Annex 1
Foreign & Commonwealth Office Main
Estimate 2005-06
RECONCILIATION OF
2005-06 MAIN ESTIMATES
TO SR2004 OUTCOME
1. The 2004 Spending Review settlement showed
the FCO Resource Budget for 2005-06 as £1,581.311 million
and the capital budget as £84.074 million. Since July 2004
there have been a number of changes to the FCO's Departmental
Expenditure Limits (DELs) which bring the current Resource DEL
figure for 2005-06 to £1,813.483 million and the Capital
DEL to £122.978 million. The tables below show the main changes
and reconcile the DELs with the Main Estimates figures.
|
| Table 1 Resource | 2005-06
|
|
| Resource DEL Baseline from SR 2004 (£m)
| 1,581.311 |
| Changes to Resource DEL |
|
| Conflict Prevention Pool Main Estimate Changes (net)
| 171.886 |
| Near Term Pressures Reserve Claim | 50.700
|
| Impairments Departmental Unallocated Provision
| 20.000 |
| Efficiency Challenge Fund | 9.600
|
| Iraq: increased expenditure on behalf of OGDs
| 47.347 |
| Iraq: OGD receipts to match increased expenditure
| -47.347 |
| Iraq OGD transfer from resource to capital |
-10.875 |
| OPM adjustment 2003-04 FCO | -7.600
|
| Net effect of reclassifying British Council as Public Corporation
| -2.340 |
| Other changes less than £1 million |
0.801 |
| New Resource DEL | 1,813.483
|
| Difference Between Resource DEL and Main Estimate
| |
| Remove Common Foreign and Security Policy (non-voted expenditure in DEL)
| -6.713 |
| Add Reimbursement of Taxes (voted expenditure outside of DEL)
| 18.000 |
| Exclude Departmental Unallocated Provision—including £20 million impairments DUP (not voted)
| -46.000 |
| 2005-06 Main Estimate Resource Total
| 1,778.770 |
|
| |
|
| Table 2 Capital | 2005-06
|
|
| Capital DEL Baseline from SR 2004 (£m)
| 84.074 |
| Changes to Capital DEL |
|
| Near Term Pressures Reserve Claim for security
| 35.900 |
| Iraq OGD transfer from resource | 10.875
|
| Net effect of reclassifying British Council as Public Corporation
| -7.800 |
| OPM | -0.071 |
| New Capital DEL | 122.978 |
| Difference Between Capital DEL and Main Estimate
| |
| Departmental Unallocated Provision for Capital (not voted)
| -1.000 |
| 2005-06 Main Estimate Capital Net Total
| 121.978 |
|
| |
Explanation of most significant changes
CONFLICT PREVENTION
POOL MAIN
ESTIMATES CHANGES
2. Activity and expenditure under the Conflict Prevention
Pools are undertaken jointly by the FCO, MOD and DFID. The FCO
manages the Peacekeeping and Global programme expenditure elements
of the pool and has £74 million for the Global Conflict Prevention
Pool in its Resource DEL baseline which is added to by other pool
partners through transfers between Departments in Main and Supplementary
Estimates. The effect of the transfers between pool partners to
the 2005-06 FCO Main Estimates is a net increase of £171.886
million, which includes an increase of £200 million for peacekeeping.
3. The Chief Secretary to the Treasury has so far agreed
that Parliamentary approval should be sought for up to £373
million of peacekeeping expenditure for 2005-06. Since there is
uncertainty over these costs due to changes in demand for military
involvement, the Treasury has agreed that an initial amount of
£200 million should be applied for in the Main Estimate.
The Treasury expects that further provision will be sought in
the Supplementary Estimates, by which time more accurate information
will be available.
NEAR TERM
PRESSURES RESERVE
CLAIM
4. The FCO made a claim on the Reserve in July 2004 for
funds to implement changes recommended in the review of FCO security
that followed the November 2003 attack on the British Consulate
General in Istanbul and also for funds for network modernisation
and exceptional pressures. The overall amount granted was £50.7
million resource and £35.9 million capital.
5. The security related claim for £20.7 million
FCO resource, £35.9 million FCO capital and £6 million
for British Council (resource) was met in full. In addition, £10
million was made available from the Reserve for network modernisation
and £14 million for exceptional pressures. The network modernisation
funds will be used towards the Future Firecrest Project, which
will replace the FCO's current ICT systems, as well as towards
the up-front costs of our efficiency programme. The funds for
exceptional pressures will mainly be used for the cost of the
UK presence in Iraq.
DEPARTMENTAL UNALLOCATED
PROVISION FOR
IMPAIRMENTS
6. The non-cash Departmental Unallocated Provision for
impairments does not form part of the FCO's baseline and so was
not included in the Spending Review figures. Treasury has allowed
the FCO continued access to this unallocated provision of £20
million for 2005-06. Impairments arise where the cost of a building
exceeds its current value and an accounting adjustment is made
to write off the difference as a non-cash cost. The difference
arises because the FCO has to provide buildings that, as far as
possible, conform to UK health and safety standards and incorporate
additional safety and security features. It is rare for such additions
to be fully reflected in the local market value.
EFFICIENCY CHALLENGE
FUND
7. The FCO is drawing down the £9.6 million that
HM Treasury made available for 2005-06 from the Efficiency Challenge
Fund as part of the 2004 Spending Review settlement. This will
be used to continue to fund FCO Efficiency Plan proposals for
early retirement in the UK and to restructure the overseas network
of locally-engaged staff. The aim is to bring the FCO staffing
structure into line with current operational requirements.
IRAQ
8. Income and expenditure have been increased by £47.347
million to account for the contribution of other government departments
to their share of the cost of the UK presence in Iraq. Of this,
£10.875 million has been transferred to the capital DEL to
cover higher capital costs.
OVERSEAS PRICE
MOVEMENTS
9. OPM is an agreement between the FCO and the Treasury
that safeguards the Department's overseas spending power against
exchange rate movements and increases in overseas inflation rates,
when the latter exceed UK inflation. Where spending power is eroded
by exchange rate variations or inflation, the Treasury makes good
the shortfall in the Department's budget. Where sterling exchange
rate gains or relative overseas deflation produce windfall gains,
as here, the Department returns funds to the Treasury.
NET EFFECT
OF RECLASSIFYING
BRITISH COUNCIL
AS A
PUBLIC CORPORATION
10. The reclassification of the British Council from
a Non-Departmental Public Body (NDPB) to a Public Corporation
has been reflected in the FCO's Resource and Capital Departmental
Expenditure Limits since the 2004 Spending Review. As an NDPB
the resource and capital expenditure of the British Council was
included in the FCO's Resource and Capital DELs and the Resource
DEL included an element for British Council non-cash costs such
as depreciation. As a Public Corporation only the grant-in-aid
payable to the British Council needs to be recorded in the FCO's
Resource DEL and the British Council's capital expenditure is
no longer included in the FCO's Capital DEL. The amount of grant-in-aid
payable to the British Council is unaffected by its change in
status.
IMPACT ON
PSA TARGETS
11. The additional £14 million for Iraq outlined
in paragraph 5 will contribute to the FCO's pursuit of PSA targets
one, two and three, relating to Weapons of Mass Destruction, terrorism
and conflict prevention. The additional expenditure on security
and network modernisation will contribute to the achievement of
all the FCO's PSA targets.
DEPARTMENTAL EXPENDITURE
LIMIT (DEL) AND
ADMINISTRATION BUDGETS
12. The tables below shows a comparison of the 2005-06
DEL (Table 3) and Administration (Table 4) budgets with the 2003-04
outturn, 2004-05 forecast outturn and plans for 2006-07 and 2007-08.
| | |
| | |
| Table 3 (£m) | 2003-04
Actual
| 2004-05
Forecast | 2005-06
Budget
| 2006-07
Plan | 2007-08
Plan
|
| | |
| | |
| Resource DEL1 | 1,585.188 |
1,786.890 | 1,813.483 | 1,683.660
| 1,720.660 |
| Capital DEL | 49.821 | 77.533
| 122.978 | 111.203 | 109.203
|
Less: Depreciation2 | -103.538
| -111.218 | -133.624 | -168.624
| -184.624 |
Total | 1,531.471
| 1,753.205 | 1,802.837 | 1,626.239
| 1,645.239 |
| | |
| | |
| | |
| | |
1 Resource DEL figures for 2006-07 and 2007-08 are understated
because they do not include conflict prevention expenditure, which
will be transferred at the time of the 2006-07 and 2007-08 Main
and Supplementary Estimates.
2 Depreciation, which forms part of Resource DEL is excluded
from the total DEL, since Capital DEL includes the purchase cost
of capital assets. To add on the depreciation of those assets
would double count their cost.
| | |
| | |
| Table 4 (£m) | 2003-04
Actual
| 2004-05
Forecast | 2005-06
Budget
| 2006-07
Plan | 2007-08
Plan
|
| | |
| | |
| Administration Budget | 745.715
| 741.855 | 797.638 | 827.068
| 833.068 |
| | |
| | |
| | |
| | |
DEPARTMENTAL UNALLOCATED
PROVISION
13. In accordance with Treasury guidance, the FCO have
put aside a Departmental Unallocated Provision (DUP) on RfR1 of
£16 million resource and £1 million capital for 2005-06.
This would be used to meet unforeseen requirements arising in-year.
There is also a non-cash DUP of £20 million (see paragraph
6 above) to meet costs relating to the impairment of fixed assets.
14. In addition, in 2004-05, the FCO did not draw down
its RfR1 DUP of £11 million resource, £1 million capital
or its £20 million non-cash impairments DUP and anticipates
rolling these forward under the end year flexibility scheme.
15. For RfR2 there is £10 million of DUP remaining
for the Global Conflict Prevention Pool global programme expenditure.
Sir Michael Jay KCMG
Accounting Officer
May 2005
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