Select Committee on Home Affairs Fourth Report


2  Nature and implications of a tighter financial settlement in the Comprehensive Spending Review 2007

Police funding projections

34. In this section of our report we examine the police service's projections of the resources it is likely to need and likely to receive over the three years (2008-09 to 2010-11) of the Comprehensive Spending Review 2007 (CSR 07). We then consider some of the implications of a possible funding shortfall.

35. As part of the negotiation process for the CSR settlement, in November 2006 ACPO and APA produced a joint submission entitled Sustainable Policing. In it they state that there is likely to be a tighter funding settlement:

36. The submission identified a funding shortfall for the CSR years, which, it argued, would be substantial. The calculations, based on returns from police authorities, are set out in figure 9 below.[43] These figures were arrived at by taking away the total projected funding anticipated by the police from the total funding requirement identified by the police, as shown in figure 10 below.Figure 9: ACPO/APA projected funding shortfall 2007-08 to 2010-11[44]
Year Projected shortfall (£m)
2007/08
391
2008/09
656
2009/10
831
2010/11
966

Source: Sustainable Policing: the case for resourcing the police service 2008-09 to 2010-11 (2006)Figure 10: Police projected budget requirement increase 2007-08 to 2010-11[45]
2007-08 2008-09 2009-10 2010-11
Total funding requirement 10,880 11,454 11,951 12,419
% increase year on year 8.0 5.3 4.3 3.9
Total anticipated funding 10,489 10,799 11,120 11,453
% increase year on year 4.1 3.0 3.0 3.0
Annual Shortfall-391 -655-831 -966

Source: Adapted from Sustainable Policing: the case for resourcing the police service 2008-09 to 2010-11 (2006)

The Sustainable Policing submission stated that "analysis of police budgets has consistently shown that the police service needs annual net resource increases of at least 5% in order to stand still". [46] The APA told us that the estimation of between 5% and 7% is "a realistic assessment of what forces need". They explained the calculation behind the 5% figure:

    Surveys of police authorities confirm that the average 2007-08 budget requirement increase was 4.69%. This figure is after Authorities have taken measures to reduce future commitments, and confirms the yardstick of at least 5% per annum for standstill.[47]

37. The police projections set out in figure 10 above predict that percentage increase requirements for each of the CSR years will be 5.3% in 2008-09, 4.3% in 2009-10, and 3.9% in 2010-11. In only one of these years, 2008-09, is the projected increase actually over 5% per annum, and on this trajectory the year-on-year increase requirement decreases over the three CSR years. The police's own figures, therefore, did not seem to bear out their claim that the service needs annual net resource increases of 5% minimum in order to "stand still". When challenged on this point, Bob Jones of the APA responded that:

    It is important to put the +5% references in context. I don't think Sustainable Policing actually says that 5% p.a. is needed across the CSR years (although I acknowledge that we have often made statements that imply this). The reason why the year on year increase in the model tends to fall away in years three and four is the slightly optimistic assumption on net growth (extra demands less cash efficiencies) which magnifies itself the longer ahead it is projected.[48]

Notwithstanding Mr Jones's comment, the language used in the Sustainable Policing submission ("the police service needs" [our italics]) strongly implies that the 5% figure is the minimum required by police now as well as in the past.

38. We asked the Government if it accepted the police contention that there would be a funding gap over the CSR years. The Minister, Mr McNulty, responded:

    I accept the contention that we are at least plateauing in resource terms rather than constant growth as there has been for the last six, seven or eight years…but I do not accept many of the presumptions and assumptions made behind what is going to happen over the next couple of years in terms of inflation, police pay and others that get to this huge gap.[49]

Mr McNulty told us that the financial assumptions behind the police calculations are "actually perfectly fair, they are not wild assumptions, but they are not the assumptions that I would necessarily agree with".[50] He declined to spell out the specific assumptions the Government was making, on the grounds that this was a confidential part of the CSR negotiations.[51] He did however acknowledge that "there will be tight years ahead in terms of the CSR settlement".[52]

39. The APA claimed to us that the police service is already coping with a shortfall. In the Sustainable Policing submission the police service projected that it needed an 8% total funding requirement increase to be able to meet its commitments in 2007-08 (see figure 10 above). The final settlement for 2007-08 provided for a 4.69% increase. The APA told us that the final total funding requirement for the police service in 2007-08 was in the end less than the projected 8% figure, as the subsequent decision to scale back the number of PCSOs being recruited "removed a significant block of demand from the 'funding requirement' increase".[53]

40. Despite this reduction in the total sum needed in 2007-08, police representatives told us that there was still a significant shortfall between the funding settlement of 4.69% and the required 8%. The APA stated us that police authorities have covered the gap by "use of reserves; deferring and rescheduling plans; holding posts vacant; temporary reductions in service; applying cash limits from the centre; not supporting partnerships; accepting lower quality at the margin".[54] It added that these actions enable "the service to squeeze a 'quart out of a pint pot'"[55] but warned that "without those use of reserves, without those reductions, without, in some cases, very substantial increases in council tax precept that gap would have been wholly in terms of service reduction".[56]

Police precept

41. Over the last ten years the proportion of total police funding raised through precept on Council Tax has risen from 13.0% in 1997-98 to 21.5% in 2006-07 (see figure 11 below). The Government has made clear that it expects council tax increases for 2007-08 onward not to exceed 5% increase per annum. Guidance from the Department for Communities and Local Government on the Local Government Finance Settlement states that:

Figure 11: Proportion of police expenditure financed through Council Tax precept 1997-98 to 2006-07


Source: CIPFA Police Statistics, Various Years

42. There is not a specific cap on police precept increases, but on an authority's overall budget. The criteria used to decide which councils might be capped are the responsibility of the Secretary of State under the Local Government Act 1999. For 2006-07 the Government deemed that budgets were excessive if, compared to 2005-06, budget requirement had increased by more than 6% and council tax had increased by over 5%. We asked the Government whether the political commitment to a 5% cap on Council Tax increases risked under-funding public services. The Minister told us that "we remain committed to 5% overall for council tax". However, although he noted that "much of the substantial increase in council tax has come from the broader, general council tax than the police precept side", he conceded that "I think it is appropriate, when looking at finance, to look at not overall council tax and capping, but to look at the issue of the police precept and whether it remains appropriate for that to be capped".[58] He gave examples of where there has already been flexibility on capping in the system:

    We have in exceptional circumstances looked on a case-by-case basis at the increases year on year. … Unusually in the last year there were any number that went fairly significantly, and very significantly in one place, over budget, but the cases were well met and I would happily defend each of those increases, from Durham's 34.9% down to Norfolk's 7%.[59]

43. There is wide variation in police precept across forces. The Minister referred to: "the disparity in terms of police precept locally…the figures range from £88, to some £230 in the Met". He asked the question "why over the years, as there has been an ebb and flow of national funding and local funding ... has that disparity occurred?" He added "I am not clear myself in public policy terms what would be an appropriate cut-off point for local contribution versus national contribution, but I think that is a really interesting debate".[60]

Implications of any shortfall

44. The Sustainable Policing submission surveyed Chief Constables from 17 forces as to the impact of a funding shortfall on the service. Respondents agreed that:

45. Police representatives agreed that any shortfall would impact on staff. Mr Jones of APA told us:

    clearly if we do not have sufficient resources we are in a dilemma in terms of where the savings have to come from, given that 80% is staff related … clearly it is very difficult to make reductions of this size without looking at the position of the police officers.[62]

When asked to quantify these observations, Mr Jones said "it is difficult to calculate, depending on how you actually choose that mix but clearly you could be talking about a move [from the current number of 141,000 police officers] down to 135,000-136,000".[63] Mr Jones emphasised that this projected figure of about 5,000 police officer job cuts would be "an absolute worst case scenario and clearly all police authorities will be committed to avoiding that".[64]

46. On 16 November 2006 the Minister instigated a review of police pay, to be undertaken by the former civil servant Sir Clive Booth. The review was in two stages, the first of which reported in February 2007, and the second of which is due to report later this year. The terms of reference of the two parts were: 1) to consider the options for replacing the current arrangements for determining changes to police officer pay for 2007; and 2) to review the effectiveness of the negotiating machinery for the police, and make recommendations for how police pay and other conditions of service should be determined.[65]

47. ACPO told us that "successfully constraining budget increases to the lower level of funding expected under CSR07 will depend almost entirely on restraining pay".[66] However, they also warned of the dangers of reducing pay for staff recruitment and retention.[67] Ms Berry of the Police Federation claimed that there is a good deal of unrest within the police service about the possible outcomes of the Booth pay review:

    Police officers are feeling extremely frustrated at the way that they see they are bring treated at the moment in the terms of their pay and conditions. The conditions that are placed on them to be on duty 24/7 … that they are personally responsible for their actions both on and off duty … and the fact that at this stage they do not have the right to take industrial action.[68]

48. Ms Berry added that the Booth review "seeks to remove any negotiation from police officers; it seeks to suppress police pay over a period of time".[69] She denied press reports that she had said that changes to the basis on which police pay is negotiated could result in industrial action. She informed us that her actual comments, at the Police Federation Annual Conference, had been "I believe it would be a tragedy for policing if police officers were ever forced to go on strike … it's the last thing police officers want … but push them any further, and the last thing they want might just become their only option".[70]

49. The Minister, Mr McNulty, recognised that any shortfall would impact on police officer numbers. He said that "I do accept the basic premise that, if there is a decline, then there is not a whole lot that can happen without bodies being involved in the end". However, he argued that staff cuts were not inevitable.[71] The Minister told us that, although "this year's round of negotiations in terms of pay will be very, very delicate and very, very interesting", police pay "must figure in the equation"[72] of the CSR settlement.

Conclusions: A funding shortfall?

50. There is agreement that the Comprehensive Spending Review financial settlement will be tight for the police service. Our police witnesses and the Government were in agreement that the settlement will, at the least, see a lower rate of increase in the investment the police have enjoyed over the last few years. The precise scale of the settlement, and of any related shortfall, remains unclear.

51. We recommend that when the results of the Comprehensive Spending Review are announced later this year, the Government should publish at the same time the full assumptions which underpin the police funding settlement.

52. We note that the Government retains the power to place capping limits on council tax increases, and we acknowledge that the issue of capping is looked at on a case by case basis. However, we recommend that the Government should look again at the specific question of whether it is appropriate for police precept to remain effectively capped at 5% in line with other local authority budget increase limits.

53. We share the concern expressed by the Minister about the considerable disparities in the amount of police precept raised by different forces. This is a matter of significance, particularly where the disparity cannot be adequately explained by locally made decisions as to the level of service provided by the police. It is far harder to justify local autonomy and delegation when not everyone begins at the same starting point. We recommend that the Government should commission research into the reasons behind the variations and what might be done to reduce disparity between forces.

54. Police pay settlements over the CSR period will probably be tight. We have seen no short-term evidence of recruitment and retention problems in the police service. Indeed, recruitment of both police officers and civilian staff has been boosted in correlation with the increased resources allocated to police. However, this issue should be kept under review to guard against the possibility of problems developing in the longer term.


42   Sustainable Policing-an overview of the APA/ACPO approach to the Comprehensive Spending Review 2007 (November 2006), p 3 Back

43   Sustainable Policing: the case for resourcing the police service 2008-09 to 2010-11 (November 2006), p 32  Back

44   The projected shortfall takes into account the 3% uniformed pay settlement made in September 2006 and is based on inflation at 3% and net growth pressures at 2%.  Back

45   Adapted from Sustainable Policing: the case for resourcing the police service 2008-09 to 2010-11 (November 2006), p 34 Back

46   Ibid., p 15 Back

47   Ev 44 Back

48   Ev 51 Back

49   Q 56 Back

50   Q 58 Back

51   Q 61 Back

52   Q 58 Back

53   Ev 51 Back

54   Ibid. Back

55   Ibid. Back

56   Q 13 Back

57   Department for Communities and Local Government A guide to the Local Government Finance Settlement p 11 Back

58   Q 55 Back

59   Q 55 Back

60   Q 54 Back

61   Sustainable Policing: the case for resourcing the police service 2008-09 to 2010-11 (November 2006), p 30 Back

62   Q 14 Back

63   Q 15 Back

64   Q 18 Back

65   www.policepayreview.org Back

66   Ev 30 Back

67   Ev 30 Back

68   Q 25 Back

69   Q 25 Back

70   Jan Berry, Chair of the Police Federation: Speech to the Police Federation Annual Conference, May 2007 Back

71   Q 60 Back

72   Q 99 Back


 
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Prepared 19 July 2007