Capital settlement 2002/03

Report: 11
Date: 21 February 2002
By: Treasurer and the Commissioner

Summary

This report sets out the details of the 2002/03 capital settlement and its implications for the medium term capital programme 2002/03 to 2005/06.

A. Recommendations

The Committee is invited to:

1. approve an increase in the Directorate of Property Services capital allocation for 2002/03 of £4.7m and £0.5m for works at Heron House. Financing to be achieved through additional funding made available through the capital settlement (paragraph 10).
2. approve that further utilisation of the additional funding made available through the capital settlement be delayed pending resolution of key issues affecting the medium term capital programme (paragraphs 11 and 12).
3. note the capital settlement details for the MPA for 2002/03 of capital grant of £22.803m and supplementary credit approvals of £21.708m (paragraph 2).
4. note that an increase of £8.788m on the 2001/02 capital settlement has been received (paragraph 3).
5. note that a further £20m is to be made available by the Home Office to police authorities across England and Wales to modernise the police estate and communications technology (paragraph 4).
6. note that adjustments will be made to the medium term capital programme 2002/03 to 2005/06 in respect of revised costs for refurbishment schemes at Acton, Dagenham and Southall Police Stations (paragraph 9).
7. note that details are still awaited from the Home Office in respect of the bid for funding of the C3i Project (paragraph 11).

B. Supporting information

Capital settlement 2002/03

1. Details of the capital settlement for 2002/03 for police authorities in England and Wales were announced by the Home Office on 28 January. A total provision of £209m has been made available through capital grant and supplementary credit approvals (SCAs). This is a £52m, or 33.1%, increase on the 2001/02 figure.

2. Of the total provision of £209m, £179m has been allocated to individual police authorities. Of this latter figure the MPA has been awarded capital grant of £22.803m and SCAs of £21.708m. This gives a total allocation of £44.511m, which represents 24.9% of the national total. (The comparable figure for 2001/02 is 22.7%.)

3. The total allocation of £44.511m represents an increase of £8.788m, or 24.6% on the 2001/02 figure. The sum awarded in respect of capital grant remains unaltered. The increase is totally reflected in awarded SCAs. (A credit approval permits an authority to pay for capital expenditure from credit e.g. borrowing rather than cash.)

4. A further £20m will be made available to police authorities in England and Wales to modernise the police estate and communications technology. Authorities will be invited to submit plans for projects with an agreement to provide half of the cost. A key criterion in deciding which schemes will progress will be the extent to which the efficiency and effectiveness of police officers will be improved. The Home Office has advised that plans for specific schemes will be considered in the context of authorities' medium term capital programmes. The Home Office has promised that further information on the bidding process will be published shortly.

5. The final £10m of the overall capital settlement for police authorities in England and Wales has been held back by the Home Office. Deliberations on how this money should be utilised are ongoing.

Medium term capital programme 2002/03 to 2005/06

6. The draft medium term capital programme for 2002/03 to 2005/06 was reported to Committee members on 17 January. The funding assumptions underpinning the agreed funding limit for each financial year were as follows:-

7. The capital grant and SCAs shown throughout the medium term programme reflected 2001/02 levels. This was based on the understanding given by the Home Office in mid-2001 that little increase in settlement levels was likely to be forthcoming. With a higher than planned settlement figure for SCAs in 2002/03 the total funding available has increased. This confirms that the planning assumptions supporting the 2002/03 capital programme can be accommodated. It also demands that careful consideration be given as to how the additional £8.788m total funding made available should be utilised.

8. Five sources of funding are noted as financing the 2002/03 capital programme. In prioritisation terms police grant and SCAs will be used first. These will be followed by other sources of in year finance, before calling on usable capital reserves. Therefore, whilst the total funding available for 2002/03 has grown by £8.788m as a result of an increase in the level of awarded SCAs, the impact of this rise will be to reduce the demand to support capital expenditure through the use of capital reserves.

Adjustments to medium term capital programme

9. Reports in respect of Dagenham Police Station and Ealing Borough have been prepared by the Directorate of Property Services. They show increased capital costs beyond initial estimates. The draft medium term capital programme noted by Committee members on 17 January will be adjusted to reflect revised project costings. It is expected that these amendments will be accommodated within the overall business group allocations for the Directorate of Property Services for 2002/03 to 2005/06. Details of how projects have been rephased will be communicated to Committee members shortly.

10. In the report to Committee members on the medium term programme on 17 January it was disclosed that the Home Office had given some indication that an increase in the capital settlement would be forthcoming. In anticipation of this, preliminary discussions had taken place with the Directorate of Property Services to ascertain what capacity existed to bring forward refurbishment and development schemes. The long lead in time associated with the commencement of major building projects has meant that the opportunity to advance schemes at short notice is limited. The Directorate of Property Services has indicated that £4.7m of the additional £8.788m could be utilised during 2002/03. Included within the £4.7m total is £1m for the first stage of "Operation Cleansweep". This entails improvements to front offices, locker and shower rooms and would be expected to enhance police officer morale. Accordingly, approval is sought to increase the Directorate of Property Services' capital allocation for 2002/03 by £4.7m. Approval is now also sought to include in 2002/03 a sum not exceeding £0.5m for IT communications and associated security works prior to occupation of Heron House by the MPA.

C3i Project

11. The C3i Project has been noted in past reports to the Committee as being funded from sources outside of the main programme. This relates to a bid of £147.5m submitted to the Home Office to meet expenditure requirements. The shortfall against the estimated project cost of £157.4m is expected to be bridged by use of a £10m contingency sum for the scheme held in the 2001/02 programme. Information is still awaited on the submission forwarded to the Home Office. It is not known whether it will be fully successful. Accordingly, it is not known if it will prove necessary to adjust the scope of the project to meet available funding. In view of this, it is regarded as prudent to delay full utilisation of the additional £8.788m achieved through the capital settlement to verify whether any funding will need to be diverted to support the C3i Project.

Improvements to police estate and communications technology

12. At paragraph 4 information is provided on the £20m to be provided by the Home Office for improvements to the police estate and communications technology. Full details on how this facility will operate are still awaited. An MPA response will be prepared once comprehensive information on how this facility will operate is made available. At this time it will be possible to assess what impact the scheme could have on the capital programme as presently prepared.

C. Financial implications

Financial implications are discussed in the main body of the report.

D. Background papers

Corporate Finance – Draft medium term capital programme 2002/03 to 2005/06.

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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