Revenue and capital budget monitoring 2005/06- period 7

Report: 05
Date: 15 December 2005
By: Commissioner

Summary

The report provides an update on the revenue and capital budget monitoring position for 2005/06 at Period 7 (to the end of October). The revenue budget is forecast to overspend by £14.3m (0.5% of budget), which includes £55m of estimated costs relating to Operation Theseus. The underlying forecast underspend excluding Operations Theseus and Bracknell is £9.8m, which is further increased by favourable variances on Police Officer Pensions of £28.8m and Operation Bracknell of £2.2m.

The expenditure to date for the Capital Programme as at Period 7 (October) is £122.3m, which is 37.3% of the revised budget of £327.4m. Some adjustments to the capital programme are submitted for approval.

A. Recommendation

Members are invited to:

1. Note the year to date and forecast position for revenue budgets and the capital programme.
2. Approve the release of reserves (paragraph 38)
3. Approve budget increases to the capital programme as set out in this report.

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.

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

2. Table 1 provides a summary of the revenue forecast and additional cost forecast for Operations Theseus and Bracknell by Business Group. Table 2 compares the forecast outturn variances from Period 6 and Period 7 by Business Group excluding expenditure relating to Operation Theseus and Operation Bracknell. Table 3 provides a summary of the forecast outturn comparison between Period 6 and Period 7.

Table 1 – Summary of revenue forecast against budget at period 7

Table 2 – Comparison of period 6 forecast outturn variation with period 7 forecast outturn variation (excluding Operations Theseus & Bracknell)

Table 3 - Summary of period 6 forecast outturn with period 7 forecast outturn

3. The main reasons for the improvement in the forecast between Period 6 and Period 7 are:

• Reduction in the forecast for police officer pay.
• Actions by Business Groups to reduce expenditure particularly in relation to premises costs and supplies and services.
• Allocation of centrally held non-pay budgets to Business Groups.

4. In overall terms the forecast position has improved by £6.0m of which £7.0m is in the core MPS budget and £0.5m in the pensions budget. There has been a marginal adverse movement in the Operation Theseus forecast (£1.5m).

5. The underspend on core MPS has increased by £7m, from £2.8m in period 6 to £9.8m in period 7. Excluding the effects of the £5.95m reduction in the ATOC forecast and the £10m Theseus funding, there is a £6.2m overspend on core MPS as compared to an equivalent overspend of £13.2m in period 6. This committee has resolved that the core budget should break even. A further £6.2m reduction in spend would reduce the overall forecast overspend in the table above from £14.326m to £8.126m.

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 October 2005 with the same period last year:

• Total notifiable offences are falling: down 2.4%
• Homicide is falling: down 5.8% (excluding those killed on the bus in the terrorist attacks on July 7th).
• Gun enabled crime is rising: up 11.4%
• Knife enabled crime is falling: down 3.7%
• Residential burglary is rising: up 2.6%
• Robbery is increasing: up overall by 15.7%
• Rape is rising: up 15.5%
• Motor vehicle crime is falling: down 0.9%

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.

Operation Theseus

8. The current forecast for this operation is £55.0m of additional costs as compared to a forecast of £53.5m at Period 6. There may be further adjustments to the forecast as operational requirements become more clearly defined.

Table 4 – Estimated costs of Operations Theseus

Revenue forecast by business group

9. The forecast outturn position for the MPS is an overspend of £14.3m (0.5% of budget). The subjective position by business group is at Appendix 1. The overall position for the MPS is at Appendix 2.

Territorial Policing – A forecast overspend of £22.8m – 2.1% of budget

10. Forecast additional expenditure on Theseus and Bracknell has remained constant at £15.3m. Excluding such expenditure, there is a forecast overspend of £7.5m. The principle reasons for this overspend are Police Overtime on street crime and other operational commitments and Police Pay where there is a forecast of 117 officers above budgeted workforce totals (BWT) at the year end. Also, there are overspends within Supplies and Services costs such as Forensics, IT consumables and desk top support, scenes of crime equipment and public order clothing. These overspends are partially offset by an underspend on the Police Community Support Officers (PCSO) budget. The forecast overspend has reduced by £6.1m from period 6 principally due to the reduction in the forecast of police officers from 302 over BWT in period 6 to 117 over BWT in period 7.

Specialist Operations – An overspend of £23.6m – 13.0% of budget

11. Forecast additional expenditure on Theseus and Bracknell has increased from £15.4m to £17.4m. Excluding such expenditure, there is a forecast overspend of £6.2m. The principle reasons for this overspending remain as overseas travel and subsistence costs. The overspend has increased by £1.1m from Period 6, primarily due to a revised police staff pay forecast which is now expected to be 28 above affordable workforce target by the year end.

Specialist Crime – An overspend of £7.1m – 2.4% of budget

12. Forecast additional expenditure on Theseus and Bracknell has increased from £4.7m to £5.5m. Excluding such expenditure, the forecast overspend is £1.6m. The principle reasons for this overspend are within Supplies and Services and relate to forensics expenditure and budgets held on behalf of the service such as DNA Expansion, Telephone Investigation Unit and Police National Computer (PNC) charges. The forecast overspend has reduced by £9.2m from Period 6 principally due to action taken to reduce expenditure and the allocation of centrally held budgets to cover previously unfunded corporate expenditure.

Central Operations – An overspend of £0.1m – 0.4% of budget

13. Forecast additional expenditure on Theseus and Bracknell has reduced from £2.3m to £2.0m. Excluding such expenditure, the forecast underspend in Central Operations is £1.9m. The principle reason for the underspend is the under-achievement of the deployment plan in the Firearms section, vacancies within various sections and additional income from various sources. The change from Period 6 relates to action taken to reduce expenditure and the allocation of centrally held budgets to cover previously unfunded corporate expenditure and a transfer of budget from Specialist Operations.

Deputy Commissioner’s Command – An overspend of £0.6m – 0.6% of budget

14. Forecast additional expenditure on Theseus and Bracknell has increased from £0.7m to £0.9m. Excluding such expenditure, the forecast underspend is £0.3m. The reason for the underspend primarily relates to Police Pay where there is a forecast of 39 officers below BWT due to the experiencing of delays in recruiting officers. This underspend is partially offset by higher insurance premiums and compensation payments. The forecast has reduced by £1.1m since Period 6 mainly due to the allocation of funding from reserves to cover service review expenditure and a reduction in the forecast for compensation claims.

Directorate of Information – An underspend of £0.1m – 0.1% of budget

15. Forecast additional expenditure on Theseus and Bracknell has increased from £1.7m to £2.0m. Excluding such expenditure, there is a forecast underspend of £2.1m. The principle reason for the underspend is reduced running expenses associated with various projects that have been rephased. The forecast underspend has increased by £0.6m since period 6 primarily due to the allocation of centrally held budgets to cover additional non-pay inflation costs partially offset by emerging cost pressures including the call handling system.

Human Resources (excluding police pensions) – An overspend of £0.4m – 0.5% of budget

16. Forecast additional expenditure on Theseus and Bracknell has reduced from £0.3m to £0.2m. Excluding such expenditure there is a minor overspend of £0.2m. The budget pressures in respect of police staff premature retirements and secondment income are offset by underspends in police pay and police staff pay due to vacancies. There has been a minor adverse movement in the forecast position since Period 6 due to additional charges for police clothing.

Resources – An underspend of £7.7m – 3.2% of budget

17. Forecast additional expenditure on Theseus and Bracknell has increased from £0.4m to £1.4m. Excluding such expenditure, the forecast underspend in Resources is £9.1m. This is principally due to the reduction in the expected tax liability on free rail travel following discussions with the Inland Revenue, additional income for service charges at Lambeth from the Forensic Science Service and increased investment income. As previously reported, budget pressures exist in relation to building works. There has been a minor adverse movement in the forecast position since Period 6 due to additional maintenance costs on premises.

Metropolitan Police Authority and Internal Audit – An underspend of £0.4m – 4.2% of budget

18. There has been little change to the position previously reported. The underspend position principally results from unanticipated income relating to internal audit work on fraudulent claims by interpreters.

Pensions – A favourable variance of £28.8m – 9.9% of budget

19. A small increase in variance of £0.5m since the Period 6 forecast which relates to a review of the forecast for widows pensions.

Centrally held budgets – A favourable variance of £4.4m

20. Forecast additional expenditure on Theseus has remained constant at £12.8m. The forecast also includes £10m of Home Office grant that is an interim contribution to the cost of Operation Theseus.

Funded units – An adverse variance of £1.1m

21. Although budgeted income is expected to exceed budgeted expenditure by £3.8m, the forecast suggests that only £2.7m of this will be achieved, a variance of £1.1m. The shortfall is primarily due to resources being diverted to Operation Theseus for which we cannot therefore charge the customers i.e. Transport for London, British Airports Authority etc.

Provisional revenue outturn by expenditure/income type

The main forecast variances from budget are set out below.

Police officer pay - Overspend of £5.4m – 0.4% of budget

22. The forecast includes £16.7m additional costs 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. Excluding such expenditure, there is a forecast underspend of £11.3m. This underspend is due to workforce numbers being less than budgeted through the year despite the forecast over strength position in Territorial Policing. The forecast overspend has reduced by £4.6m from Period 6 following a thorough review by Business Groups particularly taking into account the effects of 2006/07 savings targets on 2005/06 recruitment.

Police staff pay - Overspend of £0.7m – 0.1% of budget

23. Forecast expenditure on Theseus and Bracknell remains constant at £0.2m. Excluding such expenditure, there is a forecast overspend of £0.5m. The forecast has increased by £4.1m from Period 6 following a review of information available from the Workforce Planning Unit regarding the recruitment profile of Police Staff for the remainder of 2005/06.

Police Community Support Officers (PCSO) pay - Underspend of £5.5m – 9.1% of budget

24. The forecast underspend is principally due to vacancies and variations in pay averages compared to those budgeted. The forecast underspend has reduced from £6.1m in Period 6 and reflects continuing reviews of vacancies.

Traffic Warden pay - Underspend of £0.2m – 1.5% of budget

25. This forecast assumes that staff for the new car pound at Perivale will be starting during the period November 2005 to January 2006 which is later than anticipated when the budgets were originally set. The forecast underspend has reduced by £0.5m from Period 6.

Police officer overtime - Overspend of £35.9m – 30.9% of budget

26. Forecast expenditure on Theseus and Bracknell remains constant at £26.1m. Excluding such expenditure, there is a forecast overspend of £9.8m. 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. The forecast overspend has reduced by £2.0m from Period 6, mainly following a review of activity levels within Specialist Operations.

Police staff overtime - Overspend of £7.2m – 28.4% of budget

27. Forecast expenditure on Theseus and Bracknell remains constant at £1.2m. Excluding such expenditure, there is a forecast overspend of £6.0m. As previously advised, a significant element of the overspend relates to costs associated with Communication Officers. There has also been an impact within Specialist Operations where the increase in officer numbers has required additional support by police staff. There has been an increase of £0.7m in the overspend since Period 6.

PCSO overtime - Overspend of £0.4m – 48.4% of budget

28. As previously stated this overspend relates almost entirely to the cost of operations following the recent terrorist attacks in London, estimated at £0.3m.

Employee related expenditure - Underspend of £1.9m – 5.6% of budget

29. Forecast expenditure on Theseus and Bracknell remains constant at £2.3m. Excluding such expenditure, there is a forecast underspend of £4.2m. This is principally due to the reduction in the expected tax liability on free rail travel following discussions with the Inland Revenue.

Premises costs - Overspend of £3.8m – 2.0% of budget

30. Forecast expenditure on Theseus and Bracknell is £0.7m. Excluding such expenditure, there is a forecast overspend of £3.1m. The forecast overspend has reduced by £5.7m from the Period 6 position, principally due to the allocation of centrally held non-pay budgets to Business Groups.

Transport costs - Overspend of £8.6m – 17.2% of budget

31. Forecast expenditure on Theseus and Bracknell has increased from £2.3m in Period 6 to £3.2m in Period 7. Excluding such expenditure, there is a forecast overspend of £5.4m. 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. The forecast overspend has reduced by £1.6m from the Period 6 position due to the allocation of centrally held non-pay budgets to Business Groups.

Supplies and services - Overspend of £13.3m – 3.3% of budget

32. Forecast expenditure on Theseus and Bracknell remains constant at £8.5m. Excluding such expenditure, there is a forecast overspend of £4.8m. As previously advised, the main causes are DNA testing (£4.9m) and external and legal consultancy (£5.1m). The forecast overspend has reduced by £10.5m since Period 6 principally as a result of the allocation of centrally held non-pay budgets to Business Groups.

Capital financing costs - Underspend of £2.1m – 12.3% of budget

33. As previously advised, 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. Following a review the forecast underspend has reduced by £0.7m since Period 6.

Income - Forecast over-achievement of £23.5m – 8.0% of budget

34. The income forecast now includes an interim contribution of £10.0m from Home Office in respect of Operation Theseus, receipt of the MPS contribution to Operation Bracknell of £6.3m, income of £4.7m for policing the G8 meeting and an additional £1.8m from Transport for London following a transfer of police officers from Territorial Policing to the Transport Operational Command Unit (OCU). These are all one-off income streams and do not therefore affect the budget build for 2006/07. The forecast also reflects income of £3.1m for service charges at Lambeth. The forecast over-achievement has reduced by £4.5m since Period 6 due primarily to the recovery of overpayments of grants by the Home Office relating to DNA Expansion Programme (£1.2m) and a review of rental income within Property Services (£1.8m).

Funding - Forecast under-funding of £1.1m – 0.1% of budget

35. As previously advised, the forecast for Home Office funding for London Allowance is £1.1m less than that budgeted as a result of there being fewer officers who qualify for the payments.

Increase to Tasking budget

36. The 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 the Territorial Support Group (TSG), which is directed to targeting street crime, gun crime and robberies. Members are asked to agree a further drawdown of £3.0m (£0.8m drawdown in Period 6) from the Tasking reserve to cover the forecast level of expenditure.

Budget movements

37. The major budget movements in Period 7 relate to the allocation of centrally held budgets to Business Groups to fund a number of non-pay budget pressures.

Movements in reserves

38. Movements from reserves carried out in Period 7 are listed by Business Group below. The movements for Tasking and Service Review relate to the balance of the reserves that were previously approved.

Capital monitoring

39. The Finance Committee members approved a revised Capital Programme for 2005/06 of £323.7m including additional funding and budget moves on 17 November 2005.

40. As part of the budget monitoring report that will be presented to the Finance Committee on December 15, members will be asked to approve the following increases to the Capital Programme:

• £3.0m for work on the National Automatic Number Plate Recognition (ANPR) National Data Centre, which is maintained with grants from the Home Office (HO).
• £0.7m for work being carried out on Operation Megellan (DNA testing), which is being funded from a £0.5m Home Office Grant and £0.2m from reserves.

41. Assuming these two adjustments are approved this will revise the capital budget in 2005/06 to £327.4m.

42. Appendix 3 sets out the expenditure for the 2005/06 Capital Programme as at Period 7 (October) at business group level, which shows an overall total of £122.3m. This total represents 37.3% of the revised budget. The forecast for the year of £294.6m is £32.8m below the revised budget. The core Capital Programme is on target however, this is offset by a planned reprofiling on the C3i project. The position in respect of each business group is set out below.

Property Services - £6.4m underspend (5.1% of budget)

43. The forecast underspend is due to planned re-phasing of various committed projects into future years.

Directorate of Information – Excluding C3i Programme - £6.0m overspend (12.0% of budget)

44. 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 income for this will be received from the Police Information Technology Organisation (PITO), although this income has not yet been included in the figures for reasons of prudence.

Transport Services - £1.1m overspend (8.1% of budget)

45. The forecast overspend is due to the purchasing of vehicles on behalf of other business groups that were not included in the capital budget. It is expected that funding for this expenditure will come from within the various business groups and work is on going to secure this.

Directorate of Information – C3i Programme - £33.4m underspend (38.8% of budget)

46. The forecast underspend is due to the planned re-profiling of expenditure into later years in relation to subscriber terminals and Integrated Communications Control System (ICCS) contract payments. Also, expenditure on the Airwave project is forecast to be below budget.

47. Appendix 3 also shows the funding received to date as -£122.3m, which is 37.3% of the revised funding figure of -£327.4m. The forecast for funding is expected to match expenditure 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

• 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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