Revenue and capital monitoring report 2005/06 – period 3

Report: 08
Date: 21 July 2005
By: Commissioner

Summary

The report provides an update on the revenue and capital monitoring position for 2005/06 at period 3 (to the end of June). At this early stage of the year the revenue budget is forecast to have a small overspend of £0.14m (0.01% of budget). It should be noted that there is an underlying forecast overspend offset by a forecast underspend on Police Officer Pensions.

The spend-to-date for the Capital Programme as at period 3 (June) is £27.8m, which is 12.86% of the approved original budget of £215.8m.

Members should note that a forecast against the Capital Programme has not been included in this report as a separate paper to this committee addresses the carry forward of slippage and re-phasing of projects in 2004/05.

Members should note that the position reported does not reflect any possible impacts following the terrorist attacks in London on 7 July.

A. Recommendation

That members are invited to:

1. Note the year to date and forecast position for revenue budgets and the spend-to-date position of the capital programme.

B. Supporting information

Background

1. The purpose of this report is to inform members of the anticipated outturn against revenue and capital budgets for the MPA/MPS in 2005/06. It should be noted that the forecast on which this report was prepared was completed prior to the terrorist attacks in London on 7 July. The impact of responding to these terrorist attacks is not therefore factored into this report.

2. This is the first budget monitoring report to the MPA in 2005/06 based on the full forecasting and commentary exercise carried out throughout the MPS. The report gives the year to date position as at the end of June (period 3) and the forecast to the year-end based on that position and any other known factors.

3. At this stage in the year we suspect that, as in previous years, there is a degree of over forecasting as budget holders give a prudent and in some cases overly pessimistic forecast view. We will continue to challenge the assumptions made in providing the forecast position and also seek reassurance that action is being taken to manage within budget.

Changes to reporting format

4. The statement attached at Appendix 1 provides the forecast revenue outturn position for each of the business groups. The statement at Appendix 2 provides the total year to date and forecast revenue outturn position for the Service as a whole. In order to respond to a number of issues raised by Members in the past, there are some key changes to the way the information is presented this year. These changes are as follows:

• Simplification of expenditure and income headings – in previous reports we have shown the position for ‘business group’ and ‘servicewide’ expenditure and income separately. In order to simplify the layout of the report we have now merged these categories.
• Separation of funded units – on a number of occasions Members have expressed a desire to see improvements in the way funded activities are reported, this is to provide greater clarity where expenditure and income variances offset each other. Appendix 2 is now split between ‘core’ MPS budgets and ‘funded’ MPS budgets and Appendix 1 has a section for ‘funded’ units.
  The distinction between core and funded budget areas is not always an easy one, Members will of course appreciate that the whole budget is funded. We have separated out those units that either receive budgeted income from an external organisation or where there is a clear relationship between expenditure and income and which have typically required us to report related expenditure and income variances. The main units included within the funded area are:
  • Palace of Westminster
  • Partnerships
  • Heathrow
  • Transport OCU
  • Catering
  • Royal Parks

By separating out the funded units we will be able to show budget movements in expenditure and income more transparently and therefore prevent related expenditure and income variances feeding through to the overall position.

It should be noted that the funded units generate a surplus i.e. direct income exceeds direct expenditure. This surplus represents the contribution to corporate overheads and support provided from other operational departments, which is not directly charged to the units.

One consequence of this change in presentation is that we need to revise the presentation of budget movements. We will include this revised presentation in the next monitoring report.

• Enhanced reporting on changes to funding and movements in reserves – we have improved the reporting on changes in funding and movements in reserves by providing greater detail in this area. Funding and reserve movements are becoming increasingly important to the management of the bottom line and it was felt appropriate to show the monitoring of these areas more explicitly.

Increase to tasking budget

5. At Finance Committee on the 23 June, Members agreed to use £4 million of the 2004/05 underspend to fund central tasking in the Central Operations Group. Discussions are on-going to establish the appropriate budget allocations and the report does not yet reflect the increase to budget, expenditure forecast or any draw down of the reserve. The protocol for distributing this funding will be similar to that established for distributing Safer Streets funding. The budget will be controlled by the Director of Tasking and released to the spending OCU following approval to fund the activity from this tasking budget.

Operational performance

6. A short summary of key operational performance targets is reproduced below to provide a holistic view for members. Comparing operational performance in April to May 2005 with the same period last year:

• Total notifiable offences are falling; down 0.9%
• Residential burglary is rising; up 1.7%
• Robbery is increasing; up overall by 20.0%
• Motor vehicle crime is falling: down 0.3%
• Homicide is falling: down 38.0%
• Gun enabled crime is up by 8.7%
• Knife enabled crime is falling: down 10.2%
• Rape is rising: up 21.0%

Operation Trafalgar which investigates non-fatal shootings in London (excluding shootings connected to Operation Trident) has seen total shooting incidents increase from 12 (April to June 2004) to 36 (April to June 2005), a 200% increase.

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

Revenue forecast by business group

7. The forecast outturn position for the MPS is a small overspend of £0.14m (0.01% of budget). The position by Business Group is summarised in Table 1 below and provided in more detail in Appendix 1. The main variances from budget and explanations in respect of each business group are set out below.

Table 1 – Summary of revenue forecast against budget at period 3

Territorial Policing – An overspend of £19.2m – 1.8% of budget.
The main area of forecast overspend is Police Officer Pay where the numbers of officers forecast is higher than the Budgeted Workforce Target (BWT). Further work is being undertaken with colleagues in Human Resources and the Deployment Team to better understand the impact and reason for this. A further overspend is forecast in Police Officer Overtime mainly due to street crime operations. These overspends have been offset to some extent by underspends on Police Community Support Officer (PCSO) pay caused by lower forecast numbers than those budgeted for.

Specialist Operations – An overspend of £10.5m – 6.2% of budget
The forecast overspend mainly occurs in Police Officer Overtime due to counter terrorism and dedicated security post activity. Further significant overspends are forecast in Transport Costs, mainly due to overseas travel and related subsistence costs.

Specialist Crime – An overspend of £13.6m – 4.8% of budget
The majority of the forecast overspend is in Supplies and Services due to budget pressures in forensics and consultancy costs. As in 2004/05 there are also spending pressures in budgets held on behalf of the service such as DNA expansion, Telephone Investigation Unit, Police National Computer (PNC) charges and Operational Technology Support Unit.

Central Operations – An overspend of £2.6m – 1.4% of budget
This forecast overspend is mainly due to Police Officer Overtime and Transport Costs relating to the level of aid already incurred and expected for central operations.

Deputy Commissioner’s Command – An overspend of £0.5m – 0.6% of budget
This forecast overspend mainly relates to public surveys, compensation payments and increases to insurance premium costs following changes to the MPA risk strategy. These overspends are mostly offset by underspends in police officer pay, due to numbers being below the level budgeted, and in police staff pay.

Directorate of Information – An overspend of £0.2m – 0.1% of budget
The main forecast overspend is due to budget pressure in Police Staff Overtime resulting from Communications Officer’s Premium payments. However, there are forecast underspends in Police Staff Pay and Supplies and Services.

Human Resources (excluding Police Pensions) – An underspend of £0.7m – 0.8% of budget.
This forecast underspend mainly occurs in Police Officer and Police Staff Pay, due to delays in filling vacant posts. These underspends are partially offset by Corporate Employee Expenditure, due to premature retirement costs of Police Staff and police recruitment advertising.

Resources – An overspend of £3.7m – 1.6% of budget
This forecast overspend is in Premises Costs due to budget pressures within forward works and backlog maintenance and Supplies and Services resulting from consultancy costs relating to the outsourcing programme. These overspends are partially offset by an underspend in capital financing costs.

Metropolitan Police Authority – A nil variance
There are no areas of significant variance within this business group.

Pensions – A favourable variance of £26.4m – 9.1% of budget.
This variance is due to lower than budgeted costs for pensions and commuted lump sum payments (£24.9m) and transfer values received above the level assumed in the budget (£1.6m). We need to review this area further to validate the level of underspend and better understand its cause.

Centrally held – A favourable forecast variance of £23.3m.
This variance reflects corporate adjustments to the Police Officer and Police Staff pay forecasts. These adjustments are discussed in more detail in the next section of this report.

Provisional Revenue Outturn by expenditure/income type

8. The main variances from budget are set out below.

Police Officer Pay - An underspend of £5.1m – 0.4% of budget.
Although Territorial Policing are reporting an overspend in this area, the corporate view for the MPS as a whole, based on corporate workforce planning data and servicewide unit rates of pay, is that a small underspend can be expected. In order to reflect this view in the position presented we have made an adjustment of minus £13.8m in the forecast position. In order to maintain the integrity of business group forecasts and in order to hold budget holders to account for their forecasts, we have made this adjustment within the Centrally Held area. It should be noted that the requirement to make an adjustment of £13.8m suggests that the number of officers being over-forecast across the MPS as a whole is only about 300 (1% of the overall number of police officers).

The validity of the business group forecasts is being challenged and we shall continue to monitor the position. It is anticipated that as Business Groups’ forecasts become more robust the need to make this corporate adjustment will be eliminated.

Police Staff Pay - An Underspend of £5.0m – 1.0% of budget
Police Staff pay has typically in previous years been over forecast. This is particularly the case at this early stage of the year. The reasons for this is that budget holders tend to be over optimistic about the rate at which vacant posts will be filled. In order to reflect this degree of over forecasting we have made a corporate adjustment, as for Police Officer Pay. The adjustment of minus £8m is shown in the Centrally Held area. As for Police Officer Pay we will keep the need for this adjustment under review.

PCSO Pay - An underspend of £4.4m – 7.5% of budget.
The forecast underspend includes vacancies and variations in pay averages compared to those budgeted.

Traffic Warden Pay - An underspend of £0.1m – 1.2% of budget.
No particular issues under this category of expenditure.

Police Officer Overtime - An overspend of £16.1m – 14.7% of budget.
The forecast includes the anticipated costs of Operation Bracknell, the G8 summit and the Live8 concert held in Hyde Park. It does not yet include the effects of the recent terrorist attack in London. A major cause of the overspend continues to be dedicated security patrols within Specialist Operations and operational commitments within Territorial Policing relating to street crime.

Police Staff Overtime - An Overspend of £4.5m – 17.9% of budget.
A significant element of the overspend relates to costs associated with Communication Officers. There has also been an effect with Specialist Operations where the increase in officer numbers has required additional support by Police staff.

PCSO Overtime - An underspend of £0.1m – 8.5% of budget.
No particular issues under this category of expenditure.

Traffic Warden Overtime - An underspend of £0.4m – 34.0% of budget.
This underspend results mainly from the Traffic Wardens within the Transport Operational Command Unit (OCU) no longer being involved in Public Order Aid.

Employee Related Expenditure - An overspend of £1.8m – 5.4% of budget.
The forecast overspend is mainly due to the cost of police staff premature retirement/redundancies as there are more of these forecast than the budget supports.

Premises Costs - An overspend of £5.8m – 3.1% of budget.
The main cause relates to budget pressures within Property Services associated with major construction works such as custody clusters, backlog maintenance and legal and consultancy costs.

Transport Costs - An overspend of £5.6m – 11.4% of budget.
The majority of this forecast overspend relates to overseas travel and subsistence costs which result from increased security and protection duties within Specialist Operations. There are also budget pressures of £0.5m within Territorial Policing relating to safer streets vehicle maintenance and £0.7m within Central Operations relating to vehicle hire and maintenance.

Supplies and Services - An overspend of £14.7m – 3.9% of budget.
There are pressures within the business groups in this category as described above. The major pressures fall within the areas of external and legal consultancy (£5.1m), local IT procurement and office machinery (£3.8m) and forensic expenditure (£2.2m).

Capital Financing Costs - An underspend of £2.8m – 16.3% of budget.
It is estimated that there will be reduced capital financing costs due to the Minimum Revenue Provision being lower than budgeted as borrowing is forecast to be lower than originally anticipated.

Income - predicted over-achievement of £3.9m –1.4% of budget.
The main areas of income forecast to exceed budget are within forfeiture (£1.1m), miscellaneous receipts (£1.6m), and National Crime Squad and National Crime Intelligence Service (NCS/NCIS) - (£0.8m).

Funding - There is a nil variance under this heading.

Movements in reserves

9. To date there has been just one small allocation of £15k from reserves to Territorial Policing, which relates to partnership funding.

Budget movements

10. There have been a number of budget changes since the start of the year which reflect the allocation of partnership budgets; reallocation of some Counter Terrorism funding; transfer of resources from Diversity to frontline Territorial Policing; allocation of Airwave funding; allocation of Drugs Testing Scheme budgets; re-allocation of police officers to reflect a revised deployment plan and moves to reflect savings made for Information Systems charges amongst many others.

Key deliverables

11. One key development in the 2005/06 budget monitoring is that we will present quarterly updates on progress towards the MPA’s key deliverables as set out in the Mayor’s consolidated budget for 2005/06, where a more detailed description of these issues can be found. The deliverables and progress to date are detailed below:

Implementation of Community Based Policing

We now have 256 teams across London which is 8 per borough. We also have additional teams within Tower Hamlets ( the only borough to have full rollout - funded by the local authority).

Police Officer and Staff Growth in Specialist Units

Recruitment of both police officers and police staff will begin in August 2005 and some should be in post from September with the remainder in post by December.

Progress Towards MPS Workforce Targets

The proportion of officers from black and minority ethnic communities stands at 7.03% against a target of 30% whilst proportion of female officers is 19.26% against a target of 25%.

Workforce modernisation

Due to the delay in Airwave implementation, the resulting work force modernisation has been delayed until 2006/07.

Increase Police Visibility

The most recently published data for May 2005 shows an increase of 4.9% as shown in the table below.

Visibility Measure May 05

Improve Public Confidence

This information will be provided using data from the quarterly survey, which is not yet available for Quarter 1.

Improve Women’s Safety in the Capital

Several projects are being progressed such as Hazard Alley where preliminary enquiries are being made to develop interactive practical exercises to educate and raise women’s awareness of personal safety (e.g. at clubs and pubs, travelling alone etc). Additionally, two senior criminologists are engaged in analytical work building an MPS-wide profile of women’s safety issues which will be used to review our work plans. If Hazard Alley is able to be progressed, these findings will have a direct bearing on its development. A listening group meeting was arranged for 21 June with the aim of developing and structuring projects which are led by women’s opinions and concerns. Information regarding the issues of panic alarms, local focus groups and so on is to be collated and will be advised to members in future reports.

Revenue Outturn 2004/05

12. The final revenue outturn for 2004/05 has recently been reported to the MPA Corporate Governance Committee as part of that committee’s consideration of the draft final accounts for audit.

The final outturn represents an underspending against budget of £11.96m before reflecting a transfer to reserves in respect of Tasking (£4m) and the centrally held Revenue Budget Resilience Reserve (£7.96m). The outturn was also before accrual of income for the work undertaken in respect of the South East Asia Tsunami, for which a prudent 85% assessed provision pending settlement has been made (£12.5m) against the bill of £14.66m submitted to Home Office on 7 June. This sum has also been transferred to the new Budget Resilience Reserve, making a total of £20.46m. A number of other transfers to reserves (totalling £10.3m) have been included in the accounts and met from within the provisional outturn previously reported. The items are for property rent smoothing (£3m), vehicle recovery services (£3.2m), operational costs (£2.6m), property resilience work (£1.2m) and carry forward of Crime and Disorder Reduction Partnerships (CDRP) allocation/partnership income (£0.3m).

Capital Monitoring

13. The MPA Full Authority approved the 2005/06 Capital Programme on 31 March 2005. In approving the programme as presented, Members also approved the following additional schemes to be added to the detailed programme areas:

• The alteration and extension of catering facilities at Empress State Building to improve amenities at this recently occupied site (£2.368m);
• Further capitalisation of IT equipment (£0.195m) to match assumptions made in the final revenue budget submission to the Mayor;
• Replacement of the Aquarius System for SO12 (£0.9m).

Adjustments have now been made to detailed programmes and funding to include these schemes.

The revised capital budget for the year totals £215.8m (Appendix 3).

14. Members were advised of several other emerging capital pressures which need to be quantified and assessed for priority status, as well as slippage (much of which is committed and non-discretionary) in some programme areas from 2004/05 to be added to the 2005/06 programme.

A separate report that identifies the 2004/05 Outturn and the requests for carry forwards due to slippages and re-phasing into 2005/06 has been submitted for approval to the Finance Committee meeting of 21 July.

15. Appendix 3 sets out the spend-to-date for the 2005/06 Capital Programme, as at Period 3 (June) at business group level, which totals £27.8m, representing 12.86% of the approved original budget. It also shows funding received to date of £28.4m.

16. At this early stage, all areas of the business have indicated they are not aware of anything significant that will affect the current programme. However, they have stated that, should the carry forward requests not be accepted, then this in turn would highlight pressures at project level.

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 2005/06 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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