Memorandum from the Ministry of Defence
on the Ministry of Defence Main Estimates 2009-10
1. INTRODUCTION:
1.1 This Memorandum covers the Main Estimate
for the Ministry of Defence (MOD). The Department's spending plans
for 2009-10 are based upon the outcome of the Government's
2007 Pre-Budget Report and Comprehensive Spending Review
(CSR 2007 CM 7227), published in October 2007. The key features
of the settlement for Defence are:
— An increase in the Defence Budget to
£35.3 billion in 2009-10 in Total DEL.
— Continued commitment to make savings
against the Department's overheads, including a 5% year-on-year
saving in our administrative overhead, which was separately identified
in our 2008-09 budget for the first time, including a 25%
reduction in our Head Office staff numbers. The Department's target
of annual net cash-releasing savings is now £3.15 billion
by 2010-11.
— Continued investment in improving accommodation
for our people and families, including £50 million brought
forward this year for service accommodation improvement as announced
by the Chancellor in his Budget Speech.
— The net additional costs of military
operations will continue to be met on top of the core defence
budget from the Reserve. Provision is being requested in the Main
Estimates for the first time.
1.2 This Estimates Memorandum should be
read in conjunction with the Department's Main Estimate. The Introduction
to the Estimate explains some of the changes that have taken place
since the 2008-09 Estimates, together with the total for
each of the Requests for Resources (RfR).[1]
There are no contingencies funded in this Estimate. Contingent
liabilities are reported as a separate table in the Estimate.
1.3 There is a separate Estimates Memorandum
for the Armed Forces Retired Pay, Pensions Vote 2009-10 Main
Estimate.
2. SUMMARY OF
RESOURCES SOUGHT
IN THE
ESTIMATE:
2.1 Part I of the Estimate sets out the
new resource and cash requirements for the Department for the
year ending 31 March 2010. The resources requested are set
out in Tables 1—3 below.
Table 1
SUMMARY OF RESOURCE EXPENDITURE
|
| Resource Expenditure | £ M
|
|
| Provision of Defence Capability (RfR1) |
35,832.815 |
| Peace Keeping and Operations (RfR2) | 2,872.089
|
| War Pensions and Allowances (RfR3) | 1,023.706
|
| Total Net Request for Resources | 39,728.610
|
|
| |
Table 2
SUMMARY OF CAPITAL EXPENDITURE
|
| Capital Expenditure | £ M
|
|
| Provision of Defence Capability (RfR1) |
7,614.127 |
| Peace Keeping and Operations (RfR2) | 1,564.640
|
| Total Net Request for Capital | 9,178.767
|
|
| |
Table 3
SUMMARY OF NET CASH REQUIREMENT
|
| Net Cash Requirement | £ M
|
|
| Near Cash in Resource DEL | 26,336.599
|
| Near Cash in Capital DEL | 9,119.789
|
| Near Cash in AME | 1,024.124
|
| Accruals to cash adjustments | 1,187.306
|
| Non Budget (Resource + Capital) | 78.346
|
| Net Cash Requirement | 37,746.164
|
|
| |
2.2 The difference between the net request for resources
and the net cash requirement arises from a range of technical
accounting adjustments, set out in detail in Part II of the Estimate
("Resource to Cash Reconciliation").
3.COMPOSITION OF
THE MAIN
ESTIMATES:
3.1 Transfer of £600 million Budgetary Flexibility
from Capital DEL (SUME) to Resource DEL
3.1 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. In 2008-09 a
transfer of £1 billion was made in the Winter Supplementary
Estimate. Our 2008-09 Winter Supplementary Estimate pointed
out that a further transfer would likely be sought in the course
of 2009-10 (Ev4, Para 4.4 HC52). We have been able to
set this out at Main Estimates, following the conclusion of the
Planning Round. The reallocation of £600 million from
Single Use Military Equipment (SUME) Capital DEL to near cash
Resource DEL is sought in the 2009-10 Main Estimate. A further
request may be made in our Supplementary Estimates.
3.2 Non-Departmental Public Bodies
Non-Departmental Public Bodies (NDPBs) are now reported on
a net basis, which means that grants have been moved from DEL
to Non Budget (See Annex 1).
3.3 Transfers between Government Departments
Transfers to and from Other Government Departments are shown
in Tables 4 and 5 respectively; these include some transfers
where funding has been agreed for more than one year, and are
a continuation of transfers made in last year's Supplementary
Estimates.
Table 4
TRANSFERS TO MOD FROM OTHER GOVERNMENT DEPARTMENTS IN
RfR1/RfR2
| | |
|
| Exporting Department | RfR
| £M | Purpose
|
| | |
|
| Security & Intelligence Services Agency
| 1 | 42.500 | Contribution to MOD guard services provided to GCHQ.
|
| Department for International Development |
2 | 20.000 | Contribution to the Joint Pools Programmed Expenditure.
|
| Total | | 62.500
| |
| | |
|
| |
| |
Table 5
TRANSFERS FROM MOD TO OTHER GOVERNMENT DEPARTMENTS IN
RFR1/2
Importing Department | RfR
| £M | Purpose
|
| Foreign and Commonwealth Office | 1
| -0.500 | The Royal Travel Grant in Aid Budget has been transferred from the MOD to the Department of Transport, No.10, and FCO.
|
| Department of Transport | 1
| -0.500 | The Royal Travel Grant in Aid Budget has been transferred from the MOD to the Department of Transport, No.10, and FCO.
|
| Cabinet Office | 1 | -0.500
| The Royal Travel Grant in Aid Budget has been transferred from the MOD to the Department of Transport, No.10, and FCO.
|
| Department of Innovation, Universities and Skills
| 1 | -0.235 | MOD contribution to the new skills strategy
|
| Ministry of Justice | 1 |
-0.050 | Centralisation of Tribunals
|
| Department for Business Enterprise and Regulatory Reform
| 1 | -1.325 | MOD share of the management costs of transferred nuclear liabilities.
|
| Department for Business Enterprise and Regulatory Reform
| 1 | -4.000 | MOD Contribution to the Chemical and Nuclear Weapons Disposal Pool.
|
| Department for Culture, Media & Sports |
1 | -0.156 | Contribution to Pattern Room (Leeds Armoury) running costs.
|
| Cabinet Office | 1 | -0.040
| Transfer for contribution to the Government's Secure Zone Fund costs.
|
| HM Treasury | 1 | -0.045
| Transfer to the Centre of Expertise for Sustainable Procurement administration costs—a pan-Government initiative
|
| Foreign & Commonwealth Office | 2
| -28.000 | Stabilisation Aid Fund activities undertaken by FCO.
|
| Total | | -35.351
| |
| |
| |
3.4 Non Voted items
Changes under RFR1 include "non-voted"
items. These are items that form part of the Department's budget
but are not voted by Parliament. These are set out in Table 6 below.
Table 6
COMPOSITION OF RESOURCE NON VOTED EXPENDITURE
Category | £M
| Classification | Notes
|
| Non Nuclear Cash Release of Provisions (Payment)
| 211.000 | Near Cash in RDEL
| This entry offsets within DEL giving no overall impact on total DEL.
|
| Non Nuclear Cash Release of Provisions (creation)
| (211.000) | Non Cash in RDEL
| This entry offsets within DEL giving no overall impact on total DEL.
|
| Nuclear cash release of provisions | 48.862
| | See Note A. |
| Depreciation on Public Corporations | 9.520
| Non Cash | See Note B. |
| Net Running costs of NDPBs | 132.083
| | See Note C. |
| Total | 190.465
| | |
Notes: | |
| |
| A. The cash release of nuclear provisions relate to payments for the decommissioning of nuclear facilities and sites, including submarines. The provisions were created in previous years, and payments will be made this year.
| | | |
| B. Depreciation costs for Public Corporations eg trading funds.
| | | |
| C. The running costs of NDPBs eg Royal Hospital Chelsea (RHC) excludes the income from Grants issued by the MOD and therefore shows the costs to public funds.
| | | |
| |
| |
3.5 Fiscal Capital Request of £50 million
As the Chancellor announced in his Budget Speech £50 million
has been made available to improve service accommodation this
year.
3.6 £81 million Adjustment to MOD Capital Allocation
In line with standard practice, MOD's budget has been reduced
to reflect a forecast overspend in 2008-09. This was driven by
higher capital expenditure, primarily because of the lower than
anticipated receipts arising from the disposal of MOD land and
property. Because of the tight current fiscal situation the Treasury
have correspondingly reduced our 2009-10 core capital budget.
We will be able to reclaim any excess reduction should our final
audited 2008-09 outturn prove to be lower.
4. REQUEST FOR
RESOURCES 2 (RFR2):
4.1 The MOD's total request for the costs of operations
and peace-keeping is set out in table 7.
Table 7
SUMMARY COST OF OPERATIONS AND PEACEKEEPING AT 2009-10 MAIN
ESTIMATES
| | |
| | |
| Operation | Direct
Resource
DEL £M
| Indirect
Resource
DEL £M
| Capital
DEL £M | Total ME
request
2009-10 £M
| Total SSE
request
2008-09 £M
|
| | |
| | |
| Iraq | 629 | 165
| 83 | 877 | 1,958
|
| Afghanistan | 1,756 | 258
| 1,481 | 3,495 | 2,559
|
| Conflict Prevention Pool (2) | 65
| 0 | 0 | 65 |
78 |
| Total | 2,450 |
423 | 1,564 | 4,437
| 4,595 |
| | |
| | |
| Notes: | | |
| | |
| (1) Provision for the Balkans will be separately identified in the Supplementary Estimates when any drawdown plan is clearer.
| | | |
| |
| (2) This includes the Stabilisation Aid Fund. Overall responsibility for the SAF administration is currently being re-negotiated between Government Departments, and the final agreement will be reflected in the Supplementary Estimates.
| | | |
| |
| | |
| | |
4.2 Operations in Iraq and Afghanistan
For the first time the MOD is requesting funding for operations
in Iraq and Afghanistan in Main Estimates. The breakdown of the
request is set out in Table 8 below. As usual the request
is funded from the Reserve. Further requests for funds may be
required in the Supplementary Estimates.
4.3 Iraq
Operational costs in Iraq reflect the planned withdrawal
of UK Forces over the first four months of the financial year,
including the drawdown costs set out in the Government response
to Select Committee's report on the 2008-09 Spring Supplementary
Estimates. These forces will have successfully completed their
tasks by the end of May 2009 and will then leave Iraq by
the end of July. In 2009, we will move to a broad-based bilateral
relationship with close co-operation in a range of areas: economic,
cultural, commercial, educational, and defence.
4.4 Afghanistan
Operations in Afghanistan include the additional security
costs required for the local elections, and the costs of around
200 personnel providing counter improvised explosive device
(IED) expertise. Capital costs for Afghanistan include Urgent
Operational Requirements (UORs) such as further force protection
(eg tactical support vehicles and surveillance equipment), and
ongoing further modifications to military equipment for use in
the operational environment (eg further adaptations to Tornado
aircraft and Lynx and Merlin helicopters). UORs by their very
nature reveal a capability gap in a specific operational environment
and are therefore sensitive. We therefore cannot provide precise
details. There is also an additional capital provision for increased
airfield and associated support infrastructure in Afghanistan.
Table 8
THE ESTIMATED COST OF OPERATIONS IN AFGHANISTAN AND IRAQ
AT MAIN ESTIMATES 2009-10
|
| Cost Type | Iraq £M
| Afghanistan £M |
|
| Direct Resource DEL |
| |
| Civilian Personnel | 9 |
16 |
| Military Personnel | 37 |
148 |
| Stock/Other Consumption | 189
| 480 |
| Infrastructure Costs | 69 |
216 |
| Equipment Support Costs | 231
| 485 |
| Other Costs and Services | 93
| 423 |
| Income Foregone/Generated (-) | 1
| -12 |
| Total Direct Resource DEL | 629
| 1,756 |
| Indirect Resource DEL | 165
| 258 |
| Total Resource DEL | 794
| 2,014 |
| Capital DEL | |
|
| Capital Additions | 83 |
1,481 |
| Total Capital DEL | 83
| 1,481 |
| Total Estimated Costs | 877
| 3,495 |
|
| |
|
4.5 Balkans Funding
Balkans funding will be requested in the Supplementary Estimates
once any planned drawdown arrangements have been finalised.
4.6 Conflict Prevention Pool
The Department holds joint funding pools with the Department
for International Development (DfID) and the FCO. These are designed
to deliver improved UK and international support in conflict prevention
by addressing long term structural causes of conflict, managing
regional and national tension and violence, and supporting post-conflict
reconstruction combined to form a single Programme Pool, funded
at Main Estimates by a transfer from DfID of £20 million.
4.7 Stabilisation Aid Funding (SAF)
This ring-fenced fund was established last year (2008) to
fund stabilisation and reconstruction activities, eligible as
Official Development Assistance (ODA) in "hot" conflict
zones, mainly in Iraq and Afghanistan. 3% of the Fund is intended
to support the continuation of contractually committed programmes
in Iraq and Afghanistan, previously funded from the Conflict Prevention
Pool, while the remainder aims to support new projects in these
areas. The fund was profiled £73/£73/£123 million
over the three years of the CSR 07. We have transferred £28 million
of this fund to the FCO at Main Estimates to continue to support
these activities. Overall responsibility for the SAF administration
is currently being re-negotiated between Government Departments,
and the final agreement will be reflected in the Supplementary
Estimates.
5. REQUEST FOR
RESOURCES 3 (RFR3):
5.1 The Department is seeking £1,024 million
for War Pensions & Benefits, all of which is Annually Managed
Expenditure (AME). The scheme was closed to new claimants from
5 April 2005 with the introduction of the Armed Forces
Compensation Scheme. Costs for the new scheme are accounted for
under the separate vote for the Armed Forces Pension Scheme Estimate.
6. SUMMARY ESTIMATES
COMPOSITION:
6.1 Table 9 summarises the composition of the Estimate,
including changes since the CSR 07 Settlement, but excluding
AME and Non-Budget expenditure.
Table 9
DETAIL OF CHANGES TO THE 2009-10 MAIN ESTIMATE SINCE
PUBLICATION OF CM 7227—YEAR 2
All £M | Direct
R DEL
| Indirect
R DEL | Total
R DEL
| Resource
AME | Non-Budget
| Total Net
Resource | Capital
DEL
| Capital
AME | Capital
Non-Budget
| Total
Net
Capital |
| [1] | 1 | 2
| 3 | 4 | 5
| 7 | 8 | 9
| 10 | 11 |
| CSR figures Cm 7277 Yr2 (DEL ONLY)
| 23,734.0 | 11,431.0
| 35,165.0 | 124.4
| 136.6 | 35,426.0
| 8,187.0 | 56.8
| 2.1 | 8,245.9
|
| Transfers in | 42.5 |
| 42.5 | | |
42.5 | | |
| 0.0 |
| Transfers out | -7.4 |
| -7.4 | | |
-7.4 | 0.0 | |
| 0.0 |
| Stabilisation Fund re-allocation to RfR2 |
-73.0 | | -73.0 |
| | -73.0 |
| | | 0.0 |
| MOG Changes | -13.7 |
| -13.7 | | |
-13.7 | | |
| 0.0 |
| Flex Capital to Resource. | 600.0
| | 600.0 | |
| 600.0 | -600.0 |
| | -600.0 |
| Additional Grants to Museums | -3.3
| | -3.3 | |
3.3 | | |
| | |
| Adjustment for excess Capital Expenditure in 2008-09
| | | |
| | | -81.0 |
| | -81.0 |
| Additional service Accommodation |
| | | |
| | 50.0 | |
| 50.0 |
| Total | 24,279.1
| 11,431.0 | 35,710.1
| 124.4 | 139.9 |
35,974.4 | 7,556.0 |
56.8 | 2.1 | 7,614.9
|
| Less Non-voted items |
| | | |
| | | |
| |
| Non Nuclear Cash Release | 211.0
| -211.0 | 0.0 |
| | 0.0 | |
| | 0.0 |
| Nuclear Cash Release | 48.9 |
| 48.9 | -48.9 |
| 0 | |
| | 0.0 |
| NDPB Costs | 132.1 | 9.5
| 141.6 | | |
141.6 | 0.9 | |
| 0.9 |
| RfR1 Total | 23,887.1
| 11,632.5 | 35,519.6
| 173.3 | 139.9 |
35,832.9 | 7,555.1 |
56.8 | 2.1 | 7,614.0
|
| Stabilisation Fund | 73.0 |
| 73.0 | |
| 73.0 | | |
| |
| Transfers In | 20.0 |
| 20.0 | | |
20.0 | | |
| |
| Transfers Out | -28.0 |
| -28.0 | | |
-28.0 | | |
| |
| Reserve Bid | 2,384.3 | 422.7
| 2,807.0 | |
| 2,807.0 | 1,564.6 |
| | 1,564.6 |
| RfR2 Provision | 2,449.3
| 422.7 | 2,872.0
| | | 2,872.0
| 1,564.6 | |
| 1,564.6 |
| RfR3 Provision |
| | 0.0 | 1,023.7
| | 1,023.7 |
| | | 0.0
|
| Total RfRs | 26,336.4
| 12,055.2 | 38,391.6
| 1,197.0 | 139.9
| 39,728.6 | 9,119.7
| 56.8 | 2.1 |
9,178.6 |
Notes:
[1] Definitions of the column headings are shown at Annex 1
[2] Minimal differences may occur due to roundings
| | | |
| | | |
| | |
7. SUPPLEMENTARY ESTIMATES:
7.1 We anticipate that a number of items will change
between Main and Supplementary Estimates:
— Any End of Year Flexibility (and prior year adjustments)
will be sought in the Supplementary Estimates, following publication
of HM Treasury's Public Expenditure Outturn White Paper (PEOWP).
— A Request for additional funding for continuing operations
in Afghanistan, and funding for the Balkans (under RfR2) may be
required.
— The reallocation of the Stabilisation Aid Fund.
— The Department may need to reflect any further changes
in the value of its land and property resulting from new market
conditions.
— Further International Financial Reporting Standards
(IFRS) changes are anticipated in the Supplementary Estimates
as part of the Clearer Line of Sight Treasury incentive to simplify
financial reporting.
8. THE DEPARTMENT'S
PUBLIC SERVICE
AGREEMENTS & STRATEGIC
OBJECTIVES:
8.1 As set out in the 2007 Pre-Budget Report and
Comprehensive Spending Review (Cm 7227), the Ministry of Defence
will contribute over the CSR 07 period to the delivery of
the cross-Governmental Public Service Agreements to reduce the
impact of global and regional conflict and to reduce the risk
to the UK and its interests overseas from international terrorism.
These are underpinned by the three Departmental Strategic Objectives
(DSO) to achieve success in the military tasks we undertake at
home and abroad, be ready to respond to the tasks that might arise,
and build for the future. The Department formally reports performance
against its targets to Parliament in the Autumn and in the Annual
Report and Accounts, and these reports are also published on the
Department's website (www.mod.uk).
9. DEPARTMENTAL EXPENDITURE
LIMIT (DEL):
9.1 Table 10 shows the DEL from 2006-07 to
2009-10 for all RfRs. The figures are for Voted DEL. Further
detail of this is shown in the Notes to the Estimate.
Table 10
THE VOTED DEPARTMENTAL EXPENDITURE LIMIT FOR 2006-07 TO
2009-10
DEL | 2006-07
Outturn £M
| 2007-08
Outturn £M | 2008-09
Main Estimate £M
| 2008-09
Spring Supplementary Estimate £M*
| 2009-10
Main Estimate £M* |
| Resource DEL | 33,453.021 |
35,632.209 | 33,567.283 | 37,891.603
| 38,391.716 |
| Capital DEL | 7,184.245 | 7,944.279
| 7,870.045 | 8,312.045 | 9,119.789
|
| Depreciation | -5,828.509 |
-6,291.892 | -7,408.960 | -8,237.825
| -8,273.962 |
| | |
| | |
| Total DEL | 34,808.757
| 37,284.596 | 34,028.368
| 37,965.823 | 39,237.543
|
| |
| | | |
* Includes RfR2 provision for operations in Iraq
& Afghanistan.
10. DEL END YEAR
FLEXIBILITY:
10.1 The requirement for End of Year Flexibility (EYF)
will be assessed following the publication of the Treasury's Provisional
Expenditure Outturn White Paper (PEOWP) later this year.
11. ADMINISTRATION COSTS
LIMIT:
11.1 An Administration Cost Limit Budget was introduced
last year. This is identified as a separate sub head in the Estimate.
12. PROVISIONS AND
CONTINGENT LIABILITIES:
12.1 Provisions for liabilities and charges are based
on realistic and prudent estimates of the expenditure required
to settle future legal or constructive obligations. Provisions
are generally charged to the Operating Cost Statement (OCS). We
have included provisions in DEL and in AME for nuclear provisions
and some pension payments for personnel employed overseas (who
are not part of either the UK Civil Service or the Armed Forces).
12.2 MoD's provisions cover legal claims, civilian early
departure costs, environmental costs, restructuring and nuclear
decommissioning and restoration costs. Details of the Department's
Contingent Liabilities are set out in a separate table in the
published Main Estimate.
13. MACHINERY OF
GOVERNMENT CHANGES:
13.1 A Machinery of Government (MOG) change is made when
the responsibility for a service transfers from one Government
Department to another. The most recent MOG was the transfer of
responsibility for the Defence Export Services Organisation (DESO)
to the estimates for the Department for Business Enterprise and
regulatory Reform (DBERR), UK Trade and Investment (UKTI), and
the Foreign and Commonwealth Office (FCO) effective from 1 April
2008.
1
For detail on the different Requests for Resources, See Annex
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