Revenue and capital provisional outturn 2005/06

Report: 5
Date: 15 June 2006
By: Commissioner

Summary

This report provides the provisional outturn position against the revenue budget for 2005-06. The expectation is for a year-end underspend of £7.5m. This takes account of the use of £7m for budget support for 2006/07 agreed at the MPA full authority meeting on 30 March 2006 and a £3m provision for dilapidations.

Also included is the provisional outturn against the capital budget for 2005-06. The expected outturn for the year at £228.3m is £64.5m below budget.

A. Recommendations

Members are invited to:

1. Note the provisional outturn position against the revenue and capital budgets for the year.
2. Approve the use of the net underspend to provide for earmarked reserves detailed below.
3. Note that these figures may be subject to change as account closure continues.

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. The financial year 2005/06 was a particularly challenging one with the July terrorist attacks and the MPS response (Operation Theseus) having a significant impact on the financial position. There were additional pressures through the year such as the General Election, continued response to the south-east Asia tsunami Operation Bracknell, the Live 8 concert in Hyde Park, the G8 Summit and changes to licensing laws allowing 24 hour drinking. The budgets for 2005/06 reflected a number of major developments including:

• Increasing Police Officer numbers to provide 285 additional Safer Neighbourhood teams;
• Establishing a centralised Traffic Criminal Justice Unit;
• Development of Victim and Witness Focus Desks;
• Further investment in improved Communications, Command and Control facilities; and
• Modernising operations in Territorial Policing with Integrated Borough Operations rooms.

The MPS was successful in securing £30 million of additional funding to help offset some of the additional costs arising from Operation Theseus as well as reimbursement of costs incurred on Operation Bracknell and the G8 summit. Targeted efficiency savings (cashable and non-cashable) of £75 million were over-achieved by £28 million following reductions in Police Officer and Police Staff sickness levels, reduced medical retirements, the introduction of penalty notices for disorder (PNDs) and increased special constable numbers increasing Police Officer availability.

Despite the budget pressures the MPS have been able to return, as at 31 March 2006, a revenue budget underspend of £7.5 million, which is intended to provide earmarked reserves for significant budget pressures and other specific commitments for which approval is sought at paragraph 8.

3. Table 1 provides a summary of the forecast outturn comparison between Period 11 and outturn.

Table 1 - Summary comparison of Period 11 Forecast Outturn with provisional outturn

4. The provisional outturn position for the MPS was an underspend of £7.5m (0.2% of budget). This reflected the action taken by the MPS to reduce expenditure in 2005/06 to produce a balanced budget in line with the wishes of the MPA Finance Committee.

Operational performance

5. A full briefing on MPS crime performance data was presented to the MPA full Authority meeting on 27 April but a short summary of key operational performance is reproduced below to provide a holistic view for Members. Comparing operational performance in for 2005/06 with the previous year:

• Total notifiable offences fell: down 3.1%.
• Homicide fell: down 10.2%.
• Rape fell: down 2.0%.
• Racist offences fell: down 11.7%.
• Criminal damage fell: down 9.8%.
• Domestic violence fell: down 3.6%.
• Gun enabled crime rose: up 4.2%.
• Knife enabled crime rose: up 3.4%.
• Residential burglary rose: up 1.7%.
• Robbery rose: up by 16.1%.
• Motor vehicle crime rose: up 1.2%.

6. Members will be aware that more detailed information regarding operational performance is available from the Strategy Unit within Central Services.

Operation Theseus

7. The outturn for this operation between 7 July 2005 and 31 March 2006 is £47.6m of additional costs as compared to a forecast of £53.1m at Period 11. The figures in Table 2 include £30m in grant received from the Home Office and £0.6m from other sources.

Table 2 – Additional costs of Operations Theseus

Provisional revenue outturn by business group

8. The provisional outturn position for the MPS was an underspend of £7.5m (0.2% of budget). The overall position for the MPS is at Appendix 1. The subjective position by Business Group is at Appendix 2. A detailed outturn review with each Business Group is taking place at the time of writing this report and the findings will be used to help improve the financial monitoring processes. The main variances are described below.

Territorial Policing – An overspend of £28.6m – 2.6% of budget.

9. Additional expenditure on Theseus and Bracknell was £13.7m. Excluding such expenditure, there was an overspend of £14.9m. The principle reasons for overspend were within Running Expenses (£13.7m) such as Electricity, Gas, Cleaning, Fuel, Forensics and Interpreter fees and also within Police Overtime (£5.4m) on street crime and other operational commitments. These overspends were partially offset by an underspend on the PCSO budget (£5.0m).

Specialist Operations – An overspend of £15.0m – 8.3% of budget.

10. Additional expenditure on Theseus and Bracknell was £13.2m. Excluding such expenditure, there was an overspend of £1.8m. The principle reasons for overspending were overseas travel and subsistence costs with other overspends falling against desktop support, telephony, local procurement, clothing and police overtime. These were mostly offset by an underspend within Police Officer Pay due to an under-strength position.

Specialist Crime – An overspend of £14.2m – 4.8% of budget.

11. Additional expenditure on Theseus and Bracknell was £5.5m. Excluding such expenditure, the outturn overspend was £8.7m. The principle reasons for this overspend were within Supplies and Services and related to forensics expenditure and DNA Expansion charges.

Central Operations – An underspend of £4.0m – 2.1% of budget.

12. Additional expenditure on Theseus and Bracknell was £1.9m. Excluding such expenditure, the forecast underspend in Central Operations was £5.9m. The principle reasons for the underspend were the under-achievement of the deployment plan in the Firearms section, vacancies within various sections and additional income from various sources.

Deputy Commissioner’s Command – An underspend of £1.1m – 1.1% of budget.

13. Additional expenditure on Theseus and Bracknell was £0.6m. Excluding such expenditure, the forecast underspend was £1.7m. The reason for the underspend primarily related to Police Pay where there were delays in recruiting officers with the appropriate experience. Also within Police Staff Pay a review of Impact Consultant posts determined a lower level of requirement than originally budgeted and these were offered as savings in 2006-07.

Directorate of Information – An underspend of £1.7m – 0.7% of budget.

14. Additional expenditure on Theseus and Bracknell was £1.8m. Excluding such expenditure, there was an underspend of £3.5m. The principle reason for the underspend was reduced running expenses associated with various projects that were re-phased.

Human Resources (excluding Police Pensions) – An overspend of £1.9m – 2.2% of budget.

15. Additional expenditure on Theseus and Bracknell was £0.4m. Excluding such expenditure there was an overspend of £1.5m. As previously reported, budget pressures in respect of police staff premature retirements and secondment income were mostly offset by under-spending on Police Pay and Police Staff Pay.

Resources – An underspend of £24.8m – 10.2% of budget.

16. Additional expenditure on Theseus and Bracknell was £3.6m. Excluding such expenditure, the underspend in Resources was £28.4m. This was principally due to the reduction in the expected tax liability on free rail travel following discussions with the Inland Revenue, the release of the associated provision as well as lower than expected Capital Financing costs, additional income for service charges at Lambeth from the Forensic Science Service and increased investment income.

Metropolitan Police Authority – An underspend of £0.3m – 3.3% of budget.

17. The underspend position principally resulted from unanticipated income relating to internal audit work on fraudulent claims by interpreters.

Pensions – A favourable variance of £25.6m – 8.8% of budget.

18. The underspend position resulted from a combination of lower than budgeted expenditure as less officers retired and increased income with higher than anticipated transfer values and more officer contributions. The favourable variance reduced by £4.0m since the period 11 forecast due to three main areas of movement; lump sums, transfer values paid to other authorities and transfer values received.

With lump sums the number of ordinary retirements had remained fairly constant, but in March there was an increase of 15 retirements over previous month’s forecasts. These included some senior ranking officers which also inflated the outturn. The second main reason for the increase was for officers who joined the 30 plus scheme who hadn’t previously formed part of the forecast. There were 25 officers who signed up, with a total lump sum cost of £1.25m.

Transfer values, both into and out of the MPS are very difficult to accurately forecast. There is no way of knowing the value of any existing recruit’s pension that they may wish to transfer into the police pension scheme. In addition to this a new recruit has up to 18 months to decide whether to transfer their pension. Consequently, a rolling 24 month historical average is used to forecast transfer values received, which at period 11 was £0.8m per month. From period 11 to outturn, £2.9m was posted, which was the highest monthly amount (by over £1m) for many years.

Members will be aware of the changed treatment for MPS pensions from 2006/07 and that there will be no future benefit to the MPS from favourable variances in pensions costs.

Centrally held budgets – A favourable variance of £12.8m.

19. Additional expenditure on Theseus relating to mutual aid costs was £6.5m but the outturn includes £30m of Home Office grant contribution to the cost of Operation Theseus and income relating to Operation Bracknell and the G8 summit. Additionally a transfer to reserves of £10m was recorded relating to the £7m budget support for 2006/07 approved at the MPA full authority meeting on 31 March and a £3m provision for dilapidations. Transfers from reserves of £22.8m were recorded against centrally held in relation to the 2005/06 Budget Support (£22m) and the release of £0.8m of unused reserves.

Funded units – An adverse variance of £3.0m.

20. The budget for funded units assumed income would exceed expenditure by £3.9m. The outturn shows that £0.8m was achieved, an adverse variance of £3.0m. Units where costs have exceeded income include the DNA Expansion Programme where £1.6m of funding previously agreed with Home Office was not forthcoming, the National Identification Service, Transport OCU and Subject Access Office.

Provisional Revenue Outturn by expenditure/income type

21. The main forecast variances from budget are set out below.

Police Officer Pay - Underspend of £10.9m – 0.8% of budget.

22. The outturn includes £9.5m additional costs relating to Mutual Aid provided to the MPS and NI payable on overtime payments resulting from operations following the terrorist attacks in London and Operation Bracknell. Excluding such expenditure, there was an underspend of £20.4m. This underspend was due to workforce numbers being less than budgeted through the year in most Business Groups.

Police Staff Pay - Underspend of £2.9m – 0.5% of budget.

23. Expenditure on Theseus and Bracknell was £0.2m. Excluding such expenditure, there was an outturn underspend of £3.1m. This was managed to help offset budget pressures in other expenditure categories.

PCSO Pay - Underspend of £6.4m – 10.7% of budget.

24. The underspend was principally due to vacancies and variations in pay averages compared to those budgeted.

Traffic Warden Pay - Underspend of £1.8m – 14.1% of budget.

25. As previously reported, the outturn reflected delays in recruiting staff for the new car pound at Perivale.

Police Officer Overtime - Overspend of £31.2m – 26.2% of budget.

26. Expenditure on Theseus and Bracknell was £22.0m. Excluding such expenditure, there was an outturn overspend of £9.2m. The major cause of the remaining overspend was operational commitments within Territorial Policing relating to street crime.

Police Staff Overtime - Overspend of £7.4m – 28.5% of budget.

27. Expenditure on Theseus and Bracknell was £1.3m. Excluding such expenditure, there was an outturn overspend of £6.1m. As previously advised, a significant element of the overspend related to costs within the Directorate of Information associated with Communication Officers. There was also an impact within Specialist Operations where the increase in officer numbers required additional support by Police staff.

PCSO Overtime - Overspend of £0.4m – 53.2% of budget.

28. As previously stated, much of this overspend related to the cost of operations following the recent terrorist attacks in London, estimated at £0.2m.

Employee Related Expenditure - Underspend of £18.1m – 54.9% of budget.

29. Expenditure on Theseus and Bracknell was £0.4m. Excluding such expenditure, there was an underspend of £18.5m. This was almost entirely due to the reduction in the expected tax liability on free rail travel following discussions with the Inland Revenue and the corresponding release of the associated provision.

Premises Costs - Overspend of £4.4m – 2.3% of budget.

30. Additional expenditure on Theseus and Bracknell was £1.4m. Excluding such expenditure, there was an overspend of £3.0m. This was due to higher than expected building work costs and overspends within facilities management and cleaning costs.

Transport Costs - Overspend of £20.9m – 41.5% of budget.

31. Additional expenditure on Theseus and Bracknell was £5.2m. Excluding such expenditure, there was an overspend of £15.7m. As previously reported, the majority of the overspend related to overseas travel and subsistence costs which resulted from increased security and protection duties within Specialist Operations. There were also budget pressures relating to increased fuel costs, vehicle hire and maintenance.

Supplies and Services - Overspend of £17.5m – 4.4% of budget.

32. Additional expenditure on Theseus and Bracknell was £11.1m. Excluding such expenditure, there was an overspend of £6.4m. As previously reported, the main causes were DNA testing, external and legal consultancy, scenes of crime equipment and telephone rental.

Capital Financing Costs - Underspend of £4.3m – 24.8% of budget.

33. As previously advised, reduced capital financing costs arose from the Minimum Revenue Provision being lower than budgeted, as capital expenditure in 2004/05 was lower than originally anticipated.

Income - Forecast over-achievement of £42.1m – 14.1% of budget.

34. As previously reported, the income outturn included a contribution of £30m 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 were all one-off income streams and did not therefore affect the budget build for 2006/07.

Proposed transfers to earmarked reserves

35. The MPS Investment Board have conducted, over the last 2 months, a review of the major change programmes across the MPS and emerging budget pressures, and have prioritised a number of major items which require additional funding in 2006/07 as follows:

Information on these requests is as follows:

• Safer Neighbourhoods: Project slippage has occurred in 2005/06 due to delays in finding suitable accommodation and obtaining planning approval. It is necessary to carry over the funding for the revenue implications of that slippage.
• NSPIS Case and Custody Project: The aim of this project is to allow the MPS to work towards the government targets for joined-up criminal justice. Project delays in 2005/06 have occurred as PITO (Police Information Technology Organisation) have been unable to confirm the level of external funding.
• TRIS (Traffic Reporting Information System) Project: This project within the Central Traffic Criminal Justice Unit is to support centralisation of traffic prosecution work at Marlowe House. The current work of the unit is seriously hampered by the need to use inefficient legacy IT systems involving multiple keying of the same information.
• Met Forensics: this project is to provide a Forensic Case Management System giving a complete audit trail of forensic evidence. The project has suffered significant delays due to supplier under-performance against the contracted plan.
• MPS Insurance Strategy: This is to safeguard the MPS against the risk of increased premiums in 2006/07. In recent years the MPA and MPS have sought to reposition the organisations insurance strategy, reflecting the volatile and changing environment the MPS is operating within.
• Potential legal costs: This is required to provide for potential legal/settlement costs in case litigation moves against the MPS/MPA.
• Citizen Focus Policing Programme: This relates to a delay in undertaking plans due to a necessary re-direction of activity in 2005/06. The funding will be used to support 3 key areas i.e. MPS Citizen Focus Policing Programme, MPS Single Equalities Scheme and Legislative training requirements.
• MPA Link Member Projects: This is to support the local Crime and Disorder Reduction Plan and generate partnership working. The funding will not be used to deliver general borough operations but is to allow pilot of other activities that would not otherwise be undertaken.
• Other emerging budget pressures: Requests to fund a further £6.1m of budget pressures have been received from Business Groups and the balance of the available underspend could be placed within an earmarked budget pressures reserve to contribute to these high priority projects.

Capital monitoring

36. Appendix 3 sets out the outturn for the 2005/06 Capital Programme by programme/project, which shows an overall total of £228.3m, which is 77.9% of the revised budget of £292.8m. This represents an underspend of £64.5m for which there will be a requirement to re-profile certain amounts into 2006/07. The amounts of the budget to be re-profiled will be identified as part of the monthly revenue and capital monitoring reports for 2006/07.

Property Programme - £11.4m underspend (9.8% of budget)

37. This underspend was due to the planned re-phasing of various projects due to delays in planning and commercial issues.

38. The underspend will be utilised by funding the various projects that have been re-phased into the new financial year.

Information Programme – Excluding C3i Programme – £12.4m underspend (21.2% of budget)

39. The underspend was due to planned re-phasing of the following projects; MetTime, Metafor, Modernising Ops, Magellan Phase 4 and the National ANPR Data Centre.

Transport Projects - £1.7m overspend (13.1% of Budget)

40. The overspend was due to the purchase of vehicles and equipment on behalf of other business groups that had not been included in the capital budget. The financing of this overspend was met by revenue contributions to capital from the various business groups.

Directorate of Information – C3i Programme - £48.6m underspend (56.7% of budget)

41. The underspend was due to the planned re-profiling of expenditure into later years for the subscriber terminals and Integrated Communications Control System (ICCS) contract payments.

Step-Change Programme – 1st and 2nd Tranche Costs - £6.3m overspend (89.2% of budget)

42. As approved at the last Finance Committee meeting (20 April 2006), there was a significant re-profiling of budget into 2006/07 for reasons that have been previously explained. The outturn position for 2005/06 indicates a minor overspend for which the 2006/07 budget will be adjusted.

Abbreviations

ANPR

Automatic Number Plate Recognition

DNA

deoxyribonucleic acid

Magellan

ANPR system collecting data from various systems

MetTime

MPS' Duties Management Application

Metafor

Met Application for Forensic Case Management

Modernising Ops

 to ensure that technology and changes are suitable for policing London

MPA

Metropolitan Police Authority

MPS

Metropolitan Police Service

NSPIS

National Strategy for the Provision of Information Systems

OCU

Operational Command Unit

Operational Bracknell

MPS response to SE Asian Tsunami

Operation Theseus

MPS response to July terrorist attacks

PCSO

Police Community Support Officer

PND

Penalty Notice for Disorder

TRIS

Traffic Reporting Information System

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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