Estimates Memorandum 2009-10 submitted
by HM Treasury
INTRODUCTION
The Estimate covers the administration costs
of the core Treasury, the Debt Management Office and the Office
of Government Commerce. Programme spending on coinage and cost
of capital charges for the Treasury's investments in the Bank
of England and the Royal Mint are also included. These are continuing
functions from previous years. The Estimate features a structural
change involving the movement of the OGC spending from RfR 3 to
RfR 1 and the creation of a new RfR 3 to cover Financial
Stability spending including running costs of UKFI, TIFU and on
the Asset Protection scheme; on Northern Rock, Bradford &
Bingley (B&B) and any recapitalisations. An explanation of
key terms used in the Memorandum is provided at Annex A.
SUMMARY OF
RESOURCES SOUGHT
IN THE
MAIN ESTIMATE
Summary of the main indicators sought in the Estimate
The Main Estimate provides for a:
Net Resource Requirement (NRR) of £ 1,883,647,000 and;
a Net Cash Requirement (NCR) of £ 35,248,862,000.
RfR1 £ 325,797,000
RfR2 £ 52,500,000
RfR3 £ 1,505,350,000
Budgetary data
The key budgetary figures are:
|
| Resource Departmental Expenditure Limit (DEL)
| £ 215,747,000 |
|
| of which: | |
| near cash is | £ 216,662,000
|
| Administration budget is | £ 165,145,000
|
| DEL Capital budget is | £ 781,942,000
|
| Annually Managed Expenditure (AME) |
£ 1,692,375,000 |
| AME Capital budget | £33,723,000,000
|
|
| Detail by Section within the Part II table of the Main Estimate (Net resource spend in brackets)
|
Request for resources (RfR) 1, HM Treasury/Debt Management
Office/Office of Government Commerce (£325,797,000)
Section A—funding covers the administrative costs of
the Treasury's core business, formulating and implementing the
Government's financial and economic policies, and Group shared
services. It also covers core Treasury programme costs including
the printing of Budgets and Estimates, cost of capital charges
on the Treasury's investment in Partnerships UK, conferences and
spending in connection with a pilot scheme on the provision of
generic financial advice. (Net resources for Section A: £130,409,000).
Capital expenditure of £3,800,000 is principally on
IT equipment.
Section B—covers running costs of the United Kingdom
Debt Management Office (DMO). The DMO is an executive agency of
the Treasury specialising in the provision of policy advice on
and the delivery of the government's financing needs and acts
as a key gateway for government to the wholesale financial markets.
It performs these functions primarily to support HM Treasury's
objective of maintaining sound public finances. The DMO also incorporates
the Public Works Loan Board (PWLB) and the Commissioners for the
Reduction of the National Debt (CRND), and provides operational
services for the Treasury, other government departments and the
Bank of England. (Net resources for Section B: £10,395,000).
Capital expenditure of £1 million largely relates to
IT infrastructure.
Section C— covers the running costs of the Office of
Government Commerce—an independent office of the Treasury.
Its role is to drive value for money improvements in public procurement
and estates management in central government, improve delivery
of programmes and projects across government and deliver sustainable
procurement and sustainable operations on the government estate.
Spending covers OGC administration costs and other current costs
for the management and disposal of the surplus civil estate. (£24,993,000).
Section D—cost of capital charges (non-cash) on the
Treasury's investment in the Bank of England (£160,000,000).
The actual charge will be calculated at a rate based on the target
rate of return agreed between the Treasury and the Bank (6%),
applied to the average value of the Bank's net assets over the
year.
RfR 2, UK coinage (£52,500,000)
Section A—for the manufacturing and distribution of
UK coinage by the Royal Mint (£20,000,000).
Section B—cost of capital charges (non-cash) on the
manufacturing element of the Treasury's coinage stock held by
the Royal Mint (£125,000).
Section C—cost of capital charges (non cash) on the
Treasury's investment in the Royal Mint (£2,800,000)
Section D—covers the cost of metals used in the production
of UK coinage (£29,400,000).
Section E—cost of capital charges (non-cash) on the
metal element of the Treasury's coinage stock held by the Royal
Mint (£175,000).
RfR 3, Financial Stability (£1,505,350,000)
Section A—covers the running costs of United Kingdom
Financial Investments Limited (£5,350,000).
Section B—covers capital payments by the Infrastructure
Finance Unit Limited in respect of PFI projects (£775,000,000).
Section C—covers the cost of capital charge (non-cash)
on financial investments in financial organisations (£1,500,000,000).
Section D —Financial assistance to financial organisations
other than Northern Rock, including payments in respect of Royal
Bank of Scotland and working capital loans to B&B (£18,723,000,000).
Section E—Refinancing payments to Northern Rock, including
loans and working capital loans (£15,000,000,000).
EXPLANATION OF
SIGNIFICANT CHANGES
MADE SINCE
THE 2008-09 ESTIMATES
|
| Net resource requirement: | 2009-10
| £1,883,647,000 |
| 2008-09
| £21,068,184,000 |
|
The main change since the presentation of the 2008-09 Main
Estimate is the coverage of RfR 3. In previous years the RfR covered
OGC spending but this has now been subsumed into RfR 1 bringing
together all of the Treasury's administration budget spending
within one RfR. RfR 3 now covers financial stability including
the running costs of United Kingdom Financial Investments, payments
to Northern Rock and B&B and the costs of capital charge on
investments in financial institutions.
The Main Estimate total is 91% lower than total provision
for last year. This is principally due to last year's Estimate
including impairments on the department's financial investments.
Forecast resource outturn for the 2008-09 Estimate shows
an over spend of approximately £30 billion against the
total provision voted in the Revised Spring Supplementary Estimate.
This overspend arises from the inclusion of a provision for losses
of approximately £30 billion in relation to financial
stability measures consistent with the estimate given in Box 2.3 of
the Economic and Fiscal Strategy Report. The accounting requirement
to include this non-cash provision came to light too late for
inclusion in the Treasury's Revised Spring Supplementary Estimate.
The department has a Departmental Unallocated Provision (Resource
DEL budget cover) of £3,631,000 for 2009-10.
|
| Net cash requirement: | 2009-10
| £35,248,862,000 |
| 2008-09
| £89,236,052,000 |
|
The large decrease in 2009-10 in the cash requirement compared
to 2008-09 is mainly due to the large financial stability
interventions in 2008-09, including recapitalisations.
|
| Resource DEL: | 2009-10
| £215,747,000 |
| 2008-09
| £221,624,000 |
|
The reduction in Resource DEL compared with the previous
year reflects the CSR settlement, as adjusted for subsequent inter-departmental
transfers.
|
| Administration budget: | 2009-10
| £ 165,145,000 |
| 2008-09
| £ 169,543,000 |
|
The reduction in the administration budget reflects the impact
of the CSR settlement, as adjusted for subsequent inter-departmental
transfers.
|
| Capital DEL: | 2009-10
| £781,942,000 |
| 2008-09
| £7,021,000 |
|
The increase in Capital DEL reflects the Infrastructure Finance
Unit funding comprising a transfer of £5,250,000 to
HM Treasury from DEFRA and DEL Reserve claims totalling £769,750,000,
offset by a small reduction reflecting the CSR settlement. The
capital DEL figure includes a DUP of £2,142,000.
|
| Capital AME: | 2009-10
| £33,723,000,000 |
| 2008-09
| £89,902,455,000 |
|
The figures for 2009-10 reflect reduced costs of financial
stability interventions compared to those made in 2008-09.
THE TREASURY
GROUP'S
2004 SPENDING REVIEW
(SR2004) PUBLIC SERVICE
AGREEMENT (PSA)
A report on progress against the Treasury Group's PSA targets
will be published in the 2009 Annual Report and Accounts,
due to be published before the summer Recess.
DEPARTMENTAL EXPENDITURE
LIMIT (DEL)
The table below compares outturn from the last few years
with planned DEL budgets for the future.
|
| | |
| £'000s
|
| OUTTURN
| PLANS |
| 2007-08
| 2008-09* | 2009-10
| 2010-11 |
|
| Resource DEL | 200,805
| 206,723 | 215,747
| 205,049 |
| o/w Near cash | 199,195
| 209,974 | 216,662
| 205,159 |
| o/w Non-cash | 1,610
| (3,251) | (915)
| (905) |
| Capital DEL | -904
| 3,783 | 781,942
| 6,700 |
| less Depreciation** | (5,932)
| (7,489) | (7,915)
| (8,800) |
| TOTAL DEL | 193,969
| 203,017 | 989,774
| 202,154 |
|
*Provisional outturn.
** Depreciation, which forms part of RDEL, is excluded from total DEL since CDEL includes capital spending and to include depreciation of those assets would lead to double counting.
|
The DEL plans figures are consistent with the 2007 CSR
settlement after taking account of various inter-departmental
transfers that have taken place since the settlement.
END YEAR
FLEXIBILITY (EYF)
The 2008-09 EYF stock for HM Treasury was reported in
the Public Expenditure Outturn White Paper 2007-08 (PEOWP)
(Cm 7419). There has been no draw down of EYF or any other changes
to the entitlements since publication of PEOWP.
|
| | |
| | | £'000
|
| Admin
| Other
resource
| TOTAL
Resource | of which:
near cash
| non-cash | Capital
|
|
| PEOWP Cm 7419 July 2008 | 70,110
| 131,526 | 201,636
| 201,636 | -
| 72,616 |
| Winter supp | -
| - | -
| - | -
| - |
| Spring supp | -
| - | -
| - | -
| - |
| Balance of EYF at 31 March 2009 | 70,110
| 131,526 | 201,636
| 201,636 | -
| 72,616 |
|
The department's current 2008-09 provisional outturn
indicates that EYF entitlements will be increased by underspends
of £14.901 million resource DEL and £3.238 million
capital DEL. It has been agreed that, provided the Treasury can
demonstrate need, the department can access up to £20 million
in resource EYF in 2009-10 to fund the increased workload
brought about by financial stability issues. The need for EYF
draw down in 2009-10 will be assessed later in the year in
the light of forecasts of spending by the Treasury group as a
whole.
ADMINISTRATION BUDGET
A comparison with earlier years (outturn) and plans is set
out below.
|
| | |
| £'000
|
| OUTTURN
| PLANS |
| 2007-08
| 2008-09* | 2009-10
| 2010-11 |
|
| Administration budget | 159,870
| 158,286 | 165,145
| 161,335 |
|
*Provisional outturn.
2008-09 outturn is based on provisional figures net of £12 million of income paid to the Consolidated fund. Excluding this, outturn would be £168 million.
|
PROVISIONS
|
| | |
| £'000
|
| Provisions for liabilities and charges
| Early
departures
| Surplus
leasehold
property
| Other | Total
|
|
| Estimated balance at 1 April 2009 |
7,300 | 6,900
| 30,000,000 | 30,014,200
|
| Provided in year at Main Estimate | 0.0
| 0.0 | 0.00
| 0.0 |
| Provision expected to be used in year | 2,400
| 400 | 0.00
| 2,800 |
| | |
| |
| Estimated balance at 31 March 2010 |
4,900 | 6,500
| 30,000,000 | 30,011,400
|
|
In addition to provisions there are liabilities arising from
commitments to pay out fixed term depositors of Kaupthing Singer
& Friedlander, Icesave and London Scottish bank that will
be met in 2009-10. These are included in the "Use of provisions"
figure shown in "Part II: Resource to cash reconciliation".
CONTINGENT LIABILITIES
The contingent liabilities note in the Main Estimate covers
contingent liabilities outstanding at the date of finalisation
of the Estimate. The list includes the following changes and additions
since the equivalent note in the Spring Supplementary Estimate:
— New liabilities in respect of Dunfermline Building
Society covering Treasury guarantees to underwrite Bank of England
losses in connection with the social housing portfolio and underwrite
any losses the Bank might incur through managing the working capital
facility;
— New liabilities concerning B&B continuing to operate
above the minimum regulatory capital requirements and indemnities
provided by B&B for its new directors against liabilities
and losses incurred in the course of their actions;
— New liability to pay compensation in respect of Dunfermline
Building Society in the event that an independent valuer determines
that compensation is payable to certain parties;
— Changes to the levels of liabilities for the asset
purchase scheme (up from £50 million to £150 million)
and asset protection scheme (up from unquantifiable to £457 billion).
The background to these changes were included in FSBR Box C4;
and
— Small changes to the levels of liability in respect
of Northern Rock's back-up liquidity facility and the guarantee
arrangements for certain wholesale borrowings and deposits with
B&B.
APPROVAL OF
MEMORANDUM
This Memorandum has been prepared with reference to guidance
in the Estimates Manual provided by HM Treasury and that
found on the House of Commons, Scrutiny Unit website. The information
in this memorandum has been approved by the department's Finance
Committee.
GLOSSARY OF
KEY TERMS
Departmental Expenditure Limit (DEL)
This is spending within the Department's direct control and
which can therefore be planned over an extended period, such as
the costs of its own administration, payments to third parties,
etc.
Annually Managed Expenditure (AME)
AME spending is generally less predictable and controllable
than expenditure in DEL.
Request for Resources (RfR)
A Request for Resource is a function based description of
the organisational level of the department. These can vary between
one or more RfR and should be objective—based, referring
to the purpose for which the functions being carried out by the
department are intended to meet.
Subheads and Sections
Subheads and sections are lines within RfRs that detail the
functions that the department is carrying out in pursuit of its
objective. For example, subhead A1 is frequently "Administration"
in many departmental Estimates.
Departmental Unallocated Provision (DUP)
A contingency reserve, which the department accesses, where
necessary, by means of a Supplementary Estimate.
End of Year Flexibility (EYF)
A mechanism that enables the Department to plan the use of
resources over Spending Review years and therefore carry forward
unspent provision in the Departmental Expenditure Limit (DEL)
in one year to subsequent years.
Voted and Non-Voted
Voted expenditure is that which has gone through the Supply
Estimates process. Non-voted, as its description suggests, has
not been through this process. It usually refers to expenditure
that comes from another source eg consolidated fund standing services.
December 2009
|
