Additional budget demands

Report: 12
Date: 4 October 2001
By: Commissioner

Summary

This report updates Members on the work completed to date by the MPS to prioritise budget developments for 2002/03. Full details will be provided for the planned Member workshop to facilitate a thorough review of these issues.

A. Recommendations

Members are asked to:

1. Note the development proposals set out in this report.

2. Note that the costing for the 1,000 additional officers may be subject to amendment

3. Note that a separate exercise has began to identify the resource demands presented by the recent security situation and that discrete bid will be made to central Government to meet these demands.

4. Agree the recommended Member workshop.

B. Supporting information

Scrutiny process

1. The current position regarding budget proposals for 2002/03 reflects an extremely robust exercise that has been carried through to a very tight timescale by the Management Board. The original list of new proposals submitted by business groups for 2002/03 totalled £145m. These proposals have been subjected to three separate scrutiny exercises - by Business Managers and Finance Directorate staff, by members of Senior Management Team (SMT) of the MPS - and formally by SMT itself. To aid consideration of budget proposals, they have been classified as firstly - ‘structural’ in nature, secondly - providing ‘additional officers’ in line with the commitment from the mayor, and thirdly - ‘budget re-alignment’. Each of these is described below.

2. Given the competing demands of in-year monitoring and final accounts closure, and the limited resources available in the Finance Directorate the degree of corporate testing of proposals has been limited; the proposals should, accordingly, be regarded as work in progress. Refined figures will be produced for the 25th October Authority meeting. However, the internal MPS scrutinies have been done with the Mayor’s budget guidance and emerging Policing Plan priorities in mind. (See report elsewhere on this agenda.)

Structural inheritance

3. Proposals in this category total £15.617m and include funding for partnerships, the replacement of the vehicle removal contract, public order events and funding for Specialist Operations, where increased levels of activity - particularly murder investigation - have not been matched by increased funding in the past. Appendix 1 details these items.

Additional officers

4. The Medium Term Financial Forecast presented to members in July recorded the increase of police officer numbers towards the target of 28,000. The mayor has indicated that he is prepared to fund an additional 1,000 officers with the first half-year cost of £22.7m provided for in 2002/03. Whilst the figure of £22.7m is derived from earlier data produced by the MPS for the 1,050 officers part-funded in 2001/02, an exercise is currently taking place to upgrade this figure - it is evident that, in the past, the cost of additional officers has been understated by not taking into account all of the consequential costs associated with recruitment, such as additional accommodation, the increased support required from HR staff etc.. The scale of the increase in officers for the second year in a row implies a step change in the level of associated costs that it would be unwise to ignore - this would simply produce further budget pressure in the future. Any revised figure for funding will need to be the subject of consultation with the mayor and the GLA.

5. Whilst bids have been received for additional officers to support specific areas of policing, the precise allocation of this resource will be confirmed in the light of overall objectives and priorities, later in the budgetary cycle.

Budget re-alignment

6. The issues developed through the challenge process noted above are detailed on Appendix 2 and total £65.9m. They will be further refined before the Authority meeting on the 25 October.

Capital City funding

7. The development of a bid for Capital City funding to recognise the additional demands of, for instance, the Golden Jubilee celebrations in 2002/03, has now been overtaken by the events of 11 September. A detailed exercise is now underway to draw up a major bid for government funding for the development of a national anti-terrorist function and this will be reported to the MPA. The ‘normal’ capital city-funding requirement will be subsumed within the larger funding issue.

Transport for London (TfL)

8. Members will note that it is anticipated that funding will be provided through TfL to support measures aimed at addressing street crime on bus routes.

Savings

9. Savings of £4.2m have been identified as follows:

• £1.6m - reduced compensation payments (net of cost of Civil Actions Unit)
• £2.0m - 2001/02 provision for overt Metvests drops out
• £0.269m - savings in corporate cleaning materials budget
• £0.33m - additional income from re-imbursement of translator/interpreter services and sales of items.

Other issues

10. A number of budget issues in the wider context need to be highlighted.

Pay awards (pay inflation)

11. The medium term financial forecast assumed that pay awards for 2002/03 would be 3.0%. Indications now suggest that this may be an understatement.

Non-pay inflation

12. The 2001/02 contingency for inflation has been used, in part, to provide

for the efficiency savings imposed in the current year: the rest has been allocated in full to meet price increases on Forensic Medical Examiner and Interpreter and Translator fees. Given the extent to which the MPS is subject to unavoidable contractual increases on a range of outsourced contracts, it is essential that an appropriate provision is maintained for inflation in the 2002/03 budget.

Efficiency savings

13. Members will be aware, from in-year monitoring reports and the budget

scrutiny exercise, of the difficulty the MPS has in delivering ‘efficiency’ savings. Whilst the Accenture reviews have commenced, there is little in the way of tangible proposals emerging that will deliver savings in 2002/03. Members will also appreciate what a 0.5% annual efficiency savings target actually represents: once police pay, police pensions and contractual budgets are excluded as being untouchable, the savings target on the remainder of the budget is significantly higher. In practical terms, ‘efficiency savings’, at this stage of the organisational development of the MPS, are effectively cuts, and members will no doubt wish to consider this in the wider budget debate.

MPA contingency

14. The MPA contingency for 2001/02 is currently £4.2m - as things currently stand, this will reduce to £3.6m in 2002/03 when the full-year cost of finance restructuring is provided for. In view of the pressures upon operational policing, Members will no doubt wish to give careful consideration to the appropriate use of these funds.

Police pay vacancy factor

15. MPS budgets for police pay currently operate with a built-in vacancy factor of 1% i.e. budgets are set to fund 99 police officers against an approved establishment of 100. Whilst this approach may have been acceptable in earlier years, given the then evident recruitment difficulties - such is the current pressure on achieving police officer numbers that it must be appropriate to examine whether the vacancy factor in police pay remains acceptable. A 1% vacancy factor equates to a budget provision of approximately £8m.

C. Financial implications

As noted in the above report.

D. Contact details

Report author: Ken Bell, Head of Corporate Finance, 020 7230 8660

For information contact:

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

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