Report detail

BACKGROUND – BUDGET CONTEXT
The Board approved the 2025-26 annual budget on 27 March 2025 which set out the spending plans for Police Scotland, Forensic Services and SPA Corporate regarding revenue, capital, and reform for the coming financial year.

The Authority received a core revenue funding increase of £56.7m (4.1%), plus an additional £15.2m to fund 60% of increased national insurance costs and an additional £10.0m to support reform and modernisation. The remaining national insurance costs (£10.1m) will be funded in 2025-26 through reduced employer pension contributions.

The budget for 2025-26 includes a core budget for around 16,500 officers and an average 5,900 FTE police staff. National insurance changes resulted in a £25.3m cost pressure for policing. The annual pay award is also a significant year-on-year pressure, with every 1% pay increase costing an additional £12.5m. Pay negotiations for 2025-26 have now been agreed for both officers through PNBS and staff through Trade Unions. The outcome of these pay discussions are now reflected in the Q2 FC, however in addition a potential inflation guarantee payment may be triggered later in the financial year as part of the pay award agreement. Other pressures include new technology costs, general inflation and other specific price increases.

The budget includes vacancy management savings and an income challenge to be delivered as part of the overall budget, as well as over £9.0m of non-pay savings and efficiencies - a highly challenging requirement given that only 14% of the budget relates to non-pay costs.

The reform budget to support change and transformation for 2025-26 is £20.4m. The budget includes £16.2m of overprogramming to be managed in-year as the work progresses on the prioritisation of change.

The total capital allocation for 2025-26 is £71.0m including capital receipts. This investment marks the starting point of delivery of the estate’s masterplan, supports the rolling replacement programme and progress change and transformation programmes. It is recognised that additional resources are required in key enabling functions to support and deliver an increased capital programme.

FURTHER DETAIL ON THE REPORT TOPIC

The Head of Finance 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 two (Q2) finance report.

Quarter 2 summary

Revenue
• The Q2 net expenditure forecast is in line with budget and funding.

• The Q2 forecast position presents a number of challenges, particularly when viewed in the context of the emerging cost pressures. Key risk areas include overtime, ill-health pension costs, liability claims, and a potential inflation guarantee payment that may be triggered as part of pay award agreements.

• It is critical that spend is tightly controlled over the remainder of the financial year to ensure a balanced position in line with funding.

• The forecast will be closely monitored alongside the financial threats and opportunities detailed on page 19 (Appendix A), with appropriate action to be taken if required.

• Funding discussions are ongoing with regards to Op Roll (POTUS visit) and Op Oclate (VPOTUS visit) totalling £24.1m. Confirmation of funding is not expected until the Spring Budget Review is completed in the early part of 2026, and as such costs are reported separately to the BAU financials in Appendix A.

• The year-to-date actual position at period 6 is £4.5m over Q1 forecast and £0.7m under budget.

Capital
• The capital forecast at Q2 is £73.1m, £2.1m above the budget position of £71.0m. The forecast overspend is fully funded by additional capital receipts and other grants.
• Capital delivery plans and forecasts have been updated by business areas to accurately reflect current timelines and spend profiles at Q2 forecast.

• The Q2 capital forecast requires £5.9m of slippage to be achieved throughout the remaining part of the financial year.

• Committed and uncommitted spend will continue to be monitored throughout the year and tracking of these is highlighted in Appendix A.

• Finance are engaging regularly with business areas to support delivery of their capital plans.

• The year-to-date capital spend at period 6 is over Q1 forecast by £4.8m and over budget by £0.9m.

Reform
• The reform forecast at Q2 of £20.8m, £0.4m (fully funded) above the budget position of £20.4m.

• The reform forecast has removed £15.9m of the £16.2m overprogramming included as part of the approved budget, leaving only £0.3m of slippage still to be achieved across the remainder of the year.

• Committed and uncommitted spend will continue to be monitored throughout the year and tracking of these is highlighted in Appendix A.

• The year-to-date reform spend at P6 is under Q1 FC by £0.4m and under budget by £0.2m.