MPA budget submission 2003/04 - progress update

Report: 09
Date: 27 September 2002
By: Treasurer and Commissioner

Summary

This report sets out the current position in preparing a budget submission for the MPA to consider. It includes an update on key activities and events since the last meeting of the Committee, and sets out a current position statement preparatory to an informal member workshop on 4 October.

A. Recommendations

It is recommended that the contents of this report be noted as preparatory information for the informal member workshop on 4 October 2002.

B. Supporting information

There are 4 appendices to this report:

• Appendix 1 Provisional Budget Summary 2003/04 based on 11 July Finance Committee Report.
• Appendix 2 Revised Schedule of New Initiatives for 2003/04.
• Appendix 3 Police Reform Costing.
• Appendix 4 Position Statement – Funding Gap 2003/04.

Background

1. The Medium Term Financial Projection (MTFP) was considered by Finance Committee on 11 July [agenda item 11] and the full MPA on 25 July. It was agreed that this projection would form the financial planning framework within which the detailed budget build for 2003/04 would take place.

2. A summary of the implications for 2003/04 included in the July papers is set out in Appendix 1. This summary shows the committed growth, identified savings, and new initiatives (inclusive of additional police officers).

3. In setting these expenditure levels against funding assumptions, the report identified a gap between the planned expenditure and available funding of £72.3m for 2003/04. In arriving at this gap, a 23.5% increase in the precept had been calculated based on the Mayor’s guidance.

Update on events since 11 July Committee

4. The identified budget build work has been ongoing during July and August to validate, update, verify and construct the detailed Business Group budgets using the MTFP as the planning framework. Business Groups have now completed this work and this is being collated and scrutinised at a corporate level.

5. The financial pressures included in the MTFP that have been calculated corporately are being revisited and checked against the most updated information available.

6. As part of this process particular attention has been paid to the re-evaluation of the items in the MTFP as growth, committed and new initiatives, to ensure the figures represent the most up to date understanding within the overall context of the funding gap. This revisit has resulted in some items in the MTFP potentially being deleted from the MTFP, some being deferred to subsequent years, and others being revalued. The expectation is that once this work has been completed this will have a marginal positive impact on the funding gap.

7. Elsewhere on the agenda is a paper by the Treasurer which considers the options for change to the grant distribution formula. On the basis of those options it is considered that a distributional gain of £20 million could be assumed in the budget consideration. This figure is therefore included in the position statement on the funding gap (Appendix 4). At this stage there is no further information from the Home Office about the national total of police grant resources which will be available for distribution in 2003/04 and no other changes have been made to the grant projection included in the July report.

8. The initial meeting between the MPA Chair, MPA members and officers, and the Deputy Commissioner and MPS officers took place with the Mayor and GLA officers on 30 July. It was acknowledged that the budget for 2003/04 was work in progress and no particular change was required to the basis upon which we are proceeding. Further meetings continue between MPA and GLA officers, and one further meeting with the Mayor is scheduled for 10 October.

9. The Finance Committee’s Budget Group received an early draft of the paper explaining the New Initiatives. This has been finalised and included at Appendix 2 for information and consideration at the workshop on 4 October.

10. An informal workshop for all members will be held on 4 October, following the Co-ordination and Policing Committee, to consider the budget position for 2003/04. This will provide an opportunity for members to give a steer to the draft budget which will be submitted to the special meeting of this Committee on 14 October.

11. The MPA will be formally reviewing its own budget and reporting to the Coordination and Policing Committee on 4 October. Any new MPA initiatives can then be considered at the informal workshop which follows.

12. Following the publication of the MPA/MPS three year strategy, ‘Towards a Safer City’, members will be aware that work is continuing to develop the policing plan priorities for 2003/04. It will be essential to ensure that these emerging priorities are considered alongside the budget development so that there is a sound match between policy objectives and resources.

Update on specific issues

Police reform

13. A review of the financial implications of the Police Reform pay package has been undertaken and details are attached at Appendix 3. This appendix sets out the impact of each element of the Police Reform Package over the life of the MTFP.

14. These figures represent the information considered by the Police Reform Steering Group for the projected complement of officers at 31/03/03. Growth proposals (including bids for extra officers from the Mayor and others) will include the impact of Police Reform in those costings. While these figures are considered here in the context of the budget, this information will also be considered by the Human Resources Committee.

15. The costing for this package has moved from that included in the MTFP due to changes to the package itself, and further guidance on the potential application of the package within the MPS. Members are reminded that the MTFP (and therefore the 2003/04 Budget) assumes that this will be fully funded. The effect on the funding gap of these changes is neutral and they have therefore been excluded from the position statement at Appendix 4.

PNB negotiations

16. The 2002/03 settlement for police officer pay is an increase of 3%, whereas the budget for 2002/03 included a provision for 3.5%. The full year effect of this saving for 2003/04 is £4.6m, £2.7m as a reduction in the base budget and £1.9m in associated pay inflation. The assumption of a 3.5% increase next September being retained.

MTFP growth items

17. As stated in 6 above the items included in the MTFP have been revisited. The result of this process is being finalised for the information to be presented at the 4 October workshop. 

18. Those items included as New Initiatives have been revisited and finalised for inclusion at Appendix 2 of this report. Members will note that the value of these items has reduced from £11.7m to £10.5m

Bid to the Mayor for additional officers

19. The MTFP included net recruitment growth of 1,500 officers as this was deemed to be the maximum capacity for the organisation to absorb in one year. This comprised 200 for the slippage agreed with the HO as part of the C3i protocol, 200 funded via TfL, 200 funded from Home Office Counter Terrorism funding (assumed civilian ex-police officers used in the first instance) with the remaining 900 forming a bid to the Mayor for additional officers to be funded via a precept increase.

20. The position has developed since that point, but is yet to be finalised.

• High-level information on the intent of TfL has been received; the translation into the number of police officers they intend to fund is ongoing.
• HR Directorate expect to recruit the full requirement of CT officers in 2003/04. This will remove this recruitment requirement in the planning for 2003/04

21. It is anticipated the revised position will be available for the workshop on 4 October, together with the impact of any change on the implied precept.

Savings

22. A preliminary target of £30m has been set for savings in 2003/04. The base budgets have been adjusted to eliminate the costs of services/functions where it will not be possible to make savings, e.g., police pay in SO and TP, pension costs. Directorates have been asked to exemplify 2% savings on the adjusted budget. Proposals received by the Budget Change Team to date total £15.5m, which are yet to be subject of verification and scrutiny. Additionally, this team has examined themes put forward through the Star Chamber that did not eventually become part of the £60m savings package for 2002/03 and also recommendations of recent audit reports. Directorates have been asked to consider those themes which may produce savings and put them forward if they are not already included. There is also continuing work to assess the scope for including further savings from the efficiency and effectiveness review programme in the 2003/04 budget. The MPS is committed to identifying the £30m savings target and may need to adjust the 2% factor to ensure the target is achieved. All proposals will then receive the consideration of Management Board.

Consultation

23. In accordance with the Mayor’s budget guidance we will be involved in wider consultation on the budget proposals in order to prepare the way for the mayor’s formal consultation in December/January. Information and/or presentations are being made to the London Business Forum and other pan-London stakeholders regularly consulted by the MPA. The Society of London Treasurers is being provided with a programme of briefings and the MPA will also meet with the ALG.

Next steps

24. The detailed work will continue for the remainder of September to enable the briefing to the workshop on 4 October. The outcome of that meeting will assist the finalising of the draft submission for consideration by the 14 October Finance Committee, together with the additional elements of the submission required by the Mayor. The full Authority will approve the submission on 31 October with an opportunity for final fine tuning at the Finance Committee on 14 November.

C. Equality and diversity implications

There are no equality and diversity implications arising from this report.

D. Financial implications

The financial implications are those set out in this paper.

E. Background papers

• The MPA Budget Book 2002/03
• Medium Term Financial Projection Report to 11 July 2002 Finance Committee

F. Contact details

Report author: Kevin Geeson, Head of Corporate Finance.

For more information contact:

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

Appendix 1: Provisional budget summary 2003/04

based on Medium Term Financial Projection considered by Finance Committee on 11 July 2002 and the MPA on 25 July 2002

Appendix 2

See Supporting material.

Appendix 3: Costed elements of police reform package

1. £402 increase for each spine point and shortening of pay scales

Note
Based on average strength of 28,500 in 2003/04 and 28,600 from 2004/05 onwards. Excludes any growth funded by Mayor, TfL or HO for CT in future years as the effect of this change in payscale will be reflected in the costings of additional officers funded by those bodies.

2. Competency threshhold payments of £1,002 after 1 year at maximum of payscale

Average number of officers at qualifying point:

Based on 75% of eligible officers receiving payment:

Based on 90% of eligible officers receiving payment:

Note
Takes account of number of officers expected to reach max of payscale + 1 year during the period and estimated numbers off officers leaving the "pool", whether due to leaving the Service or gaining promotion.

3. Special priority payments

Based on minimum limits of 1% basic paybill in 2003/04, 1.5% in 2004/05 and 2% in 2005/06

Notes
1. Awaits further information about roles and numbers selected for payment of SPP and at what rate.

2. Assumes that guideline % of paybill relates to amount actually paid to officers, so ERNIC is additional cost. No information yet available as to whether HO will fund the ERNIC, or allow the % limits to operate such as to include ERNIC.

3. Awaits clarification as to whether HO funding at minimum limits will include any growth in paybill arising from additional officers funded from other sources.

4. Bonus payments

Note
The new scheme replaces a small number of existing allowances. Any additional costs (eg as a result of wider qualifying criteria or setting a % link to the paybill) will need to be managed within existing budgets. Figures above exemplify cost if limit set at 0.2% of paybill.

5. Rationalising allowances

Notes
1. Plain clothes allowance halved from 1.4.2003 and abolished from 1.4.2004.

2. Changes to subsistence, refreshment, lodging and removal allowances are assumed to be cost neutral.

Summary impact on budget

Appendix 4: Funding gap 2003/04 position statement

Based on Medium Term Financial Projection considered by Finance Committee on 11 July 2002 and subsequent updates

The summary below is organised on the basis of the 11 July 2002 MTFP options to close the funding gap at paragraph 36 of that report. No assumption has been made about any change to the precept.

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