DR 338: Written evidence from Keith Luck, Finance Director General, Foreign & Commonwealth Office

 

 

Main Estimate 2009-10 Memorandum for the Foreign Affairs Committee

Introduction

1. The Foreign and Commonwealth Office Estimate has two Requests for Resources (RfRs):

· RfR 1: Promoting internationally the interests of the UK and contributing to a strong world community, that covers:

· Section A: Expenditure by the Foreign and Commonwealth Office (FCO), including UK Trade and Investment, on its administration, FCO Services, Wilton Park Executive Agency, hospitality and facilities; international organisations; grants in aid to bodies supporting FCO objectives; scholarships, information services and sponsored visits; special payments and assistance programmes to support foreign policy objectives including human rights, good governance, international security and the fight against the illicit drug trade; and international organisations; and on associated non-cash items.

· Sections B and C: Resource grant in aid to the BBC World Service for broadcasting and to the British Council, respectively;

· Sections D and E: Capital grant in aid to the BBC World Service for broadcasting and to the British Council, respectively.

· Section F: AME Provision for impairments; and

· Section G: The refund of certain taxes and duties paid by certain Foreign and Commonwealth governments.

· RfR 2: Conflict prevention, that covers:

· Section A: Expenditure by the Foreign and Commonwealth Office on conflict prevention, early warning, crisis management, conflict resolution/peacemaking;

· Section B: Peacekeeping and peace building activity and on associated strengthening of international and regional systems and capacity; and

· Section C: Provision of specialist, targeted assistance in countries emerging from violent conflict.

RfR1 Main Estimates Changes

Machinery of Government transfer of the Science and Innovation Network to DIUS

2. There is a machinery of Government change comprising of £150,000 administration costs transfer to DIUS in respect of running the overseas elements of the Science and Innovation Network

Budget cover transfers

3. There is a £1,122,000 transfer of other current from DIUS offset by a transfer of £500,00 other current to DIUS as part of the re-allocation of responsibilities for the Science and Innovation Network that were not included in the Machinery of Government change as they do not cover permanent staff transfers; a £500,000 transfer of other current from MOD for the Foreign Secretary's overseas travel costs; a £45,000 transfer of administration to the Office of Government Commerce for Sustainable Procurement; a £40,000 transfer of other current to the Cabinet Office for the Government Secure Zone; a £40,000 transfer on behalf of the British Council of other current to the Cabinet Office for the Government Secure Zone and a £18,000 transfer of administration to DIUS for the FCO's contribution to the Skill's Strategy.

RfR2 Main Estimates Changes

4. As discussed in previous correspondence with the FAC we have updated the sub-head structure of RfR2 to reflect the merger of the Global and Africa Conflict Prevention Pools and the Peacekeeping Pools in the Comprehensive Spending Review.

5. Subsequent to this the FS issued a Written Ministerial Statement on the 25 March, announcing arrangements for conflict funding in 2009/10. DFID, FCO and MOD have set aside £627 million for conflict funding in 09/10, £171 million of which is for discretionary conflict activity. This will fund all discretionary conflict prevention, stabilisation and Peacekeeping activity. It will be managed through five strategies: the SAF Afghanistan and CPP South Asia programmes have been merged; so too the SAF Iraq and CPP Middle East and North Africa programmes. A new Wider Europe programme funds activity in Russia/Commonwealth of Independent States and the Balkans (previously individual programmes). The Africa programme continues. A separate programme has been earmarked for thematic work, including support to international institutions. The Strategies continue to be managed tri-departmentally.

6. Expenditure is added to by other pool partners through transfers between Departments in Main and Supplementary Estimates. The effect of the transfers between pool partners to the 2009-10 FCO Main Estimates is a net increase of £418,000,000. Of the above amounts we have taken on £350,000,000 for Peacekeeping (Section B), £40,000,000 for Conflict Prevention (Section A) and £28,000,000 for the Stabilisation Aid Fund (Section C).

Reconciliation of 2009-10 Main Estimates to SR2004 Outcome

7. The Comprehensive Spending Review 2007 settlement showed the FCO Resource Budget for 2009-10 as £1,608,000,000 and the capital budget as £216,000,000. Since October 2007 there have been a small number of changes to the FCO's Departmental Expenditure Limits (DELs) which bring the current Resource DEL figure for 2009-10 to £2,028,888,000 and the Capital DEL to £216,060,000. The tables below show the main changes and reconcile the DELs with the Main Estimates figures.

 

Table 1 Resource	2009-10
Resource DEL Baseline from CSR 2007 (£m)	1,608.000
Changes to Resource DEL (Chronological Order)
Changes effected in Main Estimates 2009-10
Machinery of Government transfer from MoD for Defence Export Sales	2.059
Reserve claim for Peacekeeping	350.000
Transfer from DFID for Conflict Prevention	40.000
Transfer from MoD for Sustainability Aid Fund (SAF)	28.000
Transfer from MOD for FS travel	0.500
Machinery of Government transfer from DIUS for Science and Innovation Network	0.472
Transfer to Cabinet Office for Government Secure Zone	-0.080
Transfer to Office of Government Commerce for Sustainable Procurement	-0.045
Transfer to DIUS for Skill's Strategy	-0.018
Resource DEL at 1 April 2009	2,028.888
Difference Between Resource DEL and Main Estimate
Remove non-Voted Expenditure in the OCS (Common Foreign Security Policy)	-3.000
Include BBCWS Capital Grant from Capital DEL (Resource in Estimates)	31.000
Include British Council Capital Grant from Capital DEL (Resource in Estimates)	7.800
Include International Subscriptions Capital Grant from Capital DEL (Resource in Estimates)	22.500
Include Voted expenditure outside budgets (Reimbursement of certain duties, taxes and licence fees)	18.000
Remove unallocated resource provision (DUP)	-17.000
Include Voted AME (impairments)	20.000
2009-10 Main Estimate Resource Total	2,108.188
Table 2 Capital	2009-10
Capital DEL Baseline from CSR 2007 (£m)	216.000
Changes to Capital DEL
Machinery of Government transfer from MoD for Defence Export Sales	0.060
Capital DEL at 1 April 2009	216.060
Difference Between Capital DEL and Main Estimate
Remove BBCWS Capital Grant from Capital DEL (Resource in Estimates)	-31.000
Remove British Council Capital Grant from Capital DEL (Resource in Estimates)	-7.800
Remove International Subscriptions Capital Grant from Capital DEL (Resource in Estimates)	-22.500
2009-10 Main Estimate Capital Net Total	154.760

Departmental Expenditure Limit (DEL) & Administration Budgets

8. The tables below show a comparison of the 2009-10 DEL (Table 3 and 3a) and Administration (Table 4) budgets with the 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 outturn, the forecast for 2008-09 and plans for 2009-10 and 2010-11.

9. Table 3a shows outturn on the definition of DEL used in the year concerned in order to be consistent with published Departmental Expenditure Limits. They do not therefore correspond to the outturns in Table 3 that are on a consistent basis year on year, including reclassification by Treasury of expenditure across all years of the Public Expenditure cycle.

Table 3 DEL Comparison
	2003-04	2004-05	2005-06	2006-07	2007-08	2008-09	2009-10	2010-11
	Actual	Actual	Actual	Actual	Actual	Forecast	Budget	Plans
Resource DEL 1,2	1,512.728	1,718.120	1,878.691	1,836.554	1,877,548	2,077.551	2,028.888	1,600.489
Capital DEL	86.671	116.676	131.842	160.314	226.377	216.060	216.060	205.060
Less Depreciation 1,3	64.060	67.156	108.725	81.555	73.220	85.050	103.050	100.050
Total	1,535.339	1,767.640	1,901.808	1,915.313	2,030.705	2,208.561	2,141.898	1,705.499

¹Figures for all years reflect the reclassification of impairment expenditure from DEL into AME.

² Resource DEL figures from 2009-10 onwards are understated because they do not include all of the conflict prevention expenditure, which will be subject to a Reserve claim and transferred at the time of the 2009-10 Supplementary Estimates. In addition 2005-06 included expenditure on a number of one off items (Tsunami expenditure, Efficiency Challenge Fund & G8 & EU presidencies).

³ Depreciation, which forms part of Resource DEL, is excluded from the total DEL, since Capital DEL includes the purchase cost of capital assets. To add on the depreciation of those assets would double count their cost.

 

Table 3a Previous years' expenditure against Departmental Expenditure Limits £m
Year	Voted	Non-voted	Total DEL	Outturn1	Variance
Resource
2004-05	1,607.192	209.690	1,816.882	1,736.188	80.694
2005-06	1,999.224	6.713	2,005.937	1,916.190	89.747
2006-07	1,924.913	44.213	1,969.126	1,852.024	117.102
2007-08	1,950.523	5.862	1,956.385	1895.961	60.424
Forecast outturn 2008-09	2,074.701	3.000	2077.701	2077.701	0
Capital
2004-05	101.533	1.000	102.533	71.236	31.297
2005-06	135.697	1.000	136.697	92.959	43.738
2006-07	157.779	1.000	158.779	160.747	-1.968
2007-08	243.567	-	243.567	227.973	15.594
Forecast outturn 2008-09	216.060	-	216.060	230.060	-14.000
1 Outturn in is based on the definition of DEL in the relevant year and so is not consistent with the outturn in Table 3 that includes subsequent classification changes effective across all years.

 

Table 4 Administration Budget Comparison £m
	2003-04	2004-05	2005-06	2006-07	2007-08	2008-09	2009-10	2010-11
	Actual	Actual	Actual	Actual	Actual	Forecast	Plans	Plans
Administration budget	375.811	405.345	399.781	393.051	367.358	430.367	420.345	397.214

¹Figures for all years reflect the reclassification of impairment expenditure from DEL into AME.

Departmental Unallocated Provision (DUP) 2009-10

10. At the time of the Main Estimate, the FCO has £17,000,000 of unallocated resource.

Table 5 2009-10 Departmental Unallocated Provision	Resource	Capital
RfR1 DUP to met unforeseen requirements arising in-year	£17.0m	£0.0m
Total	£17.0m	£0.0m

 

11. The DUP will be used to meet unforeseen pressures such as unfavourable currency exchange rate changes since CSR 2007.

Changes in Accounting Policies

12. We are adopting hedge accounting in respect of forward purchase of foreign currency.

 

End Year Flexibility (EYF)

13. The Public Expenditure Outturn White Paper published in July 2008 showed a total figure of £171.931 million for carry forward of underspend into 2009-10 under the DEL EYF scheme.

14. We intend to spend resource EYF carried forward into 2009-10 on restructuring and any capital EYF on our ongoing programme to increase the security and safety of our Estate and the people using it.

 

 

Table 5 Accumulation of EYF £m	Administration	Programme	Total Resource	Of which near cash	Capital	Total
Total FCO EYF Entitlement in Public Expenditure Provisional Outturn July 2008 (table 6 - Cm 7419)	58.559	96.538	155.097	120.383	16.834	171.931
EYF drawn down in Winter Supplementary	-	-	-	-	-	-
EYF drawn down in Spring Supplementary	-	17.300	17.300	17.300	-	17.300
BALANCE OF ACCUMULATED END YEAR FLEXIBILITY GOING INTO 2009-10	58.559	79.238	137.797	103.083	16.834	154.631

 

Public Service Agreements

15. Full details of the FCO's Public Service Agreements for 2009-10 will be published in the 2008-09 Departmental Report.

 

 

15 May 2009