Provisional MPA efficiency plan 2005/06 and future years

Report: 08
Date: 17 February 2005
By: Treasurer and Commissioner

Summary

This report sets out the financial aspects of the MPA’s Efficiency Plan for 2005/06.

A. Recommendation

That members approve the provisional plan and note the process for providing in-year updates.

B. Supporting information

Introduction

1. The purpose of this report is to present the 2005/06 Efficiency Plan, attached at Appendix 1.

Background

2. As part of their Annual Policing Plan, all police forces and authorities are required to identify efficiency savings and demonstrate that performance has been maintained or improved. Her Majesty’s Inspectorate of Constabularies (HMIC) monitor Police Authorities’ achievement through quarterly inspections.

3. From 2005/06 a new Police Service Efficiency Strategy will be implemented. Draft guidance was issued in December 2004 but it is now understood that, in response to feedback, revised guidance will be issued in February 2005. In the meantime the plan has been formulated based on the draft guidance. The main changes are:

• Plans will be produced on a 3 year rolling basis.
• The target will increase from 2% to 3% (a minimum of 1.5% must be cashable to recycle to support front line activity even if it is not required to bridge a budget gap).
• The ability to carry over gains or shortfalls between years starting from 2004/05. Any excess carried forward may be a combination of both cashable and non-cashable.
• Each planned efficiency gain should be identified as contributing to performance in one or more of the 27 areas for which HMIC conducts a baseline assessment (any risks to performance must be identified for gains above £100k).

4. A copy of the Plan should be sent to the Home Office by the end of February 2005 and will also need to be included in the Annual Policing Plan for 2005/06.

5. The HMIC inspections cover both financial and operational performance. Failure to meet the annual efficiency target may result in a reduction to funding, in particular the Crime Fighting Fund.

Three year targets

6. The 3% efficiency target for 2005/06 is £75.3m, being 3% of net revenue expenditure (NRE) (excluding specific grants) of £2,510.3m. Under Home Office rules this target will change to reflect actual net expenditure in year. The targets for 2006/07 and 2007/08 are £80m and £82.6m, being 3% of NRE of £2,665.4m and £2,756.4m, although these forecasts do not at present include further phases of Step Change, nor do they make any assumptions about the level of budget reductions to be achieved in those years.

Cashable savings

7. The exercise to balance the revenue budget for 2005/06 identified £73m of savings and additional income, and of this £44.2m can be counted towards our efficiency plan, in accordance with the guidance, compared with the minimum target for cashable savings of £37.6m. We evidence this saving by demonstrating a reduction in budgets and by managing within those reduced budgets throughout the financial year. Cashable savings of approximately £40m for 2006/07 and 2007/08 will be identified through the Medium Term Financial Plan (MTFP) process, but this will require greater budget savings to be made (as some savings e.g. increased income, do not count towards the Efficiency Plan targets).

8. An additional £16.4m cashable savings have been identified which meet the new Home Office definition of cashable gains. These represent savings which have been reflected directly in a lower budget provision or which have actually been recycled into other provisions. The details of all cashable savings for 2005/06 are shown at Appendix 2.

Non-cashable savings

These efficiency savings are the result of better utilisation of existing resources. The main areas identified so far for 2005/06 are:

• Front line policing (FLP) measure, reflecting predicted increases from the 2003/04 baseline measure of 66.4%. Present assumptions are that the measure will improve to 66.8% in 2004/05, 67.2% in 2005/06 and 68.2% in 2006/07. The figure for 2007/08 is still awaited from DCC2 and will be inserted, as soon it is available.
• C3i related savings (these will also provide savings in 2006/07 onwards),
• Increase in the number of Special Constables – an increased contribution by special constables may be claimed, whether resulting from an increase in numbers or in average hours worked. The saving shown results from an increase in numbers and is based on information from workforce data comparing numbers in April 2004 to expected target in April 2005.
• Procurement related savings.
• Various other initiatives.

In addition, surplus non-cashable savings of £9.71m, expected to be achieved in 2004/05 can now be carried forward to 2005/06.

Contribution to performance

10. Each item will need to be linked to one of the 27 performance areas subject to baseline assessment by HMIC and input from Corporate Planning will be sought on these links. We will also need to consider, for items over £100k, whether there are any risks to performance by implementing the savings. Strategic Finance may need to consult separately with Business Groups on these aspects.

Summary 2005/06 Efficiency Plan

11. Appendix 1 shows the provisional 2005/06 Efficiency Plan and the HMIC targets for 2006/07 and 2007/08. It can be seen that we have identified potential cashable savings of £60.7m, which is £23.1m in excess of the 1.5% of target, and £24.9m for non - cashable savings. Overall, £84.3m of savings have been identified, which is £9m in excess of the 3% target to be carried forward into 2006/07. However, as the Plan has been put forward to Committee earlier than in previous years and the Home Office guidance has not yet been finalised, the figures may change and if so a final version will be put to Finance Committee in April 2005.

Efficiency planning in the medium term

12. The guidance issued by the Home Office in December 2004 requires all police forces to develop a rolling 3-year efficiency plan and also introduces more flexibility between financial years. The Budget Submission for 2005/06 had already been submitted to the Mayor in November 2004 and contained forward projections for the medium term financial plan for 2006/07 and 2007/08 but without savings targets.

13. In relation to non-cashable savings, the forthcoming Service Review will be identifying, as part of its work, where resources can be re-directed to front line service delivery and (together with some already known items e.g. C3i related savings, FLP) will contribute to achieving circa £40m per annum of non-cashable savings in future years.

Future reporting

14. Following each quarterly HMIC inspection, an update paper will be provided to the MPS Resource Approval Committee and the MPA Finance Committee.

C. Equality and diversity implications

There are no equality and diversity implications arising from this report.

D. Financial implications

The financial implications are those set out in this paper.

E. Legal implications

There are not considered to be any new legal implications associated with this report.

F. Background papers

• Home Office guidance.

G. 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

Appendix 1: Provisional 2005/06 - 2007/08 efficiency plan

Appendix 2: Cashable Efficiency Savings

Note: saving is estimated pending further detail

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