Main Estimate 2009-10
Select Committee Memorandum
TABLE OF
CONTENTS
| 1 | Executive Summary
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| 2 | Introduction |
| 3 | Summary of the main spending control figures contained in the Estimate
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| 4 | Explanation of significant changes in provision compared with 2008-09
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| 5 | Detailed explanation of changes in provision compared with 2008-09
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| 6 | Explanation of significant changes in provision compared with the 2007 Comprehensive Spending Review allocations
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| 7 | Impact on Public Service Agreement targets
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| 8 | DEL Budget |
| 9 | DEL End Year Flexibility
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| 10 | Administration Budget |
| 11 | Provisions and contingent liabilities
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| 12 | >Breakdown of Sub-heads in Part II of the Estimate
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| Annex A | Summary of funding variations by RfR and Sub-head
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| Annex B | Explanation of key terms used in the Memorandum
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1. EXECUTIVE SUMMARY
The Part II table of the Main Estimate is structured to align
with Defra's Departmental Strategic Objectives (DSO).[1]
The DSOs were set as part of the Comprehensive Spending Review
2007 (CSR07) and subsequently modified following the creation
of the Department of Energy and Climate Change (DECC). How internal
programmes map to the new DSO structure has mainly been resolved
but may require finessing over time.
The Department's Budget has changed since the CSR07 settlement,
mainly due to the transfer of the majority of Defra's Climate
Change mitigation expenditure programmes to the DECC. In summary,
the Resource DEL Budget has decreased by £257 million
and the Capital DEL Budget has decreased by £381 million.
The Net Resource Requirement has increased by £19 million
(0.3%) compared to last year. This increase is made up of a number
of small changes, the details of which are shown in Annex A. The
main increases relate to increased investment in flood management,
the Rural Development Programme for England (RDPE) and Regional
Development Agencies (RDA). These increases are largely offset
by decreases due to the Rural Payments Agency's (RPA) efficiency
gains and the effect of exchange rates on Single Payment Scheme
(SPS) payments.
The Net Cash Requirement has decreased by £218 million
(4%) compared to last year. This is mainly due to a £200 million
adjustment to the movement in creditors reflected in the 2008-09 Spring
Supplementary Estimate (SSE). RPA processed SPS 2008 payments
to farmers earlier than in previous years, requiring extra cash
in 2008-09. Having made this step change in paying the majority
of farmers within the first two months of the payment window,
overall cash requirement will revert to a normal level year on
year.
The pictorial representation of the differences between the
Parliamentary Estimate and Treasury Budget control regimes is
attached, together with a cross-referenced version of the Estimate.
Defra finance staff are available at the Committee's convenience
for informal discussions on any of the technical issues within
the Estimate and Budget.
2. INTRODUCTION
The purpose of this memorandum is to confirm that the resources
and cash sought in the Main Estimate are consistent with the plans
set out in the CSR07, support the delivery of Defra's Public Service
Agreement (PSA) target and to compare with previous years' actuals
and future years' plans.
3. SUMMARY OF
THE MAIN
SPENDING CONTROL
FIGURES CONTAINED
IN THE
ESTIMATE
Voted Provision
The Main Estimate provides for:
— a total net resource requirement of £5,348,997,000;
split between:
— RfR 1 Defra £5,273,818,000
— RfR 2 Forestry Commission £75,179,000
— a combined net cash requirement of £5,236,206,000
Budgetary data
The key budgetary figures are:
— Resource Departmental Expenditure Limit £2,708,632,000;
of which:
— Administration budget £304,296,000
— Near-cash £2,373,200,000
— Capital Departmental Expenditure Limit £668,915,000
— Resource Annually Managed Expenditure £4,449,000
— Capital Annually Managed Expenditure £500,000
4. EXPLANATION OF
SIGNIFICANT CHANGES
IN PROVISION
COMPARED WITH
2008-09
Net resource requirement
The net resource requirement is £19 million (0.3%)
higher than last year. A detailed explanation, broken down by
Estimate Sub-head, is given in Annex A. The main increases relate
to increased investment in flood management, the Rural Development
Programme for England and Regional Development Agencies. These
increases are largely offset by decreases due to RPA's efficiency
gains and the effect of exchange rates on SPS payments.
Net voted capital expenditure
Net voted capital expenditure has fallen by £19 million
(20.3%). This is due to assumptions made on the split between
Capital and Capital grants at the time the 2008-09 Estimate
was produced. Capital grants are classified as Resource in the
Estimate and Capital in the Budget.
Net cash requirement
The £218 million (4%) fall in the net cash requirement
is mainly due to a £200 million adjustment to RPA's
movement in creditors processed in the 2008-09 SSE. RPA processed
SPS 2008 payments to farmers earlier than in previous years,
requiring extra cash in 2008-09. Having made this step change
in paying the majority of farmers within the first two months
of the payment window, overall cash requirement will revert to
a normal level year on year.
Resource DEL
Resource DEL has increased by £41 million (1.5%).
This is mainly due to increased spend on flood management and
Regional Development Agencies.
Capital DEL
Capital DEL has increased by £50 million (8.1%).
This is mainly due to increased investment in flood management,
including Capital spend brought forward to 2009-10 from 2010-11 in
the Pre-Budget Report Fiscal Stimulus package, and waste strategy.
5. DETAILED EXPLANATION
OF CHANGES
IN PROVISION
COMPARED WITH
2008-09
Detailed explanations for any significant variances between
the SSE 2008-09 and the Main Estimate 2009-10 are shown
in the table in Annex A.
6. EXPLANATION OF
SIGNIFICANT CHANGES
IN PROVISION
COMPARED WITH
THE 2007 COMPREHENSIVE
SPENDING REVIEW
(CSR07) ALLOCATIONS
Resource DEL
2009-10 Main Estimate £2,708,632,000
2009-10 in CSR07 £2,966,000,000
DEL Resource has decreased by £257.4 million because:
| £000
|
Transfer to the Department for Communities and Local Government for Revenue Support Grants for contaminated land.
| (600) |
| Transfer from the Department for Communities and Local Government to undo a pan Government Agreement from 2003 for an Ordnance Survey mapping service. DCLG will invoice customers for this service in the future.
| 1,750 |
| Transfer from the Marine and Fisheries Agency (MFA) to the Welsh Assembly Government (WAG) for the transfer of MFA staff already working in Wales on behalf of WAG.
| (233) |
| Transfer to HM Treasury as a contribution towards Sustainable Procurement.
| (915) |
| Transfer to the Cabinet Office as a contribution towards the Government Security Zone.
| (40) |
| Machinery of Government transfer to DECC. |
(255,996) |
| Transfer to the Cabinet Office for Natural Hazards work.
| (300) |
| Transfer to the Department for Innovation, Universities and Skills as a contribution towards the Skills Strategy.
| (34) |
| Transfer to HM Treasury to allow a PFI project for a waste disposal plant in Manchester to access the PFI investment fund.
| (1,000) |
| |
Capital DEL
2009-10 Main Estimate £668,915,000
2009-10 in CSR07 £1,050,000,000
Capital DEL has decreased by £381 million because:
| £000
|
Machinery of Government transfer of the Chemicals Regulation Directorate (formerly known as the Pesticides Safety Directorate) to the Department for Work and Pensions.
| (220) |
| Machinery of Government transfer to DECC. |
(410,000) |
| Pre-Budget Report Fiscal Stimulus package increased capital spend for flood management, brought forward from 2010-11.
| 20,000 |
| Pre-Budget Report Fiscal Stimulus package increased capital spend for the British Waterways Board (BWB), brought forward from 2010-11.
| 5,000 |
| Transfer to HM Treasury to allow a PFI project for a waste disposal plant in Manchester to access the PFI investment fund.
| (4,250) |
| Increase announced in the 2009 Budget for grants for developing reprocessing facilities for food waste, creating jobs and enabling new composting and anaerobic digestion facilities to be built. To be administered by the Waste and Resources Action Programme (WRAP).
| 8,385 |
| |
7. IMPACT ON
THE PUBLIC
SERVICE AGREEMENT
(PSA) TARGETS
The provision sought is in accordance with CSR07, the HM
Treasury Pre-Budget and Budget Reports and plans about to be published
in the 2009 Departmental Report.
CSR07 contains a new set of cross-government priorities
or PSAs to replace those which were agreed in the 2004 Spending
Review. There are 30 new PSAs across government. Following
the creation of DECC, Defra[2]
leads on 1 PSA:
— Secure a healthy natural environment for everyone's
well being, health and prosperity, now and in the future.
Defra has also signed up to be a formal delivery partner
for seven additional PSAs and will contribute to another four.
The new framework also requires departments to develop a
set of Departmental Strategic Objectives (DSOs) covering the full
breadth of a department's work. Defra has nine DSO's for assessing
performance internally and will report regularly against them
to HM Treasury. Detailed information about funding and the Department's
PSA targets will be published in the Departmental Report.
8. DEL BUDGET
The table below compares outturn from 2004-05 onwards
with planned DEL for the current and future years:
£m | Outturn
| | | |
| Plans |
| 2004-05 | 2005-06
| 2006-07 | 2007-08
| 2008-09 | 2009-10
| 2010-11 |
Resource DEL | 2,618 |
2,608 | 2,884 | 2,704
| 2,668 | 2,709 | 2,682
|
| Of which: | |
| | | |
| |
| Near cash | 2,274 |
2,147 | 2,331 | 2,320
| 2,363 | 2,373 | 2,339
|
| Non cash | 344 |
461 | 553 | 384 |
305 | 336 | 343 |
| Capital DEL | 314 | 639
| 568 | 559 | 619
| 669 | 608 |
| less depreciation* | 184 |
136 | 155 | 212 |
197 | 224 | 210 |
| Total DEL | 2,748 | 3,111
| 3,297 | 3,051 | 3,090
| 3,154 | 3,080 |
* 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.
Figures include Forestry Commission for all years.
| | | |
| | | |
| |
| | | |
| |
This table reflects a reduction in DEL Budgets reported in
previous years in accordance with machinery of government (MoG)
processes due to the transfer of the majority of Defra's Climate
Change responsibilities to DECC
Non-cash costs increased in 2005-06 and 2006-07 mainly
due to the creation of the CAP disallowance provision. Near-cash
costs increased from 2006-07 due to the utilisation of both
the CAP and Environment Agency closed pension fund provisions.
Near-cash costs then decrease in 2010-11 due to Defra's contribution
to the Value for Money and the Operational Efficiency Programme
2010-11.
Capital DEL increased in 2005-06 when capital grants
were transferred from resource to capital and increases again
from 2008-09 to 2010-11, mainly due to increased investment
in flood management and waste. Further details will be included
in the 2009 Departmental Report.
9. DEL END YEAR
FLEXIBILITY (EYF)
£m | Admin
| Other
Resource | Total
Resource
| of which
Near-cash | Non-cash
| Capital |
PEOWP (July 08) | - |
85 | 85 | 63 | 22
| - |
| Take up in Winter Supplementary Estimate (WSE)
| - | - | - |
- | - | - |
| Balance of EYF at 31 March 2009 | -
| 85 | 85 | 63 |
22 | - |
| |
| | | |
|
The Department drew down £56,000 EYF in the 2008-09 SSE
relating to an Invest to Save Budget project for Investing in
Communities.
The accumulated stock of near-cash EYF largely relates to
an underspend on the ring-fenced disallowance provision for SPS.
The timing of when the provision is utilised is very uncertain
due to lengthy EC processes and is mainly beyond the Department's
control. As a consequence the Department did not fully utilise
the Budget cover in 2007-08.
The accumulated stock of non-cash EYF largely relates to
an underspend on notional cost of capital for the Forestry Commission's
Public Forest Estate. The value of the Public Forest Estate fluctuates
considerably and fell in 2006-07 to a level where the cost
of capital was below that provided in the Estimate.
10. ADMINISTRATION BUDGET
A comparison with earlier years' outturn and future years'
plans is set out below:
£m | Outturn
| | | |
| Plans |
| 2004-05 | 2005-06
| 2006-07 | 2007-08
| 2008-09 | 2009-10
| 2010-11 |
Administration Budget | 338
| 356 | 357 | 346
| 311 | 304 | 298
|
| |
| | | |
| |
This table reflects a reduction in Administration Budgets
reported in previous years in accordance with MoG processes due
to the transfer of the majority of Defra's Climate Change responsibilities
to DECC.
The Administration Budget falls during the CSR07 period
as efficiency savings are realised.
11. PROVISIONS AND
CONTINGENT LIABILITIES
RfR 1 contains £42 million voted DEL (ringfenced)
for possible increases to provisions for CAP disallowance and
£59.3 million voted AME for the increase to the Environment
Agency Closed Pension Fund provision to cover interest on scheme
liabilities.
The Main Estimate also includes details of all the contingent
liabilities included in the Department's interim (nine-month)
resource accounts.
12. BREAKDOWN OF
SUB-HEADS
IN PART
II OF THE
ESTIMATE
Details which may be of interest to the Committee are:
— £58 million within voted DEL "A Healthy
Natural Environment" for subsidies and capital grant to British
Waterways;
— £547 million within voted DEL "A Healthy
Natural Environment" for the Rural Development Programme
for England, of which £337 million is EC funded and
so included as a Consolidated Fund Extra Receipt (CFER);
— £60 million within voted DEL "Strong
Rural Communities" for payments to the Regional Development
Agencies;
— £127 million within voted DEL "Addressing
Environmental Risk and Emergencies" for the Animal Health
agency;
— £117 million within voted DEL (under Support
for Local Authorities) "Sustainable Consumption and Production"
for Waste Strategy; and
— A breakdown of the Non-Budget grant-in-aid to Defra's
Non-Departmental Public Bodies is shown as a note to the Main
Estimate. Included within the grant-in-aid to the Environment
Agency is £613 million for Flood Management.
This memorandum has been prepared with reference to guidance
in the Estimates Manual provided by HM Treasury. The information
in this memorandum has been approved by Helen Ghosh, Accounting
Officer and Permanent Head of Defra.
Annex A
SUMMARY OF FUNDING VARIATIONS BY RFR AND SUB-HEAD
RfR/Estimate Sub-head |
Description | SSE
2008-09
| Main
Estimate
2009-10 |
Variation from SSE 2008-09 to Main Estimate 2009-10
| Explanation of Variance |
| | £m
| £m | £m
| % | |
RfR 1 | |
| | | |
|
| Spending in DEL Central Government
| | | |
| |
| A | A Healthy Natural Environment
| 792 | 825 | 33
| 4 | Increase mainly due to an increase in RDPE and spend brought forward from 2010-11 for BWB as part of the fiscal stimulus package.
|
| B | Sustainable Consumption and Production
| 96 | 94 | (2)
| 0 | The decrease is made up of a number of small changes.
|
| C | Addressing Environmental Risk and Emergencies
| 346 | 365 | 19
| 5 | This includes an increase to flood management.
|
| D | A Thriving Farming and Food Sector
| 80 | 86 | 6 |
8 | The increase is made up of a number of small changes.
|
| E | Championing Sustainable Development
| 7 | 5 | (2) |
(29) | The decrease is made up of a number of small changes.
|
| F | Strong Rural Communities |
76 | 98 | 22 | 29
| Increase mainly due to an increase in spend for the Regional Development Agencies.
|
| G | A Respected Department |
229 | 278 | 49 |
21 | The increase is partly related to 2008-09 including income cover for the recharge to DECC of corporate services and partly due to the realignment of COINS with internal systems.
|
| H | Rural Payments Agency: EC Funded
| 1,990 | 1,878 | (112)
| (6) | The decrease is mainly due to an increase processed in the 2008-09 SSE to provide cover for exchange rate movements on SPS payments.
|
| I | Rural Payments Agency: Running Costs
| 230 | 207 | (23)
| (10) | The decrease is mainly due to RPA's efficiency gains.
|
| J | Rural Payments Agency: Other
| 56 | 56 | 0 |
0 | No change. |
| K | Adapting to Climate Change
| 40 | 32 | (8)
| (20) | Decrease due to the realignment of COINS with internal systems.
|
| L | A Sustainable, Secure and Healthy Food Supply
| 4 | 4 | 0 |
0 | No change. |
| Spending in DEL Support for Local Authorities
| | | |
| |
| M | A Healthy Natural Environment
| 64 | 74 | 10 |
16 | The increase is made up of a number of small changes.
|
| N | Sustainable Consumption and Production
| 105 | 119 | 14
| 13 | Increase due to increased expenditure on waste reduction.
|
| Addressing Environmental Risk and Emergencies
| 9 | 0 | (9) |
(100) | Decrease due to the realignment of COINS with internal systems.
|
| O | Rural Payments Agency: EC Funded
| 7 | 5 | (2) |
(29) | Decrease due to CAP school milk.
|
| P | Area Based Grants: DEFRA |
3 | 3 | 0 | 0
| No Change |
| Spending in AME Central Government
| | | |
| |
| Q | A Healthy Natural Environment
| 37 | 24 | (13)
| (35) | 2008-09 figure is higher due to a provision raised for the Food From Britain (FFB) pension provision.
|
| Spending in Non-Budget Central Government
| | | |
| |
| R | A Healthy Natural Environment
| 486 | 489 | 3
| 1 | Increase due to a number of small movements in grant in aid provision.
|
| S | Addressing Environmental Risk and Emergencies
| 563 | 620 | 57
| 10 | Increase due to an increase in grant in aid for the Environment Agency to cover additional spend on flood management.
|
| T | A Thriving Farming and Food Sector
| 18 | 3 | (15)
| (83) | Decrease due to the winding down of FFB.
|
| U | Strong Rural Communities |
6 | 6 | 0 | 0
| No change |
| W | Championing Sustainable Development
| 2 | 3 | 1 |
50 | The increase is made up of a number of small changes.
|
| RfR1 Total | |
5,246 | 5,274 | 28
| 1 | |
| RfR2 | |
| | | |
|
| Spending in DEL Central Government
| | | |
| |
| A | Forestry Commission (England)
| 65 | 57 | (8)
| (12) | The 2008-09 figure was higher, mainly due to transfers from RfR1 to cover a decline in timber sales and additional cost of capital charges.
|
| B | Forestry Commission (GB Core)
| 19 | 18 | (1)
| (5) | The 2008-09 figure is higher, mainly due to transfers from RfR1 to cover a decline in timber sales.
|
| RfR2 Total | |
84 | 75 | (9)
| (12) | |
| Estimate Total | |
5,330 | 5,349 | 19
| 0 | |
|
| | | |
| |
Annex B
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, CAP 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. Defra has very little
AME expenditure, mainly adjustments to the Environment Agency
closed pension fund and Levy Funded Body resource and capital
costs.
REQUEST FOR
RESOURCES (RFR)
This is the functional level at which the Departmental Estimates
may be split. Defra has the following two RfR's:
RfR1: Ensuring that consumers benefit from competitively
priced food, produced to high standards of safety; environmental
care and animal welfare from a sustainable, efficient food chain,
to contribute to the well-being of rural and coastal communities
and funding aspects of the Common Agricultural Policy and Rural
Development Programme for England Guarantee Section as economically,
efficiently and effectively as possible.
RfR2: Direction of the delivery of the Government's Strategy
for Trees, Woods and Forests in England and taking the lead in
development and promotion of sustainable forest management across
Great Britain.
DEPARTMENTAL UNALLOCATED
PROVISION
Part of a Departments total DEL that is not allocated to
particular spending, but held back by the Department to meet unforeseen
pressures.
END YEAR
FLEXIBILITY (EYF)
A 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 eg Defra EU CAP income and NDPB 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
used eg 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 Limits.
1
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2
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