Revenue and capital budget monitoring 2007/08- period 4

Report: 4
Date: 20 September 2007
By: Director of Strategic Finance on behalf of the Commissioner

Summary

This report provides an update on the revenue and capital budget monitoring position for 2007/08 at Period 4 (to the end of July). The revenue budget is forecast to underspend by £3.7m (0.1% of budget), which includes £3.6m of estimated additional costs related to Operation Seagram. The Capital Programme as at period 4 (to the end of July) shows year to date total expenditure of £37.2m. This total represents 17.0% of the revised budget of £218.7m. The forecast for the year of £178.6m is £40.1m below the revised budget.

A. Recommendations

That Members note the year to date and forecast position for revenue and capital budgets.

B. Supporting information

Background

1. This paper provides information on the forecast against revenue and capital budgets for the MPA/MPS in 2007/08 based on the position at the end of July.

Revenue forecast by business group

2. Table 1 provides a summary of the revenue forecast and additional cost forecast for Operation Seagram (the response to the vehicle-borne improvised explosive device (VBIED) found in Haymarket at the end of June). Table 2 compares the forecast outturn variances for Period 4 and Period 2 by business group (with no Finance Committee held in August, Period 3 was not reported).

3. The outturn variance for period 4 is forecast as an underspend of £3.7m. This includes a forecast outturn of £3.6m for the additional costs attributed to Operation Seagram. The period 4 forecast outturn variance excluding Operation Seagram costs is an underspend of £7.3m.

Table 1 – Summary of revenue forecast against budget at period 4

Table 2 - Comparison of Period 4 forecast outturn variance with Period 2 forecast outturn variance

4. The subjective position by Business Group is at Appendix 1. The overall position for the MPS is at Appendix 2. The figures in the Appendices include expenditure on Operation Seagram.

Territorial Policing – An underspend of £4.0m – 0.3% of budget

5. There has been a favourable movement of £2.1m from the position reported at period 2. This movement is principally due to staffing levels for Police Officers and Police Community Safety Officers being below the budgeted strength allocation. This is offset by additional expenditure expected within Police Officer overtime resulting from initiatives to tackle youth crime issues.

Specialist Crime – An underspend of £1.8m – 0.5% of budget

6. There has been a favourable movement of £2.1m from the position reported at period 2, principally as a result of reductions to Police Officer pay costs following a review of likely recruitment levels for the remainder of the year.

Specialist Operations – An overspend of £1.7m– 0.9% of budget

7. There has been an adverse movement of £1.1m from the position reported period 2, principally as a result of police overtime and mutual aid requirements for Operation Seagram. If the forecast additional costs for Operation Seagram are excluded then Specialist Operations only has a minor overspend of £0.4m.

Central Operations – An overspend of £2.9m – 1.1% of budget

8. There has been an adverse movement of £1.7m from the position reported at period 2, principally due to additional Police Officer overtime costs to be incurred on Operation Hargood (policing of the environmental camp at Heathrow Airport).

Operational Services – An overspend of £2.3m – 1.4% of budget

9. There has been an adverse movement of £0.1m from the position reported at period 2. The overspend relates to Police Staff pay and Police Staff overtime as a result of additional staffing requirements within the Central Communications Command to meet required standards for call handling performance.

Strategy, Modernisation & Performance – An underspend of £0.5m – 3.6% of budget

10. There has been a favourable movement of £0.1m from the position reported at period 2. The forecast underspend relates to Police Officer pay and Police Staff pay and reflects the current level of vacancies with the Directorate.

Directorate of Public Affairs – An underspend of £0.2m – 2.7% of budget

11. The variation is minor and there is minimal change from the position reported at period 2.

Directorate of Information – An overspend of £0.8m – 0.4% of budget.

12. There has been an adverse movement of £1.7m from the position reported at period 2, principally due to the need to recruit technical specialists to cover vacant posts at an additional cost and increased workstation support costs.

Resources – An underspend of £1.2m – 0.5% of budget

13. There has been a favourable movement of £0.1m from the position reported at period 2.

Human Resources – An underspend of £2.4m – 1.6% of budget

14. There has been a favourable movement of £2.9m from the position reported at period 2, principally as a result of additional income forecast in relation to recovery of sickness benefits for Police Officers and reductions to Police Officer pay costs following a review of likely recruitment levels for the remainder of the year.

Metropolitan Police Authority – An underspend of £0.2m – 1.5% of budget

15. There has been a favourable movement of £0.1m from the position reported at period 2, principally within Police Staff Pay following a review of likely recruitment levels for the remainder of the year.

Centrally Held Budgets – Nil variance

16. There is no change from the position reported at period 2.

Discretionary Pension Costs – An underspend of £1.0m – 3.3% of budget

17. There has been a favourable movement of £1.0m from the position reported at period 2, principally as a result of revised projections of the costs of ill health retirements.

Revenue forecast by expenditure/income type

18. Table 3 compares the forecast variance for Periods 4 and 2 by income/expense type.

Table 3 – Forecast outturn by income/expense type

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

Police Officer Pay - Underspend of £24.3m – 1.4% of budget

20. This underspend is due to workforce levels being below those budgeted within all Business Groups. The forecast underspend has increased by £8.5m since period 2 as Business Groups have re-assessed their anticipated recruitment profiles. Table 4 shows the police officer strength by Business Group at 31 July against the Budgeted Workforce Total for 31 March 2008.

Table 4 – Police Officer strength v BWT

Police Staff Pay - Underspend of £7.2m – 1.3% of budget

21. This underspend is mainly due to vacancies within Specialist Crime, Specialist Operations, Central Operations and Territorial Policing. There has been a favourable movement of £2.3m since period 2 as Business Groups have re-assessed their anticipated recruitment profiles.

PCSO Pay - Underspend of £3.4m – 2.5% of budget

22. The underspend, and favourable movement of £3.8m from that reported at period 2, is within Territorial Policing and relates to delays to the planned implementation of changes to the Station Reception Officer role which are to be undertaken by PCSOs. This underspend is offset slightly within Central Operations as the Transport OCU are forecasting to be over strength as they have been recruiting PCSOs instead of Traffic Wardens.

Traffic Warden Pay - Underspend of £0.7m – 6.2% of budget

23. This underspend is principally due to Transport OCU forecasting to be under budgeted strength as they have been recruiting PCSOs instead of Traffic Wardens. There has been a favourable movement of £0.4m from that reported at period 2.

Police Officer Overtime - Overspend of £18.4m – 15.0% of budget

24. There has been an adverse movement in the forecast of £12.9m from that reported at period 2. This is principally due to Operation Seagram (the response to the vehicle-borne improvised explosive device (VBIED) found in Haymarket at the end of June), Operation Hargood (policing of the environmental camp at Heathrow Airport) and recently planned initiatives within Territorial Policing to tackle youth crime issues. There are also forecast overspends relating to additional aid within Central Operations for events at Wembley Stadium.

Police Staff Overtime - Overspend of £3.1m – 10.4% of budget

25. This forecast overspend is principally due to overtime within the Central Communications Command to meet required standards for call handling performance. There has been an adverse movement of £0.6m in the forecast from that reported at period 2 among various Business Groups.

PCSO and Traffic Warden Overtime - Underspend of £0.1m – 6.9% of budget

26. Minor underspend.

Employee Related Expenditure - Overspend of £2.1m – 5.5% of budget

27. There has been an adverse movement of £1.2m from the forecast at period 2 following a change to the anticipated subjective allocation of Counter Terrorism budget carried forward from 2006/07 (budget has now been allocated to DNA testing within the category of Supplies and Services). The overspend principally relates to the costs of Police Staff premature retirements within the Human Resources Directorate and to seconded officers relating to Operation Seagram within Specialist Operations.

Premises Costs – Overspend of £0.7m – 0.3% of budget

28. There has been a favourable movement of £0.5m from that reported at period 2 mainly due to no rental payments being required for the Regional Asset Recovery Team within Specialist Crime following relocation to MPS premises. The overspend relates mainly to a budget allocation issue for the Training Centre within Territorial Policing.

Transport Costs - Overspend of £2.8m – 4.8% of budget

29. There has been a small adverse movement of £0.2m from that reported at period 2. The overspend relates mainly to Specialist Operations due to overseas travel and subsistence costs and vehicle hire connected with Operations Seagram and Overt/Overamp. There is also an overspend within Central Operations due to corporate vehicle hire and fuel costs related to the anticipated increased level of aid as well as higher than anticipated levels of maintenance within the Air Support Unit.

Supplies and Services - Overspend of £13.5m – 3.1% of budget

30. There has been an adverse movement of £3.7m in the forecast from that reported at period 2. This is mainly within the Directorate of Information due to consultants covering vacancies (£1.7m) and additional workstation costs (£0.6m). There has also been an increase within Specialist Crime due to increased Police National Computer charges (£2.3m). The overspend primarily relates to the above and expenditure on accommodation and expenses for mutual aid officers (£2.5m), Interpreters fees (£1.0m) and Medical Examiner fees (£0.7m). There are also overspends related to expenditure on dangerous dogs (£0.7m) and additional uniform costs for increasing numbers of Metropolitan Special Constables (£0.8m). Paragraph 31 below explains particular variances in greater detail.

31. Finance Committee members have asked for more detailed information regarding the following:

Interpreters Fees: Budget £8.7m – Forecast £9.7m – Variance £1.0m

With the growth of the European Union and easier entry to the UK, the use of interpreters has grown steadily over the past four years so that demand has outstripped any increases to the budget allocation. However, some of the expenditure relates to immigration prisoners for which offsetting income is received. The Medium Term Financial Plan for 2008/09 includes an increase of £1.0m with a further £1.0m budget increase planned for 2009/10.

DNA Testing: Budget £12.3m – Forecast £12.2m – Variance £0.1m

There had previously been a forecast overspend of £1.5m related to expenditure connected with Counter Terrorism activities. There has now been an allocation of £1.5m from Counter Terrorism budgets to offset the forecast overspend in this area.

Medical Examiner Fees: Budget £12.2m – Forecast £12.9m – Variance £0.7m

A separate report regarding this issue is being presented to Finance Committee elsewhere on the agenda.

Capital Financing Costs – Underspend of £0.1m – 0.2% of budget

32. Minor underspend.

Income - Forecast over-achievement of £7.3m – 2.4% of budget

33. There has been a favourable movement of £5.1m from the forecast presented at period 2. This relates mainly to a Home Office grant relating to Counter Terrorism within Specialist Operations and recovery of DSS benefits for Police Officers and Police Staff within Human Resources. As well as the above, the over-achievement of income primarily relates to Operation Safeguard (the accommodation of Home Office prisoners within police cells).

Budget movements

34. The major budget movements undertaken in periods 3 and 4 are shown below in Table 5.

Table 5 – Major budget movements actioned in periods 3 and 4

Movements in reserves

35. The reserve drawdowns and transfer to reserves carried out in periods 3 and 4 are shown in Table 6.

Table 6 – Reserve drawdowns and transfer to reserves carried out in Periods 3 and 4

Capital monitoring

36. The MPS capital strategy focuses on processes to take forward a strategically led, priority driven, capital programme. To enable efficient and effective planning of investment requirements it is recognised that that the programme’s scope will need to be extended to cover at least a seven-year period. This will enable better consideration to be given to affordability, capacity and timing issues. It will also assist in reinforcing links between capital investment and associated revenue costs. On-going review of the strategy will ensure that it is effective and reflects developments in the Authority’s strategic aims and optimises asset management. The draft seven-year capital programme is currently being finalised and a paper will be presented to Finance Committee in October. This will reflect the impact of capacity within the Service to deliver the capital programme in the current and future years. Members will be asked to approve the re-phasing of the 2007/08 Capital Budget as part of the seven-year capital programme at that time.

37. Appendix 3 sets out the expenditure for the 2007/08 Capital Programme as at Period 4 (July) by programme, which shows a year to date total of £37.2m. This represents 17.0% of the revised budget of £218.7m. The forecast for the year of £178.6m is £40.1m below the annual budget including approved carry forwards from 2006/07.

38. Property Programme – underspend of £20.9m (32.2% of budget)
The forecast underspend reflects planned re-phasing of works into future years which will be addressed as part of the draft seven-year capital strategy. The re-phasing of the Property Services capital programme is focusing on the provision of operational bases and general accommodation included within the Estates Strategy. The re-phasing reflects current capacity issues within Property Services, which are being addressed through a range of initiatives.

39. Information Programme – excluding C3i Programme – Nil variation

40. MPA Information Technology – Nil variation

41. Transport Projects – Nil variation

42. Other Plant & Equipment Expenditure – £1.3m overspend (36.1% of budget)
This primarily relates to additional forecast expenditure on aircraft and associated support equipment.

43. Directorate of Information – C3i Programme - £2.4m underspend (7.7% of budget)
The forecast underspend relates to the Heathrow Special Schemes which will now be funded from the 2007/08 Revenue Budget.

44. Safer Neighbourhoods Programme (Phases 1 to 3) - £18.1m underspend (66.1% of budget)
The Safer Neighbourhoods Programme has been delayed due to a review of the procurement process. The review has now been completed and the Finance Committee in July 2007 agreed the procurement framework for Phase 2 of the Safer Neighbourhood Property Programme. Approval to the detailed procurement proposals is included elsewhere in this agenda. The delay in starting Phase Two of the Programme affects spend on both Information Technology and Property projects.

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

• 2007/08 Budget Book; Previous monitoring reports.

F. Contact details

Report author: Anne McMeel, Director of Strategic Finance, MPS

For more information contact:

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

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