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

Report: 10
Date: 21 February 2002
By: Treasurer and the Commissioner

Summary

This report provides a summary of the revenue budget position as at the end of December together with a commentary on the main budgetary issues including in particular the counter terrorism measures. It also provides an update on the budget priorities.

A. Recommendations

That the Committee : 

1. Members are asked to note the financial position to December 2001 as set out in Appendix 1
2. Note the update on the budget priorities as set out in paragraphs 11 to 14 B. 

B. Supporting information

Introduction

1. Reports have been submitted regularly to this Committee to advise on the progress of expenditure against budget for the year, and to the forecast outturn position for the full year. This report updates members based on the current information available, including the outcome of the analysis undertaken regarding counter terrorism measures following the events of 11th September. 

Review of financial performance

2. The summary position is shown at Appendix 1, with a Business Group summary Appendix 2. These statements reflect a forecast outturn underspend of £6m (0.3% of the net revenue budget). Excluding the marginal forecast overspend on the counter terrorism measures the underlying position is a £6.5m forecast underspend. The year to date position shows a marginal underspend of £1.3m.

3. Previous reports have been presented to this committee highlighting that it has proved difficult to disaggregate the spend on the Counter Terrorism measures from the overall spend of the MPS. This work has now been completed and Appendix 3 shows the resulting assessment, which has been included in both the year to date and full year forecast at Appendices 1 and 2. Members will note that the full year forecast for Counter Terrorism does show a marginal overspend of the £22m additional grant received from the Home Office.

See Supporting material for the appendices.

Headline issues 

4. The Budget Star Chamber decisions and processes have produced savings in excess of the £14m target it was set following the 8th November meeting of this committee. An assessment of the Civil pay and key non-pay lines show an extra £6m saving has been achieved. 

5. The response to the Counter Terrorism threat following 11th September has developed into substitute activity for many operational units rather than being wholly additional spend. The opportunity cost of these resources for the year to date is excess of £10m. 

6. While increased management control and scrutiny has been introduced, some areas of the forecast continue to not recognise the full value of the liabilities of the MPA. These areas relate to recognising future liabilities and form part of the District Auditors Annual Audit Letter (FPBV 17th January 2002). Members are aware that the key constraint in recognising these potential liabilities is the size of the overall budget of the MPA. With this in mind, and in the context of assessments of compensation liabilities ranging from £21m to £150m, it is considered appropriate that any underspends against this years compensation budget be used to establish a provision to meet unsettled claims in the future. 

7. In arriving at the forecast underspend budget previously frozen as part of the Budget Star Chamber activities has been released to support the services focus on street crime for the last quarter of the financial year. 

8. Management Board remains committed to not exceeding the budget in 2001/2 and are aware of the margin of error associated with delivering an exact breakeven position in a £2bn budget organisation that is still developing its financial control and financial management capability. It is therefore leaving in place the constraints introduced by the Budget Star Chamber until the end of the year although the Budget Star Chamber itself has been stood down. 

9. The focus on delivering a marginal underspend for 2001/2 is expected to provide some contingency against year end developments, or if not required, some cover against the delivery of the challenging savings target set for next year. The final position will also have to be considered in the light of the adequacy of the Authority's reserves. 

Major variances

10. The major variances have been commented on in previous reports, significant points to note are: 

• Police Pay – The points made in previous reports stand to explain this variance. Members are also reminded that additional funds are included in the MPA's budget submission for fully funded police pay for 2002/3
• Civil Pay – The funding of the impact of the Hay review continues to be held centrally. The ballot of staff has recommend acceptance of the new pay structure which will commence implementation in February. The increase in the forecast underspend represents the continued freeze on civil staff recruitment as part of the work of the Budget Star Chamber. 
• Police Overtime – As expected inclusion of the full year forecast of Counter Terrorism does show an increase in the reported forecast overspend against this heading. This has been contained by the substitution activity referred to at paragraph 5. 
• Pensions – The trend of underspending against this budget continues and the forecast position has increased to an underspend of £12.9m for the year. 
• Business Group Running Expenses – The position net of Counter Terrorism expenditure shows an overspend of £5.9m, a major contributor to this remains £4.9m for partnerships activity which is offset by unbudgeted income. 
• Service Wide Running Expenses – the forecast underspend stands at £18m after excluding Counter Terrorism expenditure. This includes the forensic overspend of in excess of £11m. Further any forecast underspending in compensation has been removed as explained in paragraph 6 above. Business Groups/Service Wide Income – The points made in previous monthly reports stand to explain income exceeding target by £13.4m, much of which relates to partnership activity.

Budget priorities update

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

Table 1 – Performance on Police Officer Recruitment and Retention

NB: 
1. There is no recruit intake in September.
2. The minor discrepancies between the calculated strength and actual strength in the first few months can be accounted for by officers recorded on strength at 31 March, who actually left in the last financial year and are not therefore shown in the wastage for this year. The minor discrepancies shown for December and January are due to non-attributable changes to personnel data in the respective months.

12. The downward trend in the number of police officers occupying designated civil staff posts with Borough Command Units has reversed in November and December as demonstrated in table 2. It is probable that the dramatic slowdown in civil staff recruitment to ease the financial position is the major cause of this reversal.

Table 2 – Police Officers Filling Designated Civil Staff Posts

13. 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. It is expected that the impact of the Hay Review of Pay and Grading will appear in February and March payrolls. The review changes are backdated to August 2001.

14. Information technology programme

Attached as Appendix 4 (see Supporting material) is a schedule of the projects in the IT programme with comments as to where they are in the development and implementation cycle at present.

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, Head of Finance, MPS.

For information contact:

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

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