Further Detail

Pay award budgeting was originally based on Public Sector Pay Policy (PSPP). Pay awards through negotiation at both Police Negotiating Board (PNB) and Trade Unions were agreed in August and October respectively. As part of the pay negotiations, the additional funding required (£37.0m) to support the process was underwritten by the Scottish Government.  A budget adjustment has been made to reflect this change in the 2022/23 revenue budget.

Capital and reform funding allocations had been set as flat cash for 2022-23.  Given the current impact of inflation, this represented a real terms reduction in funding. When combined with capital receipts, the capital allocation is £52.6m for 2022-23 which has been eroded by inflation and will now pay for significantly less. The Scottish Government continued to provide reform funding up to £25m to support change and the transformation of policing. As part of the Spring Budget Revision (SBR) transfer process, Reform funding was reduced to £21.7m, with £2.8m of the funding re-directed to support capital expenditure investment.

IFRS 16 Leases is effective from 1 April 2022 in the public sector. The standard provides a single lessee accounting model and, under the latest Financial Reporting Manual (FReM) requirements, requires a lessee to recognise assets and liabilities for leases which last over 12 months, but not including low value leases. The standard will have the effect of largely eliminating the current “off-balance” sheet treatment of operating leases. Technical accounting adjustments during financial year 2022/23 are required that impacts both Resource Departmental Expenditure Limits (RDEL) and Capital Departmental Expenditure Limits (CDEL) budgets, which will see a reduction in RDEL and an increase in CDEL but with minimal overall impact on funding.  A budget adjustment has been made for both capital and revenue to reflect the impact of IFRS 16.

Additional in-year funding and resource expenditure (revenue and reform) over a certain threshold is subject to approval through the Scottish Government’s AO template process.  The purpose of this template is to enable the Accountable Officer to document decision making and set out the relevant approvals required for material spend decisions.  Finance and Procurement work closely with the business to ensure that material spend decisions are documented as appropriate. 

The Chief Financial Officer provides the routine finance report which outlines the year to date and forecast position for the revenue, capital and reform budgets.

Appendix A provides the detailed quarter three (Q3) finance report.

Revenue

The Q3 forecast break even position remains in line with budget.

There are a number of significant offsetting variances that form part of the Q3 forecast, with £28.6m of cost pressures funded by underspends of £28.8m.

The net expenditure forecast is £3.8m under revised budget mainly due to an over-recovery of income (£6.4m), net underspends as noted above (£0.2m) offset by other funded pressures (£2.8m).

All known material threats have been built into the Q3 forecast with the additional costs offset by additional income and other favourable variances, reducing the risk of deliverability to amber (previously heading towards red). The financial position, alongside any remaining threats and opportunities, will be closely monitored in the final quarter and forecast deliverability will be reviewed as appropriate.

The year to date actual position versus budget is underspent by £0.5m.

Operational costs associated with the passing of Her Majesty the Queen (HMTQ) are highlighted separately in Appendix A. The costs of £15.4m have been covered in full by His Majesty’s Treasury (HMT) and has been dealt with as a Spring Budget Revision (SBR) transfer.

Capital

The capital forecast at Q3 is £61.0m, £3.2m above the revised budget position of £57.8m, mainly due to additional fleet investment £5.6m offset by underspends on other capital expenditure items £2.4m.

This forecast overspend is fully funded and primarily compensated by an agreed reallocation of funding from Revenue Reform £2.8m and other items £0.4m (net).

The capital forecast at Q3 requires £7.1m of further slippage to be managed down over the remaining quarter of the year.

The year to date actual position versus budget is underspent by £2.9m.

Reform

The reform forecast at Q3 of £21.3m is £3.7m under budget with £2.8m of the funding re-directed to support capital expenditure investment.

The reform forecast at Q3 requires £0.5m of further slippage to be managed down over the remaining quarter of the year.

The year to date actual position versus budget is underspent by £0.6m.