Revenue and capital budget monitoring 2004/05

Report: 5
Date: 7 December 2004
By: Commissioner

Summary

This report provides an update on the performance against the revenue budget as at the end of October (period 7). The overall year to date position is an underspend against budget of £4.7m and a forecast underspend at year-end of £2.8m. 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 October, including information on capital receipts for the first time. Expenditure on capital to date totals £52.5m, which is 27.9% of the annual budget. This is in line with the pattern of spend experienced in previous years. The forecast for the year at £192.1m is £4.0m above budget.

A. Recommendation

The Committee is invited to note 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 October 2004 (Period 7) 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 October 2004 (Period 7) 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 4a shows a breakdown of budget movements for the year to date and Appendix 4b a breakdown for the current month. The statement at Appendix 5 provides a breakdown of the forecast £61.3m savings made during the budget build process. The full year forecast and year to date position in respect of capital expenditure by business group appears at Appendix 6.

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 September 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 12%
• Gun enabled crime is falling: down 15%
• Knife enabled crime is falling: down 5%
• Fatalities on the road are down 18%

Challenges exist in the following area:

• Total violent crime has increased by 9%

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 October, net expenditure for the MPS was £1,413m, an underspend of £4.7m (0.3%) on the year to date budget. The main variances from budget to date are set out below:

Police officer pay - £6.7m 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 - £10.5m overspend.

This overspend mainly appears in the following business groups:

• Territorial Policing (£3.9m), due to operational activities and skills shortages in the light of the high number of probationers within the Business Group. An on-going review is in place to bring the spend under control;
• Specialist Operations (£7.0m) resulting from increased protection activity, Operation Calm and increased security requirements;
• Specialist Crime Directorate (£0.9m) 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 - £3.7m overspend

This overspend appears primarily in the following business groups:

• Directorate of Information (£2.0m) relating to the increased demand on police staff to cover vacancies in the Communications Service.
• Specialist Operations (£0.9m) relating to costs incurred at the Palace of Westminster, which will be fully offset by additional income.
• Specialist Crime Directorate (£0.8m) where the overspend has mainly occurred within Forensic Services with nearly all units showing an overspend. This is being addressed in the same way as Police Officer overtime and new practices for management should now start having an impact.

Pensions - £15.0m 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 underspend of £2.8m on budget, a net improvement of £5.3m against the previously reported overspend of £2.5m. In the light of the net favourable variance of £23.7m on pensions, concerted efforts are being made to bring other areas of expenditure into line with budget.

7. The main variances from budget and changes from the previous forecast (shown in brackets) are set out below:

Police officer pay - £6.7m underspend (unchanged).

The forecast underspend reflects lower average unit costs than assumed in the budget due to a high level of recruits and probationers. This is partially offset by a higher number of police officers than assumed in the budget.

Police staff pay - £10.9m underspend (£6.6m).

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 in the budget. Although it is envisaged by business groups that staff numbers will increase as the year progresses, it is unlikely that this will be significant and levels will remain below those budgeted for the remainder of the year.

Police officer overtime - £17.3m overspend (£14.1m).

The forecast overspend arises mainly in the following Business Groups:

• Specialist Operations (£11.6m – up from £10.3m) this change is the result of a correction to forecasts, overtime to cover sickness, cover for officer shortages and increases in CT work. These increases have been partially offset by decreases following a review of overtime procedures;
• Territorial Policing (£5.5m – up from £3.3m) This change reflects an adjustment to partnerships to more accurately reflect the planned use of the funding, aid and unplanned activity including countryside protests and additional deployments following anti hunt protests and the batman incident;
• Specialist Crime Directorate (£1.4m down from £1.8m) due to the increased management attention on overtime.

Pensions income/costs - £23.7m net favourable variance, (£22.9m).

The forecast reflects increased pension contributions of £8.2m (£7.5m), a higher level of transfer-in values of £4.5m (£4.1m), and lower commuted lump sum and other payments of £11.0m (£11.3m) due in part to a lower number of deferred pensions coming into payment.

Business group supplies & services – £5.2m overspend (£11.6m).

The fall in forecast expenditure results from a detailed review of the spend and forecasting processes relating to forensics which are now expected to fall within budget. The remaining forecast overspend is mainly within Territorial Policing at £5.3m (£6.1m) due to IS/IT support, clothing and furniture costs arising from increased officer numbers.

Corporate supplies & services - £11.6m overspend (£7.4m).

The increase in forecast overspend results from the recent identification of additional pressures within the Directorate of Information relating to the C3i programme, the Bichard enquiry, Evidential laboratories and hardware support costs (this is offset by underspends within the Directorate of Information on police staff pay).

The remaining overspend is mainly reflected within Specialist Crime Directorate (£3.9m - unchanged) caused by a rise in the volume of telephone subscriber checks, plus additional spending on covert operations and Criminal Justice protection costs.

Servicewide income – Under-recovery of £3.4m, (£2.0m).

This under-recovery is mainly reflected in Human Resources (£4.6m - unchanged) due to reduced income from HR secondments and is partly offset by a number of favourable variances elsewhere.

Overall budget position – revenue – business group forecast outturn

8. The main variances from budget and reasons for changes to the forecast, in respect of each business group, are set out below.

9. Territorial policing – Are forecasting an overspend of £22.9m (£9.1m). The increase is almost entirely due to the higher level of police officer pay (£11.8m) where the pay award is reflected in the forecast but the budget for this item is in centrally held funds. Overspends are also shown against Business Group Supplies & Services at £5.3m (£6.0m), and Police Officer Overtime at £5.5m (£3.3m). The change in overtime is detailed in Paragraph 7.

10. Specialist operations – Are forecasting an overspend of £12.6m (£10.1m). The main issue is Police Officer Overtime at £11.6m (£10.3m), which has risen due to the reasons stated in Paragraph 7. There are also forecast overspends in police staff overtime at £1.5m (£1.2m) in connection with the Palace of Westminster and the heightened security situation. In addition, overspends are forecast in respect of Transport costs at £2.7m (£3.1m). As previously reported, this is due to 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 over-recovery of income at £6.0m (£6.8m). As reported, this is due to increased protection services as well as income from the National Public Order Intelligence Unit (NPOIU). The change reflects a more accurate forecast for the NPOIU.

11. Specialist crime directorate – Are forecasting an overspend of £3.7m (£7.2m). The reduction in expenditure is due to a revised forensics forecast now in line with budget following from a detailed review of the spend and forecasting processes. The overspend results mainly, as previously reported, from the volume of telephone subscriber checks, plus additional spending on covert operations and Criminal Justice protection costs. There is also an over-recovery in the level of income received of £1.0m (£1.6m) although it has reduced following a change in responsibility to other Business Groups for forecasting funding for the NIM Analysis Programme Team.

12. Directorate of information – Are forecasting an overspend of £2.1m, (unchanged). The main area of overspend is Corporate Supplies and Services at £9.0m (£4.7m) as detailed in paragraph 7. This overspend is to a large extent offset by underspends in other areas, in particular Police Staff Pay at £5.7m (£1.2m). As reported this is due to actual numbers being lower than those assumed in the budget and the change represents the results of a detailed review of the cost of recruitment planned for the remainder of the year.

13. Human resources (excl. Police Pensions) – Are forecasting an overspend of £2.8m (£3.3m). The main area contributing to this overspend is an under-recovery of Income at £4.6m (unchanged) due to less seconded officers within NCIS and NIS. This is partially offset by an underspend on Police Pay of £2.4m (£2.6m).

14. Resources – Are forecasting an overspend of £2.3m (£1.5m). The main area contributing to this overspend is an under-recovery of income of £2.4m (£2.2m) due to income generation targets not being achieved and Recruit Cleaning & Laundry charges not being made to date. There are overspends forecast within Corporate Premises of £2.0m (£1.1m) due to delays with C3i contracts that were envisaged to produce savings, and Employee Related Expenditure of £1.7m (unchanged) mainly relating to the outsourcing programme. These are partially offset by a projected underspend of £2.7m within the Minimum Revenue Provision (MRP) and an underspend within Police Staff Pay of £1.1m (£0.9m) due to staff numbers being lower than planned.

15. Deputy Commissioner’s Command and MPA - The overall projected variances from budget in these Business Groups are small.

Budget & reserve movements

16. Budget movements: The details of budget movements to date, by Business Group and subjective heading, are summarised in Appendix 4a and budget movements in the current month are detailed at Appendix 4b.

17. Major items included in the budget movements for the current month are:

• TP: The allocation of £3.6m of matching partnership income and expenditure budgets and £1.1m of reserves (see below).
• SO: The allocation of £2.2m of reserves (see below)

18. Reserves: Major movements from reserves carried out in the current month are listed by Business Group Below:

• Devolved OCU Carry Over (2002-03): £1,068,489 (TP)
• Devolved OCU Carry Over (2002-03): £300,000 (SO)
• CBRN Kit: £240,000 (SO)
• Budget Support (Atlantic Blue): £500,000 (SO)
• War Crimes Unit: £1,100,000 (SO)

Revenue savings

19. The target set for revenue savings was £61.3m and the forecast as at the end of October (period 7) shows that £52.7m of these savings will be achieved. The individual items making up the target and their forecast are detailed at Appendix 5, sub-totalled by Business Group. It is anticipated that other savings will over-recover to compensate for the shortfall in the planned savings, in particular in areas covering income from the Immigration Service, Traffic Warden’s pay, Police Staff pay and Interest receipts.

Overall budget position – capital

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

21. Appendix 6 provides the current summary of the capital programme as at the end of period 7 (October), when capital expenditure of £52.5m was recorded. This represents 27.9% of the revised budget figure of £188.0m, which is in line with expenditure patterns experienced in recent years.

22. The current forecast of expenditure for the year is £192.1m, which is an increase of £4.0m on budget.

23. Information on capital receipts is provided for the first time, which shows a year to date income of £4.9m against the revised capital receipts budget of £12.0m. The current forecast for capital receipts for the year is £36.7m.

C. Race and equality impact

There are none specific to this report.

D. Financial implications

The financial implications are those set out in this report.

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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