Efficiency plan 2006/07 and future years

Report: 09
Date: 16 February 2006
By: Commissioner and Treasurer

Summary

This report sets out the financial aspects of the Efficiency Plan for 2006/07 and future years.

A. Recommendations

That the Committee

• approves the Efficiency Plan for 2006/07 and that a further £7m. of savings will be included, once identified, during 2006/07;
• notes the process for providing in-year updates; and
• notes that the plan will be submitted to the Home Office by the end of February, and included within the Annual Policing Plan for 2006/07.

B. Supporting information

Introduction

1. The purpose of this report is to present the 2006/07 Efficiency Plan, which is summarised at Appendix 1.

Background

2. As part of their Annual Policing Plan, all police forces and authorities are required to identify efficiency savings and demonstrate that performance has been maintained or improved. Her Majesty’s Inspectorate of Constabularies (HMIC) monitor Police Authorities’ achievement through quarterly inspections.

3. In 2005/06 a new Police Service Efficiency Strategy was implemented. Guidance was issued in February 2005 by the Home Office. The main changes were:

• Plans to be produced on a 3-year rolling basis.
• The target was increased from 2% to 3% of net revenue budget (a minimum of 1.5% must be cashable to recycle to support front line activity even if it is not required to bridge a budget gap).
• The ability to carry over gains or shortfalls between years starting from 2004/05. Any excess carried forward may be a combination of both cashable and non-cashable.
• Each planned efficiency gain should be identified as contributing to performance in one or more of the 27 areas for which HMIC conducts a baseline assessment (any risks to performance must be identified for gains above £100k, £1m for the MPS).
• A Cash Certificate to be signed off by the Treasurer and Chief Constable by the first quarter of each financial year confirming that the cashable savings have been removed from the base budget.

4. The Home Office has confirmed that there will be minor changes to the 2006/07 guidance which will be issued sometime in the New Year but these changes will not affect the main points listed above.

5. A copy of the Plan must be sent to the Home Office by the end of February and will also need to be included in the Annual Policing Plan for 2006/07.

6. The regular HMIC inspections cover both financial and operational performance. The Home Office guidance also states that failure to meet the annual efficiency target may result in a reduction to funding, in particular the Crime Fighting Fund.

Three year targets

7. The 3% efficiency target for 2006/07 is £73.87m, being 3% of net revenue expenditure (NRE) of £2,462.5m. Under Home Office rules this target will change to reflect actual net expenditure in year. The targets for 2007/08 and 2008/09 are £77.47m and £80.18m, being 3% of NRE of £2,582.3m and £2,672.7m. The target for 2006/07 is slightly lower than the target of £75.43 for the current financial year. This is due to the re-classification of certain general grant funding for 2006/07 and the pension funding changes from April 2006.

Cashable Savings

8. The exercise to balance the revenue budget for 2006/07 has identified £67.2m of savings and additional income, and of this £65.9m can be counted towards our efficiency plan, in accordance with the current guidance compared with the minimum target for cashable savings of £36.9m. A further £&m. of savings will be added during 2006/07 when he use of £7m. of reserves to balance the budget has been replaced by savings. These savings will be identified and reported in the quarterly monitoring reports to this committee. We evidence this saving by demonstrating a reduction in budgets and by managing within those reduced budgets throughout the financial year. Cashable savings of approximately £40m for 2007/08 and 2008/09 will be identified through future budget planning process, but this will require greater budget savings to be made (as some savings e.g. increased income, do not count towards the Efficiency Plan targets).

9. An additional £6.3m of cashable savings have been identified which meet the Home Office definition of cashable gains. These represent savings which have been reflected directly in a lower budget provision or which have actually been recycled into other budgets.

10. The 2005/06 Quarter 3 monitoring report elsewhere on this agenda indicates a forecast overachievement of £25.5m of savings against the Home Office target of 3% (and £75.4m). Of this surplus, cash savings of £18.9m (compared to the minimum 1.5% Home Office target of £37.7m) have been carried forward to 2006/07.- with the balance of £6.6m being carried forward as non cashable savings.

Non-cashable savings

11. These efficiency savings are the result of better utilisation of existing resources. The main areas identified so far for 2006/07 are:

• Front line policing (FLP) measure, reflecting predicted increases from the 2003/04 baseline measure of 66.4%. Our assumptions last year were that the measure would improve to 66.8% in 2004/05, 67.2% in 2005/06 and 68.2% in 2006/07. However, the 2004/05 increase did not materialise and there is no certainty on what the projected figure for 2005/06 will be. The projected figure for 2007/08 is still awaited from DCC2. Given the uncertainty around the projections, NO notional saving has yet been included for 2006/07 or for future years. Due to the uncertainty, it is suggested that gains should not be included within the plan based on predicted increases-but only when actual figures are known i.e. retrospectively.
• C3i related savings (these will also provide savings in 2007/08 onwards).
• Increase in the number of Special Constables – an increased contribution by special constables may be claimed, whether resulting from an increase in numbers or in average hours worked. Target increasing to 4,000 by the end of 2008.
• Increase in the use of Volunteers – based on the average number of volunteers per borough and average number of hours worked. The numbers of volunteers are planned to increase over the next couple of years.
• Procurement related savings on re-tendered contracts etc.
• Penalty Notices for Disorder (PND’s) and Livescan Home Office Initiatives which also form part of the Anti Bureaucracy Campaign.

A list of the currently projected savings is included within Appendix 1. The list also includes surplus non cash savings of £6.6m carried forward from 2005/06.

Contribution to performance

12. Each savings item will need to be linked to one of the 27 performance areas subject to baseline assessment by HMIC and input from Corporate Planning will be sought on these links. We will also need to consider, for items over £1m, whether there are any risks to performance by implementing the savings. Strategic Finance may need to consult separately with Business Groups on these aspects.

Summary 2006/07 Efficiency Plan

13. Appendix 1 shows the provisional 2006/07 Efficiency Plan and the 3% targets for 2007/08 and 2008/09. It can be seen that for 2006/07 we have identified potential cashable savings of £91.2m (which is £54.2m in excess of the 1.5% of target), and £19.9m for non - cashable savings. Overall £110.7m of savings have been identified, which is £36.8m in excess of the 3% target of £73.8m. However, as the Home Office guidance has not yet been finalised, the figures may change slightly, and this will be reported in the first quarterly update report during 2006/07.

Efficiency Planning in the Medium Term

14. The guidance issued by the Home Office in February 2005 requires all police forces to develop a rolling 3-year efficiency plan and also introduces more flexibility between financial years. Further work is still required to produce a detailed efficiency plan covering 2007/08 and 2008/09.

15. The recent Service Review has identified areas for potential future savings which includes restructuring of some services. The implementation of these restructures, plus the work of the new MPS Modernisation Delivery Board will ensure that further longer term savings are achieved.

Future Reporting

16. A self certification/assessment is completed following each quarter and sent to HMIC. In addition an update report will be provided every quarter to the MPS Investment Board and the MPA Finance Committee.

C. Race and equality impact

There are no equality and diversity implications arising from this report.

D. Financial implications

The financial implications are those set out in this report.

E. Background papers

Home Office Guidance

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

Send an e-mail linking to this page

Feedback