Annex A
Budget 2003 - Key assumptions and commentary
Income
1.
The ARF for 2003 remains unchanged at £290, and income is budgeted to
remain constant: other income, for example registrations and scrutiny fees, have
been included at the levels budgeted for 2002.
2.
PLAB income is budgeted to rise by £1.3 million (44%) reflecting increased
volumes because the number of PLAB applications continues to grow and more tests
are planned or booked in 2003.
3.
In response to market demand, we are planning to establish a dedicated
assessment centre in the Greater London area. A dedicated centre will be cost
neutral, because operating costs will be no greater than the cost of hiring appropriate
facilities.
4.
Other sales and investment income are budgeted to remain at approximately
2002 levels.
Baseline expenditure
5.
All GMC activities in 2002 will continue and transaction volumes are not
expected to decrease. Registration activity is forecast to increase as a result of the
higher volumes of registrations and PLAB tests.
6.
New Fitness to Practise complaints are expected to remain at about the 2002
level. We will continue to invest in clearing any remaining backlog and on improving
service standards.
7.
Inflation is projected to add £1.7 million to the cost base in 2003. This includes
salary inflation of £0.6 million, plus £0.1 million as a result of the National Insurance
surcharge of 1% from 1 April 2003.
8.
We have budgeted for the full year costs of new posts created and filled part
way through 2002. As part of the fundamental review of all costs, we will be
reconsidering staff levels against a detailed review of the implementation of the
reform programme, including the introduction of revalidation.
Superannuation
9.
On actuarial advice, contributions to the staff pension scheme were increased
from 15.9% of salaries to 22.1% with effect from 1 January 2003. The aim was to
reduce the impact of the fall in value of the scheme’s investments during 2002 and to
reflect the underlying contribution rate required for existing employees reported in the
last full actuarial valuation (December 2000). The cost of contributions is budgeted to
rise by £0.8 million in 2003.
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10.
The current volatility of stock markets has had a significant, adverse impact on
the assets of the scheme, and current estimates project a potential long-term funding
deficit of £7.5 million. However, it has been assumed that no additional funding will
occur in 2003 beyond the adjustment to the funding rate.
Reconstituted Council and reforms
11.
The elections and induction of the reconstituted Council are budgeted to cost
£0.2 million. To support the implementation of reform, new committee members and
a new committee planning section has been budgeted to cost £0.5 million.
Revalidation
12.
The costs of preparing for revalidation will rise by £0.6 million to £1.5 million in
2003. This will facilitate further piloting, road shows and workshops, as well as IT
enhancements to allow for the introduction of the licence to practise. A further
£0.1 million is included in the Corporate Affairs budget to cover launch costs and
communication about revalidation and appraisal.
Accommodation strategy
13.
The release of Lombard Street and the substitution of Barnett House,
Manchester, will save about £0.5 million in 2003. Barnett House has been budgeted
throughout 2003.
14.
The search for new Manchester premises is progressing. £0.5 million has
been budgeted to cover three months rent, service charges, rates and insurance.
This may be used to acquire further temporary space.
15.
The cost of the property search, legal costs, project management costs,
restructuring and relocation of staff has been budgeted at £1.5 million. The budget
includes £2.3 million for fitting out and IT infrastructure costs, which will be
capitalised; a small amount of depreciation will be charged to operating costs in
2003. Timing is uncertain.
16.
During 2003, there will be no significant costs arising from the search for a
new London office.
17.
A small office in Scotland has been budgeted at £0.3 million.
18.
No account has been taken of any relief for VAT on rent, which depends upon
a Customs & Excise ruling in favour of the GMC.
Other
19.
£0.2 million has been budgeted for the Shipman Inquiry.
20.
Conferences for members and associates in the four countries of the UK are
budgeted at £0.4 million.
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21.
The investment portfolio at the end of 2002 was valued at £19 million. The
budget assumes no variation to the value of investments throughout 2003.
Efficiency and cost saving
22.
Reshaping the cost base and the transformation of the business into a more
responsive organisation will not be complete by the end of 2003. However, we will
have made significant progress, both to enhance efficiency and to contain costs. In
some instances, this requires investment in 2003 to produce future benefits.
23.
We are overhauling the provision of legal services. We have recruited
in-house lawyers and the team will continue to be expanded. The budget assumes
this will be cost neutral 2003, with significant savings coming on-stream in 2004
onward. Meanwhile, competitive tendering has produced savings of £0.7 million for
2003.
24.
We will invest in new IT support within Fitness to Practise, at a cost in 2003 of
£0.5 million. Meanwhile, we are reviewing staffing against likely demand.
25.
There will be substantial redevelopment of our website at a cost £0.3 million.
This will enhance services to PLAB candidates, enable on-line booking and payment
for tests, and provide current date information in response to enquiries. The budget
includes £0.1 million for a telephone monitoring system, designed to support
improved training, quality assurance and customer service.
26.
The HR IT system will be upgraded to support multi-site operations.
27.
To deal with the requirements of the Data Protection Act and the Freedom of
Information Act a new record management system has been budgeted at a cost of
£0.4 million.
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28.
The summarised cash flows for 2002 and 2003 are as follows:
Cash Flow
Operating Surplus/(Deficit)
Add back investment income
Add back depreciation
Add back Exceptional items
Pension prepayment
(Increase)/Decrease in Debtors
(Increase/(Decrease) in
Creditors
2002
Unaudited
000
2003
Budget
£ 000
10,375
1,952
(930)
671
(800)
810
339
5,006
5,939
Net Inflow/(Outflow) from
Operations
Investment Income & Interest
21,400
1,962
1,673
800
Capital expenditure
Net Realisation/(Purchase) of
Investments
Net Increase/Decrease in
Cash
(393)
(6,485)
(3,802)
16,195
(1,040)
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