Revenue budget monitoring 2002/03

Report: 06
Date: 12 December 2002
By: Commissioner

Summary

This report sets out the income and expenditure for the MPA/MPS to the end of October 2002 (Month 7) and provides an update to the projected financial outturn for the year.

A. Recommendation

1. Members are asked to note the contents of this report.

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 fourth 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 October 2002 (Month 7) 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 an underspend of £16.2m (£15.7m) for the year to date and a forecast underspend for the year of £18.5m (£17.7m) (0.9% of the Net Revenue Budget) (month 6 figures are shown in brackets).

Headline issues

Police pay

4. This budget line shows an underspend of £4.5m (£4.1m) for the year to date, with a projected underspend of £11.7m (10.0m) for the year. This forecast underspend recognises the effect of:

• the PNB agreement of a 3% increase in pay 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 “smoothline” budget assumption (a table of recruitment and retention to date is shown at Appendix 3a).
• marginal reduction on the budgeted average cost of an officer as the larger number of officers on lower pay points has been greater than originally estimated.

5. 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.

6. 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 calculation is under review and it has been identified that a reduction in the average length of service is leading to a saving against the budget in the current financial year. The position continues to be monitored and taken into account in the forecasts. Members will also be aware that a reduction in the estimated average cost of an officer has been identified as part of the savings for the 2003/04 budget.

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 (£25.2m 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. Additionally, considerable pay costs were misposted to HR Directorate after the posting of recruits to Territorial Policing.

Civil staff pay

8. This budget line is showing an underspend of £4.5m (£4.5m) for the year to date, projected to £5.3m (£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.

9. Members will note that this freeze together with the 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, there is significant pressure on civil staff budgets.

10. Appendix 3b sets out an update on the number of civil staff posts that are formally being filled by police officers. In addition, police officers are also engaged in covering civil staff duties where this is required to complete essential tasks. However, it is not possible to quantify the extent to which this occurs from records currently available, but previous sampling exercises have indicated that this can be equivalent to a doubling of those posts formally covered.

Police overtime/MPA holdback

11. The £10m held back by the MPA as part of the budget allocation process for 2002/03 has now been reallocated to the appropriate budgets within the MPS as per Finance Committee approval on the 24 October.

Service wide premises costs

12. The main drivers for this overspend are the estimated additional revenue costs for Tintagel House (£2.0m 2002/03), 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 budget, as reported recently to Finance Committee, and are included against other budget lines elsewhere in the statement.

Income

13. Overall income is showing an over achievement by £3.6m (£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, the most significant of which is police overtime. Members are reminded that income forecasts should be treated with caution.

Budget savings

14. 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 £59.4m being achieved. This improves upon the position reported in October (£59.2m) and it is anticipated that the target savings of £60m will be achieved.

Additional costs of the fire dispute

15. The Service is incurring additional and opportunity costs arising from the fire dispute. Additional costs estimated at £161k will be the subject of a claim on the Office of the Deputy Prime Minister (ODPM). It is anticipated that these additional costs and a number of other opportunity costs will be fully reimbursed.

Other budget pressures

16. Since the forecast was completed a number of other budget pressures have emerged (eg the Turkish Taskforce) and these will be reflected in the Period 8 (November) forecast and monitoring report.

Realignment

17. The MPS realigned its operational commands with effect from 1st November. Every effort is being made to incorporate these in future monitoring reports. However, the 2003/04 budget has taken priority and any budget movements will need to be quality assured. The re-pointing exercise continues to be bedded in, with formal structures unlikely to be finalised until the new year. It may not therefore be possible to report accurately in the new structure until early next year. At the OCU level basic financial monitoring is in place. Care is being taken to not move away from the current stable financial monitoring regime whilst any uncertainty over the new management hierarchy remains that could undermine the much improved financial management controls currently in place.

At the OCU level basic financial monitoring remains; it is essentially repointing OCUs in the new management hierarchy that is being undertaken.

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

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 officers in designated civil staff posts

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