Memorandum from the Ministry of Defence
1. INTRODUCTION
1.1 This Memorandum covers the Winter Supplementary
Estimate for the Ministry of Defence (MoD). The Department's spending
plans for 2007-08 are based upon the outcome of the Government's
Spending Review 2004. This Estimates Memorandum should be read
in conjunction with the Winter Supplementary Estimate and the
Department's Main Estimate (07/08).
1.2 The Introduction to the Estimate lists
the changes being made since the Main Estimate. This is shown
by Request for Resources (RfR[1]),
and the section number shown in brackets after the detail for
each change is a reference to the line(s) that are affected by
the change in Part II of the Estimate.
1.3 There is no change to the Armed Forces
Retired pay, Pensions vote.
2. SUMMARY OF
RESOURCES SOUGHT
IN THE
ESTIMATE
2.1 The Introduction to the Estimate shows
a net increase in Voted DEL resources of £1,889.379 million
from £32,548.165 million at Main Estimates to £34,437.544
million. There is an increase in RfR1 (Provision of Defence Capability)
resources of £574.439 million, which is primarily due to
near cash resource requirements funded by a transfer from CDEL,
EYF take up, PES transfers, and additional income; and an increase
in RfR2 (Operations and Peace Keeping[2])
resources of £1,315 million, which is additional funding
for Iraq and Afghanistan. Further details are provided at Para's
4 and 5. There are net changes in capital of £144 million
which mainly relate to RfR1 near cash flexing, Capital EYF take
up, and cash release of non-nuclear provisions funding. The RfR2
request relates to additional funding of £604 million for
operations in Iraq and Afghanistan. The changes are summarised
in the following tables:
Table 1
CHANGES IN RESOURCE AND CAPITAL EXPENDITURE
| Resource Expenditure
| £ m |
|
| Provision of Defence Capability (RfR1) |
574.439 |
| Operations and Peace Keeping (RfR2) | 1,315.000
|
| Total Net Request for Resources |
1,889.439[3]
|
| Capital Expenditure | £ m
|
| Provision of Defence Capability (RfR1) |
(460.000) |
| Operations and Peace Keeping (RfR2) | 604.000
|
| Total Net Request for Capital | 144.000
|
| £ m |
| Total Change in Capital and Resource
| 2,033.439 |
2.2 The total change in the Estimate is £2,033.439
million which generates an additional net cash requirement of
£2,158.439 million. The cash requirement is analysed in the
following table, and a reconciliation between the changes in the
Estimate and the net cash requirement is shown in Part II of the
Estimate, "Resource to Cash Reconciliation".
Table 2
CHANGE IN VOTED CASH REQUIREMENT
| £ m |
| Near Cash (Voted) in Resource DEL | 1,889.379
|
| Near Cash in Capital DEL | 144.000
|
| Accruals to cash adjustments | 125.000
|
| Non Budget (Grants) | 0.060
|
| Net Cash Requirement | 2,158.439
|
2.3 The most significant changes to the Defence Expenditure
Limits (DEL) are:
— net transfers in of £43.439 million from
other Government Departments under RfR1 (Table 4), the main transfer
being funding for GCHQ support services;
— increase in RfR2 of £1,315 million Resource
DEL and £604 million Capital DEL to reflect the forecast
costs of peace keeping operations in Iraq and Afghanistan;
— the take up of Resource End Year Flexibility (EYF)
of £21 million and Capital EYF of £65 million;
— £55 million relating to additional income
being made available as Resource DEL in year;
— transfer of £455 million from Capital DEL
to Direct Resource DEL to reflect latest forecast spending patterns;
— the reduction of £70 million in voted capital
DEL to fund non-voted Near Cash cash release of non-nuclear provisions
(which are not part of Voted Resource DEL).
3. DETAILED EXPLANATION
OF CHANGES
3.1 Part I of the Estimate summarises the changes described
above and provides detail about the costs included in each RfR.
3.2 Part II of the Estimate shows the changes proposed
in the Estimate, by Top Level Budget Holder (TLB). This shows
the present net position (the position at Main Estimates), the
changes in the position, and the new net provision (Winter Supplementary
Estimates). Again this is set out by Request for Resources. The
transfers and other changes outlined in the Introduction to the
Estimate are analysed in this section of the Memorandum.
3.3 The table below shows how the Winter Supplementary
Estimate is compiled, identifying changes since 2007-08 Main Estimates.
Table 3
SHOWING CHANGES TO VOTED RESOURCES AND CAPITAL AT WINTER
SUPPLEMENTARY ESTIMATES
| £ million | Direct R DEL
| Indirect R DEL | Total R DEL
| AME | Non budget Near cash
| Total Net Resources | Net Capital DEL
| Capital Non Budget | Total Net Capital
|
| [1] | 1 | 2
| 3 | 4 | 5 |
6 | 7 | 8 | 9
|
| RfR1 Provision at Main Estimates | 21,886.2
| 10,617.7 | 32,503.9 | 91.2
| 13.1 | 32,608.2 | 7,547.6
| 1.9 | 7,549.5 |
| Transfers In | 47.6 |
| 47.6 | | |
47.6 | | |
|
| Transfers Out | -4.1 |
| -4.1 | | |
-4.1 | | |
|
| Switch from CDEL to Direct RDEL | 455.0
| | 455.0 | |
| 455.0 | -455.0 |
| -455.0 |
| EYF | 21.0 |
| 21.0 | | |
21.0 | 65.0 | |
65.0 |
| Project Income | 55.0 |
| 55.0 | | |
55.0 | | |
|
| Switch Voted to Non-Voted re cash release of provisions
| | | |
| | | -70.0 |
| -70.0 |
| RfR1 at Winter Supplementary Estimates
| 22,460.7 | 10,617.7
| 33,078.4 | 91.2
| 13.1 | 33,182.7
| 7,087.6 | 1.9 |
7,089.5 |
| RfR2 Provision at Main Estimates | 44.3
| 0.0 | 44.3 |
| | 44.3 | 0.0
| | 0.0 |
| Additional Provision at Winter Supplementary Estimates
| 1,315.0 | | 1,315.0
| | | 1,315.0
| 604.0 | | 604.0
|
| RfR2 at Winter Supplementary Estimates
| 1,359.3 | 0.0 |
1,359.3 | |
| 1,359.3 | 604.0
| | 604.0 |
| RfR3 Provision at Main Estimates |
| | | 1,027.0
| | 1,027.0 |
| | |
| Additional Provision | |
| | 0.0 |
| 0.0 | | |
|
| RfR3 at Winter Estimates |
| | | 1,027.0
| | 1,027.0 |
| | |
| Winter Supplementary Estimates Total*
| 23,820.0 | 10,617.7
| 34,437.7 | 1,118.2
| 13.1 | 35,569.0
| 7,691.6 | 1.9 |
7,693.5 |
[1] Definitions of the column headings are shown at Annex
1.
[2] Minimal differences may occur due to roundings.
4. RFR1 PROVISION
OF DEFENCE
CAPABILITY—EXPLANATION
OF CHANGES
Transfers In/Out
4.1 The Estimate includes three transfers in from Other
Government Departments and two transfers out, which are detailed
in Table 4.
Table 4
SHOWING TRANSFERS BETWEEN MoD AND OTHER GOVERNMENT DEPARTMENTS
| Transfers Out | RfR
| £ m | Purpose
|
| Department of Culture, Media, and Sport
| 1 | (0.149) | Contribution to the Leeds Armouries Museum Pattern Room staffing costs.
|
| Department of Trade and Industry | 1
| (4.000) | Contribution to the Global Partnership against the spread of weapons and materials of Mass Destruction.
|
| Transfers In | |
| |
| Department for Environment, Food and Rural Affairs
| 1 | 4.863 | Contribution to the National Meteorological Programme and Severe Weather Warning Service.
|
| Cabinet Office | 1 | 0.200
| Contribution to the future funding for the expansion of the Parliamentary Counsel Office.
|
| Security and Intelligence Services Agency |
1 | 42.525 | Support services funding for GCHQ.
|
| Total Net Transfers In |
| 43.439 | |
Transfer from Capital Resource DEL to Direct Resource DEL—£455
million
4.2 The Department has requested £455 million flexibility
from CDEL to Resource Near Cash to reflect forecast actual spending
patterns this year.
End Year Flexibility: £21 million RDEL; £65 million
CDEL
4.3 The Department has agreed with the Treasury, and
has taken up the EYF it requires, for Direct Resource and Capital
spend. The Resource EYF funds have been allocated to Defence Equipment
and Support so that Defence Modernisation Fund projects can continue
until completion (eg Defence Information Infrastructure and the
Management of Joint-Deployed Inventories system which tracks equipment
and stores in theatre). The Capital EYF funds have been used to
fund in part the purchase of additional Mastiff armoured personnel
carriers. Any requirement for further draw downs of EYF funds
will be requested at Spring Supplementary Estimates.
Other Changes: Additional Income £55 million
4.4 MoD has brought to account accumulated additional
project income of £55 million in the current year.
Funding for Cash Release of Non Nuclear Provisions: £70
million
4.5 Under arrangements agreed in SR 04, increases in
planned cash release of provisions (which score as non-voted DEL)
must be offset against valid near cash provision. This relates
to an increase in cash release payments to cover military and
civilian redundancies in Northern Ireland and DE&S restructuring,
and will be offset against capital DEL.
Increases in Non Budget Items
4.6 There is an increase in Grants in Aid for the Royal
Irish Benevolent Fund of £60,000, which provides help to
members of the Irish Home Service and their dependents. This has
been funded internally by a re-allocation from Resource DEL to
Non Budget, in the Land TLB.
AME Items
4.7 There is no change at Winter Supplementary Estimates.
Neutral Transfers
4.8 The changes under these sub-headings reflect alterations
to TLB allocations of Resource and Capital funding to bring the
allocations into line with responsibility transfers between TLBs,
and other adjustments to reflect the defence outputs planned since
the start of the year, but which require funding adjustments to
deliver as the year progresses. These comprise a number of individual
changes. These changes do not represent substantive adjustments
to our planned outputs. Examples are the transfer of funds from
"customer" TLBs to Defence Estates for estate projects.
5. REQUEST FOR
RESOURCES 2: OPERATIONS
AND PEACE
KEEPING
5.1 The Winter Supplementary Estimate requests an additional
£955 million for peace keeping operations in Iraq and £964
million for peace keeping operations in Afghanistan. This is summarised
in Table 5 below, with a more detailed analysis is shown in Table
6. (The Department has not included a contingency in this Estimate.)
Because of the unknown volatility of operations, in particular
the need for Urgent Operation Requirements, the Department may
seek additional provision in the Spring Supplementary Estimates.
Table 5
SUMMARY CONFLICT PREVENTION CLAIM FOR AFGHANISTAN AND
IRAQ AT 2007-08 WSE
| Operation | Direct Resource DEL £m
| Capital DEL £m | Total WSE claim 2007-08 £m
|
| Iraq | 729 | 226
| 955 |
| Afghanistan | 586 | 378
| 964 |
| Total | 1,315
| 604 | 1,919 |
5.2 The current estimate (rather than the forecast cost)
for operations in Iraq and Afghanistan for the 2007-08 Winter
Supplementary Estimates is shown in Table 6.
Table 6
THE ESTIMATED COST OF OPERATIONS IN AFGHANISTAN AND IRAQ
AT WSE 2007-08
| Cost Type | Iraq £m
| Afghanistan £m |
| Direct Resource | |
|
| DEL Civilian Personnel | 12
| 6 |
| Military Personnel | 95 |
62 |
| Stock/Other Consumption | 169
| 138 |
| Infrastructure Costs | 106 |
95 |
| Equipment Support Costs | 234
| 185 |
| Other Costs and Services | 108
| 103 |
| Income Generated/Foregone (Net) | 5
| -3 |
| Total Direct Resource DEL | 729
| 586 |
| Capital DEL | |
|
| Capital Additions | 226 |
378 |
| Total Capital DEL | 226
| 378 |
| Total Estimate | 955
| 964 |
5.3 The total conflict prevention claim for 2007-08 Winter
Supplementary Estimates is set out in Table 7.
Table 7
TOTAL CONFLICT PREVENTION CLAIM FOR 2007-08 WSE
| Operation | Direct Resource DEL £m
| Capital DEL £m | Total Estimate 2007-08 £m
| Total Outturn 2006-07 £m (Includes IRDEL)
|
| Iraq | 729 | 226
| 955 | 956 |
| Afghanistan | 586 | 378
| 964 | 742 |
| Total | 1,315
| 604 | 1,919 |
1,698 |
6. RFR3 WAR
PENSION BENEFIT
6.1 Any additional request will be presented at Spring
Supplementary Estimates.
7. THE DEPARTMENTAL
EXPENDITURE LIMIT
(DEL)
7.1 Table 8 shows the DEL from 2004-05 to 2007-08 for
all RfRs. The Total DEL is calculated by adding Resource DEL to
Capital DEL and deducting depreciation, (which forms part of Resource
DEL). The figures are for voted and Non-voted DEL; the Non voted
DEL figure for 2007-08 is £83.832 million net of depreciation,
and this is shown in more detail in the Notes to the Winter Supplementary
Estimate.
Table 8
CHANGES TO MOD DEPARTMENTAL EXPENDITURE LIMITS
| 2004-05 SSE £m
| 2005-06 SSE £m | 2006-07 SSE £m
| 2007-08 ME £m | 2007-08 WSE
|
| Resource DEL | 32,831 | 33,727
| 34,104 | 32,831 | 34,721
|
| Capital DEL | 6,662 | 6,798
| 7,448 | 7,548 | 7,692
|
| Depreciation | -8,049 | -8,168
| -7,401 | -6,818 | -6,818
|
| Total DEL | 31,444
| 32,357 | 34,151
| 33,561 | 35,595
|
8. ADDITIONAL RESOURCES
THAT WILL
BE REQUESTED
IN SPRING
SUPPLEMENTARY ESTIMATES
8.1 The Department plans to request the following major
additional resources in the Spring Supplementary round:
— The Indirect Resource DEL claim for RfR2.
These "non-cash" costs of operations are particularly
difficult to forecast;
— The usual RfR2 claim for peace keeping and
operations in the Balkans funded by a budgetary transfer from
the FCO under long-standing global pool peace keeping arrangements);
— Any additional direct resource and capital
funding for RfR2 resulting from changes in operational tempo later
in the current year.
The Department will also re-align TLB Sub Head provisions
for DEL, AME and Non Budget to reflect the latest forecasts of
outturn with no impact on overall RfR1 resource.
9. ADMINISTRATION COSTS
LIMIT
9.1 The Department is not currently subject to an Administration
Costs Limit. The MoD will implement an Administration budgetary
regime in 2008-09.
10. PROVISIONS AND
CONTINGENT LIABILITIES
10.1 There are no increased provisions at Winter Supplementary
Estimates.
11. MACHINERY OF
GOVERNMENT CHANGES
11.1 A Machinery of Government Change was effected 1
April 2007. This relates to the Contribution in Lieu of Rates
(CILOR) for MoD estate in Gibraltar, formerly administered by
HM Revenue and Customs (HMRC). Operating appropriations in aid
are increased by £2,059,000, with a corresponding gross resource
cost increase also of £2,059,000. The net resource requirement
and the net cash requirement are unaffected.
12. NET ADDITIONAL
CASH REQUIREMENT
12.1 The Net Cash impact for the Winter Supplementary
Estimate is an increased requirement of £2,158 million, of
which £1,889 million relates to Resource DEL and £144
million to Capital DEL.
Annex 1
A. DEFINITION OF
TERMS
1. Direct Resource Departmental Expenditure Limits (RDEL)
This is a control aggregate within the resource budget. It
excludes the non-cash items such as depreciation, cost of capital
and movement in provisions. Direct Resource DEL is also known
as "near cash in the resource budget".
2. Indirect Resource DEL (IRDEL)
This covers items such as depreciation, cost of capital charges,
movement in provisions, and the notional auditors' fees for the
National Audit Office (NAO). This is also known as non-cash.
3. Total Resource DEL
This is the sum of Direct and Indirect Resource DEL.
4. Annually Managed Expenditure (AME)
Annually Managed Expenditure (AME) includes Programmes that
are demand-led, such as War Pensions (RfR3) and exceptionally
volatile items that cannot be controlled by the Department. AME
also includes Programmes that are so large that the Department
could not be expected to absorb the effects of volatility within
them, such as cash release of nuclear provisions.
5. Non-Budget
Items of expenditure which are included in the Estimate,
but are outside of DEL and AME eg Grants in Aid, Royal Hospital
Chelsea. This is a Parliamentary control but not a Treasury control.
6. Total Net Resources
This is the net of items 1 to 5.
7. Capital Departmental Expenditure Limit (CDEL)
This is for new investment, including Capital additions,
disposals, and the capital repayment of loans.
8. Capital AME
Includes the capital element of the loan repayments for self-financing
public corporations, such as QinetiQ.
9. Total Net Capital
This is the sum of the above capital items.
10. Total Near Cash
This is the total accrued expenditure spend and is the sum
of Direct RDEL and Capital DEL.
11. Request for Resources 1
Provision of Defence Capability, provides for expenditure
primarily to meet the Ministry of Defence's operational support
and logistics services costs and the costs of providing the equipment
capability required by defence policy.
12. Request for Resources 2
Request for Resources 2 provides primarily for the additional
costs of peace keeping and operations. These are the net additional
costs incurred: the costs that the Department would have incurred
regardless of the operation taking place, such as wages and salaries
are recorded against RfR1.
13. Request for Resources 3
War Pensions and Allowances, etc provides primarily for the
payments of pensions and allowances for disablement or death arising
out of war or service in the Armed Forces after 2 September 1939,
and associated non-cash items.
14. Single Use Military Equipment (SUME)
Single use military equipment is equipment that only has
a single fighting application eg a tank, rather than dual use
eg aircraft that could be used for transport purposes. Fighting
equipment includes guided weapons, missiles and bombs, and associated
costs (eg capital spares, assets in the course of construction
and intangible development costs).
B: LIST OF
ABBREVIATIONS USED
IN THE
ESTIMATE
| AME | Annually Managed Expenditure
|
| DE | Defence Estates |
| DE and S | Defence Equipment and Support
|
| DUP | Departmental Unallocated Provision
|
| EYF | End Year Flexibility |
| FCO | Foreign and Commonwealth Office
|
| FDSCi | Future Defence Supply Chain initiative
|
| MoD | Ministry of Defence |
| NAO | National Audit Office
|
| RfR | Request for Resources
|
| SBSO | Single Balance Sheet Owner
|
| SSE | Spring Supplementary Estimates
|
| SUME | Single Use Military Equipment
|
| UK | United Kingdom |
| WSE | Winter Supplementary Estimates
|
1
For detail on the different Requests for Resources, see Annex
1. Back
2
Now re-named from Conflict Prevention to Operations and Peace
Keeping. Back
3
This includes a £60,000 increase in Grant-in-Aid for Royal
Irish Benevolent Fund. Back
| 
