Revenue and capital budget monitoring 2006/07- period 2

Report: 6
Date: 20 July 2006
By: Commissioner

Summary

The report provides the revenue and capital budget forecast position for 2006/07 at Period 2 (to the end of May). The revenue budget is forecast to overspend by £22.3m (0.8% of budget).

The Capital Programme forecast as at Period 2 (to the end of May) indicates that there are no significant variances from budget.

A. Recommendations

Members are invited to:

1. Note the year to date and forecast position for revenue and capital budgets.
2. Approve a revenue budget virement of £1.25m relating to the Leadership Academy.
3. Approve the Capital Programme carry forward requests totalling £60.7m from 2005/06 to provide for re-phasing of certain projects into the 2006/07.

B. Supporting information

Background

1. This report provides information on the forecast against revenue and capital budgets for the MPA/MPS in 2006/07 based on the position at the end of May.

Recent developments

2. The Government has introduced a new system of police pensions funding resulting in police authorities making an employer contribution for each officer currently employed. In moving to this new system, the majority of pension costs and income are now accounted for differently. Employers’ Superannuation contributions (ASLCs) are now reported as part of Police Pay within the relevant Business Groups (a total budget of £253m) and injury awards and capital equivalent charges for ill-health retirements will be reported separately within a new category of Discretionary Pension Awards.

3. Restructuring of the former Deputy Commissioner’s Command has resulted in the creation of two new Business Groups. They are:

• Central Services; which comprises the Commissioner’s Private Office, Strategy Modernisation and Performance Directorate, Diversity and Citizen Focus Directorate and the Directorate of Public Affairs and Internal Communication; and
• Standards and Intelligence Command; which comprises the Directorate of Professional Standards, the Intelligence Standards Unit and Legal Services.

These new Business Groups are shown separately within the reports.

Operational performance

4. A short summary of key operational performance targets is reproduced below to provide a holistic view for members. Comparing Operational performance in April to May 2006 with the same period last year:

• Total notifiable offences fell: down 6.4%.
• Homicide rose: up 43.5%.
• Rape fell: down 4.5%.
• Gun enabled crime fell: down 25.9%.
• Knife enabled crime rose: up 3.9%.
• Residential burglary fell: down 2.8%.
• Robbery rose: up by 5.3%.
• Motor vehicle crime rose: up 2.4%.

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

Revenue Forecast by Business Group

6. The forecast outturn position for the MPS is an overspend of £22.3m (0.8% of budget). This reflects budget pressures principally relating to forensics, police overtime and police staff premature retirements. These are discussed in greater detail below.

7. Table 1 over the page provides a summary of the budget, forecast and variance by Business Group for Period 2. The subjective position by Business Group is at Appendix 1. The overall position for the MPS is at Appendix 2.

Table 1 – Period 2 Budget, forecast and variance

Territorial Policing – An overspend of £4.8m – 0.4% of budget

8. The principal reason for the forecast overspend is within Police Pay and results from the accelerated introduction of Safer Neighbourhood teams where 368 posts will be filled by the end of December rather than March as originally budgeted for (£4.9m effect). Additionally, an overspend of £2.8m within Police Overtime is forecast. These overspends are partially offset by a forecast underspend of £2.9m on the PCSO budget where recruitment projections suggest an under-strength position through the year.

Specialist Crime – An overspend of £12.7m – 3.5% of budget

9. The principal reason for this overspend results from projected expenditure on forensics where demand continues to exceed budget provision. There is also a forecast overspend within Police Staff Pay (£1.8m) mainly related to forensic services.

Specialist Operations – An overspend of £15.1m – 7.0% of budget

10. The principal reasons for the forecast overspend are within Police overtime which is a consequence of work related to the under strength position of Dedicated Security Posts. Other pressures relate to seconded officer costs which are a legacy issue from Operation Theseus, overseas travel costs and Supplies and Services.

Central Services – An underspend of £1.4m – 4.2% of budget

11. The principal area of the underspend forecast is within Police Staff pay and relates to vacancies within most parts of the Business Group. Recruitment efforts are underway that are expected to minimise the variance.

Standards and Intelligence – An underspend of £2.5m – 3.7% of budget

12. The underspend primarily relates to Police Pay where there is a forecast of 32 officers below BWT within the Directorate of Professional Services (DPS). DPS require Officers with experience and specific skill sets but with Specialist Operations and Specialist Crime Directorate having priority over posting of potential recruits, DPS expect to operate below BWT throughout the year.

Directorate of Information – An underspend of £1.5m – 0.7% of budget

13. The principal reason for the underspend is within Police Staff Pay where the forecast reflects the current level of vacancies within the Directorate. However, recruitment plans are advanced and significant growth in staff numbers is imminent.

Central Operations – An underspend of £2.7m – 0.9% of budget

14. The forecast underspend results principally from within Police Officer pay, where some units have lower than expected officer numbers, and additional income generation.

Resources – An overspend of £1.5m – 0.6% of budget

15. The main budget pressures relate to Gas and Electricity costs for which additional budget will be requested from the Centrally Held budget allocation.

Human Resources – An overspend of £3.6m – 3.0% of budget

16. The principal reason for the forecast overspend relates to expenditure (£2.0m) within the Transformation Project where budgets have not yet been allocated to Human Resources from Centrally Held. This will be resolved for the next report. The other budget pressure within Human Resources relates to the cost of police staff premature retirements. Whilst Human Resources have now implemented a policy that will see other Business Groups meet the first two years of an early retiree’s costs, Human Resources still have to meet the remaining unbudgeted costs and those of existing early retirees.

Metropolitan Police Authority and Internal Audit – An overspend of £0.2m – 1.6% of budget

17. The overspend position results from budget pressures within Police Staff pay.

Centrally held budgets – A favourable variance of £7.9m

18. The forecast underspend results from budgets that have yet to be allocated to Business Groups for specific expenditure items and for non-pay inflation costs, which have been included within Business Group forecasts.

Funded units – An adverse variance of £0.4m

19. The budget for funded units assumes a surplus of income over expenditure of £2.3m. The forecast suggests that the surplus will be reduced to £1.9m, an adverse variance of £0.4m.

Provisional Revenue Outturn by expenditure/income type

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

Police Officer Pay - Overspend of £0.9m – 0.1% of budget

21. This overspend is due to the accelerated introduction of Safer Neighbourhood teams within Territorial Policing, partially offset by a forecast under-strength position in Standards and Intelligence and various units within Central Operations.

Police Staff Pay - Underspend of £4.6m – 0.9% of budget

22. This underspend is due to vacancies within Central Services, Directorate of Information and Resources Directorate.

PCSO Pay - Underspend of £2.1m – 2.7% of budget

23. This underspend is principally due to a forecast under-strength position within Territorial Policing based on recruitment projections.

Traffic Warden Pay - Overspend of £0.9m – 7.8% of budget

24. This overspend principally relates to Traffic Warden costs at Heathrow Airport and within the Transport OCU that are matched by additional income.

Police Officer Overtime - Overspend of £14.4m – 12.7% of budget

25. This overspend is a consequence of work related to the under-strength position of Dedicated Security posts within Specialist Operations and a forecast overspend within Territorial Policing.

Police Staff Overtime - Overspend of £1.0m – 3.6% of budget

26. This forecast overspend is principally due to overtime within the forensics service (Specialist Crime Directorate) and within various units in Specialist Operations.

PCSO Overtime - Overspend of £0.1m – 7.7% of budget

27. Minor overspend.

Employee Related Expenditure - Overspend of £4.8m – 19.4% of budget

28. This overspend principally relates to the costs associated with seconded officers within Specialist Operations and the cost of Police Staff premature retirements within the Human Resources directorate.

Transport Costs - Overspend of £0.5m – 0.8% of budget

29. The majority of the overspend related to overseas travel and subsistence costs resulting from increased security and protection duties within Specialist Operations.

Supplies and Services - Overspend of £11.2m – 2.7% of budget

30. This overspend primarily relates to projected expenditure on forensics where forecast demand continues to exceed budget provision.

Income - Forecast over-achievement of £4.9m – 1.9% of budget

31. This over-achievement of income primarily relates to additional income from third parties that are still subject to negotiation.

Budget movements

32. Following approval from Investment Board, Members are asked to approve a budget virement of £1.25m to Human Resources with regard to funding for the Leadership Academy. This virement will be allocated within Period 3 and the funding will be provided from savings from LiveScan and the Victims Code of Practice. Additionally, budget moves related to Organised Criminal Networks funding are expected to be finalised for Period 3.

33. Other budget movements carried out since the beginning of the financial year relate mainly to the allocation of centrally held Counter Terrorism funding, additional funding from the Home Office to Business Groups such as Specialist Crime for the Human Trafficking Team and Specialist Operations for the Joint Police Intelligence Unit, and for the separate identification of Accruing Superannuation Liability Charges (ASLC) costs for Traffic Wardens and Police Community Support Officers (PCSOs).

Movements in Reserves

34. The opening budget for transfers from reserves is £23.9m, which was planned as part of the base budget position. No other reserve movements have occurred to date.

35. Following the presentation of the provisional 2005/06 outturn report to MPA Finance Committee on 15 June 2006, the following movements to reserves were approved:

Capital monitoring

36. The MPA Finance Committee approved a Capital Programme of £181.3m on 16 February 2006.

37. In 2005/06 there was an underspend that was principally due to the planned re-phasing of several projects against the Capital Programme into 2006/07. Members are asked to approve the carry forward requests totalling £60.7m from 2005/06 to provide for re-phasing of certain projects into 2006/07.

38. If approved, the revised Capital Programme for 2006/07 will be £242.0m and is contained at Appendix 3.

39. At this stage, all Business Groups have indicated that they are not aware of anything significant that will affect the programme in 2006/07. However, Business Groups have stated that should the carry forward requests not be accepted that this would result in significant budget pressures in 2006/07.

40. As part of the Period 3 process, Business Groups will be asked to provide a realistic assessment of the Capital Outturn for 2006/07. Members will then be requested to approve the appropriate adjustments to the Capital Programme budget for 2006/07 based on this assessment.

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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