The Work of the Department - Business and Enterprise Committee Contents

Further supplementary memorandum submitted by BERR



  1.  Following an announcement by the Prime Minister in October 2008 about the way Government is organised, a new Department of Energy and Climate Change (DECC) was created. This brought together policy responsibility for Energy, which was formerly with the Department for Business, Enterprise and Regulatory Reform (BERR), and climate change, (formerly a responsibility of the Department for Environment, Food and Rural Affairs (Defra). Both BERR and Defra are transferring 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 2008-09, 2009-10 and 2010-11.

  2.  The purpose of this Memorandum is to provide the Select Committee with additional information about the content of the Department's Spring Supplementary Estimate for 2008-09. Included is information on changes made in the Estimate and how these changes relate to Departmental budgets, Control Totals, Departmental Strategic Objectives (DSOs) and the possible impact on Public Service Agreement targets (PSAs). An explanation of key terms used in the Memorandum is provided at Annex A.

  3.  BERR's ambit has been revised in the Spring Supplementary to reflect the movement of the majority of Energy programmes to DECC. The revised ambit[1] is attached at Annex B. This continues to include reference to "nuclear decommissioning" as BERR retains responsibility for the UK Atomic Energy Authority (UKAEA) through the Shareholder Executive. BERR has also retained responsibility for British Nuclear Fuels Ltd and the related dividend income.

  4.  We are publishing a Spring Supplementary Estimate for 2008-09, which seeks the necessary resources and cash to support the functions of the Department and its Non Departmental Public Bodies (NDPBs), and to transfer the budgets for those activities now undertaken by DECC to the new Department.

  5.  The Department has transferred two of its DSOs to DECC:

    —  DSO Ensure the reliable supply and efficient use of clean, safe and competitively-priced energy; and

    —  DSO Manage energy liabilities effectively and responsibly.

  BERR's DSO structure is now as follows:

    —  DSO1 Promote the creation and growth of business and a strong enterprise economy across all regions.

    —  DSO2 Ensure that all Government Departments and Agencies deliver better regulation for the private, public and third sectors.

    —  DSO3 Deliver free and fair markets, with greater competition, for businesses, consumers and employees.

    —  DSO4 Ensure that Government acts as an effective and intelligent shareholder and provide a source of excellent corporate finance expertise within Government.

    —  DSO5 Provide the professional support, capability and infrastructure to enable the Department's objectives and programmes to be successfully delivered.

  6.  The responsibility for delivering PSA 27 to "Lead the global effort to avoid dangerous climate change" has also been transferred to DECC with the related funding. BERR will play a full part in the governance structure for PSA 27 but will not be classed as a contributing Department for reporting purposes.


  7.  Spring 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 the Postal Services Commission (to increase its Appropriations in Aid).


  8.  The Department's Spring Supplementary Estimate changes Departmental budgets for 2008-09 in the following ways:

    —  The Department Expenditure Limit (DEL) budget will be reduced by £1,906 million from £3,368 to £1,462 million. Further detail is provided at paragraph 9.

    —  The Annually Managed Expenditure (AME) budget will be reduced by £3,490 million from £4,314 million to £824 million. Further detail is provided at paragraph 12.

    —  The Net Cash Requirement will be reduced by £2,011 million from £4,474 million to £2,463 million. Further details are provided in paragraph 13.

    —  The Administration budget will be decreased by £54 million from £333 million to £279 million. Further details are provided in paragraph 14.

  A summary explanation of the full changes to the Estimate and how these impact the Departmental Expenditure Limits is provided at Annex C.


Departmental Expenditure Limit (DEL)—Changes in provision

  9.  The DEL provision has decreased by £1,906 million from £3,368 million to £1,462 million. The following table shows the relevant DEL changes:

NotesNear Cash Non CashCapital
£m £m£m

DEL budget in Winter Supplementary Estimate
2,048110 1,211
MoG transfers to DECC1 (801)51(1,241)
PES transfer from UKTI to the Government Offices 2(1)
Switch from Near Cash to Capital3 (9)9
HMT funding for National Debtline4 1
HMT funding for Citizens Advice Bureau 52
Call on Reserve to fund provision for new Enterprise Finance Guarantee Scheme 621
Call on Reserve to fund provision for new Automotive Assistance Programme 725
Part repayment of Capital loan from DIUS 835
RDA switch from Near Cash to Capital9 -11
Other minor changes/rounding differences 101-1 1
Reclassification under FRS2611 1
DEL budget in Spring Supplementary Estimate 1,239207 16[2]

Departmental Expenditure Limit—Changes in provision


    1. MoG changes representing the funding for DSOs 4 and 5 transferred to DECC, including Admin.

    2. PES transfer of £1.2 million made by UK Trade & Investment (UKTI) from its Admin to the Department for Communities and Local Government (CLG) to cover restructuring costs of Government Office staff (employed on behalf of UKTI) in the Regions.

    3. Switches from underspends in Admin (£2 million) and Programme (£7 million from the Insolvency Service (INSS), where the Near Cash budget is being reduced and the Non Cash budget increased to cover additional provision for bad debts), to reduce the negative balance on the Capital Departmental Unallocated Provision (DUP).

    4. HM Treasury has provided £850k additional funding for the National Debtline with additional sums for forward CSR07 years of £2.5 million in both 2009-10 and 2010-11.

    5. HM Treasury have also provided additional funding for the Citizens' Advice Bureau of £2.5 million in 2008-09 and £7.5 million in 2009-10 to meet increased demand in the current economic climate.

    6. On 14 January, the Secretary of State announced a support package designed to leverage £22 billion of lending—made up of the Enterprise Finance Guarantee Scheme (£1.3 billion), the Capital for Enterprise Fund (£75 million), and the Working Capital Scheme (£20 billion)—to help companies struggling to access finance for working capital and investment in the current economic climate. The Schemes are intended to support viable businesses that have been impacted through a combination of the credit crunch and economic downturn, during which lending conditions have tightened and payment periods extended; these are not businesses that have suddenly been transformed from being successful to failing businesses. As agreed with HM Treasury when designing the Schemes, BERR has made a Non Cash Call on the Reserve of £21 million to fund a provision for the new Enterprise Finance Guarantee Scheme to provide for potential defaults resulting from the proportion of Scheme lending in 2008-09.

    7. On 27 January, the Secretary of State announced a further £2.3 billion package of loan guarantees to Britain's automotive manufacturers and large suppliers; primarily to support investment in low carbon plant and research and development. The guarantees will unlock loans of up to £1.3 billion from the European Investment Bank (EIB) and BERR will offer guarantees to support up to a further £1 billion of lending, or loans where appropriate, to cover worthwhile investments not eligible for EIB support or which will bring special value to Britain. As agreed with HM Treasury when designing the Schemes, a Non Cash Call on the Reserve has been made amounting to £25 million to fund potential defaults under this new Automotive Assistance Programme.

    8. The Department for Innovation, Universities and Skills (DIUS) have repaid £35 million Capital in part repayment of a loan made by BERR in 2007-08. This is being used to reduce the negative balance on the Capital DDUP. The balance of £43 million Capital will be repaid in 2009-10.

    9. A minor change in funding has been made to the RDA budget through the virement of £1.196 million from Near Cash to Capital to realign RDA allocations.

    10. A transfer was made by the Department for Work and Pensions (DWP) in respect of initial payments made to mesothelioma sufferers amounting to £330k, of which £80k was transferred on to DECC (Coal Health Liabilities). The £250k transferred to BERR will fund reimbursements to DWP from British Shipbuilders' Liabilities, where a claimant has entitlement to compensation for mesothelioma and DWP have already made some payment of benefit to the claimants. Funding amounting to £500k per annum has also been provided for 2009-10 and 2010-11. As a consequence, a Non Cash provision of £8.6 million has also to be made from BERR's resources.

    11. An additional Non Cash item has been added in 2008-09 following HM Treasury's decision to implement the financial instrument standards (FRS 25, FRS 26 and FRS 29) from 2008-09. In the financial year 2008-09, BERR anticipates the impact of the introduction of the Standards to amount to £1.7 million. This figure comprises £1.3 million for the Insolvency Service representing additional discounted Non Cash costs for debtors at the end of 31 March 2009 and £0.4 million for the Department's liability to Investors in the High Technology Investment Fund.

  The Committee may wish to note that International Reporting Standards (IFRS) will be implemented in 2009-10. To meet this requirement all Departments will be required to:

    —  Prepare shadow IFRS-based accounts for 2008-09, except where the entity can demonstrate, exceptionally, to HM Treasury that it is unable to prepare full IFRS-based accounts for that year; and

    —  Make any necessary changes to budgets as a result of the switch to IFRS in the Winter Supplementary Estimates 2009.

Departmental Expenditure Limit—Neutral changes

  10.  These consist of:

    —  Identification of a £4 million underspend in the Selective Finance for Investment in England (SFIE) Programme due to slippage in large scale Capital projects vired into British Shipbuilders' Liabilities to fund Public Dividend Capital payments; and

    —  Identification of underspends in the Insolvency Service's Capital budget of £1 million (slippage in an IT project) vired into the negative Capital DUP.

  11.  The Committee may also wish to note that the budgets for Energywatch, Postwatch and the National Consumer Council have all been combined to form a single budget for the new organisation, Consumer Focus. Consumer Focus is the new consumer champion working in England, Wales, Scotland and, for postal services, Northern Ireland.

Annually Managed Expenditure (AME)

  12.  The AME provision has decreased by £3,489 million from £4,314 million to £825 million. This represents Voted provision of £654 million and Non-Voted provision of £171 million as shown in the following table:

£m£m £m

Provision in Winter Supplementary Estimate
4,754(440) 4,314
Amounts transferred to DECC as part of the MoG change (4,400)419(3,981)
Non Cash—increase in RDA impairments on their portfolio of asset holdings due to the current economic climate 6262
Redundancy Payments Service—increase in the level of expected payments because of the current economic climate 130130
Shareholders Loan made to Royal Mail in accordance with the option granted under the terms of the Subordinated Credit Facility Deed dated 19 March 2007 300300
Provision in Spring Supplementary Estimate 546279 825

Net Cash Requirement

  13.  The Estimate decreases the Net Cash Requirement by £2,011 million from £4,474 million to £2,463 million. This decrease relates to the cash impacts of the changes outlined above.


Net Cash Requirement in Winter Supplementary Estimate 4,474
Change in Voted Departmental Expenditure Limit budget 892
Decrease in Voted Annually Managed Expenditure (2,704)
Decrease in Payments against Provisions (573)
Increase in Debtors374
Revised Net Cash Requirement in Spring Supplementary Estimate 2,463


  14.  The Department's Administration Cost Limit (reflected in the DEL changes shown above) has decreased by £55.7 million from £332.5 million to £276.8 million. The changes are shown in the following table:
Administration Cost Limit in Main Estimate 332.5
MoG transfer to DECC(52.5)
PES transfer to DCLG for GO restructuring (1.2)
Transfer to Capital(2.0)

Revised Administration Limit

  15.  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 plan. As well as the direct costs of the staff and functions transferring to DECC, BERR has also provided an additional £4 million Admin towards the costs of establishing DECC's Corporate Centre and increasing staff numbers in the ex-Energy Group.


  16.  As part of the Spending Review process, the Department agrees its PSAs and DSOs and the spending plans to deliver them. The total funds required to achieve those targets are allocated to Departmental Groups arranged by DSO.

  17.  The major funding movements within this Supplementary Estimate relate to the MoG change due to the creation of DECC. Responsibility for the delivery of two DSOs and PSA target 27 are being transferred alongside the funding. BERR will play a full part in the governance structures for PSA 27 but will not be classed as a contributing Department for performance reporting purposes.

  18.  The additional (Non Cash) funding of £56 million from HM Treasury will assist BERR to provide additional support to business.

  19.  The Capital provided by DIUS (£35 million) will not have any impact on the achievement of PSA targets as the allocation of Capital budgets at the beginning of 2008-09 was premised on receiving this sum.

  20.  A full report on progress against the Department's DSO and PSA targets was provided in the Department's 2008 Autumn Performance Report, and is available at:


  21.  Annex D provides a summary of the Department's remaining EYF stock as reported to HM Treasury and published in the Public Expenditure Outturn White Paper (Cm 7419) adjusted for the amounts transferred to DECC as part of the MoG change. However, the two fiscal stimulus packages have the potential to utilise these EYF stocks to meet funding demands arising from potentially unavoidable defaults on the Schemes.


  22.  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 E. The preparation of the interim Resource Accounts has indicated a requirement to establish or maintain provisions for the following:

    —  Reduction in the onerous leases, due to new tenants taking occupation;

    —  Increase in the Small Firms Loan Guarantee Scheme due to the current economic climate;

    —  New Enterprise Finance Guarantee Scheme for potential defaults; and

    —  New Automotive Assistance Programme for potential defaults.


  23.  The total income variations allowed for within the Spring Supplementary Estimate are itemised in the Introduction to the Estimate. Operating (Resource) Appropriations in Aid have decreased from £3,107 million to £2,038 million, a reduction of £1,069 million, and Non Operating Capital Appropriations in Aid remain as £6,450 million. The variations have been calculated in accordance with the latest business projections and are off-set by equivalent decreases in spend.

  24.  The changes are due to the MoG transfer of £1,130 million, reinstatement of £20 million in contributions from Defra to the RDAs, new income of £36 million from DECC to the RDAs and a £5 million increase in income expected by the Insolvency Service.


  25.  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


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)

  AME 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 including Grant in Aid paid to Non Departmental Public Bodies (NDPBs). Non-Voted funds have by definition not been through that process. These may include, for example, the resource consumption of NDPBs which features within DEL. Expenditure funded by the National Insurance Fund is also Non-Voted (for example the Redundancy Payments Service).

Annex B


  Promotion of enterprise, innovation and increased productivity delivered through market solutions designed to meet market imperfections identified within the portfolios of innovation, international trade and investment, regional investment, enterprise for small firms and people & skills; support for business, including support for specific industries, small businesses, regional programmes and programmes to promote research and development, innovation, best practice and sustainable development; promotion of strong, fair and competitive markets at home and abroad including developing fair and effective legal and regulatory frameworks and delivering regulatory reform, measures to combat international bribery and corruption, measures to protect investors, measures to promote the interests of consumers, support for employment relations programmes and measures to promote a skilled and flexible labour market; efficient management and discharge of liabilities falling to the Department, including nuclear waste management and decommissioning and liabilities in respect of former shipbuilding industry employees; provision of a repayable credit facility for Royal Mail; exchange risk and other guarantee losses; subscriptions to international organisations and fulfilment of international treaty obligations; payments to other Government departments and the Devolved Administrations in relation to programmes supporting BERR objectives; support for Government Offices; grants and grants-in-aid to organisations promoting BERR objectives, including Non-Departmental Public Bodies; financial assistance to public corporations and trading funds including Ofcom; managing the Government's shareholder interest in the portfolio of commercial businesses wholly or partly owned by Government; funding of the Department's executive agencies; issuing budgets and making payments to Regional Development Agencies, to which other Government departments will contribute by supplying resources which BERR will appropriate in aid; payments to local authorities in respect of Local Area Agreements and New Burdens responsibilities; miscellaneous programmes, including payments in respect of claims for the restitution of property of victims of Nazi persecution, compensation for distant water trawlermen and assistance to redundant steelworkers; Departmental administration costs and a share of the administration costs of UK Trade and Investment; payments towards the expenses of the Office of Manpower Economics; associated non-cash items.

Annex C


2008-09 Budget Control Total Movements

£m£m £m
Departmental Expenditure Limit Resource 2,157(712)1,447
Of which:
  Administration332 55277
  Near-Cash2,048 1,239
Departmental Expenditure Limit Capital 1,211(1,195)16
Total Departmental Expenditure Limit 3,368(1,195) 1,463
Annually Managed Expenditure Resource4,754 (4,208)546
Annually Managed Expenditure Capital(440) 719279
Total Annually Managed Expenditure 4,314(3,489)825
Total Resource6,911 (4,920)1,991
Total Capital771 (476)295

2008-09 Voted Control Total Movements

£m£m £m
Request for Resources 14,474 1,8721,517
Total Voted Resource (Net)4,474 1,8721,517
Net Cash Requirement4,474 2,0112,463

Annex D


Administration Other ResourceCapital Total
£m£m £m£m
End Year Flexibility at 31/03/08 (Cm 7419) 26531 332889
Transferred to DECC as part of MoG change (343)(58) (401)
Current EYF Stock26 188274 488

Annex E


At 1 April 2007157,593
Amortisation of one year's discount3,467
Increase/(decrease) in provision5,352
Expenditure in year—At 31 March 2008 166,412



Other Total
£'000£'000 £'000£'000 £'000£'000 £'000
At 1 April 2007
133,434 32,84660,37979,213 13,827319,699
Amortisation of one year's discount2,936 7231,3001,743 (68)6,634
Increase/(decrease) in provision51,116 (671)(8,430)34,602 193,186682270,485
Expenditure in year(73,118) (3,572)(17,974) (1,962)(96,626)
At 31 March 2008114,368 29,32635,275115,558 193,18612,479500,192

12 February 2009

1   The ambit provides the statutory description of departmental operations funded through Supply and can only be extended or otherwise modified by the presentation of a Revised or Supplementary Estimate subsequently incorporated in an Appropriation Act. Back

2   Capital funding includes £131m of receipts from Launch Investment giving a gross expenditure budget of £148 million. Back

3   Extracts from the Annual Report and Accounts 2007-08. Back

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