Supplementary memorandum submitted by
BERR
DEPARTMENT FOR BUSINESS, ENTERPRISE AND REGULATORY
REFORM (BERR) WINTER SUPPLEMENTARY ESTIMATE 2008-09 SELECT COMMITTEE
MEMORANDUM
INTRODUCTION
1. BERR's Winter Supplementary Estimate
for 2008-09 seeks the necessary resources and cash to support
the functions of the Department and it's Non Departmental Public
Bodies (NDPBs). The purpose of this Memorandum is to provide the
Select Committee with additional information about the content
of the Department's Winter Supplementary Estimate for 2008-09.
Included is information on changes made in the Estimate and how
these changes relate to Departmental budgets, Control Totals and
Public Service Agreement targets. An explanation of key terms
used in the Memorandum is provided at Annex A.
2. The Department's Winter Supplementary
Estimate excludes drawdown of any End of Year Flexibility (EYF)
stock, this has been deferred until the Spring Supplementary Estimate
on the advice of HMT.
MACHINERY OF
GOVERNMENT CHANGES
3. The Machinery of Government (MoG) changes
of 3 October 2008 announced the creation of the Department of
Energy and Climate Change (DECC), formed from the Energy Group
located in BERR and the Climate Change Group located in the Department
for Environment, Food and Rural Affairs (DEFRA).
4. Both BERR and DEFRA will transfer their
budgets for Energy and Climate Change respectively to the new
Department, based on the Settlements agreed in the Comprehensive
Spending Review 2007 (CSR07), for the financial years 2008-9,
2009-10 and 2010-11. In view of the timing of the change, the
formal transfer of budgets to the new Department will take place
through the Spring Supplementary Estimate. This Supplementary
Estimate, therefore, includes some changes relating to Energy
programmes.
SUMMARY OF
CHANGES SOUGHT
IN THE
ESTIMATE
5. The Department's Winter Supplementary
Estimate changes Departmental budgets for 2008-09 in three ways:
— The Department Expenditure Limit
(DEL) budget will be reduced by £11 million (0.3%) from £3,379
to £3,368 million. Further detail is provided at paragraphs
11 to 14.
— The Annually Managed Expenditure
budget will be increased by £5,032 million from (£718
million) to £4,314 million. Further detail is provided at
paragraph 15.
— The Net Cash Requirement will be
increased by £569 million (14.6%) from £3,905 million
to £4,474 million. Further details are provided in paragraph
16.
— The Administration budget will be
increased by £0.3 million from £332.2 million to £332.5
million. Further details are provided in paragraph 20.
6. An explanation of the full changes to
the Estimate and how these impact the Departmental Expenditure
Limits is provided at Annex B.
ESTIMATE
Structure of the Estimate
7. As agreed with the Select Committee,
the structure of BERR's Estimate has been revised to align with
its Departmental Strategic Objectives (DSOs) to ensure clarity
of reporting. DSOs 4 and 5 will transfer to DECC. The wording
of the Request for Resources (RfR) has also been amended as advised
in the Memorandum to the Main Estimate ("To help ensure business
success in an increasingly competitive world").
8. On Treasury advice, the new Non Budget
lines showing Grant in Aid to NDPBs are shown under the existing
Non Budget heading in the Estimate Part II table, followed by
new headings for the Departmental Expenditure Limit and Annually
Managed Expenditure. This format will be retained for the Spring
Supplementary Estimate, with the Main Estimate 2009-10 following
the usual order of Departmental Expenditure Limit and Annually
Managed Expenditure followed by Non Budget.
Ambit
9. The ambit will be revised in the Spring
Supplementary to reflect the movement of Energy programmes to
DECC.
UKAEA Pension Schemes Estimate
10. Winter Supplementary Estimates are also
being presented for the UKAEA Pension Schemes Estimate (which
includes the latest forecasts for expenditure and receipts and
other adjustments to the Net Cash Requirement), and for the Postal
Services Commission.
DETAILED EXPLANATION
OF CHANGES
Departmental Expenditure Limit—Increases
in provision
11. HM Treasury has provided £1 million
additional funding for Face-to-Face Debt Advice with similar sums
for forward CSR07 years. BERR has also received inward transfers
of £1 million from the Cabinet Office to part fund the Parliamentary
Counsel Office and a £4 million contribution from the Ministry
of Defence (MoD) to the Global Threat Reduction Programme.
Departmental Expenditure Limit—Reductions
in provision
12. BERR is making contributions of £1
million to DEFRA towards the costs of increased Warm Front Delivery
and £16 million to DWP in relation to Cold Weather Payments.
The RDAs have provided the associated funding through a £17
million reduction in their overall Capital budget. There are also
some other minor transfers.
Departmental Expenditure Limit—Neutral changes
13. These consist of:
— the rearrangement of the expenditure
shown in the Main Estimate into the new Estimate lines which reflect
BERR's DSOs;
— reallocations between the London
Development Agency (LDA) and the eight Regional Development Agencies
(RDAs);
— identification of underspends in
Capital budgets which have been switched to the Department's negative
Unallocated Provision;
— virements of Near Cash and Non Cash
from the Resource Departmental Unallocated Provision to fund Voted
expenditure; and
— virement from RDA Capital to the
Resource Departmental Unallocated Provision.
DEPARTMENTAL EXPENDITURE
LIMIT
14. The DEL provision has decreased by £11
million from £3,379 million to £3,368 million. The following
table shows the relevant DEL changes:
| Resource
DEL
| Capital
DEL | Total
DEL
|
| £m | £m
| £m |
Per Main Estimate | 2,151
| 1,228 | 3,379 |
| Virement from Capital to Resource | 16
| -16 | |
| BERR contribution to Cold Weather Payments and Warm Front Delivery
| -16 | -1 | -17
|
| Face-to-Face Debt Advice—new funding from HM Treasury's Financial Inclusion Fund
| 1 | | 1 |
| Transfer from MoD for the Global Threat Reduction Programme
| 4 | | 4 |
| Minor transfers to/from other Government Departments (OGDs)
| 1 | | 1 |
| Revised Winter Supplementary Position
| 2,157 | 1,211
| 3,368 |
| |
| |
Annually Managed Expenditure (AME)
15. The AME provision has increased by £5,032 million
from (£718 million) to £4,314 million. This represents
an increase in Voted provision of £563.8 million and an increase
in Non-Voted provision of £4,468 million as shown in the
following table:
| Resource
AME
| Capital
AME | Total
AME
|
| £m | £m
| £m |
Provision in Main Estimate |
(29.0) | (689.0) | (718.0)
|
| Paternity Pay—additional funding in line with the latest data which shows higher spending than forecast for the Main Estimate
| 5.0 | | 5.0
|
| Working Capital for Royal Mail—to restore the revolving loan facility to the agreed level
| | 560.0 | 560.0
|
| Non Cash—increase in nuclear decommissioning provision, cost of capital charge and depreciation for the NDA
| 4,739.0 | | 4,739.0
|
| Non Cash—increase in the nuclear decommissioning provision and cost of capital charge for British Energy
| 7.1 | | 7.1
|
| Non Cash—increase in RDA impairments |
52.7 | | 52.7 |
| Redundancy Payments Service—reduction in level of expected payments
| (19.5) | | (19.5)
|
| Increase in dividend from British Nuclear Fuels Ltd to be paid over to HM Treasury as a Consolidated Fund Extra Receipt (CFER)
| | (311.3) | (311.3)
|
| Minor reductions to: Coal Health Provisions; cost of capital charge for the UKAEA; and LDA corporation tax
| (1.2) | | (1.2)
|
| Provision in Spring Supplementary Estimate
| 4,754.1 | (440.3)
| 4,313.8 |
| |
| |
Net Cash Requirement
16. The Estimate increases the Net Cash Requirement by
£569 million (14.6%) from £3,905 million to £4,474
million. This increase relates to the cash impacts of the changes
outlined above and those detailed later in the Memorandum and
supporting Annexes.
|
| £m |
|
| Net Cash Requirement in Main Estimate | 3,905
|
| Change in Voted Departmental Expenditure Limit budget (Paragraphs 11-12)
| (72) |
| Increase in Voted Annually Managed Expenditure (Paragraph 14)
| 564 |
| Increase in Voted Grant in Aid to NDPBs |
28 |
| Increase in Payments against Provisions |
14 |
| Changes in working capital for the Insolvency Service
| 35 |
| Revised Net Cash Requirement | 4,474
|
|
| |
Impact on Public Service Agreements and Departmental Strategic
Objectives
17. As part of the Spending Review process, the Department
agrees its Public Sector Agreement and Departmental Strategic
Objectives and the spending plans to deliver them. The total funds
required to achieve those targets are allocated to Departmental
Groups. The funds are only partially drawn down in the Main Estimate
each year as this excludes funds available from EYF and includes
only a prudent partial draw down of funds from its Non-Voted resources.
This is to ensure that we do not draw down funds that are subsequently
not required. Accessing funds in a Supplementary Estimate is part
of the Department's planned and structured approach to funding
spending plans in support of its PSA targets.
18. The funding movements within this Supplementary Estimate
are relatively minor and unlikely to have a significant impact
on the Department's objectives. Slippage in Capital programmes
has resulted in some in-year under spends. The Environmental Transformation
Fund estimates an under spend amounting to £27 million. Whilst
commitments to the Enterprise Capital Fund programme are anticipated
to remain on target, actual Capital expenditure is estimated to
be under spent by £27.4 million in 2008-09. The remaining
commitment will be drawn down over the remaining CSR years. As
the under spends reflect delayed expenditure, this may have a
minor impact on PSA and DSO delivery this year, but ought not
to impact on progress over the full CSR07 period.
19. A full report on progress against the Department's
PSA targets will be included in the Department's 2008 Autumn Performance
Report.
ADMINISTRATION LIMIT
20. The Department's Administration Cost Limit has increased
by £0.3 million (0.1%) from £332.2 million to £332.5
million. The changes are shown in the following table:
|
| £m |
|
| Administration Cost Limit in Main Estimate |
332.2 |
| Transfer from Cabinet Office for the Parliamentary Counsel Service
| 1.4 |
| Transferred to the RDAs for Business Link |
(0.7) |
| Other minor transfers to the Office for Climate Change (£360k) and the Office for Government Commerce (£45k)
| (0.4) |
| Revised Administration Limit | 332.5
|
|
| |
21. At the start of the CSR07 period, the Department
set a three-year Administration spending plan financed by all
its available funds to deliver its service objectives. Administration
spending remains under control against its plans.
END OF
YEAR FLEXIBILITY
22. Annex C provides a summary position of the Department's
EYF stock as reported to HM Treasury and published in the Public
Expenditure Outturn White Paper (Cm 7419).
PROVISIONS AND
CONTINGENT LIABILITIES
Provisions
23. The Department provides for legal or constructive
obligations, which are uncertain in respect of either timing,
or amount, on the basis of the best estimate of the expenditure
required to settle the obligation. Details of the Department's
main stock of provisions as at 31 March 2008 were published in
the Annual Report and Accounts and are shown in Annex D.
REQUEST FOR
RESOURCES CHANGES
24. Full details of the draw downs and other movements
for Administration, other current Resource funding and Capital
against each Request for Resource are given in the Introduction
to the Estimate.
INCOME CHANGES
25. The total income variations allowed for within the
Winter Supplementary Estimate are itemised in the Introduction
to the Estimate. Operating (Resource) Appropriations in Aid have
decreased from £3,127 million to £3,107 million, a reduction
of £20 million, and Non Operating Capital Appropriations
in Aid have reduced from £11,950 million to £6,450 million,
a reduction of £5,500 million. The variations have been calculated
in accordance with the latest business projections and are off-set
by equivalent decreases in spend.
26. The changes are due to a reduction of £20 million
in contributions from DEFRA to the Regional Development Agencies
and a £550 million reduction in the gross working capital
provision for the Post Office.
PROCESS FOR
PREPARATION AND
APPROVAL OF
MEMORANDUM
27. This Memorandum has been prepared in accordance with
the suggested format as set out in "A Guide to Preparing
Estimate Memoranda" and Annex D to PES Circular 2004(14)
and has been approved by the Departmental Accounting Officer.
Annex A
EXPLANATION OF KEY TERMS USED IN THE MEMORANDUM
DEPARTMENTAL EXPENDITURE
LIMIT (DEL)
This is spending within the Department's direct control and
which can, therefore, be planned over an extended period, such
as the costs of its own administration.
ANNUALLY MANAGED
EXPENDITURE (AME)
Annually Managed Expenditure is primarily demand led expenditure.
It is generally less predictable and controllable than expenditure
in Departmental Expenditure Limit. Annually Managed Expenditure
spending does not fall within the Departmental Expenditure Limit.
REQUEST FOR
RESOURCES (RFR)
This is the functional level at which the Departmental Estimates
are allocated in support of the Department's objectives:
— Request for Resources 1: To help ensure business
success in an increasingly competitive world.
DEPARTMENTAL UNALLOCATED
PROVISION (DUP)
A Departmental contingency reserve, which can be accessed,
where necessary, by means of a Supplementary Estimate.
END OF
YEAR FLEXIBILITY
(EYF)
A mechanism that enables the Department to plan the use of
resources over Spending Review years and, therefore, carry-forward
unspent provision in the DEL in one year to subsequent years.
VOTED AND
NON-VOTED
FUNDS
The term Vote applies to the process by which Parliament
formally approves the supply of funds to the Department. Non-Voted
funds have by definition not been through that process. These
may include, for example, the resource consumption of Non Departmental
Public Bodies which features within DEL. Expenditure funded by
the National Insurance Fund is also Non-Voted.
Annex B
SUMMARY OF ESTIMATE CHANGES
2008-09 Budget Control Total Movements
| Main Estimate | Movement
| Winter
Supplementary
Estimate
|
| £m | £m
| £m |
Departmental Expenditure Limit Resource
| 2,151 | 6 | 2,157
|
| Of which: | |
| |
| Administration | 332 |
| 332 |
| Near-Cash | 2,042
| 6 | 2,048 |
| Departmental Expenditure Limit Capital |
1,228 | (17) | 1,211
|
| Total Departmental Expenditure Limit
| 3,379 | (11) | 3,368
|
| Annually Managed Expenditure Resource | (29)
| 4,783 | 4,754 |
| Annually Managed Expenditure Capital | (689)
| 249 | (440) |
| Total Annually Managed Expenditure |
(718) | 5,032 | 4,314
|
| Total Resource | 2,122
| 4,789 | 6,911 |
| Total Capital | 539
| 232 | 771 |
| |
| |
2008-09 Budget Control Total Movements
| Main Estimate | Movement
| Winter
Supplementary
Estimate
|
| £m | £m
| £m |
Request for Resources 1 | 3,389
| 569 | 4,474 |
| Total Voted Resource (Net) | 3,389
| 569 | 4,474 |
| Net Cash Requirement | 3,905
| 569 | 4,474 |
| |
| |
Annex C
SUMMARY OF DEPARTMENT'S END OF YEAR FLEXIBILITY STOCK
| Administration
| Other
Resource | Capital
| Total |
| £m | £m
| £m | £m
|
End Year Flexibility at 31/03/08 (Cm 7419)
| 26 | 531 | 332
| 889 |
| No utilisation in Winter Supplementary |
| | |
|
| Remaining Stock of End Year Flexibility |
26 | 531 | 332 |
889 |
| |
| | |
Annex D
PROVISIONS
PROVISIONS FOR
LIABILITIES AND
CHARGES—COAL
| Health-Related Provisions
| | Non Health Provisions
|
| COPD | VWF
| Other | Concessionary
Fuel
| Other | Total |
| £'000 | £'000
| £'000 | £'000
| £'000 | £'000
|
At 1 April 2007 | 682,369
| 272,728 | 181,115 | 404,545
| 80,094 | 1,620,851 |
| Amortisation of one year's discount | 15,012
| 6,000 | 3,984 | 8,900
| 1,762 | 35,658 |
| Increase/(decrease) in provision | (170,741)
| 96,373 | 4,559 | 19,259
| (1,827) | (52,377) |
| Expenditure in year | (294,633)
| (318,276) | (84,002) | (47,095)
| (32,172) | (776,178) |
| At 31 March 2008 | 232,007 |
56,825 | 105,656 | 385,609
| 47,857 | 827,954 |
| |
| | | |
|
PROVISIONS FOR
LIABILITIES AND
CHARGES—NUCLEAR
| UKAEA | British Energy
| Consolidated
Total |
| £'000 | £'000
| £'000 |
At 1 April 2007 | 157,593
| 2,386,327 | 2,543,920 |
| Amortisation of one year's discount | 3,467
| 52,499 | 55,966 |
| Increase/(decrease) in provision | 5,352
| 86,159 | 91,511 |
| Expenditure in year | —
| (204,502) | (204,502) |
| At 31 March 2008 | 166,412 |
2,320,483 | 2,486,895 |
| |
| |
PROVISIONS FOR
LIABILITIES AND
CHARGES—OTHER
Consolidated
|
SFLG | UKAEA
Restructuring
| Early
Retirement | British
Shipbuilders
| Onerous
Leases | Other
| Total |
| £'000 | £'000
| £'000 | £'000
| £'000 | £'000
| £'000 |
(restated)
At 1 April 2007 | 133,434
| 32,846 | 60,379 | 79,213
| — | 13,827 | 319,699
|
| Amortisation of one year's discount | 2,936
| 723 | 1,300 | 1,743
| — | (68) | 6,634
|
Increase/(decrease) in
provision | 51,116
| (671) | (8,430) | 34,602
| 193,186 | 682 | 270,485
|
| Expenditure in year | (73,118)
| (3,572) | (17,974) | —
| — | (1,962) | (96,626)
|
| At 31 March 2008 | 114,368 |
29,326 | 35,275 | 115,558
| 193,186 | 12,479 | 500,192
|
| |
| | | |
| |
WINTER SUPPLEMENTARY
ESTIMATES 2008/09—WRITTEN
STATEMENT
Subject to Parliamentary approval of the necessary Supplementary
Estimate, the Department for Business, Enterprise and Regulatory
Reform's DEL will be reduced by £11,157,000 from £3,379,070,000
to £3,367,913,000 and the Administration budget will be increased
by £358,000 from £332,173,000 to £332,531,000.
Within the DEL change, the impact on Resources and Capital
is as set out in the following table:
| Change
| New DEL |
| Voted | Non-Voted
| Voted | Non-Voted
| Total |
Resource (£000) | 34,426
| -28,583 | -497,986
| 2,654,880 | 2,156,894
|
| of which: | |
| | | |
| Administration* budget | 358 |
| 332,531 | |
332,531 |
| Near cash in Resource DEL* | 19,398
| -13,555 | -645,630 | 2,693,147
| 2,047,517 |
| Capital (£000) | -91,601
| 74,601 | -763,999
| 1,975,018 | 1,211,019
|
| Less Depreciation* (£000) | -11,327
| 11,327 | -48,780 | -24,684
| -73,464 |
| Total (£000) | -68,502
| 57,345 | -1,310,765
| 4,605,214 | 3,294,449
|
*The total of the "Administration Budget" and "Near-Cash in Resource DEL" figures may well be greater than total Resource DEL, due to the definitions overlapping.
*Capital DEL includes items treated as Resource in Estimates and Accounts, but which are treated as Capital DEL in Budgets.
*Depreciation, which forms part of Resource DEL, is excluded from the total DEL since Capital DEL includes Capital spending and to include depreciation of those assets would lead to double counting.
| | | |
| |
The change in the resource element of the DEL arises from:
RfR1
(i) increase of £825,000 in respect of an award from
the Financial Inclusion Fund for Face-to-Face Debt Advice;
(ii) transfer of £40,000 from the Non-Voted Departmental
Unallocated Provision to the Cabinet Office for the Security Monitoring
and Coordination Centre;
(iii) transfer of £4,000,000 from the Ministry of Defence
in respect of Global Threat Reduction;
(iv) virement of £17,088,000 from Non-Voted to Voted
expenditure in respect of the Regional Development Agencies reflecting
reduced contributions from other Government Departments;
(v) virement of £2,504,000 from Voted to Non-Voted expenditure
in respect of a reallocation from the London Development Agency
to the Regional Development Agencies;
(vi) virement of £1,000,000 from Voted expenditure on
Business Link Marketing to Non-Voted expenditure in respect of
the Regional Development Agencies;
(vii) virement of £16,000,000 from Non-Voted capital
expenditure in respect of the Regional Development Agencies to
the Non-Voted resource Departmental Unallocated Provision;
(viii) transfer of £16,000,000 from the Non-Voted resource
Departmental Unallocated Provision to the Department for Work
and Pensions in respect of Cold Weather Payments;
(ix) virement of £115,000 from Non-Voted to Voted expenditure
in respect of a reduction in the gross expenditure and receipts
of Postwatch as a result of the transfer of the Royal Mail Quality
of Service review to Postcomm;
(x) virement of £ 14,300,000 from the Non-Voted Resource
Departmental Unallocated Provision to Voted Insolvency Service
Non-Cash;
(xi) virement of £728,000 from the Non-Voted resource
Departmental Unallocated Provision to Voted Non-Cash Provisions
in respect of Icelandic Trawlermen compensation; and
(xii) virement of £516,000 from the Non-Voted resource
Departmental Unallocated Provision to Voted Near-Cash in respect
of British Shipbuilders Liabilities;
Also within the change to resource DEL, the changes to the
Administration budget are (RfR1):
(i) transfer of £1,463,000 from the Cabinet Office in
respect of the Parliamentary Counsel Office;
(ii) transfer of £360,000 to the Department for Environment,
Food and Rural Affairs in respect of the Office of Climate Change;
(iii) transfer of £45,000 to the Office of Government
Commerce (Cabinet Office) for the Centre of Expertise for Sustainable
Development; and
(iv) reclassification of £700,000 from Voted Administration
to Non-Voted programme expenditure in respect of the Regional
Development Agencies' Business Links;
The change in the Capital element of the DEL arises from:
RfR1
(i) virement of £39,501,000 from Voted to Non-Voted expenditure
in respect of a reallocation from the London Development Agency
to the Regional Development Agencies;
(ii) virement of £16,000,000 from Non-Voted capital expenditure
in respect of the Regional Development Agencies to the Non-Voted
resource Departmental Unallocated Provision;
(iii) transfer from Non-Voted Regional Development Agencies
expenditure of £1,000,000 to the Department for Environment,
Food and Rural Affairs in respect of increased Warm Front Activity;
(iv) virement of £27,000,000 from Voted Environmental
Transformation Fund expenditure to the Non-Voted Departmental
Unallocated Provision;
(v) virement of £27,400,000 from Voted Enterprise Capital
Fund expenditure to the Non-Voted Departmental Unallocated Provision;
(vi) virement of £2,300,000 from Non-Voted expenditure
to Voted in respect of increased recoveries of Non-Voted Launch
Investment receipts and increased Voted expenditure by the Advisory,
Conciliation and Arbitration Service.
5 November 2008
|
