Revenue budget monitoring 2003/04

Report: 05
Date: 22 April 2004
By: Commissioner

Summary

This report sets out the income and expenditure for the MPA/MPS to the end of February 2004 (Month 11) and provides an update to the projected financial outturn for the year. It also updates the committee on two issues in relation to Airwave expenditure.

A. Recommendation

Members are asked to note the contents of this report and approve the transfer of up to £5m of funding to PITO in respect of Airwave expenditure in return for police capital grant of an equivalent sum in 2004/05 as detailed in paragraphs 15-17.

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 February 2004 (Month 11), 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 £17.2m on expenditure (0.7%) and an over achievement of income by £7.5m (2.7%) for the year to date and a forecast underspend for the year of £2.8m (0.1%) after transferring £18.9m to reserves approved by the MPA and 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

Headline issues

Police officer pay

4. This budget line shows an underspend of £8.1m for the year to date, with a projected underspend of £6.6m (0.6%) for the year, an increase in the underspend of £1.5m from last month.

Police (civil) staff pay

5. Police staff pay is showing a year to date underspend of £16.7m and a forecast underspend of £18.5m (4.9%) a reduction of £2.8m from last month. This reflects a budget virement of £5m recently approved at Co-ordination & Policing Committee to help fund high priority IT projects charged against Servicewide Supplies and Services (see para 11). 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 for Police (civil) staff pay

Police overtime

6. The position on police overtime has improved slightly since last month, the year to date position and forecast showing overspends of £9.4m and £8.2m respectively. The main business group forecast overspends are in:

• Territorial Policing - £2.6m (4.0%)
• Specialist Operations - £5.9m (25.7%)
• Specialist Crime Directorate -£1.0m (5.6%)

With forecast underspends in:

• Deputy Commissioner’s Command - £0.5m (11.5%)
• Human Resources Directorate - £0.6m (15.5%)

7. A Police overtime update report was tabled at the MPA Budget Group on 12 March setting out the issues that have arisen from The Police Overtime Working Group around improving management information, management controls and patterns of working. Average annual overtime payments per officer are set out in the following table.

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

Note – all at 2000/01 cost base

Running expenses

8. Running expenses as a whole are forecast to overspend by about £3.8m (0.1%). This a reduction of £5.0m on the position reported last month due to the virement of £5m budget from Police (Civil) Staff pay (see para 11). Reduced expenditure forecasts around external consultants (£0.5m), community relations (£0.4m), devolved forensics (£0.4m) and local procurement (£0.3m) have been offset by a reassessment of the tax liability costs relating to free rail travel.

Income

9. Business Group income is showing a forecast over recovery on budget of £10.5m which is mainly due to increased recovery from third parties for the provision of additional services and immigration receipts. The main areas of over recovery are in:

• Territorial Policing - £2.7m due to immigration services work and other operational receipts.
• Specialist Operations - £3.6m due to the reimbursement of costs associated with increased security at Heathrow and the Palace of Westminster together with operational receipts.
• Specialist Crime - £3.4m due to operational receipts and some recovery from forfeiture.

10. Service wide income is forecast to under achieve the budget by £4.3m, a £3.2m decrease in expected income from last month. This is mainly due to reductions in the forecast income for Transport OCU (£1.4m) Criminal Records Bureau (£0.8m), DNA expansion Programme (£0.7m) and rents receivable (£0.6m), some of which is matched by reduced expenditure.

Budget virements

11. As the Deputy Commissioner’s Command were forecast to underspend Police (Civil) staff pay by £6.3m, there has been an intention to refocus the expenditure on some high priority IT projects. A budget virement of £5m was approved by Co-ordination and Policing Committee on 15 March from Police (Civil) Pay into Servicewide Supplies and Services to fund expenditure on projects such as C3i enabling works, Aware infrastructure and upgrade connections. This is not a permanent virement.

Budget savings in 2003/04

12. As part of the exercise to balance the 2003/04 budget the MPA/MPS identified savings of £25.8 million. These savings were reflected in reduced budgets. Savings not being achieved currently total £6.5m which remains as previously reported.

Delivering a managed underspend

13. In order to provide funding for one-off budget pressures in 2004/05 and following the Authority’s decisions on the 2004/05 budget, the MPS needs to deliver a managed underspend of £18.9m. The forecast reflects the transfer to reserves for this and the MPS remains on course to deliver the required level of underspend.

Airwave grant

14. As reported to this committee on 19 February 2004, in the provisional grant settlement for 2004/05 announced in November 2003, the Home Office had eliminated £38m of specific grant, which had been expected to fund Airwave revenue costs in 2004/05. The Home Office subsequently accepted that a mistake had been made and in January 2004 agreed to provide £30m of additional funding –but made up of £10m revenue grant in 2003/04 and £20m capital grant in 2004/05. The MPA has been allocated £0.344m of revenue grant and £3.582m capital –making £3.926m in total. The additional revenue income for 2003/04 is NOT shown in the forecast out-turn as it will be credited to a earmarked reserve in closing the accounts and carried forward to meet costs in 2004/05.

15. In addition to the above error, a similar situation has arisen in respect of funding provided by the Home Office to the national Airwave programme for 2004/05 co-ordinated by PITO. The Home Office has agreed to provide an additional £19m to the national programme in 2004/05 but only has capital rather than revenue funds available, and the ACPO chair of the national Airwave Programme Board has requested all police forces to consider transferring revenue funds to PITO in exchange for the Home Office making available an equivalent amount of capital grant in 2004/05. These additional monies have been agreed as needed by the Airwave National Board and would provide enhanced resilience requirements which have arisen since the Airwave contract was signed in February 2000 plus the capacity for officers to use Airwave on the London Underground (which is of particular importance to the MPA/MPS).

16. The Clerk (who sits on the Airwave Programme Board), the Treasurer and our external auditors have been consulted and an “in principle” offer of up to £5m has been made on behalf of the MPA/MPS, subject to the detailed mechanism for transfer of funds being agreed and the agreement of the Audit Commission to the arrangements. This transfer would be funded by utilising capital reserves in 2003/04 to fund expenditure of a capital nature currently reflected in revenue (instead of financing by way of revenue contributions to capital outlay) , which would then be replenished in 2004/05 by Home Office capital grant. This is exactly the same approach as is already being adopted with the additional capital grant referred to in paragraph 14 above.

17. The Committee is requested to approve the offer subject to the caveats listed above and to note that this transfer, if it proceeds, will need to be reflected, in due course, in the 2003/04 final accounts.

C. Race and Equality impact

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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