I have today placed in the library my proposals for the aggregate amount of grant to police authorities (referred to in the report as the Police Core Settlement) in England and Wales for 2011-12, for the approval of the House. I have also given an indication of how I intend to allocate Home Office funding for the years 2012-13 to 2014-15, for which approval will be sought at a later date. My intention in doing so is to provide police forces with the best possible information to support their financial planning.

My right hon. Friend the Secretary of State for Communities and Local Government has today also set out his proposals for police funding for the next two years. For the second two years, in England, the Local Government Resource Review may have implications for how the wider funding of local government is allocated for police authorities. The review will conclude in July 2011 and will signal the Government's intentions for the future.

The Welsh Assembly Government are also setting out today their proposals for the next two years of funding for the four police authorities in Wales.

To ensure a simple, transparent and equal share of reductions to the Police Core Settlement, funding from the Department for Communities and Local Government and from the Welsh Assembly (which together comprise the Majority of Government funding to police authorities), these allocations have been damped in 2011-12 and 2012-13 at the level of the average reduction.

This means that every police authority will see a cash reduction in this funding of 5.1% in 2011-12 and 6.7% in 2012-13. I understand that the police service is already planning on this basis and-as in previous years-I will ensure that Welsh forces receive equal damping treatment to their English counterparts. When funding for specific grants is added to this, the total cash reduction in core Government funding to the police remains 4% in 2011-12 and 5% in 2012-13, as announced on 20 October.

Damping levels for the last two years of the settlement will be decided at a later date.

These reductions will be challenging but the Government are clear that forces can make the necessary savings while protecting the front line and prioritising the visibility and availability of policing.

The Government will play their part through continuing work with authorities and forces on value for money, including more effective procurement at national level, greater collaboration between force and other partners, and better use of comparative information; through the removal of unnecessary bureaucracy which adds costs and impedes a sharp focus on front-line policing; through its policy for public sector pay; and through careful consideration in due course of the recommendations from Tom Winsor's current independent review of police remuneration and conditions.

In order to give greater local freedom and flexibility over how resources are deployed locally there will be a significant reduction in the funding allocated by means of specific grants. Specifically, the Rule 2 Grant, Crime Fighting Fund and the Basic Command Unit Fund have all been absorbed within the Police Main Grant.

I will continue to provide a specific Neighbourhood Policing Fund for the first two years of the settlement period. This recognises that neighbourhood policing provides a dedicated, consistent and visible presence in communities. From 2013-14, the new directly elected Police And Crime Commissioners will have full discretion over this funding, recognising their accountability to the communities they serve. In London, the Metropolitan police authority will have full autonomy over this funding from 2011-12, in recognition of the role the Mayor of London and the Deputy Mayor, Policing, already play.

I will also be keeping specific funding for counter-terrorism policing and have provided relative protection to this budget to ensure that critical national counter-terrorism capabilities are maintained. Authorities and forces will receive more details of their specific counter-terrorism allocations in January.

In addition to the Police Core Settlement, the Olympic safety and security budget has been prioritised. These provisions are detailed below.

I have set aside £50 million in 2012-13 to fund the first elections of Police and Crime Commissioners in that year. This amount was specifically included in the police settlement for this purpose and has therefore had no impact on allocations to forces. I have likewise set aside funding for the continuation of police private finance initiative projects.

My right hon. Friend the Secretary of State for Communities and Local Government will today make a statement on his approach to council tax increases and capping next year. He will also announce details of the outstanding capping action to be taken against Greater Manchester and Nottinghamshire police authorities.

The Police Grant Settlement 2011-12 to 2014-15

I have set out below how I propose to allocate the police settlement between the different funding streams for the next four financial years.

Indicative allocations of these grants (with the exception of counter-terrorism funding) for each force in England and Wales for 2011-12 and 2012-13 are set out in table 3, and for 2013-14 and 2014-15 are set out in table 4.

Police Allocation Formula

I have taken into consideration representations made as part of the public consultation into the Police Allocation Formula. As a result, I have made three technical changes. These are the consolidation of Rule 2 grant; the inclusion of bar density data at CSP level; and the use of more up-to-date data to determine activity based costings. Details of these changes will be given to all forces with their allocations.

Specific Grants

Indicative amounts of these grants are set out in table 3.

Neighbourhood Policing Fund

The Neighbourhood Policing Fund specific grant will continue until directly elected police and crime commissioners are in place. Funding totalling £340 million in 2011-12 and £338 million in 2012-13 will be made available. Approximately 90% of the grant will be ring-fenced for PCSOs-contributing up to 75% of their salary costs. The remaining 25% will need to be match-funded by the police, councils, businesses and other organisations. This will not apply to the Metropolitan Police Authority who will have full discretion on the spending of this funding from 2011-12. From 2013-14 this fund will be consolidated into the Police Main Grant.

Counter-Terrorism

Counter-terrorism has been prioritised to ensure that the police will have the necessary resources to respond to the changing demands posed by the terrorist threat. We have allocated £567 million to support counter-terrorism policing in 2011-12.

Forces will be notified of their individual allocations in early January. For security reasons, these allocations will not be available in the public domain.

Private Finance Initiatives Grant

Specific funding will be given to cover the costs of private finance initiative projects which are currently operational and where grants are being paid in 2010-11, and for projects that become operational in 2011-12. The Home Office will continue to support projects that are currently in procurement.

National, International and Capital City Grant

The National, International and Capital City Grant will continue to recognise the unique additional duties performed by the Metropolitan police service. In 2011-12 the funding will be £200 million. It will be reduced in subsequent years on the same basis as the Police Main Grant.

Council Tax Freeze

Funding was made available in the police spending review settlement to help police authorities deliver a council tax freeze in 2011-12. Should every authority participate in the freeze, it is estimated that they will receive a total of around £75 million in each of the next four years to compensate for income that they would otherwise have raised from council tax. Funding for this was included in the police settlement, and has been set aside accordingly.

Other Funding

Police Capital

I am today also setting out capital allocations for forces over the next four years. Police capital will be at 55% of its current level by 2014-15. In 2011-12 more pressing capital priorities within the Home Office mean that it will be reduced to 40% of its level this year, however I have ensured that the police service will be compensated through an increase in capital funding in the following financial year.

I intend to allocate the majority of this funding directly to police authorities/PCCs, who will all receive the same % change in funding, as set out in table 5. I will also continue to support the National Police Air Service and maintain a capital contingency.

Olympic Safety and Security

Safety and security for the 2012 Olympics and Paralympics is a priority for this Government. Safety and security planning is well advanced and on schedule.

In accordance with the commitment made by the then Minister for the Olympics in 2007, the Government will make up to £600 million available, if required, for the Olympic safety and security programme. Since 2007 the Home Office has identified significant financial savings and the Government believe that it will be possible to continue to make further savings without creating additional risk. At this stage, with almost two years before the games begin, we estimate that it should be possible to deliver the core cross-Government safety and security programme for about £475 million.

Beyond the £134 million which will have been spent by the Home Office by the end of the current financial year, the Home Office will be providing £107 million in 2011-12 and £192 million in 2012-13, primarily for the police service, to meet the Olympic safety and security costs. This funding is in addition to the core police funding detailed above and the contributions being made by other Government Departments. Home Office funding includes a very substantial financial provision for contingencies.

We assess this funding will be sufficient to meet the anticipated cost of delivering the capability and capacity that will be required to ensure a safe and secure Olympics and Paralympics. A further Olympic contingency of around £500 million is available for cross-programme issues, including a material change in circumstances relating to Olympic safety and security.

Venue security is a shared responsibility of the London Organising Committee of the Olympic and Paralympic Games (LOCOG), as the event organiser, and the Government, as the guarantor of security for the International Olympic Committee (IOC) and a further investment of about £280 million will also be made available for the specific purpose of supporting the (LOCOG) in their responsibilities to secure Olympic venues before and throughout the games.

The Olympic safety and security operation will depend heavily on the existing substantial investment which the Government have made in counter-terrorism policing and infrastructure. We are committed to providing £567 million in 2011-12 and £564 million in 2012-13 for counter-terrorism policing capabilities: much of this capacity will be devoted to the Olympics in 2012.