Progress report on the budget submission 2006/07 – 2008/09

Report: 9a
Date: 27 October 2005
By: Treasurer and Commissioner

Summary

This report provides an update on latest progress in the preparation of the draft Budget Submission to the Mayor for 2006/07.

A. Recommendation

That

1. members note the progress being made in preparing the overall Budget submission to the Mayor for 2006/07;
2. note the current revenue budget financial overview position as summarised in Appendix 1; and
3. agree to remit to the next Co-ordination and Policing Committee (CoP) on 4 November 2005 consideration of a further budget submission report.

B. Supporting information

Background

1. A detailed progress report on the preparation of the draft MTFP and revenue Budget Submission for 2006/07 – 2008/09 was submitted to the joint PPRC/Finance Committee on 10 October 2005. The report identified the main financial issues affecting the budget submission for 2006/07 including a number of spending pressures, proposals for budget savings, the latest government grant projection, and proposals for new initiatives/corporate priorities. A shorter update report was provided to the Finance Committee on 20 October.

2. The financial overview in the report on 10 October was of a budget deficit of £36m in 2006/07 after allowing for a precept increase of 5.5% and an increase in general Government Grant of 3.2%.

Progress on Revenue Budget Submission

3. A series of budget scrutiny meetings have been held by the Chair of the MPA and a small group of MPA members comprising the two Vice Chairs, and Chairs of Finance and Policy, Performance and Review Committees. Individual MPS business groups and Management Board members were asked to present their detailed revenue growth and savings proposals for scrutiny by the members. A small number of changes to both proposed expenditure savings and growth have already been made, and in relation to some proposals, further information has been sought from business groups. Further review of the proposals is continuing. It is intended to bring the full set of exemplifications of growth and savings items to the 4 November meeting of CoP.

4. To date, a change to proposals has incurred within TP where proposed savings have reduced from £25m to £21.3m but has been offset by reduced growth of £2.7m and further savings of £1m to be identified. In addition, a further saving of £6m has been identified by Resources business group in respect of the taxable benefit on the police officers free rail travel agreement, where it has now been agreed with the Inland Revenue that tax is not payable.

5. Proposed savings in DOI regarding Metcall totalling £3.4m require further consideration so are now not included, whilst growth items totalling £10.7m (which are one off in nature in 2006/07 only) are now proposed to be funded ‘one-off’ from reserves, i.e. the growth items of £10.7m would be removed from the 2007/08 budget. The reserves required in 2007/08 and going forward will also need further consideration later in the budget cycle and in particular, the possibility of replenishing reserves used to fund ‘one-off’ growth above. Ongoing work is continuing to establish if there are any further ‘one off’ bids that could potentially be funded in this way. Further work on the new IS/IT outsourcing contract has also resulted in the growth bid being reduced by £2.5m.

6. The bid for additional Counter Terrorism grant has now been formally submitted to the Home Office and it has been stressed that an early decision is required if the additional police officers (and associated infrastructure support) are to be in place by April 2006.

7. Further discussion has also taken place between MPS Officers and the Home Office over the proposed police officer pension funding changes planned for April 2006. The Home Office had originally indicated that a formula grant adjustment of approx. £90m would be required nationally –but the latest information would indicate a significantly larger adjustment will be required. All forces were recently requested to urgently provide updated forecasts of costs and pensioner numbers to the Home Office.

8. A meeting of the Mayor’s Budget Steering Group took place on 11 October at which the budget proposals, as presented to the joint/Finance/PPRC meeting, were reviewed. GLA Officers have re-iterated the requirement to follow the Mayor’s budget guidance to submit a balanced budget contained within a 5.5% precept increase, and to do so in accordance with the required timetable. It is, however, a matter for the MPA to decide how it responds to the Mayor’s budget guidance.

9. In relation to the use of revenue reserves, the funding of the additional costs of Operation Theseus continues to provide uncertainty to the budget process. An interim payment of £10m by the Home Office has now been received by the MPS, and whilst the projected future costs have reduced, the ongoing uncertainty around how much of the total costs the MPA/MPS will have to fund continues to make financial planning in relation to possible use of reserves very difficult. Indeed, the Treasurer has advised, at this stage, not to relax the restriction around the reserves at the present moment.

Summary

10. The overview position as set out in Appendix 1 shows that the revenue budget deficit on current grant and precept assumptions has reduced from £39m to £20m in 2006/07. This excludes the additional precept funding requirement of £31.8m for the Safer Neighbourhoods accelerated roll out of 368 teams in 2006/07. Further work is progressing to consider options for reducing this deficit- including further reviewing the budget forecast for 2005/06, the proposed growth and savings proposals and any central budget provisions which might be available.

11. A full list of budgetary pressures, comprising new initiatives and corporate priority growth proposals, plus business group savings proposals, will now be circulated with a report to a meeting of the CoP Committee on 4 November. Individual templates describing the background to the various issues are also being compiled, where appropriate, for inclusion in the final submission to the Mayor.

12. As stated above some £10.7m of one off growth proposals have been identified as being suitable for funding from reserves. At this stage no specific reserve has been identified, although in practice it might be assumed that this will be from the Budget Resilience Reserve which currently has a balance of £20.3m-and this has been reflected in Appendix 1. However, caution does need to be exercised in the use of reserves (see paragraph 9 above) and a review of reserves will be presented to the 4 November meeting of CoP.

Capital Programme submission

13. A separate progress report on the Capital Programme for 2006/07 to 2008/09 was also submitted to Finance Committee on 20 October and highlighted a number of funding pressures which still need to be resolved. They are also likely to affect the MTFP/Revenue Budget submission and work is continuing to ensure all revenue cost consequences are being included in the relevant financial years.

14. A draft of the capital submission is currently being prepared (plus schedules of proposed schemes) and this will also be submitted to the CoP meeting for approval.

Business plan submission

15. A separate business plan is also required as part of the overall Budget Submission to the Mayor. Detailed work on this is currently taking place and will be based on the recently approved draft Corporate Strategy 2006-2009 and the seven strategic priorities contained therein.

Budget and equalities submission

16. This element of the submission has already been considered by the MPA Equalities and Diversity Board at its last meeting and will be included in the overall submission.

Budget and sustainable development submission

17. This was required to be submitted to the Mayor by the end of September and was thus approved by the Finance Committee 15 September 2005 and submitted by the earlier deadline.

Consultation with stakeholders

18. As part of the budget process, (and in line with the Mayor’s guidance) the Authority has consulted with key stakeholders and a summary of the responses is enclosed at Appendix 2. Members are asked to consider these responses.

Next steps

19. The MPA overall Budget Submission for 2006/07 – 2008/09 is required to be submitted to the Mayor by 14 November 2005. It was originally anticipated that a draft of that submission would have been finalised at this point. However, given the uncertainties that are still evident, it has not been possible to reach that stage and work continues with a view to presenting a more detailed report (including growth and savings proposals) to the CoP committee meeting on 4 November 2005.

20. At this stage, it is unlikely that all elements of final submission for the Mayor will be able to be approved at that meeting. Although the budget submission deadline is 14th November, a further MPA Finance Committee is scheduled for 17th November and an extension of the deadline may be required for that meeting to consider a further report.

Further developments in financial planning

21. The multi-year approach (outlined above) to the use of reserves, flexibility around catering for ‘one-off’ costs coupled with the likelihood of a 2 year grant settlement reinforces the need to make significant sustained improvement in financial planning. Appendix 1 sets out a 3 year planning approach but to be successful the plan has to have rigour and management support in its implementation. Despite a two year settlement, as at present, Year 2 and 3 expenditure plans should not change unless specifically agreed by members, and then in a controlled manner.

C. Race and equality impact

There are no specific impacts arising from this progress report. A report on the diversity and equality implications of all revenue growth and savings budget proposals will be submitted to the MPA Equal Opportunities and Diversity Board (EODB) when the proposals have been clarified.

D. Financial implications

The current financial overview is set out in Appendix 1.

E. Background papers

• Mayors Budget Guidance 2006/07
• MPS Budget Planning Instruction 1/2005
• Medium Term Financial Plans files 2006/07

F. Contact details

Report author: Sharon Burd, Director of Finance Services, MPS and Ken Hunt, Treasurer, MPA.

For more information contact:

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

Appendix 2

Summary of responses to consultation

As part of the budget preparation process, and as required by the budget guidance issued by the Mayor, the Authority consulted with a number of key stakeholders on initial draft proposals. A letter was sent out to all key stakeholders in August, highlighting the fact they were to be consulted shortly, this was followed up by a detailed letter in October. The letter described the seven priorities identified as part of the corporate strategy asking consultees to comment on the various proposals for growth that supported these and also asked that they suggest ways in which savings could be made. Nine responses were received and a summary of the key points is highlighted below.

Association of London Government

The association feels that the emphasis on counter terrorism, security and protection reflect the current mood of London and echoes the views of the Boroughs. They feel the option to accelerate the full roll out of the remaining safer neighbourhood teams in 2006/07 will be welcomed by Boroughs, particularly if it can be achieved without imposing any additional pressure on the precept.

They believe that the Boroughs would broadly support all other corporate priorities identified in the letter, and with regard the service review the association feels that it is encouraging that 10% efficiency savings are expected over the next three years.

Capital Transport Campaign

The organisation supports the need for traffic enforcement, and identifies the scope for improving value for money through the MPS continuing to work closely with the British Transport Police and City of London Police. They feel that the service Londoners currently receives represents good value for money and therefore ‘no right minded body should advocate spending any less than is proposed.’

London Assembly Member - John Biggs

The Assembly Member supports the priorities and also adds how impressed to date he has been with the roll out of safer neighbourhood teams. He would like the roll out to continue but in a way that does not compromise it’s quality and undermine confidence in the service.

London Assembly Member - Valerie Shawcross

The Assembly Member feels the identified corporate priorities for growth are all extremely important issues, and strongly supports the issues identified as being the ones which really matter to the quality of life and security of her constituents. However, she also wishes to highlight how the MPS could raise its performance in focusing on these key issues by investing resources in Lambeth and Southwark, and would continue to argue for an integrated risk management based approach to resource allocation as opposed to the resource allocation formula (RAF).

In relation to safer neighbourhoods she feels it is evident that this an effective method of policing, yielding great improvements in crime reduction and anti social behaviour, and increasing the sense of security and community identification by local residents. Residents have identified the one thing that would really make them feel safe is seeing more police patrolling the streets. She feels that the safer neighbourhood teams that are already in place across Lambeth & Southwark are proving successful and popular with residents, with the officers not just acting as a visible deterrent but with it also resulting in much better intelligence being gathered and therefore greatly improving results.

She is concerned that current police resources in Southwark still falls short of what would be required to provide a fully adequate, preventative police force and along with the three MPS for Southwark is campaigning to increase the number of officers in Southwark from about 890 officers plus 36 PCSOs to 1,000 officers.

There are a number of large-scale regeneration schemes underway in Southwark at the moment, and experience indicates that the slow removal of settled long standing residents and the closure of properties results in squatters, increased criminality and dangerous problems for the remaining residents. The Assembly Member therefore feels that the police in Southwark need additional capacity to manage the special challenges of these large area regeneration schemes in the pre-demolition phase. For these reasons she urges the Authority to support the acceleration of the roll out of the safer neighbourhood teams so that all areas can benefit from a dedicated policing team by the end of 2006/07.

Secondly, she wants to highlight organised criminal networks as a priority of her constituents, where especially in Brixton they suffer greatly from high levels of drug dealing and related violent crime, especially gun crime. She therefore feels it is important that priority is given to investigating the organised criminal networks that control the drug and gun trade, and is concerned that this priority does not have any additional funding proposals at present, and urges that this is given a higher priority.

Finally, she states her support for the service review, and indicates her appreciation of the challenges faced by the MPS of trying to remodel services within tight budget constraints.

London Borough of Bromley & Safer Bromley Partnership (CDRP)

The Chair of the Safer Bromley Partnership’s overriding consideration is to ensure that any savings made through the budget process do not have an adverse impact on the number of police officers on the streets, or the time they have available for them to conduct front line functions.

Members of Bromley Council believe that a visible police presence in their community together with the ability to respond quickly to local needs is key to ensuring that residents are protected from crime. In addition, they feel that residents need to be reassured that positive action is being taken to reduce crime levels and apprehend offenders in order to address concerns about the safety of themselves and their property.

Members of Bromley Council believe that they fare particularly badly in the allocation of police resources so any reductions in frontline policing will hit their division harder than most. They have also commented that they wish to see more police on the streets and that everything possible should be done to minimise bureaucracy and maximise the availability to respond effectively in the fight against crime. Therefore, with regard to savings they would like to see steps taken which will reduce administration, in particular the paperwork required of frontline officers, and any savings arising from this redirected into frontline policing.

London Borough of Camden

The Council believes that the Mayors proposed increase on the precept of 5.5% is too high in the current climate with inflation at around 3%, and encourage the MPA to seek additional efficiencies in 2006/07. With regard the service review they feel it is appropriate to make savings where possible, suggesting it may be suitable to use reserves in the short term to fund efficiency saving projects which can then be paid back when appropriate.

They recognise the significant cost pressures on the MPS particularly in the area of counter terrorism, security and protections and support the bid to the Home Office for grant funding for counter terrorism. To the extent that any of the MPS’s costs can be associated with national rather than local functions and directives they would support approaches to the Government for more funding to be made directly to the MPS, rather than as a precept on the boroughs.

The Council feels that the corporate strategy includes a number of projects of great benefit to London residents, but state these policies must be managed within limited resources. They urge the MPA to carefully consider the impact of the proposals to accelerate the safer neighbourhood team rollout on both council taxpayers and service provision, stating that to severely limit resources given to the teams in order to allow a greater number of teams maybe counterproductive by rendering them ineffective.

Finally, they feel that policies such as citizen focus policing could be better informed through partnership work with local authorities to better engage local communities.

London Borough of Havering

The London Borough of Havering agrees with the seven priorities identified in the letter. With regard to counter terrorism, security and protection they recognise that that this is a priority following the July bombings, but add that it is essential that the police create an atmosphere of trust with BME communities where intelligence would be forthcoming, stating that firm relationships need to be developed with community leaders at a localised level with regular meetings.

They feel that safer neighbourhoods has resulted in a return to localised policing that has proved to be effective and support the further increase in wards that will have safer neighbourhood teams. With regard to citizen focus, they feel that whilst the MPS has made a commitment to listen to citizen needs, it needs to clarify what mechanisms are currently in place to do so and feel that clarity is also needed regarding how the processes are put in place and how they will influence decision making. In relation to information quality, they feel we need to ensure that information is accessible to all partners, as they feel difficulties currently arise in relation to local target setting and reporting structures as current information systems between local authority and police do not interface and cannot be easily interrogated.

London Borough of Hounslow

The Council is supportive of the corporate priorities and particularly supports the safer neighbourhood developments that have brought benefits to their Borough and which have been seen by residents as being beneficial. In the current financial climate they recognise all public sector organisations have to do all they can to reduce back office costs for the benefit of frontline services, and maximum benefits have to be sought from the use of IT systems. The Council is aware of major IT development within the MPS and seek assurances that expansion of IT investment is delivering efficiency savings and benefits.

In the Council’s response to the ODPM’s 2006/07 Formula Grant Distribution consultation paper they stressed that there must be sufficient resources given to the MPA for the additional tasks it has to carry out, and it would support the MPA in lobbying Government for a fair and adequate grant settlement for countering terrorism, security and protection work.

With regard to savings, they feel that expensive officers are still carrying out minor traffic work and would ask that this area of activity be re-examined.

Finally, with regard the Mayors proposed increase on the precept of 5.5%, the view of Hounslow’s Leader is that he could ‘certainly not support a 5.5% increase in the GLA precept.’

National Federation of Retail Newspapers

This organisation responded to the initial letter sent out in August and identified six areas they feel need to be considered. These are as follows:

• Reduce crime
• Enhance relationships between police, businesses and communities
• Improve relationships between police and victims of business crime
• Make business crime a police KPI and a crime reporting category
• Define a template for reporting business crime
• Encourage the police to actively support retail submissions to Government concerning business crime reduction initiatives and prevention of business crime through enhanced security provisions.

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