Budget Submission 2008/09

Report: 9
Date: 19 July 2007
By: Treasurer and Director of Strategic Finance

Summary

This report summarises the Mayor’s budget guidance issued for the 2008/09 – 2010/11 budget and business plans and outlines the steps being taken to draw up the interim information and final budget submission for consideration and approval.

A. Recommendations

That members

1. Note the Mayor’s budget guidance for the period 2008/09 – 20010/11 and the implications for the MPA budget.

B. Supporting information

Mayor’s budget guidance

1. The Mayor’s budget guidance for 2008/09 was issued on 13 June 2007, together with a letter from the Mayor to the Chair of the Authority. A copy of the budget guidance together with a copy of an accompanying letter to the Chair of the Authority is enclosed for members as Appendices.

2. The Mayor has set out his key strategic policy aims to use the budget development process to do more to:

• Mitigate the effects of and adapt to climate change to ensure climate resilience
• Deliver the London 2012 Olympic Games and Paralympic Games effectively, maximising the economic, social, health and environmental benefits of the Games to London and Londoners
• Ensure GLA Group services are provided by a workforce that reflects the diversity of London
• Ensure effective counter terrorism operations and capacity to respond to major catastrophic events
• Reduce crime and fear of crime
• Improve skills and employment opportunities of Londoners to meet the specific needs of London’s economy and reduce worklessness
• increase London’s housing supply, including affordable housing, focusing on the Thames Gateway.
• Promote a reduction in health inequalities

It is noted that these aims and objectives are not generally GLA or functional body specific: each member of the GLA Group is expected to make important contributions to the majority of them in carrying out their statutory functions of providing services to London. A critical GLA focus during the budget development stage will be to examine and assess the business plan proposals to deliver against these strategic aims and objectives, and the results expected to be achieved.

3. The 2008/09 process is similar to last year consisting of the following:

• Budget guidance issued by the Mayor revised throughout the process in the light of emerging issues
• Budget development by functional bodies and GLA
• Interim information from the functional bodies to the GLA by end September
• Preliminary draft proposals issued by the Mayor for consultation with each of the functional bodies and the Assembly by the end of October
• A formal response to the proposals by end of November accompanied by detailed budget and business plans covering at least a three year period and which must be consistent with the Mayor’s budget guidance and preliminary proposals
• Mayor’s formal draft budget proposals considered, prepared and issued for consultation in mid December
• Consultation
• Scrutiny by the Assembly’s Budget Committee throughout the process

Policy priorities

4. The specific policy priorities applicable to the MPA are:

• Delivering effective counter terrorism, security and protection services
• Reducing robbery, burglary and violent crime in the capital
• Reducing the volume and victimisation rate for race and religious hate crime, rape, sexual offences and violence against women
• Developing the Safer Neighbourhood Teams to provide effective front-line policing, and public reassurance and public confidence
• Increasing the safety of public spaces including parks and open spaces
• Working with TfL to reduce road casualties and road crime, and to maintain ease of movement
• Increasing the safety of transport interchanges through joint work with TfL and BTP
• Continuing the process of modernisation to redirect resources to front line policing
• Tackling and reducing all types of anti-social behaviour in the capital and contribute to partnership working through the London ASB strategy
• Building the confidence of London’s BAME and other communities experiencing discrimination in policing through creating a workforce that reflects the diversity of London and by improving the recruitment retention and promotion of women, and by reducing disproportionate policing activity such as Stop and Search where it has been shown to be ineffective
• Support to victims and witnesses to increase the number of successful prosecutions so that more guilty offenders are convicted for their crimes
• Reducing the harm caused by illegal drugs including substantially increasing the number of drug misusing offenders entering treatment through the CJS
• Work with the GLA to tackle environmental and wildlife crime

The Mayor has also outlined specific policy priorities applicable to the GLA and all functional bodies which are shown in full in Appendix B to the Mayor’s Budget Guidance, but which include:

• Prioritising measures to reduce carbon and other emissions and non-renewable energy consumption, the proportion of decentralised energy as well as climate change adaptation measures to ensure climate resilience
• Prioritising measures which minimise waste and increase recycling, minimise water consumption and promote water efficiency and meet the Mayor’s environmental objectives and targets
• Delivering sustainability objectives through GLA Group procurement, including increasing supplier diversity, improving fair employment, and implementing the Mayor’s environment and food strategies by ethical trading
• Implementing the Living wage for London by ensuring all direct employees of the GLA Group are paid above the living wage rate and rolling out the living wage through GLA Group contracts.

5. The budget guidance gives particular emphasis to business plans addressing how sustainable development is being achieved and delivered to cover environmental, equalities, health promotion health inequalities and other sustainability related activities. Before budget proposals are issued for consultation in December, it is intended that the Mayor should be adequately informed of how the sustainable development perspective underpins service plans, targets and programmes, and of any material budget and resource issues. After final decisions on the Mayor’s budget a review will be carried out of environmental, equalities, health promotion, health inequalities and other sustainability related activities. This review will comprise of two complementary processes and will cover equalities and social inclusion matters separately from other sustainability matters. A detailed list of the items to be covered in the review are contained in Appendix C to the Mayor’s Budget Guidance.

Business and budget plans

6. The published business and budget plans must:

• Cover at least the period to 2010-11
• Set out what is planned to be achieved in high level terms over that period, specifying profiled deliverables and defining measures to assess progress and impact
• Highlight in high level terms plans to mitigate and adapt to climate change, and to deliver other environmental improvements
• Demonstrate how the budgets and business plans will improve social inclusion and diversity and address health inequalities
• Include updated budget estimates and borrowing and capital spending plans covering the plan period (these can either be integrated into the business plans, or be in the form of separate accompanying documents)
• Include an assessment and explanation of the quantified financial benefits expected to be secured by collaborative working with other members of the GLA Group

7. Interim budget information due by 28 September must include the following:

• A succinct overview describing the main business priorities and how the MPA/MPS plans to deliver on each of the Mayoral priorities, over the three year period 2008-09 to 2010-11.
• A summary of outstanding financial uncertainties and issues.

It is recognised that by the end of September each member of the GLA Group will not necessarily have an updated balanced plan that has been formally endorsed by the Authority. Furthermore estimates might only be high-level and subject to further consideration and refinement. Accordingly there might be concern if that information were to be widely disseminated and the Mayor has therefore accepted that the interim response should be supplied in the form of advice to the Mayor. It has been made explicit that the information sought in the guidance is requested in accordance with the provisions of sections 110 and 125 of the GLA Act 1999.

Budget Ceiling Guidance

8. The Mayor does not wish to propose a consolidated budget that risks being capped, and functional bodies must therefore rigorously pursue efficiency savings, including savings from increased collaborative working across the GLA Group. For 2008-09, 2009-10 and 2010-11 budget plans should be prepared on the basis of an annual increase in net revenue expenditure of 2.25% a year over the 2007-08 amount of £2,536.7M presented in the Mayor’s published budget. In addition the there is a requirement to advise the Mayor on what the Authority would propose to do if the increase in net revenue expenditure in 2008-09 over 2007-08 were to be 0.75% more or less. The Mayor has also indicated that there is no addition to the GLA council tax precept for Olympic security costs.

Consultation

9. The Mayor has included a requirement to have dialogue with budget consultees to complement and prepare for his statutory responsibility for consultation. Each functional body should maintain a dialogue with, and provide key information to, key stakeholders before budget submissions are finalised in November. The main purpose of this dialogue is to obtain stakeholders views on policy priorities and options and communicate with stakeholders, so they are better prepared to respond to the Mayor’s formal budget consultation. The dialogue should focus on the services provided and the relative priorities of each service. The issue of the costs of these services would then be specifically addressed later in the process by the Mayor’s consultation.

10. In the week commencing 20 September, it is intended to send a letter to consultees with a statement of emerging priorities, together with a very high level assessment of resource implications, requesting responses by 20 October.

11. A preliminary assessment of responses will be made available to the joint MPA Finance/Planning and Performance Review Committee (PPRC) on 19 November.

12. Progress on development of the budget submission will be reviewed through the Mayor’s meetings with functional body members and chief officers; regular officer–level meetings, will support this.

13. The MPA has to deliver its budget submission by 27 November 2007. The Authority will need to approve the submission at its meeting on 22 November.

Financial implications of budget guidance

14. The budget guidance gives a clear expectation on the need to avoid council tax capping, with an indication of the level of increase in net revenue expenditure which is acceptable. The guidance does not give any specific direction on the level of Government Grant to be assumed. Each member of the GLA group is to keep under review a best estimate of the level of grant support expected. GLA officers will examine these assumptions during the budget development process.

15. Work has already started on the business-planning framework and this committee at its last meeting agreed an approach to dealing with the projected budget gap in 2008-09. The MPS will be reporting back to committee on 20 September on progress made.

16. Applying the Mayor’s guideline of a 2.25% increase in net revenue expenditure (NRE) to his 2007-08 published NRE of £2,536.7M would give a 2008-09 NRE envelope of £2,593.8M. The table below shows the effect in 0.75% variations away from this in 2008/09. Every 0.75% variation from the 2.25% guideline would add/deduct £19.03M. This guideline is now forming the basis of the detailed budget work now being undertaken by the MPS.

Table 1

For completeness, although not requested by the Mayor, the figures in italics above show the position in 09/10 and 10/11 if 2.25% increases were to be added to the low and high options.

18. Part of the budget process will be a review of the reserve requirements. This committee will receive at its October meeting an overview of the Authority’s reserves to 2011 and this will form the basis of identification of any resources available to assist the budget submission in due course.

C. Race and equality impact

1. The Mayor’s budget guidance gives particular emphasis to equalities issues and delivering on equalities is seen as a pre-requisite for achieving sustainability.

2. After final decisions on the Mayor’s budget for 2008-09, a review will be carried out of sustainability, equalities and health promotion performance.

D. Financial implications

The Medium Term Financial Plan and Budget will provide approval for expenditure and income during 2008/09 and future years.

E. Background papers

• Mayor’s Budget Guidance 2008/09

F. Contact details

Report author: Ken Hunt, Treasurer, MPA.

For more information contact:

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

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