Revenue and Capital Monitoring Report 2007/08 – period 5

Report: 4
Date: 18 October 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 5 (to the end of August). The revenue budget is forecast to underspend by £9.6m (0.3% of budget), which includes £5.1m of estimated additional costs related to Operation Seagram.

The Capital Programme as at Period 5 (to the end of August) shows year to date total expenditure of £44.2m. This total represents 20.2% of the revised budget of £218.7m. The forecast for the year of £177.7m 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 report 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 August.

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 5 and Period 4 by Business Group.

3. The outturn variance for period 5 is forecast as an underspend of £9.6m. This includes a forecast outturn of £5.1m for the additional costs attributed to Operation Seagram. The period 5 forecast outturn variance excluding Operation Seagram costs is an underspend of £14.7m.

Table 1 – Summary of revenue forecast against budget at period 5

Table 2 - Comparison of Period 5 forecast outturn variance with Period 4 forecast outturn variance.

4. An amount of £3.0m has been received from the Home Office in relation to the additional costs incurred for Operation Overt (relating to the arrests and on-going investigations into the plot to manufacture and smuggle explosive devices onto aircraft) and Operation Overamp (relating to the anti-terror raids at an Islamic School in Sussex and a Chinese Restaurant in South London). This sum has been transferred into the Emergency Contingencies Reserve (ECR) as previously agreed by the MPA Co-ordination and Planning Group on 7 June as part of the MPA's move to increase the level of the General Reserve and ECR to approximately 2% of net revenue expenditure.

5. 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.

6. Territorial Policing – An underspend of £11.3m – 0.8% of budget.
There has been a favourable movement of £7.3m in the forecast position from that reported at period 4. This principally results from movements in Police Officer Pay and Police Staff pay following reviews of the anticipated recruitment profiles. Additional income is also forecast following an extension of Operation Safeguard (detention of Home Office prisoners) until March 2008. The underspend also reflects some realignment of resources to support Operation Curb (to tackle violence among young people).

7. Specialist Crime – An underspend of £1.3m – 0.3% of budget.
There has been an adverse movement of £0.5m in the forecast position from that reported at period 4, principally resulting from a review of the forensics forecast. Overall, the forensics forecast is broadly in line with budget and reflects the work of the Service and the PROSPA programme in bringing down costs.

8. Specialist Operations – An overspend of £2.6m – 1.3% of budget.
There has been an adverse movement of £0.9m in the forecast position from that reported at period 4, principally related to a review Operation Seagram costs. If the forecast additional costs for Operation Seagram (£2.8m) were excluded then Specialist Operations would be reporting an underspend of £0.2m.

9. Central Operations – An overspend of £0.2m – 0.1% of budget.
There has been a favourable movement of £2.7m in the forecast position from that reported at period 4. This is mainly within Police Officer Pay following a review of the recruitment profile. Additionally, Central Operations are now forecasting additional income relating to events at Wembley and Wimbledon.

10. Operational Services – An overspend of £2.7m – 1.7% of budget.
There has been an adverse movement of £0.4m in the forecast position from that reported at period 4, principally related to an increased staffing profile within Central Communications Command (CCC). The anticipated increase in staff will help ensure that the level of service meets operational demands within CCC.

11. Strategy, Modernisation & Performance – An underspend of £0.5m – 3.2% of budget.
There has been a small adverse movement of £0.1m in the forecast position from that reported at period 4. The forecast underspend relates to Police Officer pay and Police Staff pay and reflects the current level of vacancies with the Directorate.

12. Directorate of Public Affairs – An underspend of £0.1m – 1.1% of budget.
There has been a small adverse movement of £0.1m in the forecast position from that reported at period 4.

13. Directorate of Information – An overspend of £0.8m – 0.3% of budget.
There has been minimal movement in the overall forecast position from that reported at period 4.

14. Resources – An underspend of £1.3m – 0.6% of budget.
There has been a small favourable movement of £0.1m in the forecast position from that reported at period 4.

15. Human Resources – An underspend of £0.6m – 0.4% of budget.
There has been an adverse movement of £1.8m from that reported at period 4, which results principally from the outcome of recent contract negotiations with the Association of Train Operating Companies (ATOC) for the provision of free rail travel for Police Officers.

16. Metropolitan Police Authority – An underspend of £0.2m – 1.8% of budget.
A minor change from the forecast variance reported at period 4.

17. Centrally Held Budgets – Nil variance.
There is no change from the forecast variance reported at period 4.

18. Discretionary Pension Costs – An underspend of £0.6m – 2.0% of budget.
There has been an adverse movement of £0.4m in the forecast from that reported at period 4, principally as a result of increased numbers of employees joining the 30+ scheme.

Revenue Forecast by expenditure/income type

19. Table 3 compares the forecast variance for Periods 5 and 4 by income/expense type.

Table 3 – Forecast outturn by Income/expense type

The main forecast variances from budget are set out below.

20. Police Officer Pay – Underspend of £29.2m – 1.7% of budget.
This underspend is due to workforce levels being below those budgeted within all Business Groups. The forecast underspend has increased by £4.9m since period 4 as Business Groups continue to re-assess their anticipated recruitment profiles. Table 4 shows the police officer strength by Business Group at 31 August against the Budgeted Workforce Total for 31 March 2008.

Table 4 – Police Officer Strength v BWT

21. Police Staff Pay - Underspend of £7.3m – 1.3% of budget
This underspend is mainly due to vacancies within Specialist Crime, Specialist Operations, Central Operations and Territorial Policing. There has been a minor favourable movement of £0.2m since period 4.

22. PCSO Pay - Underspend of £3.2m – 2.4% of budget.
There has been a minor adverse movement of £0.2m since period 4. The underspend 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.

23. Traffic Warden Pay - Underspend of £0.8m – 6.4% of budget.
This underspend is principally due to Transport OCU forecasting to be under budgeted strength as they have been recruiting PCSOs instead of Traffic Wardens. The forecast has remained consistent with that reported at period 4.

24. Police Officer Overtime – Overspend of £18.5m – 14.7% of budget.
There has been a minor adverse movement in the forecast of £0.1m from that reported at period 4. The overspend 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 other 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.

25. Police Staff Overtime – Overspend of £3.7m – 12.2% of budget.
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 £0.5m in the forecast from that reported at period 4 which is principally due to increased operational demands (including Operation Seagram) experienced by the technology group within the Directorate of Information.

26. PCSO and Traffic Warden Overtime – Underspend of £0.1m – 6.9% of budget.
Minor underspend.

27. Employee Related Expenditure – Overspend of £1.9m – 5.0% of budget.
There has been a minor favourable movement of £0.2m from the forecast at period 4. 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.

28. Premises Costs – Overspend of £2.4m – 1.1% of budget.
The overspend relates mainly to a budget allocation issue for the Training Centre within Territorial Policing. There has been an adverse movement of £1.7m from that reported at period 4 which results from a number of minor re-forecasting issues.

29. Transport Costs - Overspend of £4.7m – 7.9% of budget.
There has been an adverse movement of £1.9m from that reported at period 4. This is principally due a review of reported costs within Territorial Policing in respect of police travel and subsistence and transport maintenance and the indexing increase to the outsourced fleet maintenance contract in Transport Services (Human Resources). The overspend relates mainly to overseas travel and subsistence costs and vehicle hire connected with Operations Seagram and Overt/Overamp within Specialist Operations. There is also an overspend within Central Operations due to corporate vehicle hire and fuel costs related to the anticipated increased level of aid related to Operation Hargood and events at Wembley, as well as higher than anticipated levels of maintenance within the Air Support Unit.

30. Supplies and Services - Overspend of £15.4m – 3.6% of budget.
There has been an adverse movement of £2.0m in the forecast from that reported at period 4. This movement is principally due to the increased costs for the provision of free rail travel to police officers. Other overspends include technical specialists covering vacancies within the Directorate of Information, increased Police National Computer charges within Specialist Crime, and expenditure on accommodation and expenses for mutual aid officers. There are also overspends related to Interpreters fees, Medical Examiner fees, the kennelling, vets’ costs and food for confiscated dangerous dogs, and additional uniform costs for increasing numbers of Metropolitan Special Constables.

31. Capital Financing Costs – Underspend of £0.1m – 0.2% of budget.
Minor underspend.

32. Income - Forecast over-achievement of £14.7m – 4.6% of budget.
There has been a favourable movement of £7.4m from the forecast presented at period 4. This movement principally relates to an extension of Operation Safeguard by three months to the end of March 2008 within Territorial Policing. There is also additional income within Specialist Crime Directorate and additional grant from ACPO TAM for a team within Specialist Operations. Other significant areas of over-achievement include a Home Office grant relating to Counter Terrorism within Specialist Operations, sporting event income relating to Wembley and Wimbledon, and recovery of DSS benefits for Police Officers and Police Staff within Human Resources.

33. Budget movements. The major budget movements undertaken in period 5 are shown below in Table 5.

Table 5 – Major budget movements actioned in periods 5

34. Movements in Reserves. The reserve drawdowns and transfer to reserves carried out in period 5 are shown in Table 6.

Table 6 – Reserve drawdowns and transfer to reserves carried out in Period 5

35. Capital Monitoring. 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 November. 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.

36. Appendix 3 sets out the expenditure for the 2007/08 Capital Programme as at Period 5 (August) by programme, which shows a year to date total of £44.2m. This represents 20.2% of the revised budget of £218.7m. The forecast for the year of £177.7m is £41.0m below the annual budget including approved carry forwards from 2006/07.

37. Property Programme – underspend of £26.1m (39.7% 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.

38. Information Programme – Excluding C3i Programme – minor variation.

39. MPA Information Technology – Nil variation.

40. Transport Projects – Nil variation.

41. Other Plant & Equipment Expenditure – £1.1m overspend (43.1% of budget).
This primarily relates to additional forecast expenditure on aircraft and associated support equipment.

42. 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.

43. Safer Neighbourhoods Programme (Phases 1 to 3) - £14.1m underspend (51.4% 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 Two of the Safer Neighbourhood Property Programme. 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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