Further Supplementary memorandum submitted
by BERR
WINTER SUPPLEMENTARY
ESTIMATE 2007-08
Thank you for your letter of 18 January 2008,
regarding the Winter Supplementary Estimates for Postcomm and
Ofgem. The bodies concerned are responsible for the content of
their Supplementaries, but I am happy to provide a response based
on information provided by them.
Postcomm
For Postcomm, the reduction in creditors arose
due to the impact of extinguishing the deferred income creditor
with the industry (in effect Royal Mail) as a result of a 2006-07
underspend; and the surrender of the cash that supports this deferred
income creditor to the Consolidated Fund. This was anticipated
at the time of the Main Estimate for 2007-08; however, the change
was not effected on the advice of the HM Treasury spending team.
As you are no doubt aware, Postcomm is funded
by the postal industry (in effect Royal Mail) and has a token
vote. Any underspends are returned to the industry the following
year and the cash, as outlined above, surrendered to the Consolidated
Fund in accordance with Government Accounting. This gives rise
to a shortfall in cash and a Supplementary Estimate is submitted
to increase the Net Cash Requirement to recover the cash previously
surrendered.
It is intended that the Net Cash Requirement
for 2008-09 will return to a token £1,000 although Postcomm
may submit a Supplementary Estimate in future to recover cash
surrendered to the Consolidated Fund.
Ofgem
Ofgem is subject to a five-year cost control
regime based on RPI-3%. The current regime commenced from April
2005 and anticipated savings of approximately £1 million
per year, £5.3 million in total, were planned over the five-year
period. For 2005-06 and 2006-07, the planned savings of £1.1
million were achieved. In addition, extra savings of £2.9
million and £0.6 million were achieved and returned to licence
payers.
The 2007-08 Winter Supplementary Estimate increase
in gross spending of £355,000 to be financed by additional
Appropriations in Aid is made up of two components:
— an increase of £259,000, which
brings Ofgem's 2007-08 Estimate in line with its 2007-08 "cost
control regime" corporate plan level of expenditure. This
additional expenditure is funded through licence fee income; and
— an increase of £96,000 relating
to expenditure for the Energy Demand Reduction Project. The project
is funded by the Department for Business, Enterprise and Regulatory
Reform.
The reclassification of £210,000 from Programme
to Administration corrects a historic anomaly in Ofgem's Estimates,
concerning the Fossil Fuel Levy. Ofgem's role in the Fossil Fuel
Levy is an administrative one in that it collects the levy and,
in the case of the England and Wales levy, passes it over to the
Consolidated Fund. In agreement with the National Audit Office,
it took the view that it was more appropriate for its costs of
undertaking this role to be treated as Administration rather than
Programme.
20 February 2008
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