Revenue and capital budget monitoring 2004/05

Report: 6
Date: 21 October 2004
By: Commissioner

Summary

This report provides an update on the performance against the revenue budget as at the end of September (period 6). The overall year to date position is an underspend against budget of £1.3m and a forecast overspend at year-end of £2.5m. Details of budget movements from the original approved budget are also included.

The report also includes monitoring against the capital budget as at the end of September. Expenditure on capital to date totals £48.0m, which is 25.8% of the annual budget. This is in line with the pattern of spend experienced in previous years. The forecast for the year is £3.7m below budget.

A. Recommendation

That the Committee notes the revenue and capital performance against budget to date and the position of the latest revenue and capital forecasts for the year.

B. Supporting information

Background

1. The purpose of this report is to provide an update on the revenue and capital budget position of the MPA/MPS for the financial year 2004/05.

2. The statement attached at Appendix 1 reflects the year to date position for revenue income and expenditure to September 2004 (Period 6) for the organisation as a whole, and provides a projected revenue outturn position based on actual results and current information available regarding the remainder of the year. The statement at Appendix 2 provides the projected revenue outturn position against the annual budget and the year to date position to September 2004 (Period 6) at the bottom line for each of the business groups. The statement at Appendix 3 provides the projected revenue outturn position, by budget book heading, for each of the business groups. The statement at Appendix 4 shows a breakdown of budget movements for the year to date. The full year forecast and year to date position in respect of capital expenditure by business group appears at Appendix 5.

Operational performance

3. A short summary of key operational performance targets is reproduced below to provide a holistic view for members. Comparing operational performance in April to August 2004 with the same period last year:

• Total notifiable offences are falling; down 2%
• Residential burglary is falling; down 12%
• Robbery is falling; down overall by 11%
• Motor vehicle crime is falling: down 14%
• Homicide is falling: down 11%
• Gun enabled crime is falling: down 14%
• Knife enabled crime is falling: down 4%
• Fatalities on the road are down 22%

Challenges exist in the following area:

• Total violent crime has increased by 5%

Six months ago, the MPS set up Operation Trafalgar to investigate non-fatal shootings in London. In the first six months of operation:

• Non-fatal shootings have reduced by 24%
• Total shooting incidents have fallen from 59 (Jan to August 2003) to 46 (Jan to August 2004)

4. Members will be aware that more detailed information regarding operational performance is available from the Government Affairs Unit within the Deputy Commissioner’s Command.

Overall budget position – revenue – year to date

5. As at the end of September, net expenditure for the MPS was £1,193.3m, an underspend of £1.3m (0.1%) on the year to date budget. The main variances from budget to date are set out below:

• Police officer pay - £5.4m underspend
  Underspends are being experienced to date in each of the main Business Groups that have police officers (apart from Territorial Policing). This is mainly due to the average cost of police officers being lower than that assumed in the budget, reflecting the high levels of recruits and probationers in the organisation.
• Police officer overtime - £9.6m overspend.
  This overspend mainly appears in the following business groups:
  • Territorial Policing (£3.6m), due to operational activities and skills shortages in the light of the high number of probationers within the business group. A review is ongoing to bring the spend under control;
  • Specialist Operations (£6.5m) resulting from increased protection activity, Operation Calm and increased security requirements;
  • Specialist Crime Directorate (£1.1m) where the overspend is mainly due to increased operational activity and pressures in areas such as kidnaps. A Business Group Overtime Star Chamber has been set up, chaired at Deputy Assistant Commissioner level, to scrutinise overtime expenditure and forecasts.
  • A member-led review of police officer overtime expenditure is underway and is due to report in more detail shortly.
• Police staff overtime - £3.4m overspend
  This overspend appears primarily in the following business groups:
  • Territorial Policing (£1.2m) relating to the increased number of Communications Officers within Metcall.
  • Specialist Operations (£0.8m) where the main component relates to costs incurred at the Palace of Westminster. This will be offset by additional income.
  • Specialist Crime Directorate (£0.7m) where the overspend has mainly occurred within Forensic Services although nearly all units show an overspend. This is being addressed in the same way as Police Officer overtime and new practices for management of overtime should now start having an impact.
• Pension costs/income - £12.4m net underspend
  This reflects continued savings in respect of Commuted Lump Sum Payments and Pension Payments together with additional income from Pensions Contributions received and an increase in the value of pension transfers-in received.

Overall budget position – revenue – forecast outturn

6. The forecast year-end position is an overspend of £2.5m on budget, a net improvement of £0.5m against the previously reported overspend of £3.0m. This overspend position is of concern in the light of the net favourable variance of £22.9m on pensions and a concerted effort is being made to bring expenditure into line with budget. This includes the Commissioner and Director of Resources, at Management Board, continuing to stress the need for business groups to address their overspends and specific reviews in respect of police overtime expenditure.

7. The main variances from budget and the previous forecast are set out below:

• Police officer pay - £6.7m underspend, previously £6.4m.
  An underspend is reported by each of the business groups that have police officers. Investigations show that although there are increased numbers of officers against those assumed in the budget at this point in the year, this is offset by a lower average unit cost of police officers than that assumed in the budget. The impact of work being undertaken on average pay and the effect of the latest deployment plan currently being costed in relation to each business group will be included in the next report.
• Police staff pay - £6.6m underspend, previously £7.5m.
  An underspend is reported by all Business Groups other than Specialist Operations and Specialist Crime Directorate. In all areas this is due to there being lower staff numbers than assumed for in the budget. It is envisaged however that staff numbers will increase as the year progresses.
• Police officer overtime - £14.1m overspend, previously £13.3m.
  This arises mainly in Specialist Operations (£10.3m), Territorial Policing (£3.3m) and Specialist Crime Directorate (£1.8m). The increase in Specialist Operations reflects increased activity, part of which should be subject to additional funding (see Paragraph 10 below). The Territorial Policing increase reflects increased activity and skill shortages and as stated earlier there is an ongoing review to bring this under control. The Specialist Crime Directorate increase reflects operational pressures and as stated action is being taken with the aim of bringing this under control.
• Pensions income/costs - £22.9m net favourable variance, previously £20.0m.
  Reflects increased pension contributions of £7.5m (previously £7.0m), a higher level of transfer-in values of £4.1m (£4.4m), and lower commuted lump sum and other payments of £11.3m (£8.6m) due in part to a lower number of deferred pensions coming into payment.
• Business group supplies & services – £11.6m overspend, previously £12.7m.
  An overspend is reported in all Business Groups other than the Directorate of Information and Specialist Operations. The most notable variances are in Territorial Policing (£6.1m) mainly due to IS/IT support costs, clothing and forensics, and Deputy Commissioner’s Command (£2.4m) due to a number of IT projects being implemented within the group and expenditure on external consultants.
  The forensics forecast overspend has been subject to detailed investigation. This action has resulted in the forecast overspend being significantly reduced. Further investigations are planned and regular meetings have been arranged to monitor progress towards the target of eliminating the forecast overspend in this area. Whilst the forensics forecast has decreased there have been offsetting increases in forecasts for external consultants and local purchases of IT equipment.
• Corporate supplies & services - £7.4m overspend, previously £8.0m.
  This overspend is mainly reflected within Specialist Crime Directorate (£3.9m) and Directorate of Information (£4.7m). The increase in Specialist Crime is, as reported previously, primarily caused by a rise in the volume of telephone subscriber checks, plus additional spending on covert operations and Criminal Justice protection costs. The projected overspend in the Directorate of Information is, again as reported previously, due to additional network support charges arising from increases in the AWARE network capacity, projects into service and work on the IPG Enterprise and NSPIS Case and Custody projects. The Directorate of Information is currently undertaking a review of the current network with the aim of identifying cost savings that can be achieved.
• Servicewide income – Forecast of an under-recovery of £2.0m, previously £0.2m.
  This is due to reduced income from secondments (£5.8m), which is partly offset by a number of favourable variances. The forecasting of income has traditionally been prudent and it is possible that subsequent forecasts will see the position improve.

Overall budget position – revenue – business group forecast outturn

8. The main reasons for the variances in respect of each business group are set out below.

9. Territorial Policing – Are forecasting an overspend of £9.1m, previously £13.0m. The most significant categories of overspend are Business Group Supplies & Services (£6.1m) which is mainly due to IT equipment, IS desktop support, clothing and forensics, Police Officer Overtime (£3.3m) and Transport costs (£1.3m) relating to expenditure on local vehicle hire. These are partly offset by underspends in a number of categories, the most significant being in Police Staff Pay (£2.8m) and Traffic Wardens (£2.5m).

10. Specialist Operations – Are forecasting an overspend of £10.1m, previously £9.0m. The main forecast overspend is on Police Officer Overtime (£10.3m) and reflects insufficient Home Office funding for Dedicated Security Posts being covered with the use of overtime, increased activity in the main due to the Iraqi conflict, increased security levels, the Olympic Games, additional demands on protection officers and Operations Crevice, Spangle ( detention of terrorist suspects) and Calm. There are also forecast overspends in police staff overtime (£1.2m) in connection with the Palace of Westminster (which will be offset by additional income) and the heightened security situation. In addition, overspends are forecast in respect of Transport costs (£3.1m) due to the cost of overseas travel and subsistence relating to Athens and the increase in protection required in the current political climate. These overspends are partially offset by an increase in income (£6.8m) due to increased protection services provided at the Palace of Westminster and Heathrow as well as income from the National Public Order Intelligence Unit. In addition, the MPS should expect some reimbursement of costs from central Government for the cost of the Olympic Games and claims are currently in preparation.

11. Specialist Crime Directorate – Are forecasting an overspend of £7.2m, previously £7.3m. The most significant element is within Servicewide Supplies and Services (£3.9m). Within this the two main areas of projected overspend are the previously reported covert operations and the rise in volume of telephone subscriber checks. Specialist Crime Directorate do not expect to see a reduction in this expenditure in the short term although a Home Office funded project is underway which is looking at how the information can be obtained in a more cost effective way. An overspend is also being forecast on police overtime (£1.8m) which is being scrutinised by the Star Chamber mentioned previously.

12. These projected overspends have been partially offset by underspends in a number of areas, the most significant being an increase in the level of income received (£1.6m). This includes unbudgeted income from the Home Office in respect of the recruitment, training and software in connection with analysts working on the National Intelligence Model.

13. Directorate of Information – Are forecasting an overspend of £2.1m, previously £2.0m. The main area of overspend is Servicewide Supplies and Services (£4.7m). This is due to network support charges and project support costs. This overspend is to a large extent offset by underspends in other areas in particular police staff pay (£1.2m) where actual numbers are lower than those assumed in the budget.

14. As previously advised, initiatives are in hand in order to minimise the additional costs relating to network support charges and project support costs. These include a review of the current network, with the aim of identifying cost savings that can be achieved.

15. Human Resources (excl. Police Pensions) – Are forecasting an overspend of £3.3m against a previously reported underspend of £2.4m. The main area contributing to this overspend is Income (£4.6m), due to a reduction in the number of officers seconded to external organisations. This is partially offset by an underspend on police pay (£2.6m), which will change following the completion of the re-allocation of police pay budgets in line with the revised deployment plan.

16. Deputy Commissioner’s Command, Resources Directorate and MPA. The overall projected variances from budget in these Business Groups are small.

Budget & reserve movements

17. Budget movements: The details of budget movements to date, by Business Group and subjective heading, are summarised in Appendix 4. There have been no significant movements in the current month.

18. Reserves: There have been no movements from reserves in the current month.

Overall budget position – capital

19. At the Finance Committee on 23 September 2004, the Committee agreed a revised capital budget for 2004/05 of £186.0m.

20. Appendix 5 provides the current summary of the capital programme as at the end of period 6 (September), when capital expenditure of £48.0m was recorded. This represents 25.8% of the revised budget figure of £186.0m, which is in line with expenditure patterns experienced in recent years.

21. The current forecast of expenditure for the year is £182.3m, which is a reduction of £3.7m on budget.

C. Race and equality impact

There are none specific to this report.

D. Financial implications

The financial implications are those set out in this paper.

E. Background papers

• Previous 2004/05 monitoring reports and 2003/04 outturn report.

F. Contact details

Report author: Sharon Burd, Director of Finance Services

For information contact:

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

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