Revenue and capital monitoring report 2005/2006 – period 4

Report: 06
Date: 15 September 2005
By: Commissioner

Summary

The report provides an update on the revenue and capital monitoring position for 2005/2006 at period 4 (to the end of July).

The position includes the additional costs incurred to the end of July and additional costs expected for the remainder of the year following the terrorist attacks in London on 7 and 21 July.

The revenue budget is forecast to overspend by £83.1m (3.0% of budget), which includes £88.1m of costs, related to operations following the recent terrorist attacks in London. The underlying forecast overspend excluding Operation Theseus costs is £21.8m, which is offset by a forecast underspend on Police Officer Pensions of £26.8m.

The expenditure to date for the Capital Programme as at period 4 (July) is £37.7m, which is 13.3% of the approved original budget of £215.8m. The forecast outturn is £258.5m, which is £25.6m below the revised budget.

A. Recommendation

Members are invited to:

1. note the year to date and forecast position for revenue budgets and the capital programme; and
2. approve capital funding and budget increases of £1.1m.

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 Metropolitan Police Authority (MPA)/Metropolitan Police Service (MPS) in 2005/2006. It should be noted that the forecast includes the anticipated additional costs resulting from the terrorist attacks in London on 7 and 21 July 2005.

Operational performance

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

• Homicide is rising: up 1.5% (includes some victims (30) of the terrorist attacks in London)
• Gun enabled crime is up by 13.3%
• Knife enabled crime is falling: down 5.9%
• Residential burglary is rising; up 0.9%
• Robbery is increasing; up overall by 16.6%
• Rape is rising: up 20.7%
• Motor vehicle crime is falling: down 0.2%
• Total notifiable offences are falling; down 1.7%

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

Operations Theseus/Aethra/Vivace/Sevarus

3. Members will be aware of the intense operational activity following the terrorist attacks in London. This activity has had a significant impact on the financial position of the MPS and it is only appropriate to provide members with a detailed brief on this.

4. There are four main operations in progress following the bombings and attempted bombings. These are Operation Theseus which was instigated in response to the terrorist attacks which occurred in London on 7 July 2005, Operations Aethra/Vivace which were instigated in response to the attempted attack on the 21 July 2005 and Operation Sevarus which relates to the high visibility patrols specifically deployed on the London transport system.

5. The majority of additional expenditure has been incurred on police officer overtime but there have been significant other cost pressures including the mutual aid costs of other Forces (who have provided officers to support the MPS), and substantial amounts of forensic expenditure and operational technical support costs. The deployment of officers on the scale we have seen has also resulted in significantly increased cost of supporting officers on the ground i.e. catering, equipment and temporary accommodation. The current forecast for these operations is £88.1m of additional costs, which would significantly exceed the ability of the MPA to fund. The forecast has been based on a consistent set of assumptions appropriate to the various Business Groups. These assumptions are currently being reviewed and any changes will be fed into future forecasts and reflected in future reports to the MPA.

6. In order to help meet the additional cost of these activities the MPA and MPS have undertaken a number of activities. In the first instance immediate and strong representations have been made to the Home Office to secure addition specific grant funding. The Home Office have responded positively to this request, but have indicated that the MPA will be expected to meet some of the additional cost, if necessary, from its reserves. The Home Office are considering an interim payment based on estimates of the additional costs to 31 August. Negotiations continue, but decisions are unlikely to be made until Ministers have been fully briefed in September. Association of Chief Police Officer’s (ACPO) and Association of Police Authorities (APA) have also been kept updated and support the MPS’s claim. The MPS has also undertaken a review to ensure that any areas of uncommitted and discretionary spend are identified with a view to viring money to support these additional costs. The MPS is also reviewing the level of commitments against earmarked reserves to identify any flexibility in the MPA’s reserve position and to argue why the MPA must keep its general reserve at 1% of budget. The efforts to mitigate the cost pressure resulting from the terrorist activity are on-going and we will report these to Members in future reports.

7. Revenue forecast against budget at period 4

Table 1 – Summary of revenue forecast against budget at period 4

Revenue forecast by business group

8. The forecast outturn position for the MPS is an overspend of £83.1m (3.0% of budget). The subjective position by Business Group is at Appendix 1. The overall position for the MPS is at Appendix 2. Table 1 above shows a forecast underspend of £5.0m if Operation Theseus forecasts are excluded.

Territorial Policing - Overspend of £52.3m – 4.9% of budget

Excluding the costs of operations following the recent terrorist attacks in London, there is a forecast overspend of £10.1m in Territorial Policing. This is mainly within Police Pay where the number of officers forecast is higher than Budgeted Workforce Target. An overspend of approximately £1.2m is forecast in Police Officer Overtime mainly due to street crime operations. These overspends have been offset to some extent by underspends on Police and Community Support Officer (PCSO) pay caused by lower forecast numbers than those budgeted for.

Specialist Operations – Overspend of £23.2m – 13.5% of budget

Excluding the costs of operations following the recent terrorist attacks in London, there is a forecast overspend of £9.6m in Specialist Operations. This 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 increased levels of overseas travel and related subsistence costs.

Specialist Crime – Overspend of £18.0m – 6.4% of budget

Excluding the costs of operations following the recent terrorist attacks in London, the forecast overspend in Specialist Crime is £10.6m. 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 against budgets held on behalf of the service such as DNA Expansion, Telephone Investigation Unit and Police National Computer (PNC) charges.

Central Operations – Overspend of £5.9m – 3.2% of budget

Excluding the costs of operations following the recent terrorist attacks in London, the forecast overspend in Central Operations is £3.5m. This 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 – Overspend of £1.9m – 2.1% of budget

Excluding the costs of operations following the recent terrorist attacks in London, the forecast overspend in the Deputy Commissioner’s Command is £1.0m. This is mainly due to increased costs relating to public surveys, compensation payments and insurance premiums. These overspends are offset to a large extent by underspends in Police Officer Pay, due to forecast strengths being below the budgeted level, and in Police Staff Pay.

Directorate of Information – Overspend of £3.8m – 1.6% of budget

Excluding the costs of operations following the recent terrorist attacks in London, the forecast overspend in the Directorate of Information is £2.6m. This is mainly due to budget pressures in Police Staff Overtime resulting from Communications Officer’s Premium payments and within Supplies and Services due to an increase in demand for digital evidential analysis such as CCTV analysis. However, there are forecast underspends in Police Staff Pay.

Human Resources (excluding Police Pensions) – Overspend of £0.8m – 0.9% of budget

This forecast overspend mainly occurs in Corporate Employee Expenditure, due to increased levels of premature retirement costs of Police Staff and increased costs relating to police recruitment advertising. These are partially offset by underspends in Police Officer and Police Staff Pay due to delays in filling vacant posts.

Resources – Overspend of £3.6m – 1.5% of budget

Excluding the costs of operations following the recent terrorist attacks in London, the forecast overspend in Resources is £1.8m. 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 and additional investment receipts.

Pensions – A favourable variance of £26.8m – 9.3% of budget.

This variance is due to lower than budgeted costs for pensions and commuted lump sum payments mainly due to a continuing lower level of ill health and other retirements (£25.0m) and transfer values received above the level assumed in the budget (£1.8m). Further work is underway to review projections for retirements/costs in future years as part of the budget submission process for 2006/2007.

Provisional Revenue Outturn by expenditure/income type

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

Police Officer pay - Overspend of £10.4m – 0.8% of budget

The forecast now includes an additional cost of £14.4m relating to Mutual Aid provided to the MPS and approximately £6.6m of Employers’ National Insurance Contributions’ (ERNIC) payable on overtime payments resulting from operations following the recent terrorist attacks in London. Without such expenditure, the corporate view for the MPS as a whole, based on corporate workforce planning data and servicewide unit rates of pay, is that an underspend of £10.7m would be expected.

Police Staff pay - Underspend of £5.5m – 1.1% of budget

The corporate view for the MPS as a whole, based on corporate workforce planning data and servicewide unit rates of pay, is that an underspend of £5.5m would be expected principally due to delays in the filling of vacant posts.

PCSO pay - Underspend of £3.4m – 6.0% of budget

The forecast underspend is principally due to vacancies and variations in pay averages compared to those budgeted.

Traffic Warden pay - Underspend of £0.3m – 2.4% of budget

No particular issues under this category of expenditure.

Police Officer overtime - Overspend of £61.1m - 54.9% of budget

The forecast includes the anticipated costs of the operations following the recent terrorist attacks in London, Operation Bracknell, the G8 summit and the Live8 concert held in Hyde Park. The cost of operations following the recent terrorist attacks in London account for £52.5m of the forecast overspend. A major cause of the remaining overspend continues to be dedicated security patrols within Specialist Operations and operational commitments within Territorial Policing relating to street crime.

Police Staff overtime - Overspend of £5.6m – 22.0% of budget

The cost of operations following the recent terrorist attacks in London, accounts for £1.5m of the forecast overspend. Additionally, 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 - Overspend of £0.6m – 103.8% of budget

This overspend relates entirely to the cost of operations following the recent terrorist attacks in London, estimated at £1.1m.

Traffic Warden overtime - Underspend of £0.2m – 20.1% of budget.

No particular issues under this category of expenditure.

Employee related expenditure - Overspend of £5.1m - 15.3% of budget

The cost of operations following the recent terrorist attacks in London account for £3.6m of the overspend with regard to officers seconded to Special Branch. The remaining 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 - Overspend of £5.8m – 3.1% of budget

This is principally due to budget pressures within Property Services associated with major construction works such as custody clusters, backlog maintenance and legal and consultancy costs.

Transport costs - Overspend of £8.9m – 18.3% of budget

The cost of operations following the recent terrorist attacks in London account for £1.7m of the forecast overspend. However, the majority of the 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 within Territorial Policing relating to safer streets vehicle maintenance and generally relating to increased fuel costs, vehicle hire and maintenance. The MPS will continue to actively monitor expenditure in these particular areas to ensure that any overspending is kept to a minimum and that members are kept informed of the situation.

Supplies and services - Overspend of £25.1m – 6.6% of budget

The cost of operations following the recent terrorist attacks in London account for £6.3m of the forecast overspend. The major pressures fall within the areas of forensics (£6.0m), DNA testing (£5.4m), external and legal consultancy (£5.1m) and local Information Technology procurement and office machinery (£3.7m).

The MPS will continue to actively monitor expenditure in relation to Premises, Transport and Supplies and Services to ensure that any overspending is kept to a minimum and that members are kept informed of the situation.

Capital financing costs - 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 capital expenditure in 2004/2005 was lower than originally anticipated.

Income - Forecast over-achievement of £0.5m – 0.2% of budget

The main areas of income forecast to exceed budget are within forfeiture (£1.1m), miscellaneous receipts (£1.6m) and Investment Income (£0.8m). These over-achievements are partially offset by under-recovery of budgeted income on Seconded Officers (£2.1m) and National Identification Service (£0.9m).

Funding

There is a nil variance under this heading.

Increase to tasking budget

10. At Finance Committee on the 23 June, Members agreed to use £4 million of the 2004/2005 underspend to fund central tasking in the Central Operations Group. There is currently approximately £1m committed against these operations, mainly on street crime, gun crime and robberies. Commitments have been less in July which we believe results from the pressures arising from Operation Theseus.

Movements in reserves

11. Movements from reserves carried out in Period 4 are listed by business group below:

Budget movements

12. Details of the budget movements made by Business Group from the beginning of the year are at Appendix 3a and details of movements for the month of July are at Appendix 3b. They 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.

Capital Monitoring

13. Committee members approved the revised 2005/2006 Capital Programme on 21 July 2005. In approving the programme as presented, members also approved the carry forward requests by Business Groups. This gave a revised capital budget for the year of £283.0m.

Members are asked to approve the following additional funding and budget increases of £1.1m.

• Directorate of Information – excluding C3i: £0.6m additional funding from the Home Office for Operational Technical Support Unit (OTSU).
• Transport Services - £0.5m for Covert equipping – this will be funded by Revenue Contribution to Capital Outlay (RCCO) (if required).

If approved, this will revise the capital budget in 2005/2006 to £284.1m.

Expenditure to date (31 July 2005) is £37.7m, which represents 13.3% of the revised budget. The forecast outturn is £258.5m, which is £25.6m below the revised budget.

An analysis of the major areas of forecast underspend is provided below and at Appendix 4.

• Property Services - £2.5m underspend (3.0% of budget) – principally due to the planned re-phasing of a number of projects.
• Directorate of Information – Excluding C3i Programme – £4.6m overspend (9.9% of budget) – the overspend relates to the Information Strategy Implementation (it is possible that additional funding will be received in 2005/06 to offset this overspend).
• Directorate of Information – C3i Programme - £28.8m underspend (33.3% of budget) – principally due to the planned re-phasing of expenditure into future years on a number of projects.

The funding received to date is £31.2m, which is 11.0% of the revised funding figure of £284.1m. The forecast for funding is expected to be in line with the approved budget.

List of abbreviations

MPA – Metropolitan Police Authority
MPS – Metropolitan Police Service
ACPO – Association of Chief Police Officers
APA – Association of Police Authorities
BOCU – Borough Operational Command Unit
CBRN – Chemical Radiological Biological and Nuclear
OTSU – Operational Technical Support Unit
RCCO – Revenue Contribution to Capital Outlay
PCSO – Police and Community Support Officer

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.

For more information contact:

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

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