Revenue and capital monitoring report 2005/06 – period 8

Report: 05
Date: 19 January 2006
By: Commissioner

Summary

The report provides an update on the revenue and capital budget monitoring position for 2005/06 at Period 8 (to the end of November). The revenue budget is forecast to underspend by £7.7m (0.3% of budget). This is a significant improvement on period 7, mainly due to an additional Home Office grant of £20m in relation to Operation Theseus and a further improvement, due to actions by the MPS to reduce expenditure, in the core position of £3.5m.

The expenditure to-date for the Capital Programme as at period 8 (November) is £137.1m, which is 42.5% of the revised budget of £322.4m. Some adjustments and rephasing of certain projects within the capital programme are submitted for approval.

A. Recommendations

That

1. Members note the year to date and forecast position for revenue budgets and the capital programme; and
2. approve budget changes to the capital programme as set out in paragraph 40 of 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 7 and Period 8 by business group excluding expenditure relating to Operation Theseus and Operation Bracknell. Table 3 provides a summary of the forecast outturn comparison between Period 7 and Period 8. Period 7 figures in all the tables have been adjusted to reallocate £10m interim grant payments for Operation Theseus from core MPS into Operation Theseus.

Table 1 – Summary of revenue forecast against budget at period 8

Table 2 – Comparison of period 7 forecast outturn variation with period 8 forecast outturn variation (excluding Operations Theseus & Bracknell)

Table 3 - Summary of period 7 forecast outturn with period 8 forecast outturn

3. In overall terms the forecast position has improved by £22.0m of which £3.5m is in the core MPS budget and £0.4m in the Pensions budget. The Operation Theseus forecast has improved by £18.1m and now includes an additional grant from the Home Office of £20m.

4. The position on core MPS has improved by £3.5m, from a £0.2m overspend in period 7 to a £3.3m underspend in Period 8. Excluding the effects of the £5.95m reduction in the Association of Train Operating Companies (ATOC) forecast, there is a £2.7m overspend on Core MPS as compared to an equivalent overspend of £6.2m in Period 7. This committee has resolved that the core budget should break even. A further £2.7m reduction in spend would increase the overall forecast underspend in the table above from £7.7m to £10.4m.

5. The continuing improvement in the core MPS position is due to efforts taken by business groups to constrain expenditure. In particular efforts have been made to defer recruitment and delay certain projects especially in the area of information technology. Management Board will continue to exert spending constraints to ensure the improved financial forecast is delivered.

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 November 2005 with the same period last year:

• Total notifiable offences are falling: down 2.7%
• Homicide is falling: down 20.0% (excluding those killed on the bus in the terrorist attacks on July 7th).
• Gun enabled crime is rising: up 10.8%
• Knife enabled crime is falling: down 1.5%
• Residential burglary is rising: up 2.2%
• Robbery is increasing: up overall by 14.8%
• Rape is rising: up 13.2%
• Motor vehicle crime is falling: down 0.5%

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 £56.9m of additional costs as compared to a forecast of £55.0m at period 7. The figures in table 4 include £30m in grant received from the Home Office.

Table 4 – Estimated costs of Operations Theseus

Revenue forecast by business group

9. The forecast outturn position for the MPS is an overspend of £7.7m (0.3% of budget). The subjective position by Business Group is at Appendix 1. The overall position for the MPS is at Appendix 2.

Territorial Policing – An overspend of £21.9m – 2.0% of budget

10. Forecast additional expenditure on Theseus and Bracknell has increased by £0.2m to £15.5m. Excluding such expenditure, there is a forecast overspend of £6.3m. 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 81 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, Public Order Clothing and Interpreter fees. These overspends are partially offset by an underspend on the Police Community Support Officers (PCSO) budget. The forecast overspend has reduced by £0.9m from Period 7 principally due to an increased income forecast relating to forfeiture, immigration income and operational receipts.

Specialist Operations – An overspend of £22.6m – 12.5% of budget

11. Forecast additional expenditure on Theseus and Bracknell has reduced from £17.4m to £15.4m. Excluding such expenditure, there is a forecast overspend of £7.2m. The principle reasons for this overspending remain as overseas travel and subsistence costs. The forecast overspend has reduced by £1.0m from Period 7 following a reduction in the forecast level of police overtime being worked.

Specialist Crime – An overspend of £9.8m – 3.3% of budget

12. Forecast additional expenditure on Theseus and Bracknell has increased from £5.5m to £5.8m. Excluding such expenditure, the forecast overspend is £4.0m. 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 increased by £2.7m from Period 7 principally due to an increase in DNA testing (much of which is Theseus related) with smaller increases related to Telephone Investigation and prosecution fees.

Central Operations – An underspend of £0.9m – 0.5% of budget

13. Forecast additional expenditure on Theseus and Bracknell has reduced from £2.0m to £1.8m. Excluding such expenditure, the forecast underspend in Central Operations is £2.7m. 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 in variance of £1m from Period 7 relates mainly to a reduction in the police overtime forecast following a review of planned activities.

Deputy Commissioner’s Command – An underspend of £0.1m – 0.1% of budget

14. Forecast additional expenditure on Theseus and Bracknell has remained constant at £0.9m. Excluding such expenditure, the forecast underspend is £1.0m. The reason for the underspend primarily relates to Police Pay where there is a forecast of 52 officers below BWT following delays in recruiting officers with the appropriate experience. This underspend is partially offset by higher insurance premiums and compensation payments. The forecast has reduced by £0.7m since Period 7 mainly due to a reduction in the number of officers forecast to be in post by the end of the year and a reduced publicity expenditure forecast.

Directorate of Information – An underspend of £0.2m – 0.1% of budget

15. Forecast additional expenditure on Theseus and Bracknell has increased from £1.9m to £2.2m. Excluding such expenditure, there is a forecast underspend of £2.4m. The principle reason for the underspend is reduced running expenses associated with various projects that have been rephased. The forecast underspend has increased by £0.1m since Period 7 with increases in police staff pay costs offset by increased recharges for telephony costs and additional income from the City of London Police for CAD provision.

Human Resources (excluding Police Pensions) – An overspend of £1.0m – 1.2% of budget

16. Forecast additional expenditure on Theseus and Bracknell has increased from £0.3m to £0.4m. Excluding such expenditure there is an overspend of £0.6m. The budget pressures in respect of police staff premature retirements and secondment income are mostly offset by underspends in Police Pay and Police Staff Pay due to vacancies. The forecast overspend has increased by £0.6m since Period 7 mainly resulting from additional police officers taking up secondment positions.

Resources – An underspend of £3.2m – 1.3% of budget

17. Forecast additional expenditure on Theseus and Bracknell has increased from £1.4m to £6.6m following a thorough review of costs incurred, particularly within Property Services. Excluding such expenditure, the forecast underspend in Resources is £9.8m. 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.

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 £29.2m – 10.1% of budget

19. A small increase in variance of £0.4m since the Period 7 forecast which relates to an increase in transfer values received forecast.

Centrally held budgets – A favourable variance of 31.4m

20. The forecast additional expenditure on Theseus has reduced from £12.8m to £10.1m. The forecast also includes £30m of Home Office grant contribution to the cost of Operation Theseus.

Funded units – An adverse variance of £2.4m

21. Although budgeted income is expected to exceed budgeted expenditure by £3.7m, the forecast suggests that only £1.3m of this will be achieved, a variance of £2.4m. The shortfall includes £0.6m of resources being diverted to Operation Theseus for which we cannot therefore charge the customers i.e. Transport for London, British Airports Authority etc. Other adverse variances relate to Catering (£0.7m) and DNA Expansion (£1.1m).

Provisional revenue outturn by expenditure/income type

The main forecast variances from budget are set out below.

Police Officer pay - Underspend of £1.2m – 0.09% of budget

22. The forecast includes £13.5m additional costs relating to Mutual Aid provided to the MPS and National Insurance (NI) payable on overtime payments resulting from operations following the terrorist attacks in London and Operation Bracknell. Excluding such expenditure, there is a forecast underspend of £14.7m. 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 has improved by £6.7m from period 7 following further detailed reviews by business groups.

Police Staff pay - Underspend of £1.0m – 0.2% of budget

23. Forecast expenditure on Theseus and Bracknell remains constant at £0.1m. Excluding such expenditure, there is a forecast underspend of £1.1m. The forecast position has improved by £1.7m from Period 7 following further review of the recruitment profile of Police Staff for the remainder of 2005/06.

PCSO pay - Underspend of £6.8m – 11.4% of budget

24. The forecast underspend is principally due to vacancies and variations in pay averages compared to those budgeted. The forecast underspend has increased in period 7 and reflects continuing reviews of vacancies.

Traffic Warden pay - Underspend of £1.5m – 11.5% 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 improved by £1.3m from Period 7 following continuing reviews of vacancies.

Police Officer overtime - Overspend of £33.9m – 28.9% of budget

26. Forecast expenditure on Theseus and Bracknell remains constant at £25.9m. Excluding such expenditure, there is a forecast overspend of £8.0m. 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 £2.1m from Period 7, mainly following decisions to review overtime activity levels worked within various Business Groups.

Police Staff overtime - Overspend of £6.6m – 25.8% of budget

27. Forecast expenditure on Theseus and Bracknell remains constant at £1.1m. Excluding such expenditure, there is a forecast overspend of £5.5m. 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 a reduction of £0.7m in the overspend since period 7.

PCSO overtime - Overspend of £0.3m – 37.8% 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 £2.5m – 7.5% of budget

29. Forecast expenditure on Theseus and Bracknell is £0.4m. Excluding such expenditure, there is a forecast underspend of £2.9m. This is principally due to the reduction in the expected tax liability on free rail travel following discussions with the Inland Revenue. There has been a reduction of £0.6m in the overspend since period 7.

Premises costs - Overspend of £1.7m – 0.9% of budget

30. Forecast expenditure on Theseus and Bracknell is £4.2m. Excluding such expenditure, there is a forecast underspend of £2.5m. The forecast has improved by £2.1m from the period 7 position, principally due to the reallocation of Theseus costs over expenditure type headings.

Transport costs - Overspend of £15.4m – 30.5% of budget.

31. Forecast expenditure on Theseus and Bracknell is £1.9m. Excluding such expenditure, there is a forecast overspend of £13.5m. 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 increased by £6.8m from the period 7 position primarily due to the reallocation of Theseus costs over expenditure type headings and transition costs for the new vehicle repair and maintenance contract.

Supplies and services - Overspend of £22.6m – 5.7% of budget

32. Forecast expenditure on Theseus and Bracknell is £13.6m. Excluding such expenditure, there is a forecast overspend of £9.0m. As previously advised, the main causes are DNA testing and external and legal consultancy. The forecast overspend has increased by £9.3m since period 7 principally as a result of the reassessment of costs associated with facilities expenditure, interpreters, telephones, various operational support equipment and the reallocation of Theseus costs over expenditure type headings.

Capital financing costs - Underspend of £2.5m – 14.3% 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 increased by £0.4m since period 7.

Income - Forecast over-achievement of £44.2m – 15.0% of budget

34. The income forecast now includes a contribution of £30.0m 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 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 increased by £20.7m since period 7 primarily due to the receipt of a £20m Home Office grant in respect of Operation Theseus.

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 have agreed a total drawdown of £3.8m from the Tasking reserve to cover the forecast level of expenditure.

Budget movements

37. 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 November are at Appendix 3b. The major budget movements in Period 8 relate to the allocation of centrally held budgets to Business Groups for Police Staff pay inflation.

Movements in reserves

38. There have been no movements from reserves carried out in period 8 since the £6.4m reported at period 7.

Capital monitoring

39. The Finance Committee approved a revised capital programme for 2005/06 of £327.4m including additional funding on 15 December 2005.

40. Members are asked to approve the following amendments to the capital programme:

• Additional funding from revenue contributions to capital for car pound security and works (£0.8m and £1.6m respectively).
• A reduction for planned re-phasing of the Step Change (tranche 2) Programme in to 2006/07 (£7.4m).

Assuming these two adjustments are approved this will revise the capital budget in 2005/06 to £322.4m.

41. Appendix 4 sets out the expenditure for the 2005/06 capital programme as at period 8 (November) at business group level, which shows an overall total of £137.1m. This total represents 42.5% of the revised budget. The forecast for the year of £280.0m is £42.4m below the revised budget. Capital expenditure by its nature has longer lead in times than revenue due to the more lengthy procurement processes that are required, every effort is taken to manage this however, in some cases it is necessary to re-phase expenditure across years, the MPS is undertaking further reviews to determine to what extent further re-phasing is required. The position in respect of each business group is set out below.

Property services - £9.8m underspend (7.7% of budget)

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

Directorate of Information – Excluding C3i Programme - £1.2m overspend (2.4% of budget)

43. The forecast overspend is primarily due to non-budgeted expenditure on National Strategy for Police Information Systems (NSPIS) Case and Custody. The anticipated income for this project from the Police Information Technology Organisation (PITO) has not yet been included in the figures for reasons of prudence. The overall underspend has reduced from Period 7 due to a reassessment of the expenditure on the Tech Refresh project.

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

44. The forecast overspend 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 and work is on going to secure this.

Directorate of Information – C3i Programme - £34.8m underspend (40.6% of budget)

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

46. Appendix 4 also shows the funding received to date as -£137.1m, which is 42.5% of the revised funding figure of -£322.4m. At this time 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

None

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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