Revenue budget monitoring 2002/03

Report: 05
Date: 16 January 2003
By: Commissioner

Summary

This report sets out the income and expenditure for the MPA/MPS to the end of December 2002 (Month 9) and provides an update to the projected financial outturn for the year.

A. Recommendations

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 update of the revenue budget position of the MPA/MPS for the financial year 2002/03. The statement attached at Appendix 1 reflects the year to date position for income and expenditure to December 2002 (Month 9) and provides a projected outturn position based on data collated in December.

Overall position

2. The summary position is shown at Appendix 1, with a Business Group summary at Appendix 2. These statements show an underspend to 31 December 2002 of £21.4m (£16.2m) and a forecast underspend for the year of £18.9m (18.5m) (0.9% of the Net Revenue Budget). The figures previously reported are shown in brackets.

Police pay

3. The forecast for expenditure on police pay shows a reduction from the last report and the forecast underspend for this item now amounts to £18.3 million. This accounts for the bulk of the underspend in the overall forecast. The underlying reasons for reduced level of expenditure have been previously reported to this Committee and include:-

• The national PNB agreement for the police pay award in 2002 was settled at 3% whereas the budget allowed for 3.5%. This accounts for £2.7 million of the saving.
• The profile of actual recruitment of police officers in the current financial year is weighted more in the latter part of the year as compared to the budget profile which allowed for an even pattern of recruitment. This factor is assessed as saving £10.8 million. A summary of the recruitment and retention to date is shown in Appendix 3a.
• The balance of the saving, £4.8 million, arises because the average pay of a police officer is lower than allowed for in the budget. This arises from the turnover of police officers coupled with growth in numbers leading to an increased proportion of recently recruited officers. The reduction amounts to approximately £170 per officer on a average annual salary of £36, 000 including ERNIC.

4. The saving arising from the profile of recruitment will not impact on 2003/04 because the base budget for that year allows for the full cost of all officers recruited by 31st March 2003 and, the MPS is still on target to achieve that level of recruitment.

5. The reduced cost of the 2002 pay award was taken into account in the base budget build for 2003/04. A saving of £2.5 million in respect of the reduced average cost of a police officer has also been incorporated into the draft budget submission for 2003/04.

6. The average cost per officer does fluctuate marginally month by month and costs may increase in 2003/04 as officers receive pay increments. In addition, the cost of threshold payments as part of the PNB pay restructuring is now estimated to be £2 million more than the amount built in to the budget submission. This will have to be contained within the overall pay budget.

7. Previous reports have drawn attention to the overspending identified against the HR Directorate for Police pay. This has been a result of the allocation of the budget for 2002/03 in line with the Business Workforce Targets (BWT) that has not fully recognised the costs of trainees in the Hendon Training School and the misposting of recruits to the HR Directorate after their deployment in territorial policing. The mispostings have now been corrected but the budget allocation will remain out of balance until a revised allocation is made for 2003/04.

Civil staff pay

8. This budget continues to show an underspend on the year to date as the effect of the recruitment freeze last financial year slowed the recruitment process in the early part of 2002/03. Recruitment is now picking up and the underspend is slightly reduced in the forecast. The level of expenditure is still however subject to pressures on the recruitment process and may be impacted by factors such as security clearance.

Appendix 3b sets out an update on the number of civil staff posts that are formally filled by police officers. In addition police officers are also engaged in covering staff duties where this is required to complete essential tasks. As previously reported information on numbers of these posts is not accessible but overall is likely to be of the same order as the posts formally identified.

Police overtime

9. The police overtime budget is projected to underspend by £1.6 million. A separate report on this agenda confirms that expenditure in the current financial year was less than 2001/02 as at 30 November. The business forecast allows for a higher level of expenditure in the remainder of the year but still keeps within the budget provision.

10. The pattern of expenditure on overtime is volatile and influenced by a number of factors. Incidents such as the siege at Hackney result in additional demands. The costs of premium payments and overtime covering the Christmas and New Year Bank Holidays will also fall in the last three months. Further savings may however accrue if overtime payments remain at the reduced level.

Police pensions

11. This forecast incorporates additional provision for the pilot scheme for payment of the commuted lump sum to officers with 30 years service, whilst they remain employed in the police service.

Service wide premises costs

12. Previous reports have identified additional costs in respect of Tintagel House, increased rates and expenditure to establish Charlton Car Pound. The forecast has now been increased to allow for expenditure on backlog maintenance that was approved by the MPA to be met from the overall underspending in the current financial year.

Income

13. Business Group income shows a similar level of over achievement to the previous forecast statement relating to operational receipts and income generation. Whilst income forecasts must always be treated with some caution, there is increasing confidence that this will be realised.

Ongoing budget pressures and overall financial position

14. The budget forecast reflects a satisfactory position on revenue expenditure with a small underspending of a little under 1% of the budget for the year. It should be recognised, however that significant financial pressures remain and tight control of expenditure continues to be essential.

15. The savings on police pay will not benefit the budget position in 2003/04 for the reasons outlined in this report. The audit qualifications on the accounts in respect of underprovision for pension lump sums and third party liabilities need to be addressed as quickly as possible. To assist with this, where charges are made to third parties for police officers including notional pensions costs, the income from these charges will be used to strengthen the provision for pension liabilities.

16. There are also a number of pressures on expenditure for which no provision has been made in the 2003/04 budget submission. Items previously drawn to members attention include the early roll out of Mobile Data Terminals for the Airwave Project (£3m), additional costs arising from the impact of Congestion Charging (£1m) and various smaller items including accommodation (£3 m).

17. No additional specific grant has been allocated in 2003/04 to further strengthen the provision for counter terrorism. In addition, the civil staff pay budget continues to be under considerable pressure as recruitment up to the budget provision takes place but a significant level of unfunded vacancies remain. The budget will need to be kept under review to identify any opportunities to address these issues.

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 report.

E. Background papers

None

F. Contact details

Report author: Mike Jennings, Director of Finance

For more information contact:

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

Appendix 3

Appendix 3a: Police officer recruitment and retention summary

Appendix 3b: Police officers in designated civil staff posts

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