Agenda item

Purpose of the report:  Each year, as part of the budget setting process, a Medium Term Financial Forecast (MTFF) is prepared to assist with demonstrating whether the Force is financially sustainable in the medium term.

Witnesses:

Lisa Townsend, Police and Crime Commissioner (PCC)

Kelvin Menon, Chief Finance Officer (OPCC)

Key points raised during the discussion:

1. The Chairman outlined the purpose of the report. The Chief Finance Officer gave a brief introduction, outlining the report was the latest updated financial forecast for the period from 2025/26 to 2028/29. It set out the level of savings based on assumptions in the forecast, which may need to be found in the period.

2. A member raised that the report stated that “[…] cumulative savings of £23.4m will be required for the 4 years from 2025/26 to 2028/29”, while the Annual Report stated that “[…] the MTFF indicates that savings of over £18m are required over the next four years”. The member asked what the reason for this discrepancy was or if it was an updated figure. The Chief Finance Officer explained they were updated assumptions. In particular, the pay assumptions in the intervening period were updated, which was why the gap increased.

3. The member noted that the report assumed for 2025/26 that the referendum limit would be returned to 2%. The member asked if this assumption was the same for the next three years. The Chief Finance Officer confirmed this was the assumption in the forecast, but hopefully in the October Budget the Government will announce what the referendum limit will be.

4. A member referred to paragraph 11 of the report which noted that Surrey could receive the lowest share of a £175m Home Office grant for funding Police Force pay awards, depending on the calculation methodology used. The member asked what contingencies were being explored for if this occurred, and what impact meetings with the Home Office had had on this area. The Chief Finance Officer explained the Force had received pay grants in previous years which unfortunately were all allocated on the funding formula basis despite the PCC lobbying the previous government to change the methodology. The same formula allocation was done this year despite the Home Office informing him that various methodologies were considered. This meant Surrey Police had the lowest share nationally of the £175m amounting to £2.1 million to cover the pay increase for officers and staff for 2024/25. One of the reasons provided was that the Home Office did not want Forces to lose faith in the current formula methodology overall. The £2.1m grant awarded should cover the increase in officer pay this year but for later years need to wait to see what next year’s increase would be.

5. The member asked what the gap between the £2.1m and the total cost of the Force’s pay award was. The Chief Finance Officer explained that for police officers, the grant just covers the additional cost over the 2.5% allowed for in the budget. However, there was no additional money to cover the staff increase and the government had been clear that the grant was intended to cover the staff and officer increase. The shortfall on this was around £2.4m.

6. A member asked if detail on the potential areas for further savings being identified by the tactical reviews and the 2025/26 in-depth budget review could be provided. The member also asked if there was a likelihood that reserves would need to be drawn on. The Chief Finance Officer explained there was an extensive change programme over the next few years, which was looking at areas such as changing shift patterns, benefits of upgrading the Enterprise Resource Planning (ERP) system and reducing overtime. There was a programme looking to rationalise the Force’s vehicle fleet. There was also a detailed budget review by area, adding that there were still savings that needed to be identified for next year. If these savings were not identified in time, reserves may have to be drawn upon to cover the shortfall.

7. A member asked to what extent had the PCC been speaking to Surrey MPs to lobby them and referred to a vote in early 2025 where Surrey MPs had an opportunity to express satisfaction or dissatisfaction with what was offered. The PCC explained that this conversation happened constantly and that there would be a meeting with herself and the Chief Constable, with all Surrey MPs, and it would be part of the discussion.

8. A member raised that the report referred to the possibility that services may be impacted by the savings required, and asked what this could mean for Surrey residents, and if there were emergency plans in place should this occur. The Chief Finance Officer replied that it was too early to comment, until it was known what the level of savings would be. It would need to be worked out which areas savings would need to be taken from. He added that The Chief Constable and the PCC were committed to try to minimise any impact on residents.

9. A member raised that his local authority was given an ‘optimistic’ and ‘pessimistic’ version of the Medium-Term Financial Plan as well as the main version of the plan. The member asked if any thought had been given to doing the same for the Surrey Police Group. The member noted that areas such as the extent to which one should allow for the possibility of income through mutual aid and renting out police cells to the prison service, had been debated in the past, though the reality was this occurred even though there had been no assumption for it. Equally, the assumption that grant funding would be essentially ‘flat’ was pessimistic. The member raised there had also been promises for more neighbourhood policing from the PCC, which required funding to deliver. The PCC stated she would welcome the Panel’s joint efforts, noting that Surrey Police Group would suffer if it was required to hire more officers, which, although good in principle, could leave the Force in a worse position if there was no additional funding.

10. The Chief Finance Officer explained that some scenario modelling was done and could be shared with the Panel. On an optimistic basis, the gap fell to £21.5m, and on a pessimistic basis the gap rose to £27.6m. The gap depended on the assumptions used in the forecast, and hence it was probably better to understand the sensitivities within the forecast. For example, if Surrey Police Group had put 2.5% pay into the forecast and if the government it would fund an additional 1% of this, it would move the forecast by £2.5m. Similarly, if the council tax cap was moved from 2% for every pound it increases a further £0.5m would be received.

11. The Chairman suggested the Panel could write a letter, together with the OPCC, to send to the Home Office in support of extra funding and the unfairness of the funding formula to Surrey.

The Panel AGREED to a write letter to Home Office.

RESOLVED:

1. The Panel NOTED the initial outcome of the forecast, the likely need for additional savings and the financial challenge that this represents.

2. The Panel NOTED the current assumptions being employed in the scenarios and the risks therein.

Actions/requests for further information:

·         The Chief Finance Officer to share the scenario modelling on the pessimistic and optimistic versions of the MTFS.