1 Devolution and accountability
1.On the basis of a report by the Comptroller and Auditor General, we took evidence from the Home Office (the Department), HM Inspectorate of Constabulary (HMIC) and the College of Policing (the College) on the financial sustainability of police forces in England and Wales.1
2.There are 43 territorial police forces in England and Wales, each headed by a Chief Constable with authority over all operational policing decisions and staff.2 Chief Constables report to elected Police and Crime Commissioners (Commissioners) created to replace Police Authorities.3 Commissioners decide on their force’s priority objectives, allocate funding and hold forces to account on behalf of the local electorate. They receive funding from: central government; the police precept, collected alongside council tax for the force area the taxpayer lives in; and income from activities such as policing at major sporting events. In 2014-15, the gross estimated spending of all 43 forces was £12.8 billion.4
3.The Department has overall responsibility in government for policing. It allocates funding to Commissioners, is responsible for the operation of the accountability framework that assures Parliament on the regularity, propriety and value for money of police spending, and intervenes if Chief Constables or Commissioners fail to carry out their duties effectively.5 The Department did not have its budget protected during the last Parliament, and forces will likely face further significant funding reductions. Between 2010-11 and 2015-16 overall precept funding to Commissioners, including local council tax support grants, increased by 2.1% (£67.1 million in real terms), while central government funding reduced by £2.3 billion (25%) from £9 billion to £6.7 billion in real terms.6
4.The Department uses a formula to determine how much funding individual Commissioners require which takes into account local conditions and likely policing needs by using data on crime, fear of crime, population and the policing of special events. While the formula takes account of the council tax base in each police force area, it does not take account of all demands on police time, relative efficiency of police forces, levels of financial reserves or the proportion of central government to police precept funding.7 Since 2010 actual funding for Commissioners has been subject to a process known as “damping”, which smoothes the large variations in funding allocations that arise from applying the funding formula, so that all Commissioners had an equal funding reduction.8 For example, West Midlands Police had its initial funding allocations reduced by £132 million between 2010-11 and 2013-14 as a result of damping, while Northumbria Police received an extra £99 million in the same period.9
5.The Department accepted that the funding formula had flaws and noted that it had “become more and more detached from the real demands on policing.” The Department told us that Ministers in the last Parliament had taken the view that rather than revising the funding formula to address these issues they should apply damping to the results it produced. However, the Department was now reviewing the funding formula and seeking a new one “to address all of the ineffectiveness in the old formula and the way it was applied.”10 A consultation document on reforming the police funding arrangements was released, after the hearing, on 21 July 2015 with the aim of implementing the change for the 2016-17 police funding allocations.11
6.The National Audit Office found that between 2010-11 and 2013-14, police forces’ total earmarked and general reserves increased by 35% in real terms to £1.85 billion, although there was significant variation across forces.12 We asked the Department what work it did to assess whether forces’ reserve levels were appropriate and whether there was any point at which it would challenge a force on its approach to spending central government funding.13 The Department told us that there were two key reasons why it was appropriate for police forces to run reserves: to manage their expenditure as they are not allowed to run a deficit; and to provide a fund for transformation investment.14 The Department maintained that a police force’s reserve level was a matter for Commissioners, and any concerns would be identified by either the Chief Financial Officer of the Commissioner, whose fiduciary duties are laid out in law, or HMIC’s new police effectiveness, efficiency and legitimacy (PEEL) assessment. The Department would only intervene in the management of a police force “in extremis”, and so far had seen no need to do so.15
7.HMIC, estimated that police forces had been required to make savings of around £2.5 billion between 2011-12 and 2014-15.16 The Department told us that it had been possible to achieve the required savings in the 2010-15 Parliament largely through squeezing money out of the existing system. But finding further significant savings as a result of the next Spending Review would require looking thoroughly at structural reforms, including the integration of specialist capabilities and partnership working.17
8.The Department confirmed that it would expect and put pressure on police forces to collaborate more to achieve the kind of savings that have been achieved by those forces that have collaborated effectively. The Department considered that the funding mechanism and fiscal pressure would drive more collaboration with other forces or with local public service delivery partners, which it incentivised through an innovation fund to kick-start collaborative projects. The Department accepted that its approach to greater collaboration was that it would be driven from the bottom-up rather than the top-down. The Department told us that there was an issue, yet to be resolved by Ministers, about the degree to which it should play a facilitating or an executive, decision-making role, and how that would work with the legal responsibilities of Commissioners.18 The Department noted that it does have “informal” conversations with individual police forces about why they are not adopting best practice.19
9.The Department told us that while it was open to formal mergers of police forces, Ministers would not impose them top-down. Any proposals for formal mergers would need to be agreed between the Commissioners involved, be supported by a business case, and need to win local consent.20 It was not clear whether local consent meant having a referendum. We noted on a visit to Devon and Cornwall Constabulary that there are legal barriers to more fundamental change, for example differing levels of police precept forces receive, that only the Department could address.21
10.Given that the Department would only intervene locally in extreme circumstances, we asked what it was doing to ensure that there was not excessive duplication of effort across police forces in areas such as contracting.22 The Department told us it had taken responsibility in some specific areas, for example, all police forces must use the National Police Air Service rather than maintain their own helicopters and there was a national procurement hub forces could use to identify the lowest cost for certain items.23 The Department said that while the Home Secretary had the power to mandate what forces do, Ministers have taken the view that collaborations should originate from the bottom-up, except where there was a good case to mandate something at either multi-force or national level.24
11.We asked the College what it was doing to support forces in sharing and learning from best practice. It told us that it shared best practice by running an online community and sending peer review teams out to police forces to identify best practice examples. However, take up of best practice was a local decision for police forces and Commissioners to make, although the Home Secretary has powers to mandate that things are done in a particular way.25
12.The College told us that the need to make savings had increased the importance of police forces possessing sufficient commercial, procurement and financial expertise.26 The College and HMIC told us that senior-level policing was very different from frontline policing. Senior police officers were essentially responsible for multi-million pound organisations. HMIC noted that around 95% of a Chief Constable’s time was spent “being the chief executive of a very large, complex, safety-critical essential monopoly and asset-intensive public service,” but that the degree of sophisticated commercial and contract skills amongst police officers was “pretty slight”.27
13.The College’s website describes it as the professional body for policing, working to find the best ways to deliver policing in an age of austerity.28 The National Audit Office reported that the College considered it did not have the resources or remit to share good practice and learning in non-operational areas.29 We asked the College to clarify its remit. It maintained that its £67 million annual budget was insufficient to allow it to take on a broader role sharing best practice and raising wider business skills, particularly around procurement, finance or HR at lower levels within police forces. It told us that its 5 year strategy, published in December 2014, focused on two main areas: dealing with high priority areas for the public such as child sexual exploitation, cybercrime and mental health; and developing and raising professional skills.30
14.The College told us that in terms of business skills, it focused its efforts on senior police officers.31 Since 2012 the College has run two strategic command courses for 100 senior police officer candidates, which included 6.5 days of what it described as “management skills” training, covering finance, commercial and HR.32 We asked the Department whether it considered that the College’s remit was sufficient to support forces in the areas of finance, demand, performance, contract and change management. The Department thought that in general the College’s remit was sufficient considering there are other professionals, such as Chief Finance Officers, involved in police forces. However, it undertook to discuss the College’s remit with the College and HMIC, and how best to ensure senior police officers and management teams have the sufficient skills to run police forces.33
1 C&AG’s Report, Financial Sustainability of police forces in England and Wales, Session 2015-16, HC 78, 4 June 2015
2 Metropolitan Police Service and City of London Police have commissioners instead of chief constables.
3 Instead of police and crime commissioners, the Metropolitan Police Service has the Mayor’s Office for Policing and Crime, and the City of London Police has the Common Council of the City of London. In this report we refer to all these parties as ‘Commissioners’.