Budget Submission 2017/18-20/21

Reference code: 
PCD 103
Date signed: 
05 December 2016
Authorisation name: 
Sophie Linden, Deputy Mayor, Policing and Crime

Executive summary

As part of the production of the GLA Group budget MOPAC is required to submit a budget proposal to the Mayor. This paper sets out the proposed revenue and capital budgets for the period 2017-18 to 2020-21. 

This budget submission has been developed in a financially challenging period where funding is restricted and the demands on policing are increasing and changing substantially. MPS are undergoing a significant programme of transformation and efficiencies.

MOPAC/MPS are still not fully compensated for the shortfall of £170m in National, International and Capital City (NICC) grant, and face a risk of a loss of resources from 2018/19 onwards from the Police Formula Funding review.

The proposed revenue budget for 2017/18 meets the budget guidance, addresses the Mayoral manifesto commitments and matches the cash sum of £613m, an increase of £17.4m on last year, allocated by the Mayor for 2017-18. We propose to maintain the strategic target of 32,000 officers. This will be increasingly challenging in the years ahead. We will work with the MPS to transform the way it works to ensure that, with these officers, it can deliver a good universal service to everyone, make the necessary improvements to specialist services to protect London’s most vulnerable people, and maintain its capability to protect the city from the threats of terrorism, organised crime, cyber crime and major civil emergencies.

A draft capital programme estimated at £1,587m over the period is also proposed to invest in existing assets and to develop new initiatives. The capital programme is under review and will be revised later in the budget process. The funding and borrowing limits to support this level of investment are also set out.

Recommendation

The DMPC is asked to approve the proposed 2017/18-20/21 budget submission to the GLA.

Non-confidential facts and advice to the Deputy Mayor for Policing and Crime (DMPC)

1.    Introduction and background

1.1.    This MOPAC budget submission forms part of the annual process to create the overall GLA Group budget. The DMPC has been delegated the authority to make the annual budget submission to the Mayor of London in line with the agreed Budget Timetable.

2.    Issues for consideration

2.1.    The MOPAC priorities and Mayoral manifesto commitments which frame the proposed budget are set out in the attached document. As this is the first year of the Mayoralty a new Police and Crime Plan has been issued for consultation for completion before the end of March 2017.  Any significant changes arising from the consultation will be contained within the overall budget.

2.2.    Revenue Budget

2.2.1.    MOPAC faces significant financial challenges over this budgeting period.  Government funding for London policing is being held below flat cash level and demands on policing are increasing.  In the spending review the flat cash settlement was based on the assumption of a 2.5% increase from Council Tax. Whilst ‘acquisitive crimes’, such as burglary and car theft, have fallen, patterns of crime are changing. In recent years, there has been an increase in some types of recorded violence within London, including knife crime and gun crime discharges, with reports of child protection, sexual violence, vulnerable people, hate crime and fraud also increasing.  Their rise has significant implications for the MPS and their partners. These crimes require more resources and specialist skills to investigate, along with partnership work with other agencies such as the Health Service and local councils.  In addition, non-crime demands (e.g. those in mental health crisis) on policing to be the service of last resort mean that there are additional unfunded pressures on the MPS budget.  

2.2.2.    MOPAC/MPS face additional funding pressures because the Home Office does not fully fund the costs the MPS incurs in providing policing in London for national and international capital city (NICC) functions.  A shortfall in NICC funding of £170m is the result – the equivalent of £61 for each household at Council Tax Band D.  The Home Office have accepted that we receive a shortfall in NICC funding but have not yet provided any additional resources to meet this extra cost. MOPAC continues to lobby the Home Office to obtain funding to meet the full cost of providing this service.

2.2.3.    Moreover the Government have announced a review of the general Police Grant to report by February 2017 with a view to implementing any changes in time for 2018/19. MOPAC/MPS receive some 25% of the national total, so against the background of no new resources, any changes in grant distribution are likely to impact disproportionally on London policing. MOPAC/MPS will continue to press the case for London on funding. However, there are clearly risks that any new distribution methodology may transfer resources away from London thereby exacerbating the funding pressures facing MOPAC/MPS.

2.2.4.    In order to address these rising demands and the changing nature of policing in London the MPS are implementing their One Met Model (OMM) transformation programme.  This is designed to invest in and improve the visibility, productivity and effectiveness of the force, and will enable the release and re-direction of officers to the priorities in the Police and Crime Plan.  Under the budget agreed by the previous Mayor currently officer numbers are 31,344.  We propose to maintain the strategic target of 32,000. This will be increasingly challenging in the years ahead. As part of previously agreed savings back office services are reducing to 15% of total revenue expenditure by 2019/20, lower than most similar forces according to HMIC/national benchmarks. 

2.2.5.    Additional unfunded costs and pressures MOPAC faces are estimated at in excess of £400m over the years 2017-21. These cover a range of items including external pressures of pay and non-pay inflation and single tier pension costs. There are also costs associated with the uplift in firearms and investment in modern IT and mobility, hence the borrowing costs from capital investment.

2.2.6.    Previously agreed savings and the identification of a further savings through this budget cycle have been balanced against these pressures.  Because officer numbers have fallen below target in 2016/17, this will help bridge the budget gap in 2017/18 as there will be vacancies in early 2017/18.  Therefore the proposed 2017/18 revenue budget meets the cash sum of £613m allocated and addresses the Mayoral commitments.  Significant efficiencies and savings in 2017/18 of £74.8m have been identified in order to meet the budget target and these will present challenges in delivery. The savings will require careful management by MPS and oversight from MOPAC to be delivered.

2.2.7.    There is planned use of reserves to support the changes necessary to meet the target budget. After taking this funding into account, the forecast budgets for 2018/19 and onwards set out below show significant unfunded pressures.

  2017/18 2018/19 2019/20 2020/21

 

£m £m £m £m
Target Budget Gaps 55 95 184 136
Additional £17m -17 -17 -17 -17
Impact of officer numbers below target at year start -38 0 0 0
Unfunded pressures 0 78 167 119

2.2.8.    The budget for 2016/17 has led to police officer numbers falling slightly below target and this means there will be vacancies early in 2017/18. The budget for 2017/18 can then be balanced through applying additional resources of £17.4million (equivalent to just over 2.5% on the Council Tax police precept) from the Mayor. However, this in itself will not balance the budget from 2018/19 onwards and further savings and/or additional resources will need to be identified. Importantly, the Budget process for 2018/19 onwards will need to begin early to allow sufficient time to identify and implement efficiency measures in order to achieve a balanced position going forward. MOPAC/MPS and GLA continue to make the case to the Home Office to obtain a fairer and more sustainable level of funding for policing, and will continue to identify further opportunities to reduce costs.

2.3.    Capital Budget

2.3.1.    The proposed investment programme for the period 2016-17 to 2020-21 is estimated at £1,587m through a portfolio of transformation called the One Met Model (OMM).  The analysis of investment across the OMM portfolio is set out in the attached draft programme.  This is subject to further MPS review and MOPAC approval to monitor delivery of such a large and complex inter-dependent series of investments. This will inform future budget processes. 

2.3.2.    The proposed funding to support this investment is also provided in the attached, and for 2017/18 requires no new borrowing.  The scale of the investment to modernise the retained MOPAC estate and to transform digital policing to enable a more visible and mobile police force may require additional borrowing.  The estimated revenue costs of any additional borrowing are included in the draft revenue budget.  We will work to ensure that our plans for estate disposal align with the Mayor’s affordable housing policies, and detailed work on this is on-going between the GLA and MOPAC.  

2.3.3.    Authorised limits and the operational boundaries for the management of borrowing to support the capital programme are included in the attached.

2.4.    Robustness of Budget

2.4.1.    The MOPAC Chief Finance Officer has provided assurance as to the robustness of the estimates proposed and the adequacy of the proposed financial reserves. The current policy on reserves is to maintain general reserves at a level of 1.5% of net revenue expenditure. The proposals made in the attached will result in a level of general reserves of 1.8% at the end of 2017-18. It is important to maintain sufficient reserves, particularly during periods of organisational change or when budgets are reducing, to provide financial cover to meet any short term pressures while the organisation adjusts to meet the financial resources available.

2.4.2.    A suite of appendices providing further detail and analysis is included. 

3.    Financial Comments

3.1.    This is a financial report and the details are set out in the body of the report.

4.    Legal Comments

4.1.    MOPAC is subject to the budget setting requirements of the Greater London Authority Act 1999, as amended. As set out above the proposed budget submission reflects the Mayor’s guidance. 

4.2.    Further to the creation of the MOPAC, pursuant to section 6 of the Police Reform and Social Responsibility Act 2011 (“the Act”), MOPAC must issue a police and crime plan within the financial year in which each ordinary election is held, which is underway and on schedule for completion before the end of March.   

4.3.    Under section 3 (6) of the Act, MOPAC is under a duty to secure the maintenance of an efficient and effective police force. Under paragraph 7 of schedule 3 of the 2011 Act MOPAC may do anything which is calculated to facilitate, or is conductive or incidental to, the exercise of its functions. Under section 79 of the Act, MOPAC must have regard to the Policing Protocol when exercising its functions. The Policing Protocol provides that PCCs (including MOPAC) as recipient of all funding, must determine how this money is spent. In London, this is also to be read within the context of the GLA Act 1999, and the Mayor’s budget setting requirements. 

4.4.    MOPAC/MPS as statutory bodies must only budget for activities that fall within its statutory powers. Further, the Commissioner must ensure that good value for money is obtained in exercising functions, which includes securing that persons under his direction or control obtain good value for money in exercising their functions. Any future proposals for a reduction in staff/officer posts must comply fully with employment law and People Services and the Directorate of Legal Services at the MPS, as appropriate, will need to be engaged to ensure compliance with any statutory or regulatory requirements in relation to any redundancy or redeployment matters.

5.    Equality Comments

5.1.    The potential equality implications of the budget are included in the equality impact assessment of the draft Police and Crime Plan which is out for consultation.

6.    Background/supporting papers

6.1.    Appendix 1 - See attached pdf.