Supplementary memorandum from Department
for Transport (DAR 01E)
SPRING SUPPLEMENTARY
ESTIMATES 2007-08
Thank you for your letter of 31 March with questions
on the Department's Spring Supplementary Estimates. Taking the
order of your questions, answers are:
1. The Supplementary Estimate allocates a
total of £121 million of additional resources to Crossrail.
The Committee would like to know why the Department did not include
this significant expenditure in the Main Estimate or Winter Supplementary
Estimate, since the Crossrail project has been underway for some
time?
The expenditure was not included in the Winter
Supplementary Estimate because the 2004 Spending Review Settlement
made no specific provision for the funding of Crossrail development
costs in 2007-08. Decisions on funding therefore had to be taken
in year and it was agreed with HM Treasury to review the funding
position before the Spring Supplementary to determine whether
a claim on the Reserve would be required or whether the costs
could be funded from headroom in other programmes and/or End Year
Flexibility.
2. The Department has used £150 million
of EYF for capital grants to the Greater London Authority (GLA)
in respect of Metronet, in order to provide Transport for London
with short-term flexibility while the costs associated with Metronet's
administration remain uncertain. Please can you explain what use
TfL has made of this additional flexibility, and whether the Department
made any provisions to recover the grant if it was not required?
The provision of this grant has allowed Transport
for London to manage the short term impact of Metronet's administration
on its finances at the same time as continuing to maintain day
to day operations. The Department has no plans to recover the
grant.
3. The Supplementary Estimate includes significant
additional resource provision of around £32 million for the
Shared Services Project (£17 million has been added to the
central administration subhead and the DVLA's capital grant-in-aid
allocation has been increased by £15 million). Please could
you explain why the £32 million of resource requested here
wasn't anticipated at the time of the Main Estimate, given that
the DVLA/DSA phase of the project went live in April 2007? Will
this additional resource have any impact on the expected total
cost of £113 million, as mentioned in the Committee's evidence
session on 30 January?
No provision for the Shared Services Project
was included in the Department's Spending Review 2004 settlement.
This meant the shared services budget requirement had to be funded
from in year savings and End Year Flexibility which could not
be included in Main Estimates. The provision sought in the Spring
Supplementary was included in the total cost of £113m reported
to the Committee in January 2008.
4. £60 million of capital grants to
local authorities have been transferred to non-voted, primarily
to fund the Integrated Transport Block (£35 million) and
UK Trust Ports (£21 million). This reduction represents a
5.5% cut in the Department's resource provision for local authorities
by way of capital grants. Please can you outline the Department's
assessment of what the impact on local authorities will be from
this reduction and what benefits are expected to arise from the
Integrated Transport Block and UK Trust Ports projects?
The transfer of funds out of the LA Major Schemes
budget followed our forecast of an underspend in that area, rather
than a policy decision to cut spending and move resources elsewhere.
The emerging underspend reflected a number of factors, including
in particular delays in local authorities submitting Business
Cases to the Department and slippages in construction timetables
(eg due to the relatively bad weather during 2007-08).
The Integrated Transport Block is capital funding
for local authorities outside London to improve their highways
and transport infrastructure.
The types of project supported (and the proportion
of local authorities' total investment on them during the first
local transport plan period) are:
— Public transport 26% including:
— bus or HOV lanes/Quality bus corridors
(8%),
— bus Improvement schemes (7%),
— interchange schemes (6%),
— park and Ride Schemes (2%), and
— light Rail and Guided Busway schemes
(2%).
— Walking, cycling and road crossing
schemes (15%):
— cycling schemes (6%), and
— road crossing schemes (3%).
— Traffic management schemes (15%).
— Local road improvement schemes
(including rural bypasses) (9%).
— Travel plan schemes (1%).
— Others (17%) (including composite
schemes).
These projects have contributed to many local
outcomes—including reductions in deaths and injuries on
the road network, more patronage on bus corridors, increased satisfaction
with local bus services and more travel choices.
The £35 million transfer of funding into
the integrated transport block enabled the Department to provide
total capital allocations of £571m for 2007-08, 4.4% or £24
million higher than the total for 2006-07. It avoided a reduction
in the integrated transport block. It enabled the Department to
target additional funding towards areas assessed as having delivered
well before and as having produced strong forward plans.
The £21m requirement for Trust Ports is
for borrowing by six Trust Ports in England and Wales (Tyne, Harwich,
Shoreham, Poole, Milford Haven and Dover) which are classified
as Public Corporations. The amount of borrowing is determined
by the Trust Ports themselves - independently of the Department—and
represents the sum of what each considers necessary to help best
meet their priorities and objectives.
5. The Estimate Memorandum details a number
of movements that result in £182 million of additional non-voted
funding for London and Continental Railways. Please can you explain
why this expenditure wasn't anticipated prior to the SSE and give
a breakdown of what it relates to, along with a timescale for
it utilisation?
London and Continental Railways (LCR) was reclassified
by the ONS as a non-self-financing public corporation in 2006.
Consequently, LCR operating losses, together with any capital
investment requirements and associated cost of capital charges,
are reflected in Departmental budgets.
No provision had been made in the 2004 Spending
Review Settlement for the budgetary impacts of this reclassification.
HM Treasury partially adjusted the Department's budgets at the
time of reclassification in 2006, however the Department was required
to meet the remaining impact by using End Year Flexibility and
by utilising emerging headroom in other programmes. Therefore,
it was prudent to wait until the position on LCR's operating losses
and capital investment requirements for 2007-08 was more certain
before drawing down EYF.
The £182 million of non-voted funding for
LCR to be utilised in 2007-08 breaks down as follows:
| Operating Losses: | Resource DEL (near cash)
| £73 million |
| Cost of capital charges: | Resource DEL (non cash)
| £ 6 million |
| Capital Investment: | Capital DEL
| £103 million |
6. In Part II of the SSE, the resource to cash reconciliation, the Department outlines a movement in provisions for liabilities and charges of £104 million. This movement does not appear to be explained in the Estimate Memorandum. Treasury guidance requires departments to provide information on the stock of the department's provisions, as well as explaining the changes (HM Treasury, PES Paper (2004) 14 Annex D, paragraph 9). Please can you explain the reason for this movement in provisions?
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The total movement includes a reduction of £143 million
for the Highways Agency's estimate of provisions for the year,
largely because of adjustments to provision in relation to new
EU tunnel safety regulations. The provisions were actually taken
up in 2006-07, but this was after the 2007-08 budget had been
set on the assumption that utilisation of the provision would
be required in 2007-08.
In addition there was a further reduction of £30m from
a write back of the provision taken in March 2006 for disputed
assets and dilapidation costs arising from the ending of the South
Eastern Trains franchise.
These reductions were partially offset by an increase of
£70m in relation to Rail pension schemes accounted for under
FRS17, reflecting the forecast movements in the scheme's assets
and liabilities.
7. In Part II of the SSE, the resource to cash reconciliation,
the Department shows a movement in creditors of £174 million.
Please can you explain the reason for this movement in creditors?
The Spring Supplementary Estimate presented an opportunity
for the Department to adjust its net cash requirement to bring
it in line with its latest cash forecasts from the central Department
and its Agencies. During the last quarter of the year a more detailed
breakdown of cash forecast (payment and receipts) was available
compared to previous period estimates submitted in the Winter
Supplementary Estimate. An adjustment was necessary to increase
creditors by £174m related to Deemed Supply.
* Numbers and percentages in the above answers are rounded.
April 2008
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