originators: john riley, pcc chief finance … budget report.pdf · 2015/16 budget report and...

2015/16 Budget Report and Revised Medium Term Financial Strategy 2015/16 to 2018/19

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ORIGINATORS: John Riley, PCC Chief Finance Officer, & Sir Jon Murphy, Chief Constable Merseyside Police.

DECISION NO: (to be completed on approval)

SUBMITTED TO: Jane Kennedy, Police and Crime Commissioner

SUBJECT: 2015/16 Budget and Revised Medium Term Financial Strategy 2015/16 to 2018/19

SUMMARY: The PCC within each force area has a statutory duty and electoral mandate to ensure an efficient and effective police service and to hold the police to account on behalf of the public. The PCC is the recipient of funding relating to policing and crime reduction, including government grant and precept and other sources of income. How this money is allocated is a matter for the PCC in consultation with the Chief Constable, or in accordance with any grant terms.

The provisions of Section 32 of the Local Government Finance Act 1992 require the PCC to set a balanced budget. In addition, Section 26 of the Police Reform and Social Responsibility Act 2011 establishes the PCC as a precepting authority for the purposes of the 1992 Act. The PCC after giving careful consideration to the options open to her regarding the precept, proposes to increase the precept by 1.95% in 2015/16. This increase equates to a modest increase of £2.03 pa for Band A properties (i.e. 4p per week) the majority of Council Tax payers on Merseyside. This increase, along with the achievement of £15.4m recurring savings and the utilisation of £8.4m of Reserves enables the PCC to set a balanced budget in 2015/16 and provide sufficient resources to enable the Chief Constable to maintain a budgeted establishment of 3,678 Police Officers. Although the PCC has been able to set a balanced budget in 2015/16, there still remains a very significant financial and policing challenge for the PCC and Merseyside Police in the years ahead, with an estimated savings requirement of over £47.4m being required to be made by the end of 2018/19. A strategy aimed at addressing this challenge is currently being developed by the Chief Constable, in partnership with the PCC.


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RECOMMENDATIONS: That following detailed consideration of the Joint Report on the Budget by the Chief Finance Officer and the Chief Constable, and in accordance with Sections 43-48 of the Local Government Finance Act, 1992 the Police and Crime Commissioner:-

(a) approves a Net Budget Requirement of £309,263,166 for 2015/16, incorporating a 1.95% Council Tax precept increase on the 2014/15 level;

(b) notes the Revised Estimate for 2014/15 as set out in Table 1;

(c) approves the continuation of the suspension of the Police and Crime Commissioners carry-over rules as set out in paragraph 3.1.18;

(d) approves in principle the strategy for utilising the estimated 2014/15 budget underspend and the additional savings achieved in 2014/15, as set out in Section 3.1, pending the final outturn position to be reported to the Police and Crime Commissioner in June;

(e) approves the proposed allocation of the 2015/16 Community Safety Funding as detailed in Table 8;

(f) approves the Capital Programme and financing arrangements as set out in Appendix C of this report;

(g) approves in broad terms the Medium Term Financial Strategy as set out in Appendix D;

(h) issues an appropriate precept requirement of £54,698,120 on the five Billing Authorities in the Merseyside area, to be levied as part of the Council Tax for the purposes of Police and Crime Commissioner for Merseyside expenses for the financial year beginning 1st April 2015 and ending 31st March 2016.

a precept of £106.45 for properties in Band A £124.20 for properties in Band B £141.94 for properties in Band C £159.68 for properties in Band D £195.16 for properties in Band E £230.65 for properties in Band F £266.13 for properties in Band G £319.36 for properties in Band H; and


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(i) requires the five Billing Authorities in the Merseyside area to pay to the Chief Finance Officer the amounts due from them respectively in pursuance of paragraph (h) above, by ten, equal instalments payable on or before:-

the 21st day of April 2015

the 29th day of May 2015 the 6th day of July 2015 the 11th day of August 2015 the 17th day of September 2015 the 23rd day of October 2015 the 30th day of November 2015 the 8th day of January 2016 the 15th day of February 2016

the 17th day of March 2016.

OUTCOME/APPROVAL BY: Signature

Date


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Public Access to Information Information in this form and associated reports is subject to the Freedom of Information Act 2000 and the Elected Local Policing Bodies (Specified Information) Order 2011. Where it has been indicated that this is a decision of significant public interest, all of this form except Part 2 will be made available on the website within 3 working days of approval. Any information that should not be automatically available on request should not be included in Part 1 but instead on a separate Part 2 form. Deferment of publication is only applicable where release before that date would compromise the implementation of the decision being approved.

Is this a decision of significant public interest? This includes a decision with any impact on the community, expenditure in excess of £50,000, or any decision that would be of obvious interest to the media or the general public

YES

Is there a Part 2 form? NO

Is the publication of this form to be deferred? NO

ORIGINATOR CHECKLIST (MUST BE COMPLETED)

Comments including who has approved the report if applicable

Has legal advice been sought on this submission if required? Yes

Has the PCC / Force Chief Finance Officer been consulted, if required?

Yes, both.

Have equality, diversity and human rights implications been considered, as appropriate?

Yes

Is the recommendation consistent with the objectives in the Police and Crime Plan?

Yes

Has consultation been undertaken with people or agencies likely to be affected by the recommendation?

Yes, Police and Crime Panel and the General Public of Merseyside.

Has communications advice been sought on areas of likely media interest and how they might be managed?

Yes

Have all relevant implications and risks been considered? Yes


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ORIGINATORS APPROVAL Name John Riley Job title PCC Chief Finance Officer Signature Date Name Sir Jon Murphy Job title Chief Constable Signature Date

CHIEF OF STAFF APPROVAL I am satisfied that relevant advice has been taken into account in the preparation of the report and that this is an appropriate request to be submitted to the PCC. Signature Date


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PART 1 – For publication

1. Purpose of the Report

The purpose of this report is to:- (i) provide an update on the Revised Estimate for 2014/15; (ii) seek approval for the Revenue Budget of the Police and Crime Commissioner

for 2015/16; (iii) seek approval for the Capital Programme of the Police and Crime

Commissioner for 2015/16; and (iv) seek agreement on the Medium Term Financial Strategy for 2015/16 to

2018/19.

2. Background 2.1 The PCC within each force area has a statutory duty and electoral mandate to ensure

an efficient and effective police service and to hold the police to account on behalf of the public. The PCC is the recipient of funding relating to policing and crime reduction, including government grant and precept and other sources of income. How this money is allocated is a matter for the PCC in consultation with the Chief Constable, or in accordance with any grant terms.

2.2 In accordance with the provisions of Section 32 of the Local Government Finance Act

1992 the PCC is required to set a balanced budget. In addition, Section 26 of the Police Reform and Social Responsibility Act 2011 establishes the PCC as a precepting authority for the purposes of the 1992 Act.

3. 2015/16 PCC Budget and Medium Term Financial Strategy 3.1 Revised Estimate 2014/15

Introduction 3.1.1 The budget set for 2014/15 represented the final year of the four year Comprehensive

Spending Review (CSR) cycle announced in December 2010. The CSR target for 2014/15 represented an overall funding reduction of 4.8% compared with the previous financial year and as a result the budget total set of £326.3m included savings targets to be achieved in the year of £13.5m.

3.1.2 These savings were planned using a combination of the continuation of the reviews under the Sustaining Excellence Programme (SEP) Phase 1 – 4, savings from the re-organisation of the Force Contact Centre and further savings from a review of the Office of the Police and Crime Commissioner for Merseyside (OPCCM) budget. Performance against these savings targets is detailed later in this section of the report.


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Projected Out-turn Position 2014/15 3.1.3 The overall out-turn position is made up of four key elements:-

Performance against budget for devolved and central budgets;

Progress against agreed savings targets;

Impact of pay and price increases against contingency for these items; and

Variations in the levels of specific grants assumed in the original budget. 3.1.4 The performance against each of these measures is shown in Table 1 below, with

further explanation of the items set out below the table.

Table 1: Summary of Estimated Out-turn Position 2014/15

Description £m £m

Central Budget Under-spends Vacancy Savings Capital Financing Pensions Forensic Costs Regional units Income (POCA) Chief Constables Priority Fund Reduction in anticipated Winsor Costs CBRN costs delayed until 2015/16 Other Net Central under-spends Central Budget Over-spends Restructure Costs Contingency Pay and Prices Devolved Budgets Excess Under-spend on Devolved Budgets Excess Under-spend on PCC Budget Suspension of Carry-over rules Under-spends Over-spends PCC Budget

(2.564) (0.925) (0.687) (0.446) (0.260) (0.224) (0.050) (0.200) (0.254) (0.573)

1.365

(0.329)

(2.131) 1.379

(6.183)

1.365

(0.329)

(0.703) (0.033)

(0.722) (0.025)

Total estimated Under-spend 6.630


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Central Budget Underspends

3.1.5 Vacancy savings – Since 2012/13 a process has been in place whereby a proportion of savings that accrue from staff and officer vacancies in devolved budgets are collected centrally, this has continued into 2014/15. These funds are used to compensate budgets with officers above their establishment levels. A surplus is forecast to be collected centrally and is shown as a central budget underspend. The total net under-spend amounts to £2.564m.

3.1.6 Capital financing - Lower than estimated capital expenditure, especially in terms of the Estate Strategy has resulted in an under-spend of £0.925m in capital financing costs. It is anticipated that at the end of 2014/15 the underspend will be transferred to the Estate Strategy Reserve to enable it to be available to fund the Estate Strategy. The capital budget at Appendix C sets out the updated plan for capital expenditure over the coming years.

3.1.7 Pensions - The central pension’s budget provides for the employer’s cost of police pensions, injury pensions and the cost of ill-health retirements. The high level of vacancies during the year has resulted in a forecast underspend on the pensions budget of £0.687m.

3.1.8 Forensic costs - Continuing improvements in quality control around forensic submissions has resulted in an estimated under-spend for the year of £0.446m.

3.1.9 Regional Units - During 2014/15, Technical Support and Witness Assistance functions were transferred to a regional collaboration within Titan. Vacancies within these teams as the units are established has resulted in an underspend estimated at around £0.260m.

3.1.10 POCA Income - The Asset Recovery Incentivisation Scheme (ARIS) was set up in 2006 to incentivise asset recovery under the Proceeds of Crime Act (POCA). Receipts come from cash forfeitures and confiscation orders and are inherently difficult to forecast with potentially large budget variances. In 2014/15 it is anticipated that these receipts will exceed the income budget by £0.224m and this will be transferred to the POCA reserve to fund specific projects and operations.

3.1.11 Chief Constables Priority Fund – The PCC has allowed any unspent balance on the Chief Constables Priority Fund to be carried forward to enable funding of larger strategic projects which span financial years. It is anticipated that at the end of 2014/15, there is a projected underspend £0.050m which will be transferred to the reserve at the end of the year to enable it to be available to fund future initiatives.

3.1.12 CBRN equipment - it has been recognised that the Force will need to renew CBRN equipment as it has a finite life. The estimated cost of this is £0.560m over a three year period with £0.254m being required in 2014/15. Work across the region to reduce these costs through collaboration has meant that the replacement programme will now not commence until 2015/16 with the result that the budgeted cost for 2014/15 will be underspent.


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3.1.13 Other under-spends - The budget for 2014/15 included a provision of £0.250m for the costs relating to a number of proposed changes resulting from the Winsor review. The changes that were implemented resulted in a cost to the force of only £0.050m with a resultant underspend of £0.200m. The balance of £0.573m for other central underspends includes income from the NATO summit together with a number of smaller underspends on central budgets.

Central Budget Overspends

3.1.14 Restructure costs - During the year, estimated costs of £1.365m will be incurred in

respect of the on-going savings programme. These costs relate to staff voluntary redundancy and voluntary early retirement.

3.1.15 Ordinarily, these costs would be charged to the Restructure Reserve, however given

the level of vacancies during 2014/15 and the resultant under-spend, it was agreed that these costs would be charged directly to revenue. Contingency for Pay and Prices

3.1.16 A contingency of £4.180m was included within the budget to cover the impact of a 1%

pay award for all officers and staff together with the budget pressures of inflation. Whilst the pay award for officers was confirmed at 1%, negotiations are still on-going regarding the staff pay award. The Trade Unions are currently balloting their Members on the Employees sides latest offer of a 2.2% pay award effective from 1st March 2015 to cover the eighteen month period until 1st September 2016. It is anticipated that this offer will be accepted.

3.1.17 If the pay offer is accepted, the delay in the implementation date of the staff pay award from September 2014 until March 2015 would give rise to a one-off underspend in 2014/15 and this, together with a small underspend on non-pay items would result in an estimated underspend on pay and prices of £0.329m.

Carry Over 2014/15

3.1.18 For devolved budgets a scheme whereby limited over and under spends can be carried forward from one year to the next exists. However, the on-going structural changes are continuing to have an adverse impact on several budgets whilst benefiting others unduly, particularly in relation to vacancies. Correspondingly, it is proposed that once again, there will be no carry-over of balances within devolved budgets at the end of the year.

3.1.19 The estimated amounts that would have fallen within the carry over criteria for

2014/15 are £2.131m in terms of under-spends and £1.369m relating to over-spends.

3.1.20 Included, within the devolved budgets is the budget for the OPPCM. It is anticipated that there will be an estimated underspend of £0.058m at the year end. The main reasons being savings on employee costs and supplies and services. It is proposed that the underspend relating to the OPCCM is transferred into the Crime Prevention Strategy Reserve to enable the PCC to continue to fund initiatives that will secure, or contribute to crime Prevention.


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3.1.21 During 2014/15 the PCC awarded Crime and Disorder Reduction grants of £2.965m to

the Force, Local Authorities, Community Safety Partnerships and the Voluntary Sector. It is anticipated that all the grant funding will be utilised by the end of the year. Utilisation of Underspend

3.1.22 In addition, to the transfers mentioned above, it is proposed to transfer £4.313m of the underspend to the Restructure Reserve in order to finance the anticipated over establishment of Police Officer posts in 2015/16 (see para 3.2.28). Once the final outturn position has been reported to the Police and Crime Commissioner in June and all the agreed transfers have been made it is recommended that any remaining underspend is used to fund invest to save projects during 2015/16.

Specific Grants

3.1.23 The 2014/15 budget included estimates for a number of specific grants totalling

£19.913m. Following the agreement of the budget the assumptions can change as further announcements are made or the PCC and Force successfully attract new funding. As a result of these changes the amount for specific grants for 2014/15 is now estimated at £21.247m, an increase of £1.334m. The movements and explanations are shown in Table 2 below.

Table 2: Movement in Specific Grants 2014/15

Specific Grant Movement £m

Drugs Intervention Programme - Grant confirmed after budget prepared and agreed Dedicated Security Posts – Late confirmation of grant after budget prepared. Prevent – Funding for Prevent Programme confirmed after budget prepared and agreed. Competed Fund - Grant awarded after budget agreed. Victim Support – Grant confirmed after budget prepared and agreed

Increase

Increase

Increase

Increase

Increase

0.746

0.231

0.231

0.094

0.032

Total Movement in Specific Grants Increase 1.334

Savings Targets 2014/15

3.1.24 The budget for 2014/15 included savings targets in respect of the implementation of

Phase 1-4 of the Sustaining Excellence Programme (SEP) as well as targeted savings from Collaboration, Call Handling and Support Networks. The total savings requirement for 2014/15 amounted to a total of £13.496m.


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3.1.25 It is estimated that at the end of the year, overall savings of £14.465m will be achieved, a surplus of £0.969m compared to the original target. Details are set out in Table 3 below.

Table 3: Overall Performance Against Savings Targets 2014/15

Savings Original Target

£m

Estimated Out-turn

£m

Variance

£m

Budgeted Savings SEP - Phase 1 SEP - Phase 2 SEP - Phase 3 SEP - Phase 4 Total Budget 2014/15 Savings achieved early SEP – Phase 5 (non-staff/VR/VER) Non-SEP savings Total SEP 2014/15 Other savings Force Contact Centre Support Networks Collaboration PCC’s Office

3.151 2.851 5.277 1.410

12.689 - -

12.689

0.427 0.030 0.250 0.100

3.415 2.592 5.034 1.690

12.731

0.942 0.212

13.885

0.427 0.030 0.023 0.100

(0.264) 0.259 0.243

(0.280) (0.042)

(0.942) (0.212) (1.196)

0.000 0.000 0.227 0.000

Total Savings Target 13.496 14.465 (0.969)

3.1.26 The table above shows that the estimated total savings in 2014/15 for SEP Phases 1-4

of £12.731m are in line with the original plan of £12.689m. However, early work relating to non-staff savings initiatives together with a number of posts within scope suitable for early VR/VER have resulted in further savings of £0.942m. This, together with additional savings in areas not currently within the scope of SEP, has resulted in total estimated over-achievement of savings amounting to £0.969m. It is recommended that the additional savings are used to fund invest to save projects during 2015/16.


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3.2 2015/16 Base Budget

Police Funding Settlement

3.2.1 On the 4th February 2015, the Home Office published their 2015/16 Police Grant Report. This report contained the 2015/16 Police Core Settlement for local policing bodies in England and Wales, as well as allocations of the Department of Communities and Local Government (DCLG) formula funding for English Local Policing Bodies.

3.2.2 The Home Secretary has decided to continue to apply damping in a way that ensures

every local policing body receives the same percentage reduction in general grant, i.e. Police Core Settlement and the DCLG formula funding. Consequently, the allocation of police general grant provided in 2014/15 has been reduced by 5.1%. The damping process ensures that all PCCs receive the same level of decrease in grant funding.

3.2.3 Consequently, the PCC for Merseyside has been awarded a general grant of

£236.660m, which is a reduction of £12.743m, i.e. 5.1%, on the 2014/15 general grant level.

3.2.4 The grant allocations for both 2014/15 and 2015/16 are based on the Police Allocation Formula distribution from 2013/14. The Home Office have not recalculated the funding formula since 2013/14 and as a consequence there is no comparative data available of where Forces sit against their potential funding formula allocations for 2014/05 or 2015/16; therefore it is not possible to see where Merseyside sits in terms of the amount of grant that it would have been assessed as against the amount awarded. However, it is assumed that if the existing funding formula was run then Merseyside would still be benefitting from the damping mechanism as it was in 2013/14. In 2013/14 Merseyside benefited to the tune of £8.833m from damping.

3.2.5 Consequently, it is still a concern that should future settlements reflect the needs assessed under the existing funding formula, the PCC could face further general grant reductions. For this reason alone it is desirable that the proportion of council tax income to grant income is increased to protect against future grant adjustments.

3.2.6 It should be noted that the Home Office are undertaking a fundamental review of the funding formula. However, as yet no proposals have been produced and it is unclear when their findings will be published and how this will impact on individual PCC grant allocations.

3.2.7 Against this background it should also be noted that the application of a flat rate grant reduction disproportionately impacts those elected policing bodies with a higher dependency on grant, such as Merseyside, as this component represents a higher proportion of the net budget requirement. Furthermore the ability to make up any loss of grant through council tax is severely limited given that this forms a smaller proportion of the total income, notwithstanding the application of the Council Tax referendum threshold.

3.2.8 This is demonstrated in Table 4 below which shows the relative funding impact on low grant dependent elected policing bodies versus high grant dependent elected policing bodies (such as Merseyside and other Metropolitan forces). As can be seen from the


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table, the true impact of the cuts in grant on overall budget is 2.6% where dependence on grant is low and 4.2% where dependence is high. If this was to be recovered solely through the council tax precept, this would require a percentage precept increase of 5.3% versus 24.9% respectively.

Table 4: Relative Impact of Flat Rate Grant Reduction on High Versus Low Grant Dependant Elected Policing Bodies

High Grant Dependent Authority

Low Grant Dependent Authority

Assumed % of Financing from:-

- Council Tax - Grant

Overall impact on funding resulting from a 5.1% cut in grant % increase in Council Tax required to make up the reduction in grant

17% 83%

(4.2%)

24.9%

49% 51%

(2.6%)

5.3%

3.2.9 In addition to the Police general grant settlement, the PCC receives a number of

specific grants. The specific grants announced or anticipated for 2015/16 and built into the budget assumptions are as shown in Table 5 below:-

Table 5: Specific Revenue Grants 2015/16

Grant £m Details

Local Council Tax Support Grant

14.103 This funding offsets the reduction in the council tax base as a result of the Local Authorities setting their Local Council Tax Support Schemes.

Council Tax Freeze Grant 2011/12

1.537 Continuation of grant in respect of the council tax freeze agreed as part of the 2011/12 budget.

Dedicated Security Post Grant

4.103 (tbc)

The final position with regard to the level of grant has not yet been confirmed. This is an estimate based upon the 2014/15 level.

Victim Support Grant 1.175 (tbc)

Funding provided to the Commissioner to commission local victims support.

Restorative Justice Grant

0.313 (tbc)

Funding provided to the Commissioner to commission local restorative justice services.

Sub Total 21.231

3.2.10 The Home Office now administer the Council Tax Freeze Grants and the Local Council

Tax Support grant previously administered by the DCLG. These grants are termed ‘Legacy Council Tax Grants’. These amounts have been built into the overall police settlement for 2015/16.


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3.2.11 The PCC receives an additional General Capital Grant to be used to fund capital spend in the year. This grant has been reduced for 2015/16 as set out in paragraph 3.3.1 below.

Revised Revenue Base Budget

3.2.12 The revenue base budget is the foundation of the budgeting process. It is updated

each year to reflect committed levels of service and any changes that have occurred during the year. These adjustments include:-

the impact of pay and price increases;

committed costs and savings;

the revenue impact of capital spending;

adjustments to cover movements in grants;

any proposed utilisation of, or contributions to, General Balances, Reserves or Provisions; and

the impact of tax base changes. 3.2.13 After these changes have been applied to the revenue base budget, the level of budget

deficit or surplus to be addressed in the budget year can be calculated. The changes applied for the year 2015/16 have been summarised in Table 6 below. This table shows that, assuming that the PCC increases the precept by 1.95%, the budget can be balanced. This is based upon the agreed savings of £15.396m being achieved and the utilisation of £8.394m of earmarked Reserves.

Table 6: Summary Base Budget 2015/16 Assuming 1.95% Precept Increase

£m £m

Revised Base Budget Inflation Net Committed Costs Net One-off Commitments Savings Already Recognised

326.188 3.351 0.890 5.951

(15.396)

Revised Base Budget 2014/15

320.984

Government Grants Home Office General Grant DCLG Formula Grant Specific Grants

(123.170) (113.491)

(21.231)

Total Government Grants

(257.892)

Contribution to /(from) Reserves Contribution to /(from) General Balances Collection Fund (Surplus)/Deficit Precept including 1.95% Uplift

(8.394) 2.263

(2.263)

(54.698)

Balanced Budget 0.000

3.2.14 Appendix A provides a draft summary budget for 2015/16 assuming a precept increase

of 1.95%.


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3.2.15 The overall funding available will be utilised by the PCC and Chief Constable to ensure that the key priorities of the PCC as contained within the Police and Crime Plan are achieved. The PCC existing priorities are shown below, though the plan is currently under review with the Chief Constable.

Reducing crime and anti-social behaviour;

Neighbourhood policing;

Tackling serious and organised crime;

Maintaining public safety;

Hate crime; and

Putting Victim Support First. 3.2.16 Included within the overall draft budget is the cost of the OPCCM and the funding for

Community Safety and Victim Services which the OPCCM manages. Details of the OPCCM budget are provided in Appendix B. Table 7 provides a summary of the specific budget allocations for the OPCCM.

Table 7: OPCCM Specific Budget Allocations 2015/16

£m

OPCCM 1.185

Community Safety Funding 2.965

Victim Support (tbc) 1.175

Restorative Justice (tbc) 0.313

PCC Priority Fund 0.150

Total 5.788

3.2.17 In 2014/15 the PCC allocated £2.965m from the Police general grant to continue to

fund Community Safety initiatives across Merseyside. The PCC also approved a Crime Prevention Fund Strategy to utilise earmarked reserves to maintain this level of funding during 2015/16 and 2016/17, as well as funding a PCC Priority Fund of £0.150m each year for the next two years.

3.2.18 With regard to the allocation of the Community Safety funding it is proposed that

organisations that received funding in 2014/15 continue to receive same level of funding in 2015/16, subject to the acceptance of the grants terms and conditions. The planned distribution of this funding is detailed in Table 8 below. Table 8: Allocation of Community Safety Fund 2015/16

Community Safety Partner £m

Merseyside Police 0.746

Wirral MBC 0.388

Liverpool CC 0.962

St Helens MBC 0.197

Sefton MBC 0.374

Knowsley MBC 0.204

Positive Futures North Liverpool Ltd 0.065

Positive Futures – Everton in the Community 0.029

Total 2.965


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3.2.19 Responsibility for the commissioning of local victim services transferred from the

Ministry of Justice to Police and Crime Commissioners in October 2014. Funding for these services is provided in the form of a victims services grant. In 2015/16 funding for victim support referral and associated services will also be transferred to the PCC. The Ministry of Justice will continue to commission some national services including rape support centres, services for victims of human trafficking, a homicide service, a court based witness service, some national telephone helplines and some domestic violence and sexual violence services. At the time of writing the Ministry of Justice has only provided the PCC with an indicative allocation of grant of £1.488m for 2015/16.

Collection Fund and Tax Base

3.2.20 Adjustments relating to the Collection Fund and the Tax Base are notified to the PCC

by each of the Local Authorities within Merseyside and are detailed below in Table 9. 3.2.21 For 2015/16 an overall Collection Fund surplus has been declared by the Merseyside

Local Authorities. The PCCs share of the overall surplus amounts to £2.263m. As this is a one-off receipt, the Chief Finance Officer proposes to transfer this sum to General Balances. This approach is consistent with that of previous years. However, consideration will be given to the utilisation of part or all of this sum when the PCC considers the outturn position in June.

3.2.22 The Tax Base across Merseyside has shown an increase of 8,163 Band D equivalent

properties. This equates to an increase in precept income of £1.278m before any change in the level of precept levied. This represents a recurring income stream and consequently the precept income within the base budget calculation is increased accordingly.

3.2.23 Details of the Local Authority Collection Fund positions, the movement in tax bases and the implications for the PCC budget is contained in Table 9 below:- Table 9: Collection Fund and Tax Base

Authority Actual Council

Collection Fund

Surplus £m

PCCs Share

(%)

PCCs Collection

Fund Surplus

£m

Increase in Council Tax

Base properties

Impact on PCC as a result of increase in Tax Base (income)

£m

Liverpool CC (10.400) 9.9 (1.028) 2,483.0 (0.389)

Knowsley MBC (1.286) 10.43 (0.134) 1,701.0 (0.266)

Sefton MBC (5.325) 10.24 (0.545) 1,327.0 (0.208)

St Helens MBC (0.894) 11.06 (0.099) 1,093.0 (0.171)

Wirral MBC (4.389) 10.41 (0.457) 1,558.7 (0.244)

Total (2.263) 8,162.7 (1.278)


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Council Tax Referendums 3.2.24 The Government believes that local people should decide whether to accept an

‘excessive’ council tax increase. Consequently, the Localism Act 2011 introduced arrangements for council tax referendums. A referendum will take place if an Authority, including a PCC, proposes a percentage increase in the basic amount of council tax which exceeds a level agreed by the Government.

3.2.25 The Secretary of State for Communities and Local Government, in consultation with

the Home Secretary, has set the principles for 2015/16; these are that a 2% referendum principle will apply for PCCs. This means that if a PCC wishes to raise their relevant basic amount of council tax in 2015/16 by 2% or more then they will have to arrange for a referendum to give the local electorate the opportunity to approve or veto the increase. The result of a referendum will be binding.

3.2.26 The PCC will therefore need to consider the potential costs of a referendum and

rebilling if a precept is set which is deemed ‘excessive’. However, the proposals contained within this report do not fall within this category.

Staffing

Police Officers

3.2.27 The budget challenges faced by the Force over the last few years have had an

inevitable impact on police officer numbers. At the end of 2013/14, initiatives agreed within the Strategic Options Project (SOP) and the Excellent Policing Programme (EPP) had resulted in a reduction in police officer posts of 574. During 2014/15 a further 3 were agreed under the Sustaining Excellence (SEP) programme to give a total reduction of 577. Initiatives agreed to date under the SEP programme for 2015/16 are expected to result in a further reduction of 265 to give a total reduction of 842, although this number is likely to increase as additional schemes are agreed.

3.2.28 At the beginning of 2013/14, it was agreed that the underspend resulting from officer

and staff vacancies would be used to fund additional recruitment in order to maintain officer strength, with the aim of retaining 4,000 officers for as long as possible. During the first half of 2014/15 as planned, it was recognised that, due to the likelihood of further funding reductions, the ambition to retain 4,000 officers would not be sustainable in the medium term and recruitment was limited to 33 new officers in the year. It is anticipated that there will be 185 leavers during the year resulting in an anticipated officer strength of 3,829.5 at the end of 2014/15. Where the number of officers exceeds the number of budgeted posts during the year there will arise a budget pressure. This was anticipated as part of the earlier recruitment plans and the funding as necessary will be provided from the Restructure Reserve as highlighted in the Medium Term Financial Strategy.

3.2.29 The anticipated movement in the number of police officer posts and actual police

officer numbers is shown in Tables 10 and 11 respectively. The number of posts funded by external partners including specific grants is also highlighted in Table 10.


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Table 10: Anticipated Budgeted Police Officer Posts

2014/15 FTE

2015/16 FTE

Budgeted Police Officer Posts at start of year Reductions arising from SEP Schemes Adjustment for change in externally funded posts Adjustment for increase in Regional units/other increases

3,950.3 (3.0) (9.3)

5.0

3,943.0 (264.9)

0.0

0.0

Estimated budgeted Police Officer posts at end of year

3,943.0

3,678.1

Including externally funded posts of: 113.5 113.5

Table 11: Actual Anticipated Police Officer Strength

2014/15 FTE

2015/16 FTE

Actual number of Police Officers at start of year Less: Leavers Add: Recruitment during year

3,981.5

(185.0)

33.0

3,829.5

(172.0)

0.0

Estimated Actual Police Officers at end of year 3,829.5

3,657.5

Police Staff

3.2.30 As at 31st December 2014, there were 2,306.1 full time equivalents (FTE) police staff

posts, including 352 Police Community Support and Traffic Officers (PCS&TOs). Of these police staff posts, 131 are funded by external partners including specific government grants. There are no anticipated reductions in posts in the final quarter of 2014/15 although 109.1 posts have been identified for deletion during 2015/16 under SEP. The anticipated movements in budgeted Police Staff posts are detailed in Table 12 below.

Table 12: Anticipated Budgeted Police Staff Posts

2014/15 FTE

2015/16 FTE

Budgeted Police Staff posts at start of year Reductions arising from SEP Schemes Other net (reductions)/increases including regional units/externally funded posts

2,347.6

(44.9)

3.4

2,306.1

(109.1)

(2.0)

Estimated Actual Police Staff posts at end of year 2,306.1 2,195.0

Including externally funded posts of 131.0 129.0


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3.2.31 Actual police staff numbers have been declining over the year, as the schemes under the SEP, EPP and Force Call Centre proposals have been implemented. As at 31st December 2014, there were 2,146.7 actual staff FTE with resultant vacancies of 159.4 FTEs. Recruitment has been restricted to allow the redeployment of staff affected by both the current and future savings programmes and avoid filling posts awaiting deletion under the SEP schemes. Police Community Support and Traffic Officers

3.2.32 As stated above, the current budgeted establishment for PCS&TOs is 352. In 2015/16,

there will be a reduction of 2 FTE posts previously funded by Mersey travel.

Office of the Police and Crime Commissioner 3.2.33 The current budgeted establishment of the OPCC, including the Police and Crime

Commissioner and Deputy is 19. A review of the PCC Private Office and Community Engagement Team was completed during 2014/15 and this will result in a reduction of one FTE post in 2015/16. In addition to these posts, three temporary posts have been established to develop the strategy for and undertake the initial commissioning of Victim Services in 2015/16. The support structure relating to the victim services is currently under review.

3.3 Capital Programme 2015/16 to 2018/19 3.3.1 The PCC’s Capital Grant allocation for 2015/16 is £2.6m; this amount is £0.6m less than

received in 2014/15. 3.3.2 The capital plan at Appendix C shows projected capital expenditure for the next four

financial years. Figures have been included to accommodate:-

The Estate Strategy;

The IT Strategy; and

The vehicle replacement programme. 3.3.3 In relation to the financing of capital expenditure, it is assumed that borrowing under

the terms of the Prudential Code will fund capital expenditure not met from capital grant, capital receipts or reserves. In this regard capital receipts are utilised in full in each year to reduce borrowing requirements.

Estate Strategy

3.3.4 The police estate in Merseyside is in need of substantial investment to bring properties

up to modern economical usage benchmarks and be able to meet both legal requirements and environmental standards. The average age of the police estate is 52 years and some buildings in use date back to 1890. Maintaining an increasingly older estate becomes costly and some buildings now require significant investment in items such as new heating and electrical systems. Even after these essential works they would still remain relatively inefficient in terms of running costs and space utilisation. A different approach is needed and with this in mind a total review of all the estate has been commissioned to look at a longer term vision for the police estate in Merseyside.


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3.3.5 This review was designed to shape an estate strategy for the future. The review was

based upon the following core principles:-

Affordability – All solutions will be fully costed with tangible benefits – delivering a significant reduction in running, maintenance and lease costs across the estate.

Co-location – Functions and departments will be co-located where possible in refurbished or new, efficient accommodation.

Maintenance first – All larger maintenance issues relating to essential buildings will be addressed.

Resource Management – The full potential of existing buildings will be fully realised.

Accessibility – Community Police Stations will be at the heart of communities and each community served by a station will have access to officers on the beat.

Focus on the future – Improve efficiency with an estate that is ready to meet future challenges.

Sustainability – Local social and economic value principles will be applied and all buildings will be fully assessed against key sustainability criteria to ensure environmental and legal compliance, whilst delivering real cost efficiencies.

Feasibility – All property solutions will support operational policing. 3.3.6 The work undertaken in formulating the Estate Strategy has been substantial. This has

involved review of each building in use by Merseyside Police and reports have been prepared for each of the 5 policing areas and the corporate estate.

3.3.7 An extensive public consultation on the strategy was undertaken by the PCC and

concluded in December 2014. In total 2,491 responses were received from members of the public, partners, police officers and staff. Of those who provided a response 92% were in favour of the proposals. Analysis of Existing Estate

3.3.8 Aside from being in need of substantial investment, the existing estate is often poorly located and underutilised either through inefficient design or changing policing requirements. Several buildings are almost totally unused or have a very high % underutilisation. The review has identified that by implementing the estate strategy, savings of 27.4% of overall space can be achieved which amounts to over 29,000 M2.

3.3.9 Additionally the current estate, in particular the corporate estate, is fragmented with

departments working over several sites and often utilising leased accommodation. This is inefficient in terms of overall running costs and does not facilitate efficient and effective working practices.

3.3.10 As previously noted, maintaining the current estate would require substantial investment over the coming years; this would translate into rising costs at a time when the Force is under pressure to reduce revenue costs. Maintaining the existing estate would go only some way to address the issues around environmental impact and overall running costs and would not address the space utilisation issues identified.


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Proposed Investment

3.3.11 The total proposed capital investment in the Estate Strategy over the next 8 to 10 years is estimated at £131m. This figure is based upon today’s prices and is net of estimated sale proceeds of £9.1m. The breakdown is as follows:- Table 13: Estimated Net Capital Cost of the Estate Strategy

Estate Strategy Strand Estimated Net Capital Cost

£m

Corporate 72.6

Wirral 11.2

Sefton 8.6

Knowsley 7.5

St Helens 7.3

Liverpool 23.9

TOTAL £131.1m

3.3.12 The total investment will be funded from the existing Estate Strategy Reserve

(estimate £6.6m), anticipated capital receipts from disposal of surplus estate (estimate £9.1m) with the balance being funded under the prudential borrowing powers of the PCC.

Revenue Implications

3.3.13 The cost schedules supporting the estate strategy have been compiled on the basis of

four scenarios, two refer to maintaining the existing estate and two refer to the implementation of the estate strategy. The cost analysis shows the following results:-


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Average costs per annum in years 1 to 10

3.3.14 The above figures representing the average costs over years 1 to 10 show that to address the issues with the existing estate would cost £18.5m per annum whilst to undertake the works proposed in the estate strategy would average £15.0m. However if these figures are extended to a 40 year cycle the figures are £21.7m to maintain the existing estate and £18.7m to undertake the estate strategy, an average saving per annum of £3.0m.

3.3.15 These calculations have been compiled by an independent cost consultancy and

include an allowance of 2.5% for inflation. Affordability

3.3.16 These cost estimates have been prepared on cautious assumptions so as to test the affordability of the estate strategy. This gives some reassurance over the revenue implications of the schemes. In particular no savings in terms of the use of open plan accommodation and co-location of services have been assumed though these will result in as yet unquantifiable efficiencies and opportunities.

3.3.17 The above cost estimates have been prepared on the basis that capital expenditure

will be funded by proceeds from the sale of surplus property and borrowing. In reality the Estate Strategy Reserve will also be used to avoid borrowing but for the purposes of comparison to existing costs this has been ignored as it could equally be used to fund existing estate maintenance issues.

•Cost per annum of existing estate without any increase in budget to reflect the outstanding and pending maintenance issues. This is unsustainable in the medium and longer term, buildings will start to fail without investment in the short term.

£12.2m

•Cost per annum of the existing estate if we make the investments required to address the outstanding and pending maintenance issues. This would not address the problems with multiple sites and inefficient design or achieve significant improvement in the environmental impact of the estate.

£18.5m

•Cost per annum of undertaking the works proposed in the estate strategy. This would address all outstanding and pending maintenance issues and deliver a more efficient estate for the future. The estimate also includes a contribution to a "sinking fund" to provide resources for future maintenance issues.

£16.4m

•Cost per annum of undertaking works in the estate strategy, as per the previous point, but restricting maintenance budget to existing level subject to inflation. This would not involve the creation of a "sinking fund," maintenance being provided as and when required but would be sufficient in medium to long term.

£15.0m


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3.3.18 The following table tests affordability against existing budget and the budget that

would be required to address the existing and anticipated estate issues. A further element relevant to this analysis being the sums already assumed within the medium term financial strategy. The final changes shown in the table show the additional/reduced resources required in the MTFS. Table 14: Impact of Estate Strategy on MTFS

Impact of Estate Strategy on MTFS (using average costs over years 1 -10)

Existing estates budget

£m Per annum

Required estate budget

£m Per annum

Baseline cost of existing estate 12.2 18.5

Complete estate strategy 15.0 15.0

Increase (decrease) in budget costs 2.8 (3.5)

Assumed increases in existing MTFS (4.9) (4.9)

ADDITIONAL IMPACT OF ESTATE STRATEGY (2.1) (8.4)

3.3.19 The above table shows that completion of the estate strategy will result in a reduction

in the requirements included in the previous MTFS and demonstrates the affordability of the plans even when comparing against the existing budget provisions.

3.3.20 These figures are calculated on the basis of average costs over years 1 to 10. The

savings will not be achieved evenly over this period but will be achieved as the schemes are developed and the surplus estate is released and the new schemes come on board.

•Average revenue saving per annum by completing the estate strategy when compared with the cost of maintaining the current ageing estate.

Saving of £3.5m per annum

•Potential reduction in the annual budget requirement already set out in the last medium term financial strategy through completion of the estate strategy.

Saving of £2.1m per annum

•Estimated annual rise in costs of the existing estate to address the outstanding and future maintenance issues if the Estate Strategy is not completed.

Cost of £6.3m per annum


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Scheme Proposals

3.3.21 Steps have been taken to estimate the phasing of the estate strategy by scheme. This

will indicate the projects that are to be undertaken in the early years of the programme though some works, such as Community Police Stations, will adopt a more flexible approach to take advantage of opportunities such as sharing facilities with partners as and when they arise. The planned developments for the next four years included in the capital plan are as follows: Table 15: Proposed Implementation of Estate Strategy

Scheme Total £m

2015/16 £m

2016/17 £m

2017/18 £m

2018/19 £m

Operational Command Centre

44.2 8.4 25.1 10.7 0.0

Police Headquarters 26.2 0.0 0.0 1.2 5.9

Other Corporate facilities 2.6 0.0 0.0 0.0 2.5

Wallasey BCU HQ 6.4 2.4 3.9 0.0 0.0

Bebington Patrol Hub 2.0 2.0 0.0 0.0 0.0

Birkenhead Patrol Hub 4.4 2.0 2.4 0.0 0.0

Marsh Lane BCU HQ 6.1 0.2 4.1 1.8 0.0

Southport Patrol Hub 3.0 0.1 2.6 0.3 0.0

Huyton BCU HQ 6.1 2.4 3.7 0.0 0.0

Kirkby Patrol Hub 2.1 0.5 1.6 0.0 0.0

Liverpool Patrol Hub 6.7 0.0 0.0 6.7 0.0

St Anne Street HQ 9.5 0.0 0.0 0.0 0.0

Smithdown Lane Tower 7.0 0.0 0.0 0.0 0.0

St Helens BCU HQ 6.3 0.0 0.1 0.2 2.9

Newton Le Willows Patrol Hub

1.1 0.0 0.0 0.0 0.0

Various CPS sites 6.5 0.9 2.9 0.6 0.7

Disposal proceeds (9.1) (1.2) (4.2) (1.8) (0.5)

Totals 131.1 17.7 42.2 19.7 11.5

3.3.22 The total of each scheme will not always equal the sums analysed by year as some

schemes will have expenditure prior to 2015/16 or will continue after 2018/19.

Prudential and Treasury Management Indicators 2015/16 3.3.23 The Local Government Act 2003 introduced the current system of capital financing and

control. The basic principle is that the PCC is free to invest in assets and set their own overall level of borrowing provided that these capital spending plans are affordable, prudent and sustainable.

3.3.24 The PCC is governed by a set of regulations known as the Prudential Code for Capital

Finance in Local Authorities (the Code), which ensures that the objectives of affordability, prudence and sustainability are met. The Code specifies arrangements


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for PCCs to set and monitor prudential indicators and impose limits for the current and next two financial years.

3.3.25 The prudential indicators, and their purpose and method of calculation, are detailed in

The Treasury Management Strategy 2015/16. They are based on the capital programme and the assumptions are consistent with the Medium Term Financial Strategy set out below in section 3.4.

The Minimum Revenue Provision

3.3.26 The Minimum Revenue Provision is a statutory charge relating to the repayment of

debt. The Local Authorities (Capital Finance and Accounting) (England) Regulations 2008 require the PCC to decide upon an appropriate level for the MRP which they consider ‘prudent’.

3.3.27 Prudent provision is not defined within the Regulations but the guidance sets out

several options that could be considered, the overriding principle being that the charge to revenue should be linked to the lives of the assets funded by borrowing. These options are detailed within the 2015/16 Treasury Management Strategy, along with recommendations on the levels of the MRP.

3.4 Medium Term Financial Strategy 3.4.1 The budget for 2015/16, and the precept decision, cannot be viewed in isolation but

needs to be considered in relation to the financial challenges facing the PCC and Force over the medium term. On the 4th December 2014 the PCC provided an update on the Medium Term Financial Strategy (MTFS) to the Panel and sought their views on the continuation of the strategy of setting the precept increase at the referendum limit, to which the PCP supported in principle. The MTFS has been refreshed to take account of the best available advice and professional judgement available at the time of writing. It will change as new announcements are delivered and assumptions on variables such as pay and inflation become more certain.

3.4.2 The main assumptions upon which the latest MTFS has been developed are as

follows:-

(i) The Police General Grant for 2016/17 and beyond will be reduced by an estimated 4.0% pa.

(ii) Specific Grants are assumed to be static. (iii) Precept increases for the four years covered by the MTFS have been assumed

at 1.95%. (iv) Pay inflation has been assumed at 1% for the year commencing 1st September

2015 increasing to 1.5% from September 2016 onwards. (v) Non-pay inflation will be at 1.5% across all years covered in the MTFS.


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(vi) Adjustments have been made for known committed spend items including pension charges and payments to national bodies.

(vii) Capital financing costs are based upon the capital programme contained within

Appendix C. (viii) National Insurance increases in April 2016 as a result of the ending of the

contracting out lower rates. (ix) The implementation of SEP and other saving initiatives in 2015/16 will realise

savings of £15.396m.

(x) The PCS&TO Reserve will be used to fund PCSO’s in 2015/16. (xi) The Restructure Reserve will be utilised to fund the costs of the over

establishment of Police Officer posts. (xii) The PCC Crime Prevention Strategy Reserve will be used to protect the current

level of Community Safety Funding and the establishment of the PCC Priority Fund until the end of 2016/17.

3.4.3 Whilst there is a reasonable basis for the assumptions on funding for 2015/16, there is

no such assurance regarding 2016/17 and beyond. However, it is anticipated that following the General Election in May the new Government will announce a new Comprehensive Spending Review in June, whether this will cover more than one year remains to be seen. The lack of detail around future funding will have an impact on the ability to plan for the future with any degree of certainty. However, it is expected that austerity will continue for the foreseeable future.

3.4.4 After taking account of all these factors, a revised MTFS has been calculated and is

summarised in Table 16 below. A detailed MTFS is contained within Appendix D. It can be seen that the PCC and Force are potentially required to identify £19.474m of savings in 2016/17, with a further £14.159m in 2017/18 and £13.779m in 2018/19, giving an anticipated overall savings requirement of £47.412m over the MTFS period.

Table 16: Summary of the Revised MTFS Savings Requirements

Description 2015/16 £m

2016/17 £m

2017/18 £m

2018/19 £m

Total Budget Requirement 320.985 324.080 310.350 302.355

Total Assumed Funding (312.591) (304.192) (296.191) (288.576)

Budget Deficit/(Surplus) 8.394 19.888 14.159 13.779

One off Contribution from Reserves (8.394) (0.414) 0.000 0.000

Savings Requirement 0.000 19.474 14.159 13.779

Cumulative Savings Requirement 0.000 19.474 33.633 47.412

3.4.5 As demonstrated by Table 16, there remains a very significant financial and policing

challenge for the PCC and the Force in the years ahead.


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3.4.6 Detailed proposals to achieve the estimated savings requirements in 2016/17 have not yet been approved. However, the following areas are under review.

MSOC Process Review;

Crime & Investigation;

BCU Operating Model;

Resource Management;

Business Services; and

Neighbourhood Review.

More details of these plans will be made available, as they are developed during 2015/16.

Sensitivity Analysis 3.4.7 Table 17 below shows how sensitive the underlying assumptions within the MTFS are

to small percentage change and demonstrates the potential impact on the anticipated savings requirement if the assumptions are changed.

Table 17: Estimated Impact on MTFS if Underlying Assumptions Change

Additional Savings

Requirement £m

A further 1% reduction in General Grant 2.366

1% reduction in the Precept 0.533

0.5% reduction in pay inflation (0.787)

0.5% increase in price inflation 0.238

3.4.8 Using these guides to the impact of change it can be seen that the overall budget is

sensitive but not greatly impacted by changes other than grant funding. It is of course possible for a combination of all of these factors to work against the PCC resulting in a more significant problem.

3.5 General Balances, Reserves and Provisions 3.5.1 The PCC retains a level of General Balances and a number of earmarked reserves and

provisions in order to ensure that adequate financial resilience is maintained over the longer term. The Chief Finance Officer and the Chief Constable have adopted a risk based approach to determine the appropriateness of the levels of retained. As a consequence, all balances, reserves and provisions are reviewed annually. Contained within the 2015/16 Budget and the MTFS are the planned contributions to and from the earmarked reserves.


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General Balances 3.5.2 The Police Service, as one of the major emergency services, is required to respond to

incidents of an unexpected nature over which it has little or no control. A major incident or a series of events could put extraordinary pressure on the budget in a particular year. As a result, financial prudence dictates that a level of General Balances should be retained to provide resilience against the effect of such a situation. This area is explored further in the Chief Finance Officer’s accompanying report on the adequacy of financial reserves.

3.5.3 The Chief Finance Officer and the Chief Constable undertake an annual review of the

level of these balances, taking into account the risks included within the PCC and Force Risk Registers. A breakdown of this analysis is included at Appendix E. This risk based review has concluded that the minimum acceptable level of General Balances should be in the region of £10.460m in 2015/16. At the start of 2015/16 the level of General Balances will be broadly equivalent to this risk assessed level which is deemed to be a satisfactory position.

3.5.4 In recent years collection fund surpluses and deficits declared by the Billing Authorities

and have been offset against General Balances. This is due to the uncertain and off-nature of these amounts. At the end of January 2015 the Billing Authorities notified the PCC that there will be an overall surplus on the Collection Fund in 2014/15 (see Table 9), which means that the PCC will receive a one-off receipt of £2.263m in 2015/16.

3.5.5 The Chief Finance Officer now proposes that this one-off receipt is again put into

General Balances. This will result in the level of General Balances increasing to £12.748m, £2.288m over the risk assessed level. However, during the course of 2015/16 the Chief Finance Officer and the Chief Constable will undertake an assessment to determine if any of this one-off receipt can be released to support the budget over the medium term.

3.5.6 The anticipated level of General Balances for 2014/15 and 2015/16 are shown in Table

18 below:- Table 18: General Balances

2014/15 £m

2015/16 £m

Balance at beginning of year: 9.574 10.485

Contribution from Revenue (i.e. Collection Fund Surplus)

0.911 2.263

Balance at end of year: 10.485 12.748


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Insurance Provision 3.5.7 The PCC holds an Insurance Provision to finance internal insurance claims. This self-

insurance policy currently substantially assumes the risk in respect of public, employer and motor liabilities.

3.5.8 The nature of police activities is such that there can be potentially large claims from

time to time. This is predominantly why there are few insurers willing to offer cover and the reason why the PCC arranges insurance cover with large excesses. The excess for liability (Public and Employer’s), and motor claims is currently £0.250m and £0.120m respectively. This balance of internal and externally funded insurance provides the most economic advantage to the PCC.

3.5.9 The size of these excesses means that all but very large claims are paid by the PCC.

Therefore, annual assessments are made of potential liabilities and the level of fund contributions required to meet these liabilities. Due to both late reporting and the length of time it takes to settle claims, it can be a number of years before the final costs are known. However, the fund review makes allowance for these factors, and at the 31st December 2014 liabilities were estimated to be in the region of £5.553m.

3.5.10 This amount consists of two elements; firstly an amount of £4.523m of known

obligations based on the insurance companies’ and in-house reserved amounts, inclusive of a 75% win ratio. Secondly, a contingency of £1.030m has been set aside, which is an estimate of claim events which have occurred but have not yet been reported to the PCC, resulting from the long life cycle of claims as referred to above, inclusive of the win ratio.

3.5.11 Consequently, the value of the overall Insurance Provision is anticipated to be

marginally less than the estimated Insurance Provision requirement. The Chief Finance Officer will review the balance on the Insurance Provision at year end to ensure that it is appropriate.

Table 19: Insurance Provision

2014/15 £m

2015/16 £m

Balance at beginning of year: 5.432 5.261

Approved Contribution from Revenue (inc interest) 3.352 3.402

Estimated Expenditure (3.523) (3.402)

Balance at end of year: 5.261 5.261


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Earmarked Reserves 3.5.12 The PCC holds a number of useable earmarked reserves which have been set aside to

finance future specified costs. As at the 1st April 2014 £38.629m was held in earmarked reserves. Details of the reserves held is contained within Appendix F, along with details of the planned movement to and from the reserves during 2014/15 and 2015/16. All the reserves are reviewed throughout the year to ensure that they are appropriate.

3.5.13 It is estimated that at the end of 2014/15 the level of reserves will have reduced to

£33.520m. 3.5.14 As part of the 2015/16 revenue budget it is proposed to utilise £8.983m of reserves to

support the revenue budget and release £5.725m to finance the capital programme. Consequently, it is anticipated that the level of reserves at the end of 2015/16 will be £18.812m. The planned utilisation of reserves in 2014/15 and 2015/16 is shown in Table 20 below.

Table 20: Planned Utilisation of Earmarked Reserves in 2014/15 and 2015/16

2014/15 2015/16

£m £m

Earmarked Reserves at the start of the year 38.629 33.520

Planned contributions to:- Restructure 4.313 0.000

Estate Strategy 0.925 0.000

Invest to Save 2.029 0.000

POCA 0.224 0.000

PCC Crime Prevention 0.058 0.000

Chief Constables Priority 0.050 0.000

Other 0.215 0.000

Planned Contributions from:- PCSO (4.643) (4.369)

Estate Strategy (4.148) (5.385)

Restructure (0.064) (4.313)

PCC Crime Prevention Strategy 0.000 (0.301)

other (4.068) (0.340)

Earmarked Reserves at the end of the year 33.520 18.812

Planned Movement 5.109 14.708

3.5.15 The Chief Finance Officer and the Chief Constable will be undertaking a review of all

the reserves and the outcome of this review will be included within the outturn report submitted to the PCC in June.


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3.6 2015/16 Precept Proposal

Council Tax Freeze Grant 2015/16

3.6.1 For the year 2015/16 the Government has again agreed that funding is available should the PCC agree to a council tax freeze. This scheme is again voluntary.

3.6.2 The scheme is available to a PCC that freezes or reduces the basic amount of council

tax in 2015/16 compared to 2014/15. The amount of grant provided will be the equivalent of 1% of the basic amount of council tax set for 2014/15. The calculation disregards the council tax reduction changes and so is in effect calculated on a larger council tax base. The grant for the 2015/16 freeze will be paid to participating authorities in 2015/16. There is no indication whether this funding will continue beyond 2015/16 or not.

3.6.3 Indicative 2015/16 freeze grants have been announced by the DCLG and the

Commissioner has been offered a grant of £666,358. The final amounts will be confirmed after the Council Tax levels and the 2015/16 tax base are known.

Referendum Threshold

3.6.4 As stated previously, the Government has announced the that the Council Tax

Referendum threshold will be set at 2% for 2015/16, thus any increase above this level would be deemed “excessive” and would trigger a local referendum under the Localism Act 2011.

Precept Options Considered by the Police and Crime Commissioner

3.6.5 Two options have been considered by the PCC in setting the precept level in 2015/16,

these are:-

Option 1 - Accept the 2015/16 Council Tax Freeze Grant; or

Option 2 - Increase the Precept by 1.95%, this being a level that would result in a £3.05 per annum increase for a Band D property.

3.6.6 Table 21 shows the different financial impact on the levels of precept on Band A

properties, i.e. the majority of Council Tax payers on Merseyside, and on Band D properties of the individual options. Table 21: Proposed Council Tax Precept Levels

Options Band A £pa

Band D £pa

1. Accept 2015/16 Council Tax Freeze Grant 104.42 156.63

2. Increase the Precept by 1.95% 106.45 159.68

3.6.7 Table 22 illustrates the reduction in income should the Council Tax Freeze Grant be

accepted. The table assumes that the Government confirms that the Council Tax Freeze Grant will be built into the overall baseline assessment. If this is not the case the financial loss will be greater in future years as the grant is withdrawn.


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Table 22: Estimated Loss of Income due to acceptance of Council Tax Freeze Grant

2015/16 2016/17 2017/18 2018/19

Option 1 Accept Council Tax Freeze Grant and increase the precept by 1.95% each year thereafter

Band D Council Tax (£) 156.63 159.68 162.79 165.96

Tax Base (Band D Equivalents) 342,548 342,548 342,548 342,548

Precept Income (£) 53,653,293 54,698,120 55,763,389 56,849,266

Council Tax Freeze Grant (£) 666,358 666,358 666,358 666,358

Total (£) 54,319,651 55,364,478 56,429,746 57,515,624

Option 2 Increase Precept by 1.95% and increase the precept by 1.95% each year thereafter

Band D Council Tax (£) 159.68 162.79 165.96 169.19

Tax Base (Band D Equivalents) 342,548 342,548 342,548 342,548

Precept Income (£) 54,698,120 55,763,389 56,849,266 57,955,696

Council Tax Freeze Grant (£) 0 0 0 0

Total (£) 54,698,120 55,763,389 56,849,266 57,955,696

Financial impact due to acceptance of Council Tax Freeze Grant (£)

(378,469) (398,911) (419,520) (440,072)

Total Loss over period of MTFS (1,636,972)

3.6.8 Detailed below are the advantages and disadvantages of the two options highlighted

above. Option 1 – Accept Council Tax Freeze Grant

Advantages:- (i) More acceptable option for local council taxpayers. (ii) Results in no increase in police element of Council Tax. (iii) Takes advantage of the grant available from Central Government, which

increases annual income by £0.666m. (iv) No adverse publicity. (v) Meets Government’s policy intention to freeze council tax.

Disadvantages:- (i) Creates an additional £0.378m savings requirement in 2015/16 to balance the

budget. (ii) The additional recurring savings requirement of £0.378m is equivalent to a

further reduction of 9 police constable posts. (iii) Leads to a loss of income amounting to £1.637m over the MTFS period.


33

(iv) Uncertainty over level and continuation of grant in the future. If the grant is rolled into the main Police general grant it will be subject to general grant reductions in the future.

(v) Short-term view that disregards desire to reduce reliance on grant. (vi) Grant is equivalent to a 1.2% increase which is below the assumed inflation in

the MTFS. (vii) Does not build resilience against future grant reductions. Option 2 – Increase Precept by 1.95%

Advantages:- (i) Builds the increase into the base budget, and grows the council tax yield

protecting against future grant cuts and any potential adverse changes in the funding formula.

(ii) Increase is within boundaries of the referendum threshold and therefore is not deemed ‘excessive’ and does not trigger need for a referendum.

(iii) Increases income by £1.045m from 2015/16. (iv) Equates to a modest increase of £2.03 pa for Band A properties (i.e. 4p per

week) the majority of Council Tax payers on Merseyside. (v) This increase is in line with the PCC precept strategy set out within the MTFS.

Disadvantages:- (i) Results in an increase in council taxpayers Council Tax. (ii) Results in the loss of available grant. (iii) Risks adverse publicity. (iv) In opposition to the Government’s policy intention to freeze council tax. 2015/16 Precept Proposal

3.6.9 Based on the considerations above the PCC proposes that option 2 is adopted, i.e.

that the precept is increased by 1.95% in 2015/16.

3.6.10 The impact of a 1.95% precept increase on Band A properties and on Band D properties, is as shown in Table 23 below.

Table 23: Impact of Option 2, i.e. increase the Precept by 1.95%, on Council Tax

Band A £pa

Band D £pa

2014/15 Precept Level 104.42 156.63

2015/16 level including 1.95% increase 106.45 159.68

Increase on previous years 2.03 3.05

Increase per week 0.04 0.06


34

Police and Crime Panel 3.6.11 On the 3rd February 2015 the PCC, in accordance with The Police Reform and Social

Responsibility Act 2011, notified the Police and Crime Panel of her proposal to increase the precept by 1.95% in 2015/16. Following consideration of the proposal the Panel issued a report on the 5th February 2015 agreeing unanimously to endorse the PCC proposal for a 1.95% increase.

4. Financial and Staffing Implications The financial and staffing implications are detailed in Section 3 of this report.

5. Risk Assessment

5.1 Whilst every endeavour is made to accommodate all known cost pressures within the

PCC budget proposals, some issues remain, which could in the future represent a risk to the PCC and/or create budget pressures. Some of these items are outside the control of the PCC or Force, whereas others are issues that may need to be addressed, but there is uncertainty as to the level or source of funding required. The PCC needs to be aware of these risks when considering the precept proposal as they have the potential to impact upon the Force’s ability to meet the agreed budget and the PCC’s key objectives as set out in the Police and Crime plan. The following risks could materially affect the future financial position:-

(i) There are still a number of funding allocations to be announced by the Home

Office, relating to the dedicated security posts and the funding for Victim Services. In addition, details of a number of ICT charges have yet to be announced. In the event that the grants received are less than the assumed levels and the charges are more than anticipated then further savings will need to be made;

(ii) It is anticipated that the austerity measures will continue. The PCC has made

assumptions on the level of the future grant reductions. However, due to the uncertainties around future funding levels these assumptions could be understated;

(iii) The Home Office are currently undertaking a fundamental review of the

funding formula. The outcome of this review is not now expected until after the next election. The PCC has benefited from the damping mechanism in recent years which has protected the PCC from the full impact of changes in the funding formula. However, changes to the funding formula or the withdrawal of damping could result in significant additional savings requirements in future years;

(iv) The PCC’s partners continue to radically examine their spending programmes.

Bearing in mind that the PCC relies on partnership funding to enhance a number of the police services, including funding for Police Officers, PCS&TOs and other Police Staff, there is a risk to these services if this source of funding is reduced;


35

(v) Police Officer pay and pensions accounts for 63% of overall expenditure. In order for the PCC and the Force to address the significant financial challenges ahead Police Officer numbers will ultimately have to continue to be reduced over the MTFS period. However, the current legislation protects Police Officers from being made redundant. In the event that budget reductions required are greater than that of Police Officer natural wastage rates this will have an impact on the delivery of the savings required and may require the utilisation of reserves or holding of staff vacancies to address any time lag in the short term;

(vi) Increases in interest rates will have an impact on borrowing costs; and

(vii) Any reductions in Local Authority Community Safety funding will potentially

have an impact on the achievement of the PCC’s overall objective of reducing Crime and Anti-Social Behaviour.

6. Equality & Diversity Impact Assessment

The Moratorium on Police Officer recruitment and the restrictions on recruiting Police Staff will impact on the PCC and the Force’s progress towards its BRM recruitment and their ability to address the workforce gender balance.

7. Environmental Impact Assessment

The implementation of the Capital Programme, in particular the Estate Strategy, contained at Appendix C of the budget report, will help the PCC and the Force towards achieving its target of reducing its carbon footprint by 34% by 2019.

8. Conclusions 8.1 The PCC after giving careful consideration to the options open to her regarding the

precept, proposes to increase the precept by 1.95% in 2015/16. This increase equates to a modest increase of £2.03 pa for Band A properties (i.e. 4p per week) the majority of Council Tax payers on Merseyside. This increase, along with the achievement of £15.396m recurring savings and the utilisation of £8.394m of earmarked reserves enables the PCC to set a balanced budget in 2015/16 and provide sufficient resources to enable the Chief Constable to maintain a budgeted establishment of 3,678 Police Officers.

8.2 The proposed precept increase of 1.95% is within boundaries of the referendum

threshold, i.e. 2%, and therefore is not deemed ‘excessive’ and does not trigger the need for a referendum. However, more importantly, it builds the increase in funding into the base budget, and grows the council tax yield protecting against future grant cuts and any potential adverse changes in the funding formula in the future. The proposed increase in precept income will also generate additional income over and above the 2015/16 Council Tax Freeze Grant being offered by the Government. As required by legislation the PCC has notified the Police and Crime Panel of her intentions and after full consideration of the options available to the PCC they have given there unanimous support to the 1.95% precept increase.


36

8.3 Although the PCC has been able to set a balanced budget in 2015/16, there still remains a very significant financial and policing challenge for the PCC and the Force in the years ahead, with estimated savings of over £47.4m being required to be made by the end of 2018/19. A strategy aimed at addressing this challenge is currently being developed by the Chief Constable, in partnership with the Commissioner.


37

Appendix A – Draft PCC Overall Budget assuming a 1.95% Precept Increase

ORIGINAL PROBABLE FINANCIALLY ACCOUNTABLE UNITS ORIGINAL

ESTIMATE OUTTURN ESTIMATE

2014/15 2014/15 2015/16

£ £ £

OFFICE OF THE POLICE & CRIME COMMISIONER

1,352,912 1,126,750 Office of the Police and Crime Commissioner 1,185,488

2,964,528 2,964,528 Community Safety Funding 2,965,000

447,000 447,000 Victim Support and Restorative Justice Services 1,487,528

0 60,440 PCC Priority Fund 150,000

8,460,310 7,757,068 STRATEGIC DEVELOPMENT 8,271,049

CITIZEN FOCUS

21,366,013 22,027,286 Citizen Focus 22,266,778

14,677,248 14,498,336 Call Handling 16,693,296

ADMINISTRATIVE SUPPORT

9,660,836 8,947,263 Personnel and Development 8,634,974

24,224,612 24,596,347 Resources Directorate 25,924,925

OPERATIONS

119,301,806 118,736,731 Basic Area Operations 109,551,792

1,114,362 1,600,628 Area Co-ordination/Community Engagement Unit 1,558,154

607,671 451,403 Special Constabulary 611,321

OPERATIONAL SUPPORT

36,463,816 30,516,426 Operational Support/Matrix Serious &Organised Crime 64,735,446

23,346,538 18,903,426 Crime and Intelligence/Central Forensics 3,871,398

13,356,334 20,945,405 Force Crime Operations -

860,615 610,876 OPERATIONAL CONTINGENCY FUND 613,149

NON RECHARGEABLE FINANCING ITEMS AND LEVIES

41,530,869 41,157,330 Police Pensions 40,468,474

318,836 260,055 Attachments 45,188

7,916,900 6,690,172 Forcewide Services 8,002,517

1,560,123 2,450,829 Underwater Search Unit/Regional Units 3,165,064

713,081 1,681,853 Capital Charges 12,862,831

(1,743,344) (1,967,516) Income (1,691,344)

(250,000) 0 Savings from collaborative working (250,000)

(1,876,079) 0 Savings target (SEP) (4,117,855)

(131,000) 0 Balance of savings 0

0 1,365,000 Restructure Costs 4,313,000

250,000 0 Net cost of Winsor 50,000

326,493,987 325,827,636 NET COST OF SERVICES 331,368,172


38

Appendix A – Draft PCC Overall Budget assuming a 1.95% Precept Increase (cont.)

ORIGINAL PROBABLE ORIGINAL

ESTIMATE OUTTURN FINANCIALLY ACCOUNTABLE UNITS ESTIMATE

2014/15 2014/15 2015/16

£ £ £

326,493,987 325,827,636 NET COST OF SERVICES 331,368,172

3,423,539 0 Contingency for Pay and Price Increases 3,351,000

329,917,526 325,827,636 NET COST OF SERVICES AT OUTTURN PRICES 334,719,172

(2,736,837) (3,764,121) Capital Appropriations (15,462,831)

(1,561,937) (1,535,586) MRP and Debt Repayment 1,621,855

786,184 199,000 Interest Payable 365,653

(70,000) (376,025) Interest and Investment Income (260,000)

326,334,936 320,350,904 NET OPERATING EXPENDITURE 320,983,849

APPROPRIATIONS

910,923 910,923 Contribution to General Balances (surplus on Collection Fund)

2,263,437

0 (280,543) Reversal of 2013/14 Carry Over - CCPF 0

0 50,294 Carry over - CCPF 0

0 925,370 Contribution to Estate Strategy Reserve 0

0 5,370,250 Contribution to/(from) Restructure Reserve (8,093,036)

0 969,000 Contribution to Invest to Save Reserve 0

0 224,172 Contribution to POCA Reserve 0

0 58,738 Contribution to/(from) Crime Prevention Strategy Res (301,000)

(4,642,000) (4,642,000) Contribution (from)/to PCSO Reserve 0

322,603,859 323,937,108 TOTAL NET EXPENDITURE TO BE MET FROM 314,853,250

GOVERNMENT GRANTS AND TAXATION

Less : Specific Home Office Revenue Grants :

(131,199,437) (131,199,437) General Grant (123,169,820)

(18,376,404) (19,709,653) Government Specific Grants (19,693,488)

(1,537,588) (1,537,588) Council Tax Freeze Grant (2011/12) (1,537,588)

(118,204,677) (118,204,677) DCLG Formula Funding (113,490,797)

(910,923) (910,923) Surplus on Collection Fund (2,263,437)

52,374,830 52,374,830 PRECEPT REQUIREMENT 54,698,120

334,386 334,386 Council Tax Base (Number of Band D Properties) 342,548

£156.63 £156.63 Council Tax - Band D £159.68

1.95% 1.95% Increase on Previous Year 1.95%


39

Appendix B

Draft Office of the Police and Crime Commissioner Budget 2015/16

Description £

Employee Related Expenditure Support Staff Salaries 649,022 Support Staff Salaries Nat. Ins. 56,680 Support Staff Salaries Superannuation 80,310 Support Staff Subsistence & Incidental Expenses 360 Support Staff Recruitment Advertisements 5,000 Support Staff Training 10,000 Total Employee Related Expenditure 801,372 Transport Related Expenditure Support Staff Travel Casual User Mileage 12,500 Support Staff Travel Tolls & Charges 180 Support Staff Public Transport Fares 20,000 Support Staff Conference Fees 2,000 Total Transport Related Expenditure 34,680 Premises Related Expenditure Rents 20,000 Hire of Premises 6,000 Total Premises Related Expenditure 26,000 Supplies and Services Equipment Purchases 5,000 Printing 5,000 Stationery 5,000 Photocopy Charges 6,000 Newspapers/Journals 500 Legal Expenses - Police Appeals Tribunals 35,000 Legal Charges/Counsel Fees 30,000 Miscellaneous Expenses 10,000 Postages 600 Mobiles-rental 5,000 H/W Purchases 5,000 General Subscriptions 40,000 Advertising Costs 10,000 Light Refreshments 496 Audit Committee Attendance Allowance 11,000 Total Supplies and Services 168,596 Third Party Payments Lay Visitors Scheme 15,000 Other Public Bodies 88,580 District Audit Fees 51,260 Total Third Party Payments 154,840

Total OPCCM Budget 1,185,488


40

Appendix C – Draft Capital Programme 2014/15 to 2018/19

Capital Programme

2014/15 2015/16 2016/17 2017/18 2018/19

Revised

£m £m £m £m £m

IT Strategy New IT Developments 1.041 0.649 0.480 0.750 0.700

Collaboration & Cooperation 0.131 0.167 0.150 0.150 0.150

Maintaining Existing IT & Communications Systems 0.531 1.670 1.250 1.000 1.100

Total IT Strategy 1.703 2.486 1.880 1.900 1.950

Technical Technical Equipment 0.070 0.095 0.095 0.095 0.095

Force ANPR Improvements - Section 152 reserve 1.160 0.000 0.000 0.000 0.000

Joint Command and Control Centre - estate strategy reserve 1.172 0.000 0.000 0.000 0.000

Road Safety Partnership Cameras - funded by contribution 0.570 0.378 0.000 0.000 0.000

Body Worn Video Cameras - Innovations fund 0.228 0.000 0.000 0.000 0.000

CCTV 0.000 0.210 0.000 0.000 0.000

Delphi Next Generation 0.020 0.130 0.000 0.000 0.000

Covert Surveillance equipment 0.429 0.000 0.000 0.000 0.000

Body Worn Video Cameras - invest to save 0.162 0.000 0.000 0.000 0.000

Personal Issue Laptops - invest to save 1.176 0.000 0.000 0.000 0.000

Total Technical 4.987 0.813 0.095 0.095 0.095


41

Appendix C – Draft Capital Programme 2014/15 to 2018/19 (Cont)

Capital Programme

2014/15 2015/16 2016/17 2017/18 2018/19

Revised

£m £m £m £m £m

Estates Management 0.478 0.470 0.470 0.470 0.470

Estates Strategy Joint Command and Control Centre 1.799 0.000 0.000 0.000 0.000

Corporate Estate Strategy 0.611 7.806 25.142 11.900 8.417

Wirral Estate Strategy 0.190 6.999 6.637 0.000 0.000

Sefton Estate Strategy 0.000 0.324 9.158 2.253 0.000

Knowsley Estate Strategy 0.377 2.775 5.353 0.000 0.000

St Helens Estate Strategy 0.000 0.083 0.068 0.229 2.909

Liverpool Estate Strategy 0.000 0.000 0.006 7.156 0.652

Total Estate Strategy 2.976 17.987 46.364 21.538 11.978

Total Estates 3.455 18.457 46.834 22.008 12.448

Total Vehicles 2.621 2.305 2.305 2.305 2.305

TOTAL CAPITAL EXPENDITURE 12.766 24.061 51.114 26.308 16.798


42

Appendix C – Draft Capital Programme 2014/15 to 2018/19 (Cont)

Funding

2014/15 2015/16 2016/17 2017/18 2018/19

Revised

£m £m £m £m £m

Home Office Capital Grants 3.463 2.600 3.200 3.200 3.200

External borrowing 0.000 11.383 42.071 19.762 11.801

Self-financed borrowing for short life assets 1.239 2.556 1.350 1.370 1.420

Other Partner contributions 0.570 0.378 0.000 0.000 0.000

Capital Receipts 0.399 1.419 4.494 1.976 0.377

Funding from Reserves Invest to Save Reserve 1.787 0.340 0.000 0.000 0.000

Section 152 Reserve 1.160 0.000 0.000 0.000 0.000

Estates Strategy Reserve 4.148 5.385 0.000 0.000 0.000

Total Funding from Reserves 7.095 5.725 0.000 0.000 0.000

TOTAL FUNDING 12.766 24.061 51.115 26.308 16.798


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Appendix D - Medium Term Financial Strategy 2015/16 to 2018/19

2015/16 2016/17 2017/18 2018/19

£m £m £m £m

EXPENDITURE

Base Budget B/F 325.686 315.035 322.249 308.748

Savings from collaboration not achieved in 2014-15 0.227 0.000 0.000 0.000

Adjustment to Expenditure - Community Safety Fund 0.000 0.000 -0.372 -0.104

Specific Grant adjustment to Expenditure - DSP 0.277 0.000 0.000 0.000

Committed Recurring Savings from previous year 0.000 0.000 -19.474 -14.159

Revised Base Budget 326.190 315.034 302.404 294.485

Net Committed Growth/(Savings)

Capital Financing -0.551 1.299 1.582 1.735

Additional cost of Home Office IT (ex NPIA) 0.580 0.000 0.000 0.000

Additional pensions contributions - 50:50 Scheme -0.110 0.000 0.000 0.000

Increase in cost of staff pensions 0.046 0.163 0.000 0.000

Additional annual cost of ill health’s retirements 0.160 0.000 0.000 0.000

Additional NI costs (contracted out rates discontinued) 0.000 4.750 0.000 0.000

Increase in custody healthcare costs 0.565 0.000 0.000 0.000

Winsor 1 -0.150 0.050 0.450 0.450

Reduction in Income from Football Clubs 0.350 0.000 0.000 0.000

0.890 6.262 2.032 2.185

Total 327.080 321.296 304.436 296.670


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Appendix D - Medium Term Financial Strategy 2015/16 to 2018/19 (Cont)

2015/16 2016/17 2017/18 2018/19

£m £m £m £m

Allowance for Inflation 3.351 4.207 4.563 4.446

Gross Base Budget Requirement 330.431 325.503 308.998 301.116

One-Off Commitments/(Savings)

Collection Fund Surplus -2.263 0.000 0.000 0.000

PCC Priority Fund 0.150 0.150 0.000 0.000

Restorative Justice Initiatives 0.313 0.313 0.313 0.313

Victims Services 1.175 1.175 1.175 1.175

Replace CBRN Equipment (c fwd to 15/16 ) 0.000 0.192 0.114 0.000

Over-establishment position 4.313 0.000 0.000 0.000

3.688 1.830 1.602 1.488

Total Budget Requirement 334.119 327.333 310.600 302.604


45


2015/16 2016/17 2017/18 2018/19

£m £m £m £m

FUNDING

Funding Assumptions -

General Grant -236.661 -227.195 -218.107

-209.383

Council Tax Freeze Grant (2011/12) -1.537 -1.537 -1.537

-1.537

Specific Grants -19.694 -19.694 -19.694

-19.694

Total Assumed Grant -257.892 -248.426 -239.338 -230.614

Brought Forward Precept Level -52.375 -54.699 -55.766

-56.853

Assumed Precept Increase -1.021 -1.067 -1.087

-1.109

(Increase)/decrease in tax base -1.303 0.000 0.000

0.000

Total Assumed Precept -54.699 -55.766 -56.853 -57.962

Total Assumed Funding -312.591 -304.192 -296.191 -288.576

GROSS DEFICIT/(SURPLUS) 21.527 23.142 14.409 14.029


46


2015/16 2016/17 2017/18 2018/19

£m £m £m £m

Less Savings Identified

Savings from SEP - Phase 5 -14.518 -3.004 0.000 0.000

Savings from SEP - Phase 1 - 4 -0.628 0.000 0.000 0.000

Savings from Collaborative working -0.250 -0.250 -0.250 -0.250

Savings identified to date -15.396 -3.254 -0.250 -0.250

One-Off Funding from/to Reserves and Balances

Contribution to/from General Balances (Collection Fund)

2.263 0.000 0.000 0.000

Contribution from PCC Crime Prevention Strategy Reserve

-0.301 -0.414 0.000 0.000

Transfer from Restructure Reserve (Over establishment officers)

-4.313 0.000 0.000 0.000

Transfer from PCSO Reserve -4.369 0.000 0.000 0.000

Total Use of one-off funding -6.131 -0.414 0.000 0.000

Further Savings Required 0.000 19.474 14.159 14.412

Cumulative Savings required 19.474 33.633 47.412

Assumptions

Pay inflation 1.00% 1.50% 1.50% 1.50%

Non-pay inflation 1.50% 1.50% 1.50% 1.50%

Precept 1.95% 1.95% 1.95% 1.95%

Central Government Funding Reduction in General

Grant of 5.1% Reduction in General

Grant of 4% Reduction in General

Grant of 4% Reduction in General

Grant of 4%


47

Appendix E - Risk Based Calculation of Adequacy of General Balances

Risk Register Ref

No. Brief Description

Residual Risk Score from Risk

Register

Estimated mid-point

Cost Financial

Requirement

£m £m

1 Financial/Performance risk 16 40.000 6.400

2 Terrorism threat 9 12.000 1.080

3 Approach to Domestic Violence 8 10.000 0.800

4 Cyber Crime 8 8.000 0.640

5 Child Sexual Exploitation 8 8.000 0.640

6 Response to Gun Crime 8 8.000 0.640

7 Killed and Seriously Injured (KSI) 8 1.000 0.080

8 Increase in recorded Crime 6 1.000 0.060

9 Impact of economic Migration/Immigration 6 1.000 0.060

10 Misconduct of Officers/Staff 6 1.000 0.060

Level of General Balances required to provide adequate financial resilience against risks identified in Strategic Risk Register 10.460

Based upon the level of residual risk and the likely financial impact a factor is included to provide a level of financial resilience should these risks occur. The table takes all risks with a residual risk score of 6 or more from the Force Strategic Risk Register and measures this against an assessment of the financial impact of the risk.


48

Appendix F – General Balances, Provisions and Earmarked Reserves

Transfers Transfers

Balance

as at 31st March 2014

In Out Balance


In Out Balance


£m £m £m £m £m £m £m

GENERAL BALANCES 9.574 0.911 0.000 10.485 2.263 0.000 12.748

INSURANCE PROVISION 5.432 3.352 (3.523) 5.261 3.402 (3.402) 5.261

CAPITAL RECEIPTS RESERVE 0.001 0.398 (0.399) 0.000 1.419 (1.419) 0.000

EARMARKED RESERVES:-

Estate Strategy 9.533 0.925 (4.148) 6.310 0.000 (5.385) 0.925

PCS & TO's 9.012 0.000 (4.643) 4.369 0.000 (4.369) 0.000

Restructure 7.270 4.313 (0.064) 11.519 0.000 (4.313) 7.206

Invest to Save Reserve 4.318 2.029 (1.787) 4.560 0.000 (0.340) 4.220

Section 152 1.491 0.184 (1.160) 0.515 0.000 0.000 0.515

Earmarked Pensions 1.137 0.000 0.000 1.137 0.000 0.000 1.137

Operational Contingency 1.026 0.000 0.000 1.026 0.000 0.000 1.026

Other 4.842 0.363 (1.121) 4.084 0.000 (0.301) 3.783

TOTAL EARMARKED RESERVES:- 38.629 7.814 (12.923) 33.520 0.000 (14.708) 18.812


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PART 2 – Not for publication

This section should only include information that, if published:

a) would, in the view of the chief officer of the police, be against the interests of national security;

b) might, in the view of the chief officer of police, jeopardise the safety of any person; c) might, in the view of the chief officer of police, prejudice the prevention or detection of crime,

the apprehension or prosecution of offenders, or the administration of justice; or d) is prohibited by any enactment.

Paragraph 2(2) Elected Local Policing Bodes (Specified Information) Order 2011 refers.

originators: john riley, pcc chief finance … budget report.pdf · 2015/16 budget report and...

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