2004/05 Revenue budget draft submission

Report: 03
Date: 13 October 2003
By: Commissioner and the Treasurer

Summary

The 2004/05 revenue budget draft submission is attached to this report for consideration by the Committee. Work is proceeding to identify further budget reductions up to £40 million and an oral report on progress will be made at the Committee.

A. Recommendation

1. To consider the draft revenue budget submission, recognising that it does not reflect the continuing exercise to identify further budget reductions, and make any recommendations to the Authority.
2. To consider and comment on an oral report on meeting a £40 million target for further savings, making any recommendations to the Authority as appropriate.

B. Supporting information

Introduction

1. The Mayor’s guidance for the preparation of the 2004/05 budget was reported to the Finance Committee on 9 June 2003. The draft budget has to be submitted to the Mayor by 10 November and in order to meet this deadline the submission will have to be substantially approved by the full Authority on 30 October. The purpose of this meeting is to enable the Finance Committee to consider the draft submission and any outstanding matters and make recommendations to the Authority.

2. The Committee has already reviewed progress in developing the 2004/05 budget at two previous meetings. On 10 July the Committee received a report setting out an update of corporate budget pressures and the resulting implications for savings requirements in accordance with various options set out in the Mayor’s guidance. The Committee agreed hat a savings target of £50 million should be pursued.

3. At the Committee’s meeting on 15 September the results of a review of business group pressures were reported together with the achievement of the savings target. At this stage the draft budget was broadly in line with option 3 in the Mayor’s guidance.

4. Since the last meeting of the Committee the Chair of the Authority has met the Mayor in a budget steering group which considered the estimated costs of the Step Change programme as well as the overall budget position. As a result the Mayor has asked the MPA/MPS to seek further savings to move towards option 2 in his budget guidance.

5. The draft submission attached to this report has been based on the position reported to the Finance Committee in September. Work to identify further savings is continuing and progress will be reported orally to the Committee.

Submission

6. The complete 2004/05 budget submission will effectively comprise five elements.

• Business plan. This will be based on the MPA/MPS corporate strategy Towards the Safest City with updated information and is being considered by the Planning Performance and Review Committee on 9 October.
• Budget and equalities submission. This will be considered by the Equal Opportunities and Diversity Board meeting on 17 October.
• Budget plan for 2004/05 to 2006/07. First draft attached to this report.
• Capital spending plan 2004/05 to 2008/09. Included on this agenda.
• Step Change programme. Also included on this agenda. Relevant information is incorporated into overall budget figures in this report.

7. It is intended that the components of the submission will be brought together for the consideration by the Authority.

Summary of submission

8. The attached 2004/05 revenue budget submission stands on its own as a statement of the budget position at this stage. The following paragraphs briefly summarise the key points.

9. The budget guidance requires the MPA to exemplify savings requirements for three options.

• Option 1 – a precept increase limited to 2.5% (resulting precept of £454.8m)
• Option 2 – 2003/04 precept plus full-year cost of 2003/04 officer and PCSO growth (resulting precept of £481.9m)
• Option 3 – a budget requirement (net budget less all specific grants) of £2,351.6 million as per the 2004/05 forward plan in the published final GLA budget.

10. The proposed budget build is set out in schedule 3.2 of the submission. The key components are as follows:

11. Grant estimates for 2004/05 are set out in schedule 3.3 and are summarised in the following table:

12. In order to compare with the Mayor’s savings options grant has to be deducted from expenditure as follows:

13. On the basis of these figures the savings requirement under option 3 has been exceeded by £0.2 million. Further savings of £44.7 million and £71.8 million would be needed to meet options 2 and 1 respectively.

Step Change programme

14. The Step Change programme has been overseen by a Steering Group with periodic reports to Coordination and Policing Committee. The executive summary of the business case included with this agenda was considered at an informal session of CoP on 3 October.

15. The preferred profile for implementing Step Change is to start with relatively limited growth in year 1. This would focus on establishing a spread of community based units across all boroughs. The preferred plan is to complete the process over the following three years. Three options have been developed which match this profile as set out below, with projected revenue costs for 2004/05.

16. The full additional cost of the Step Change programme on completion is estimated at £368.6 million, including the revenue cost of financing capital expenditure. It is likely that no firm commitment will be given to the programme and costs beyond next year subject to a review in the light of experience in twelve months time.

Overall position

17. The overall position for 2004/05, combining Step Change option B with the budget as reflected in the draft submission in line with option 3 in the Mayor’s guidance, can be summarised as follows:

18. This position was considered by the Mayor at a budget steering group on 25 September at which he requested that the MPA/MPS seek further savings to move towards option 2 in his budget guidance. In order to respond to this we have set a target for further budget reductions of £40 million.

19. Work is therefore now proceeding to examine the scope for further budget reductions covering the following areas:

• Potential for transferring expenditure of a capital nature from revenue budget to capital programme and increasing borrowing
• Review of reserves
• Review of inflation provisions
• Re-review of income
• Review overtime position
• Scope to defer growth items
• Functional change opportunities
• Further business savings
• Rigour of Step Change costs

20. Clearly this work will be ongoing for some time with no certainty about how close we can get to the target. An oral report will be provided on progress.

C. Equality and diversity implications

There is a separate Budget and Equalities section in the budget submission.

D. Financial implications

The approved budget will provide the financial framework for 2004/05 expenditure.

E. Background papers

Mayor’s Budget Guidance 2004/05

F. Contact details

Report author: Peter Martin, MPA.

For more information contact:

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

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