Revenue budget monitoring 2003/04 – as at August 2003

Report: 05
Date: 23 October 2003
By: Commissioner

Summary

This report sets out the income and expenditure for the MPA/MPS to the end of August 2003 (Month 5) and provides an update to the projected financial outturn for the year.

A. Recommendation

Members are asked to note the contents of this report.

B. Supporting information

Introduction

1. The purpose of this report is to provide an understanding of the revenue budget position of the MPA/MPS for the financial year 2003/04.

2. The statement attached at Appendix 1 reflects the year to date position for income and expenditure to August 2003 (Month 5) and provides a projected outturn position based on these actual results and current information available regarding the remainder of the year. The statement at Appendix 2 provides the projected outturn position against the annual budget for each of the business groups.

Overall position

3. The summary position is shown at Appendix 1. The statement shows an underspend of £3.9m for the year to date and a forecast underspend for the year of £5.4m. This is very close to the forecast position reported for the previous period. Headline Issues

Police pay

4. This budget line shows an underspend of £1.6m for the year to date, with a projected underspend of £5.4m for the year. The forecast underspend has increased by £3.8m which is mainly due to the effect of the police pay award of 3% being 0.5% below that which was budgeted for.

Civil staff pay

5. Civil staff pay is showing a year to date underspend of £2.7m and a forecast underspend of £8.6m. The forecast underspend has increased by £2.8m and reflects difficulties encountered in recruitment.

Police overtime

6. The position on police overtime remains of concern. The year to date position and forecast show significant overspends of £9.6m and £12.9m respectively. Commentaries from the business attribute this overspend to operational pressure resulting from the need for increased security and protection levels and the need for high visibility policing resulting from anti terrorist activity. Finance Services are currently undertaking a review to determine the specific causes of this overspend and to understand the reasons why some business groups reduced their devolved overtime budget as allocated during the budget profiling stage. The initial outcome of the review is that the internal virements reducing the budget need to be reversed, and this will be reflected in the September monitoring report. This will restore the overtime budget to £104.3m, which is still less than the forecast expenditure. Budget holders have been tasked with bringing expenditure back into line with the PNB agreement. A further update will be provided at the next meeting.

Pensions

7. We are not reporting a year to date or forecast variance for police pensions. This is to reflect the potential need to use any underspend to strengthen the Pensions Smoothing Reserve to help manage future peaks in pensions expenditure. Currently the underlying forecast underspend in police pensions is £6.8m.

Running expenses

8. Some elements of the supplies and services budget are forecast to overspend such as Local IT purchases (£1.1m) and desktop support costs (£1.1m) (these have increased due to the greater number of workstations needed to support the increase in officer numbers), as well as clothing costs (£0.9m), catering goods (£0.4m), external consultants (£0.6m) telephone rentals (£0.7m) and PSD operational support costs (£0.4m). As a result of these and other issues, running expenses as a whole are forecast to overspend by about £10m. Some overspends such as OTSU projects (£0.5m) and Payments to CSOHS (£0.5m) are matched by additional income.

9. The previously reported overspend resulting from the increased cost of free rail travel has been addressed by the allocation of centrally held non-pay inflation budget to this area.

Income

10. Business Group income is showing a forecast over recovery on budget of £5.1m which is mainly due to increased recovery of additional expenditure from third parties for the provision of additional services. These include additional Immigration Service receipts of £1.1m and reimbursements of £1m from Home Office and F&CO that had not previously been forecast.

11. Service wide income is forecast to over achieve the budget by £8.5m. This is mainly due to favourable projected receipts for investment income of £2.1m and pension contributions and transfer values of £6.9m. Other areas where income is exceeding budget have been offset by deficits on vehicle removal income caused by delays in building Charlton Car Pound (£1m) and reduced income for Criminal Records Bureau (£2.3m) due to civil staff recruitment difficulties. This reduction is matched by an underspend on civil staff expenditure in CRB.

Budget savings in 2003/04

12. As part of the exercise to balance the 2003/04 budget the MPA/MPS identified savings of £25.8m. These savings were reflected in reduced budgets. There are a few areas in which the MPS is not anticipating achieving the savings, these are police overtime, air travel and external consultancy. We are however over achieving on additional investment income by £2.1 million giving a net under achievement of £1.5 million.

Additional high priority growth in 2003/04

13. The MPA approved growth in a number of high priority areas in 2003/04 of £10.2m. The MPS is broadly on target to achieve growth in these areas and additional budgets will be fully spent.

Delivering a managed underspend

14. As part of the exercise to balance next year’s budget a number of budget pressures have been identified which it is proposed to fund by carrying forward underspend from this year. Also a number of pressures are emerging in-year which will need to be funded from underspends elsewhere. To fund these one-off budget pressure both in-year and next it will be necessary to deliver a managed underspend of about £20m. Finance Services are reviewing a means of delivering this underspend with the minimum of impact on the Service. Future reports will outline the proposed means of delivering a managed underspend in more detail.

C. Equality and diversity implications

There are no additional equality/diversity issues arising from this report.

D. Financial implications

Financial implications are covered in the main part of this report.

E. Background papers

None

F. Contact details

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

For more information contact:

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

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