Revenue budget monitoring 2002/03

Report: 05
Date: 24 October 2002
By: Treasurer and the Commissioner

Summary

This report sets out the income and expenditure for the MPA/MPS to the end of September 2002 (Month 6) and provides an update to the projected financial outturn for the year.

A. Recommendation

That

1. Members note the contents of this report.
2. Members approve the Treasurer’s recommendation to release to the MPS the £10m held-back by the MPA.
3. Members approve that the proposals for rape havens and MPA deputy clerk/policy officer be contractually committed in the current financial year.

B. Supporting information

Introduction

1. The purpose of this report is to provide members with an understanding of the revenue budget position of the MPA/MPS for the financial year 2002/03. This is the third revenue monitoring report for this year and follows the presentation approved at Finance Committee on 27 September.

2. The statement attached at Appendix 1 reflects the year to date position for income and expenditure to September 2002 (Month 6) and provides a projected outturn position based on these actual results and current information available regarding the remainder of the year.

Overall position

3. The summary position is shown at Appendix 1, with a Business Group summary at Appendix 2. These statements show a forecast underspend of £17.7m (0.8% of the Net Revenue Budget), and an underspend of £15.7m for the year to date. This is an increase in the underspend previously reported as a result of revised projections in respect of police pay. The recent bombing in Bali and the threatened strike by the Fire Brigade union have not been factored into the forecast. Efforts will be made to recover costs incurred by the MPS associated with these events but it is not clear at this stage how they will funded.

Headline issues

Police pay

4. This budget line shows an underspend of £4.1m for the year to date, with a projected underspend of £10.0m for the year. This forecast underspend recognises the effect of:

• the PNB agreement of a 3% increase for police officers, where 3.5% had been budgeted.
• a shift in recruitment profile of officers towards the end of the year compared to the budget assumption.

5. Recent reports of the profile of police recruitment have identified that this is now weighted more towards the latter part of the financial year. This reflects in the table of recruitment to date shown in Appendix 3a.

6. This shift in the recruitment profile is leading to a reduction in expenditure in the current financial year. However, provided that the overall recruitment target is met by the end of March 2003, the underlying assumptions contained in the 2003/04 draft revenue budget remain valid.

7. The Committee should note that the variation on police pay for Territorial Policing (£28.7m underspending) shown on the Business Group analysis (Appendix 2) should be read in conjunction with the variation in HR Directorate (£25.6m overspending). This situation arises from the allocation of budgets in line with police Business Workforce Targets (BWT). These targets are based on the projected position at 31st March 2003, and include the intended allocation of additional officers being recruited during 2002/03. However, actual costs are derived from the current strength, which reflects that considerable cost of officers flowing through the Hendon Training School. It is proposed to improve the reporting of budgets and actual costs in future to remove this anomaly.

8. The Committee will be aware that the calculated police pay budget for 2002/03 is based on a number of complex factors including the projected average cost of an officer. This average pay cost is currently being reviewed for 2003/04 in light of actual pay levels experienced over the first part of the year and the actual impact of the recent pay award. Budget implications arising from this review will be included in the next monitoring report to this Committee.

Civil staff pay

9. This budget line is showing an underspend of £4.5m for the year to date, projected to £4.4m for the year. A major contribution to this underspend is the lag in filling vacancies since the recruitment freeze was removed at the end of May.

10. Members will note that this freeze together with this application of a vacancy factor for 2002/03 (to meet savings target) has led to this underspend being spread disproportionately across Business Groups. Those with fundable vacancies are actively recruiting, whereas in other areas, notably Territorial Policing, this has contributed to a move towards decivilianisation.

Police overtime

11. As part of the budget allocation process for 2002/03, £2m was held back for police overtime. The agreement between the Treasurer and the MPS is that the MPS should continue to plan on the basis that this holdback will be released, and reflect this in the forecasts. When considering the £2.2m overspend forecast for overtime, this needs to be done within the context of the £2m holdback, i.e., release of this holdback will move the position to a minor overspend of £0.2m.

12. Members will recall that the outturn position for 2001/02 for police overtime showed a £20m overspending. Therefore, although the 2002/03 budget was increased by £10m, this effectively required current overtime levels to be managed down by £10m. The current forecast position for 2002/03 indicates that this lower level of overtime is being achieved.

Housing/rent allowances

13. The last monitoring statement provided to Finance Committee showed a forecast overspend of £2.3m for Housing/Rent Allowance. Members were advised that this would be reviewed and the outcome reported back to Members at this Committee. The review has concluded that the forecast spend was overstated and the forecast now shows spending slightly under budget.

Service wide premises costs

14. The main drivers for this overspend are the estimated additional revenue costs for Tintagel House (£2.0m 2002/03), the impact of the MPA holdback (£2.0m see 9 above), increased rates (£1.0m) and the cost of establishing Charlton Car Pound (£1.5m). This latter overspend is forecast to be met from other savings in the Vehicle Removal and Recovery Team budget and are included against other budget lines elsewhere in the statement.

Income

15. Overall income is showing an over achievement by £3.6m (excluding the effect of partnerships). This includes operational receipts and income generation that will reflect in increased expenditure contained in other budget headings. Partnership income is also forecast at £10.76m for the year. Members are reminded that income forecasts should be treated with caution.

MPA holdback

16. The makeup of the MPA Holdback is set out in Table 1 below:

Table 1 – MPA Holdback

17. The purpose of the holdback was to provide the MPA with a protection against a failure of budgetary control during the year leading to an unforeseen overspending which would threaten the Authority’s reserves. The evidence of the monitoring to the half-year point is that the forecasts of non-police pay headings have been relatively stable and leading to an underspending. The latest information at month 6 shows that police pay is now expected to underspend. The need for the protection provided by the holdback has therefore receded and the Treasurer has indicated that, based on the position at month 6, he is able to recommend that the holdback be released. Members are asked to endorse this recommendation.

Police officer numbers

18. Members had requested that future budget monitoring reports contain information on police officers numbers in term of recruitment, and also those covering designated civil staff posts.

Police Officer recruitment and retention

19. Appendix 3a sets a summary of the current position in respect of police recruitment in 2002/03.

Police Officers in designated civil staff posts

20. Appendix 3b sets a summary of the current position in respect of police officers covering designated civil staff posts.

Budget savings

21. The Budget Change Team continues to monitor the individual savings themes which, following the decisions of the Committee in September, now total £60.6m. The latest analysis shows savings of £59.221m being achieved. This improves upon the position reported in September (£59.067m) and it is anticipated that the target savings of £60m will be achieved.

22. Officers are currently undertaking an in-depth half-year review which involves close liaison with each Theme Manager. The review will provide more information on all themes, but particularly those which are currently predicted to under-achieve and enable further action to be taken to ensure the target of £60m is met. The review will be available at the end of October.

Rape havens and Deputy Clerk/Policy Officer

23. At the meeting of the Finance Committee on 14th October 2002, it was agreed that the proposals for rape havens and the MPA Deputy Clerk/Policy Officer posts, both taken from the list of potential new initiatives, be included in the 2003/04 draft revenue budget. Arrangements are in hand to progress the implementation of these proposals although at this stage no firm commitments have been made. Nevertheless, both items will require contractual commitments to be entered into and potentially some expenditure in the current financial year.

24. In the light of the overall revenue forecast, any such expenditure can be contained within existing budgetary provisions. Member’s approval is therefore sought to enter into contractual arrangements and commit the expenditure on these items during the current financial year.

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

None.

F. Contact details

Report author: Martin Chatfield, Acting Head of Corporate Finance, MPS.

For more information contact:

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

Appendix 3a: Police Officer recruitment and retention summary

Appendix 3b: Police Officer in designated civil staff posts

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