Proceeds of Crime Act

Report: 7
Date: 20 September 2007
By: Assistant Commissioner Specialist Crime on behalf of the Commissioner

Summary

The Payback Programme Board (PPB) proposes expenditure of £3.9m from the Home Office Asset Recovery Incentivisation Scheme in order to reduce crime by maximising the use of powers under the Proceeds of Crime Act 2002 (POCA). The PPB is directing the rollout of the Payback Strategy pan MPS. This programme is self-funding through the Home Office Incentivisation Scheme. Funds have been allocated for new posts across Business Groups against a five-year plan. The plan is mainly to build infrastructure to deliver the required step change in performance.

A. Recommendations

That

1. members note the report; and
2. agree the budget allocation of £3,863,000 in 2008/9 as outlined at Appendix 1 and the associated virements between budgets and reserves.

B. Supporting information

1. MPS Investment Board reviewed the substance of this report on 28 August 2007 and approved in principle the proposed £3,863,000 investment in POCA infrastructure. These proposals emanate from the Payback Programme Board (PPB) chaired by Assistant Commissioner House.

2. The purpose of the Payback budget is to reduce crime through mainstreaming the use of powers under the Proceeds of Crime Act 2002. This will be achieved by:

• deterring existing and would-be offenders
• building confidence that police ensure that crime does not pay
• building confidence in the Criminal Justice system
• disrupting the finance of organised criminal networks.

3. The past performance of business groups in asset recovery is shown below. The sums shown are the court orders for confiscation and forfeiture. The target set for 2006/7 of £25 million was achieved. The current MPS target for 2007/8 is £35m. These figures are also used for Statutory Performance Indicator 8c, in the National Community Safety Plan. They do not equate to income figures for the MPS. The MPS receives 17% of enforced confiscation orders and 50% of forfeiture orders in incentivisation funding.

Confiscation and forfeiture orders by business group

Source: JARD

Specific windfalls have been excluded. These are Regional Asset Recovery Team orders in 2004/5 for £14.1m and 2005/6 for £10.3m and one Territorial Policing order for £1.8m in 2004/5. These are one - off results that are unlikely to be repeated and distort underlying performance.

Operational performance

4. The current performance, as measured by the total of confiscation and forfeiture orders, is falling short of the target with a year-end projection of £22.32 million. The target of £35 million for 2007/8 is an end of process measure, which is difficult to influence in-year. The court process normally follows a conviction and the pipeline typically takes at least three years from the point of arrest to the receipt of income by the MPS. We are working with partners in the multi-agency Asset Recovery Board to streamline joint processes.

5. Existing targets focus on the end of process measure over which the MPS can exercise little control. For this reason the MPS POCA Implementation Team has developed a method of measuring activity at the beginning of the process. The Payback Index is a good indicator of effective police activity against acquisitive criminals. Each unit of the Index normally derives from dozens, sometimes hundreds, of crimes. The Index is simply the number of POCA cases plus a weighting for monetary value. This reflects the importance of POCA’s impact on individual criminals. The Payback Index shows that MPS performance at the front end of the pipeline has risen by 129% between the 1st quarter 2006/7 and the 1st quarter 2007/8, suggesting an increase in MPS income in the future. The MPS is working with ACPO to develop the Index into a national metric for future target setting for police forces.

6. All POCA performance is simply an output of police investigations into acquisitive criminals, it follows that the SCD is already a high performer in asset recovery terms and continues to improve.

7. Territorial Policing’s (TP) marked improvement is attributable to the creation of POCA champions, formal training of 215 middle-managers in POCA and the budgetary rewards given to Operational Command Unit (OCU) under the Payback Performance Reward system started in 2006/7. There appears to be a marked gearing affect whereby a small reward generates big changes in performance in TP.

8. Factors that will improve performance further include linking POCA performance to Superintendents’ Performance Development Reviews, further training of Detective Inspectors and Detective Chief Inspectors and continuance of the Performance Reward scheme.

9. The reduction in the POCA cash seizure threshold to £1,000 has been helpful in mainstreaming the use of POCA on Boroughs and has led to a significant number of lower value cases. This, however, has an impact on the court system and there appears to be a slowdown in the pipeline. This delay impacts on in-year performance and the income received through incentivisation.

Predicting income

10. It has not been possible, so far, to predict accurately MPS income from either POCA cash forfeiture or from POCA confiscation of other assets. This is because:

• the legislation is new so there is an absence of historical data from which to formulate financial projections
• large parts of the pipeline belong to other agencies and are outside MPS control
• the efficacy of the powers and MPS skill at using them is improving significantly as time passes
• the unpredictability of compensation to victims.

11. Analysis since the scheme started on 1 April 2006 shows that income is split equally between Forfeiture and Confiscation. In 2006/7 the Forfeiture process, over which we have significant control, generated £2.2m income. The MPS has £20.8m detained awaiting forfeiture in the next two years or so (the timing is dependant on the finalisation of related criminal trials); this means a likely income of £10.4m for the MPS excluding the confiscation regime and any future cash seizures. The confiscation regime, potentially the dominant source of income, is much harder to predict but the PPB expects to finalise a prediction model before the end of the calendar year. The results of this model, continuing operational improvement and the outcome of some specific planned operations will give us a clearer picture in the coming quarter.

Contingency

12. The current, short-term difficulties with accurately predicting POCA income have necessitated a contingency plan to be prepared in case the operational and income results are lower than expected. The PPB is confident that descaling these expansion proposals can be achieved without financial liability. In essence, if an unexpected shortfall in income occurs the staff can be absorbed within normal organisational staff turnover. This would include adjusting this expansion plan and revising the performance target. There are no operational, procedural or legislative reasons to think that this source of income is at serious risk. A change of Home Office rules could affect this income stream and a review is scheduled for early 2008. The PPB believes that any Home Office review is more likely to change the rules in favour of the MPS than change them adversely. The Home Office is well aware that it is the Incentivisation Scheme that has produced the excellent improvement in police performance of the last two years. The Home Office has set a challenging national target for 2009/10 and investing in successful agencies like the MPS is the obvious way to achieve their ambition.

Strategic expansion plan

13. As a result of financial projections against income, a further £3,863,000 of incentivisation funding was subject of pan MPS bids for infrastructure building, now agreed by PPB. This increase in spends, agreed by PPB against the five-year plan, now ratified by Investment Board needs approval from the MPA Finance Committee. The revised plan is at Appendix 1, the end of plan underspend is forecast as £507,000 with a significant surplus in the intervening years.

14. To date, some 589 Financial Investigators (FI) are active across all Specialist and Borough OCUs. Of these about one third are dedicated to asset recovery. The proposed infrastructure build using an additional £3,863,000 would provide an additional fifty-nine FI positions for Specialist and Borough OCUs. This will secure at least one FI on every MPS Borough OCU. This compared against only eleven out of the thirty-two Borough OCUs in April 2006. Past performance indicates that the proposed new posts will increase performance immediately against criminal networks. An increase in income for the MPS takes rather longer but will be significant from 2009 onwards.

Expansion plan detail

15. The delivery of the Payback Programme depends on dedicated teams on as many OCUs as possible with a Superintendent-rank champion responsible for introducing systems to mainstream operational use.

16. The bids are primarily for staff costs and cover a variety of schemes to improve operational effectiveness. For TP this means dedicated staff on every Borough OCU and a new central team to provide pan-MPS capability. This achieves full geographic coverage so that every Borough has the local capability to ensure crime does not pay. For SCD and other specialist Business Groups this investment means dedicated intelligence and covert staff to target the finances of Organised Criminal Networks. For all Business Groups the investment includes a modernisation programme to bring police staff into this area of skilled work.

Community projects

17. The primary purpose of the Home Office incentivisation scheme is to mainstream the use of POCA. Whether this has been achieved in the MPS, and to what degree, is to be the subject of a formal internal inspection that will report in November 2007. This report together with analysis of income during 2007/8 should allow the MPS to set a timetable and criteria for disbursing surplus amounts to community projects. The PPB recognises that there are benefits to the public recycling of criminal assets. Consequently £500,000 was disbursed to the Safer London Foundation (SLF) and much (though not all) of this has been allocated in 2007/8. The SLF have not yet disbursed their original allocation so a further disbursement need not be made in this financial year. Meanwhile the MPA will be consulted in detail on the development of a Community Payback Strategy before any further disbursements are made to the SLF.

Disbursement of funds

18. The PPB has agreed to disburse two Performance Reward payments this year, one in May and a second in November. Each disbursement will be of £300,000 to specialist OCUs and £300,000 to BOCUs. The May process has already taken place and preparations are underway for the forthcoming process. The Performance Reward system has been a major factor in focusing management attention towards the use of the new legislation. This has been necessary because the legislation introduces an entirely new concept to operational policing; the ability to effectively arrest the criminal money as well as the criminal. Payments are made from the PPB to OCU budget lines against specific audited levels of POCA performance. These funds are for frontline operational costs against acquisitive criminals e.g. overtime for arrests, extra cars, specialist software for use against robbers and burglars.

19. The proposed disbursement of the new funds will be against actual spend once the staff are recruited. The cost in 2007/8 is estimated at £2,551,000. The year on year cost thereafter will be £3,863,000. All to be met from incentivisation funding. This will maintain a credit against projection leading to a surplus of £507,000 at year 5 (see Appendix 1).

Abbreviations

PPB

Payback Programme Board

POCA

Proceeds of Crime Act

TP

Territorial Policing

FI

Financial Investigators

OCU

Operational Command Unit

SLF

Safer London Foundation

C. Race and equality impact

A Race and Community Impact Assessment has been conducted by the Implementation Team and concerns about disproportionate targeting of specific elements of the community have been the subject of detailed review. PPB is satisfied that no discernible impact has been registered. The crime reduction impact of making payments to communities from this fund will be assessed and a timetable for making future payments will be agreed in conjunction with the MPA.

D. Financial implications

1. A financial analysis of these proposals is attached at Appendix 1. Previous cash flow profiles have been based on ‘best-guess’ of estimated enforcement rates and estimated likely orders made. The new cash flow profiles are based on the receipts from the Home Office. There is a significant slowdown in the pipeline of cash seizure cases through the court system. This means that there are a large number of cases still to conclude as forfeitures resulting in a stockpile of potential future income (currently estimated at £10.4m in forfeiture alone, excluding the confiscation regime).

2. Improving the income stream from asset recovery depends on:

• ensuring that the Payback budget is spent on asset recovery.
• the development of dedicated ring-fenced teams across Business Groups.
• the effective enforcement of confiscation orders, through a dedicated Emerald team.
• minimising abstractions from this budget that do not directly improve asset recovery performance. There are a number of budget items that fall into this category. These are: charitable donations, baseline support, and any bids that do not pay for new asset recovery personnel.

3. The funding will be dependant on POCA performance. Where any funded area is not performing against the agreed measures, the funding will be withdrawn.

4. There is always the risk that the Home Office will remove this funding, but there are very tight performance targets that the Home Office need to meet. The ‘tin box’ target set for this year is £155 million where a target of £125 million was just achieved for 2006/7. The Home Office are aware that without the incentivisation funding this target is unlikely to be met. The income from incentivisation will be monitored by the Programme Board and, if it falls below projection, remedial action can and will be taken to reduce the expenditure. A plan to descale the project, if necessary, is being prepared and assumes up to 100 created posts could be managed within the current MPS staff turnover profiles. Any such falloff in income will be reported to Investment Board.

5. Once approved, the financial implications of the programme will be reflected by an appropriate movement between service budgets and earmarked reserves.

E. Background papers

None

F. Contact details

Report author: Detective Chief Superintendent Nigel Mawer, MPS

For more information contact:

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

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