Select Committee on Business and Enterprise Fifth Special Report


Appendix 2: Correspondence with the Secretary of State


Letter from the Chairman of the Committee to the Secretary of State

My Committee is grateful to BERR for its response to our recent Report on Funding the Nuclear Decommissioning Authority, but would appreciate clarification on one extremely important point.

When he appeared before the Committee, Sir Brian Bender told us "what the Treasury have accepted is that we insulate the department's budget for 2008-09 and subsequent years from the NDA." (Q 63). The Government response says:

"The NDA's budget is ring-fenced within BERR's budget. Current arrangements are that all BERR budgets (including the NDA) are managed within the overall Departmental Expenditure Limit. As such, should additional funding be needed for the NDA in future years BERR will first look to non-ringfenced budgets to make good the shortfall: this is a standard budgeting arrangement and ensures resources are allocated as efficiently as possible within the department and across Government and better enables the Government to manage its total finances."

Given the inherent difficulty in predicting NDA's budgetary requirements, we are extremely concerned that movements in the NDA's financial position could have very serious effects on the budget of the Department as a whole. We would be grateful for an explanation of the apparent discrepancy between what Sir Brian told us, and the subsequent Response.

Peter Luff, Chairman, Business and Enterprise Committee

17 June 2008

Letter from the Secretary of State to the Chairman of the Committee

Thank you for your letter of 17 June 2008.

You sought clarification between comments which Sir Brian Bender made when appearing before the Committee on 4 March 2008 and the Government response regarding the funding for any shortfalls in the NDA and the impact on non-ringfenced areas of the Departmental budget.

Sir Brian's comments were accurate, non-NDA budgets were insulated in 2008-09 and were not cut, nor was there a delay in issuing them as a result of the issues surrounding the NDA.

During the Committee hearing Sir Brian also explained the process that would be involved in making good any future shortfall within the NDA: "step one, have the NDA got the money; step two is the money somewhere in the Department's books, including the end-year flexibility cushion…..; step three, if neither of us have got it can the Treasury find it from the reserve" (Q 53).

Were the NDA unable to manage any shortfalls arising in-year the Department would look to any internal underspends in non-ringfenced budgets. These underspends represent money that would not have been spent—irrespective of any shortfalls in the NDA—and future budgets for those areas would be unaffected.

Finally, were the Department unable to meet shortfalls from underspends we would approach Treasury for access to End Year Flexibility or make a request for resources from the Reserve. This is the standard mechanism for addressing such shortfalls and is consistent with the response from the Government.

I hope this letter addresses your concerns and I thank you for the opportunity to do so prior to publication of the final response.

The Rt Hon John Hutton MP, Secretary of State for Business

26 June 2008


 
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