Provisional efficiency plan 2007/08 and future years

Report: 10
Date: 15 February 2007
By: Acting Director of Resources on behalf of the Commissioner

Summary

This report sets out the financial aspects of the provisional Efficiency Plan for 2007/08

A. Recommendations

That members:

1. Approve the provisional plan
2. Note the process for providing in-year updates
3. Note that the plan will be submitted to the Home Office

B. Supporting information

Introduction

1. The purpose of this report is to present the 2007/08 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. 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 to previous guidance 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 made minor changes to the guidance in February 2006, but these did not affect the main points listed above.

5. A copy of the Plan must be sent to the Home Office by the end of March and will also need to be included in the Annual Policing Plan for 2007/08.

6. The 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 2007/08 is £76.1m, being 3% of net revenue expenditure (NRE) of £2536.7m. Under Home Office rules this target will change to reflect actual net expenditure in year. The targets for 2008/09 and 2009/10 are £78.5m and £81.5m, being 3% of NRE of £2617 and £2717.8m. It is possible that the Home Office will increase the 3% target at some point in the future, but no decision has been made at this stage.

Cashable Savings

8. The exercise to balance the revenue budget for 2007/08 has identified £65.1m of savings and additional income, and of this £56.5m can be counted towards our efficiency plan, in accordance with the current guidance - compared with the minimum target for cashable savings of £38.m. We evidence this saving by demonstrating a reduction in budgets and by managing within those reduced budgets throughout the financial year.

9. In addition, surplus cash savings of £38.5m are expected to be achieved in 2006/07 and can be carried forward to 2007/08 (inflated to £39.53m following Home Office guidance).

10. It should be noted that any carry forward of cashable savings represents measures already taken to balance the budget. The carry forward is not available as a future benefit to balance a budget gap.

Non-cashable savings

11. These efficiency savings are the result of better use of existing resources. Areas identified so far for 2007/08 include:

• Front Line Policing (FLP) Measure: NO notional saving has yet been included for 2007/08 or future years. In line with last year’s plan, it is suggested that gains should only be added to the plan based on actual (rather than predicted) increases.
• Savings from Video ID Parades.
• A further increase in the number of Special Constables.
• Savings from using forms that automatically fill in the user’s details on- line.
• Hotel and Conference bookings savings.
• NSPIS (National Strategy for Police Information Systems) custody and case preparation efficiencies.
• Various other initiatives.

12. This list - which currently shows a deficit as set out in Appendix 1 – will be systematically developed and augmented via the work of the Productivity Strategy Board and Working Group over the next few weeks.

Contribution to performance

13. 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. Work has initially been carried out as part of the budget preparations, but further work required as part of the HMIC review to ensure savings are delivered and to check there is not a negative impact on performance. If this were the case the saving would be disallowed from the efficiency plan. Strategic Finance may need to consult separately with Business Groups on these aspects.

Summary 2007/08 Efficiency Plan

14. Appendix 1 shows the provisional 2007/08 Efficiency Plan and the 3% targets for 2008/09 and 2009/10. It can be seen that for 2007/08 we have identified potential cashable savings of £96.06m, which is £58.m in excess of the 1.5% of target, and £37m for non - cashable savings. Overall £133.1m of savings have been identified, which is £57m in excess of the 3% target. However as the Home Office guidance for 2007/08 has not yet been issued, and the budget is still to be finalised, the figures may change slightly. And this will be reported in the first quarterly update report during 2007/08.

15. In order to achieve the 3% savings target over the three years period, additional non-cashable savings of £8.9m in 2007/08, £20.0m in 2008/09 and £30.0m in 2009/10m will be required, in addition to those already planned.

16. The provisional plan will be submitted to the Finance Committee in February 2007 for approval

Efficiency Planning in the Medium Term

17. The guidance issued by the Home Office requires all police forces to produce a rolling 3-year efficiency plan for the period 2007/08 to 2009/10. Further work has been undertaken this year, to develop a plan that looks at future years in greater detail than in previous years.

18. The MPS Value for Money Steering Group (VfMSG) will continue to review and redirect resources to ensure that savings are found and delivered.

Future Reporting

19. A self-certification/assessment is completed following each quarter and sent to HMIC. In addition an update paper will be provided every quarter to the MPS Investment Board and the 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 paper.

E. Background papers

• Home Office guidance

F. Contact details

Report author: Simon Hart, Acting Director of Finance Services, MPS.

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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