Review of HMIC Value for Money profile 2009/10

Report: 4
Date: 12 April 2010
By: Director of Resources on behalf of the Commissioner

Summary

This report provides an analysis based on the recent ‘value for money’ (VfM) report produced by HMIC. Additionally it analyses a number of internal and external issues that provide context to the HMIC results.

A. Recommendations

That Members note:

1. the findings of the review of the HMIC analysis of costs contained within this report.
2. the planned work for further enhancing the MPS VfM work to support the future budget gap set out in paragraphs 15 -18 of the report.

B. Supporting information

Background

1. In October 2009 Her Majesty’s Inspectorate of Constabulary (HMIC) issued Finance and Resources (F&R) Analysis 2009/10, comparing the planned expenditure of the Metropolitan Police Service (MPS) with that of its Most Similar Forces (MSF). To supplement this, HMIC developed individual force ‘value for money’ (VfM) profiles comparing estimated 2009/10 budgeted net revenue expenditure (NRE) of the MPS with that of its MSF. The MPS profile was issued in December 2009.

2. Both the F&R analysis and the VfM profile provide a very high level analysis using nationally published and non-published data (CIPFA 2009/10 Statistics, Home Office crime data 2008/09 and Annual Data Returns). The purpose of both analyses is to provide comparative information on resourcing levels and performance outputs which are relevant, timely and accessible. It is designed to be used as a diagnostic tool to identify opportunities where productivity could be improved.

3. HMIC accepts that this analysis does not provide a comprehensive comparison of the spending of similar forces, and acknowledges that it is ultimately limited by the quality of the budgetary information provided to CIPFA by each force. The F&R analysis and VfM profile consists of the following main areas:

• Gross service cost per 1000 of population
• Budgetary and Staffing
• Performance (Offences and Survey Outcomes)

4. HMIC anticipates that each force will pursue further detailed analysis of its own expenditure following the issue of the VfM profile. Appendix A provides the outcome of the internal review of the HMIC F&R analysis and VfM profile for the budgetary and staffing elements.

HMIC VfM Methodology

5. There are a number of areas of contention with the HMIC data, such as:

• Exclusion of specific grant funding from each force’s Net Revenue Expenditure (NRE), which distorts MPS expenditure on both pay and non-pay lines, as Home Office (HO) formula based grants are adjusted to take into account the higher costs associated with operating in London;
• Comparisons throughout the profile are made on a per capita basis, which disadvantages the MPS, given that London’s transient population, which includes tourists and commuters, greatly increases the remit of the MPS beyond that of the quoted resident population of 7.5m;
• The impact of National, International and Capital City (NICC) policing and the associated overheads has not been fully removed from the profile. Analysis by Strategic Finance shows that the MPS still finances NICC activity to the value of £93m from its own budget. NICC commitments are not shared by the other forces to the same extent.
• The recorded offences/1,000 resident population figures used in the HMIC report do not take into account the 0.9m commuters that enter the capital daily, as well as tourists, who are often victims of crime. Tourist nights in London in 2003 totalled 79m. London’s offences figures are exacerbated as a result of it being a key tourist destination compared to the MSF. London’s day-time population is therefore significantly greater than the stated residential population and, as such, the figures per capita used for inter-force comparative purposes in the HMIC report are vastly understated. This is aptly illustrated by the number of 999 calls received per 1000 population. In 2009/10, this is 289 for the MPS compared to an average of 163 for all other forces in England and Wales.

Budgets and Staffing

6. Overall the HMIC F&R comparison demonstrates that the MPS spends a comparatively lower percentage of gross budget than other forces on Police Officer pay (55.7% v 59.2% average) and a higher percentage of gross budget (21.1% v 17.6% average) on non-pay expenditure notably premises and supplies & services. Similarly, the HMIC VfM profile demonstrates that MPS expenditure is above average on both pay and non pay budget lines; and the MPS has the highest number of police officers, staff and PCSOs per 1000 of population. Comparisons throughout the VfM profile are however, made on a per capita basis, which disadvantages the MPS, given that London’s transient population, which includes tourists and commuters, greatly increases the remit of the MPS beyond that of the quoted resident population of 7.5m.

7. There are a number of reasons that explain why MPS NRE of premises and supplies and services, in particular, are higher than those of most of its MSF and also why the MPS has the highest number of full time equivalents (FTEs) per 1000 population. A brief summary of the major issues identified is as follows:

Premises

• 2009/10 MPS budgeted cost of premises as a percentage of staff costs were 3% higher than the average of the MSF group.
• The MPS leases a number of properties (2009/10 budgeted expenditure of £50m). As a result, the MPS has high premises revenue costs compared to other forces. Additional rental costs are slightly offset by lower capital financing costs of those properties that are bought.
• Premises includes relevant premises costs for National, International, Capital City and Counter Terrorism functions performed by the MPS – a responsibility which is shared by MSF only to a limited extent.
• 55% of MPS police stations are open 24 hours a day compared to a national average of 13% thereby incurring additional premises costs.
• The Service is looking to reduce property costs through the Corporate Real Estate SIP Programme and initial savings have already been incorporated into the medium term budget.

Supplies and Services

• 2009/10 MPS budgeted cost of MPS supplies and services costs as a percentage of staff costs are 5% higher than MSF.
• The MPS contracts out a number of services that are delivered in-house by other forces thereby increasing reported supplies and services costs in this analysis.
• The Association of Train Operating Companies (ATOC) costs are unique to the MPS, which increase supplies and services expenditure by £16.4m for the direct cost of providing free travel for police officers and increase ‘Other Employee Expenditure’ by £5.5m for the tax benefit charge, which is borne by the MPS on behalf of employees for providing free travel. It is a necessary cost to recruit and retain police officers.
• There are MPS and London issues, such as the inclusion of supplies and services costs which relate to National, International, Capital City and Counter Terrorism functions, thereby distorting MPS figures; and costs in London being higher than outside London, as highlighted in the Lyons Review.
• The MPS is endeavouring to improve efficiency and VfM by the introduction of more effective governance and control, maximising cashable efficiencies by more efficient and streamlined processes and improving ability to spend, whilst reducing risk. The Developing Resource Management (DRM) Programme work streams include procurement processes (P2P), GPC and improved Corporate Governance, which have already shown benefits this year. SIP projects addressing catering, training and delivery of Property Services will also provide future efficiency savings in supplies and services.
  

Staff

• The HMIC VfM profile shows that MPS staff costs per head of population exceed those of MSF by 48%.
• The increased costs associated with living in London impact upon staff expenditure and are not offset by corresponding formula grants, which are adjusted for these costs.
• MPS budgeted NRE per head of population for PCSOs exceeds that of MSF by 64% and there are 0.61 MPS PCSO FTEs per 1000 of population, whereas the average of the MSF group is 0.39.
• The Safer Neighbourhoods programme in the MPS was rolled out two years ahead of the Government set target for national neighbourhood policing. It is expected that PCSO expenditure will increase throughout MSF over the next two years, as this scheme is developed.
• There are 4.32 MPS police officer FTEs per 1000 of population, whereas the average of the MSF is 3.38.
• The MPS has 1.95 police staff FTEs per 1000 of population, whereas the average of the MSF is 1.74.
  
• The comparison of staffing is made on a population figure of 7.5m. This does not take into account tourists and commuters, which increase London’s daytime population. This has an inflationary effect on the results of the MPS. It is considered that a population figure of 8.7m is more representative of the MPS’s policing remit.
• MPS police staff levels have increased by just 4% over the past five years, compared to an average increase of 16% in MSF, reiterating the MPS’s commitment to efficient use of human resources.
• The VfM profile shows that MPS staffing of Local Policing has reduced over the past three years by 1%, compared with the MSF average increase in staffing of Local Policing by 8%; the complexities of the MPS has required it to specialise, which is supported by Police Objective Analysis (POA) analysis but not by analysis of Specialist Functions in the VfM profile. This discrepancy remains an area of contention and clarity on how staff FTEs have been assigned to functions will be sought from HMIC. Local Policing has also reduced due to the centralisation of Roads Policing, Intelligence and Criminal Justice functions.
• The MPS has a greater NICC responsibility, compared with MSF, which requires more FTEs.
• MPS progress in increasing officer and staff efficiency includes the successful implementation of the C3i I.T. system, which has modernised communication systems, officer deployment, call handling and improved knowledge and information bases; and the development of the Transforming HR programme, which will deliver savings of some £15m a year.
• Group Finance is currently undertaking a review of Operational Policing Measure (OPM) codes to cleanse the data, ensuring that all codes accurately reflect staff activity. The updated OPM codes will feed into the Policing Objective Analysis (POA) and 12 Policing Activities Analysis to demonstrate workforce activity, enabling management to ensure that staff are deployed correctly and as efficiently as possible.

8. It can be seen that there are a number of valid reasons to explain the higher than average levels of NRE within the MPS compared to MSF.

Active use of comparative Performance Information

9. Notwithstanding the caveats on the figures presented in the report, MPS Performance Board continually monitors the performance of the MPS. Performance Board members consider its Critical Performance Areas monthly via a performance pack, which presents the latest MPS Performance both in absolute terms and as ranked against its MSF group. Thus, Performance Board takes into account both factors when deciding on which areas to focus management attention and resources. It is an integral part of their decision making. An example of this mechanism in action is given below.

10. The 2008/09 data for Confidence in local policing (% people who agreed that the police and local council are dealing with anti-social behaviour and crime issues that matter in this area) showed that the MPS is second in its MSF group of four. Recognising the importance of this issue, Performance Board receives a monthly update on the activities being undertaken to raise our performance in this area. One of the activities in December was “The ten boroughs with the lowest confidence ratings will get further support. The three with the lowest rates will be supported by a central team to identify ways to improve. The others will receive written guidance with follow up visits on a roll-out basis.” As a result of this management focus the latest available data shows that the MPS is now first in its MSF group of four. A similar approach is taken to addressing all performance data, sometimes undertaking an ‘In Depth Analysis’ to understand the underlying factors contributing to an overall performance figure.

Improvements evidenced by the HMIC F&R Analysis 2009

11. A review of the 2009 F&R analysis information compared to 2008 shows the MPS as having achieved the following efficiencies:

Premises

12. From analysis of the CIPFA data, although higher in absolute terms, budgeted MPS premises costs per police officer have risen at a slower rate than those for MSF. Between 2004/05 and 2009/10:

• The budgeted premises costs per police officer of the MPS increased by 15%
• The average budgeted premises costs per police officer of MSF (excluding MPS) increased by 25%.

Supplies and Services

13. Based on the CIPFA statistics, the 2009/10 budgeted supplies and services costs per police officer in the MPS decreased by approximately 16.38% from the previous year.

Transport

14. The 2009/10 MPS budgeted cost of transport per police officer is 2.4% lower than the transport budget per police officer in the previous year.

Further development of the MPS VfM work

15. The MPS has launched a number of efficiency initiatives, which will deliver savings of £124 million in 2010/11; £169 million in 2011/12; and £194 million in 2012/13, as identified in the Business Plan. The Business planning process will continue to develop an overall assessment of how we can now deliver even more in support of VfM.

16. Current SIP projects are addressing the issues of comparatively high non-staff costs per head of population, as identified by the HMIC VfM profile. Projects include:

• The SIP Property Services and Property Estates Usage projects, which will provide savings of £27.6m by 2012/13
• The SIP Training and Catering projects which will deliver reductions in Supplies and Services costs of £3.7m and £3.4m respectively by 2012/13
• Workforce efficiency, as highlighted by the HMIC VfM profile, is being reviewed by SIP projects including TP modernisation and the review and restructure of Finance and Resources support services, which both aim to drive out better value for money, economies of scale, consistency in delivery and better performance. The centralisation of many functions as a result of these projects will also have beneficial impacts on non-staff costs also. In addition to this, the MPS will continue review all our areas such as procurement, IT and our estate, while cutting bureaucracy and waste.

17. Future work will now be supported by a review of other sources of data such as POA to establish areas where the MPS is not already developing projects to review efficiency, so the MPS has a defined package that covers all the key areas where perceived efficiency may be gained.

18. The MPS has made contact with each of the MSFs to initiate a benchmarking group, the remit of which will be to identify and share best practice in the pursuit of VfM in service provision. It is expected that the first meeting of this benchmarking group will occur at the beginning of next financial year.

Environmental impact

19. There are no environmental impacts to this report. The environmental impacts of SIP projects have and will continue to be considered.

C. Race and equality impact

There are no equality or diversity implications arising directly from this proposal. Equality Impact Assessments are undertaken as part of each VfM exercise.

D. Financial implications

There are no direct financial implications from this report but as described in paragraphs 15-18 the MPS has a planned way forward for further enhancing it VfM work, which will support the MPS budgetary position in future years.

E. Legal implications

1. Section 54 and Section 55 of the Police Act 1996, as amended, sets out the HMIC’s statutory duty to inspect the efficiency and effectiveness of every police force. It also requires the Police Authority (in this case the MPA) to comment upon and publish its comments in respect of any HMIC review, following receipt of any comments from the Commissioner in relation to the review report.

2 The Local Government and Public Involvement in Health Act 2007 put in place the legal framework for many of the proposals in the Governments White Paper “Strong & Prosperous Communities”, within which the development of a Comprehensive Area Assessment (“CAA”) was a key element. The CAA is a far wide ranging assessment which examines how well public bodies work together to meet the needs of the people its serves.

3. This report has received pre-scrutiny by the MPS Performance Board as it has delegated authority to review reports from the HMIC on performance issues and agree appropriate MPS action.

F. Background papers

• Appendix 1 - Review of HMIC value for money profile 2009/10

G. Contact details

Report authors: Anne McMeel, Director of Resources, MPS

For more information contact:

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

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