Revenue and capital budget monitoring 2004/05

Report: 05
Date: 17 February 2005
By: Commissioner

Summary

This report provides an update on the performance against the revenue budget as at the end of December (Period 9). The overall year to date position is an underspend against budget of £4.3m and a forecast underspend at year-end of £6.9m. Details of budget movements from the original approved budget are also included.

Also included is the monitoring against the revised capital budget (after movements) as at the end of December. Expenditure on capital to date totals £94.0m, which is 43.4% of the revised annual budget. This is in line with the pattern of spend experienced in previous years. The forecast for the year at £175.8m is £40.6m below budget.

The report also seeks authorisation for three capital budget movements by the MPA Finance Committee.

A. Recommendation

 That

1. Members note revenue and capital performance against budget to date and the position of the latest revenue and capital forecasts for the year;
2. note that capital approved budget movements have been increased to include £18.23m of previously approved movements;
3. note capital budget movements of £5.5m made under delegated Authority; and
4. approve three capital budget movements, which exceed £1m.

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 December 2004 (Period 9) 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 December 2004 (Period 9) 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 shows capital budget movements actioned. The full year forecast and year to date position in respect of capital expenditure by business group appears at Appendix 6.

3. The figures within this report do not include any of the additional costs that are to be expected as a result of the MPS response to the disaster in South-East Asia (Operation Bracknell). Cost data is being collated and the latest position will be advised to the committee separate to this report.

Operational Performance

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

• Total notifiable offences are falling; down 2%
• Residential burglary is falling; down 9%
• Robbery is falling; down overall by 6%
• Motor vehicle crime is falling: down 13%
• Homicide is falling: down 10%
• Gun enabled crime is falling: down 10%
• Knife enabled crime is falling: down 10%

Challenges exist where total violent crime has increased by 12% and rape has increased by 6%.

5. Operation Trafalgar which investigates non-fatal shootings in London (excluding shootings connected to Operation Trident) has seen total shooting incidents fall from 79 (January to December 2003) to 61 (January to December 2004) a 23% reduction against a target of 4%.

6. 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

7. As at the end of December, net expenditure for the MPS was £1,832m, an underspend of £4.3m (0.2%) on the year to date budget. The main variances from budget to date are consistent with previous reports and are set out below:

• Police Officer Pay - £7.6m 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 - £7.5m underspend
  Underspends fall within Territorial Policing (£3.4m) where there has been slippage in the recruitment of Designated Detention Officers and staff for Victim and Witness Focus desks, Directorate of Information (£2.4m) where staff numbers are less than anticipated and Resources Directorate (£1.7m), due to management of vacancy factors and a number of posts are being filled by contractors and interim staff. Generally, vacancies are being filled later than anticipated in the budget and the time taken to obtain security clearance has contributed to delays.
• Police Officer overtime - £14.5m overspend.
  This overspend appears mainly in the following business groups:
  • Territorial Policing (£6.3m), due to operational activities including high visibility patrols and Aid as well as skills shortages due to the high number of probationers within the Business Group.
  • Specialist Operations (£9.9m) resulting, as previously reported, from ongoing increased protection activity, Operation Calm and increased security requirements.
• Pensions - £19.9m underspend
  This reflects 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.
• Running expenses (servicewide & devolved) - £19.9m overspend
  All business groups are overspending on running expenses. These overspends occur across a range of budgets (dependent upon the Business Group) and include both servicewide and devolved budget. Specific items in certain Business Groups including vehicle hire, overseas travel, external consultants, telephone charges, tax liability on the cost of free rail travel, covert operations, witness protection and information systems.

Overall Budget Position – Revenue – Forecast Outturn

8. The forecast year-end position is an underspend of £6.9m (0.3% of overall budget) on budget compared with an underspend previously reported of £4.2m.

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

• Police Officer Pay - £9.7m underspend – 0.8% of budget (£7.0m).
  The report now reflects the allocation of centrally held pay budgets to business groups and changes to planned deployments. The increase in variance results mainly from TP where the number of officers forecast for the remainder of the year has been clarified.
• Police Staff Pay - £8.8m underspend – 2% of budget (£10.7m).
  Again, the report now reflects the allocation of centrally held pay budgets to business groups. The reduction in the underspend reflects a reassessment of recruitment between now and the end of the year. Individual Business Group changes are discussed below. 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 expenditure will remain below that budgeted for the remainder of the year.
• Police Officer Overtime - £19.1m overspend – 17% of budget (£18.6m).
  Little change compared to the previous forecast. However, events following the recent disaster in South-East Asia are likely to see the outturn figure increase above that currently reported (along with other budget lines).
• Pensions Income/Costs - £27.3m net favourable variance – 9.6% of budget (£23.9m).
  The variance has increased following the correction of a forecast relating to notional pension costs for Transport for London (£3.4m). Although the forecast for pension contributions has increased by £0.5m the level of transfer-in values has fallen by a similar amount.
• Business Group Transport Costs - £4.1m overspend – 12.6% of budget (£3.8m)
  Local vehicle hire (£2.0m) and overseas travel (£1.9m) continue to form the majority of the overspend with the forecast for fuel supply increasing by £0.3m.
• Business Group Supplies & Services – £6.1m overspend – 3.5% of budget (£7.7m).
  The reduction in the overspend occurs within Territorial Policing because of slippage of Telephone Investigation Bureau costs (£0.6m) and increases in partnership funding.
• Corporate Supplies & Services - £9.5m overspend – 4.8% of budget (£10.9m).
  The reduction in variance is due to increases to budgets relating to expenditure previously forecast for the Police Information Technology Organisation (PITO) that is matched by income.
• Business Group Income – Over-recovery of £9.8m – 8.8% of budget (£5.6m)
  The increase in variance follows a reclassification of income relating to Transport for London (TfL) from Servicewide to Business Group Income (£7.5m). This has been offset to some extent by reduced income forecasts for Heathrow and an increase in partnership income budgets.
• Servicewide Income – Under-recovery of £2.4m – 1.5% of budget (£4.3m over-recovery).
  The change in variance is due to the above re-classification of TfL income to Business Group Income. The reduction has been offset slightly by an increase in forecast income for seconded officers (£1.2m).

Overall Budget Position – Revenue – Business Group Forecast Outturn

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

11. Territorial Policing – Are forecasting an overspend of £1.3m – 0.1% of budget (£19.9m). Although the net expenditure forecast has increased by £1.3m since last month, budgets have also increased by £19.8m. Information on budget moves is given later in this report.

12. Specialist Operations – Are forecasting an overspend of £10.6m – 5.8% of budget (£11.0m). Although there have been increases in Business Group running expenses of £1.2m this is offset by increases in forecast income relating to the Athens Olympics and the Atlantic Blue counter terrorism exercise.

13. Specialist Crime Directorate – Are forecasting an overspend of £4.4m – 1.6% of budget (£5.0m). An increase of £3.4m mainly relating to police and police staff pay costs. This is offset by the allocation of centrally held budgets.

14. Deputy Commissioner’s Command – Are forecasting an overspend of £1.6m – 1.7% of budget (underspend of £0.2m). The change in forecast results from increases to insurance premiums (£0.5m) following the introduction of a revised risk strategy agreed with the MPA. Additionally, compensation costs have increased by £0.9m resulting both from exceptional cases that the MPS have lost plus unexpected fast resolution of other cases.

15. Directorate of Information – Are forecasting an overspend of £1.2m – 0.6% of budget (£2.5m). The net expenditure forecast is similar to last month and the movement in variance reflects the allocation of centrally held budgets.

16. Human Resources (excl. Police Pensions) – Are forecasting an underspend of £0.4m – 0.5% of budget (overspend of £1.4m). The change in the variance relates mainly to an increase of income expected for seconded officers.

17. Resources – Are forecasting an overspend of £2.8m – 1.1% of budget (£4.5m). The reduction in variance relates to the allocation of centrally held budgets for police staff pay and changes to corporate premises costs.

18. MPA - There has been little change in the projected variance from budget in the MPA.

19. 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.

• 20. Major items included in the budget movements for the current month are:
• The allocation of £27.0m from centrally held budgets relating to both pay and non-pay inflation.
• The movement of £3.4m from Territorial Policing and £3.8m from Specialist Operations to Human Resources relating to income charged for notional pension costs from funded activities.

21. Reserves - Movements from reserves of £2.2m carried out in the current month are listed by Business Group Below:

• National Intelligence Model £300,000 SC
• Child Protection £286,250 SC
• Crime & Disorder reduction partnership £350,000 TP
• Street Crime Initiatives £744,000 TP
• Devolved carry over 2002-03 £242,000 TP
• MPA 6th Floor accommodation £175,000 MPA
• MPA carry forward £ 55,000 MPA
• MPA Legal Expenses (Bow St) £ 90,000 MPA

Revenue savings

22. The target set for revenue savings was £61.3m and the latest forecast as at the end of November predicts that £46.2m of these savings will be achieved, a reduction of £3.5m against previously reported figures. As previously advised, it is anticipated that other savings will be made 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

23. At the MPA 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 PITO has been received, which gives a revised budget for capital in 2004/05 of £188.0m.

24. A further £18.23m has been included as approved budget movements, this amount includes the following: -

• Budget for the costs of Central London Estate Strategy (previously approved by MPA Finance Committee)
• Contribution to the ODPM for the Key Home Buy Scheme (previously approved by MPA Finance Committee).
• The total budget required for spends against the helicopter fleet.

25. The budget changes at Appendix 6 have been made under MPS Delegated Authority, and/or have received previous approval at the MPA and are reported here for information.

26. Members are asked to authorise the following budget movements:

C3i Project

• As a result of the delays in the C3i spending, the profile has changed. In 2004-05, £2m was originally budgeted within Property Services, with Directorate of Information (DoI) passing the funds across. This funding should now be transferred back to DoI; therefore the change required to Property Services’/DoI’s capital budgets should be £2m.

Central London Estate Strategy

• An item of expenditure reported under the separate exempt report.

Transport Services (including other MPS Transport related costs)

• The purchase of 62 Counter Terrorism vehicles at a cost £2.2m to be funded from revenue contribution to capital. Transaction to be completed at the end of this financial year.

27. A summary for paragraphs 24 to 26:

28. Appendix 5 provides the current summary (Including adjustments summarised in paragraph 27), of the capital programme as at the end of December (Period 9), when capital expenditure of £94.0m was recorded. This represents 43.4% of the revised budget figure of £216.4, which is in line with expenditure patterns experienced in recent years. The forecast for the year of £175.8m is £40.6m below budget.

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.

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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