PCD 1421 Budget Monitoring Q3

PCD 1421 Budget Monitoring Q3

This report sets out the 2022/23 financial forecast for MPS and MOPAC as at 31 December 2022.  This is the third financial monitoring report for the year and is to be considered alongside the published quarterly monitoring report that also sets out key outcomes information.   

In February 2022 the 2022/23 budget was set at £3,186.2m. Subsequent changes to the budget have been approved reflecting additional grant funding, other income and changes to the application of reserves. As at Quarter Two the revised budget was £3,185.1m.  

The Quarter Three budget includes further changes, reflecting additional grant funding of £21.8m and other income of £3.3m and a net reduction in the use of reserves of £11.0m. The net revised budget remains unchanged at £3,185.1m to the position reported at Quarter Two.  

As at the end of December 2022 MPS and MOPAC are reporting a forecast underspend of £4.0m against the revised budget of £3,185.1m, of which £2.5m relates to MOPAC and £1.5m relates to MPS.   The forecast position includes the additional costs to date for Operation London Bridge and assumes the MPS will be reimbursed by the Home Office.  

At Quarter Two a revised budget for the Capital Programme of £321.8m was approved. The Capital Expenditure Forecast for 2022/23 is £273.7m, an underspend of £48.1m against the revised budget.  

The forecast position on reserves is also set out in the report and shows that earmarked reserves are forecast to reduce from an opening balance of £522.7m to £420.1m by the end of 2022/23.  The reduction in reserves is £21.3m less than anticipated when the budget was set due a number of reasons including, reprofiling of projects into future financial years requiring funds to be carried forward from both 2021/22 into 2022/23 and also 2022/23 into 2023/24, and changes in planned usage of reserves.   

The Deputy Mayor for Policing and Crime is asked to: 

1. Approve the revised budget for MOPAC/MPS as set out in the report, noting the increase in gross expenditure is funded through a combination of additional grant income and transfer from reserves;  

2. Note the forecast full year underspend at Quarter 3 of £4.0m, of which £2.5m relates to MOPAC and £1.5m relates to the MPS;  

3. Note the forecast full year underspend of £48.1m on the revised budget for the 2022/23 capital programme;  

4. Approve budget virements with an individual value in excess of £0.5m including additional grant and income, a detailed breakdown is provided at Appendix One and Two; 

5. Approve the transfer to MOPAC earmarked reserves totalling £6.2m, noting a further transfer to reserves totalling £2.8m which is already approved. A detailed breakdown is provided at Appendix Three; 

6. Approve the net transfer from MPS earmarked reserves totalling £2.0m, a detailed breakdown is provided at Appendix Four; 

7. Note the MPS are forecasting to deliver £61.1m savings against an approved savings target of £68.1m.  

PART I - NON-CONFIDENTIAL FACTS AND ADVICE TO THE DMPC 

Decision required – supporting report 

1. Revised MOPAC/MPS Revenue Budget 2022/23 

1. In February 2022, the MOPAC/MPS 2022/23 revenue budget was set at £3,186.2m, comprising of a £4,269.2m expenditure budget and a £1,083.0m income budget (this included a £123.9m transfer from reserves). Subsequent changes to the budget have been approved to reflect additional grant funding, other income and the application of reserves. At Quarter Two net revised budget was £3,185.1m. The Quarter Three budget includes further changes, reflecting additional grant funding of £21.8m and other income of £3.3m and a net reduction in the use of reserves of £11.0m. The net revised budget remains unchanged at £3,185.1m to the position reported at Quarter Two. 

MOPAC Budget 

2. In February 2022 the MOPAC budget was set at £64.5m. Subsequent changes have been approved to reflect additional grant funding and a reduction in the planned use of reserves. Net expenditure remained unchanged at £64.5m.  

3. At Quarter Three the MOPAC budget has been updated to reflect further changes in grant funding and other income totalling £6.6m this includes the addition of £5.8m grant funding for Operation Soteria following confirmation from the Home Office. The budget has also been updated to reflect an additional transfer to reserves totalling £9.0m of which £2.8m is already approved, and £6.2m is subject to approval. Whilst net expenditure remains unchanged at £64.5m, gross expenditure has reduced to £120.9m, and income has reduced to £56.4m (this includes a £1.8m transfer from reserves). These changes and a number of budget virements in excess of £0.5m are subject to DMPC approval. Further detail of the budget virements is provided at Appendix One, with detail of the reserves provided at Section Four and Appendix Three.  

MPS Budget 

4. In February 2022 the MPS budget was set at £3,121.7m. Subsequent changes have been approved to reflect additional grant funding, other income and the application of reserves. Net expenditure is now £3,120.6m.  

5. At Quarter Three the budget has been updated to reflect additional grant funding and other income totalling £18.5m, this includes £12.3m Home Office grant funding and £1.3m additional Counter Terrorism grants. The budget has also been updated to include a net transfer to reserves totalling £2.0m. These changes and a number of budget virements in excess of £0.5m are subject to DMPC approval. Further detail of the budget virements is provided at Appendix Two, with detail of the reserves provided at Section Four and Appendix Four.  

2. MOPAC/MPS Revenue Budget 2022/23 

1. As at the end of December 2022 MPS and MOPAC are reporting a forecast underspend of £4.0m against the revised budget of £3,185.1m, of which £2.5m relates to MOPAC and £1.5m relates to MPS.   The forecast position includes the additional costs to date for Operation London Bridge and assumes the MPS will be reimbursed by the Home Office. Based on the Quarter Three Workforce Plan which assumes a year end officer strength of 34,800 officer FTEs, c700 FTEs short of the Police Uplift Programme (PUP) target, the MPS now assume that they will not receive any of the ring-fenced PUP grant of £30.8m this year. Some significant risks around recruitment persist including an increase in attrition rates, competition in a buoyant labour market and vetting challenges. 

2. Overtime continues to be a financial pressure within the MPS, whilst this is being managed within the overall budget largely due to vacancies, it is not sustainable to continue overtime expenditure at the current rate. Risks are being actively managed and will continue to be monitored throughout the year.  A summary of the variances as at the end of December 2022 is set out below.  

MOPAC Budget 

3. As at Quarter Three MOPAC is forecasting a year end underspend of £2.5m, which is a £1.2m increase compared to the £1.3m underspend reported at Quarter Two. The increase in the underspend is mainly due to the reprofiling of commissioning programmes into next year. Of the £2.5m underspend, £0.7m relates to an underspend in staff due to vacancies and £2.0m relates to an underspend on supplies and services, these are offset by an under delivery in income of £0.2m that will no longer be achieved.  The forecast position also includes reprofiling of projects totalling £5.8m where delivery will continue beyond the current financial year, and £0.4m of funding no longer required. These are matched by a corresponding transfer to reserves of £6.2m and is subject to DMPC approval. The budget has been updated to include Grant funding for Operation Soteria totalling £5.8m following formal confirmation from the Home Office.  

MPS Budget 

4. The MPS are forecasting a year end underspend of £1.5m, this represents a decrease of £0.4m to the forecast position reported at Quarter Two. The main reasons for the forecast position are as follows:-  

• Police Officer pay is forecasting an underspend of £26.6m and assumes a year-end officer strength of c700 FTEs short of the Police Uplift Programme (PUP) target. The MPS therefore now assume that they will not receive any of the ring-fenced PUP grant of c£30.8m this year.  

• Police Staff Pay is forecasting an underspend of £34.0m, the majority of which relates to Met Ops (£17.7m) for which significant additional funding has been provided this year and which will take time to recruit.  

• Overtime continues to be a financial pressure.  Discounting the impact of Operation London Bridge and externally funded areas there is a forecast overspend of c£24.1m on police officer overtime and £12.3m on police staff overtime.  The level of overtime required should reduce during the year with the ongoing recruitment and training of additional staff. 

• Additional capital financing costs associated with the mobile phone roll out of £7m, offset in part by a £2.1m underspend on borrowing costs. 

• There is over recovery of income of £9.7m. This increases to £21.4m when under recovery of income of £11.7m from externally funded areas (offset by reduced expenditure) is taken into account. This is being driven by a number of factors including additional interest receipts, additional costs recovered in relation to policing events including football matches, the officer travel scheme and CT/PS funded areas. 

5. The forecast includes the additional costs of London Bridge, and assumes these additional costs will be reimbursed by the Home Office. 

6. For 2022/23 the MPS has an approved saving target of £68.1m. Of this, £4.2m of identified savings are considered no longer deliverable, and savings of £2.8m have been identified as delayed and expected in future years, leaving £61.1m of the original savings planned to be delivered in line with the position reported at Quarter Two. The progress on efficiencies is being monitored. Further work will be undertaken with MPS to establish why some of the targets cannot be achieved and what mitigating actions can be put in place. 

3. Capital Budget 2022/23 

1. The Capital Expenditure Forecast for 2022/23 is £273.7m, an underspend of £48.1m against the revised budget of £321.8m. As in previous years, the Quarter Two forecasts became the revised capital budgets for Quarter Three. The main variances are as follows: 

• Property Services - forecast of £75.8m against a revised budget of £86.4m, this represents an underspend of £10.6m, of which £4.6m relates to the Central Estates Programme, £1.6m relates to the Transforming the Workplace Programme and £4.4m relates to Property BAU (including Forward Works). 

• Transformation – forecast of £59.7m against a revised budget of £93.4m, this represents an underspend of £33.7m, of which £30m relates to Command and Control due to revised delivery timelines.  

• Digital Policing – forecast of £53.2m in line with the revised budget.  

• CTPHQ – forecast of £52.6m against a revised budget of £56.4m, this represents an underspend of £3.8m and is due to limited staffing resource, both permanent and temporary to support the planning and implementation of project and/or supply chain issues for kit and equipment.  

• Fleet Services – forecast of £27.1m in line with revised budget.  

• Met Ops – forecast of £5.3m in line with revised budget (original budget £10.2m).  

2. Full details can be found in the MOPAC Q3 Performance Report 2022-23 

4. Reserves 

1. Earmarked reserves of £522.7m were available from 1 April 2022 and the budget approved in February 2022 included the proposed use of reserves totalling £123.9m.  At Quarter Two the budget was updated to reflect the planned use of reserves £113.6m as a result of the reprofiling of projects into future financial years and changes in planned usage of reserves.  

2. At Quarter Three the planned use of reserves is now forecast to be £102.6m, of which £100.8m relates to the MPS and £1.8m to MOPAC. This represents a reduction in the planned use of reserves of £11.0m to that reported at Quarter Two, of which £9.0m represents a reduction in the planned use of reserves within MOPAC and £2.0m a reduction in the planned use of reserves within the MPS.  

3. A summary of the changes in MOPACs planned use of reserves are set out below, a more detailed breakdown is provided at Appendix Three, this includes the transfer to reserves totalling £6.2m which are subject to DMPC approval and a further £2.8m which are already approved. 

• Carry Forward – Transfer to reserve for projects where delivery has been reprofiled into 2023/24 - £5.8m 

• Budget resilience – Transfer to reserve in relation to funds no longer required - £0.4m 

• Budget resilience – Reduction in planned use of reserves - £2.8m 

4. A summary of the changes in the MPS planned use of reserves is set out below, a more detailed breakdown is provided at Appendix Four. 

• Use of funds carried forward from 2021/22 - £1.0m 

• Increase in the proposed use of reserves - £2.9m 

• Reduction in the planned use of reserves - £6.0m 

5. The general reserve remains at £46.1m. In light of the economic climate and the uncertainty over inflation and the potential impact on pay awards, the level of general reserves will be continually reviewed to ensure they remain realistic and are sufficient to cover potential risks within the overall financial strategy should they crystallise. 

5. Financial Comments 

1. The forecast includes a number of known risks that will be closely monitored, in particular inflation and recruitment. In addition budget forecasts assume that the costs of London Bridge will be met in full by the Home Office.  Overtime continues to be a financial pressure. This is being managed within the overall budget, largely due to vacancies, but it is not sustainable to continue overtime expenditure at the current rate. There is also the potential for further slippage should there be delays in commissioning some services. 

2. Regular monitoring is in place across MOPAC and MPS on a monthly basis and the risks will continue to be monitored.   

3. The overall position on reserves continues to be higher than previously budgeted and the planned reduction in reserves is already lower than originally anticipated when the budget was set.   

4. Progress on the capital programme continues to be monitored to ensure that trends of previous years which have seen significant slippage are not repeated.  

6. Legal Comments 

1. There are no direct legal implications arising from this proposal. 

2. MOPAC/MPS as statutory bodies must only budget for activities that fall within its statutory powers. Under the Scheme of Delegation and Consent the DMPC must approve any budget movement for £500,000 or above.  Under Financial Regulations all decisions in relation to the transfer in and out of reserves will be made by the DMPC. 

7. GDPR and Data Privacy  

1. GDPR matters have been discussed with the Data Protection Officer, who has confirmed that no Data Protection Impact Assessment (DPIA) is required for this area of spend. However, the personal details of any individuals or organisations with whom contract is made for the purposes of the engagement will be managed in accordance with MOPAC’s wider Privacy Notice. 

8. Equality Comments 

1. MOPAC is required to comply with the public sector equality duty set out in section 149(1) of the Equality Act 2010. This requires MOPAC to have due regard to the need to eliminate discrimination, advance equality of opportunity and foster good relations by reference to people with protected characteristics.  The protected characteristics are: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation.  

2. There are no equality and diversity implications arising from this report.