Winter Supplementary Estimates Memorandum
2009-10 submitted by HM Treasury
This memorandum provides details of changes
sought in the Treasury's Winter Supplementary Estimate for 2009-10 published
in "Central Government Supply Estimates" 2009-10: Winter
Supplementary Estimates' HC 24. Further details of the work of
the Treasury and its finances can be found in the "HM Treasury
Annual Report and Accounts 2008-09" HC 611. Supply Estimates
and the Treasury"s Departmental Report are available from
http://www.hm-treasury.gov.uk
2. The purpose of this memorandum is to provide
the select committee with an explanation of how the resources
and cash sought in the Winter Supplementary Estimate will be applied
to achieve departmental objectives and Public Service Agreement
(PSA) targets. This includes information on comparisons with the
resources provided in earlier years in Estimates and departmental
budgets.
SUMMARY OF
THE CHANGES
SOUGHT IN
THE ESTIMATE
3. The Estimate seeks an increase of £20,819,000 in
net resources and an increase of £17,795,819,000 in
the net cash requirement. The increase in resources is the net
effect of take up of Administration Budget EYF, draw down of the
balance of our administration Departmental Unallocated Provision
(DUP) and programme DUP. The increase in the net cash requirement
comprises the near cash consequences of the net resource increase
above plus capital payments to RBS and Lloyds as a result of involvement
in the Asset Protection Scheme, and the taking up of the Government's
share of the rights issue respectively.
DETAILED EXPLANATION
OF THE
CHANGES BEING
SOUGHT
Request for Resources 1: Maintain sound public
finances and ensure high and sustainable growth, well being and
prosperity for all.
4. The increase in resources is the net effect
of the following:
Take up of DEL End Year Flexibility (EYF)
5. There is an increase of £15,000,000 in
Section A covering the administrative and programme costs of the
Treasury's core business. The increase is to fund the increased
workload arising from financial stability work.
Movements between RfRs
6. There is an increase of £2,000,000 programme
DEL in Section A. The increase is to finance increased costs associated
with financial stability workload pressures and the Money Guidance
pilot project. The increase is offset by a reduction in Section
A of RfR 2 covering spending on the manufacture of coinage
which is forecast to be lower than originally planned at the time
of the Main Estimate.
Departmental Unallocated Provision
7. There is a draw down of administration
DUP of £1,531,000 and £2,100,000 for programme
DUP to fund increased spending in Section A in connection with
financial stability (administration) and spending on financial
inclusion (programme) for core Treasury.
Changes in forecasts—AME
8. The adoption of International Financial
Reporting Standards means that employee benefits must now be accounted
for in the Estimate. A new Section E has been introduced with
provision of £2,188,000.
REQUEST FOR
RESOURCES 2: COST-EFFECTIVE
MANAGEMENT OF
THE SUPPLY
OF COINS
AND ACTIONS
TO PROTECT
THE INTEGRITY
OF COINAGE
9. The reduction in resources is the net effect
of the following:
Changes due to revised forecasts of requirements—DEL
10. The forecast for the cost of the manufacturing
element of coinage production is forecast to be in the region
of £18,000,000. The resulting reduction in existing provision
of £2,000,000 programme costs is being reallocated to
RfR 1.
REQUEST FOR
RESOURCES 3: PROMOTING
A STABLE
FINANCIAL SYSTEM
AND OFFERING
PROTECTION TO
ORDINARY SAVERS,
DEPOSITORS, BUSINESSES
AND BORROWERS
11. The increase in capital AME of £17,775,000,000 is
required for the following:
(i) RBS has agreed to participate in the Asset
Protection Scheme and as a result the Government has agreed to
inject £25,500,000,000 in additional capital. The Treasury's
Main Estimate already includes £13,000,000,000 for RBS
recapitalisation and the Winter Supplementary Estimate includes
the balance of £12,500,000,000.
(ii) It was agreed that Lloyds would not participate
in the APS but raise additional private sector capital through
a rights issue and issuance of contingent convertibles ("cocos").
The Government, as a Lloyds shareholder, will take up its share
of the rights issue resulting in a gross payment of £5,900,000,000.
12. There is a reduction in capital DEL in Section
E covering capital payments by Infrastructure Finance Unit Limited
in respect of PFI projects, PPP projects and other infrastructure
projects approved by HM Treasury. Following a revised forecast
of requirements for the remainder of the year, Estimate provision
and the department's capital DEL has been reduced by £625,000,000.
THE NET
CASH REQUIREMENT
13. The increase in the net cash requirement
amounts to £17,795,819,000 and arises from the changes
outlined in paragraphs 6 to 12 above.
CONSOLIDATED FUND
EXTRA RECEIPTS
(CFERS)
14. The forecast of operating CFERs has been
increased to reflect Lloyds obligation to pay an APS exit fee
of £2,500,000,000 and estimated Credit Guarantee Scheme
fees of £1,500,000,000.
IMPACT ON
THE DEPARTMENT'S
PUBLIC SERVICE
AGREEMENTS
15. The increase in capital AME of £17,775,000,000 is
to support stability in the financial services sector and is in
line with Treasury DSO outcome DSO 2(e): "Supporting fair,
stable and efficient financial markets" and with PSA 6: Deliver
conditions for business success in the UK".
DEPARTMENTAL EXPENDITURE
LIMIT
16. The Resource DEL is increasing by £15,000,000 arising
from the take up of Administration Budget EYF outlined in paragraph
5 above. There is a reduction of £625,000,000 in
Capital DEL as set out in paragraph 12 above. The following
table shows a comparison between DEL plans between 2005-06 and
2008-09 (after changes made via Supplementary Estimates)
and the outturns for those years, and the DEL for 2009-10.
COMPARISON OF EXPENDITURE AGAINST DEPARMENTAL
EXPENDITURE LIMITS £M
|
| Year | Voted
| Non-voted | Total DEL
| Outturn | Variance
|
|
| Resource | |
| | | |
| 2005-06 | 227
| 29 | 256
| 215 | -41
|
| 2006-07 | 225
| 21 | 246
| 206 | -40
|
| 2007-08 | 212
| 20 | 232
| 201 | -31
|
| 2008-09 | 201
| 21 | 222
| 200 | -22
|
| 2009-10 | 210
| 21 | 231
| | |
| Of which near cash | 200
| 31 | 231
| | |
| Capital | |
| | | |
| 2005-06 | 5 |
- | 5
| -9 | -14
|
| 2006-07 | 7 |
- | 7
| -1 | -8
|
| 2007-08 | 7 |
- | 7
| -1 | -8
|
| 2008-09 | 6 |
1 | 7
| 3 | |
| 2009-10 | 155
| 2 | 157
| | |
|
DEPARTMENTAL UNALLOCATED
PROVISION (DUP)
17. The remaining DUP of £3,631,000 has been
drawn down comprising £1,531,000 Administration Budget
and £2,100,000 programme costs, both for RfR 1 Section
A.
END YEAR
FLEXIBILITY
18. Administration Budget EYF of £15,000,000 has
been drawn down in the Winter Supplementary. The following table
shows the remaining EYF entitlements for 2009-10.
|
| | |
| | £m
|
| Administration | Other resources
| Total resource
EYF |
Of which
near cash |
Capital | Total EYF
|
|
| 65 | 137
| 202 | 202
| 77 | 279
|
|
ADMINISTRATION BUDGET
19. The Administration Budget is increasing by £15,000,000 through
take up of EYF. The following table shows a comparison between
administration budget plans between 2005-06 and 2008-09 (after
changes made via Supplementary Estimates) and the outturns for
those years, and the budget for 2009-10.
COMPARISON OF ADMINISTRATION COSTS AGAINST LIMIT
|
| | |
| | £m
|
|
| Year | Voted
| Non-voted | Total
| Outturn | Variance
|
| 2005-06 | 167
| 0 | 167
| 161 | -7
|
| 2006-07 | 167
| 1 | 168
| 160 | -8
|
| 2007-08 | 171
| 0 | 171
| 160 | -11
|
| 2008-09 | 170
| 0 | 170
| 154 | -16
|
| 2009-10 | 180
| 0 | 180
| | |
|
CONTINGENT LIABILITIES
20. The following changes have been made to the list
of contingent liabilities:
(i) The exposure arising from the guarantee arrangements for
certain retail and wholesale deposits in Northern Rock (NR) has
been reduced to £18,600,000,000;
(ii) The value of the liability arising from the back-up liquidity
facility for NR has been increased to £5,700,000,000;
(iii) The value of the liability guarantee arrangements safeguarding
certain wholesale borrowings and deposits with Bradford &
Bingley has been reduced to £10,000,000,000;
(iv) As announced, the value of the Bank of England Asset
Purchase Facility Fund has been increased to £200,000,000,000;
(v) Amendment of the narrative for the Asset Backed Securities
Scheme including the extension of the draw down period to 31 December
2009;
(vi) Amendments to the narrative and the maximum liability
of the Asset Protection scheme. The maximum liability falls to
£199,440,000,000;
(vii) Amendments to the narrative and value of the contingent
capital liability for RBS. Liability increases to £8,000,000,000;
(viii) A new unquantifiable liability in respect of the Equitable
Life Ex Gratia payment Scheme. This liability is new to the Supply
Estimate contingent liability note but was previously included
in note 27.1.3 of the department's 2008-09 accounts
;
(ix) A new unquantifiable liability arising from the guarantee
for panel members who will appoint the independent valuer under
article 4 of the Dunfermline Building Society Compensation
Scheme, Resolution Fund and Third Party Compensation Order 2009;
(x) Amendments to the narrative following the Dunfermline
Building Society Compensation Scheme Order coming into force on
7 July.
November 2009
|
