Resource Allocation Formula - challenges and time for review?

Report: 6
Date: 17 October 2000
By: Commissioner

Summary

This paper is intended to brief MPA members on the method that the MPS uses to inform allocation of resources to borough OCUs - the Resource Allocation Formula (RAF). The paper considers the challenges to RAF and proposes a joint MPA/MPS review of the formula and its application. This review would inform the allocation process from 2002/3 onwards.

A. Supporting information

Background

1. The MPS has developed a formula based approach to resource allocation decisions known as the Resource Allocation Formula (RAF). RAF is concerned with identifying differences in relative demand between boroughs. RAF does not seek to identify the absolute level of funding required for policing functions.

2. The results from RAF are considered during the budget proposal process that currently takes place in late summer for the following financial year. The formula is presently used to inform the allocation of police officers to boroughs but in the past an element of dampening has usually been applied to avoid too major a switch of resources between boroughs. Last year, as a result of the targeting of Crime Fighting Fund resources on the worst performing boroughs, the distribution of resources to boroughs moved quite close to a straight RAF allocation.

3. The structure of RAF is described at Appendix 1. Comparison of RAF outcomes with other approaches Home Office Borough families

4. Following the publication by Home Office of borough families based on Crime and Disorder Reduction Partnerships, the MPS has produced a chart illustrating how the London boroughs would be grouped (Appendix 2) - please note that colour copies of the chart will be supplied at the meeting.

5. A similar exercise, using output data from RAF, groups the boroughs based on their proportionate levels of demand. These RAF groups are illustrated in the chart at Appendix 3. Please note that colour copies will be supplied at the meeting. These two illustrations show many common factors. For example, all the boroughs in Family 2 appear in the same RAF group with comparatively similar demands, and many of the outer boroughs that appear in Family 3 also fall within the same RAF grouping.

Use of deprivation indices

6. Appendix 4 represents the borough families according to deprivation. The source data for this illustration is the DETR, and the results are derived from a range of indicators including income, health, education, housing etc. (Please note that colour copies of Appendix 4 will be supplied at the meeting.)

7. Again, this comparison suggests a fairly close match with RAF groupings with highly deprived boroughs appearing in the same RAF groups and relatively affluent boroughs showing moderate demands under RAF. If either borough families or deprivation formed the basis of an allocation process, the results would be unlikely to differ significantly from those produced by RAF. Challenges to RAF

8. The use of a formula-based approach such as RAF is now generally accepted in the MPS. But a number of challenges have been made to RAF which support the proposal for a review:

• Distribution is unequal between inner and outer London boroughs
• RAF has no predictive element, unlike the National Funding Formula
• Management judgement needs to be applied to smooth out changes
• By focusing on past demand RAF rewards failure
• Any formulaic approach is fundamentally flawed
• There is no minimum allocation for small boroughs
• The demand analysis rests on historical data
• RAF allocations are too volatile between years
• There is no link between police officer allocation and resident population

These points are discussed in more detail in Appendix 5

Arguments for a review

9. A full review would:

• Ensure that the allocation of resources to boroughs is transparent
• Demonstrate that alternative options e.g. using different socio-economic criteria and comparison with the National Funding Formula, have been considered
• Address the range of current challenges to RAF
• Give the Authority the opportunity to influence and agree the use of the formula
• Contribute to the debate about the impact of the National Funding Formula on the MPS

B. Recommendation

That the MPS and MPA conduct a joint review of the principles underlying the Resource Allocation Formula and the existing RAF model.

C. Financial implications

The financial implications relating to the RAF Formula are largely dependent on its application. RAF is an apportionment process and therefore results in movement of budgets and staff. It does not have any effect on the actual level of funding available.

D. Review arrangements

Future review arrangements would be decided as part of the initial review project.

E. Background papers

The following is a statutory list of background papers (under the Local Government Act 1972 S.100 D) which disclose facts or matters on which the report is based and which have been relied on to a material extent in preparing this report. They are available on request to either the contact officer listed below or to the Clerk to the Police Authority at the address indicated on the agenda.

None.

F. Contact details

The author of this report is Michael Debens, MPS Corporate Development Group.

For information contact:

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

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