Budget Submission 2006/07

Report: 3
Date: 17 November 2005
By: Treasurer and Commissioner

Summary

The Authority is asked to approve the 2006/07 budget submission. The projected precept increase is 5.5%. Incorporating the effects of the full roll out of the safer neighbourhood programme would lift the precept increase to 11.2%. The budget will be reviewed following the provisional grant settlement in early December and in the meantime work will continue to identify options for reducing the budget. The Authority will make final decisions on the budget submission to the Mayor at its meeting on either 6 December or 26 January 2006.

A. Recommendation

Members are asked to

Consider whether they wish to endorse a budget submission which includes the full safer neighbourhoods roll out in 2006/07;
Approve the 2006/07 budget submission subject to review in December/January;
Require continuing work to identify options for reducing the budget so that they are available for consideration following the announcement of the grant settlement;
Note that the reserves position will be reviewed in December/January.

B. Supporting information

Introduction

1. The 2006/07 budget submission has to be delivered to the Mayor by 14 November 2005 and is before the Authority for approval at this meeting. In order to facilitate consideration by the GLA within a very tight timescale, the draft submission has been presented to the GLA, but is subject to members’ amendments and formal approval.

2. The submission has been developed in accordance with the Mayor’s guidance and comprises five sections:

Business Plan (section A). Already reviewed and approved by the joint Finance/Planning Performance and Review Committee.
2006/07 Revenue Budget and Medium Term Financial Projection (section B). Presented herewith. This incorporates the safer neighbourhoods Business Case noted by the joint Finance/Planning Performance and Review Committee.
Budget and Equalities submission (integrated into the main budget submission this year as required by the Mayor’s Budget Guidance)
Borrowing and Capital Spending Plan 2005/06 to 2008/9 (section C).
Budget and Sustainable Development submission. Already considered by the Finance Committee and submitted to the GLA.

3. In approving the submission the Authority will be endorsing all its components. This covering report particularly highlights key issues in relation to the 2006/07 revenue budget.

Safer Neighbourhoods Programme

4. The safer neighbourhoods business case included with the revenue budget submission (section B) supports the accelerated roll out of 368 additional teams in 2006/07. The total funding required for this proposal is £75.1m in 2006/07 and £118.7m in 2007/08. This can be partly resourced by grant funding for PCSOs provided through the Home Office Neighbourhood Policing Fund and partly by redirection of existing permanent beat officers already employed by the MPS. A balance remains, however, that would need to be funded by resources additional to existing MPA budgets and outside the 5.5% precept increase guideline. The additional amount chargeable to the precept would be £31.8m in 2006/07 (£58.8m in 07/08), which would add a further 5.7% to the precept giving a total of 11.2%.

5. The safer neighbourhood costs are driven by the assumption that a substantial number of the teams are in place from the beginning of 2006/07. To achieve this, recruitment of PCSOs would need to commence during January-March 2006. However commitments will need to be made before the final budget approval in February and there would be additional costs in 2005/06 which the Authority would have to be able to accommodate. Implementation of the new neighbourhood teams will therefore have to be considered by the Authority at its meeting on either 6 December or 26 January 2006 following the grant settlement and with clear guidance from the Mayor in relation to next year’s budget.

6. Members are asked to consider if they wish to endorse a submission which includes the full financial effect of the safer neighbourhoods roll out.

Overall 2006/07 revenue budget

7. The detailed description and analysis of the 2006/07 revenue budget is set out in section B of the submission. The Mayor’s budget guidance requested details of a budget resulting in a 5.5% precept increase. The submission was also to detail how to achieve 624 safer neighbourhood (SN) teams by 2008, although paragraph 4 above explains the latest position on the SN teams. On this basis the budget as drafted falls within the 5.5% precept increase in 2006/07.

8. The draft budget for 2006/07 reflects net expenditure of £2,817.9 million, a 3.1% increase over 2005/06. At the present moment net expenditure exceeds grant and precept funding by £7 million. It is expected that this gap will be closed before the Authority reconsiders the budget submission in December/January. The following table summarises the variation between the two years.

	£m	£m
2005/06 net expenditure		2,733.1
Inflation	68.5
Committed increases	86.1
Committed decreases	(9.8)
Efficiency and other savings	(67.1)
New initiatives	7.1
		84.8
06/07 net expenditure		2,817.9

9. The increase is substantially accounted for by inflation and commitments, offset by savings totalling approximately £67 million. New initiatives represent only a small percentage of the increase. Details of the variations are set out in the schedules to section B of the submission.

10. The following table summarises the draft budget before and after inclusion of the safer neighbourhood roll out.

	2006/07 £m	Increase %	Total precept £m	Increase %
Budget as submitted	2,590.7	3.9	591.3	5.5
Safer Neighbourhood teams	31.8	1.3	31.8	5.7
Total	2,622.5	5.2	623.1	11.2

11. The estimates of grant entitlement are based on assumptions at this stage. The provisional grant settlement is expected to be announced the week commencing 5 December (probably the 8 December) at which stage firmer grant figures should be available and the budget position will have to be reviewed. It is unclear at the moment whether it will be possible to report to the 6 December full Authority. The next meeting is 26 January.

12. The proposed use of reserves in 2006/07 is explained in section B of the revenue budget submission. £17m of specific earmarked reserves are proposed to be used to finance one off growth items, some of which will generate savings in the short to medium term. It is proposed to replenish these reserves in 2007/08. The uncertainty over the likelihood of further government support for the additional costs of the police operation following the bombings/attempted bombings continues. Accordingly it is not proposed to relax the moratorium on the use of uncommitted reserves at this stage. It is recommended that the reserves position is further considered in December/January, when there will be more certainty about government grant and any increased flexibilities around using reserves.

13. The likelihood is that there will be a tight grant settlement and there are still many unknowns. There may well be a need to constrain the precept increase especially in the context of potential council tax capping. Given that the budget will be reviewed following the grant settlement it may be that the Authority would wish the MPS to continue work to identify options for budget reduction that can be brought forward at short notice after the grant settlement. The Authority is asked to endorse this view.

14. The budget guidance requires the Treasurer to produce a report on the robustness of the estimates. This was presented to the Co-Ordination and Policing Committee on 4 November and is appended to the Budget Submission (Section B). This advice can only be provisional pending the further review of the budget following the grant settlement.

15. Following approval of the submission (provisionally submitted to the Mayor) the Authority will reconsider the budget at its meeting on 6 December/26 January in the light of the timing and details of the grant settlement and further dialogue with the Mayor.

C. Race and equality impact

Equalities issues in relation to the budget are specifically addressed in the Equalities and Budget element of the submission. Individual expenditure and savings proposals will be assessed for any diversity implications.

D. Financial implications

The budget provides the approval for expenditure in 2006/07 and the basis for budgetary control during the year.

E. Background papers

MPA/MPS 2006/07 budget files

F. Contact details

Report author: Ken Hunt, Treasurer, MPA.

For more information contact:

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

Appendix 1

MPA Budget Submission to the GLA

November 2005

Section A: business plan

Capital strategy: report presented to the joint meeting of the Finance and Planning Performance & Review Committees on 10 October 2005

Section B & C

see supporting material