Department for Environment Food and Rural Affairs

Spring Supplementary Estimate 2009-10

Select Committee Memorandum

 

Table of Contents

Section

Section Header

Page

1

Executive Summary

2

2

Introduction

4

3

Summary of changes sought

4

4

Detailed explanation of the changes

5

5

Impact on Public Service Agreement targets

14

6

Departmental Expenditure Limit

15

7

DEL End Year Flexibility

16

8

Administration Budget

16

9

Machinery of Government changes

16

10

Consolidated Fund Extra Receipts

16

11

Provisions and Contingent Liabilities

17

12

Net Cash Requirement

17

13

Breakdown of Sub-heads in Part II of the Estimate

17

Annex A

Explanation of key terms used in the Memorandum

18


1. Executive Summary

This document supports the Spring Supplementary Estimate (SSE) 2009-10 for the Department for Environment, Food and Rural Affairs (Defra).

The Spring Supplementary has been agreed with HM Treasury officials and will amend the Estimate for 2009-10. It sets out changes to the Departmental Expenditure Limit (DEL), Request for Resources (RfR) and the Net Cash Requirement (NCR) and is the mechanism by which Parliament approves its funding.

In summary, the SSE is requesting an increase of £41.608m to its DEL budgetary position and further increases in RfR and NCR in relation to the Rural Payments Agency (RPA) Single Payment Scheme (SPS). This is because the SPS expenditure is reported through the RfR, whilst the income is treated as Consolidated Fund Extra Receipts (CFERs). In total the SPS income and expenditure is DEL neutral.

We are asking for an increase of £41.608m in our DEL because we need to accrue in our accounts this year the probable disallowance for the two SPS scheme years 2005 and 2006. As the Committee is aware, we had made provision for payment of disallowance evenly across the three years of CSR07, because we could not predict in which year any payment would fall. The Commission has now reached a judgement on the level of disallowance for these two years. We expect the final settlement letter to be received in financial year 2009-10 and payment to be made during 2010-11. As a consequence, we will be required to accrue in 2009-10 for the deduction of disallowance for two scheme years (SPS 2005 and 2006) within a single financial year. The total disallowance figure for these two years is within the overall provision we had made.

Of the £41.608m increase to DEL, £30m is being brought forward from the 2010-11 ring-fenced disallowance provision, £12.5m is being returned by the Department of Energy and Climate Change (DECC) out of funding Defra provided to DECC to meet the expected costs of the Carbon Capture and Storage Front-End Engineering Design (FEED) studies, which in the event they did not spend. These sums have been partially offset by minor movements relating to transfers to and from other government departments. We will also be using the remaining £26m of our Departmental Unallocated Provision, which does not require a formal increase to our DEL.

The main changes to the Estimate, as well as the above, relate to faster payments to farmers made by the RPA and actions taken by Defra and the RPA to follow more closely the guidance contained within the Financial Reporting Standards (FRS) for impacts of foreign exchange and scheme income and expenditure recognition. These include changes to both the RfR and the NCR:

o Change in Accounting Policy

We set up a review following the 2008-09 Resource Accounts to cover weaknesses identified in RPA's accounting policy on foreign exchange and income and expenditure recognition. We took action to implement a new accounting policy for recognising SPS income and expenditure and complying with Financial Reporting Standard 21, impacting on the accounting for foreign exchange. Prior to this review, the annual accounts included 9/12 of the total SPS costs for the previous scheme year and 3/12 of the total SPS costs for the current scheme year spread evenly. The new basis recognises income and costs as the claims are validated and valued through RPA operational systems and a liability to the claimant crystallises. This better reflects the substance of RPA's role and function as a claim processing agent and results in the matching of income and costs. This has had the impact of increasing the RfR (voted DEL) in the current year, with a corresponding increase in EU income, classified as non-voted DEL. This is a change to an accounting recognition point which has no impact on how the scheme is administered or on the final payments made to scheme participants.

 

o Prior Period Adjustment

Wherever a change of accounting policy is introduced, accounting regulations state that any material impact on preceding years' accounts, must be valued and the numbers for the prior year restated. In terms of the Estimate however, any prior period adjustment (PPA) affecting the amount of the RfR voted in that preceding year needs to receive Parliamentary approval. The mechanism for this is through the current year's Estimate. The SSE therefore includes a PPA reflecting the effect on the RfR of applying this new income and cost recognition policy and compliance with FRS21 on accounting for impacts of foreign exchange on previous years data.

 

o Increase in scheme expenditure

There has been an increase in expenditure relating to the latest EU sugar and isoglucose restructuring fund. The sugar & isoglucose restructuring fund was introduced as part of the European Commission 2005 sugar reforms. The fund offers processors compensation in return for giving up sugar production quota with the aim of reducing EU sugar production. This increase is for covering the payment Defra is making on behalf of the EU for a payment to British Sugar to compensate them for giving up a percentage of their sugar quota to the Commission. This is DEL neutral as the voted expenditure is offset by an increase in non-voted EU income.

 

o Net Cash Requirement (NCR)

The NCR has increased as a result of a higher volume of SPS claims being processed and payments being made in the year, than previously forecast in the Winter Supplementary Estimate, in line with RPA's main objective of making faster payments. The NCR has also increased as a result of the increase in scheme expenditure mentioned above, the change in accounting policy for recognising SPS income and expenditure and the increase to the DEL budget.

 

We expect outturn to run close to these revised control totals.

These changes are set out below and are explained further, along with other proposed changes.

The pictorial representation of the differences between the Parliamentary Estimate and Treasury Budget control regime is attached, together with a cross-referenced version of the SSE. 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

In accordance with the wishes of HM Treasury, Ministers and the Committee as originally set out in the HM Treasury Public Expenditure System (PES) paper (2004) 14 Annex D, we present the following Estimate Memorandum.

The Introduction to the SSE follows the form set by HM Treasury to set out the detailed changes proposed. This shows transfers to/from other government departments and non-voted budgets. In addition, other changes are set out which have a neutral effect on the RfR but which affect the detailed sub-heads in Part II of the Estimate. What follows here is an explanation of why the changes are being proposed.

3. Summary of changes sought

The Defra SSE for 2009-10 requests additional provision above the Winter Supplementary Estimate of:

Net resources within Request for Resources 1 (RfR1)[1] £601.973m

Net resources within Request for Resources 2 (RfR2)[2] £17.335m

Net voted capital expenditure -£1.362m

Net cash requirement £1,037.618m

The most significant changes arising from the Estimate are:

1. An increase in income and expenditure for the RPA to cover the effect of a change in accounting policy for income and cost recognition and accounting for the impact of exchange rates on SPS payments.

2. A prior period adjustment for the RPA due to a change in the accounting policy for recognising SPS income and expenditure and FRS accounting for impacts of foreign exchange.

3. An increase in income and expenditure relating to the latest EU income requirements for the sugar and isoglucose restructuring fund.

4. An increase in cover with agreement from HM Treasury to cover an RPA CAP disallowance issue that has materialised this year. The Estimate therefore includes a transfer from some of next year's ring fenced disallowance provision, drawdown of the DUP and reallocation of DECC budget for Carbon Capture and Storage FEED studies.

5. An increase in income and expenditure for the RPA to cover EU payments to the Devolved Administrations to adjust previous forecast in line with the fixed exchange rate for SPS 2009.

6. An increase in grant in aid for Natural England and the Environment Agency.

7. A transfer of budget to the Forestry Commission (RfR2) from RfR1 to cover the potential impact of International Accounting Standard (IAS) 41 on the value of the public forest estate, other non-cash allocations and a shortfall in income from timber sales.

8. Reallocation of spend across estimate lines due to small internal budget movements and some revisions to reflect the most recent Departmental Strategic Objective (DSO) restructure.

 

4. Detailed explanation of the changes

The total increase proposed for the RfR is made up of a £397.901m increase to voted DEL resource shown in section A of the table overleaf, composed of:

 

1. £356.481m increase to RPA scheme expenditure. Of this, £134.453m relates to the latest EU income requirements for the sugar and isoglucose restructuring fund and £222.028m relates to a change in the accounting policy for recognising SPS income and expenditure, compliance with FRS on impacts of foreign exchange and the application of hedge accounting at the RPA.

2. £56.000m increase due to CAP disallowance, funded by £30.000m brought forward from next year's ring fenced disallowance provision and £26.000m transferred from the DUP. This was required to cover an RPA disallowance issue for scheme years 2005 and 2006 that materialised this year.

3. £11.608m net transfers from other government departments. £12.500m transfer from DECC to return funding Defra previously provided to DECC for the Carbon Capture and Storage FEED studies, £0.827m transfer to Department of Agriculture and Rural Development Northern Ireland (DARDNI) for Transmissible Spongiform Encephalopathy (TSE) responsibility, £0.265m transfer to DECC for Anaerobic digestion and £0.200m transfer from the Cabinet Office for the Office of Parliamentary Counsel.

4. -£25.300m transfer of budget cover to the department's Non Departmental Public Bodies (NDPB), mainly to the Environment Agency and Natural England.

5. £0.112m transfer from capital to capital grants relating to corporate services.

6. -£1.000m decrease in cover for the Rural Development Programme for England.

and a £221.407m increase to voted Non-Budget Resource. £180.700m for a prior period adjustment due to a change in accounting policy for recognising SPS income and expenditure at the RPA and £40.707m increase in cash cover for the Department's NDPBs, mainly the Environment Agency and Natural England.

Net voted capital expenditure changes by -£1.362m due to a transfer of capital cover to the Environment Agency of £1.250m and a transfer from capital to capital grants of £0.112m relating to corporate services.

The table overleaf also shows details of non-voted movements and neutral switches.

Amount

£

Description

A) Movements in provision relating to Voted Resource DEL

Transfers to other Government Departments

-£265,000

Transfer to Department of Energy and Climate Change (DECC) from Sustainable Consumption and Production (Capital Grants) relating to Anaerobic digestion (Section B3).

-£827,000

Transfer to Department of Agriculture and Rural Development for Northern Ireland (DARDNI) from Addressing Environmental Risks and Emergencies (Other Current) relating to Transmissible Spongiform Encephalopathy (TSE) (Section C2).

£200,000

Transfer from the Cabinet Office to A Respected Department (Administration) relating to the Office of the Parliamentary Counsel (OPC) charge (Section G1).

£12,500,000

Transfer from DECC to Rural Payments Agency Other (Other Current) returning funding Defra previously provided to DECC for the Carbon Capture and Storage FEED studies (Section J2).

Departmental Unallocated Provision (DUP)

£26,000,000

Transfer of the Departmental Unallocated Provision from Non-voted to Voted Rural Payments Agency Other (Other Current) relating to the CAP disallowance (Section J2).

Other Changes in DEL

£30,000,000

Brought forward £30,000,000 from 2010-11 relating to the CAP disallowance for Rural Payments Agency Other (Other Current) (Section J2).

Transfer to Non-Voted

-£27,378,000

Transfer of budget to Environment Agency (EA) (NDPB): For the Business Regulation Efficiency (BREW) -£500,000 (Section M3), -£300,000 (Section A2), -£387,000 (Section C2); for the improved implementation of Water Framework Directive -£1,589,000 (Section M3), -£2,335,000 (Section A2), -£1,156,000 (Section A5), -£460,000 (Section B2), -£529,000 (Section A3), -£750,000 (Section M3); resulting from the internal review of budget allocations -£140,000 (Section C3), -£865,000 (Section C2), -£25,000 (Section C2); for the transfer of Aggregates Levy Sustainability Fund (ALSF) funding from Climate change adaptation, Air quality, Landscape and Rural Affairs Directorate (CALR) -£75,000 (Section A2); for the Defra Noise Mapping function (Local Environment Quality programme) -£928,000 (Section A2); for a capital grants to resource switch for the Pitt programme -£5,000,000 (Section C3), £5,000,000 (Section C2); for the Defra Water Availability and Quality programme -£139,000 (Section A2) and -£17,200,000 for the allocation of non cash costs to delivery bodies (Section G2).

-£6,572,000

Transfer of budget to Natural England (NE) (NDPB). -£1,101,000 relating to Chief Information Officer Directorate (CIOD) recharges (Section G2), -£5,471,000 relating to provision cover (Section A3).

-£175,000

Transfer of budget to Sustainable Development Commission (SDC) (NDPB). -£175,000 resulting from the internal review of budget allocations (Section F2).

-£1,000,000

Decrease in voted resources (Other Current) for A Healthy Natural Environment, offset by a decrease in non-voted CFER DEL income relating to the latest forecasts for the Rural Development Programme for England (RDPE) scheme (Section A2).

Amount

£

Description

Transfer from Non-Voted

£47,000

Transfer of budget from Commission for Rural Communities (CRC) (NDPB). £47,000 for the allocation of non cash costs to delivery bodies (Section G2).

£200,000

Transfer of budget from Royal Botanical Gardens, Kew (NDPB). £200,000 for the allocation of non cash costs to delivery bodies (Section G2).

£2,250,000

Transfer of budget from NE (NDPB). £2,250,000 for the allocation of non cash costs to delivery bodies (Section G2).

£6,328,000

Transfer of budget from EA (NDPB). £1,189,000 for the improved implementation of Water Framework Directive (Section A3), £5,082,000 resulting from the internal review of budget allocations (Section C2), £57,000 for the Defra Noise Mapping function (Local Environment Quality programme) (Section C2).

£356,481,000

Increase in voted resources (Other Current) for Rural Payments Agency EC Funded, offset by an increase in non-voted CFER DEL income. £134,453,000 relates to the latest EU income requirements for the sugar and isoglucose restructuring fund and £222,028,000 relates to a change in the accounting policy for recognising SPS income and expenditure, compliance with FRS on foreign exchange and for the application of hedge accounting at the RPA.

Transfer from Capital Grants to Capital

£112,000

Transfer of budget from A Respected Department (Capital) to A Healthy Natural Environment (Capital Grants to Local Authorities) for the National Parks and Broads Authority (Section M3).

Transfer of Resource from RfR1 to RfR2

-£1,151,000

Decrease in Other Current spend (-£807,000) and increase in Appropriation in Aid (-£344,000) for A Healthy Natural Environment, relating to transfers to the Forestry Commission (FC). -£707,000 transfer for the early departure provision, -£100,000 relating to a Forest Research provision and for the Cambridge to Bristol relocation and -£344,000 relating to a shortfall in asset sales and timber income due to declining prices (Section A2 and A5).

-£140,000

Decrease in Other Current spend for Sustainable Consumption and Production, relating to a shortfall in asset sales and timber income due to declining prices (Section B2).

-£14,144,000

Decrease in Administration spend (-£6,950,000) and Other Current spend (-£7,194,000) for A Respected Department: for the allocation of non cash costs to delivery bodies (-£7,544,000) and for the impact of IAS 41 Agricultural assets on the FC (-£6,600,000) (Section G1 and G2).

-£1,900,000

Decrease in Grants for A Healthy Natural Environment (LA) relating to a shortfall in asset sales and timber income due to declining prices (-£1,000,000), a Forest Research provision and for the Cambridge to Bristol relocation (-£900,000) (Section M3).

Transfer of Resource to RfR2 from RfR1

£8,454,000

Increase in Other Current spend for Forestry Commission (England) relating to the non cash costs allocations to delivery bodies £6,970,000 and a shortfall in asset sales and timber income due to declining prices £1,484,000 (Section A2).

Amount

£

Description

£8,881,000

Increase in Other Current spend for Forestry Commission (GB Core) relating to the non cash costs allocations to delivery bodies £574,000, release of the early departure provision £707,000, relating to a Forest Research provision and for the Cambridge to Bristol relocation £1,000,000 and the impact of IAS 41 on the FC £6,600,000 (Section B2).

£397,901,000*

Total increase to Voted Resource DEL

 

B) Movements in provision relating to Voted Non-Budget

£4,722,000

Increase in grant in aid for EA. £11,219,000 for Environmental Protection: for the implementation of Water Framework Directive (£6,880,000), for the Business Regulation Efficiency (BREW) (£2,250,000), for the transfer of Aggregates Levy Sustainability Fund (ALSF) funding from Climate change adaptation, Air quality, Landscape and Rural Affairs Directorate (CALR) (£75,000), following the simplification of EA reporting (£5,892,000) and reduction in grant in aid following a reassessment of requirements (-£3,878,000). -£5,892,000 for Fisheries: following the simplification of EA reporting. £1,937,000 for Water resources for the EA closed pension fund utilisation (£3,500,000) and for the Business Regulation Efficiency (BREW) (-£1,563,000). (Section R3). -£2,542,000 for Flood Management: for the Defra Noise Mapping function for flood risk management (£871,000), funding from Defra Water Availability and Quality programme to EA for flood risk management (£139,000) and to reflect a re-assessment of grant in aid requirements (-£3,552,000) (Section S3).

£35,210,000

Increase in grant in aid for NE. £28,638,000 to cover 08/09 corporate service charges paid in 09/10; £5,471,000 Grant in Aid to cover for the release of a provision; £1,101,000 for additional budget from Defra to cover IT charges. (Section R3).

£600,000

Increase in grant in aid for Gangmasters Licensing Authority (GLA). £600,000 to reflect a re-assessment of grant in aid requirements (Section T3).

£180,700,000

Increase in Other Current for Rural Payments Agency EC Funded. £180,700,000 for a prior period adjustment due to a change in accounting policy for recognising SPS income and expenditure at the RPA (Section V3).

£175,000

Increase in grant in aid for SDC. £175,000 grant in aid from Sustainable Development Team for additional work (Section W3)

£221,407,000

Total increase to Voted Resource Non-Budget

 

C) Movements in provision relating to Non-Voted Resource DEL

Transfers from Voted

£24,260,000

 

Transfer of £20,010,000 to EA, £4,322,000 to NE, £175,000 to SDC, -£200,000 from RBGK, -£47,000 from CRC for various movements (see transfers from/to non-voted in the Movements in provision relating to Voted Resource DEL section above for more detail)

Amount

£

Description

-£355,481,000

Increase in non-voted CFER DEL income offset by an increase in voted DEL Resource: -£134,453,000 relates to the latest EU income requirements for the sugar and isoglucose restructuring fund; -£222,028,000 relates to a change in the accounting policy for recognising SPS income and expenditure, compliance with FRS on foreign exchange and the application of hedge accounting, at the RPA and £1,000,000 relates to the latest forecasts for the RDPE scheme.

Transfers from Resource to Capital

-£30,000,000

Transfer of -£30,000,000 from resource to capital for the Environment Agency in respect of flood defences where the exact nature and classification of the expenditure is determined by the Environment Agency, as they undertake the work.

.-£5,000,000

Transfer of -£5,000,000 from resource to capital for the Environment Agency for the Pitt programme.

-£750,000

Decrease in resource for the National Forest Company (NFC) (NDPB) to purchase land.

Departmental Unallocated Provision (DUP)

-£26,000,000

Transfer of the Departmental Unallocated Provision from Non-voted to Voted Rural Payments Agency Other (Other Current) relating to the CAP disallowance.

-£392,971,000

Total decrease to Non-Voted Resource DEL

 

D) Movements in provision relating to Non-Voted Resource AME

-£3,500,000

 

Decrease in non cash AME relating to utilisation of the Environment Agencies Closed Pension Fund.

-£3,500,000

Total decrease to Non-Voted Resource AME

 

E) Movements in provision relating to Voted Capital DEL

Transfer from Resource (Capital Grants) to Capital

-£112,000

Transfer of budget from A Respected Department (Capital) to A Healthy Natural Environment (Capital Grants to Local Authorities) for the National Parks and Broads Authority (Section G7).

Transfer to Non-Voted

-£1,250,000

Transfer of budget to EA (NDPB): relates to the funding requirement for new the Geographic Information System (GIS) (Section A7).

-£1,362,000*

Total decrease to Voted Capital DEL

 

 

Amount

£

Description

F) Movements in provision relating to Non-Voted Capital DEL

Transfers from Voted

£2,290,000

Transfer of budget to EA (NDPB): £500,000 For Business Regulation Efficiency (BREW); £1,650,000 for the implementation of Water Framework Directive; £140,000 resulting from the internal review of budget allocations.

Transfers from Resource to Capital

£30,000,000

Transfer of £30,000,000 from resource to capital for the Environment Agency in respect of flood defences where the exact nature and classification of the expenditure is determined by the Environment Agency, as they undertake the work.

£5,000,000

Transfer of £5,000,000 from resource to capital for the Environment Agency for the Pitt programme.

£750,000

Increase in capital for the NFC to purchase land.

£38,040,000

Total increase to Non-Voted Capital DEL

 

G) Neutral Switches

Transfers between Sections within the Estimate

£5,245,000

Increase in expenditure for A Healthy Natural Environment. £3,122,000 Administration spend: (Section A1), £2,678,000 relates to the transfer of depreciation budgets to the business areas, -£179,000 transfer of Estates budgets, £623,000 resulting from the internal review of budget allocations. £278,000 Other Current (Section A2) of which £250,000 for Severn Tidal Power feasibility study, £100,000 switch between the New Forest National Park offices and sustainability fund grants, £208,000 from rural area grants to British Waterways rural activities to reflect a change in delivery approach, £110,000 relates to the risk-based Audit IT project, £198,000 in relation to Law and Corporate Services recharges and -£608,000 resulting from an internal review of budget allocation. £1,845,000 Grants (Section A3) for the allocation of non cash costs to British Waterways Board.

-£203,000

Decrease in expenditure for Sustainable Consumption and Production (SCP). £147,000 Administration spend: (Section B1) Transfer of Depreciation budget to Business Areas. -£865,000 Other Current spend: (Section B2), -£350,000 transfer for the Communications Directorate's World Without Waste event and -£515,000 transfer to SCP for Waste Resource Action Programme (WRAP) projects. £515,000 Grants: (Section B3) for the waste improvement and efficiency WRAP projects.

Amount

£

Description

-£484,000

Decrease in expenditure for Addressing Environmental Risk and Emergencies. £7,062,000 Administration spend: (Section C1) £5,700,000 transfer of Depreciation budget to Business Areas; £4,500,000 funding for the RPA review; -£2,505,000 changes to virtual charge regime between Defra Estates and Veterinary Laboratory Agency (VLA); -£900,000 for the allocation of non cash costs to Food and Environment Research Agency (FERA); £1,699,000 reduction in VLA income from Defra to cover decrease in costs and -£1,699,000 decrease in VLA costs and £267,000 resulting from an internal review of budget allocation. -£10,281,000 Other Current spend: (Section C2) of which -£8,453,000 resulting from an internal review of budget allocation, -£5,156,000 for the release of Animal Health Business Reform Programme (BRP) additional programme; -£1,710,000 for Exotic Disease and Agency Portfolio (EDARP) recognised EU outbreak; £2,579,000 additional non cash allocations for Animal Health (AH), £2,294,000 for additional CIOD non pay charges for AH; -£110,000 relates to the risk-based Audit IT project and -£160,000 for sheep and goats inventory. £3,435,000 Grants (Section C3) resulting from an internal review of budget allocation. -£700,000 Appropriations in Aid (Section C5) Exotic Disease and Agency Portfolio (EDARP) recognised EU outbreak income.

£654,000

Increase in expenditure for A Thriving Farming and Food Sector. £118,000 Administration spend: (Section D1) £345,000 reduction in Veterinary Medicines Directorate (VMD) income from Defra to cover decrease in costs and -£345,000 decrease in VMD costs; £900,000 for the allocation of non cash costs to FERA and -£782,000 resulting from an internal review of budget allocation. £536,000 Other Current spend: (Section D2) £160,000 for sheep and goats inventory; £656,000 transfer of CIOD charges for FERA; £172,000 from Climate Change adaptation programme; -£1,200,000 transfer from AH to the BRP; -£1,500,000 for the Sustainable Farming Systems; £2,000,000 for Sustainable Water Management; -£350,000 for Environmental Protection Research; -£1,150,000 for Food Chain Meeting Consumer Needs; £2,000,000 for Enhancement of UK Greenhouse Gases and -£252,000 resulting from internal review of budget allocations.

£500,000

Increase in expenditure for Championing Sustainable Development. £500,000 Administration spend: (Section E1) resulting from the internal review of budget allocations.

-£1,413,000

Decrease in expenditure for Strong Rural Communities. £175,000 Administration spend: (Section F1) transfer of Depreciation budget to Business Areas. -£1,008,000 Other Current: (Section F2) -£300,000 relating to Whole Farm Approach (WFA) for e-channel project, -£170,000 Cattle Tracing System (CTS) funding for People and Performance Directorate (PPD) costs, -£208,000 from rural area grants to British Waterways rural activities to reflect change in delivery approach, -£130,000 CTS funding IBM Project Change Note (PCN) and -£200,000 resulting from internal review of budget allocations. -£580,000 Grants: (Section F3) -£160,000 CTS Capital IBM PCN04 User Acceptance Testing (UAT) costs, -£300,000 WFA for e-channel project, -£120,000 CTS funding Capital IBM PCN.

-£8,752,000

Decrease in expenditure for A Respected Department. -£4,474,000 Administration spend: (Section G1) of which -£14,365,000 transfer of Depreciation budget to Business Areas; £15,791,000 for the allocation of non cash costs to delivery bodies; -£6,308,000 resulting from the internal review of budget allocations and £179,000 transfer of responsibility for office accommodation expenses at Temple Quay, Bristol to Defra Estates. -£11,395,000 Other Current spend: (Section G2) of which £13,659,000 transfer of Depreciation budget to Business Areas; -£18,000,000 for the allocation of non cash costs to delivery bodies; -£3,148,000 relates to CIOD recharges and -£4,036,000 resulting from the internal review of budget allocations. £1,531,000 Grants (Section G3) resulting from the internal review of budget allocations. £5,586,000 Appropriations in Aid (Section G5) resulting from the internal review of budget allocations.

 

Amount

£

Description

-£4,886,000

Increase in Appropriations in Aid for Rural Payments Agency EC Funded. -£4,886,000 Appropriations in Aid: (Section H5) for the final Over Thirty Month Scheme (OTMS) claim for reimbursement from EC.

£24,724,000

Increase in expenditure for Rural Payments Agency Running Costs. £24,014,000 Other Current spend: (Section I2) of which £305,000 relates to funding from Defra RCSPD (Responsibility and Cost Sharing Programme) to RPA for the cost of running a TSE helpline service, -£2,227,000 for the allocation of non cash costs to RPA; £170,000 funding for the CTS transferred from WFA; £818,000 additional CTS funding; £300,000 funding as agreed with WFA for e-channel project e-SPS Online; £10,616,000 relating to the SPS 2008 hedging contract; £8,924,000 switch relating to RPA's cost of capital charge; £2,600,000 for CAP Healthcheck funding and £2,508,000 resulting from the internal review of budget allocations. £710,000 Grants: (Section I3) £410,000 funding for the CTS Capital IBM costs transferred from WFA and £300,000 funding as agreed with WFA for e-channel project e-SPS online.

-£13,750,000

Decrease in expenditure for Rural Payments Agency Other. -£13,750,000 Other Current spend: (Section J2) -£8,924,000 switch relating to RPA's cost of capital charge and -£4,826,000 for the allocation of non cash costs to RPA.

£178,000

Increase in expenditure for Adapting to Climate Change. £178,000 Other Current spend: (Section K2). £350,000 for waste improvement and efficiency Autumn World Without Waste Event and -£172,000 due to efficiencies in climate change adaptation.

£198,000

Increase in expenditure for A Sustainable, Secure and Healthy Food Supply. £300,000 Administration spend: (Section L1) and -£102,000 Other Current spend: (Section L2) resulting from the internal review of budget allocations.

-£2,011,000

Decrease in Grants for A Healthy Natural Environment. (Section M3). -£1,661,000 relates to the reduction in the requirement of funding by Local Authorities for the treatment of contaminated land, -£100,000 switch between the New Forest National Park offices and sustainability fund grants and -£250,000 resulting from the internal review of budget allocations.

-£387,000

Decrease in Capital spend for A Healthy Natural Environment: (Section A7) -£137,000 reduced budget for Estates recharges following the re-analysis of the Facilities Management (FM) project spend between capital and revenue and -£250,000 reduced funding requirement for the GIS system.

£11,006,000

Increase in Capital spend for Addressing Environmental Risks and Emergencies: (Section C7) £4,800,000 for refurbishment works at VLA, £5,000,000 for a temporary laboratory at AH, £3,925,000 for Defra Estates recharges for VLA, -£250,000 switch to FERA for science park development, -£200,000 transfer to FERA for E-Domero project and -£2,269,000 reduction in the IT budget resulting from the internal review of budget allocations.

-£11,656,000

Decrease in Capital spend for A Respected Department: (Section G7). £200,000 transfer to FERA for E-Domero project, £250,000 switch to FERA for science park development, -£2,368,000 alignment of FM budgets, -£1,420,000 transfer of budget to reflect sustainability expenditure on assets held by VLA, and -£8,318,000 resulting from the internal review of budget allocations.

£1,037,000

Increase in Capital spend for Rural Payments Agency Running Costs: (Section I7) £630,000 for CTS accreditation benefits and £407,000 relating to Peach e-Horticultural Marketing Inspectorate (HMI).

Amount

£

Description

Increases/decreases in gross spending offset by Appropriations in Aid

£2,400,000

Increase in Other Current spend offset by an increase in Appropriations in Aid for Addressing Environmental Risks and Emergencies (Section C2 and C5) relating the increase in Exotic Disease and Agency Relationship Portfolio (EDARP) Blue tongue receipts.

£2,607,000

Decrease in Appropriations in Aid offset by a decrease in Other Current spend for A Respected Department (Section G5 and G2) resulting from an internal review of budget allocations.

£3,427,000

Increase in Other Current spend offset by an increase in Appropriations in Aid for Rural Payments Agency Running Costs (Section I2 and I5): £3,307,000 relating to additional Older Cattle Disposal Scheme (OCDS) work and £120,000 relating to Cattle Passport replacements.

£33,917,000

Increase in Other Current spend offset by an increase in Appropriations in Aid for Rural Payments Agency EC Funded (Section V2 and V5) relating to latest forecasts based on current exchange rates: £13,998,000 for Northern Ireland, £12,519,000 for Wales and £7,400,000 for Scotland.

Increases/decreases in gross spending offset by non-operating Appropriations in Aid

£11,247,000

Decrease in non-operating Appropriations in Aid offset by a decrease in Capital expenditure for A Respected Department (Section G8 and G7): £647,000 relating to FERA property enhancements, and £10,600,000 resulting from an internal review of budget allocations.

* These totals differ to the DEL table due to transfers relating to capital grants that are treated as Resource in the Estimate and Capital in the Budget.

 

 

 

 

 

 

 

 

 

 

 

 

5. Impact on Public Service Agreement (PSA) targets

Defra[3] is leading on one cross-government PSA for the remainder of the CSR period:

· 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 7 additional PSAs and will contribute to another 4.

Defra now has 9 DSOs and has produced the Estimate Part II Table to conform to the post DECC DSO structure. Most decisions have been made on how programmes are mapped to these new DSOs, but some further minor remapping maybe required in the future. Detailed information about funding and the Department's PSA targets will be published in the Departmental Report.


 

6. Departmental Expenditure Limit

This Supplementary Estimate will increase Defra's Resource DEL by £11.873m to £2,720.880m and increase Capital DEL by £29.735m to £694.250m. This is shown in the following table (a detailed breakdown is included in section 4):

Changes to Departmental Expenditure Limit in 2009-10 (£000)

 

Voted

Non-Voted

Total DEL

Resource

 

 

 

Existing Estimate provision

4,001,027

-1,292,020

2,709,007

Change announced in the SSE

404,844

-392,971

11,873

 

 

Total resource DEL

4,405,871

-1,684,991

2,720,880

Capital

 

 

 

Existing Estimate provision

270,376

394,139

664,515

Change announced in the SSE

-8,305

38,040

29,735

 

Total capital DEL

262,071

432,179

694,250

Less Depreciation in the existing Estimate provision *

-125,270

0

0

-99,119

-224,389

Less change in Depreciation in SSE*

9,450

-9,450

0

Total DEL

4,552,122

-1,361,381

3,190,741

*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.

 

The following table compares outturn with planned DEL from 2006-07 to 2008-09.

Previous years' expenditure against Departmental Expenditure Limits (£000)

 

Provision

Outturn

Variance

Year

Voted

Non-Voted

Total DEL

 

 

Resource

 

 

 

 

 

2006-07

4,675,672

-1,641,726

 

3,033,946

 

2,884,477

149,469

2007-08

4,196,145

-1,426,527

2,769,618

2,703,596

66,022

2008-09

4,050,855

-1,382,984

2,667,871

2,605,678

62,193

Capital

 

 

 

 

 

2006-07

338,413

203,867

542,280

568,016

-25,736

2007-08

282,500

275,956

558,456

558,690

-234

2008-09

259,902

358,939

618,841

609,740

9,101

 

7. DEL End Year Flexibility (EYF)

The Department has not requested the drawdown of any EYF in this Supplementary Estimate.

 

8. Administration Budget

This Supplementary will increase the Department's Administration Budget by £0.200m. The tables below show the Administration Budget for current and prior years:

Changes to the Administration Budget in 2009-10 (£000)

 

Provision

Administration Budget in the existing Estimate provision

304,296

Change announced in the SSE

200

Administration Budget

304,496

 

Previous years' expenditure against Administration Budget (£000)

Year

Provision

Outturn

2006-07

295,845

356,836

2007-08

348,452

345,596

2008-09

310,583

304,878

 

2006-07 outturn is high in comparison to the provision for that year. This is because in 2007-08 there was a Programme to Administration spending switch for expenditure on consultancy services to comply with specific guidance for the definition of consultancy services as per PES 2007 (08). Prior year outturn data was also adjusted to allow yearly comparisons.

 

9. Machinery of Government (MoG) changes

This Supplementary Estimate does not include any MoG changes.

 

10. Consolidated Fund Extra Receipts (CFERs)

The Department's CFERs have increased by £355.481m in this Supplementary Estimate. This increase is mainly due to an increase in RPA scheme income and expenditure. Of which £134.453m relates to the latest EU income requirements for the sugar and isoglucose restructuring fund and £222.028m relates to a change in the accounting policy for recognising SPS income and expenditure, compliance with FRS on accounting for impacts for foreign exchange and the application of hedge accounting, at the RPA. There is also a £1.000m decrease in cover for the Rural Development Programme for England.

11. Provisions and Contingent Liabilities

The only change to the Department's provisions in this Supplementary Estimate relates to the CAP disallowance provision. Following agreement with HM Treasury, £30.000m was brought forward from next years ring fenced disallowance provision to cover an RPA disallowance issue that has materialised this year.

 

12. Net Cash Requirement

As a result of this Supplementary Estimate the Department's net cash requirement has increased by £1,037.618m compared to a total increase in resource of £619.308m and decrease in capital of £1.362m. The difference of £419.672m is shown in the Resource to Cash Reconciliation in Part II of the Estimate, and consists of £585.669m decrease in Creditors due to the processing of RPA SPS payments in line with RPA's main objective of making faster payments, -£180.700m decrease for the non cash prior period adjustment relating to the change in accounting policy, -£6.382m decrease in cost of capital charges, £9.450m increase in depreciation and £11.635m increase in other non-cash.

 

13. Breakdown of Sub-heads in Part II of the Estimate

Details of some of the larger programmes which may be of interest to the Committee are:-

· £58m within voted DEL 'A Healthy Natural Environment' for subsidies and capital grant to British Waterways;

· £539m within voted DEL 'A Healthy Natural Environment' for the Rural Development Programme for England (RDPE), of which £336m is European Commission (EC) funded and so included as a Consolidated Fund Extra Receipt (CFER);

· £60m within voted DEL 'Strong Rural Communities' for payments to the Regional Development Agencies;

· £131m within voted DEL 'Addressing Environmental Risk and Emergencies' for the Animal Health agency;

· £117m 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 NDPBs is shown as a note to the Estimate. Included within the grant in aid to the Environment Agency is £610m 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 - 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 HM 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 HM 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 (CAP) 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 e.g. Defra EU CAP income and NDPB resource and capital costs.

 


Administration Budget

A HM 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 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 Limits.

 

 

 



[1] 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.

[2] 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.

[3] http://www.defra.gov.uk/corporate/about/how/busplan/spending-review/psa2007.htm