Medium Term Financial Plan And Budget Submission 2005/06–Progress Report

Report: 10
Date: 23 September 2004
By: Treasurer and Commissioner

Summary

The report presents the current position on the development of the medium term financial plan (MTFP) and preparation of the budget submission for 2005/06 to the Mayor.

A. Recommendation

Members are asked to note the report

B. Supporting information

Introduction

1. The last meeting of this committee on 22 July 2004 received a report summarising the Mayor’s budget guidance for 2005/06 and also an initial analysis of SR 2004 and grant funding. The implications of the budget guidance were considered and an approach to the development of the 2005/06 budget submission was approved including that the budget submission should exemplify four options for precept increases ranging from 2.5%, 5%, 9.9% and in line with current MTFP projections; and that a target of £60m savings be pursued.

2. The detailed implications of the budget guidance were set out in the previous report but can be summarised in relation to the 2005/06 precept increase (based on the existing MTFP) as follows

Existing MTFP requirement (before savings) = £2,523.3m

3% government grant increase =24.0% precept increase

5% government grant increase =17.1% precept increase

MTFP/ Revenue Budget Progress to date

3. In July 2004, Commissioners SMT also considered the Mayor’s budget guidance and agreed individual savings targets for each business group totalling £70m-an extra £10m to provide some flexibility to meet unavoidable growth pressures not included within the existing MTFP e.g. extra costs of Free rail travel and some changes in specific grants.

4. SMT also agreed, for the first time, an individual budget control total for each business group (based on current budgets, existing MTFP growth and a share of the savings target) and required budget proposals to be prepared that would contain net expenditure within that control total. Detailed guidance for developing the budget submission and templates were issued to each business group on 4 August to be returned at the end of August. In addition the new MPS Planning Process Board, which has been established to more closely align corporate planning and financial resources, has issued planning assumptions that will underpin the 2005/06 planning process (including finance issues) to be followed by all business groups. The Board has also met monthly since June to oversee the planning process.

5. Detailed returns have now been received from all business groups and considered by the MPS Change Co-ordination Committee. Whilst the returns identify savings in excess of the agreed target (although a few need to be scrutinised for delivery), they also identify a large range of growth items not previously identified or included within the MTFP last year across all business groups, to the extent that the control totals have been exceeded by £130m.Detailed scrutiny of the returns is now taking place but business groups have been requested to urgently review their submissions and to exemplify a budget which remains within the control total by Friday 17 September. A further update, following scrutiny of these revised submissions, will be provided at the committee meeting.

6. An initial review of the savings proposed indicates that only approx. £20m would count towards the Home Office cashable efficiency target of £40m and thus further savings may need to be required to meet this target. In addition, the proposals only include £1m in respect of police overtime compared to £3.5m required under our revised target submitted to the Home Office.

7. The savings proposals also include £10m of expenditure to be transferred to Capital Programme from 2005/06 (£5m for Directorate of Information and £5m for Property Services) and funded from increased borrowing under the Prudential Code. The committee will need to consider these proposals as part of the overall Borrowing and Capital Spending Plan at the Finance (Budget) Committee on 11 October.

Grant Funding update

8. The outcome of the Government’s spending review, SR2004, was reported to the last meeting of the Committee. Although it appeared that the Home Office overall had received relatively favourable treatment, too many uncertainties remained to allow firm conclusions to be drawn about the implications for the MPA. The position is broadly unchanged at this stage, and indeed it is unlikely that any greater degree of certainty will emerge before the announcement of the provisional grant settlement for 2005/06 around mid November.

9. Although this means that the budget submission will have to be developed with a range of possible grant outcomes it also reflects the fact that significant decisions have not yet been made and there are still opportunities to seek to influence those decisions in our favour. Therefore a lobbying strategy is being pursued designed to ensure that ministers and senior civil servants are aware of the implications of allocating more or less grant to the MPA.

10. The approach is firmly based on the significant improvement in the performance of the MPS and that additional grant funding is therefore investing in success. Key aims are to maximise specific grant funding for neighbourhood policing, to secure full funding for the MPS’s national, international and capital city functions, and to encourage the Government to move as quickly as possible to ensure that we are fully funded in accordance with the Government’s grant allocation formula. The messages need to be pressed home over the next month before the final decisions affecting the grant settlement are made.

11. There has been one specific development since July in relation to grant funding for additional community support officers (CSOs). As part of SR2004 the Home Secretary announced the establishment of a new neighbourhood policing fund (NPF), which would facilitate further recruitment of CSOs to a national total of 20,000 by March 2008. An initial instalment of this funding has been made available to enable the recruitment of 1,500 CSOs between January and March 2005, and forces have been invited to submit bids with the agreement of their police authority. A copy of the proposed bid (which needs to be approved by the authority prior to being submitted to the Home Office on 24th September) will be circulated separately prior to the Committee meeting.

12. Some aspects of this particular bidding process are not particularly helpful to the MPA. Although it is intended to provide 100% funding for 2004/05 and 2005/06 (reducing to 75% for 2006/07) a maximum amount per CSO is specified which falls short of the cost of PCSOs in London. The criteria for prioritising bids in the event that it is oversubscribed appear to be weighted against the MPS. Information from the Home Office also suggests that there will be no further funding available from the NPF until 2006/07. This implies that, following recruitment of CSOs to March 2005, there would then be a twelve month pause in recruitment until further government funding comes on stream. This hardly suggests a coherent strategy and is particularly unhelpful in supporting the continuing Step Change programme. All these points will be addressed as part of the lobbying process described above.

13. A separate report on the implications for Step Change of early recruitment of PCSOs is being prepared for consideration and approval shortly.

Budget Submission –progress on other elements

14. Progress on other elements of the budget submission is being made as follows

• Business Plan 2005/06 to 2007/08 is being prepared by the Corporate Planning team within DCC and will be submitted to the full Authority meeting on 28 October
• Budget and Equalities Submission is being prepared in liaison with MPA and the EODB and will be submitted to full authority on 28 October.
• Budget and Environment submission has been drafted and will be submitted to this committee as a separate agenda item on 11 October.
• Borrowing and Capital Spending Plan 2005/06 to 2009/10. This is currently being collated by Finance Services and will also be submitted to this committee on 11 October.
• Step Change (Phase 2) business case and budget projections. The programme and future years budget projections are currently being reviewed and options developed for submission to this committee on 11 October

C. Race and Equality impact

Potential equality and diversity implications of the budget will be included in a specific budget and equalities submission to the Mayor.

D. Financial implications

The MTFP and Budget will provide approval for expenditure and income during 2005/06

E. Background papers

• Mayors Budget Guidance 2005/06,
• MTFP files 2005/06

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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