Memorandum from the Ministry of Defence
WINTER SUPPLEMENTARY ESTIMATES 2008-09
1. INTRODUCTION
1.1 This Memorandum covers the Winter Supplementary
Estimate for the Ministry of Defence (MoD) and should be read
in conjunction with the Department's Winter Supplementary Estimate
(2008-09). The Introduction to the Estimate lists the changes
being made since the Main Estimate. This is shown by Request for
Resources (RfR), 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.
1.2 There is a separate Estimates Memorandum
for the Armed Forces Retired Pay and 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 £3,560 million from
£33,567 million at Main Estimates to £37,127 million.
There are two principal elements to this:
a) When Main Estimates were submitted to Parliament,
the Department's internal planning round had not been completed
and a number of changes to the Defence Budget from that announced
in the Government's 2007 Comprehensive Spending Review had not
been finalized. The figures in Main Estimates were thus to some
extent provisional. The Winter Supplementary Estimate reflects
the outcome of the planning round and the changes to the Budget.
The main change in RfR1 is a reallocation of £1 billion from
Single Use Military Equipment (SUME) Capital DEL to near cash
Resource DEL; and an addition of £50 million (fiscal) Capital
DEL. These changes align the budget more closely to the cost of
the Defence programme in 2008-09 resulting from the Department's
2008 planning round. Further details are at paragraph 4.3.
b) The RfR2 (Operations and Peace Keeping[1])
resources net request of £2,636 million is additional funding
for military operations in Iraq, Afghanistan and the Balkans and
comprises net direct resource costs of £2,286 million and
indirect resources of £350 million. The RfR2 capital request
of £1,063 million is mainly for Urgent Operational Requirements
(UORs) in Iraq and Afghanistan. Further details are provided at
paragraphs 4 and 5.
2.2 The Voted Resource and Capital changes
are summarised in the following tables:
Table 1
CHANGES IN RESOURCE AND CAPITAL EXPENDITURE
|
| Resource Expenditure | £ M
|
|
| Provision of Defence Capability (RfR1) |
989.692 |
| Operations and Peace Keeping (RfR2) | 2,636.430
|
| Total Net Request for Resources |
3,626.122 |
|
|
| Capital Expenditure | £ M
|
|
| Net Provision of Defence Capability (RfR1) |
(950.000) |
| Operations and Peace Keeping (RfR2) | 1,063.000
|
| Total Net Request for Capital | 113.000
|
|
|
| £ M |
|
| Total Change in Capital and Resource
| 3,739.122 |
|
| |
2.3 The total change in the Estimate is £3,739.112
million, which generates an additional net cash requirement of
£3,389.122 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 | 3,210.019
|
| Near Cash Non Budget | 66.103
|
| Near Cash in Capital DEL | 113.000
|
| Net Cash Requirement | 3,389.122
|
|
| |
2.4 In addition to the changes outlined in paragraphs
2.1 above, the changes to the Winter Supplementary Estimate comprise:
— additional Non Operating Capital receipts arising
from the sale of MoD' s interests in DARA (£60 million) and
QinetiQ (£200 million), offset by a corresponding increase
in gross capital expenditure;
— net budgetary transfers out of £16.646 million
to Other Government Departments under RfR1 and RfR2 (Table 4).
The largest transfers are to the FCO for the Stabilisation Fund,
and from the FCO for helicopter pilot training for counter-narcotics;
— Various technical changes relating to Non Departmental
Public Bodies (NDPBs) which have been re-classified from Voted
DEL to Non Budget and Non-Voted DEL;
— Re-alignment of Resource and Capital Sub Head
provisions to reflect the finalisation of MOD plans (see para
2.1(a) above), and changes in budgetary responsibility, with no
overall impact on 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 overleaf shows how the Winter Supplementary
Estimate is compiled, identifying changes since 2008-09 Main Estimates.
Table 3
SHOWING CHANGES TO VOTED RESOURCES AND CAPITAL AT WINTER
SUPPLEMENTARY ESTIMATES
£M | Direct R
DEL
| Indirect R
DEL | Total
R DEL
| AME | Non
budget
Near
cash
| Total Net
Resources | Net
Capital
DEL
| Capital
Non
Budget/
AME
| Total
Net
Capital |
[1] | 1 | 2
| 3 | 4 | 5 |
6 | 7 | 8 | 9
|
| RfR1 Provision at Main Estimates | 22,537.2
| 10,940.5 | 33,477.7 | -84.8
| 28.4 | 33,421.3 | 7,870.1
| 2 | 7,872.1 |
| Switch £1Bn from C DEL to R DEL | 1,000.0
| | 1,000.0 |
| | 1,000.0 | -1,000.0
| | -1,000.0 |
| Additional C DEL Provision |
| | | |
| | 50.0 | |
50.0 |
| Transfers In | 3.0 |
| 3.0 | | |
3.0 | | |
|
| Transfers Out | -4.1 |
| -4.1 | | |
-4.1 | | |
|
| Reallocation of NDPBs | -73.3
| | -73.3 | |
64.2 | -9.2 | |
| |
| Additional Grants to NDPBs | -2
| | | | 2
| 0 | | |
|
| RFR1 at Winter Supplementary Estimates
| 23,460.8 | 10,940.5
| 34,401.3 | -84.8
| 94.5 | 34,411.0
| 6,920.1 | 2 |
6,922.1 |
| RfR2 Provision at Main Estimates | 89.6
| 0 | 86.6 | 0 |
0 | 89.6 | 0 | 0
| 0 |
| Additional Provision at Winter Supplementary Estimates
| 2,302.0 | 350.0 | 2,652.0
| | | 2,652.0
| 1,063.0 | 0 | 1,063
|
| Transfers In | 2.4 |
| 2.4 | | |
2.4 | | |
|
| Transfers Out | -18.0 |
| -18.0 | | |
| | |
|
| RFR2 at Winter Supplementary Estimates
| 2,376.0 | 350.0
| 2726.0 | 0 |
0 | 2,726.0 | 1,063.0
| 0 | 1,063.0 |
| RfR3 Provision at Main Estimates |
| | | 1,015.1
| | 1,105.1 |
| | |
| RFR3 at Winter Supplementary Estimates
| | | | 1.015.1
| | 1.015.1 |
| | |
| Winter Supplementary Estimates Total*
| 25,836.8 | 11,290.5
| 37,127.3 | 930.3
| 94.5 | 38,152.1
| 7,983.1 | 2 |
7,985.1 |
[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 five transfers out, which are detailed
in Table 4.
Table 4
SHOWING TRANSFERS BETWEEN MOD AND OTHER GOVERNMENT DEPARTMENTS
Transfers Out | RfR
| £M | Purpose
|
Her Majesty's Treasury | 1
| (0.045) | Transfer to the Centre of Expertise for Sustainable Procurement administration costs—a pan-Government initiative.
|
| Cabinet Office | 1 | (0.040)
| Transfer for contribution to the Government's Secure Zone Fund costs.
|
| Department for Business, Enterprise and Regulatory Reform (BERR)
| 1 | (4.000) | MoD Contribution to the Chemical and Nuclear Weapons Disposal Pool.
|
| Foreign and Commonwealth Office (FCO) | 2
| (16.000) | Stabilisation Aid Fund costs transfer for Iraq & Afghanistan.
|
| Department for International Development (DIFD)
| 2 | (1.970) | Stabilisation Aid Fund costs transfer for Iraq and Afghanistan.
|
| Transfers In | |
| |
| Foreign & Commonwealth Office | 1
| 2.800 | Contribution for Helicopter pilot training costs.
|
| Cabinet Office | 1 | 0.209
| Transfer for the Parliamentary Counsel costs.
|
| Foreign & Commonwealth Office | 2
| 2.400 | Contribution to the Balkan Conflict Prevention Pool Costs.
|
| Total Net Transfers Out |
| (16.646) | |
| |
| |
End Year Flexibility
4.2 The Department may draw down its end year flexibility
for resource and capital in the Spring Supplementary round.
Transfer of £1 billion Budgetary Flexibility from Capital
DEL (SUME) to Resource DEL
4.3 Spending on Single Use Military Equipment (SUME)
is classified in the National Accounts as resource rather than
capital expenditure. Under the terms of the Comprehensive Spending
Review (CSR), MoD has been permitted to transfer elements of its
budget from SUME to near-cash resource DEL. For 2007-08 the transfer
amounted to some £400 million. At the time of 2008-09 Main
Estimates the level of any transfer required for 2008-09 had still
to be agreed between MoD and HM Treasury. In Winter Supplementary
Estimates a transfer of £1 billion for the current year is
sought. A further transfer is likely to be sought in the course
of the next financial year.
Additional Fiscal Capital Request of £50 million
4.4 The Winter Supplementary Estimate includes a request
for an additional £50 million fiscal Capital. This is primarily
to cover for the forecast down turn in expected receipts from
the disposal of MoD land by Defence Estates.
Other Changes
AME Items
4.5 There are no changes to RfR1 Resource AME at Winter
Supplementary Estimates.
Non Budget Items
4.6 The changes to Non Budget at the Winter Supplementary
Estimate reflect the re-classification of the museums from Voted
DEL to Non Budget.
Neutral Sub Head Budget Transfers
4.7 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 funding adjustments to align TLB provision with the
outcome of the Department's planning round which was finalised
after Main Estimates. The capital transfers between sub heads
are principally for transfers of budgetary provision from "customer"
budgets to Defence Estates, which is responsible for most estate
expenditure. There are related IRDEL cost re-allocations associated
with the Capital budget re-allocations.
Non Operating Appropriations in Aid
4.8 The Non-Operating Appropriations in Aid changes to
the Winter Supplementary Estimate reflect the anticipated receipts
from the sale of the Defence Aviation Repair Agency (DARA), and
QinetiQ, with a corresponding increase in gross capital expenditure.
Grants in Aid
4.9 There are five Grants in Aid increases recognised
in the Winter Supplementary Estimates. The grant in aid of £0.075
million to the Royal Naval Museum (for the single RN museums project
set up costs); £1 million for the Royal Hospital Chelsea
(superannuation payments and additional running costs for the
new infirmary); £0.400 million for the Royal Air Force Museum
(roof repairs and maintenance for the Hendon Museum); £0.395
million for the National Army Museum (mainly for asbestos removal,
increased fuel costs and a special exhibition on the relationship
between the Army and the public); and £0.080 million for
the Armed Forces Memorial (in-year maintenance costs). The Grants
in Aid have been allocated within the existing provision of the
TLBs' current DEL.
Implementation of stage 1 of the International Financial Reporting
Standards
4.10 The Department has implemented part of the IFRS
requirements at Winter Supplementary Estimates. The first stage
of the IFRS implementation relates to discounting of long-term
debtors/liabilities and the movement on financial derivatives
on forward purchase contracts. The impact of these changes score
to IRDEL. The Department has estimated a neutral impact overall
at Winter Supplementary Estimates, and will revise its forecasts
in the Spring Supplementary Estimates because of the high volatility
of these transactions at present. The impact of FRS 23, which
relates to valuing all foreign currency transactions at spot rate
rather than using the General Accounting Rate (which was aligned
to the buy forward rate) will be implemented in the Spring Supplementary
Estimates.
5. REQUEST FOR
RESOURCES 2: OPERATIONS
AND PEACE
KEEPING
5.1 The Winter Supplementary Estimate requests an additional
£1,397 million for peace keeping operations in Iraq and £2,318
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 increase reflects the demands of the operations concerned,
in particular the need for Urgent Operational Requirements. There
are transfers of funding out to FCO (£16 million) and DIFD
(£1.97 million) being the MoD's contribution to the Government's
Stabilisation Fund. There is also a transfer in of £2.4 million
from the FCO as a contribution to the Balkans cost of operations.
A further transfer in from DIFD will be made in the Spring Supplementary
round for their contribution to the Global Pool costs.
Table 5
SUMMARY COST OF OPERATIONS AND PEACE KEEPING CLAIM AT
2008-09 WSE
Operation | Direct
Resource
DEL £M
| Indirect
Resource
DEL £M
| Capital
DEL £M | Total WSE
request
2008-09 £M
| Outturn
2007-08 |
Iraq | 971 | 170
| 256 | 1,397 | 1,457
|
| Afghanistan | 1,331 | 180
| 807 | 2,318 | 1,504
|
| Balkans | 2 |
| | 2 | 26 |
| Stabilisation Fund contribution out to FCO and DIFD
| -18 | | |
-18 | 0 |
| Total | 2,286 |
350 | 1,063 | 3,699
| 2,987 |
| |
| | | |
5.2 The current cost estimate for operations in Iraq,
Afghanistan and the Balkans for the 2008-09 Winter Supplementary
Estimates is shown in Table 6.
5.3 The Department has requested the £350 million
Indirect Resource DEL from the Treasury Reserve to cover cost
of capital, depreciation and impairment charges associated with
fixed assets purchased under Urgent Operational Requirement arrangements.
These are continuing non-cash charges associated with holding
these assets and are charged to RfR2 for as long as they are deployed
on operations.
Table 6
THE ESTIMATED COST OF OPERATIONS IN AFGHANISTAN, IRAQ
AND THE BALKANS AT WSE 2008-09
| | |
|
| Cost Type | Iraq £M
| Afghanistan £M | Balkans £M
|
| | |
|
| Direct Resource DEL | |
| |
| Civilian Personnel | 17 |
10 | 1 |
| Military Personnel | 116 |
106 | 1 |
| Stock/Other Consumption | 195
| 379 | 6 |
| Infrastructure Costs | 119 |
147 | 5 |
| Equipment Support Costs | 332
| 385 | 6 |
| Other Costs and Services | 194
| 311 | 2 |
| Income Foregone/ Generated (-) | -2
| -7 | -2 |
| Total Direct Resource DEL | 971
| 1,331 | 19 |
| Indirect Resource DEL | 170
| 180 | 0 |
| Total Resource DEL | 1,141 |
1,511 | 19 |
| Capital DEL | |
| |
| Capital Additions | 256 |
807 | 0 |
| Total Capital DEL | 256 |
807 | 0 |
| Total Estimated Costs | 1,397
| 2,318 | 19 |
| | |
|
| | |
|
5.4 The Department has revised the Estimate ambit for
RfR2 to reflect the Committee's 2007-08 Spring Supplementary Estimates
recommendations for a more detailed description of our RfR2 activities.
6. RFR3 WAR
PENSION BENEFIT
(WPB)
6.1 There are no changes to the RfR3 War Pension Benefit
at Winter Supplementary Estimates.
7. THE DEPARTMENTAL
EXPENDITURE LIMIT
(DEL)
7.1 Table 8 shows the DEL from 2005-06 to 2008-09 for
all RfRs. The Total DEL is calculated by adding Resource DEL,
Capital DEL and deducting depreciation, which forms part of Resource
DEL. Depreciation is excluded from Total DEL; including this as
well as Capital DEL would be double counting. The figures are
for Voted and Non-voted DEL; the Non voted DEL figure for 2008-09
is £137.561 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
| 2005-06
SSE £M
| 2006-07
SSE £M | 2007-08
SSE £M
| 2008-09
ME £M | 2008-09
WSE
|
Resource DEL | 33,727 |
34,104 | 36,940 | 33,623
| 37,273 |
| Capital DEL | 6,798 | 7,448
| 8,120 | 7,871 | 7,984
|
| Depreciation | -8,168 | -7,401
| -8,218 | -7,418 | -7,747
|
| Total DEL | 32,357
| 34,151 | 36,842
| 34,076 | 37,510
|
| |
| | | |
8. ADMINISTRATION COSTS
LIMIT
8.1 The Department introduced an Administration Costs
Limit in its 2008-09 Main Estimates for the first time. There
is a small reduction of £0.045 million reflecting a budgetary
transfer to the Treasury, reflecting the MoD's contribution to
the Centre of Expertise for Sustainable Procurement.
9. PROVISIONS AND
CONTINGENT LIABILITIES
9.1 No changes have been made at WSE.
10. MACHINERY OF
GOVERNMENT CHANGES
10.1 There are no Machinery of Government Changes.
11. IMPACT ON
PSA TARGETS
11.1 The changes in provision sought are not linked to
the overall achievement of the PSA targets to which the Department
contributes our Departmental Strategic Objectives (DSO) but rather
enables delivery across the range of outputs in accordance with
our plans. However, a failure to grant the additional RfR2 allocation
would undermine the prosecution of operations in Iraq and Afghanistan
(PSA 30 and DSO 1).
12. NET ADDITIONAL
CASH REQUIREMENT
12.1 The Net Cash impact for the Winter Supplementary
Estimate is an increased requirement of £3,389.122 million.
This is broken down in Table 2.
1
Now re-named from Conflict Prevention to Operations and Peace
Keeping. Back
|
