House of Commons - Communities and Local Government Committee

Communities and Local Government's Departmental Annual Report 2009, and the performance of the Department in 2008-09 - Communities and Local Government Committee Contents

Explanatory memorandum from the Department for Communities and Local Government (MEST (09-10) 01)

MAIN ESTIMATE 2009-10

INTRODUCTION

1. The purpose of this memorandum is to provide the Select Committee with an explanation of how the resources and cash sought in the Main Estimate will be applied, how this compares with previous years and plans, and how the expenditure planned will relate to Departmental Strategic Objectives (DSOs) and Public Service Agreement (PSA) targets.

2. HM Treasury's decision on when the Main Estimates are laid in the House of Commons is expected in week ending 5 June 2009. They set out the planned expenditure by the Department for Communities and Local Government in 2009-10.

3. The Comprehensive Spending Review 2007 (CSR07) set out the Government's spending plans for the three years 2008-09 to 2010-11. The CSR settlement also set out the new Departmental Strategic Objectives (DSOs) and Public Service agreements covering those years. Other spending announcements were made in autumn 2008 and April 2009; details of how this year's Main Estimate relates to those announcements can be found at Section D and at Annex A below. Further details of how spending plans relate to PSAs and DSOs are given in sections A and C below.

(A) SUMMARY OF THE ESTIMATE

4. The Main Estimate covers two Requests for Resources (RfRs):

— RfR2 (Providing for effective devolved decision making within a national framework) covers local government expenditure.

5. RfR1 is structured so that it broadly reflects the new Departmental Strategic Objectives (DSOs) of the Department over the Spending Review period. The objectives are:

— DSO 1: to support local government that empowers individuals and communities and delivers high quality services efficiently;

— DSO 2: to improve the supply, environmental performance and quality of housing that is more responsive to the needs of individuals, communities and the economy;

— DSO 3: to build prosperous communities by improving the economic performance of cities, sub-regions and local areas, promoting regeneration and tackling deprivation;

— DSO 4: to develop communities that are cohesive, active and resilient to extremism;

— DSO 5: to provide a more efficient, effective and transparent planning system that supports and facilitates sustainable development, including the Government's objectives in relation to housing growth, infrastructure delivery, economic development and climate change; and

— DSO 6: to ensure safer communities by providing the framework for the fire and Rescue Service and other agencies to prevent and respond to emergencies.

6. Note: these objectives have been abbreviated for the purposes of the Main Estimate and the Departmental Annual Report tables for reasons of space. The full objectives can be found at

http://www.communities.gov.uk/corporate/about/howwework/publicserviceagreements/departmentalstrategicobjectives/

7. The Department for Communities and Local Government's Main Estimate for 2009-10 requests:

Table 1

£ million

Compared to:

2009-10 2008-09

Total Net Resource Requirement of: 38,744.1 37,287.4

of which:

Request for Resources 1 12,663.9 11,776.9

Request for Resources 2 26,080.2 25,510.5

Net Cash Requirement 38,741.5 38,075.6

Net Voted Capital 41.1 94.5

8. Most of the expenditure within the Net Resource Requirement or Voted capital also falls within Departmental Expenditure Limits (DEL). But the totals (total DEL compared to total Voted RFR plus capital) are not the same because:

— some expenditure within DEL is non-Voted, while some Voted expenditure is outside DEL. The Departmental Expenditure Limits consolidate expenditure of the Department with that of the Non-Departmental Public Bodies (NDPBs) which the Department sponsors. Voted expenditure in the Estimate, however, records expenditure by the Department and its executive agencies only, which includes grant in aid to NDPBs, but not NDPB expenditure itself;

— some voted expenditure is within Annually Managed Expenditure rather than DEL; and

— supported borrowing falls within the DELs, but is not voted. Departmental Unallocated Provision—a small reserve—is also not voted.

9. Further details of the Departmental Expenditure Limits are given in Section B.

(B) DETAILED EXPLANATION OF THE ESTIMATE

RfR1—Improving the quality of life by creating thriving, inclusive and sustainable communities in all regions

10. The individual budgets included within each of the Sections of the Estimate are as follows (all figures in £ million):

Table 2

	2009-10	Compared to 2008-09
Request for Resources 1
Spending in Departmental Expenditure Limits:
Central Government spending:
Section A: Supporting local government (DSO 1)
Efficiency improvements in local government—(re-named to Capacity Building and Efficiency Improvement)	1.5	0.5
Section B: Improving the supply and quality of housing (DSO 2)
Choice Based Lettings	0.2	0.2
Housing Defects Grants	0.1	0.1
Housing Strategy for Older People	15.0	0.0
Support for Voluntary & Community Sector Sustainability	49.4	0.0
Sustainable Communities Bill	0.4	0.0
Building Regulations	7.2	6.4
Commission for Architecture and the Built Environment	6.9	6.9
Disabled facilities grant	0.2	0.2
Growth Areas New Growth Points and ECO Towns	29.0	4.6
Gypsy site grant	0.0	20.0
Home buying and selling	0.0	2.0
Homelessness & Housing Reform	18.7	17.5
Homeowners mortgage support	0.0	0.3
Homes and Communities Agency	0.3	10.3
Housing Management	0.7	0.2
Housing Mobility Services	2.3	1.8
Implementing European Union Energy Performance of Building Directives	2.1	10.2
National Housing and Planning Advice Unit	1.4	1.4
National register of social housing	0.4	0.4
Payments to Audit Commission for Registered Social Landlord inspections	1.8	1.8
Rent officer services and pensions liabilities	2.4	3.9
Residential Property Tribunal Service	11.2	10.9
Supporting People administration	10.0	6.3
Thames Gateway (direct funding)	89.1	1.4
Valuation Office Agency right to buy charges	1.6	1.0
Zero Carbon Buildings	0.0	0.2
	250.5	110.5
Section C: Building prosperous communities, promoting regeneration and tackling deprivation (DSO 3)
Decent Mixed Communities	45.0	0.0
Olympics Contributions	552.0	357.3
Coalfields Enterprise Fund	0.6	0.6
Coalfields Regeneration Trust	17.7	17.7
Mersey Basin	0.5	0.5
New Horizons research	0.7	0.5
Fiscal stimulus capital Regional Development Agencies	100.0	0.0
Regeneration Monitoring and Digital Inclusion	6.0	5.7
Regeneration Strategy	6.6	6.1
Regional Chambers	1.8	0.1
Regional Development Agencies	1,491.1	1,553.5
Renewing Neighbourhoods	18.5	19.6
Research	9.5	9.3
Sustainable Communities Development Unit communications	0.5	2.6
Shanghai Expo	0.4	0.3
Sun National Economic Development	0.1	0.1
	2,250.8	1,973.9
Section D: Developing communities that are cohesive, active and resilient to extremism (DSO 4)
Cohesion and race equality	22.5	15.0
Community empowerment	31.1	13.8
Adults facing chronic exclusion (gross £1 million expenditure less £1 million receipts from other Government Departments)	0.0	0.7
Tenant empowerment	2.5	2.5
Tackling Extremism	6.5	0.0
	62.6	32.0
Section E: Providing a more efficient, effective and transparent planning system (DSO 5)
Planning Inspectorate Agency	47.2	52.3
Implementing planning reforms	31.3	12.7
E-planning	8.7	9.5
Regional Assemblies	11.0	10.6
	98.1	85.0
Section F: Ensuring safer communities by providing the framework to prevent and respond to emergencies (DSO 6)
Firelink	49.6	52.2
Fire Regional Control rooms	53.4	29.4
Fire services	2.0	0.0
Fire publicity	0.0	0.0
Fire Service College	0.0	2.1
Fire service statistics	0.3	0.0
Emergency fire service	0.4	0.0
Fire Centre of Excellence	1.5	0.5
New dimension	0.0	18.2
Emergency resettlement costs	0.1	0.0
Fire and Rescue Services Improvement Programme	23.1	7.8
	131.0	111.1
Section G: Central administration
Central administration, within Administration Budget	167.0	176.6
Central administration, outside Administration Budget	1.5	3.4
Central department & Government Office Restructuring	21.1	17.9
	189.6	197.9
Section H: Government Office administration
Government Office administration, within Administration Budget	105.9	112.9
Government Office administration, outside the Administration Budget	0.0	12.3
	105.9	125.2
Section I: European Regional Development Fund: (ERDF) income relating to 2007-13 programme
ERDF income funding payments to Regional Development Authorities of ERDF under new programme	—525.8	—66.3
Section J: European Regional Development Fund: Communities and local Government
ERDF losses and write offs	8.0	58.2
INTERREG (Inter regional assistance—an ERDF programme)	2.3	2.7
	10.3	60.9
Section K: Ordnance Survey
Payments for mapping data and services (net, after contributions from other government Departments)	14.3	5.5
Section L: QEII Conference Centre Executive Agency
QEII Conference Centre Executive agency trading fund short term loans	—1.4	—4.2
Support for local authorities:
Section M: Improving the supply, environmental performance and quality of housing (DSO 2)
Choice Based lettings	1.2	1.1
Extend Social Housing Regulations to Local Authority Stock	4.0	0.0
Capital pooled Housing Receipts	—13.2	—17.8
Disabled facilities grants	158.3	148.8
Gypsy site grant	0.0	27.0
Homelessness & Housing Reform	69.1	59.5
Housing Management	0.0	2.0
Housing Mobility Services	1.9	0.1
Regional Housing Pot	422.5	347.4
Social Co-ownership Partnership	0.0	0.8
Supporting People programmes	1,666.0	1,686.0
Thames Gateway	0.0	1.0
	2,309.7	2,255.8
Section N: Building prosperous communities, promoting regeneration and tackling deprivation (DSO 3)
New Deal for communities	179.1	242.2
Local Enterprise Growth Initiative	26.4	25.3
Free Swimming	5.0	0.0
	210.5	267.5
Section O: Developing communities that are cohesive, active and resilient to extremism (DSO 4)
Tackling extremism (outside Area Based Grant)	0.0	1.5
Cohesion and race equality	6.5	2.2
Migration Impacts Fund	29.3	0.0
	35.8	3.7
Section P: Providing a more efficient, effective and transparent planning system (DSO 5)
Housing and Planning delivery grant	135.0	101.0
Implementing Planning Reforms	21.4	5.8
Regional Assemblies	7.0	9.9
	163.4	116.7
Section Q: Ensuring safer communities by providing the framework to prevent and respond to emergencies (DSO 6)
New dimension	51.5	36.5
Fire Regional Control rooms	9.9	13.0
Firelink	10.0	10.0
Fire services improvement	35.0	2.8
EU Solidarity Fund	0.0	30.6
	106.4	93.0
Section R: Area Based Grant
Area Based Grant (CLG element)	674.5	645.1
Section S: European structural funds—net
European Regional Development Fund payments to LDA (income from EU covering this and Section Y is shown against section I)	30.7	3.0
Spending in Annually Managed Expenditure:
Section T: Improving the supply and quality of housing (DSO 2)
Housing Revenue Account subsidy	697.8	586.5
Section U: Ensuring safer communities by providing the framework to prevent and respond to emergencies (DSO 6)
Fire service superannuation (the winding down of an inherited central scheme)	0.1	0.0
Support for local authorities:
Section V: Ensuring safer communities by providing the framework to prevent and respond to emergencies (DSO 6)
Fire service superannuation (support to the local authority schemes)	228.4	231.4
Non budget:
Section W: Improving the supply and quality of housing (DSO 2)
Homes and Communities Agency: grant in aid	4,760.0	2,944.9
Housing Corporation: grant in aid	0.0	1,202.0
Overhanging debt repayment on disposal of local authority housing stock	300.0	514.5
English Partnerships: grant in aid	0.0	64.0
Leasehold advisory services: grant in aid	1.3	1.2
Loan charge grants	7.0	7.0
Other growth areas—English Partnerships	0.0	0.8
Other growth areas—West Northants Development Corporation	16.7	21.2
Tenant Services Authority: grant in aid	35.6	36.2
Thames Gateway—South East England Development Agency	0.0	2.5
Thames Gateway—London Development Corporation	0.0	43.2
Thames Gateway—Thurrock Development Corporation	0.0	32.8
	5,120.7	4,870.3
Section X: Ensuring safer communities by providing the framework to prevent and respond to emergencies (DSO 6)
Firebuy	1.6	6.9
Community Development Foundation	0.0	1.5
	1.6	8.4
Section Y: European Structural Funds: payments to Regional Development Agencies for 2007-13 programme
European Regional Development Fund payments to RDAs (income from EU covering this and section S is shown against section I)
ERDF North East New Programmes	48.8	6.1
ERDF North West New Programmes	147.3	19.1
ERDF Eastern New Programmes	14.4	1.8
ERDF South East New Programmes	3.1	0.4
ERDF South West New Programmes	75.7	9.5
ERDF East Midlands New Programmes	34.9	4.4
ERDF West Midlands New Programmes	51.9	6.5
ERDF Yorkshire and Humberside New Programmes	119.0	15.5
	495.1	63.3
Section AA: Providing a more efficient, effective and transparent planning system
Infrastructure Planning Commission	1.5	0.0
Request for Resources 2
Spending in Departmental Expenditure Limits:
Central Government spending:
Section A: Valuation services
Valuation Office Agency	172.9	172.2
	172.9	172.2
Section B: Best Value Inspection subsidies to public corporations & best value intervention costs
Best Value Inspectorate	19.8	21.8
	19.8	21.8
Section C: Local government research and publicity, mapping costs and electoral law
Local government research	2.6	2.5
Local government publicity	0.6	0.6
Local Government Commission mapping costs	0.1	0.1
	3.3	3.2
Support for local authorities
Section D: Revenue Support Grant
Revenue Support Grant	4,547.4	2,909.4
PFI special grant	853.0	677.0
	5,400.4	3,586.4
Section E: Non-domestic Rates payments
Non-domestic Rates payments	19,500.0	20,500.0
	19,500.0	20,500.0
Section F: London governance
General GLA grant	47.9	48.0
	47.9	48.0
Section G: Other grants and payments
PSA performance fund	257.0	346.0
Improvement, Transformation and Efficiency	121.7	102.8
Local authority business growth incentive	50.0	0.0
Emergency financial assistance to local authorities	6.6	6.2
Best value parishes grant	0.0	0.0
LG Management Info Systems	3.5	1.0
Invest to save	0.0	0.4
Flood Discount Grant	0.0	1.2
Interest Payments to LAs	0.0	0.1
	438.8	457.7
Spending in Annually Managed Expenditure:
Support for local authorities:
Section H: Non-domestic Rates outturn adjustments and Local Authority Business Growth Incentive Scheme
Non-domestic rates outturn adjustments	463.0	600.0
Local authority business growth incentive	0.0	101.7
	463.0	701.7
Section I: Non-departmental public bodies
Valuation tribunals	11.0	11.1
Local Government Standards Board	7.3	8.3
Commission for Local Administration in England	15.7	0.0
	34.0	19.4
Voted Capital
Section C: Building prosperous communities, promoting regeneration and tackling deprivation
Coalfields Enterprise Fund	0.0	5.0
Regeneration Monitoring and Digital Inclusion	0.0	2.5
	0.0	7.5
Section E: Providing a more efficient, effective and transparent planning system
Planning Inspectorate	9.5	5.4
E-planning	2.0	3.0
	11.5	8.4
Section F: Ensuring safer communities by providing the framework to prevent and respond to emergencies
Fire Regional Control rooms	0.0	49.4
Firelink	3.1	3.8
New dimension	1.5	1.5
Fire services improvement	1.1	0.9
	5.7	55.6
Section G: Central administration
Central administration	21.1	18.0
Section H: Government Office administration
Government Office administration	2.9	3.5
Section J: ERDF
ERDF	0.0	2.6
Section L: Queen Elizabeth II Conference Centre Agency
Queen Elizabeth II Conference Centre Agency: loan repayments	—0.1	—0.1
Notes
1. Not all rows sum to sections sub-total due to rounding.
2. Capacity Building and Efficiency Improvement in Housing is in the wrong DSO category. This is better placed in DSO2 and will be amended at the next Supplementary Estimates.

Comparison with 2008-09: RFR1

11. Overall budgetary provision sought for RFR1 is 8% above the final, Spring Supplementary Estimate, budget for 2008-09. The Main Estimate 2009 includes the changes made for the September 2008 Housing Package, Pre Budget Report 2008 and Budget Report 2009 adjustments to support the housing sector in response to the economic downturn. These were the main contributors for this increase in budget (See section D & Annex A for further information).

12. Explanations of the large variations from 2008-09 budgets which Table 2 highlights are as follows:

— Section B: +£140 million. This increase results from the inclusion of all Thames Gateway funding (£89 million) against this Section, as in previous years some funding was delivered via NDPBs and recorded against the equivalent of Section W (grant in aid to NDPBs). During the year, as decisions are made on the allocation of funding, the balance of funding between different delivery vehicles may alter, and we would expect to reflect such changes at Supplementary Estimates. In addition, there is a budget of £49 million for the Support for Voluntary and Community Sector to support the sector through the newly established Community Builders Fund (to support cross-cutting community organisations) and other initiatives to take forward the community empowerment agenda.

— Section C: +£277 million. This is mainly accounted for by an increase in budget to £552 million (from £357 million in 2008-09) for capital contributions to the Department for Culture, Media and Sport (DCMS) toward Olympics funding for 2009-10. The budget has been phased over the build period to reflect expenditure on site. In addition, £100 million of capital was brought forward from 2010-11 to 2009-10 as part of Pre Budget Report 2008. Regional Development Agencies were invited to identify projects up to this value to provide a fiscal stimulus to regional and national economic development.

— Sections I, S and Y: —£459 million and +£459 million. This is a result of an increase in activity for European Regional Development Funding (ERDF). Last year's ERDF receipts and payments were smaller because the 2007-13 Programme was at an early stage: its first claim was received in January. The volume of project claims will increase, requiring increased receipts cover, through 2009-10 in proportion to increasing Programme activity.

— Section T: +£111 million. Sums payable as Housing Revenue Account Subsidy vary between years, and during the year, for a number of reasons. For example the sums payable depend on the formula grant calculated relating to the size and condition of local authority council housing stock and therefore not controllable by the Department. This programme is included by Treasury in Annually Managed Expenditure due to the difficulties there would be in managing variations in expenditure within fixed Departmental Expenditure limits.

— Section W: +£251 million. The sum sought is more than last year due largely to an increase in funding of £550 million for the Homes and Communities Agency offset by a reduction of £215 million on the Overhanging Debts repayment on disposal of local authority housing stock. Most of this net increase on the Homes and Communities programme is due to the September 2008 Housing Package, Pre Budget Report 2008 and Budget Reports 2009 and more directly impacts on the National Affordable Housing Programme (NAHP) element of the Homes and Communities Agency which supports DSO 2. The reduction on the Overhanging Debts repayment is due to uncertainty about all the transfers, hence the forecast of £300 million being the best estimate.

Comparison with 2008-09: RFR2

13. The main change is a decrease of £1 billion in support for local authorities through National Non Domestic Rates (Section E). This is the amount of non-domestic rates available to be redistributed to authorities as part of the annual Local Government Finance Settlement. The amount of non-domestic rates is dependent on (a) the amount of non-domestic rates expected to be collected in the year for both local & central list properties less any reliefs and repayments in respect of previous years, (b) the balance brought forward in respect of the Distributable Amount (DA) calculations for previous years, and (c) an amount to allow for fluctuations in collection—normally attributable to downward revaluations of properties within the year. It is worth noting that the DA is the amount of money that will be redistributed to local authorities and it is not the amount of money we expect to collect from them.

14. When calculating the DA for 2009-10, the balance brought forward from 2008-09 was projected to be a deficit in the region of £1.4 billion. In an attempt to redress this imbalance, the amount to be redistributed in 2009-10 was set below the amount expected to be collected.

15. As the figures used for both 2008-09 and 2009-10 are estimates, a more accurate picture for those years will be established when the DA is calculated for 2010-11 as outturn figures will be used for 2008-09 and more accurate estimates will be available for 2009-10.

16. The Estimate structure reflects the Departmental Strategic Objectives (DSOs) covering the CSR07 period.

17. The Public Service Agreement (PSA) set was revised for the whole of Government for the CSR07 period. Most PSAs are now cross-cutting and reflect shared objectives across a number of Departments. CLG has lead responsibility for two of these new PSAs:

— PSA 20: to improve long term housing supply and affordability; and

— PSA 21: to build more cohesive, empowered and active communities.

18. CLG will also contribute to a wide variety of other PSAs over the spending review period. For a number of them our direct contributions will be limited, whereas for others we will support delivery more directly—for example, our work on planning will impact on the Transport and Climate Change PSAs. Full details of the department's contributions to individual PSAs are set out in the relevant Delivery Agreements which are available from the HM Treasury website at http://www.hm-treasury.gov.uk/

19. In many cases it is not practical to attempt to directly relate spending in a particular area to a specific PSA outcome. However, we have highlighted several PSAs below where the department makes a substantial and clearly quantifiable financial contribution:

— much of the expenditure shown against DSOs 2 and 5 (Sections B, E, M, P, T, and W of RFR1) will contribute towards PSA 20. This includes expenditure on the Thames Gateway, growth areas/points and eco towns; on improving the planning system and delivery; and on grant- in-aid to the Homes and Communities Agency;

— much of the expenditure shown against DSO 4 (Section D, and O of RFR1) will contribute towards PSA 21. This includes expenditure on cohesion and race equality programmes; and community empowerment;

— funding for the Regional Development Agencies (RDAs) (Section C, DSO 3) supports PSA 7 (Improving the economic performance of all English regions and reducing the gap in economic growth rates between regions);

— race equality programmes (Section D and O, DSO 4) support PSA 15 (Addressing the disadvantage that individuals experience because of their gender, race, disability, age, sexual orientation, religion or belief);

— supporting People (Section N, DSO 3) supports PSA 16 (increasing the proportion of socially excluded adults in settled accommodation and employment, education or training); PSA 17 (Tackling poverty and promoting greater independence and well-being later in life); and PSA 18 (Promoting better health and wellbeing for all);

— capital contributions to Department for Culture, Media and Sport for the Olympics (Section C, DSO3) support PSA 22 (Delivering a successful Olympic Games and Paralympic Games with a sustainable legacy); and

— the Homes and Communities Agency grant in aid (Section W, DSO 2) also supports PSA 16 (increasing the proportion of socially excluded adults in settled accommodation and employment, education or training).

20. The Department's investment also indirectly supports the delivery of a number of other PSAs—for example, the RDA investment referred to above will assist PSA 8 (maximising employment opportunity for all). It is not meaningful to attribute expenditure or relate particular programmes to these.

21. The PSA does not cover the full range of activities undertaken by the Department. These are, however, covered by the Departmental Strategic Objectives. Decent homes targets, for instance, relate to DSO 2, but are not specifically covered by a new PSA.

22. It should also be noted that where the Department makes payments to local authorities, it is the Department's policy, wherever possible, to make these through non-ringfenced general grants, either Revenue Support Grant or the new Area Based Grant, which authorities are free to use in support of local, regional and national priorities as they see fit.

23. There are a number of funding streams contributing to the Area Based Grant programme for 2009-10. In total Communities and Local Government are contributing over £674 million to the Area Based Grant (Section R) from six individual funding streams which for clarity are set out below.

Table 3

AREA BASED GRANT (RFR1, SECTION R): CLG CONTRIBUTIONS

	£ million
Cohesion	11.0
Supporting People admin	35.0
LEGI	75.0
Stronger safer communities	31.0
Working Neighbourhood Fund	507.0
Preventing Violent Extremism	15.0
Total	674.0

(D) DEPARTMENTAL EXPENDITURE LIMITS (DEL)

24. The programme DELs covering RfR 1 and RfR2 at the start of 2009-10 are set out in the following tables:

Main programme DEL (where voted, within RFR1)

Table 4

	DEL		£ million
2009-10	Voted	Non voted	Total
Resource	3,946	599	4,545
of which:
Administration budget	273		273
Near cash	3,894	576	4,470
Capital	2,213	6,409	8,622
less depreciation	—36	—13	—49
Total	6,123	6,995	13,118

25. The following Table shows how the DEL was arrived at taking the Comprehensive Spending Review 2007 (CSR07) settlement for 2009-10 as the baseline:

Table 5

£million

2009-10

Main DEL Notes Resource Capital Total

CSR07 settlement 4,488 7,337 11,825

Transfers to and from other government

departments (see further details in section 29) 23 23

Various DEL surrenders 1 —46 —46

Transfer from Treasury—HCA transition 2 30 30

Sept 2008 Housing Package 3 625 625

Pre Budget Report 2008 3 450 450

April 2009 Budget changes 4 50 210 260

Total DEL (including depreciation) 4,545 8,622 13,167

less depreciation

—49 —49

Total DEL 4,496 8,622 13,118

Notes

1. DEL surrenders include £35 million for Council rents, £7 million for the Energy Performance Certificate and £4 million for HRAS AME (see section 28).

2. Financial adjustments, approved by HM Treasury, for the Department's near-cash DEL over the CSR period to take account of the transition to the new Agency.

3. See Section 27 and Annex A.

4. The April Budget changes included further funding for the housing programmes (see section 27 & Annex A) as well as a re-profile of £200 million from the Fiscal Stimulus from 2009-10 to 2010-11 and £50 million brought forward from 2010-11 to 2009-10 for the Working Neighbourhoods Fund programme.

26. Depreciation, which forms part of the Resource DEL, is excluded from total DEL since capital DEL includes capital spending and to include depreciation of those assets would lead to double counting.

Relationships to announcements made to the September Housing Package and subsequently

27. The funding sought in the Main Estimates derives from decisions announced in the CSR07 settlement, the September 2008 Housing Package, the Pre Budget Report 2008 and Budget Report 2009 (see Annex A for further information).

Details of the CSR07 settlement were reported in the Explanatory Memorandum of the Main Estimates 2008-09.

September Housing Package

— £905 million over three years to ensure stability and fairness in the housing market. In 2009-10, £650 million of this has been allocated to:(a)contribute towards delivery of up to 5,500 new social homes over three years by means of an additional £300 million investment in the National Affordable Housing Programme;

(b)offer up to 18,000 first-time buyers an opportunity to get on the property ladder through £250 million funding for a new shared equity scheme (HomeBuy Direct); and

(c)support up to 6,000 of the most vulnerable homeowners facing repossession to remain in their home through investment of £100 million in a Mortgage Rescue Scheme.

Pre Budget Report 2008

— £775 million over two years to support critical housing and regeneration projects. In 2009-10, £625 million is sought to:(a)provide around 2,000 new homes for social rent through £150 million investment in the National Affordable Housing Programme;

(b)accelerate improvements on an estimated 12,000 dwellings by bringing forward £120 million of funding for the Decent Homes Programme. In addition, £175 million has been brought forward to fund major repairs and maintenance work for council housing;

(c)complete key transport projects and support critical national and regional regeneration projects through an additional £80 million for the Homes and Communities Agency's Property and Regeneration Programme; and

(d)provide a fiscal stimulus to regional and national economic development by bringing forward £100 million of funding for key projects led by the Regional Development Agencies.

Budget 2009

— £705 million over two years to support stalled housing projects, kick-start new social housing schemes and boost efforts to reduce carbon emissions. In 2009-10, £486 million has been allocated to:(a)unlock stalled housing developments through investment of £320 million in a combination of equity, gap and infrastructure funding and supporting viability with an expansion in the provision of HomeBuy Direct, social and intermediate housing;

(b)deliver new local authority housing by means of a £30 million funding pot for new social homes;

(c)support efforts to reduce carbon emissions through schemes proposing high energy efficiency standards including provision of cavity wall insulation for existing social housing (£21 million) and community energy schemes which support housing development (£55 million); and

(d)provide further protection for vulnerable households facing repossession through a £40 million extension of the Mortgage Rescue Scheme, as well as a £20 million fund to allow local authorities to make small loans to help homeowners facing repossession or homelessness.

Post Budget 2009

Transfers into Annually Managed Expenditure

28. Where Departmental policy decisions impact upon Annually Managed Expenditure forecasts, Departments are required to make switches from Departmental Expenditure Limits into Annually Managed Expenditure. Reductions to DEL of £4 million have been made, reflecting the increase in forecast for AME for the Housing Revenue Account Subsidy (see table 5 above).

29. Transfers to and from other government Departments

Transfers to other government Departments

— £5 million, under arrangements for the Pan-Government Agreement for mapping services, that are now being made more consistent and transparent. Previously some Departments had transferred DEL baseline to CLG, whereas other Departments retained their DEL to make cash payments to CLG. Departments that had previously transferred DEL to CLG, are now transferring it back so that all can make cash payments to CLG for services provided.

— £1 million, as part of Machinery of Government changes, to the Department for Business, Enterprise and Regulatory Reform for the Northern Way programme.

Transfers from other government Departments

— £25 million, in respect of the Migration Impact Fund, comprising £4.2million from the Department of Health, £4.2 million from the Department for Children, Schools and Families, £8.6 million from the Home Office and £8 million from the Department for Innovation, Universities and Skills. This programme is administered by CLG but will be funded by the Home Office from receipts to be collected in visa fees via the UK Borders Agency.

— £3 million, in respect of support for UK Nationals being repatriated from Zimbabwe, from the Department of Health.

— £2 million, as part of Machinery of Government changes, from the Department for Work and Pensions for the functional responsibilities of the Rent Office Services.

RfR1/Main Programmes DEL expenditure over last three years

30. Expenditure against budget for RfR1/Main Programmes DEL for the financial years since 2006-07 is set out in the table below:

Table 6

PREVIOUS YEARS' EXPENDITURE AGAINST DEPARTMENTAL EXPENDITURE LIMITS

£ million
Year	Voted	Non voted	Total DEL	Outturn	Variance	%
Resource
2006-07	3,545	121	3,666	3,504	—162	4.4
2007-08	4,118	218	4,336	4,198	—138	3.2
2008-09	3,716	369	4,085	3,934*	—151	3.7
Capital
2006-07	2,208	3,588	5,796	5,635	—161	2.8
2007-08	2,445	3,624	6,069	6,069	0	0
2008-09	2,103	5,225	7,328	7,095*	—233	3.2
Total
2006-07	5,753	3,709	9,462	9,139	—323	3.4
2007-08	6,563	3,842	10,405	10,267	—138	1.3
2008-09	5,819	5,594	11,413	11,029*	—384	3.4
* forecast outturn as at March 2009

Local Government DEL (where voted, within RFR2)

Table 7

			£ million
	DEL
2008-09	Voted	Non voted	Total
Resource	24,615	103	24,718
of which:
Administration budget
Near cash	24,615	102	24,717
Capital	175	1	176
less depreciation	0	1	1
Total	24,790	103	24,893

The following Table shows how the DEL was arrived at taking the CSR07 Settlement for 2009-10 as the baseline:

Table 8

			£ million
2009-10 LG DEL	DEL Resource	Capital	Total
CSR07 settlement	25,600	114	25,714
Transfers to and from other government departments	—4	—8	—12
Total DEL (including depreciation)	25,596	106	25,702
less depreciation			0
Total DEL	25,596	106	25,702

31. Changes since the last spending review settlement comprise:

Transfers in:

— £7.9 million resource and £1.6 million capital grant from the Department for Culture, Media and Sport to GLA General Grant for Museum of London funding.

— £2.5 million resource from the Department of Health for the IDEA (Improvement and Development Agency) Healthy Communities programme into Revenue Support Grant.

— £3.7 million resource from the Home Office for "Stray Dogs" into Revenue Support Grant.

— £1.2 million resource from the Food Standards Agency for "Food Hygiene on Farms" into Revenue Support Grant.

— £0.6 million resource from the Department for Environment, Food and Rural Affairs for "Contaminated Land" into Revenue Support Grant.

— £0.1 million resource from the Department for Business, Enterprise and Regulatory Reform for "Services Directive" into Revenue Support Grant.

— £0.1 million resource from Communities and Local Government (Main DEL) for "Community Empowerment" into Revenue Support Grant.

— £1.7 million resource from the Department of Health to the Commission for Local Administration in England for health related complaints.

— £0.7 million resource from Communities and Local Government (Main DEL) for Community Empowerment to the Commission for Local Administration in England.

Transfers out:

— £21.7 million resource from Revenue Support Grant to the Department for Children, Schools and Families for "Student Finance".

— £0.3m from Tribunal Services to the Ministry of Justice for Valuation Tribunal appointments.

— £9 million capital from Local e-Gov (Local Electronic Government) to the Department for Work and Pensions for Government Connect.

— £0.3 million from the Standards Board to the Ministry of Justice for Adjudication Panel For England costs.

Past expenditure

32.The DEL expenditure for RfR2/Local Government DEL for the financial years since 2006-07 is set out in the table below:

Table 9

PREVIOUS YEARS' EXPENDITURE AGAINST DEPARTMENTAL EXPENDITURE LIMITS

£ million
Year	Voted	Non voted	Total DEL	Outturn	Variance	%
Resource
2006-07	22,460	106	22,566	22,551	—15	—0.1
2007-08	22,711	104	22,815	22,751	—64	—0.3
2008-09	24,615	103	24718	24,651*	—67	—0.3
Capital
2006-07	259	6	265	223	—42	—15.8
2007-08	126	4	130	64	—98	—75
2008-09	175	1	176	122*	—54	—31
Total
2006-07	22,719	112	22,831	22,744	—57	—0.3
2007-08	22,838	107	22,945	22,783	—162	—0.7
2008-09	24,789	104	24,893	24,773*	—120	—0.5
* Forecast outturn

(E) END YEAR FLEXIBILITY (EYF)

33. The Department uses its EYF to fund ongoing programmes where slippage has occurred and for the management of unbudgeted pressures which arise. The EYF available to the department for 2009-10 will not be finally known until the Public Expenditure Provisional Outturn White Paper is published, usually in July. The forecast EYF available for 2009-10 is made up of the sum of underspends accumulated in years to 2008-09, less EYF drawn down, plus the current forecast underspend for 2008-09, and is set out in the following tables:

Main DEL

Table 10

END YEAR FLEXIBILITY

£ million
	Resource				Capital	Total
	Admin	Other Resource	TOTAL Resource	of which near cash
Balance of accumulated End Year Flexibility not yet drawn down	61	115	176	135	397	573
of which ringfenced:
Regional Development Agencies		3	3	3	9	12
Estimated additional EYF consistent with forecast outturn	42	151	193	153	232	425
of which ringfenced:
Olympics Contingency					214	214
Total estimated EYF	103	266	369	288	629	998

34. From 2009-10, the ring-fenced programmes will include the Olympics, tackling violent extremism and the Regional and London Development Agencies.

LG DEL

Table 11

END YEAR FLEXIBILITY

£ million
	Resource				Capital	Total
	Admin	Other Resource	TOTAL Resource	of which near cash
Balance of accumulated End Year Flexibility not yet drawn down		96	96	96	326	422
of which ring fenced:
Local Government PSA performance fund		66	66	66	291	357
Invest to Save special grant		4	4	4	1	5
Research, publicity and Valuation Office Invest to Save		1	1	1		1
Capacity building and local e- Government		6	6	6	1	7
Estimated additional EYF consistent with forecast outturn		67	67	67	54	121
Total estimated EYF	0	163	163	163	380	543

(F) ADMINISTRATION BUDGET

35. The Administration Budget for 2009-10 is £273 million.

36. The following Table shows how the Administration Budget was arrived at taking the CSR07 Settlement for 2009-10 as the baseline:

Table 12

	£ million
2009-10 Administration Budget (part of main DEL)	Resource
CSR07 settlement	274.0
transfers to other government departments	—0.4
Classification change	—0.6
Total	273.0

37. The administration budget covers the costs of staff and related overheads in the core department and Government Offices.

38. The main changes were:

— the transfer of resources to cover the accommodation costs of the newly created Government Equalities Office (£0.4 million); and

— reclassification of the work of the Crown Premises Inspection Group from administration to programme expenditure.

(G) PROVISIONS AND CONTINGENT LIABILITIES

Provisions

39. The department provides for legal or constructive obligations, which are of uncertain timing, or amount, at the balance sheet date on the basis of the best estimate of the expenditure required in settling the obligation. The following table sets out the provisions made for the start of 2009-10:

Table 13

PROVISIONS ESTIMATED 1 APRIL 2009 POSITION

	£ million
Early departures	31.6
European Regional Development Fund Correction	74.4
Compensation payments	5.2
Dilapidations	6.4
Firefighters' pensions	2.0
Total	119.6

Early Departure Costs

40. The department meets the additional costs of benefits beyond the normal Principal Civil Service Pension Scheme (PCSPS) benefits in respect of employees who retire early, by paying the required amounts annually to the PCSPS over the period between early departure and normal retirement date. The department and its agencies provide for this in full when the early retirement programme becomes binding by establishing a provision for the estimated payments discounted by the Treasury discount rate of 2.2% in real terms.

Other Costs

European Regional Development Fund Correction

41. The European Commission have concerns relating to some specific projects within the 1997-99 and 2000-06 tranches of programmes and they have extrapolated across the whole programme to reach a total potential disallowance ineligible for grant claims which will be disallowed.

Compensation Payments

42. These relate to claims made by staff and third parties against the department. The majority represent claims by ex Property Services Agency employees who may have contracted an industrial lung disease. It is expected that nearly half of these cases may be settled in 2009-10 with the remainder settled in the following year.

Dilapidations

43. The provision relates to complying with lease clauses for buildings occupied by the Government Offices.

Firefighters' Pensions

44. The Firefighters' Pension Scheme is a small scheme that has similar conditions to the Principal Civil Service Pension Scheme and which was inherited from the Home Office in respect of 18 (now 15) ex-fire fighters and their widows.

Contingent Liabilities

45. Contingent liabilities are those liabilities where the likelihood and amount of payment are uncertain so they are not provided for in the balance sheet, only disclosed in a note. The departments' estimated contingent liabilities for 2009-10 are:

Table 14

Nature of Liability	£'000
Statutory
Fire Service Act 1947 s17 and the Fire Service (Discipline Regulations) 1985. Liability to litigation by Fire Authorities resulting from delays in processing appeals to the Secretary of State.	220
Housing Association Act 1987, s84. Indemnity of building society mortgages for shared ownership schemes.	120
Indemnity given for the Land Stabilisation Project to proceed in Northwich under Section 1 of the Derelict Land Act 1982	25,000
Non-Statutory
Possible administrative irregularities (Article 4 and 10 checks) in respect of the European Regional Development Fund Programme, where approximately 50% of the total irregularities value would not be recovered due to insolvency occurring.	24,900
Three Local Authorities (Corby, Slough and Cannock Chase) have launched legal action against the Department for underpayment of the Local Authority Business Growth Incentive Scheme grant. There is a chance that the court will rule in favour of the Local Authorities. This would result in an additional payment to the Local Authorities.	101,000
Possible obligations from Employment Tribunal decision including asbestos claims against the Department.	4,300
Liability to pay grant in future years relating to the annual gap-funding agreements for negative values transfers of council housing stocks	656,255
Planning appeals brought by the developers against a decision from West Northamptonshire Development Corporation—one of CLG's Non Departmental Public Bodies. Decision expected from SoS July 2009	10,000
Indemnity given to the Nationwide Building Society as lender for claims relating to the treatment or removal of asbestos in connection with housing stock transfers	Unquantifiable
Indemnity given to the Fire and Rescue Services in respect of possible incidents because of mass decontamination.	Unquantifiable
Possible financial corrections for irregularities with EC funds in respect of the 2000-06 European Regional Development Fund programmes	46,000
Possible financial corrections in relation to the Interreg programme and for European Regional Development Fund projects undertaken by Business Links	18,000
On 21 April, CLG announced the Homeowners Mortgage Support Scheme guaranteeing mortgage lenders against a proportion of any loss incurred on deferred interest payments in circumstances where the borrower defaults	500,000

(H) PROCESS FOR PREPARATION AND APPROVAL OF MEMORANDUM

46. This Memorandum has been prepared in accordance with guidance in the Estimates Manual provided by HM Treasury and that found on the House of Commons website. It has been seen and approved by the Department's Principal Accounting Officer, Peter Housden.

Annex A

SEPTEMBER HOUSING PACKAGE, PRE BUDGET REPORT 2008 AND APRIL 2009 BUDGET REPORT

SEPTEMBER HOUSING PACKAGE

A major cross-government package of new measures to meet challenges in the housing market was launched in September 2008. This package brought forward £1 billion from 2009-10 and 2010-11. It made £905 million of capital available for expenditure on Mortgage Rescue, HomeBuy Direct and Social Rented Housing in 2008-09, 2009-10 and 2010-11. In addition, £95 million of capital was made available to support changes to Support for Mortgage Interest through the Department for Work and Pensions.

This was drawn from capital expenditure previously allocated to the Regional Development Agencies and National Affordable Housing Programme for 2009-10 and 2010-11.

September 2008 Housing Package

SUPPORT FOR THE HOUSING MARKET—SEPTEMBER HOUSING PACKAGE (£m)

Expenditure	2008-09	2009-10	2010-11	Total
Support for Mortgage Interest	0	40	55	95
Total Resource	0	40	55	95
Mortgage Rescue	50	100	55	205
HomeBuy Direct	50	250	0	300
Social Rented Housing	100	300	0	400
Total Capital	200	650	55	905
Total Capital and Resource	200	690	110	1,000
Funding	2008-09	2009-10	2010-11	Total
Regional Development Agencies	0	—25	—275	—300
Other Capital	0	0	—300	—300
Social Rented Housing	0	0	—400	—400
Total Capital	0	—25	—975	—1,000

Pre Budget Report 2008

Further announcements within the Pre Budget Report made a number of amendments to Communities and Local Government capital DEL for 2008-11:

Pre Budget Report Amendments (£m) 2008-09 2009-10 2010-11

Decent Homes 130 120 —250

Homes for Social Rent 0 150 —150

Community Infrastructure Fund 20 0 0

Regeneration (Homes and Communities Agency Property & Regeneration
Programme) 0 80 —100

Regional Development Agencies 0 100 —100

Total 150 450 —600

In addition, as a result of announcements within the Pre Budget Report, Communities and Local Government has invited local authorities in England to bring forward up to £175 million of planned major housing repairs expenditure from 2010-11 to 2009-10 to maximise investment in housing stock.

Budget 2009

Furthermore, Budget 2009 announced funding for several programmes. This is detailed in the following table:

BUDGET 2009 (£m)

Programme	2009-10	2010-11
Stalled sites fund	320	80
Local authority house building	15	35
Housing environment package	76	29
Additional resources for preventing repossessions and evictions:
Mortgage Rescue Scheme	40	40
Repossessions Prevention Fund (resource)	20	0
Total	471	184
The Main Estimates exclude £40 million in 2009-10 capital for the Mortgage Rescue Scheme and £20 million in 2009-10 for Repossessions Prevention Fund pending receipt of these amounts under the End of Year Flexibility rules.

The stalled sites fund will unlock currently stalled housing developments through a combination of equity, gap and infrastructure funding and supporting viability with an expansion in the provision of HomeBuy Direct, social and intermediate housing. The housing environment package comprises social housing cavity wall insulation and community energy programmes.

Annex B

A NOTE ON THE EUROPEAN REGIONAL DEVELOPMENT FUND

The European Regional Development Fund (ERDF) is a structural fund of the European Union. In normal circumstances, income from the EU covers expenditure on grant payments to recipients, leading to no overall cost to the Request for Resources or Departmental Expenditure Limit. Losses (including foreign exchange losses), write offs or fines by the EU are, however, costs to the DEL and RFR.

ERDF operates in programmes; each programme covering a range of years:

Expenditure and income under this programme is recorded as follows:

— RFR1, Section J: losses, write offs and other payments or income shortfalls not funded by the EU; and

— all of these lines fall within the Departmental Expenditure Limit (DEL).

— The 2007-13 programme ("New programmes") is being administered by the Regional Development Agencies, which are Non-Departmental Public Bodies, apart from the London Development Agency, which is a local authority body. The Department continues to make claims to the EU, but passes on that funding to the RDAs in order to cover the grant payment costs incurred by the RDAs.

Expenditure and income under this programme is recorded as follows:

(i)RFR1, Section I: income from the EU (within DEL);

(ii)RFR1, Section S: payments to the LDA (within DEL);

(iii)RFR1, Section Y: payments to RDAs (not LDA) (outside DEL);

(iv)Non voted DEL: expenditure by RDAs (not LDA) on grant payments.

This recording is necessary to comply with Treasury and Estimate rules that require payments to an NDPB to be scored within the RFR but outside DEL; while the expenditure funded by those payments must be recorded in DEL but is non voted. Normally both amounts (ie items iii) and iv) above) would be the same, although timing differences may occur.



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