Winter Supplementary Estimate Memorandum
2009-10 submitted by HMRC
INTRODUCTION
The HMRC Winter Supplementary Estimate for 2009-10 seeks
the necessary resources and cash to support the functions of the
Department.
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 Strategic Objectives (DSOs) targets. This
includes information on comparisons with the resources provided
in earlier years in Estimates and Departmental budgets. Details
of changes in resources relative to original plans set out in
the last Spending Review are provided.
During this winter round, the changes in provision
sought in this Supplementary Estimate relate primarily to:
— £70,000,000 Resource DEL draw
down from End Year Flexibility reserves
— £42,585,000 Resource DEL and
£3,559,000 Capital DEL draw down of non-voted DUP (DEL
neutral)
— Reduction of £303,166,000 Resource
DEL and £13,081,000 Capital DEL due to the formal Machinery
of Government transfer from HMRC to the Home Office in respect
of the UK Border Agency (UKBA)
An explanation of key terms used in the memorandum
is provided as an annex.
SUMMARY OF
THE MAIN
SPENDING CONTROL
FIGURES CONTAINED
IN THE
ESTIMATE VOTED
PROVISION
The Supplementary Estimate provides a 5.38%
decrease in voted resource:
— Decrease in the Net Resource Requirement
(NRR) of£52,581,000
— Decrease in the Net Cash Requirement
(NCR) of£51,375,000
BUDGETARY DATA
The changes to key budgetary figures are:
Resource Departmental Expenditure Limit decreases
by£228,968,000
Capital Departmental Expenditure Limit decreases
by£13,081,000
The net decreases above are caused by the Machinery
of Government transfer from HMRC to the Home Office in respect
of the UK Border Agency (UKBA), for which details are given further
below.
Annually Managed Expenditure increases by£138,000,000
This is due to Child Benefit and Child Trust
Fund increases offset by a small credit in respect of Accrued
Employee Benefits (annual leave) under International Financial
Reporting Standards.
DETAILED EXPLANATION
OF CHANGES
IN PROVISION
SOUGHT IN
THE SUPPLEMENTARY
ESTIMATE, AND
IMPLICATIONS FOR
BUDGETS
|
| Amount | Description
|
|
| Movements in provision related to DEL
|
| Draw down of End Year Flexibility
|
| £70,000,000 | Draw down of EYF near cash to fund the closure of various non-strategic sites delivering this through staff redeployments, departures and other efficiency measures.
(RfR1: subhead A)
|
| Transfer of budgetary cover from the Ministry of Justice
|
| £4,198,000 | Transfer in from the Ministry of Justice of near cash programme expenditure in respect of work carried out in processing applications for leave to appeal and appeals on points of law from decisions of the Social Security and Child Support jurisdiction within the Tribunal Service in respect of National Insurance benefits.
(Non-voted DEL)
|
| Machinery of Government transfer from HMRC to the Home Office
|
| -£303,166,000 | Machinery of Government transfer from HMRC to the Home
|
| Resource | Office as part of the establishment of the UK Border Agency
|
| -£13,081,000 | (UKBA). Details are provided in a separate section further
|
| Capital | below
(RfR1 : subhead A)
|
| -£242,049,000 | Total change in provisions related to DEL
|
| Movements in provisions related to AME
|
| Child Benefits |
| £130,000,000 | Increase in AME in relation to Child Benefit requirements due mainly to higher than expected number of 16-19 year olds staying in Full Time education.
(RfR5: subhead A)
|
| Child Trust Fund |
| £10,000,000 | Increase in AME in relation to Child Trust Fund requirements due to higher projected births and other qualifying children.
(RfR5: subhead B)
|
| Tax Credits |
| £289,763,000 | Increase to AME non-voted funding in respect of Tax Credits due to higher spend on In Work claimants than anticipated.
(Non-voted)
|
| Accrued Employee Benefits |
| -£2,000,000 | Decrease in AME programme to record the movement in accrued employee annual leave as required under International Financial Reporting Standards.
(RfR1: subhead C)
|
| £427,763,000 | Total change in provisions related to AME
|
| Movements in provisions neutral in budgets
|
| Take up of Resource Departmental Unallocated Provision
|
| £42,585,000 | Draw down of non-voted DUP as voted administration near cash costs to facilitate improvements to key operational activities.
(RfR1: subhead A)
|
| Take up of Capital Departmental Unallocated Provision
|
| £3,559,000 | Draw down of non-voted DUP as voted capital costs to facilitate improvements to key operational activities.
(RfR1: subhead A)
|
| NAO Audit Fee |
| £1,780,000 | Auditors remuneration costs for work carried out on International Financial Reporting Standards and the UK Border Agency transfer, offset by a reduction to non cash provisions.
(RfR1: subhead A)
|
| £47,924,000 | Total change in provisions neutral in budgets
|
| Changes in operating appropriations-in-aid (fully offset by changes in spending)
|
| £11,000,000 | To increase the levels of administration income by £11,000,000 mainly due to pension reform work resulting from the Government's undertaking to reform the UK pensions system to deliver increased financial security for an ageing population as part of the Pensions Act 2007.
(RfR1: subhead a)
|
| £37,021,000 | To increase the levels of administration and programme income due to the UK Border Agency transitional Service Agreements. Details are provided in a separate section further below
(RfR1: subhead a)
|
| £48,021,000 | Total change in operating appropriations-in-aid
|
|
IMPACT ON
DEPARTMENTAL STRATEGIC
OBJECTIVES
Objective I:—Improve the extent to which individuals
and businesses pay the amount of tax due and receive the credits
and payments to which they are entitled.
A proportion of £42,585,000 Resource Departmental
Unallocated Provision
Draw down of non-voted DUP of £42,585,000 taken
up as voted administration near cash costs to facilitate improvements
to key operational activities.
A proportion of £3,559,000 Capital Departmental
Unallocated Provision
Draw down of non-voted DUP of £3,559,000 taken
up as voted capital costs to facilitate improvements to key operational
activities.
£70,000,000 Administration Near Cash End Year
Flexibility
Draw down of £70,000,000 EYF near cash to fund
the closure of various non-strategic sites delivering this through
staff redeployments, departures and other efficiency measures.
Objective II:—Improve customers' experience of HMRC and
improve the UK business environment.
A proportion of £42,585,000 Resource Departmental
Unallocated Provision
As detailed in Objective 1.
A proportion of £3,559,000 Capital Departmental
Unallocated Provision
As detailed in Objective 1.
Objective III:—Reduce the risk of the illicit import
and export of material that might harm the UK's physical and social
well being.
-£303,166,000 Resource Machinery of Government
transfer
Machinery of Government resource transfer of £303,166,000 from
HMRC to the Home Office as part of the establishment of the UK
Border Agency (UKBA).
-£13,081,000 Capital Machinery of Government
transfer
Machinery of Government capital transfer of £13,081,000 from
HMRC to the Home Office as part of the establishment of the UK
Border Agency (UKBA).
DEPARTMENTAL EXPENDITURE
LIMIT
This Supplementary Estimate will result in an overall reduction
in resource DEL of £228,968,000 and an overall decrease
in capital DEL of £13,081,000. The revised total DEL will
decrease by £253,820,000. Details of DEL in Estimates are:
|
| £'000s | Voted
| Non-voted | TOTAL
|
|
| Resource DEL | |
| |
| Main Estimate | 3,868,432
| 389,724 | 4,258,156
|
| Winter Supplementary Estimate | 3,677,851
| 351,337 | 4,029,188
|
| Capital DEL | |
| |
| Main Estimate | 251,155
| 3,559 | 254,714
|
| Winter Supplementary Estimate | 241,633
| - | 241,633
|
| Revised Total DEL* | 3,712,513
| 351,337 | 4,063,850
|
|
| *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 table below compares outturn from 2005-06 to 2008-09 with
planned DEL.
|
| | |
| | £ '000s
|
| Year | Voted
| Non-voted | TOTAL*
| Outturn* | Variance
|
|
| Resource | |
| | | |
| 2005-06 | 3,960,974
| 349,051 | 4,310,025
| 4,116,918 | -4.48%
|
| 2006-07 | 3,987,148
| 347,939 | 4,335,087
| 4,293,297 | -0.96%
|
| 2007-08 | 3,872,277
| 372,813 | 4,245,090
| 4,068,552 | -4.16%
|
| 2008-09 | 3,845,404
| 347,739 | 4,193,143
| 4,129,998 | -1.50%
|
| 2009-10 | 3,677,851
| 351,337 | 4,029,188
| | |
| 2010-11 | 3,765,429
| 388,074 | 3,851,918
| | |
| Capital | |
| | | |
| 2005-06 | 374,269
| 2,977 | 368,856
| 371,073 | +0.60%
|
| 2006-07 | 338,331
| 0 | 330,322
| 296,789 | -10.15%
|
| 2007-08 | 288,230
| 3,739 | 283,728
| 248,593 | -12.38%
|
| 2008-09 | 284,866
| 3,648 | 293,071
| 289,777 | -1.12%
|
| 2009-10 | 241,633
| 0 | 241,633
| | |
| 2010-11 | 244,642
| 3,472 | 237,549
| | |
|
| The Resource DEL outturn for 2008-09 of £4,129,998 represents an underspend of £63,145 compared to final provision of £4,193,143 (equivalent to—1.5% of Resource DEL). The main underspends relate to non-cash surpluses.
|
| The Capital DEL Outturn for 2008-09 of £289,777 compares against a final provision of £293,071. The underspend of £3.3 million was achieved through a surplus by the Valuation Office Agency.
|
| * Removes baseline transfer and costs associated with two machinery of government changes: Serious Organised Crime Organisation (SOCA); and the United Kingdom Border Agency (UKBA) in 2006-07 and 2009-10 respectively.
|
DEL END-YEAR
FLEXIBILITY
The 2008-09 EYF stock for HMRC was reported in the Public
Expenditure Outturn White Paper 2008-09 (PEOWP) (Cm 7606).
The breakdown below reflects the latest EYF position at the Winter
Supplementary.
|
| £'000 | Admin
Resource
| Other
Resource
| Total | of which:
Near-cash
| Non-cash | Capital
|
|
| PEOWP (July 2007) | 61,825
| 63,106 | 124,931
| 155,790 | -30,859
| 33,257 |
| Take-up in WSE | -
| 1,400 | 1,400
| 1,400 | -
| - |
| Balance of EYF after Winter/Spring Supplementaries
| 61,825 | 61,706
| 123,531 | 154,390
| -30,859 | 33,257
|
| Changes to 2006-07 outturn | 1,500
| -1,500 | -
| -30,859 | 30,859
| 2,295 |
| PEOWP (July 2008) to be added | 63,325
| 60,206 | 123,531
| 123,531 | -
| 33,257 |
| 2007-08 Underspend | 144,432
| -18,050 | 126,382
| 62,289 | -
| 31,202 |
| Reductions for virement out of Admin budgets
| -18,050 | 18,050
| - | -
| - | -
|
| Reductions for Reserve claims | -30,000
| - | -30,000
| -30,000 | -
| - |
| Other Adjustments | 299
| - | 299
| 299 | -
| - |
| 2008-09 Entitlement | 160,006
| 60,206 | 220,212
| 56,119 | 64,093
| 66,754 |
| Changes to 2007-08 outturn | -
| 47,624 | 47,624
| 47,624 | -
| - |
| 2008-09 Underspend | 62,321
| - | 62,321
| 8,053 | 54,268
| 3,614 |
| Other adjustments | 473
| 4 | 477
| 477 | -
| - |
| 2009-10 Entitlement PEOWP (July 2009) | 222,800
| 107,834 | 330,634
| 212,273 | 118,361
| 70,368 |
| Take up in WSE | -70,000
| - | -70,000
| -70,000 | -
| - |
| Balance | 152,800
| 107,834 | 260,634
| 142,273 | 118,361
| 70,368 |
|
ADMINISTRATION BUDGET
The administration budget is £3,957,886. A comparison
with earlier years (outturn) and plans is set out below.
ADMINISTRATION BUDGET (PREVIOUS YEARS)*
|
| Year | Plans
| Outturn |
|
| 2005-06 | 4,201,611
| 4,000,064 |
| 2006-07 | 4,269,918
| 4,245,702 |
| 2007-08 | 4,180,705
| 4,033,842 |
| 2008-09 | 4,124,749
| 4,055,160 |
|
| During 2005-06 an underspend was generated mainly as a result of the de-scoping and deferral of some projects following a review of our change portfolio.
|
| For 2006-07 there was a small voted underspend. An excess level of receipts was added to this, which led to the surplus.
|
| The 2007-08 underspend relates mainly to Departmental Transformation and general administration underspends, including paybill.
|
| For 2008-09 the underspend related mainly to non-cash surpluses generated by an imbalance between our near and non-cash splits created during CSR07.
|
| *Removes baseline transfer and costs associated with two Machinery of Government changes: Serious Organised Crime Organisation (SOCA); and the United Kingdom Border Agency (UKBA) in 2006-07 and 2009-10 respectively.
|
The changes to the current year's Administration Budget are:
CHANGES TO ADMINISTRATION BUDGET IN 2008-09
|
| 1 April 2009 at Main Estimate |
4,159,275 |
| Change announced in winter supplementary |
-201,389 |
| Revised Administration Budget | 3,957,886
|
|
ADMINISTRATION BUDGET (REMAINING CSR YEARS)
|
| Year | Plans
|
|
| 2010-11 | 4,056,226
|
|
MACHINERY OF GOVERNMENT CHANGES
|
| Description | RfR and
section
| Date of
transfer
| Amount £000 |
Transferring
Dept |
Receiving
Dept |
|
| Establishment of the UK Border Agency (UKBA)
| RfR1
Subhead A | 1st April 2009
| £303,166,000
Resource
£13,081,000
Capital
| HMRC | Home Office
|
|
More details follow:
MACHINERY OF
GOVERNMENT CHANGES
Legislation was passed on 21 July 2009 establishing
the UK Border Agency (UKBA). As a result, staff and other assets
are transferring from HMRC to the UKBA and funding as agreed between
HMRC and the Home Office (the UKBA parent department) is being
transferred via this Supplementary Estimate. Accounting Officer
responsibility for the functions transferring passes from Mike
Eland, Director General, HM Revenue and Customs, to the Home Office.
The funding transfers are as follows:
Administration: Staff and other running costs£271,389,000
Programme: Other running costs£31,777,000
HMRC will also be continuing to bear costs on behalf of the
UKBA for which charges will be levied. The value of these costs,
£37,021,000, is included within the total fund transfer
outlined above thereby providing cover to the Home Office for
the charges. HMRC's appropriations-in-aid limit is therefore increasing
by £37,021,000 in this supplementary, wholly
offset by an increase in expenditure which itself offsets the
£37 million reduction in HMRC funding included within
the total transfer of funds. The overall net effect is DEL neutral
and can be summarised (ignoring Capital) as follows:
|
| HMRC
| Home Office |
|
| Appropriations in Aid | -£37,021,000
| |
| Funding for charges levied |
| +£37,021,000 |
| Funding for all other expenditure | -£266,145,000
| +£266,145,000 |
| Net Resource DEL | -£303,166,000
| +£303,166,000
|
|
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 Principal Accounting
Officer of HMRC Lesley Strathie.
GLOSSARY OF
KEY TERMS
Appropriations-in-aid—income received by a department
which it is authorised to retain (rather than surrender to the
Consolidated Fund) to finance related expenditure. Such income
is voted by Parliament in Estimates and accounted for in departmental
resource accounts.
Administration Budget—a Treasury control on
the resources consumed directly by departments in providing those
services which are not directly associated with frontline service
delivery. Includes such things as: civil service pay, resource
expenditure on accommodation, utilities and services. The Administration
Budget is part of Resource DEL.
Annually Managed Expenditure (AME)—a Treasury
budgetary control for spending that is generally difficult to
control, large as a proportion of the department's budget, and
volatile in nature
Departmental Expenditure Limit (DEL)—a Treasury
budgetary control for spending that is within the department's
direct control and which can therefore be planned over an extended
(Spending Review) period (such as the costs of its own administration,
payments to third parties, etc).
Departmental Unallocated provision (DUP)—a part,
usually between 1% and 1.5% of a department's 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 whereby
departments are allowed to carry forward unspent DEL provision
into later years.
Estimates—a statement of how much money government
needs in the coming financial year, and for what purposes, by
which Parliamentary authority is sought for the planned level
of expenditure and receipts in a department.
Estimates Memorandum—an explanation to the relevant
departments select committee setting out the links to other spending
controls and the contents of a department's Estimate.
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 are no cash transactions
but which are included in the body's accounts (or taken into account
in charging for a service to establish the true cost of all resources
used.
Request for Resources (RfR)—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.
|
