Revenue budget monitoring 2001/02 (including budget implementation update)

Report: 9
Date: 6 December 2001
By: Treasurer and Commissioner

Summary

This report provides a summary of the revenue budget position as at the end of October together with a commentary on the main budgetary issues and issues impacting on the year end outturn. It also provides an update on the budget priorities.

A. Recommendations

1. Members are asked to note the financial position to October 2001 as set out in Appendix 1.
2. Members are asked to note the update on the budget priorities as set out in paragraphs 20 to 23.

B. Supporting information

Introduction

1. Reports have been submitted regularly to this Committee to advise on the progress of expenditure against budget and the forecast outturn position at the year-end. At the meeting on 8 November details were reported of corrective action being taken to offset a projected overspend of £13 m. This report updates the position as shown by the expenditure and forecasts reported as at the end of October.

Review of financial performance

2. The summary position is shown in Appendix 1. As Members will appreciate, there has been a significant impact on the finance of the MPS arising from the counter terrorism measures taken since 11 September. The Appendix includes the costs of these measures, amounting to approximately £5m, that have been incurred up to the end of October. The forecast position, however, excludes any further costs that will fall in the period November to March 2002. This approach has been taken because of the uncertainty about the pattern of expenditure over the rest of the year and the lack of any information about Home office funding. Grant of £22m has now been announced for the MPA and future monitoring reports will include both the grant income and the related expenditure. Revised budgets shall be set accordingly.

3. The overall year to date position shows a net overspend of £3m. Taking account of the expenditure on counter terrorism, this is a small underspend against the profiled budget. The principal variations within the year to date position also reflect in the forecast outturn. Comment on these areas is given below.

4. The report on 8 November identified actions being taken under the aegis of the Budget Star Chamber. The key areas for reducing spend are:

• The slowing down of civil staff recruitment
• Tighter control and focus on police overtime
• IT investment slippage
• Reducing forensic service submissions
• Significant reductions in the use of hire vehicles.

5. Implementing these measures has led to a marked improvement in the forecast which is now showing a year end underspend of £133k. excluding counter terrorism measures.

6. Further comments on the major variances are set out in the following paragraphs.

7. Police Pay
As previously reported there are a number of factors which are leading to an overspend in this area, these include:

• The MPS success in attracting new recruits has meant that the vacancy factor built into this budget will not be achieved
• The pay award for police officers was budgeted to be 3% - the actual award was 3.5%
• There has been a settlement of certain pay anomalies in respect of married couples housing allowances
• Allowance has also been made for the tax liability in respect of free travel. This was not funded in the budget.

8. Civil Staff Pay
Civil staff pay continues to show an underspend against budget. No account has been taken of the provision for implementation of the Hay review so that the budget for this of £13.4m remains in the Centrally held funds. The projected underspend of £15.8m at the year-end will be protected by the restrictions on civil staff recruitment in order to offset areas of overspending.

9. Police Overtime
Significant overspends have been recorded in Police overtime during the year and the counter terrorism measures also impact predominantly on overtime costs. The overspend to October amounts to £18.5 m. However, measures taken to control expenditure coupled with the diversionary effect of the counter terrorism pressures result in the forecast indicating that the rate of spend has been reduced to close to the budgeted level.

10. Pensions
The trend of underspending against budget has continued in this period and pensions for police and civil staff are estimated to underspend by a total of £11.5m.

11. Business Group running expenses
There are a number of under and overspends in this area which are contributing to a year to date net overspend of £2.6m and year-end forecast overspend of £7.6m. The most significant factor contributing to this overspend is expenditure on partnership initiatives. This expenditure is largely unbudgeted but is offset by additional business group income.

12. Employee related expenditure
Expenditure to date shows a net underspend of £2.4m and a projected forecast of £1.1m. The majority of this saving arises from the reduced cost of recruit advertising where the MPS has benefited from a Home Office recruitment campaign which has complemented the MPS recruitment drive.

13. Premises costs
The year end forecast shows an overspend of £3.2m. This includes the costs a rent review resulting in an increase in rents payable of £3m. However, this is offset by passing the rent increase on to sub-tenants so that income is increased. It is proposed to amend the next report to reflect the higher expenditure and income in the budget lines.

14. Transport costs
The year to date spend is roughly on budget being £98k underspent, however, the year-end forecast shows an overspend of £2.4m. This can be attributed to two areas of budget pressure. Firstly members will be aware that the contract for vehicle maintenance has been amended but at a higher cost than budgeted for. However, it is anticipated that further review and action by the Star Chamber will reduce the overspend in this area. Secondly there continues to be expenditure pressure in the area of corporate vehicle hire that tends to be a reflection of pan-London operational needs.

15. Supplies and Services
The current position shows an underspend of £0.5m and a forecast underspend of £3.8m. Within this area there are a number of budget pressures, the most significant of which is forensic science submissions. However, these pressures are more than being compensated for by underspending in compensation and IT development.

16. MPA Contingency
The residual MPA contingency budget of £4.1m is forecast to be fully committed by the year -end. It is proposed that, in view of continuing reservations about the delivery of the corrective action achieving the forecast result, the contingency should remain frozen as agreed by the Authority at its meeting on 25 October 20001.

17. Business Group income
This area is showing a considerable level of receipts above those budgeted for. The position to date shows excess receipts of £3.7m and the year-end forecast shows excess receipts of £8.4m. This is predominantly due to unbudgeted partnership income that is offsetting unbudgeted partnership expenditure (see para. 11)

18. Service-wide income
Again receipts are running ahead of budgeted income by £2.9m year to date and £7.3m at the year-end forecast. This is due to three areas of higher than anticipated income:

• Rents receivable (see para. 13)
• Pension contributions from additional officers
• Reimbursement of Criminal Record Bureau set up costs which is offsetting unbudgeted expenditure relating to the creation of the character enquiries centre within Specialist Operations.

Overview of budget position

19. This monitoring report shows net expenditure forecast to be in line with budget at the year-end. This year-end position has been achieved following a systematic internal review of the budget position and after identifying a number of corrective actions. It is recognised that this year-end position can only be achieved if these actions are followed through robustly and to this end the scrutiny and reporting process will need to remain rigorous for the remainder of the year.

Budget priorities update

20. Police Officer Recruitment and Retention
Detailed reports on recruitment and retention issues are regularly submitted to the Human Resource Committee. Table 1 sets out current performance on police recruitment and wastage:

Table 1 – Performance on Police Officer Recruitment & Retention

NB: There is no recruit intake in September.

21. The downward trend in the number of police officers occupying designated civil staff posts with Borough Command Units continues as demonstrated in Table 2.

Table 2

22. Civil Staff Pay Measures
The improved Location Allowances were put into payment in May backdated to April 2001. The costs of £8.9 m are now reflected in the budget reports. The remaining provision for civil staff pay improvement of £13.338m is still held in the Central provision. Work is progressing on the Hay review with a view to implementing this in January 2002. A report to the Human Resources Committee on the implementation has been referred to the MPA Full Authority meeting on 10 December for approval.

23. Information Technology programme
Members of the Committee have been sent a schedule of the projects in the IT programme with comments as to where they are in the development and implementation cycle as at October 2001. This information is exempt.

C. Financial implications

There are no financial implications arising directly from this paper.

D. Background papers

Previous Committee reports referred to above.

E. Contact details

Report author: Bob Alexander, Director of Finance, MPS.

For information contact:

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

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