House of Commons - Home Affairs

Select Committee on Home Affairs Written Evidence

Supplementary memorandum submitted by the Association of Police Authorities

SUSTAINABLE POLICING: SUPPLEMENTARY NOTES ON FORECAST ANNUAL FUNDING SHORTFALLS—JUNE 2007

1. The figures described as "Funding Requirement" in the table on page 34 represent what the Police Service calculates it needs to stand still under the assumptions set out in the report and summarised on page 35. The forecasts were prepared in Autumn 2006, based on the information available at that time in 2006-7 budgets and plans for future years.

The "total funding" line follows a similar approach; it makes assumptions about the governments plans for RSG and Police Grant Funding, and Council Tax capping, for 2007-08 and beyond.

2. As you note, this generates a net funding increase of 7.99% for 2007-08.

Again as you note, I reported subsequently that the actual budget increase for 2007-08 was 4.69%.

It is important to clarify the conceptual difference between these two figures. The net funding increase (7.99%) is putting a figure on the percentage increase in budgets needed to meet our assessment of the increase in costs and demands. The net budget requirement increase shows what Authorities were actually able to fund—so it takes into account the actual grant settlement, Council Tax capping, local funding strategies, and all the many other responses by local forces and Authorities which were needed to bring the figure into balance. This is essentially what happens every year—plans and aspirations are reduced to meet the financial realities once they are announced, but it doesn't alter the underlying needs. Reserves are a part of this equation, but they don't explain the whole of the variation between 7.99% and 4.69%.

Another very significant factor in reconciling these two figures for 2007-08 is the Home Secretary's decision to relax the rules on Crime Fighting Fund and his plans for the increase in PCSO numbers. The PCSO change—which was not announced until several months after the Sustainable Policing forecasts were completed—removed a significant block of demand from the "funding requirement" increase. We made reference to the change in rules in the final section of the report, but at that time it was too early to say how individual Authorities would react, and so it was not feasible to re-run the models. The actual budget figures show that Authorities did take advantage of the relaxation in PCSO targets, and this is one of the reasons why the +7.99% forecast was not borne out.

It is important that the service emphasises the impact of short-termism at both national and local levels. We are satisfied as a service that the initial assumptions on funding requirements are realistic and soundly based. Surveys tend to confirm that Authorities do not arbitrarily overstate the forecasts by assuming unrealistic demands and levels of service. The process of reconciling these potential requirements with what eventually emerges in the grant settlements is approached in different ways. In some cases it may be achieved by real cuts in the base (eg reductions in the range of services; permanent efficiency savings). For a significant part, however, it is achieved by:

— use of reserves;

— deferring and rescheduling plans;

— holding posts vacant;

— temporary reductions in service;

— applying cash limits from the centre;

— not supporting partnerships; and

— accepting lower quality at the margin.

This is what is happening locally. It enables the service to squeeze a "quart out of a pint pot". The service is concerned that these short term measures are not sustainable and that eventually either services will fail or the reductions will have to be reinstated.

Recently these concerns have been compounded by some of the strategies adopted by Home Office to make the figures balance.

— Continued cash limiting of certain ring fenced grants.

— Funding for dedicated security posts has been cut in 2007-08 even though the numbers have expanded.

— Grants do not cover the full (and increasing) costs of PCSOs and their support.

— Current proposals to fund Protective Services by top slicing funds within the existing settlements.

— Under the new efficiency regime, there is an increasing tendency to assume that gains will still be available to fund new demands as previously, but at the same time be available to reduce the budget.

Some of these transactions represent disguised cuts—and mean that the headline increase in local grant funding is often not what it seems. Others risk using the same money twice.

All of the measures are valid approaches in order to bring things into balance in the short term, but the combination of what is happening nationally and locally could be more fundamental longer term imbalance.

3. The figures of 5.28%, 4.34%, 3.92% represent what the service was actually forecasting it needed for the period to 2010-11 (subject to the various provisos outlined above).

It is important to put the +5% references in context. I don't think "Sustainable Policing" actually says that 5% per annum is needed across the CSR years (although I acknowledge that we have often made statements that imply this). In paragraph 2.24, the references to +5% are related to past studies; and in para 4.4 we refer to "meeting the full impact of growing demand". 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. Also, it is important not to ignore the uncertainties at that time about future Pensions funding, which would potentially have put the figure above 5% in all four years (see note J on page 35)

4. Flexibilities

It may help in answering this question if I list some of the matters raised by Police Authorities in a recent survey which asked where they would like to see further flexibilities in order to release funding, enable a more co-ordinated approach, or reduce overheads. These included:

— Continuation of CFF relaxation.

— Workforce modernisation implementation.

— Civilianisation.

— CSO numbers and role.

— More flexibility on charging the full economic cost.

— Terms and Conditions.

— Audit/Inspections/Compliance.

— Data collection for national PIs.

— Capping.

— Carry over of special grants.

— Sharing of national efficiency gains.

— Protection of national grant level.