Revenue and capital budget monitoring report  2008/09 – period 2

Report: 04
Date: 17 July 2008
By: Director of Resources on behalf of the Commissioner

Summary

This report provides an update on the revenue and capital budget monitoring position for 2008/09 at period 2 (to the end of May). The revenue budget is forecast to underspend by £12m (approximately 0.4% of budget). The capital programme as at period 2 (to the end of May) shows year to date total expenditure of £14.7m. This total represents 6.1% of the annual budget of £241.1m.

A. Recommendations

That

1. members note the year to date and forecast position for revenue and capital budgets; and

2. approve budget changes relating to Olympics Security and Counter Terrorism funding (see paragraph 36).

B. Supporting information

Background

1. This report provides an update on the forecast against the revenue and capital budgets for the MPA/MPS in 2008/09 based on the position at the end of May 2008. It reflects recent changes to Business Group structures with two new business areas being reported, namely the Olympics Security Directorate and the Deputy Commissioner’s Portfolio.

Revenue Forecast by Business Group

2. Table 1 provides a summary of the revenue forecast by Business Group.

Table 1 – Summary of revenue forecast against budget at period 2

3. The forecast outturn variance at period 2 is an underspend of £12m. However, it should be noted that this forecast position is based on a series of assumptions in respect of specific grant payments to the MPS. In particular, there are currently unresolved issues in respect of Olympics grant and London Safety Camera Partnership grant from Transport for London. The forecast underspend of £12m identified above could be affected adversely when decisions on grant levels are finalised.

4. The subjective position by Business Group is at Appendix 1. The overall position for the MPS is at Appendix 2.

5. Territorial Policing – An underspend of £7.7m – 0.5% of budget.

The forecast underspend relates principally to Police Officer pay due to vacancies against the deployment plan and to Police Staff Pay due to vacancies within Central Communications Command and vacancies relating to PCSOs.

6. Specialist Crime – A minor variation.

7. Specialist Operations – An underspend of £0.6m– 0.3% of budget.
The forecast underspend relates principally to Police Staff Pay due to the expected level of vacancies.

8. Central Operations – An overspend of £1.4m – 0.6% of budget.
The forecast overspend relates principally to Police Overtime and a shortfall in income recovery related to a number of externally funded units.

9. Olympics Security – An underspend of £0.5m – 4.7% of budget.
The forecast underspend relates principally to Police Officer vacancies. The corresponding repayment of grant has been reflected in the Specific Grant forecast within Centrally Held.

10. Deputy Commissioner’s Portfolio – An overspend of £0.1m – 0.1% of budget.
A minor overspend relating to Supplies and Services expenditure.

11. Directorate of Public Affairs – An underspend of £0.4m – 7.1% of budget.
The underspend relates principally to a reduction in printing costs following the Mayor’s decision to cease publication of The Londoner. However, it should be noted that statutory performance information is still required to be published and additional costs may arise in the future.

12. Directorate of Information – A minor variation.

13. Resources Directorate – An underspend of £4.8m – 1.8% of budget.
The forecast underspend relates principally to increased interest receipts and Police Staff vacancies.

14. Human Resources – An overspend of £0.5m – 0.3% of budget.
The forecast overspend relates principally to higher than budgeted cost of vets and kennelling of dangerous dogs.

15. Metropolitan Police Authority – An underspend of £0.6m – 4.9% of budget.
The forecast underspend relates principally to Police Staff vacancies and a delayed furniture replacement programme in MPA accommodation.

16. Centrally Held Budgets – An overspend of £0.5m – 0.0% of budget.
This minor overspend relates to an under recovery of Olympics Specific Grant which is matched by an underspend in the Olympics Security Directorate.

17. Discretionary Pension Costs – A minor overspend – 0.1% of budget.

Revenue Forecast by expenditure/income type

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

19. Police Officer Pay – Underspend of £7.9m – 0.4% of budget.
As indicated in Table 2, the current forecast indicates that the original target strength at 31 March 2009 of 32,930 will be achieved. However, the underspend indicated in the Period 2 forecast is due to actual strength at the end of May being below the levels assumed in the original budget. That is, the target strength of 32,930 will be achieved by the end of 2008/09 but the growth profile will be different to that assumed in the original budget.

Table 2 – Police Officer Actual Strength v Target Strength

20. Police Staff Pay - Underspend of £7.5m – 1.3% of budget
The forecast underspend relates generally to vacancies across a number of Business Groups.

21. PCSO Pay - Underspend of £2.9m – 2.1% of budget.
The forecast underspend relates to PCSO vacancies within Territorial Policing.

22. Traffic Warden Pay - Underspend of £0.5m – 4.6% of budget.
The forecast underspend relates to Traffic Warden vacancies within Central Operations.

23. Police Officer Overtime – Underspend of £0.1m.
A minor underspend.

24. Police Staff Overtime – Overspend of £0.2m – 0.7% of budget.
A minor overspend.

25. PCSO and Traffic Warden Overtime – Minor overspend.

26. Employee Related Expenditure – Underspend of £0.8m – 2.3% of budget.
The forecast underspend relates principally to reductions in the number of police secondments within Specialist Crime and Specialist Operations.

27. Premises Costs – Underspend of £0.6m – 0.2% of budget.
A minor underspend.

28. Transport Costs - Overspend of £0.4m – 0.7% of budget.
The forecast overspend relates principally to increased fuel costs.

29. Supplies and Services - Overspend of £1.7m – 0.4% of budget.
The forecast overspend is principally within Specialist Operations and relates to Counter Terrorism expenditure for which there are corresponding underspends in a number of other areas of the budget.

30. Capital Financing Costs – Nil variation.

31. Interest Receipts – Forecast over-achievement of £3.0m – 25.5% of budget
The forecast over achievement relates to higher than anticipated cash balances and increased interest rates.

32. Other Income - Forecast under-achievement of £8.4m – 2.4% of budget.
The forecast under-achievement is principally within Central Operations and relates to reductions in income recovery for the Transport OCU, Heathrow Airport and the Palace of Westminster, which are matched by lower staff costs. There is also an under-recovery within Specialist Operations relating to ACPO TAM units, which, again, is matched by lower staff costs. Within Territorial Policing an under-achievement is forecast relating to immigration income reflecting decreased activity in this area. It is likely that Territorial Policing will seek a permanent budget reduction for immigration income in the future.

33. Specific Grant – Under recovery of £0.5m – 0.1% of budget.
This minor under recovery relates to the Olympics Specific Grant which is matched by an underspend in the Olympics Security Directorate.

Budget movements

34. Budget amendments relating to changes in the funding streams for both the Olympics and Counter Terrorism are included in this report. With regard to the Olympics, the original revenue budget was based upon figures submitted to the Home Office in 2007 and subsequently supported, with minor amendments, by HMIC. The figures represented the total anticipated spend on Olympic safety and security in 2008/09. In the accompanying text within the Corporate Plan it was stated that the figures represented early estimates and were subject to change. Under current proposals, Olympic funding will not be released as one grant, but will constitute a number of separate grants for specific projects. It is anticipated that a core revenue stream in the region of £10m will be made available for planning. Although the exact amount of 2008/09 funding has yet to be agreed with the Home Office, the budget has been amended to reflect only this anticipated funding for planning. Additional funding is anticipated throughout the year, subject to business cases being approved by the MPA and Home Office and budgets will be amended to reflect any additional grant received together with related expenditure.

35. It is a similar position with Counter Terrorism Grant where the budgets were set based on anticipated levels of funding, which turned out to be lower than expected when the grant was announced by the Home Office.

36. In both cases, a reduction in expenditure budget is matched by a reduction in funding budget. Members are therefore asked to approve matching budget reductions to expenditure and funding of £34.590m for Olympics funding and £13.786m for Counter Terrorism funding.

37. The major budget movements undertaken in period 2 are shown below in Table 3.

Table 3 – Major budget movements actioned in period 2

Movements in Reserves

38. The reserve movements carried out in period 2 are shown in Table 4. 

Table 4 – Reserve movements carried out in Period 2

39. Capital Monitoring – Appendix 3 provides a summary of the approved annual capital budget and year to date expenditure as at Period 2. In line with previous years, the first capital expenditure forecast for 2008/09 will be included in next month’s (period 3) paper.

40. An exercise has been undertaken as part of the Period 2 monitoring process, to establish a realistic level of delivery against the approved budget in 2008/09 having regard to expenditure slippage from 2007/08 and forecast slippage into future years. The results of this exercise indicate that 2008/09 spend should be broadly in line with the currently approved budget. It is not therefore proposed to amend the proposed budget at this stage. Any programme variations are expected to be managed through over-programming facilities and maintained within the approved budget.

41. It should be noted that the current budget position for 2008/09 is based on a number of assumptions regarding the financing of capital expenditure. For example, the budget for capital receipts is based on the original plan for 2008/09; it does not take into account any problems that could be encountered generating this level of receipts given the current market conditions. Also, with regards to budgets for the grants receivable in respect of the Olympics and Counter-Terrorism expenditure, these amounts will only be available to the MPS if the expenditure is incurred in 2008/09.

42. A complete reassessment of the seven-year capital programme and budget will be undertaken in the autumn as part of the budget and business planning process. This exercise will provide an update as to the level of capital expenditure that will be delivered in 2008/09 in addition to providing an update to the already existing seven-year capital programme. It is expected that the results of this exercise will be presented to the MPS Investment Board in September and subsequently to the Finance Committee in October.

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

• Policing London 2008-11 Business Plan

F. Contact details

Report author(s): 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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