Supplementary memorandum from the Ministry
of Defence
Set out below are the Department's responses
to the Select Committee questions arising from the Winter Supplementary
Estimate and the Department's Estimates Memorandum.
1. What is the rationale for the figure of
£120 million Resource DEL End Year Flexibility drawdown,
and for the £72 million figure for Capital DEL EYF drawdown?
The Memorandum identifies the TLBs which will be given the extra
funds, but for what purpose do these TLBs need the additional
funds?
RESPONSE
The EYF drawdown was agreed between the Department
and the Treasury, reflecting the Department's emerging 2005-06
outturn in near cash Resource DEL and Capital DEL under RfR1.
The TLBs have been given the additional funding
to cover fuel cost pressures (Fleet), carry forward of Defence
Modernisation Fund projects (DLO), IT and Communication projects
(in both DLO and the Central TLB), some slippage in Defence Estates
expenditure (DE), some additional expenditure over initial budget
on the Army's manning and training margin (AG), and additional
spend on equipment projects (DPA).
2. Did the Department wish to draw down more
of its available stock of EYF, identified in the Public Expenditure
Provisional Outturn White Paper [Cm 6883, Table 5]? To what extent
did the Treasury restrict the amounts that could be drawn down
in this Winter Supplementary Estimate?
RESPONSE
The figures published in the Public Expenditure
Provisional Outturn White Paper (PEOWPS) were based on provisional
outturn. The EYF for 2006-07 was agreed with the Treasury subsequently.
The Treasury did not restrict the Department's entitlement to
EYF which could be drawn down in the Winter Supplementary Estimate.
3. In the Memorandum, the DEL EYF to be drawn
down is broken down between TLBs [Memo para 4.3], "to match
required defence outputs". But there are also more significant
reallocations of existing provision between TLBs. To what extent
are the allocations (and reallocations) between TLBs tied to the
need to maintain performance against specific PSA targets (or
to prevent targets being missed), and to what extent do the allocations
reflect a need to cover particular TLBs' outturns exceeding originally
envisaged spending levels?
RESPONSE
The allocations (and reallocations) between
TLBs are not tied to the need to achieve performance against specific
PSA targets but rather to enable TLBs to deliver across the range
of their outputs in accordance with our plans.
4. What is the rationale for the transfer
from the Cabinet Office for the expansion of the Parliamentary
Counsel Office?
RESPONSE
During 2004, Government decided that the Office
of the Parliamentary Counsel (OPC) should be expanded to cope
with the growth in the volume of legislation, and that the increase
in its cost should be shared amongst user departments. This transfer
represents the share of the baseline funding for the Department
for 2006-07. The Department will be invoiced for its share of
the costs during the year.
5. Supplementary Estimate includes a £100
million transfer within RfR-1 Resource DEL, from "non-cash"
(or "indirect" costs) to "near cash" ("direct").
The Estimate Memorandum identifies this as comprising £80
million allocated to Strike Command to cover increased fuel costs
and £20 million to the DLO for higher logistical costs [Memo
para 4.2.1]
(i) From which TLBs will the "non
cash" funds come?
(ii) What is the basis of these £80
million and £20 million figures—do they reflect the
extent of increased fuel and logistical costs or the extent by
which non-cash costs now appear to have been over-estimated?
RESPONSE
(i) This has been resourced from the Central
TLB which was holding an excess of Indirect Resource DEL above
its requirement.
(ii) The £100 million near cash has
been allocated to Strike (£80 million) and the DLO (£20
million) reflecting increased fuel and logistical costs. The amounts
of transfers between Near Cash Resource DEL and Indirect Resource
DEL require Treasury agreement.
6. A further breakdown of the figures on
the costs of operations in Iraq and Afghanistan [Memo, para 5.1]
would be helpful. In particular,
(i) How much of the personnel costs are
attributable to civilian personnel?
(ii) What infrastructure projects are
the infrastructure costs attributable to?
(iii) Please explain, by way of example,
what falls under "other costs and services", as opposed
to "stock/other consumption".
RESPONSE
(i) A total of £29 million is attributable
to civilian personnel of which £22 million relates to Iraq
and £7 million to Afghanistan.
(ii) Infrastructure costs cover estates
and facilities management services, building rental or maintenance
and provision of IT and communications. Examples of the current
major projects are:
Iraq
To develop the single Contingency Operating
Base located at Basrah Air Station, which will allow planned re-basing
of UK and coalition forces within Multi-National Division (SE)
to a single enduring location; and the development of a water
generation plant to help support our forces.
Afghanistan
The infrastructure priority is the continued
expansion and consolidation of facilities in Helmand province
and at Kandahar Airfield (KAF). In the main this involves the
upgrade of living accommodation at KAF and Camp Bastion from Tier
1 to Tier 2 standard, upgraded hospital facilities at Camp Bastion
and relocation of the UK Task Force HQ to Lashkar Gah.
(iii) The major elements which fall under
"Other Costs and Services" are:
utility costs, personnel and freight movements,
hire of transport, staff training, medical treatment, welfare
services, food and administration costs.
7. Why are the costs of Balkan operations
not presented in these Winter Supplementary Estimates?
RESPONSE
Unlike operations in Iraq and Afghanistan, funding
for operations in the Balkans comes from the Peacekeeping element
of the Conflict Prevention Pools. This funding is sought from
the FCO in the Spring Supplementary Estimates, when they will
have received full funding for Global Conflict Prevention Pool
activities.
8. You expect to build the costs of the tax-free
bonus for operationally deployed personnel in the Spring Supplementary
Estimates [Memo para 8.1]. What is your approximate current estimate
of the likely figure? Why have you been unable to present a figure
at the time of these Winter Estimates?
RESPONSE
The Winter Supplementary Estimates were based
on figures reported by MOD Top Level Budgetary areas at the end
of August prior to the announcement of the "Operational Allowance".
The "Operational Allowance" was not announced until
10 October 2006. We currently estimate that the annual costs are
likely to be around £60 million.
9. The Winter Supplementary Estimates include
an increase in capital costs of £858 million. Part of this
is accounted for as an £360 million increase for Iraq/Afghanistan
operations. What are the main causes of the remainder of the increase?
10. What is the cause
of the increase in the RfR-1 Capital DEL provision for Defence
Estates, which has grown from £34 million at Main Estimate
to £428 million in the WSE?
RESPONSE
The Department manages its Capital DEL on a
net basis, whereas the Estimate shows the Capital expenditure
and Non Operating Appropriations in Aid under separate columns.
Erroneously at Main Estimates, as previously reported, the Capital
DEL figure for Defence Estates was entered as a net figure. The
bulk of the increase in Capital DEL for Defence Estates is offset
by a similar increase in Defence Estates non-operating Appropriations
in Aid. The net capital budget for RFR1 remains as agreed at Main
Estimates, with the addition of £72 million end of year flexibility.
11. What are the main causes in the changes
in the RfR-1 net Resource DEL provision for the individual TLBs
listed below [in Part 2 of the Estimate]
| Fleet | Cut of £2.0 billion
| = 47% cut |
| CinC Land | Cut of £1.4 billion
| = 24% cut |
| Strike Command | Cut of £1.7 billion
| = 45% cut |
| CDL | Increase of £5.8 billion
| = 80% increase |
| Central | Cut of £1.1 billion
| = 34% cut |
| Defence Estates | Increase of £1.5 billion
| = 163% increase |
RESPONSE
The Department has centralised fixed asset management under
four Single Balance Sheet Owners (Paragraph 4.5.1 of the Estimates
Memorandum refers) and this has resulted in an adjustment of Indirect
Resource DEL (depreciation and cost of capital charge) across
the Department. There have therefore been significant increases
in the Indirect Resource DEL for the Defence Logistics Organisation
(DLO) and Defence Estates (DE), offset by reductions in the other
TLBs. It is expected that there will be further adjustments in
the Spring Supplementary Estimates.
12. The increase in RfR-1 Resource DEL funded from EYF
(£120 million) includes a shortfall in income that can be
Appropriated-in-aid of £28 million [Part II of the Estimate].
What are the main reasons for this shortfall on A-in-A income
overall, and for the individual TLBs most affected?
RESPONSE
The Main Estimate for 2006-07 was prepared on the basis of
the second year's data from the 2005 planning round. When the
TLBs drew up their budgets for 2007-08 more up to date information
about likely income was available, and in sum the Appropriations
in Aid were lower than those notified in the planning round by
some 2%. Additionally, there have been transfers of Appropriations
in Aid to Defence Estates as part of the Direct Resource DEL consequence
of the introduction of Single Balance Sheet Owners. This relates
to receipts from single living accommodation and service families
accommodation.
30 November 2006
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