Revenue and capital monitoring report 2005/06 – period 5

Report: 05
Date: 10 October 2005
By: Commissioner

Summary

The report provides an update on the revenue and capital monitoring position for 2005/06 at Period 5 (to the end of August). The revenue budget is forecast to overspend by £52.6m (1.9% of budget), which includes £70.4m of costs related to Operation Theseus. The underlying forecast overspend excluding Operation Theseus and Operation Bracknell costs is £15.6m, which is offset by a forecast underspend on Police Officer Pensions of £28.8m.

The expenditure to date for the Capital Programme as at Period 5 (August) is £96.5m, which is 29.98% of the revised budget of £320.3m.

A. Recommendation

That members:

1. Note the year to date and forecast position for revenue budgets and the capital programme.
2. Note the additional £36.2m capital funding and budget approved by the MPA Full Authority on 28 July 2005.

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.

2. At MPS Investment Board on 26 September, it was agreed that an urgent series of meetings would take place with the purpose of reviewing the original Period 5 financial forecast for the various business groups. The last of these meetings took place on 4 October and the results follow in this report.

3. The meetings focused on reviewing the Period 5 forecast information relating to each of the Business Groups, challenging the assumptions that had driven the forecast and confirming the accuracy of the original Period 5 forecasts. In certain cases, forecasts were adjusted where it was believed that more up-to-date assumptions were available and it was possible to quantify the adjustments required.

4. In total, a reduction of £4.3m was made to the original Period 5 forecast as a result of this review process.

• Territorial Policing (£2.8m) – reduced police pay forecast based on the most up-to-date information provided by the Workforce Planning Unit (£1.0m) and the transfer of a number of police officers to the Transport Operational Command Unit over the coming months, for which Transport for London will provide funding (£1.8m).
• Directorate of Information (£0.9m) - delays in the delivery of Airwave Training and associated expenditure.
• Deputy Commissioner’s command (£0.6m) - relating to the Directorate of Professional Standards

5. The meetings with Specialist Crime, Specialist Operations, Central Operations, Human Resources and Resources Business Groups confirmed the accuracy of the original Period 5 forecast and therefore no adjustments were made. Further work on the year-end forecast will be undertaken as part of the half-year monitoring and review process.

6. A summary of the position is given in the tables below:

Table 1 – Summary of revenue forecast against budget at period 5

Table 2 – Comparison of period 4 forecast outturn variation with period 5 forecast outturn variation (excluding Operations Theseus and Bracknell)

Table 3 - Summary of Period 4 Forecast Outturn with Period 5 Forecast Outturn

Operational performance

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

• Total notifiable offences are falling; down 2.1%
• Homicide is down by 38% (excluding the number killed on the bus in the terrorist attacks on July 7).
• Gun enabled crime is up by 10.7%
• Knife enabled crime is falling: down 6.1%
• Residential burglary is rising: up 1.6%
• Robbery is increasing: up overall by 16.2%
• Rape is rising: up 19.1%
• Motor vehicle crime is rising: up 0.1%

8. 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

9. 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.

10. 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, for the first time in living memory, have provided officers to support the MPS), and substantial amounts of forensic expenditure and operational technical support costs.

11. The deployment of officers on this scale has resulted in significantly increased costs of supporting officer’s i.e. catering, equipment and temporary accommodation. The current forecast for these operations is £70.4m of additional costs as compared to a forecast of £88.1m of additional costs at Period 4. The forecast has been based on a consistent set of assumptions appropriate to the various Business Groups. The forecast will reduce as operational requirements become more clearly defined.

12. Since the first attack on 7 July 2005, the level of officers/police staff dedicated to the operation has gradually decreased to a level sufficient to maintain the various investigations and provide public reassurance. Since the operation first began, more than half of all those officers/police staff that were originally assigned to the operation have returned to their normal duties. It is expected that further reductions to the forecast expenditure on these operations will occur in future months.

13. The Home Office have indicated that the MPA will be expected to meet some of these additional costs from its reserves possibly up to 1% (£27m) of the net expenditure. The Home Office are considering an interim payment based on estimates of the additional costs to 31 August.

14. Additionally the MPS is considering level of commitments against earmarked reserves to identify any flexibility that may exist. The efforts to mitigate the cost pressure resulting from the terrorist activity are therefore on-going and these will be reported to Members in future reports.

Table 4 – Estimated costs of Operations Theseus/Aethra/Vivace/Sevarus

Revenue forecast by business group

15. The forecast outturn position for the MPS is an overspend of £52.6m (1.9% of budget). The subjective position by Business Group is at Appendix 1. The overall position for the MPS is at Appendix 2. Tables 1 and 2 above show a forecast underspend of £15.6m excluding Theseus and Bracknell. Figures reported at the last MPA Finance Committee are shown in brackets.

16. Territorial Policing - Overspend of £37.4m – 3.5% of budget (£52.3m).
Excluding the additional costs forecast for operations Theseus and Bracknell, there is a forecast overspend of £12.5m (£9.9m) in Territorial Policing. Police overtime is the main budget pressure within Territorial Policing due to street crime operations with forensic expenditure also overspending. The increase in overall forecast relates to police overtime which is now expected to be incurred on core duties rather than on Operation Theseus as previously forecast.

17. Specialist Operations – Overspend of £25.4m – 14.1% of budget (£23.2m)
Excluding the additional costs forecast for operations Theseus and Bracknell, there is a forecast overspend of £6.9m (£9.3m) in Specialist Operations. The overspend occurs mainly 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.

18. Specialist Crime – Overspend of £16.9m – 6.0% of budget (£18.0m)
Excluding the additional costs forecast for operations Theseus and Bracknell, there is a forecast overspend of £10.3m (£9.7m) in Specialist Crime. The forecast shows little change from that previously reported and budget pressures continue in forensics and for budgets held on behalf of the Service such as DNA Expansion, Telephone Investigation Unit and Police National Computer (PNC) charges.

19. Central Operations – Overspend of £6.0m – 3.3% of budget (£5.9m)
Excluding the additional costs forecast for operations Theseus and Bracknell, there is a forecast overspend in Central Operations of £2.9m (£3.5m). The overspend results from Police Officer Overtime and vehicle hire costs relating to the additional costs associated with policing public order events following the terrorist attacks in London.

20. Deputy Commissioner’s Command – Overspend of £1.6m – 1.8% of budget (£1.9m)
Excluding the additional costs forecast for operations Theseus and Bracknell, there is a forecast underspend in the Deputy Commissioner’s Command of £0.4m (£0.9m overspend). The reduction results from a review of expected staffing costs.

21. Directorate of Information – Overspend of £3.0m – 1.2% of budget (£3.8m)
Excluding the additional costs forecast for operations Theseus and Bracknell, there is a forecast overspend in the Directorate of Information of £1.2m (£2.5m). As previously reported, the budget pressures are 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. The reduction in forecast results principally from a review of expected costs following delays in the delivery of Airwave training.

22. Human Resources (excluding Police Pensions) – Overspend of £0.6m – 0.7% of budget (£0.8m)
The forecast shows little change from that previously reported and the budget pressure remains within Corporate Employee Expenditure, due to increased levels of premature retirement costs of Police Staff. Budget pressure also exists with the level of income for seconded officers forecast to be below that budgeted. These are partially offset by underspends in Police Officer and Police Staff Pay due to delays in filling vacant posts.

23. Resources – Overspend of £0.7m – 0.3% of budget (£3.6m)
Excluding the additional costs forecast for operations Theseus and Bracknell, there is a forecast underspend in Resources of £3.4m (£0.1m underspend). Budget pressures remain within Premises Costs due to 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, additional investment receipts and the service charges income for Lambeth mentioned above. The change in forecast results principally from additional service charges income expected from the Forensic Science Service for accommodation at Lambeth.

24. Pensions – A favourable variance of £28.8m – 9.9% of budget (£26.8m).
This increase in variance relates to transfer values received to date being significantly above the level assumed in the budget.

25. Centrally held budgets – An underspend of £12.0m (£5.1m)
Excluding Operation Theseus expenditure the forecast is for an underspend of £24.8m (£19.3m). The increase in underspend relates to forecast income for Operation Bracknell which has been now recognised in the forecast.

Provisional revenue outturn by expenditure/income type

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

27. Police Officer Pay - Overspend of £13.9m – 1.0% of budget (£10.4m).
The forecast includes an additional cost relating to Mutual Aid provided to the MPS and National Insurance (NI) 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 £2.6m would be expected.

28. Police Staff Pay - Underspend of £8.3m – 1.6% of budget (£5.5m)
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 £8.3m would be expected principally due to delays in the filling of vacant posts.

29. Police Community Support Officers (PCSO) Pay - Underspend of £5.7m – 9.6% of budget (£3.4m).

The forecast underspend is principally due to vacancies and variations in pay averages compared to those budgeted. The increase in underspend relates to the allocation of budget within funded units for which costs had already been forecast.

30. Traffic Warden Pay - Underspend of £0.6m – 4.6% of budget (£0.3m).
The forecast assumes staff for the new car pound at Perivale will be starting during the period November 2004 to January 2005 which is later than anticipated when the budgets were originally set.

31. Police Officer Overtime - Overspend of £51.7m – 46.4% of budget. (£61.1m)
The cost of operations following the recent terrorist attacks in London account for £36.0m of the forecast overspend (£52.5m). 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.

32. Police Staff Overtime - Overspend of £6.3m – 24.7% of budget (£5.6m).
The cost of operations following the recent terrorist attacks in London, accounts for £1.4m of the forecast overspend. Additionally, a significant element of the overspend relates to costs associated with Communication Officers. There has also been an effect within Specialist Operations where the increase in officer numbers has required additional support by Police staff.

33. PCSO Overtime - Overspend of £0.3m – 42.9% of budget (£0.7m)
This overspend relates entirely to the cost of operations following the recent terrorist attacks in London, estimated at £0.5m.

34. Employee Related Expenditure - Overspend of £2.7m – 8.0% of budget. (£5.1m)
The reduction in the overspend is principally due to a reduction of £0.9m within the Directorate of Information relating to external training costs. There is still a forecast overspend due to the cost of Police Staff Premature Retirement/Redundancies as there are more of these forecast than the original budget catered for.

35. Premises Costs - Overspend of £5.6m – 2.9% of budget (£5.8m).
Little change from that previously reported. The overspend 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.

36. Transport Costs - Overspend of £10.0m – 20.2% of budget (£8.9m)
The cost of operations following the recent terrorist attacks in London account for £1.8m of the forecast overspend. Much of the increase from last month relates to clarification on the costs of the G8 Summit. However, as previously reported, 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 relating to increased fuel costs, vehicle hire and maintenance.

37. Supplies and Services - Overspend of £19.7m – 5.1% of budget (£25.1m).
The cost of operations following the recent terrorist attacks in London account for £9.3m of the forecast overspend. The reduction in forecast occurs within centrally held budgets following a review of expenditure forecasts within Business Groups. As previously advised, the major pressures fall within the areas of forensics (£7.1m), DNA testing (£5.4m) and external and legal consultancy (£5.6m).

38. 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.

39. Capital Financing Costs - Underspend of £2.8m – 16.3% of budget (£2.8m).
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 2004/05 was lower than originally anticipated.

40. Income - Forecast over-achievement of £12.0m – 4.2% of budget (£0.5m).
The increase in the income forecast since the last report relates to receipts for the MPS contribution to the disaster in South East Asia (Operation Bracknell - £5.8m) together with an invoice of £3.1m for service charges at Lambeth which has now been agreed with the Forensic Science Service. The transfer of police officers from Territorial Policing to the Transport Operational Command Unit (OCU) is expected to generate an additional £1.8m.

41. Funding - Forecast under-funding of £1.1m - (£nil).
It is forecast that Home Office funding for London Allowance will be reduced by £1.1m from that budgeted as a result of there being fewer officers who qualify for the payments. Future monitoring reports will reflect a corresponding change in the Police Officer Pay Budget.

Increase to Tasking Budget

42. The Together Tactical Tasking process has been operating since May 2005. 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. The largest element of the Tasking budget has been allocated to TSG (£1.6m). This is directed to targeting street crime, gun crime and robberies.

Movements in reserves

43. Movements from reserves carried out in Period 5 are listed by Business Group Below:

Budget movements

44. 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 August are at Appendix 3b. The major budget move in August relates to the allocation of £11.8m of Counter Terrorism committed underspend budgets from 2004-05. Other budget moves reflect the allocation of partnership funding budgets and funding for additional armed patrols at Heathrow among others.

Capital monitoring

45. MPA Finance Committee Members approved a revised Capital Programme for 2005/06 of £284.1m including additional funding and budget moves of £1.1m on 15 September 2005.

46. At the MPA Full Authority meeting on the 28 July 2005, approval was given for the acquisition of a property. These have now been added to the 2005/06 Capital Programme giving a revised budget for the year of £320.3m and will be funded through unsupported borrowing.

47. Appendix 4 sets out the expenditure to date for the 2005/06 Capital Programme as at Period 5 (August) at business group level, which shows an overall total of £96.5m. This total represents 29.98% of the revised budget. The forecast for the year of £292.8m is £27.5m below the revised budget. The position in respect of each business group is set out below.

48. Property Services - £2.2m underspend (1.8% of budget). The latest spend includes the acquisition of two properties. It is expected that there will be some re-phasing of projects into future years. This will be considered at the mid-year review stage and reported back to Members.

49. Directorate of Information – Excluding C3i Programme - £3.7m overspend (8.0% of budget). The forecast overspend is primarily due to non-budgeted expenditure on National Strategy for Police Information Systems (NSPIS) Case and Custody. It is anticipated that funding for this will be received from the Police Information Technology Organisation (PITO), although this funding (£5m) has not yet been reflected in the figures.

50. Transport Services - £1.1m overspend (7.9% of budget) The overspend shown on Transport Services is due to the purchasing of vehicles on behalf of other business groups that were not included in the capital budget. Funding for this expenditure will come from within the various business groups.

51. Other Plant & Equipment – Forecast to meet budget.

52. Directorate of Information – C3i Programme - £29.9m underspend (34.0% of budget).
In 2005/06 the forecast for Airwave is below budget due to the re-profiling of expenditure into later years in relation to subscriber terminals and Integrated Communications Control System (ICCS) contract payments.

53. In 2005/06 the expenditure on C3i Technology and Consultancy is forecast to be below budget. Expenditure is being re-profiled to reflect the extended implementation of the project due to delays arising from the Integrated Communications Platform (ICP)/ICCS contract.

54. Step-Change Programme – 1st Tranche Costs – Minor variation.

55. Step-Change Programme – 2nd Tranche Costs – Forecast to meet budget.
Appendix 4 also shows the funding received to date as £43.7m, which is 13.6% of the revised funding figure of £320.3m. The forecast for funding is expected to match the plan for the year.

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

None

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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