Revenue budget monitoring 2003/04

Report: 05
Date: 18 December 2003
By: Commissioner

Summary

This report sets out the income and expenditure for the MPA/MPS to the end of October 2003 (Month 7) 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 October 2003 (Month 7), 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 £7.0m on expenditure (0.48%) and an over achievement of income by £5.4m (3.2%) for the year to date and a forecast underspend for the year of £5.8m (0.24%) after transferring the £12.8m to reserves required under the budget submission to the Mayor. A summary of the overall position by Business Group is as follows:

Table 1 – Overall position by Business Group

The increase in the reported underspending reflects the pressure that has been applied to declare expected underspends early in order to secure the necessary transfer to reserves to support next year’s budget.

Headline issues

Police Officer pay

4. This budget line shows an underspend of £3m for the year to date, with a projected underspend of £4.8m for the year. The forecast underspend has increased by £3.3m. Investigation suggests that previous forecasts were overstated as some cost centres had erroneously included pay inflation in their forecast.

5. Variances at a business group level are small relative to the size of the budgets. Specialist Crime Directorate is forecasting an overspend of £3.4m (2.9%) and Specialist Operations an underspend of £2.9m (2.1%) this reflects the changed priorities in-year in the deployment plan for officers agreed by HR Star Chamber. Human Resources are showing an overspend of £3.7m (4.7%) which is associated with better than expected recruitment. Centrally Held is showing an underspend of £5.5m which reflects the lower than anticipated pay award of 3% rather than the budgeted 3.5%. The budget assumptions for 2004/05 have been reduced to reflect the lower levels of award now expected.

Police (Civil) Staff Pay.

6. Police staff pay is showing a year to date underspend of £7.7m and a forecast underspend of £10.5m. Table 2 shows the year end forecast position against full year budget for each business group.

Table 2 – Comparison of annual budget to forecast year end position

Police overtime

7. The position on police overtime continues to improve as seen last month, the year to date position and forecast showing overspends of £8.9m and £3.5m respectively. The operational reasons for this overspending have previously been reported to this committee. The main business group overspends are in:

• Territorial Policing - £1.5m (2.4%)
• Specialist Operations - £2.7m (11.6%)

8. The Police Overtime Working Party is due to meet again on 12 December with the continuing remit to improve management controls in this area and identify opportunities to further reduce the forecast overspend. Average overtime payments per officer are set out in the following table.

9. The reduced forecast for police overtime expenditure has reduced the average amount forecast to be paid per officer by £39.

Table 3 – Amount paid on average to individual officers since 2000/01

Note – all at 2000/01 cost base

Pensions

10. We are not reporting a year to date or forecast variance for police pensions expenditure. This is to reflect the MPAs wish to use any underspend to strengthen the Pensions Smoothing Reserve to help manage future peaks in pensions expenditure. In addition the MPA have consistently pointed out that part of the net pensions underspend relates to lump sum transfers into the MPS (see paragraph 13) which should be earmarked for payment of pension liabilities in future years. In conjunction with the Treasurer, the MPS are re-examining accounting treatment and policy in this area.

Running expenses

11. Running expenses as a whole are forecast to overspend by about £5.5m. This is a marked decrease on the position reported last month of £10.8m. The main variances at business group level are in:

Overspends

• Specialist Operations - £5.1m (21%) mainly due to overseas travel, witness protection and expenses for officers on attachment from other forces.
• Resources Directorate - £5.7m (2.8%) due to external consultants, tax liability on free rail travel, PFI charges, vehicle maintenance, operational support such as public order equipment, catering goods. (N.B. some of this additional expenditure is offset by additional income)

Underspends

• Deputy Commissioner’s Command - £5.2m (3.7%) due to reductions in compensation payments and desktop support costs, together with delays to the vulnerable and intimidated witness programme.

Income

12. Business Group income is showing a forecast over recovery on budget of £8.1m which is mainly due to increased recovery from third parties for the provision of additional services. The main areas of increased recovery are in:

• Territorial Policing: £1.9m due to immigration services work and other operational receipts
• Specialist Operations: £2.1m due to the reimbursement of costs associated with increased security at the Palace of Westminster.
• Specialist Crime: £3.7m due to operational receipts and some recovery from forfeiture.

13. Service wide income is forecast to over achieve the budget by £1.4m. This is mainly due to favourable projected receipts for investment income. In previous months the forecast over recovery on pension contributions and transfer values was shown. However this has now been shown as being transferred to the pension reserve (see paragraph 10).

Budget savings in 2003/04

14. 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 as previously reported. Also the MPS is likely not to achieve income targets for the Income Generation Unit due to legal obstacles (again, as reported to the Finance Committee on 20 November) and Mutual Aid recharges. We are, however, over achieving on additional investment income by £2.2 million giving a net under achievement of £3 million.

Table 4 – Break down of planned and forecast savings by Business Group

Additional high priority growth in 2003/04

15. 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. The summary at Appendix 3 provides an update for each area of growth.

In-year budget pressures

16. There are a number of in-year budget pressures such as counter terrorism, security, state visits and National Intelligence Model (NIM) implementation etc which need to be funded in this financial year. Work is still on-going by Finance Services to resolve the funding of these. An update will be reported next month now that the main budget submission has been completed.

Delivering a managed underspend

17. In order to provide funding for one-off budget pressures in 2004/05 the MPS needed to deliver a managed underspend of £12.8m. The forecast now reflects the transfer to reserves for this.

18. Following the Authority’s decisions on the 2004/05 budget at its meeting on 9 December, the transfer to reserves out of the 2003/04 underspending is to be increased by £6m. This leaves an extremely tight budget to manage in the remainder of this financial year.

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: 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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