Revenue and capital budget monitoring 2004/05

Report: 05
Date: 20 January 2005
By: Commissioner

Summary

This report provides an update on the performance against the revenue budget as at the end of November (Period 8). The overall year to date position is an underspend against budget of £6.7m and a forecast underspend at year-end of £4.2m. 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 November. Expenditure on capital to date totals £61.2m, which is 32.6% 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

That

1. Members 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 November 2004 (Period 8) 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 November 2004 (Period 8) 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.

4. It should be noted that the current forecast does not include figures for the MPS’s response to the tsunami in South East Asia. An update on this can be provided at the meeting.

Operational Performance

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

• Total notifiable offences are down overall by 2%
• Residential burglary is down 9%
• Robbery is falling: down overall by 6%
• Motor vehicle crime is falling: down 13%
• Gun enabled crime has decreased by nearly 10%
• Homicides are down by 12%
• Fatalities are falling down by 22%%
• Violent crime is rising up by 8%

From December 2003 to December 2004 (Rolling year to date) compared with the previous year:

• Total notifiable offences are down overall by 1%
• Residential burglary is down 8%
• Robbery is falling: down overall by 7%
• Motor vehicle crime is falling: down 11%
• Gun enabled crime has decreased by 9%
• Homicides are down by 12%
• Fatalities are falling down by 22%
• Violent crime is rising up by 7%

6. The detection rate for total notifiable offences continues to increase towards the target of 20% - it now stands at 19.7%. This relates to 37k more offences brought to justice.

7. The sanction detection rate has risen, up from 12.2% to 12.9%, an additional 3,500 sanction detections.

8. Detections for gun-enabled crime have increased dramatically; they stand at 25% compared to 17.9% last year.

9. 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

10. As at the end of November, net expenditure for the MPS was £1,635m, an underspend of £6.7m (0.4%) on the year to date budget. The main variances from budget to date are set out below:

• Police Officer Pay - £6.8m underspend
  As previously reported the underspend is 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. This information has been reflected in the 2005-06 budget submission.
• Police Staff Pay - £6.5m underspend
  The majority of the underspend falls within Territorial Policing where there has been slippage in recruitment of Designated Detention Officers and staff for Victim & Witness Focus desks. Generally, vacancies are being filled later than anticipated in the budget and rigorous security clearance measures have contributed to delays.
• Police Officer overtime - £12.2m overspend.
  This overspend mainly appears in the following business groups:
  • Territorial Policing (£4.3m), due to operational activities including high visibility patrols and Aid as well as skills shortages in the light of the high number of probationers within the Business Group.
  • Specialist Operations (£8.4m) resulting as previously reported from ongoing increased protection activity, Operation Calm and increased security requirements;
  • Specialist Crime Directorate (SCD) (£0.9m) where the overspend is continuing to reduce following the impact of the SCD Overtime Star Chamber. The overspend results mainly from increased operational activity and pressures in areas such as kidnaps.
• Police Staff overtime - £4.1m overspend
  This overspend appears primarily in the following business groups:
  • Directorate of Information (£2.1m) relating to the increased demand on police staff to cover vacancies in the Communications Service.
  • Specialist Operations (£1.1m) £0.6m of this is charged to external bodies and is offset by income. The remaining overspend occurs within Anti-Terrorism and Royalty Protection and reflects both increased activity and vacancies.
  • Specialist Crime Directorate (£0.9m) 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 are expected to now start having an impact.
• Pensions - £15.1m 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

11. The forecast year-end position is an underspend of £4.2m on budget, a net improvement of £1.4m against the previously reported underspend of £2.8m.

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

• Police Officer Pay - £7.0m underspend (£6.7m)
  Although some individual Business Group forecasts have changed which are discussed below, the overall forecast has remained fairly constant. It continues to reflect lower average unit costs than assumed in the budget, partially offset by higher numbers of police officers.
• Police Staff Pay - £10.7m underspend (£10.9m)
  Again, individual business group changes are discussed below but the overall forecast has remained fairly constant. 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 - £18.6m overspend (£17.3m)
  The increase in forecast arises within Territorial Policing where a detailed review of local forecasts, in light of actual spend to date, and accruals has identified some under-reporting, and under-forecasting, of expenditure.
• Pensions Income/Costs - £23.9m net favourable variance, (£23.7m)
  Little change from previous reports but the forecast reflects increased pension contributions of £8.6m (£8.2m), a higher level of transfer-in values of £4.7m (£4.5m), and lower commuted lump sum and other payments of £10.5m (£11.0m) due in part to a lower number of deferred pensions coming into payment.
• Business Group Supplies & Services – £7.7m overspend (£5.2m)
  The increase in forecast expenditure results particularly from partnership spending within Territorial Policing that had not previously been forecast as well as increases in Forensic Medical Examination (FME) fees, desktop support and telephone rental costs. Within Specialist Crime Directorate there have been increases due to new IT equipment required for the Telephone Investigation Unit and the transfer of a grant income credit that had been misposted and is now correctly reported within income. There have also been increases within Resources Directorate for the anticipated cost of external consultants relating to re-tendering of the pay and pensions contract.
• Corporate Premises - £5.8m overspend (£3.2m)
  The increase results mainly within Territorial Policing (£1.6m) where charges have been made relating to accommodation costs for the London Safety Camera Partnership (£0.6m) which had previously been forecast within Corporate Supplies and Services, together with increased accommodation charges for Soho Square, Royal Mint (TPHQ) and the Central Traffic Criminal Justice Unit (CJU). Resources Directorate have also shown an increase (£1.4m) with additional expenditure forecast on Legal Charges (£0.8m) and following a review within Property Services, increased demand for security barriers and a higher demand of high value unplanned building repairs. It should be noted that part of the increase in Corporate Premises Costs will be offset by additional funding Income Grant and a more detailed explanation will be provided at this meeting.
• Corporate Supplies & Services - £10.9m overspend (£11.6m)
  The reduction in forecast overspend results from the movement of forecast relating to the LSCP accommodation costs (see Corporate Premises above). As previously reported the overspend is due to additional costs relating to the C3i programme, Bichard enquiry, Evidential laboratories, hardware support costs, a rise in the volume of telephone subscriber checks, additional spending on covert operations and Criminal Justice protection costs
• Servicewide Income – Over-recovery of £4.3m, (£3.4m under-recovery)
  A significant movement in forecast (£7.7m) of which £7.2m is reported in Territorial Policing. Of this £6.0m relates to income from Transport for London (TfL) following the transfer of responsibility for the Traffic Warden Service to TfL on 1 November. This had not previously been included in forecasts as there was much uncertainty as to the timing of the transfer. A further £1.2m of income relates to the cost of additional officers for Transport Operational Command Units (OCU) Plus which is a short term agreement for high visibility transport hot spot patrols.

Overall Budget Position – Revenue – Business Group Forecast Outturn

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

14. As previously reported variances across Business Groups have been affected by the retention of pay inflation (police officer and police staff) in centrally held budgets and changes to planned deployments. Work is being finalised to allocate these budgets to business groups, and these will be included in the business group analysis in the next report. The estimated impact of the allocation by business group is set out below:

• TP £21m
• SO £1.7m
• SCD £4m
• HR £0.5m
• Resources £1.2m
• DoI £1.8m
• DCC £0.5m

15. In addition, £4.5m has been allocated from centrally held inflation budgets to cover price/contractual rises in utilities, medical examiners, forensics, transport, and technology. Again this will be included in the business group level analysis in the next report.

Territorial Policing

16. Are forecasting an overspend of £19.9m (£22.9m). Whilst the expenditure forecast has increased by £5.6m since last month, it is offset by an increase in the income forecast of £8.6m. Within expenditure, the Police pay variance has increased by £3.0m due in part to a rise in the number Sergeants included in the forecast. £1.2m relates to additional officers for TOCU Plus (matched by income). A review is underway within TP of the costs of Police pay. Other explanations for increases in expenditure and income in Territorial Policing are given in paragraph 7 above.

Specialist Operations

17. Are forecasting an overspend of £11.0m (£12.6m). The reduction in forecast can be attributed to the recent allocation of additional Counter Terrorism funding within Police and Police Staff pay where some £3.6m of costs had been included in previous forecasts without the corresponding budget allocation. This has been offset somewhat by a reduction of £1.9m in the forecast for business group income, predominately relating to the Palace of Westminster, following detailed reviews.

Specialist Crime Directorate

18. Are forecasting an overspend of £5.0m (£3.7m). The increase falls within Police Staff Pay where an SCD4 recruitment drive for additional Crime Scene Examiners as part of Sole Response to Burglary Initiative assumes that an additional 106 staff will be recruited before the end of the financial year at a cost of £1.7m. However, this assumption appears optimistic and it is likely that slippage will occur. Other additional costs are discussed in paragraph 7 above. The business group income forecast has increased by £1.1m following a correction of a misposted credit (£0.6m previously recorded within supplies and services category) and income for the Dedicated Cheque and Plastic Crime Unit (£0.5m).

Directorate of Information

19. Are forecasting an overspend of £2.5m, (£2.1m). The main increase is in Police Staff overtime due to high levels of demand for overtime by Communications Officers, previously reported within Territorial Policing.

Human Resources (excl. Police Pensions)

20. Are forecasting an overspend of £1.4m (£2.8m). This reduction in the forecast is within Police Pay (£0.6m) following a revised recruitment profile and Police overtime (£0.4m) as there are fewer seconded officers incurring overtime.

Resources

21. Are forecasting an overspend of £4.5m (£2.3m). Increases have occurred which relate to external consultant costs, legal charges and other costs as discussed in paragraph 7 above. Employee related expenditure has also increased (£0.8m) following additional PAYE tax liability costs for free rail travel and Senior Police Officers benefits. In addition, an invoice of £0.4m has been received for PSA tax Assessment.

Deputy Commissioner’s Command and MPA

22. There has been little change in the projected variances from budget in these business groups.

Budget movements

23. 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.

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

• The allocation of £14m of additional Counter Terrorism funding to Specialist Operations (£11.7m), Territorial Policing (£1.3m), Directorate of Information (0.9m) and Specialist Crime Directorate (£0.1m).
• The movement of £3.2m of budget within Property Services relating to the Central London Accommodation Strategy as agreed by MPA Finance Committee in May. Of the above £2.4m is for a ring fenced reserve and a further £0.8m relates to debt and interest payments.
• The movement of £2.5m from Territorial Policing to the Directorate of Information following the transfer of responsibility for C3i communications staff.

25. Reserves: Movements from reserves carried out in the current month are listed by business group below:

• BOCU Pathfinders Carry Over (2003-04) £100,000 SO
• Devolved OCU Carry over (2002-03) £58,000 TP
• SE London Training £36,550 HR
• Efficiency & Effectiveness £23,800 MPA

Revenue savings

26. The target set for revenue savings was £61.3m and the latest forecast as at the end of November predicts that £49.7m of these savings will be achieved, a reduction of £3m against previously reported figures. 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

27. At the Finance Committee on 23 September 2004, the Committee agreed a revised capital budget for 2004/05 of £186.0m. A further £2m in additional funding for contributions from P.I.T.O. has been received, which gives a revised budget for capital in 2004/05 of £188.0m.

28. Appendix 6 provides the current summary of the capital programme as at the end of period 8 (November), when capital expenditure of £61.2m was recorded. This represents 32.6% of the revised budget figure of £188.0m, which is in line with expenditure patterns experienced in recent years. The forecast for the year of £192.1m is £4.1m above budget. The position in respect of each business group is set out below.

Property Services:

29. Expenditure to date of £16.7m reflects only 26% of the annual budget. Although the rate of expenditure is normally much greater in the second half of the year, it is believed that not all costs incurred to date are being fully recorded and corrective steps are being taken in this respect. The forecast of £65.2m is £2.7m above budget.

Directorate of Information:

30. The year to date spend of £10.1m represents 32% of the annual budget. As for Property Services, most of the expenditure is incurred on development projects in the latter part of the year. This is the position in respect of both the infrastructure programmes and the information strategies as well as for technology refresh where the whole of the spend is expected to arise in the latter part of the year. The current forecast of £33.2m is £1.3m above budget.

Transport Services (incl. Other MPS Transport related costs):

31. Expenditure in this area is more evenly spread throughout the year, with 65% of the budget having been spent to date. However, there is a heavier weighting of the Equip for Service expenditure during the second half of the year and this has been reflected in the forecast which is £0.4m above the budget.

Directorate of Information – C3i Programme:

32. The forecast is currently being reviewed and is expected to reduce when next reported. This is due to delays in relation to the Integrated Communications Platform (ICP) which are likely to result in slippage in expenditure into the next financial year.

33. Capital receipts of £5.1m have been received in the period to date, with a further £13.5m due on 11th March 2005, against the annual budget of £12.0m. The current MPS capital receipts forecast for the year is £27.0m.

C. Equality and diversity implications

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, MPS.

For more information contact:

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

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