Appendix: Main Estimate 2009-10
Department of Energy and Climate Change
Introduction
1. The formation of the Department of Energy and
Climate Change (DECC) was announced by the Prime Minister on 3rd
October 2008. This brought together policy responsibility for
energy, from the Department for Business, Enterprise and Regulatory
Reform (BERR), and most of the climate change policy, from the
Department for Environment, Food and Rural Affairs (Defra). A
New Estimate was voted in February 2009 for 2008-09.
2. 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 for 2009-10 will be applied to
achieve Departmental Strategic Objectives and Public Service Agreement
(PSA) targets. An explanation of key terms used in the Memorandum
is provided at Annex A.
Ambit and Structure of the
Estimate
3. DECC's Ambit and structure remain as shown in
the New Estimate published in February 2009 with one Request for
Resources (RfR1): "Supporting the provision of energy that
is affordable, secure and sustainable; bringing about a low-carbon
UK; securing an international agreement on climate change; promoting
low carbon technologies at home and in developing countries; managing
historic energy liabilities effectively and responsibly."
The Main Estimate introduces two new Estimate lines in Part II
showing non budget expenditure against "Supporting affordable,
secure and sustainable energy" and "Bringing about a
low-carbon UK".
Summary of the main spending
control figures in the Estimate
Voted Provision
The Main Estimate provides for:
- Net Resource Requirement of
£2,878,823,000 (£2,809,371,000 for 2008-09)
- Voted Capital of £121,600,000 (£1,944,000
for 2008-09)
- Net Cash Requirement of £3,226,606,000 (£3,077,510,000
for 2008-09)
The Net Resource Requirement has increased by £69,452,000
(2.5%) because of the following increases and decreases to Estimate
lines compared with 2008-09:
Detail Line shown in Part II of the Estimate
| Increase / (decrease) compared to 2008-09
(£000)
| Explanation of change |
| A - Supporting affordable, secure and sustainable energy (DEL)
| 2,495
3%
| Various immaterial changes. |
| B - Managing historic energy liabilities effectively and responsibly (DEL)
| 95,905
7%
| Concessionary fuel reduces by £92m as the earlier year included the £104m provision increase (non-cash). Appropriations in Aid reduce by £187m because of reduced forecasts for NDA commercial income.
|
| C - Bringing about a low carbon UK (DEL) |
160,766
25%
| The national element of the Environmental Transformation Fund increases by £187m as a result of previously planned increases and £135m of new funding announced in Budget 2009.
|
| D - Developing an international agreement on climate change (DEL)
| (16,408) | Improvements in classifications between lines C, D and E compared to last year's New Estimate analysis inherited from BERR and Defra.
|
| E - Promoting low carbon technologies in developing countries (DEL)
| 56,200
100%
| The international element of funding for the Environmental Transformation fund increases by £50m. Plus improvements in classifications between lines C, D and E compared to last year's New Estimate analysis inherited from BERR and Defra.
|
| F - Professional support and infrastructure (DEL)
| (4,808)
5%
| Admin reduces as a result of efficiency savings required of all departments under the CSR07 settlement, the establishment in 2008 of a new Non-Departmental Public Body (the Committee on Climate Change) resulting in a transfer of costs out of Administration and allowing for the impact of annual salary increases.
|
| G - Managing historic energy liabilities effectively and responsibly (AME)
| (93,673)
46%
| Coal health liabilities and coal privatisation provisions (non-cash) were increased in 2008-09 but no similar increase is expected for 2009-10.
|
| H - Supporting affordable, secure and sustainable energy (Non-Budget)
| 1 | This is a new estimate line to account for return of overpayments on petroleum exploration licence rental. It has to have a net balance to be part of the Vote.
|
| I - Managing historic energy liabilities effectively and responsibly (Non-Budget)
| (134,583)
5%
| Grant in aid to NDA reduces largely as a result of reduced forecasts for commercial income. Because NDA's commercial income is treated as voted DEL under Treasury rules, the NDA non-Budget grant-in-aid is the sum of the actual net cashflow support required plus the commercial income. As NDA's commercial income is expected to be £187m lower in 2009-10, this also reduces the grant-in-aid. NDA's commercial income is expected to fall because of lower electricity generating income plus specific commercial deals not being repeated.
|
| J - Bringing about a low carbon UK (Non-budget)
| 3,557 | This is a new estimate line to account for grant in aid to the Committee on Climate Change NDPB, which was formed on 1 December 2008.
|
| TOTAL | 69,452
| |
Voted capital has increased by £119,656,000 as a result of
new funding announced in Budget 2009 for energy efficiency loans
to the public sector and small and medium sized enterprises.
The Net Cash Requirement has increased by £149,096,000
(4.8%) because of the above changes to the Net Resource Requirement
and Voted Capital (excluding those specified as non-cash), and
a decrease of £204,549,000 in forecasts for cash payments
against the provision for Coal Health.
Budgets
The key budget figures are:
- Resource Departmental Expenditure
Limit (DEL) of £1,105,163,000 (£1,089,003,000 for 2008-09),
of which:
- Near cash is £1,126,125,000
(£1,031,971,000 in 2008-09)
- Administration budget is £93,512,000
(£98,320,000 in 2008-09)
- Capital Departmental Expenditure
Limit of £2,027,305,000 (£1,708,631,000 in 2008-09)
- Resource Annually Managed Expenditure of £178,957,000
(£4,588,987,000 in 2008-09)
- Capital Annually Managed Expenditure of -£409,000,000
(-£419,000,000 in 2008-09)
Changes to the DECC Comprehensive
Spending Review 2007 allocation
4. DECC received a Comprehensive Spending Review
(CSR07) Settlement letter from HM Treasury which extracted the
relevant parts of the BERR and Defra Settlement letters. This
included the budget switches agreed with those Departments as
part of the Machinery of Government changes and established the
Departmental Expenditure Limit budgets for DECC for the three
years to 2010-11. The changes in DEL budgets since the CSR Settlement
letter are as follows:
| | 2009-10
| 2010-11
|
| | Resource DEL
| Capital DEL
| Resource DEL
| Capital DEL
|
| | £000
| £000
| £000
| £000
|
| CSR 07
| 1,095,127
| 1,770,705
| 1,152,258
| 1,766,654
|
| Budget 2009 new funding
| 10,036
| 256,600
| 8,911
| 66,050
|
| Additional efficiency savings announced in Budget 2009
| 0 |
0 | (20,000)
| 0 |
| TOTAL
| 1,105,163
| 2,027,305
| 1,141,169
| 1,832,704
|
The movements in Resource DEL due
to Budget 2009 new funding are to reflect the non-cash implications
of the associated capital movements.
Public Service Agreement
targets
5. DECC is responsible for delivering Public Service
Agreement (PSA) 27 - to "Lead the global effort to avoid
dangerous climate change", in addition to contributing to
a number of other PSA targets owned by other Departments.
Impact on Public Service
Agreements and Departmental Strategic Objectives
6. As part of the Spending Review process, the Department
agrees its Public Service Agreement and Departmental Strategic
Objectives (DSO) and the spending plans to deliver them. The
total funds required to achieve those objectives for which DECC
has responsibility were transferred to the Department in the CSR07
settlement letter. A full report on progress against the Department's
PSA target will be included in the Department's 2009 Annual Report.
Departmental Strategic Objectives
7. DECC has responsibility for 3 Departmental Strategic
Objectives transferred from BERR and Defra:
1. Ensure the reliable supply and efficient use
of clean, safe and competitively-priced energy (from BERR)
2. Manage energy liabilities effectively and
responsibly (from BERR)
3. Climate change tackled internationally and
through domestic actions to reduce greenhouse gas emissions (from
Defra)
Departmental Expenditure
Limit
8. The table below shows planned DEL for 2008-09,
2009-10 and 2010-11:
|
| 2008-09 | 2009-10
| 201011 |
| | £000 | £000
| £000 |
| Resource DEL | 1,089,003 |
1,105,163 | 1,141,169 |
| including Administration of | 98,320
| 93,512 | 89,424 |
| Of which: | |
| |
| Near cash | 1,031,971
| 1,126,125 | 1,172,507 |
| Non cash | 57,032 |
(20,962) | (31,338) |
| Capital DEL | 1,708,631 |
2,027,305 | 1,832,704 |
| Less depreciation* | 6,977
| 7,091 | 8,665 |
| Total DEL | 2,790,657 | 3,125,377
| 2,965,208 |
| * Depreciation, which forms part of resource DEL, is excluded from the total DEL since capital DEL includes capital spending and to include depreciation of those assets would lead to double counting.
|
9. Administration has fallen by 5% in nominal terms in 2009-10
and a further 4% in 2010-11 compared to 2008-09 as a result
of delivering the 5% real efficiency savings required of all departments
under the CSR07 settlement, the establishment in 2008 of a new
Non-Departmental Public Body (the Committee on Climate Change)
resulting in a transfer of costs out of Administration, and allowing
for the impact of annual salary increases.
10. Near cash resource has risen by 9% in 2009-10
compared to 2008-09 and by 4% in 2010-11 as a result of additional
budget for the Nuclear Decommissioning Authority originally agreed
as part of the BERR CSR07 settlement.
11. Non cash moved from £57,032,000 cost in
2008-09 to £20,962,000 credit in 2009-10 because the earlier
year included the £104,400,000 increase in the cover for
the Concessionary Fuel Scheme. Non cash is normally a credit
as the cost of capital charge calculation includes the large provisions
set out in Annex B which generate a non-cash credit.
12. Capital has risen by 19% in 2009-10 compared
to 2008-09 as a result of new funding announced in Budget 2009
for low carbon technologies and loans to small businesses and
the public sector for increased energy efficiency in buildings.
End Year Flexibility
13. End Year Flexibility (EYF) stock is shown in
the following table:
| EYF in respect of:
| Near cash Resource | Capital
|
| | £000 | £000
|
| NDA (ring fenced) | 289,514 |
21,747 |
| Global Threat Reduction programme (ring fenced)
| 3,052 | |
| Non-ring fenced stocks | nil
| 36,471 |
| Total | 292,566
| 58,218 |
This does not include the outcome against budget of 2008-09 which
will be shown in the Public Expenditure Out-turn White Paper normally
published by Treasury in July.
Other matters of interest
Nuclear Decommissioning Authority (DSO2)
14. The largest budget transferred by BERR to DECC
relates to the Nuclear Decommissioning Authority (NDA). The NDA
is a non-departmental public body set up under the Energy Act
2004 to ensure that the UK's civil public nuclear legacy sites
are decommissioned and cleaned up efficiently and effectively.
On 1st April 2005 it took over responsibility for 19 sites formerly
owned by United Kingdom Atomic Energy Authority (UKAEA) and British
Nuclear Fuels Limited (BNFL). Competitions for contracts to manage
the work on these sites are expected to improve decommissioning
performance and drive value for money through innovation and efficiency.
The NDA is also required to continue existing commercial activities
until current contracts have been met and to seek to maximise
the revenue from these activities in order to use this to contribute
to the expenditure on decommissioning, thereby reducing the net
call on the public purse. It was also given responsibility for
delivering an integrated nuclear waste policy.
The NDA's budget over the CSR period
is as shown in the following table:
| | 2008-09 | 2009-10
| 2010-11 |
| | £000 | £000
| £000 |
| Near cash DEL | 1,696,539 |
1,575,566 | 1,569,078 |
| Less near cash income | (1,343,068)
| (1,155,795) | (1,066,013) |
| Net near cash DEL | 353,471
| 419,771 | 503,065
|
| Capital DEL | 1,183,691 |
1,193,126 | 1,187,169 |
| Total DEL | 1,537,162
| 1,612,897 | 1,690,234
|
| Non cash AME: | |
| |
| Cost of capital charge | (1,645,963)
| (1,838,358) | (1,959,703) |
| Depreciation | 600,000 |
600,000 | 600,000 |
| Movement in provisions | 5,600,000
| 1,600,000 | 1,600,000 |
| FRS26 reclassification | 46,000
| To be agreed | To be agreed
|
| Total AME | 4,600,037
| 361,642 | 240,297
|
Annually Managed Expenditure
15. The total Annually Managed Expenditure (AME)
for 2009-10 is as shown in the following table:
| | Near Cash
| Non Cash
| Total Resource
| Capital
|
| Voted | £000
| £000 | £000
| £000 |
| Receipts from Coal Pension surpluses |
| 111,800 | 111,800 |
|
| Coal Health Liabilities | |
(1,518) | (1,518) |
|
| Coal Privatisation | | (690)
| (690) | |
| Total Voted in New Estimate | NIL
| 109,592 | 109,592
| NIL |
| Non Voted | |
| | |
| Receipts from Coal Pension Surpluses |
| | | (409,000)
|
| Coal Health Liabilities | 81,120
| (81,120) | - |
|
| Coal Privatisation | 15,500 |
(15,500) | - | |
| Urenco dividend | (32,000) |
| (32,000) | |
| British Energy Liabilities |
| (260,277) | (260,277) |
|
| NDA non cash items | | 361,642
| 361,642 | |
| Total Non Voted | 64,620
| 4,745 | 69,365
| (409,000) |
| Total Budget | 64,620
| 114,337 | 178,957
| (409,000) |
Provisions and Contingent
Liabilities
16. 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 provisions and contingent liabilities as at 31 March 2009
will be published in the annual resource accounts in July.
Process for Preparation and
Approval of the Memorandum
17. This Memorandum has been prepared in accordance
with the suggested format as set out in "Guidance on Producing
Estimates Memoranda" (Supply Estimates: a guidance manual)
and has been approved by the Accounting Officer.
Explanation of key terms
used in the Memorandum
Departmental Expenditure Limit
(DEL)
This is spending that is within the Department's
control and can therefore be planned over an extended period.
It is a Treasury budgetary control that is set for three-year
periods. Examples include administration costs, payments for
goods and services, grant scheme payments and non-cash costs such
as depreciation.
Annually Managed Expenditure
(AME)
This is spending that is generally less predictable
and controllable than expenditure in DEL. It is a Treasury budgetary
control that is reviewed twice a year with Departments via the
Supplementary Estimates.
Request for Resources (RfR)
This is the functional level at which the departmental
Estimates may be split. DECC has one RfR:
RfR1: Supporting the provision of energy that
is affordable, secure and sustainable; bringing about a low-carbon
UK; securing an international agreement on climate change; promoting
low carbon technologies at home and in developing countries; and
managing historic energy liabilities effectively and responsibly.
Departmental Unallocated Provision
Part of a Department's total DEL that is not allocated
to particular spending, but held back by the Department to meet
unforeseen pressures.
End Year Flexibility (EYF)
An HM Treasury mechanism which allows the Department
to carry forward unspent DEL provision into later 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 via the
Supply Estimate. Non-voted funds have by definition not been
through that process e.g. Non Departmental Public Body resource
and capital costs.
Administration Budget
A Treasury control on the resources consumed directly
by departments and agencies in providing those services which
are not directly associated with frontline service delivery.
Includes such things as: pay, resource expenditure on accommodation,
utilities and services.
Near-cash
Resource expenditure that has a related cash implication,
even though the timing of the cash payment may be slightly different.
For example, expenditure on gas or electricity supply is incurred
as the fuel is used, though the cash payment might be made in
arrears on a quarterly basis.
Non-cash
Costs where there is no cash transaction but which
are included in a body's accounts to establish the true cost of
all the resources consumed e.g. depreciation.
Comprehensive Spending Review
(CSR)
A cross-government review of departmental aims and
objectives and analysis of all spending programmes. Results in
the allocation of three-year Departmental Expenditure Limit
|
