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2014/15 Budget Book

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Executive Summary The PCC has set a budget of £276.2m for the 2014/15 financial year, which represents a cash reduction of £3.5m (1.2%) or a real terms reduction of £11.5m (4.1%) on the 2013/14 budget.

The budget has been funded from the following sources:- £185.9m (67.3%) – received from central

government in form of grants; and £90.3m (32.7%) – received from local council

tax payers.

The budget has been allocated as follows:- £1.4m (0.5%) – to support the PCC and her Office costs; £2.6m (0.9%) – to support wider community safety commissioning initiatives; £272.2m (98.6%) – to support the Constabulary in delivery of the Police and Crime Plan.

The budget for the Constabulary has in turn been allocated as follows:-

£225.1m – to support the employee costs; £61.5m – to support non-employee running costs; £14.4m – in additional income not from main grants or council tax;

The PCC approved an increase in the police element of local council tax bills of 1.99%, which means that the average council tax bill for policing stands at £171.37, an increase of £3.34 p.a. from last year.

The budget has been set after the identification of £11.5m of savings. These build on the savings already identified and delivered since 2010/11, taking our cumulative savings to £45.9m (15% of our 10/11 budget). We estimate that over the three years from 2015/16 – 2017/18 we will need to identify and deliver a further £34.8m of savings, taking our cumulative savings since 2010/11 to £80.7m (27% of our 10/11 budget).

The Constabulary is working hard on its plans to meet this financial challenge, whilst protecting frontline policing services and delivering against the PCC’s local policing plan.

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Revenue Budget 2014/15

INTRODUCTION This document presents the budget for 2014/15 as approved by the Police & Crime Commissioner (PCC) for Avon & Somerset. This budget of £276.2m is the culmination of a substantial amount of planning, and has been balanced after the identification of £11.5m of further savings.

2014/15 is the fourth year of the current Spending Review (SR) period. During the first three years of this SR period £34.4m of savings were identified and delivered, and in setting this budget for 2014/15 our cumulative savings have risen to £45.9m in four years.

Owing to the scale of our forward transformation programme, which will result in significant restructures to our Constabulary operating model during 2014/15, this budget book has only been presented to show a subjective breakdown of our revenue budget. Following the implementation of our restructures, we will look to reinstate a fuller budget book presentation for the 2015/16 financial year.

FINANCIAL SUMMARY

2012/13

£’000

2013/14

£’000

2014/15

£’000

COST OF SERVICES

1,400 1,450 Office of the PCC (formerly Police Authority) 1,406

- 2,403 PCC commissioning budget 2,556

281,239 275,808 Constabulary operating budget 272,231

282,639 279,661 TOTAL Cost of Services 276,193

FUNDED BY

(112,691) (115,805) Police grant (112,510)

(60,166) (61,543) Formula grant (58,676)

(5,245) (3,339) Council tax freeze grant (3,331)

(7,313) - Neighbourhood Policing Grant1 -

- (11,341) Council tax support grant2 (11,378)

(356) (2,403) Community Safety grant1 -

(95,879) (84,678) Council tax (88,464)

(989) (552) Surplus on prior year collection fund (1,834)

(282,639) (279,661) TOTAL Funding (276,193)

1 Both of these funding streams have been consolidated into the police grant;

2 This funding stream replaces the lost council tax funding which was brought about by the abolition of council tax benefit and

the replacement of this with local council tax discount schemes.

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GRANT FUNDING The 2014/15 provisional settlement was announced on 18th December 2013, with the final position confirmed on 5th February 2014. These announcements affirmed the forecasts we had been making.

The PCC will receive £177.2m (2013/14 - £179.8m3) in main grant funding for 2014/15, representing a £8.6m/4.8% reduction. Total grant funding, incorporating council tax freeze grant and the local council tax support grant, will be £185.9m (2013/14 - £194.4m), representing a £8.5m/4.3% reduction.

The following are highlights of the 14/15 grant settlement:-

The Government has continued to consolidate funding streams. In 14/15 our community safety grant funding (predominantly funding now provided to the PCC which historically was provided to local authorities) has been consolidated into main grant funding;

There have been several “topslices” applied to police funding by the Home Office in 14/15, including:-

o Growth funding for the Independent Police Complaints Commissioning (IPCC). The total topslice was £18m in 14/15, and we are expecting further incremental topslices of similar values in 15/16 and 16/17;

o Provision of additional resources to Her Majesty’s Inspectorate of Constabularies (HMIC). The total topslice was £9.4m in 14/15, and we do not anticipate any further topslices to police funding for HMIC beyond this.

The Government has only confirmed the 14/15 funding position, leaving open the question as to the size and structure of our funding for 15/16 and beyond. However, at the time of the funding settlement the Secretary of State for Communities and Local Government did state that the 11/12 and 13/14 council tax freeze grants would be consolidated into base thereby removing the threat of a funding cliff edge in 2016/17.

FORMULA FUNDING AND DAMPING The main police grant has historically been distributed through a formula. The current formula was introduced in 2006/07, and determines “assessed need” for each police area in England and Wales based upon a range of key factors. Applying the Governments own formula, the assessed need in Avon & Somerset is greater than our historical funding levels. Correspondingly other areas of the country were identified as having historic funding levels in excess of assessed need. In this way the formula identified a need for a redistribution of police funding across the country.

The reality of this position has proved too difficult for successive Governments to implement. They have instead adjusted the actual funding back to historic levels, thereby ignoring the results of the formula. Up until 2013/14 the Government continued to run the formula, and then adjust this to historical position through application of “damping”. In the eight years up to and including 2013/14 Avon & Somerset has seen its policing grant reduced by £110m. On average that lost funding would have enabled us to employ a further 300 police officers.

3 Includes community safety grant which was consolidated into main grant in 14/15.

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In determining the 2014/15 grant funding, the Home Office abandoned the formula altogether, and have embarked upon a review of the formula. We will continue to press for a fair, transparent and fully implemented formula for the future distribution of funding.

COUNCIL TAX FUNDING

During 2013/14 the PCC undertook extensive consultation with the public on the issue of council tax, and as a consequence of the overwhelmingly positive support she received, she has decided to increase the precept by 1.99%. This increase has been reviewed and supported (majority support) by the Police and Crime Panel at their meeting on 5th February 2014.

This increase follows a period when the police element of the council tax bill has been frozen for three successive years. Avon & Somerset is one of only 9 police force areas in England and Wales to have frozen the precept for the past 3 years. The proposed increase does not require a referendum as it is below the 2% threshold set by the Government.

In 14/15 the average band d council tax bill will be £171.37 (13/14 - £168.03).

Council Tax Funding by Authority

13/14 Base

14/15 Base

% Base Change

14/15 Precept

£’000

14/15 Surplus £’000

14/15 TOTAL £’000

B&NES 59,360.2 60,433.3 +1.81% (10,357) (217) (10,574)

Bristol 113,099.0 115,008.0 +1.69% (19,709) (502) (20,211)

North Somerset 70,870.8 73,217.0 +3.31% (12,547) (145) (12,692)

South Glos 82,868.0 86,262.0 +4.10% (14,783) (474) (15,257)

Mendip 36,498.3 37,452.9 +2.62% (6,418) (110) (6,528)

Sedgemoor 36,224.2 36,797.1 +1.58% (6,306) (254) (6,560)

South Somerset 54,870.6 56,140.8 +2.32% (9,621) (54) (9,675)

Taunton Deane 37,280.6 37,663.0 +1.03% (6,454) (39) (6,493)

West Somerset 12,861.8 13,229.0 +2.86% (2,267) (39) (2,306)

TOTAL 503,933.4 516,203.1 +2.43% (88,464) (1,834) (90,298)

INFLATION AND OTHER UNAVIODABLE COMMITMENTS

Throughout our process for setting the 14/15 revenue budget it has been necessary to review our cost base, and account for any changes to this. The following are therefore the key areas of consideration:-

Pay and Staffing adjustments – these reflect the largest area of commitment for us in 2014/15. Pay awards of 1% are forecast for September 2014, which when added to the impact of incremental pay progression, increases to our pension contributions and other smaller adjustments results in an increase of £5.1m to our cost base;

Inflationary adjustments – all areas of non-pay spend have been reviewed, and we have accounted for known contractual inflationary adjustments, as well as for anticipated inflationary pressures. In particular we have reviewed our fuel and

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utilities costs and provided for anticipated increases here. In total we have added £0.4m to our cost base in 2014/15;

Cost of Capital adjustments – we continue to employ a passive borrowing strategy, and as such we have been able to reduce our revenue costs of capital by £0.3m in 14/15;

Other unavoidable commitments – we have three new PFI buildings becoming operational in 14/15, and we therefore have to account for the costs of these buildings being brought into our budget. There are earmarked savings identified at the time the Government approved our PFI scheme which will cover these increases in costs, however for the purposes of this budget exercise it is necessary to gross out these costs. Once these have been added to unavoidable costs for national finance systems, and for the costs of bringing in new student officers in order to maintain our police officer numbers, we have added £2.8m to our cost base.

SAVINGS

The identification and delivery of savings has been necessary to balance our budget for several years now. £45.9m of savings have been identified since the beginning of the current spending review period, enabling us to balance our budget over the past three years and into 2014/15.

As the above graph demonstrates, £11.5m of these savings have been identified for delivery in 2014/15. These savings have been generated across all of our budgets, and have either already been delivered or will be delivered from the following areas:-

A new operating model (£4.9m) – The Constabulary has completed a fundamental review of the way that we do things: how we organise our people, processes and systems to give the public the best possible service. Through this process we have listened to both the public and our staff, as well as undertaking a detailed review of our demand. We have designed our new operating model in light of this work and

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these responses, and in so doing have identified £8m of savings, £5.4m of which will be delivered in 2014/15;

Collaboration (£0.3m) – We have entered into collaboration around some of our specialist operations functions with Gloucestershire and Wiltshire Constabularies. Through this collaboration our road policing, firearms officers and dog handlers will be delivered. By sharing our management structure, and aligning our operating model in these areas Avon & Somerset has identified £1.3m of savings, £0.3m of which will be delivered in 2014/15;

Estates and Sustainability initiatives (£1.7m) – With the introduction of our new PFI buildings expected for the first quarter of 2014/15, we have been able to release some estates costs primarily from our repairs and maintenance budgets. Further savings from estates are expected in future years, as our estates strategy is implemented and the size of our physical footprint is reduced. In addition to these reductions to our estates budget, we have made investment in specific projects which not only reduce our carbon footprint, but also deliver savings from our budget. These initiatives have included the introduction of a bio-mass boiler and photo-voltaic cells at our HQ site;

Contingencies (£1.4m) – Removal of our contingency held against the delivery of savings in 2013/14, combined with the removal of some small contingencies held by chief officers to support emergency spend, has enabled the delivery of savings. This has removed our future contingencies, which means that should we require it we will have to rely on our reserves to support future budgetary pressures;

Police Officer T&C’s review (£1.0m) – Police Officer terms and conditions were reviewed, and amended nationally. One of the changes that this introduced was a reduction in a competency related threshold payment, payable to police officers once they had achieved certain operational competencies. This additional payment has been removed, and its reduction is being phased in over 3 years. The reduction taken reflects the 13/14 and 14/15 reductions, as a consequence of us not knowing about the reduction in CRTP in sufficient detail when we set the 13/14 budget;

Scientific Investigations (£0.4m) – Following review of our forensics budget we have identified an opportunity to reduce this further in line with current spend patterns, and achieve a saving. It is the nature of this budget that it can be reactive to operational demand, and any risk associated with this budget reduction will be managed against our reserves;

Over-achievement of previous savings (£0.3m) – Having now worked through the detail of the savings identified and delivered in previous years, we have been able to achieve a greater saving than that which was originally identified;

Other Non-Pay Savings (£0.6m) – Throughout our detailed budget build exercise we worked with budget holders to identify further opportunities for savings. This review identified savings from across all of our budgets, many of which are individually very small in value but combined have made a contribution towards our savings target;

Other Pay Savings (£0.6m) – Throughout our detailed budget build exercise we worked with budget holders to identify further adjustments to our pay budgets, particularly in relation to allowances. This review identified savings from across all of our budgets, many of which are individually very small in value but combined have made a contribution towards our savings target;

Other Income Savings (£0.1m) – Throughout our detailed budget build exercise we worked with budget holders to identify further opportunities to increase income budgets. This review identified growth in income budgets across a number of areas.

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REVENUE BUDGET 2014/15 – SUBJECTIVE STRUCTURE

2012/13

£’000

2013/14

£’000

2014/15

£’000

155,384 155,307 Police Officers – Pay & Allowances 147,044

55,287 54,679 Police Staff – Pay & Allowances 59,368

11,312 10,851 PCSO’s – Pay & Allowances 10,742

1,181 1,081 Indirect Employee Expenses 983

6,329 6,704 Pensions 6,921

229,493 228,622 TOTAL EMPLOYEE COSTS 225,057

10,120 10,170 PREMISES RELATED EXPENDITURE 10,372

7,053 5,991 TRANSPORT RELATED EXPENDITURE 5,945

6,984 6,648 Communications and Computing 6,081

2,092 2,011 Forensic Investigation Services 1,581

10,649 10,773 Other Supplies and Services 10,685

19,725 19,432 TOTAL SUPPLIES AND SERVICES 18,347

23,137 22,584 THIRD PARTY PAYMENTS 22,982

4,731 4,739 CAPITAL FINANCING COSTS 3,857

294,259 291,538 TOTAL CONSTABULARY EXPENDITURE 286,603

(8,315) (8,508) INCOME – Special Grants (7,504)

(4,705) (7,222) INCOME – Other (6,868)

281,239 275,808 TOTAL CONSTABULARY 272,231

1,400 1,450 Police Authority / Office of the PCC 1,406

- 2,403 Community Safety Commissioning 2,556

1,400 3,853 TOTAL PCC & COMMSSIONING 3,962

282,639 279,661 TOTAL NET REVENUE EXPENDITURE 276,193

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HOLDING ACCOUNTS 2014/15 The following are managed by Avon & Somerset Constabulary, but reflect operations which extend beyond the reach of simply Avon & Somerset. The budget for them is therefore held in holding accounts, which means that they are managed outside of the main budget as set out in the preceding pages. Western Counties Air Operations Unit (WCAOU)

2012/13

£’000

2013/14

£’000

2014/15

£’000

593 145 Contribution from Avon & Somerset 0

296 73 Contribution from Gloucestershire 0

889 218 TOTAL WCAOU 0

The Western Counties Air Operations Unit (WCAOU) existed as a collaboration between Avon & Somerset Constabulary and Gloucestershire Constabulary for the purposes of providing a helicopter in support of policing operations. From July 2013 the helicopter and this service was passed across into the new National Police Air Service (NPAS). The consequence of this is that WCAOU has now been disbanded, and our contribution into NPAS is managed through the Constabulary’s budget.

Regional Serious Organised Crime Group (ZEPHYR)

2012/13

£’000

2013/14

£’000

2014/15

£’000

937 986 Contribution from Avon & Somerset 1,188

968 1,018 Contribution from Devon & Cornwall 1,220

338 356 Contribution from Dorset 431

311 327 Contribution from Gloucestershire 397

339 356 Contribution from Wiltshire 428

186 - Contribution from Reserves -

1,489 1,489 Grant Funding 2,375

4,568 4,532 TOTAL ZEPHYR 6,039

The five forces in the South West of England entered into a collaboration covering our management of serious and organised crime in 2012/13. This regional unit incorporated the existing Regional Intelligence Unit, and the Regional Asset Recovery Team as well as establishing a team of officers drawn from across the region to tackle serious and organised crime groups. During 2013/14 this regional unit has expanded to incorporate witness protection, cyber-crime, fraud and prison intelligence. This expansion was in part supported by an increase in grant funding.

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REVENUE BUDGET BEYOND 2014/15

Austerity in public spending is set to continue across the medium term. Many forecasters are indicating that in order to meet the Governments current fiscal targets, austerity will need to continue through until at least 2020. If this is true then Avon & Somerset police face at least another five years of funding reductions.

Forecasting the future is, by its nature, based upon assumptions and judgments. Our forecasts have proved to be materially accurate over the past four years, and we can take some confidence from this as to our ability to forecast the future.

Our forecasts suggest that we face a standstill deficit (i.e. before any new savings are accounted for) of £34.8m by 2017/18. When added to the £45.9m already saved since 2010/11, this brings our total cumulative deficit since the beginning of austerity to £80.7m across seven years – equating to 27% reduction in real terms when compared to our 2010/11 budget.

The key assumptions and factors which have been included within our forecast are:-

Pay awards will continue in 2014 and 2015 at 1%, with an assumed 2.5% thereafter;

Increase in our employers national insurance contributions will occur from 2016/17 as a consequence of reform of the state pension;

Provision for general, and specific (e.g. fuel and utilities) has been made based on an assessment of the likely changes to future costs;

Grant funding is set to reduce by 8.4% over the next three years, with 15/16 (4.6%) and 16/17 (2.2%) seeing particularly large annual reductions;

Our council tax base is set to grow by 0.8% p.a. over the next three years;

Our working assumption is for the council tax precept (the charge to local taxpayers) to increase by 2% p.a. for the next three years.

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We have already made progress towards closing the forecast budget deficit. To date we have identified £11.8m of new savings to be delivered from 2015/16 onwards. These savings are being delivered across a number of areas, including:-

Full-year effect of the savings achieved from the changes to our operating model;

Further savings from collaboration on specialist operations with Wiltshire and Gloucestershire constabularies;

Savings from further collaboration with regional forces in the areas of forensics and major crime investigation;

Further savings from estates and sustainability initiatives as we progress our estate strategy;

Savings across our fleet management, potentially through collaboration with partners;

Savings from the implementation of a new crime, intelligence, case and custody management system;

Savings achieved through offender management initiatives.

The profile of these savings across the next three years is outlined in the following table:-

2015/16

£’000

2016/17

£’000

2017/18

£’000

Standstill deficit 13,415 25,294 34,820

Less; planned savings (9,553) (11,803) (11,834)

Deficit to be closed from further savings 3,862 13,491 22,986

There remains a forecast deficit in each of the next four years, becoming particularly material from 16/17 onwards. In recognition of this fact the Constabulary has already commenced work to identify options in order to help in the closure of this forecast deficit.

Given the size and scale of this challenge, following four years in which we have already had to implement sizeable savings, it is clear that there remain some difficult decisions ahead. Our priorities, as set out by the PCC in the Police and Crime Plan, will guide our decisions about where future savings will be achieved. Wherever possible we will seek to:-

Continue to modernise our structures and processes - ensuring that we’re learning from and implementing wherever possible the best practice from across the public and private sector experience;

Expand our collaborative initiatives - working alongside other constabularies, blue light providers, local authorities, criminal justice partners, NHS bodies and the private sector to identify and implement new effective and efficient ways of working across our organisational, cultural and geographical boundaries; and

Continue to transform and rationalise our structures – building upon the work undertaken in re-designing our operating model to review our support services structures ensuring that they remain as efficient and effective as they can be in supporting operational policing.

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Capital Programme 2014/15

RESOURCES

The PCC and the Constabulary have sought to maintain a strategic capital programme, continuing to invest in enhanced services for our local communities, as well as for operational efficiency, ensuring that this remains affordable within ongoing economic constraints.

In funding the capital programme the PCC will utilise all sources of funding available, which include:-

Revenue contributions – from both in-year budgets as well as from reserves;

Capital grant funding;

Capital receipts (proceeds from sale of surplus assets); and

Borrowing.

The PCC will continue the passive borrowing strategy set by the Police Authority, seeking only to borrow after all other sources of funding have been exhausted, and then only when deemed necessary from a cash-flow perspective. This way we are able to keep our costs of borrowing down in the short and medium term.

KEY FEATURES

In setting the 2014/15 Capital Programme the PCC and Constabulary have identified proposed areas for forward investment, but this does not necessarily mean that all projects and programmes will be taken forward and that the full allocation of resources identified will be required. Working through the PCC’s regular Finance Meeting we will continue to refine the programme, ensuring that all items of expenditure deliver operational and or financial benefits which can be tracked and recorded.

Highlights of the programme are:-

Provision for the introduction of a new system to manage our crime, intelligence case and custody functions;

Investment in both mobile and fixed line telephony in support of future efficiencies and savings;

Investment in the facilities at our HQ site, ensuring that we’re maximising the largest single asset in our estate portfolio;

Investment in support of our estates rationalisation programme, which will seek to deliver a reduction in our physical footprint over the next five years;

Ongoing replacement of our marked and unmarked police vehicles in accordance with our usage of these vehicles against their useful lives (typically four years old or completion of 100,000 miles);

Ongoing replacement and upgrades of our Automatic Number Plate Recognition (ANPR) infrastructure.

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Capital Programme 2014/15

PROJECTS

Anticipated 2013/14

C/Forward

£’000

New 2014/15

Programme

£’000

TOTAL 2014/15

Programme

£’000

Rolling replacement and renewal programme 0 120 120

Projects – corporate systems 1,917 5,370 7,287

Projects – national/collaborative systems 0 576 576

Projects – mobile/fixed line telephony 0 5,000 5,000

Projects – custody technology 60 450 510

Projects – security and access control 0 500 500

Projects - other 0 85 85

IC&S TOTAL 1,977 12,101 14,078

Rolling replacement and renewal programme 282 300 582

Projects – HQ site and projects 450 1,660 2,110

Projects – estates rationalisation programme 130 1,498 1,628

Projects – PFI building programme 610 100 710

Projects – front reception refurbishments 0 300 300

Projects – other 0 90 90

ESTATES TOTAL 1,472 3,948 5,420

Rolling replacement - Non-specialist fleet 143 2,445 2,588

Rolling replacement - Specialist fleet 0 840 840

Projects - In-vehicle tracking devices 0 565 565

VEHICLE FLEET TOTAL 143 3,850 3,993

Rolling replacement – ANPR 0 165 165

Rolling replacement – other 0 300 300

Plant, Machinery and Equipment TOTAL 0 465 465

TOTAL CAPITAL PROGRAMME 3,592 20,364 23,956

FUNDING 2014/15

£’000

Home Office Capital Grant 2,393

Revenue Contributions 8,605

Capital Contributions 466

Capital Receipts 12,492

TOTAL FUNDING 23,956

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Further information can be obtained online at:-

www.avonandsomerset-pcc.gov.uk (PCC Website)

www.avonandsomerset.police.uk (Constabulary website)

Or in writing to:-

The Chief Finance Officer

Office of the PCC for Avon & Somerset

PO Box 37, Valley Road

Portishead

Bristol

BS20 8QJ

Telephone: 01275 816380