Foreign and Commonwealth Office Annual Report 2008-09 - Foreign Affairs Committee Contents

Letter to the Clerk of the Committee from UK Trade & Investment

ESTIMATES MEMORANDUM AND WRITTEN STATEMENT: UK TRADE & INVESTMENT

  HM Treasury guidance specified that departments are required to provide a "Written Statement" and an "Estimates Memorandum" to their Select Committee explaining the changes sought in Supplementary Estimates and how these link to the department's published targets.

  I enclose UK Trade & Investment's Estimates Memorandum and Written Statement for the forthcoming Spring Supplementary at Annex A and B respectively. These reflect the changes required to our funding for 2009-10. A significant difference this year is the requirement to incorporate changes resulting from the first time adoption of International Financial Reporting Standards (IFRS).

  Three types of adjustments are included in UKTI's Supplementary Estimate:

(i) Classification changes resulting from the adoption-of IFRS required a £3,740k transfer from the resource to capital budget together with the associated depreciation cover (£81k).

(ii)> Increased expenditure cover (to deliver the inward investment conference) funded from a £500k transfer from the Department for Business, Innovation and Skills; and a net increase of £1k in expenditure resulting from an increase in income recovery of £1,194k offset by an increase in expenditure of £1,195k.

(iii) A technical adjustment of £486k required under vote accounting rules to ensure voted DEL (Resource or Capital) is not reduced from its previously voted position. This does not involve additional expenditure.

  Overall, these changes have led to a total Resource DEL change of £1k and a total Capital DEL change of £3,740k, giving an overall total DEL change of £3,741k.

  Whilst the timetable for the presentation and publication of the forthcoming Spring Supplementary is not fixed, it is likely that presentation to the House of Commons will be on Tuesday, 23 February 2010.

  Should the Committee require any additional information, I would be happy to expand the Statement appropriately.

  I am also sending a copy of this letter and enclosure to the Clerk of the Business Innovation & Skills Committee.

Curtis Juman

Director of Finance

10 February 2010

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Annex A

SPRING SUPPLEMENTARY ESTIMATE 2009-10

Introduction

  The purpose of this memorandum is to provide the Select Committee with an explanation of how the resources and cash sought in the Spring Supplementary Estimate will be applied to achieve departmental objectives. This includes information on comparisons with the resources provided in earlier years in Estimates and departmental budgets, and may also refer to future financial plans. Details of changes in resources relative to original plans set out in the last Comprehensive Spending Review are provided. They will also include the adjustments required as a result of the HMT guidance that all departments adapt International Financial Reporting Standards (IFRS) as the accounting basis.

The change in the resource element of Departmental Expenditure Limit (DEL) sought in this Supplementary Estimate relate primarily to:

Description Reclassification/changes as a result of IFRS adoption	Resource near-cash £'000s	Resource non-cash £'000s	Capital £'000s
A transfer to capitalise assets purchased in current year	-1,067		1,067
A transfer for assets purchased in prior years	-965	965
An increase/transfer from BIS to capitalise assets purchased in the current year			2,673
An increase in depreciation		81
New Expenditure
An increase/transfer from BIS to fund the Inward Investment conference	500
Token increase of expenditure (Increase of income £1,194k; Increase in expenditure £1,195k)	1
Technical Adjustments
Estimate Exclusion Adjustment*	486
Total Resource DEL Change	1
Total Capital DEL change			3,740
TOTAL DEL CHANGE	3,741
*  A technical adjustment under vote accounting rules to ensure voted DEL (either Resource or Capital) is not reduced from its previously voted position.

  The UKTI's Spring Supplementary Estimate for 2009-10 seeks the necessary resources and cash for its programme and capital Vote. UKTI's administration costs are met from within the resources of the Department for Business, Innovation & Skills (BIS) and the Foreign & Commonwealth Office (FCO) and consequently any changes related to Administration costs are shown in the BIS and FCO Spring Supplementary Estimates.

  An explanation of key terms used in the memorandum is provided in the glossary of key terms located at the end of this memorandum.

FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS

  The adoption of IFRS is the most significant change in financial reporting in the UK public sector since the adoption of resource accounting. All departments must now prepare their accounts in line with International Financial Reporting Standards (as applicable to Central Government) and reflect changes arising in this Spring Supplementary.

  The impact on UKTI is that expenditure previously classified or treated as off-balance sheet under UK GAAP is now required under IFRS to be on the balance sheet. This includes expenditure which lay within UKTI Programme and BIS Administration. This results in an internal switch of £1,067,000 from UKTI's resource DEL to Capital DEL and the transfer of £2,673,000 from BIS, with the relevant depreciation cover of £81,000.

SUMMARY OF THE MAIN SPENDING CONTROL FIGURES CONTAINED IN THE ESTIMATE VOTED PROVISION

Voted Provision

  The Supplementary Estimate provides for a 3.9% increase in net Voted resource:

Resource and Capital DEL	Change Voted	Change Non-Voted	Total Increase £'000s
Resource DEL	1	—	1
Total Resource DEL	1	—	1
Capital DEL	3,740	—	3,740
Total Capital DEL	3,740	—	3,740
TOTAL DEL	3,741	—	3,741

The Net Cash Requirement

  The Net Cash Requirement (NCR) has increased by £4,174,000 from £97,003,000 to £101,177,000. As the table below shows, this is mainly due to IFRS changes and the settlement of creditors; in relation to prior year spend.

Net Cash Requirement	Increase/ Reduction £'000s
Resource DEL:
IFRS change, transfer to capital DEL	-1,067
IFRS change, increase in depreciation	81
Transfer from BIS	500
Estimates exclusion adjustment	486
Token increase	1
Capital DEL:
IFRS change, transfer from UKTI Resource	1,067
IFRS change, transfer from BIS Admin	2,673
Depreciation	-1,046
Decrease in Creditors	1,479
TOTAL NET CASH REQUIREMENT INCREASE	4,174

Budgetary data

  The effect of the Vote changes on UKTI resource is as follows:

Total Departmental Expenditure Limit (TDEL) increases by £3,741,000

Of which:

Near-cash in RDEL due to token increase £1,000

Capital DEL due to IFRS change increase £3,740,000.

  There is also an increase in gross expenditure offset by increased appropriations-in-aid arising from income generated from UKTI chargeable services being higher than forecast in the Main Estimate. This entails a net change in RDEL of £1,000, as a token increase. This token transfer is required to allow Parliament to affect the changes sought by UKTI. This is shown in the following table:

Resource DEL	Increase/ Reduction £'000s
Increase in Appropriations-in-Aid due to take-up of UKTI's chargeable services being higher than expected in the Main Estimate	-1,194
Increase to UKTI's Gross Resource DEL to off-set the increased Appropriation-in-Aid	1,195
TOTAL RESOURCE DEL INCREASE	1

Detailed explanation of changes in provision sought in the Supplementary Estimate, and implications for budgets

Description Movements in provision related to Resource DEL	Amount £'000's
A transfer to capitalise assets purchased in current year due to IFRS changes	-1,067
An increase in depreciation due to IFRS changes	81
An increase/transfer from BIS to fund the inward investment conference	500
An increase as a result of the Estimate Exclusion Adjustment	486
An increase of a token £1,000 to allow the increase in Appropriations-in-Aid (increased income of £1,194,000, increased expenditure of £1,195,000)	1
Movements in provision related to Capital DEL
An increase due to IFRS changes	1,067
An increase/transfer from BIS to capitalise assets purchased in the current year	2,673
TOTAL RESOURCE DEL CHANGE	3,741
Movements, neutral in provision
Gross expenditure offset by increased appropriations-in-aid arising from income generated from UKTI chargeable services being higher than forecast in the Main Estimate	+1,194

Departmental Expenditure Limit

  This Supplementary Estimate will result in an overall increase in Resource DEL of £1,000.

  Capital DEL increases by £3,740,000. Details of DEL in Estimates are:

Resource DEL	Voted	Non-Voted	Total £'000's
Main Estimate	96,362	—	96,362
Spring Supplementary Estimate	96,363	—	96,363
Capital DEL
Main Estimate	248	—	248
Spring Supplementary Estimate	3,988	—	3,988
REVISED TOTAL DEL*	100,351	—	100,351
*  Depreciation, which forms part of RDEL, is excluded from total DEL since CDEL include capital spending and to include depreciation of those assets would lead to double counting.

  The only significant movement in DEL Budget is due to IFRS of £3,740,000.

FINANCIAL PERFORMANCE

  The table below compares final outturn from 2004-05 onwards with planned DEL for the previous and current years. These figures are available from the relevant UKTI Accounts:

Year	Voted	Non-Voted	Total	Outturn	Variance
Resource	£'000s	£'000s	£'000s	£'000s	%
2005-06	100,057	—	100,057	95,374	-4.68
2006-07	95,329	—	95,329	94,088	-1.30
2007-08	89,329	—	89,329	87,807	-1.70
2008-09	91,527	—	91,527	90,927	-0.66
Capital
2005-06	248	-	248	155	-37.50
2006-07	248	—	248	176	-29.03
2007-08	248	—	248	176	-29.03
2008-09	48	—	48	28	-41.66%
These figures do not reflect retrospective IFRS adjustments

  The Resource DEL outturn for 2008-09 of £90,927,000 was an underspend of £600,000 compared to the final provision of £91,527,000 (equivalent to 0.7% of Resource DEL). The underspend was largely due to late cancellation or postponement of events and the over estimation of cost for overseas activities.

  The Capital DEL Outturn for 2008-09 of £28,000 compares against a final provision of £48,000. This large variation was due to UKTI continuing to utilise its asset base efficiently.

DEL END-YEAR FLEXIBILITY

	Resource £'000s	Capital £'000s
EYF at start of 2009-10	11,963	1,667
EYF drawn down in Winter Supplementary Estimates	—	—
EYF drawn down in Spring Supplementary Estimates	—	—
Current EYF balance	11,963	1,667

  This Supplementary Estimate will not draw down any EYF. The stock of EYF arose due to the managed planned reductions in resource resulting in a limited underspend over a number of years.

Administration Budget

  UKTI's Vote does not include Administration provision, which is included in the Estimates for our parent departments, BIS and FCO. UKTI Spring Supplementary Estimate includes a transfer from BIS Administration to UKTI Capital of £2,673,000 as a result of IFRS changes.

Provisions

  UKTI does not have any provisions.

Contingent Liabilities

  UKTI does not have any contingent liabilities.

Approval of Memorandum

  This memorandum has been prepared with reference to guidance in the Supply Estimates: a guidance manual provided by HM Treasury. The information in this memorandum has been approved by Sir Andrew Cahn, KCMG, the departmental Accounting Officer.

Annex B

SPRING SUPPLEMENTARY 2009-10 WRITTEN STATEMENT

  The statement below follows the format guidance as set out in Supply Estimates: a guidance manual, available on the HMT website.

Subject to parliamentary approval of any necessary Supplementary Estimate, UKTI's total DEL (Resource and Capital) will be increased by £3,255,000 from £96,610,000 to £99,865,000. This reflects the net transfer of £500,000 in Voted resource from BIS's Vote to UKTI's Vote and the relevant IFRS changes. Within the total DEL change, the impact on resources and capital is set out in the following table:

	Change		New DEL		£'000
	Voted	Non-Voted	Voted	Non-Voted	Total
Resource DEL	-485	—	95,877	—	95,877
Of which:
Near-cash in RDEL	-1,531	—	94,744	—	94,744
Capital DEL
	3,740	—	3,988	—	3,988
Less Depreciation
	-1,046	—	-1,212	—	-1,212
Total DEL	2,209	—	98,653	—	98,653
Capital DEL includes items treated as resource in Estimates and accounts but which are treated as Capital DEL in budgets.
Depreciation, which forms part of resource DEL, is excluded from total DEL since Capital DEL includes capital spending and to include depreciation of those assets would lead to double counting.

  UKTI's Vote does not include Administration provision, which is included in the Estimates of our parent departments, BIS and FCO.

  The change in the resource element of Departmental Expenditure Limit (DEL) sought in this Supplementary Estimate relate primarily to:

— A decrease of £1,067,000 to allow more cover in capital due to IFRS.

— An increase of £81,000 to allow for depreciation cover due to IFRS.

— An increase of £500,000 as a result of the BIS transfer to UKTI for the inward investment conference.

— An increase of £486,000 as a result of the Estimate Exclusion Adjustment.

— An increase of a token £1,000 to allow the increase in Appropriations-in-Aid.

  The change in the capital element of DEL sought in this Supplementary Estimate relate primarily to:

— An increase of £1,067,000 due to IFRS.

— An increase of £2,673,000 transferred from BIS due to IFRS changes.

UK Trade & Investment

February 2010

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Prepared 21 March 2010