Capital programme 2003/04 to 2007/08

Report: 08
Date: 10 April 2003
By: Commissioner and Treasurer

Summary

This report seeks approval of the capital programme 2003/04 to 2007/08. It confirms details of the capital settlement 2003/04 that have previously been reported verbally to the Committee. Account is taken of (i) adjustments that need to be made to funding of the capital programme; and (ii) revisions to the range of capital schemes to be undertaken in light of the review of the MPA estate strategy and other initiatives. These changes have occurred since the draft programme was seen by the Committee on 24 October 2002.

Information is also provided on (i) the revenue implications of the capital programme 2003/04 to 2007/08; and (ii) present forecasts of the outturn position for the capital programme 2002/03 and the likely level of funds that will be required to be carried forward for schemes in future years as a result of slippage in the programme.

A. Recommendations

The Committee is invited to:

1. note details of the capital settlement 2003/04 (paragraph 4-7).
2. approve the use of capital receipts to meet the shortfall in funding arising from the lower than expected capital settlement (paragraph 9).
3. note the potential impact of the introduction of the Prudential Code (paragraphs 11-13).
4. approve the five year capital programme 2003/04 to 2007/08 (Appendix 2).
5. note the forecast expenditure position for the capital programme 2002/03 as at the end of period 11 (paragraph 14).
6. note the intention to carry forward through reserves sums allocated to projects that continue to be required for scheme completion (paragraphs 15).

B. Supporting information

Background

1. A draft capital programme 2003/04 to 2007/08 was approved by the Committee at its meeting on 24 October 2002. This information was required as part of the formal budget submission to be made by the MPA as one of the functional bodies of the Greater London Authority (GLA). It was not possible at that time to give final approval to the programme as details of the capital settlement for 2003/04 were still awaited from the Home Office.

2. The programme submitted was drawn up on the basis that Home Office capital expenditure approvals would continue at the level received in 2002/03. The programme also took account of a projection of capital receipts and a phased use of capital reserves. The allocation to business groups was as set out below.

Table 1: Capital Programme Indicative Business Group Allocations

3. The overall expenditure in the programme for business groups reduces in the later years as capital reserves used to support the programme are depleted.

Capital Settlement 2003/04

4. Details of the capital settlement for 2003/04 for police authorities in England and Wales were provided via e-mail by the Home Office on 12 February 2003. The total settlement for the MPA including both capital grant and supplementary credit approvals (SCAs) was notified as £41.244m. This represents a reduction of £3.267m, or 7.34%, on the 2002/03 figure of £44.511m. This information was reported orally at the Finance Committee held on 13 February 2003. Disappointment was expressed at the poor settlement figure and it was requested that further detail be provided on the settlement sum.

5. Formal notification of the capital settlement was received by the Clerk to the MPA on 6 March 2003. The letter from the Police Resources Unit confirmed that the settlement comprised £24.402m capital grant. This represents an increase of £1.599m, or 7.01%, on the 2002/03 figure of £22.803m. The remainder of the settlement related to issued supplementary credit approvals of £16.842m. This is a reduction of £4.866m on the 2002/03 figure of £21.708m. A comparison for 2002/03 and 2003/04 of the MPA share of the overall settlement is shown at Table 2.

Table 2: Capital Settlement – MPS Share of Total

6. The Home Office has provided no explanation as to why the overall level of SCAs available for issue has reduced. The MPA has also been disadvantaged in comparison with other authorities as its percentage share of the overall settlement figures for both capital grant and credit approvals have reduced. Table 2 above refers. The Treasurer has discussed this issue with the Home Office officials who have assured him that the distribution formula has been properly applied. The deterioration in the MPA position is due to the relative movement in estimated capital receipts which are also taken into account. The overall reduction in the sums distributed accounts for £1.850m of the £3.267m reduction and the lower MPA percentage share for the balance of £1.417m.

7. The Home Office has also announced as part of the settlement the continued operation of the Premises Improvement Fund (PIF). A further sum of £20m is to be made available to police authorities in England and Wales to modernise the police estate and communications technology. Whilst the intent of the PIF is laudable, its continued operation works to the detriment of the MPA. £20m is ring fenced with bids invited from individual authorities identifying how officer efficiency and effectiveness would be improved should approval be given for a scheme to proceed. Each authority is required to match fund approved schemes with a maximum of two bids for £0.5m being invited from each force. If the sum ring fenced for PIF purposes continued to be made available for general distribution, the MPA, being the largest police authority, would receive circa £5m. This compares with a maximum of £1m from the PIF on the assumption that our bids are successful.

Review of Capital Programme Resources

8. The reduced allocation of Home Office approvals for 2003/04 limits the funds available from that source to finance the capital programme. For planning purposes it is also assumed that a similar level of approvals would be received annually for the remainder of the programme.

9. However, recent capital receipts have been significantly higher than previously assumed and, taking account of these resources, it is recommended that the capital programme can be maintained at the level approved in the draft programme. The overall impact on capital reserves is set out in Appendix 1. This shows the phased use of reserves with a balance remaining of £6.168m at the end of the five year programme.

10. It should be noted that, in the short term, capital reserves will be required to fund expenditure on the C3i Programme in advance of the receipt of Government specific grant. Future years’ grant receipts will serve to restore the reserves to a large extent.

Capital Finance Regulations – The Prudential Code

11. Whilst the proposed capital programme has been drawn up on the basis of resources available within existing capital controls, the legal framework for control of capital expenditure is presently under review. A new system of control known as the Prudential Code is to be introduced which will allow authorities greater flexibility for capital investment providing spending plans are affordable, prudent and sustainable. A paper by the Treasurer dealing with the implications of this development is on the agenda for this meeting (agenda item 7).

12. The Prudential Code is presently being finalised and the earliest date for implementation is 1 April 2004. In overall terms the new control framework should enable the Authority to increase its borrowing and thereby capital expenditure. This will assist in addressing the problems of lack of investment in the MPA estate and equipment.

13. It is not possible at this stage to assess to what degree the new framework will add to resources available for investment. Nevertheless, it is expected that the resources to be allocated for 2004/05 onwards to the capital programme will be revised upwards.

Capital Expenditure Programme 2002/03

14. At the end of period 11, expenditure of £91.694m is forecast against the revised capital budget of £125.084m. This underspend of £33.390m (26.69%) is largely accounted for by:

• adjustments to the land and buildings capital programme (£11.063m). Much of this relates to the review of the Estate strategy and delays to the commencement of major refurbishment schemes;
• slippage in the C3i Programme (£15.560m);
• delays in the IT Implementation Strategy (£4.034m); and
• delays in vehicle purchase, especially specialist orders (£2.922m).

15. In the vast majority of cases business groups/project managers will be requesting that the sums noted as ‘slippage’ be carried forward through reserves to 2003/04 and subsequent years. This is in line with present capital funding policy whereby sums allocated to a project are deemed available over the lifespan of that project. Full details of affected projects will be provided to Finance Committee as part of the 2002/03 capital expenditure final outturn report.

Capital Expenditure Programme 2003/04 to 2007/08

16. In drawing up the detailed capital programme, business groups were asked to review their allocation of resources. Key criteria were the identification of projects which:

• the MPA is contractually committed to complete;
• support operational objectives;
• are deemed essential to the delivery of significant efficiency gains; and
• replace inadequate/dilapidated accommodation and/or equipment.

17. A summary of expenditure and funding for the five year capital programme 2003/04 to 2007/08 is shown at Appendix 2. Full details of the projects proposed within the programme are contained in an accompanying exempt report. Figures noted in respect of expenditure incurred before 2003/04 include the full revised budget figures for 2002/03. Comments on the various areas in the programme are as follows.

Property Services

18. It has been acknowledged that the scale of funding which can be made available to Property Services is insufficient to fund the full range of schemes initially proposed to be undertaken over the course of the capital programme 2003/04 to 2007/08. It is also recognised that the growth in police numbers and the introduction of police community support officers brings with it accommodation issues that must be addressed. In recognition of this the land and buildings programme has been revised. It has moved to a policing priority theme based approach concentrating on the statutory and contractual obligations placed on the MPA. Full details of this revised policy are contained within a separate report on the agenda of this Committee meeting.

Directorate of Information

19. The technology programme is almost exclusively taken up by the Infrastructure Renewal Programme and the Information Strategy Implementation. These programmes of work were previously shown as single line entries. The opportunity has been taken to separate the work streams into a number of coherent projects that will deliver the objectives of the MPA with regard to information systems, their development, integration and management.

Transport Services

20. The transport allocation is based on the assumption that like for like replacement will occur as and when vehicles fall due for replacement. Any restructuring of the fleet will be contained within the overall sum available. The opportunity of leasing certain classes of vehicles is also being explored. The Committee will be kept aware of any developments in this area.

C3i /Airwave Programme

21. In keeping with good business practice the expenditure forecast for the C3i programme is constantly reviewed. This is imperative as whilst the majority of funding for the Programme is coming from specific grant provided by the Home Office, considerable input of funds from the MPA is also required. Members will recall that £11.147m of MPA funds was invested at the onset of the project. Present forecasts indicate that a further £7.653m will be required. This is made up of £5.813m for the C3i project under the matched funding agreement with the Home Office for the final completion of the scheme, together with an unbudgeted sum of £1.84m to achieve full implementation of the Airwave Project. The figures set out in Appendix 2 make provision for this enhanced level of expenditure.

C. Equality and diversity implications

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

D. Financial implications

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

E. Background papers

• Corporate Finance – Capital Programme 2003/04 to 2007/08

F. Contact details

Report author: Sharon Burd, Director of Finance, MPS.

For more information contact:

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

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