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.
|