce the precept. His proposals are set out in the attached letter (Appendix C) which was received in the afternoon of Friday 28 November. A further report will be circulated before the Authority meeting addressing the mayor’s proposals.

35. In advance of considering possible areas where the budget might be reduced it is worth reminding members of a number of features of the budget as currently drafted which limit the room for manoeuvre.

• Efficiency and other savings of £56.8 million are already reflected in the draft budget. This means that cumulative budget savings over four years now total £161 million. Non cash releasing efficiency savings of £69 million have also been incorporated in annual efficiency plans over the last three years. This therefore represents £230 million of efficiency gains and other savings over a four year period.
• The cash savings have largely been achieved against a ‘reducible’ budget, excluding police officer pay, pensions and contractual payments, representing just 30% of the total budget. The cumulative budget savings represent some 25% of the reducible budget. The scope for savings is further constrained since half of this reducible budget is accounted for by civil staff pay costs where there is a strong reluctance to make savings which may adversely impact on the availability of police officers for operational duties.
• In putting forward the budget submission the Authority agreed that further significant savings could not be achieved without reductions in police officer numbers and support staff and consequential adverse impacts on operational effectiveness.
• The budget submission includes additional income of £10.6 million following a detailed review of income sources and actual income received in 2002/03, a comparison with budgets and outturn forecasts for 2003/04 and potential new sources of income. The additional income includes increased operational receipts, investment income, recharges to other forces and the Immigration Service, and charges to recruits for laundry and cleaning. A further review of 2003/04 outturn forecasts is currently being carried out to identify if there are movements from the previous position.
• Growth bids originally identified by MPS business groups have been through a rigorous scrutiny process resulting in items to a value of over £40 million being rejected or deferred. Many of these pressures will remain and will need to be addressed in due course but were not felt to be affordable in 2004/05.
• The draft budget is already relying on the use of managed underspends in the current year and surplus monies identified in the reserves to fund one off expenditure in order to limit the demand on the precept.
• The scope of the Step Change programme has been substantially restricted in the first year. Further emasculation would question the value of implementation at all next year.
• Pay inflation provision has been tightened leaving a risk of overspending if, in the event, our assumption is exceeded. Each 0.25% by which the level of actual awards exceeded the budget assumption would add around £2.5 million to our costs in 2004/05.

36. The Mayor’s letter proposes a police budget requirement for 2004/05 of £2,334.3 million. This compares with the budget requirement for the amended budget of £2,358.2 million (see paragraph 32) and therefore represents a further budget reduction of £23.9 million. To achieve the Mayor’s proposed budget we would therefore have to incorporate all the changes set out in paragraph 3 of the letter, totalling £24 million.

37. The letter implies that we could defer £10.5 million of ‘commitments’. This can only be based on a misunderstanding of the commitments. Commitments are not simply contractual obligations. They may for example include developments that are essential for and committed by changes already taking place. Thus the ‘modernising operations’ referred to in the letter is essential if C3i is to be implemented effectively in boroughs. All the items listed will be examined and the reasons why they are committed will be spelt out in the supplementary report.

38. Equally whilst new initiatives are not, by definition, commitments they may be responding to pressures that cannot otherwise be accommodated. Again the rationale and importance of each item will be set out in the supplementary report.

39. Reference has already been made at paragraph 35 above to the further review of income in the current year and the results of this will be reported in the supplementary paper.

40. Finally members are aware of the current dialogue with the MPS on police overtime. A further update has been provided by the MPS to the Finance Committee since the submission was approved by the Authority and advice, in the light of this, will be offered through the supplementary report.

41. There will undoubtedly be some options which members will be able to agree. However it is most unlikely that these will come anywhere near the required total of £24 million. Indeed MPA members may conclude that if the Mayor insists on reducing the budget to that extent the only viable option is to defer Step Change completely until 2005/06, thus reducing next year’s budget by £26.6 million.

42. The Mayor’s letter will also be considered in the context of the risk of capping discussed at paragraphs 63-72 below.

Pension costs

43. Notification has recently been received that the rates of employers contributions to the principal civil service pension scheme (PCSPS) which covers police staff, PCSOs and traffic wardens will increase from 1 April 2005. This will therefore affect the second and subsequent years of the medium term financial plan.

44. If the existing valuation methodology were retained contribution rates would broadly double. A substantial element of this increase would reflect poor performance of equity investments. However the Treasury has agreed with the Cabinet Office (who administer the scheme) that it is appropriate to move to a valuation methodology which is based on a long term discount rate rather than seeking to replicate conventional pension fund investment policies. This has the effect of locking into a long term contribution rate which will not be affected by the volatility of investment markets. The resulting stability is bought at the price of foregoing future benefits of above average investment performance.

45. The change in methodology still produces a significant increase in contribution rates because at present employers in the civil service scheme are still enjoying reduced rates reflecting good investment performance in the past. There will be an average increase across the whole scheme of 46%, with the average employers contribution rate rising from 13.3% to 19.4% of pensionable pay of current employees.

46. In broad terms, and taking account of the effect of the significant growth in police staff numbers over the next few years arising from the implementation of C3i and the proposed Step Change programme it is estimated that the proposed increase in contribution rates could add around £27 million to our costs in 2005/06, rising by a further £7 million in 2006/07 and £8 million in 2007/08.

47. The medium term financial projections for 2005/06 onwards need to be amended to reflect this change. The Home Office has also been approached to emphasise our concern that this increase is properly reflected in SR2004 and ultimately in our grant entitlement.

Medium term projection

48. The medium term financial projections (excluding Step Change) were summarised at paragraph 57 of Part 3 of the budget submission. Incorporating the increase in pension contributions reported above produces the following revised figures.

49. At present these figures do not assume further savings beyond those reflected in 2004/05. The projected increases will therefore be mitigated to the extent that savings can be delivered in future years. Especially in view of the current settlement future years’ grant prospects are problematical. It is therefore likely that a significant proportion of the projected expenditure increase would have to be met from the council tax precept.

50. The estimated costs of the Step Change programme would add a further 3.4% to the growth in 2005/06 with similar increases in the next two years. Although a case will be made to the Home Office for grant support to the programme there is no indication at this stage that such an approach will be successful. Given the scale of the potential increase in budget from 2005/06 without Step Change, and the uncertainties around grant funding, no budgetary commitment can be given to the Step Change programme beyond 2004/05. There will need to be a continuing review of the programme’s objectives and costs during the coming year, when grant prospects should also be clarified as a result of SR2004, in the light of initial experience and in advance of budget decisions in twelve months time.

Prudential system for capital finance

51. From 1 April 2004 the current centralised and highly regulated control system for local authority capital finance will be replaced by a prudential system of self regulation. Government prescription of local authorities’ borrowing will be abolished. Authorities will be able to borrow on the basis of need and affordability which they will have to demonstrate through compliance with the Prudential Code developed by CIPFA (the Chartered Institute of Public Finance and Accountancy) and given statutory force by government regulation.

52. The key objectives of the Prudential Code are to ensure that the capital investment plans of the authority are affordable, prudent and sustainable, as well as being consistent with and supporting local strategic planning, local asset management planning and proper option appraisal. To demonstrate that authorities have had regard to these objectives, the Prudential Code sets out 14 indicators that must be considered covering 5 distinct areas – affordability, capital expenditure, prudence, external debt and treasury management. The indicators must be approved through the budget process before 1 April each year, but can be revised during the year if required. This means that the MPA, as with other functional bodies, should report its prudential indicators to the Mayor as part of the budget submission.

53. The key indicators that will drive the capital budget decision making process will be those concerning affordability, as these measure the impact of capital investment decisions on the overall revenue budget and in particular the precept. It is therefore likely that the capital budget process will become more complex, with a significant increase in the link between the capital and revenue budget processes in terms of decision making.

54. In setting or revising the prudential indicators the Authority is required to have regard to:

• Affordability, e.g. implications for the precept
• Prudence and sustainability, e.g. implications for external borrowing
• Value for money, e.g. option appraisal
• Stewardship of assets, e.g. asset management planning
• Service objectives, e.g. strategic planning for the Authority
• Practicality, e.g. achievability of the forward plan

Monitoring

55. Under the Code, the Treasurer will be responsible for ensuring that all matters required to be taken into account when setting or revising indicators are reported to the Authority for consideration. The Treasurer is also required to establish procedures to monitor performance against all forward-looking indicators; any significant deviations from forward forecasts will need to be reported and acted upon. The indicators requiring the most attention during the year are those in relation to the authorised limit and operational boundary for external debt.

Current status

56. The Prudential Code has been approved and published by CIPFA and interim guidance provided. Draft regulations have been issued for consultation by ODPM. Final regulations are expected to be laid before Parliament early in December and indications are that they will be little different to the draft. There is therefore sufficient information to produce prudential indicators but they need to be regarded as provisional at this stage.

Capital Investment Decisions - Budget Submission

57. The capital programme included in the budget submission approved by the MPA on 30 October 2003 is based on the previously approved programme contained within existing financing resources. The financing assumes a continuation of the present level of supported borrowing. There are two actual or potential decisions which will increase the capital programme and, in the absence of any other source of funding, the borrowing requirement. These are:

• The decision reflected in the revenue budget submission to transfer £5 million of IT expenditure of a capital nature from the revenue budget to the capital programme with a corresponding increase in borrowing.
• The Step Change programme which includes capital spending of £22.799 million in 2004/05 with further projected sums in the subsequent five years.

58. Given the uncertainties around the feasibility of the full Step Change programme commitment can only be given at this stage to the first year’s costs. The indicators therefore will show the costs of schemes relating to Step Change that have 2004/05 starts only.

59. The prudential indicators themselves, which the Authority will be asked to approve, will be included with the supplementary report.

Robustness of estimates and adequacy of reserves

60. The Local Government Act 2003 places a duty on the chef finance officer, ie the Treasurer in the case of the MPA, to make a report to the Authority on the robustness of the estimates and the adequacy of the reserves.

61. Advice on reserves was included in the budget submission at paragraphs 46-53 of Part 3: 2004/05 Revenue Budget and Medium Term Financial Projection. In summary this stated that:

• The general reserve, at £24.047 million, is at its 1% policy minimum which can be considered acceptable but clearly must not be reduced.
• All earmarked revenue reserves have been reviewed and sums no longer required for their original purpose have been identified and utilised within the context of the 2004/05 budget.
• Because of impending developments in relation to pensions accounting it is concluded that, subject to regular review, no further sums need to be set aside for pension reserves after the current year.
• The contingency reserve to meet unavoidable budget pressures has been earmarked to fund exceptional costs arising in 2004/05 as a result of the timing and number of public holidays in that year.
• Earmarked reserves will be created out of managed underspendings in 2003/04 specifically to fund one off expenditure in 2004/05.

62. The robustness of the estimates will be dependent on any further changes that may follow from consideration of the Mayor’s proposals and the Treasurer will therefore include advice on this aspect in the supplementary report. However advice can be offered now on one issue relating to the robustness of the estimates, namely the risk of capping.

Capping

63. The Mayor (and Assembly) will need to consider the risk of capping when setting the budget. The MPA should also be aware of this issue in endorsing the draft budget for submission to the Mayor.

64. The Government has power to cap a local authority’s budget after it has been set if it determines that the budget increase, and therefore the demand on the local council taxpayer is unreasonable. Reduced council tax bills will then have to be issued and budget reductions agreed and implemented. This is a costly and very disruptive process for the local authority which is therefore very much to be avoided.

65. In view of recent council tax increases, the Government has indicated its willingness to apply selective capping in respect of 2004/05 budgets. There is a view that local authority increases above 10% could be vulnerable, especially if there is a recent history of high increases. However the Government is aware of the relatively high gearing which applies to police authorities’ precepts which means that they have to levy higher percentage council tax increases to meet a grant shortfall compared with local authorities generally. Furthermore the police precept only accounts for about 10% of the total council tax bill so that it has a relatively marginal impact on the total demand on the council taxpayer.

66. The APA has recently published information suggesting that police authority precepts are likely to rise on average by 15% in 2004/05. There would clearly be a spread around that average and it is probably unlikely that a police authority would be capped with an increase below 20% unless this followed an increase substantially above average this year. The MPA precept increase in 2003/04 (21.8%) was actually the median result for English and Welsh police authorities. The projected increase for 2004/05 reflected in the latest budget position set out in paragraph 32 above is 20.8% and therefore some further reduction would be prudent to ensure a final increase clearly below 20%.

67. However two other factors are relevant in considering the likelihood of capping:

• firstly the involvement of the Government in the Authority’s budget increase, and
• secondly the Government’s decisions in relation to grant.

68. A substantial proportion of the expenditure increase reflected in the budget relates to matters that are either closely related to government policy or result from decisions by, or endorsed by, the Government. For example:

• The full year costs of increased police and PCSO numbers which have contributed substantially to the national increase in police officers which the Government has publicly welcomed.
• Police pay reform costs resulting from the PNB agreement endorsed by the Home Secretary.
• The continuing increase in the cost of the London pay lead agreed by the Home Secretary days before the MPA was formally established.
• Free rail travel arrangements supported by the Home Secretary.
• The transitional revenue costs of the C3i programme which is heavily supported by the Government through capital grant, together with the cost of retaining police officer posts released by civilianisation which was a specific requirement of the Home Secretary in agreeing the capital grant.
• The cost of PFI schemes, substantially developed before the MPA’s commencement, for which, probably uniquely in local government, there is no government grant support.
• Response to new legislation.
• Additional support for national responsibilities which should be covered by specific grant provision.

69. Together with inflation and increased pension costs these expenditure increases represent a 7.2% addition to the budget. This compares with the overall budget increase of 5.1% excluding Step Change and 6.2% with Step Change. With so much of the budget movement determined by past actions and decisions endorsed or otherwise supported by Government it is difficult to see the justification for ministers declaring the budget increase unreasonable.

70. The MPA’s overall government grant allocation has increased by just 2.2% following the provisional grant settlement. The allocation formula, which distributes the general grants, is intended to reflect the relative need for police expenditure in each authority area. £56 million of grant assessed by that formula as required to meet policing need in London has been withheld from the MPA and is being paid to the rest of the country.

71. If we were receiving the full grant to which we are entitled according to the Government’s own assessment, the MPA’s precept could be 12.6% lower. On current figures, instead of a 20.8% increase in council tax the budget would require an increase of just 8.2%. The Government can hardly expect that this shortfall in grant should be matched by reductions in police spending in London.

72. Given all of this, it would seem that the Mayor would have a strong case to argue that capping should not apply in respect of the MPA element of the precept. In the event that the precept was capped, the Mayor will, we imagine, consider seeking a judicial review on the grounds that such a decision would be unreasonable.

C. Equality and diversity implications

The budget submission addressed equalities and diversity issues through the equalities and budget section. There are no further implications arising directly from the additional material presented in this report.

D. Financial implications

These are spelt out in the report.

E. Background papers

• MPA/MPS budget files.

F. Contact details

Report author: Peter Martin, MPA.

For more information contact:

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

Appendix C

Greater London Authority
Mayor's Office

Lord Toby Harris

Chair, Metropolitan Police Authority, 10 Dean Farrar Street, London SW1 H0NY
City Hall, The Queen's Walk, London SE1 2AA
Switchboard: 020 7983 4000
Minicom: 020 7983 4157
Web: www.london.gov.uk
Our ref: KL/Budget/Police
Your ref:
Date: 27 November 2003

Dear Toby

2004-05 Budget for Greater London Authority and functional bodies preparation of draft component budget

1. The purpose of this letter is to seek any comments that your Authority would wish to make before I prepare the draft component budget in accordance with the provisions of schedule 6 of the Greater London Authority Act 1999.

Present intention

2. On the basis of the information on expected grant funding I am proposing to prepare a budget for consultation for the Police Authority of £2,334.3m. Although this budget requirement is £17m less than that sought, it would mean that the budget requirement would have increased by £478m since 2000-01 and would require a 15% increase in the police element of the GLA precept next year.

3. In the absence of any other options which might be put forward by the Authority, it is considered that this budget requirement could be achieved by the following changes:

• Increase income budget in line with current year forecast £5.0m
• Defer items classified as committed but which from the information provided do not seem to be committed: Extensions to estate portfolio, support to covert and overt operations, burglary sole response and modernising operations £10.5m
• Reduce overtime in line with PNB target £3.5m
• Defer new initiatives not funded from balances £5.0m

4. These reductions totalling £24m would be partially offset by a reduction of £7m in expected amount of specific grants.

5. On the basis of my current intentions and delivery of the savings identified above, the budget will provide resources to maintain the current level of activity and would provide £26.6m to roll-out the first year of the Step Change programme. The estimate for Step Change will however need to be reviewed in light of detailed costings when they are made available.

Equalities

6. The extent that the budget is expected to deliver improvements in the recruitment and retention of women and black and ethnic minority officers is being covered during the current round of budget and equalities meetings. The Authority must continue to prioritise equalities so that substantial progress is made in the recruitment and career development of women and black and minority ethnic employees.

Timing

7. It is my intention to prepare all component budgets before 12 December. Any further comments by your Authority, therefore, need to be received by then. They should be sent to Martin Clarke, Head of Strategic Finance, Finance and Performance Directorate, 3rd Floor, City Hall, London SE1 2AA (fax 020 7983 4241 or email martin.clarke@london.gov.uk).

Budget consultation

8. Consultation on my budget proposals for the GLA and the functional bodies is due to commence immediately following the preparation of all of the component budgets. The Metropolitan Police Authority will be consulted and I will let you know the arrangements in due course.

Yours sincerely

Ken Livingstone
Mayor of London

Copies to: GLA Executive Director of Finance and Performance
MPA Clerk to the Authority and Treasurer
MPS Commissioner and Director of Resources

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