Letter to the Clerk of the Committee from
UK Trade & Investment
2010-11 UKTI ESTIMATES
MEMORANDUM
HM Treasury guidance in Supply Estimates: a guidance
manual specifies that departments are required to provide
an "Estimates Memorandum" to their Select Committee
explaining the allocations sought in the Main Estimates and how
they link to the department's published targets.
I enclose UK Trade & Investment's Estimate Memorandum
for the forthcoming 2010-11 Main Supply Estimate. This allows
the draw down of £92.9 million resource, £3.1 million
capital and a £95.3 million net cash requirement, in line
with the Comprehensive Spending Review Settlement. This includes
the changes arising from the adoption of the International Financial
Reporting Standards; the Clear Line of Sight alignment project
and the £2.1 million reduction in the UKTI contribution to
Regional Development Agencies (RDAs) for inward investment support.
Should the Committee require any additional information, I would
be happy to expand the Memorandum appropriately.
Main Estimates are to be published Monday 21 June
2010.
18 June 2010
UK TRADE & INVESTMENT MAIN ESTIMATE 2010-11
INTRODUCTION
1. The purpose of this memorandum is to provide the
Select Committee with an explanation of how the resources and
cash sought in UK Trade & Investment's (UKTI) Main 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 also refers to
future financial plans. Details of changes in resources relative
to original plans set out in the last Comprehensive Spending Review
(CSR) are provided.
MAIN ESTIMATE
2. The UKTI's Main Estimate for 2010-11 seeks the
necessary resources and cash for its programme and capital Vote.
3. UKTI's administration costs are met from within
the resources of the departments for Business Innovation &
Skills (BIS) and the Foreign & Commonwealth Office (FCO).
Consequently any changes related to the administration costs fall
within the BIS and FCO Estimates.
4. An explanation of key terms used in this memorandum
is provided in Annex A.
SUMMARY OF
THE MAIN
SPENDING CONTROL
FIGURES CONTAINED
IN THE
MAIN ESTIMATE
Total Departmental Expenditure Limit (DEL)
| Outturn |
Plans |
| 2008-09
£m
| 2009-10
£m1, 3 |
2010-11
£m3 |
Total Net Resource Requirement (NRR) | 90.974
| 96.463 | 92.909 |
Annually Managed Expenditure (AME) | 0.000
| 0.021 | 0.021 |
Net Resource DEL | 90.974 |
96.442 | 92.888 |
Capital DEL | 0.028 | 3.988
| 3.098 |
Less Depreciation2 | (0.112)
| (1.233) | (1.090) |
TOTAL DEL | 90.890 | 99.197
| 94.896 |
1 Provisional figures
2 Depreciation, which forms part of Net Resource
DEL, is excluded from total DEL as it is also included in Capital
DEL. To include it again would lead to double-counting.
3 IFRS changes were introduced in 2009-10
and only impact on budgets from 2009-10 onwards. This accounts
for the increase in UKTI's Capital DEL, which was transferred
from BIS vote.
SUMMARY OF
ALL CHANGES
5. Annually Managed Expenditure: There is no change in
the provision.
6. Net Resource DEL: There have been a number of
changes to UKTI budgets from the ongoing CSR settlement. UKTI
received additional funding in the 2009 budget (£5 million
2009-10, £5 million 2010-11) to help UK businesses better
showcase their strengths to overseas customers. International
Financial Reporting Standards (IFRS) changes were implemented
in 2009-10.
7. Other changes include: the transfer of support for defence
exports from the Ministry of Defence (MOD); the Alignment Project
or "Clear Line of Sight" (CLOS); a £2.1 million
reduction in the UKTI contribution to Regional Development Agencies
(RDAs); and a £500k transfer from BIS in 2009-10, which is
being transferred back in 2010-11. All of these changes are demonstrated
in the table below:
Net Resource DEL | Outturn
| Plans |
| 2008-09
£m
| 2009-10
£m1 | 2010-11
£m
|
CSR Settlement gross | 91.720
| 92.220 | 93.220 |
Appropriations-in-Aid | (2.500)
| (3.000) | (4.000) |
Depreciation | 0.166 | 0.166
| 0.166 |
Cost of Capital | (0.079) |
(0.079) | (0.079) |
CSR Settlement net | 89.307 |
89.307 | 89.307 |
Net Defence export Resource DEL | 2.198
| 2.055 | 1.928 |
2009-10 Budget announcement | -
| 5.000 | 5.000 |
IFRS Changes from UKTI Resource to Capital |
- | (1.067) | (1.750)
|
Clear Line of Sight change2 |
0.159 | 0.079 | 0.079
|
Depreciation (IFRS changes) | -
| 0.081 | 0.924 |
Transfer to/ from BIS | - |
0.500 | (0.500) |
Reduction in UKTI support to RDAs | -
| - | (2.100) |
SSE resource adjustments | 0.001
| 0.487 | - |
Consolidated Fund Extra Receipts (CFER) |
(0.112) | - | - |
Underspend | (0.579) |
| |
Total Net Resource DEL | 90.974
| 96.442 | 92.888 |
1 Provisional figures.
2 Due to CLOS, there will no longer be a cost of
capital charge from 2010-11 onwards.
8. Due to the Alignment (or "Clear Line of Sight") Project
(CLOS) there is no longer a non-cash element in Estimates. The
decrease in near-cash RDEL in 2010-11 compared with the previous
year is due to the IFRS changes; the reduction of the UKTI contribution
to the RDAs and the repayment of the £500k transfer to BIS.
9. Capital DEL: There have also been changes to
UKTI capital budgets since 2009-10 as a result of IFRS. This required
the reclassification of expenditure from BIS Admin to UKTI Capital.
These changes are reflected in the tables below:
Capital DEL Requirement | 2008-09
£m
| 2009-10
£m | 2010-11
£m
|
CSR Settlement | 0.248 |
0.248 | 0.248 |
Transfer to BIS | (0.200) |
| |
IFRS changes from UKTI Resource to Capital
IFRS changes from BIS Admin to UKTI Capital
| -
- | 1.067
2.673 |
1.750
1.100 |
Total Net Capital DEL Requirement | 0.048
| 3.988 | 3.098 |
EXPLANATION OF
SIGNIFICANT CHANGES
IN PROVISION
COMPARED WITH:
Spending Review Allocations
10. At the start of 2008-09 UKTI's allocation reflected a net
flat-cash budget settlement in the Comprehensive Spending Review
(CSR) 2007 of £89 million for each of the three years.
11. This funding is for the delivery of UKTI's agreed targets;
its marketing commitments related to the Olympics over the CSR
period; and a contribution to the Regional Development Agencies
(RDA) single pot of £17/16/16 million in relation to inward
investment activities. The contribution to the RDAs has been reduced
by £2.1 million from £16.002 million to £13.902
million for 2010-11.
12. In 2008-09 the responsibility for defence exports promotion
moved from the Ministry of Defence to UKTI to provide greater
integration with the Government's general support activities.
The related net budget decreases over the CSR period, reflecting
agreed efficiencies.
13. The provision increases from 2008-09 as a result of additional
resource (£5 milliion 2009-10, £5 million 2010-11),
provided in the 2009 Budget to help UK businesses better showcase
their strengths to overseas customers and markets which leads
to an increase in UKTI's overall net resource requirement as detailed
above. During 2009-10, a transfer of £500k was made to UKTI
from BIS to support inward investment work that was brought forward.
This increased our Net resource DEL requirement in 2009-10 but
is offset by the repayment of £500k to BIS in 2010-11.
14. IFRS changes required the reclassification of expenditure
from resource to capital. This resulted in a transfer of funds
from UKTI Resource to UKTI Capital in both 2009-10 and 2010-11
and it also resulted in a transfer from BIS Admin to UKTI Capital
for the same period.
Resource DEL Requirement | Outturn
| Plans |
| 2008-09
£m
| 2009-10
£m1 |
2010-11
£m |
CSR Settlement gross | 91.720
| 92.220 | 93.220 |
Appropriations-in-Aid | (2.500)
| (3.000) | (4.000) |
Depreciation | 0.166 | 0.166
| 0.166 |
Cost of Capital | (0.079) |
(0.079) | (0.079) |
CSR Settlement net DEL | 89.307
| 89.307 | 89.307 |
Net Defence export Resource DEL | 2.198
| 2.055 | 1.928 |
2009-10 Budget announcement | -
| 5.000 | 5.000 |
Transfer from UKTI Resource to Capital
(IFRS change)
| - | (1.067) | (1.750)
|
Cost of Capital2 | 0.159
| 0.079 | 0.079 |
Depreciation (IFRS changes) | -
| 0.081 | 0.924 |
Transfer to/ from BIS
UKTI reduced contribution to the RDAs
SSE Adjustments (non IFRS)
Consolidated Fund Extra Receipts
Underspend
| -
-
0.001
(0.112)
(0.579) |
0.500
-
0.487
-
- | (0.500)
(2.100)
-
-
-
|
Total Net DEL Requirement | 90.974
| 96.442 | 92.888 |
Capital DEL Requirement | Outturn
| Plans |
| 2008-09
£m
| 2009-10
£m1 |
2010-11
£m |
CSR Settlement | 0.248 |
0.248 | 0.248 |
IFRS changes from UKTI Resource to Capital |
- | 1.067 | 1.750 |
IFRS changes from BIS Admin to UKTI Capital
Transfer to BIS
Underspend
| -
(0.200)
(0.020) | 2.673
-
-
| 1.100
-
- |
Total Net Capital DEL Requirement | 0.028
| 3.988 | 3.098 |
Total DEL Requirement (RDEL + CDEL) |
Outturn | Plans
|
| 2008-09
£m
| 200910
£m1 |
2010-11
£m |
CSR Settlement net | 89.555 |
89.555 | 89.555 |
Resource DEL changes | 1.667
| 7.135 | 3.581 |
Capital DEL changes | (0.220)
| 3.740 | 2.850 |
Total Net DEL Requirement | 91.002
| 100.430 | 95.986 |
1Provisional figures
2Due to CLOS, there will no longer be a cost of
capital charge from 2010-11 onwards. Hence it has been added to
offset the cost of capital charge in our net CSR settlement.
CLEAR LINE
OF SIGHT
- THE ALIGNMENT
PROJECT (CLOS):
15. The Alignment (or "Clear Line of Sight") Project
seeks to simplify government's financial reporting to Parliament
by better aligning the recording of government spending in departmental
budgets, Estimates and resource accounts. Full details of the
alignment reforms were set out in Cm 7567 published in March 2009.
16. Changes to the budgetary framework resulting from the Alignment
Project have been implemented in 2010-11. The main change is that
the separate near-cash and non-cash controls within resource budgets
have been removed. Of those transactions previously recorded in
non-cash budgets:
- cost of capital charge has been removed from budgets, Supply
Estimates and Resource Accounts;
- provisions, revaluations, write-off of bad debt and exchange
rate gains/losses have been moved from DEL budgets into AME; and
- depreciation, impairments and notional audit fees have remained
in Resource DEL.
All figures were subject to re-forecasting before the classification
changes were made.
17. These classification changes, which are reflected in all departmental
Estimates, have the effect of reducing DEL budgets across departments
in all years. However, the adjustments have no impact on the purchasing
power of departments or the planned level of expenditure.
18. For the first time, the Main Estimates are produced under
the clear line of sight guidelines.
19. The main effect on UKTI's 2010-11 Main Estimate as a result
of CLOS is that there is no longer a distinction made between
near-cash and non-cash. For UKTI, this involves the total removal
of the cost of capital charge (-£79k) and the change of depreciation
from non-cash to near cash (£166k).
20. This results in a £79k increase in the total 2009-10
UKTI budget. There is no longer any non-cash element in the main
estimate and all budgets are now classed as near-cash.
Previous year comparison (with 2009-10)
21. As set out above, the RDEL provision decreases from 2009-10
due mainly to the £2.1 million reduction in the UKTI contribution
to the RDA "single pot", IFRS changes and the repayment
of the £500k transfer to BIS.
22. The CDEL provision decreases from 2009-10, solely due to a
reduction in UKTI's capital spend as planned.
Net Cash Requirement
Net Cash Requirement | 2009-10
£m1
| 2010-11
£m |
Net Resource Requirement | 96.463
| 92.909 |
Capital | 3.988 | 3.098
|
Less Non-operating A-in-A | -
| - |
Total Net Voted Capital | 3.988
| 3.098 |
Accruals to cash adjustment |
| |
Depreciation | (1.233) | (1.111)
|
Increase (-) / Decrease (+) in creditors |
1.959 | 0.410 |
Total accruals to cash adjustments | 0.726
| (0.701) |
Excess cash to be CFER'd | -
| - |
Net Cash Requirement | 101.177
| 95.306 |
1 Provisional figures
23. In comparison to the previous year the main change in the
net cash requirement relates to UKTI having £3.5 million
less resource; £0.9 million less capital and £1.5 million
less required to satisfy creditors.
DEPARTMENTAL STRATEGIC
OBJECTIVE
24. UKTI is a joint department of the Foreign & Commonwealth
Office (FCO) and the Department for Business Innovation &
Skills (BIS). Consequently UKTI's funding and human resources
reflect this framework. It shares its Departmental Strategic Objective
(DSO) targets with its parent departments, delivering through
staff employed by either the FCO or BIS.
25. These shared objectives for FCO and BIS respectively are to
Support the British Economy and promote the creation and growth
of business and a strong enterprise economy across all regions.
They are underpinned by UKTI's Strategic Objective, and related
targets:
By 2011, deliver measurable improvement in the business performance
of UK Trade & Investment's international trade customers,
with an emphasis on innovative and R&D active firms; increase
the contribution of foreign direct investment to knowledge intensive
economic activity in the UK, including R&D; and deliver a
measurable improvement in the reputation of the UK in leading
overseas markets as the international business partner of choice.
DEPARTMENTAL EXPENDITURE
LIMIT
26. There has been an upward movement in the DEL budget from 2007-08
due to the transfer of defence export promotion activity to UKTI
from the MOD. The summary table on the first page compares outturn
from 2007-08 onwards with the provisional outturn for 2009-10
and planned DEL for the CSR period which includes the additional
£10 million over two years announced in the 2009 Budget;
the subsequent IFRS and CLOS changes and the transfer and repayment
of £500k to BIS.
DEL END-YEAR
FLEXIBILITY
27. At the start of 2010-11 UKTI will have an accumulated End
Year Flexibility (EYF) entitlement of £11.963 million resource
and £1.667 million capital, subject to any further adjustments
that emerge during the finalisation of the 2010-11 Resource Accounts.
DEL End-Year Flexibility | Resource
£m
| Capital
£m |
EYF at start of 2009-10 | 11.963*
| 1.667 |
EYF draw down in Winter Supplementary | 0
| 0 |
EYF draw down in Spring Supplementary | 0
| 0 |
Current EYF balance | 11.963
| 1.667 |
* of which, £11.479 million is near cash.
28. The stock of EYF arose as a result of planned reductions in
resource over a number of years. There are no plans to draw down
any EYF during the financial year.
PROVISIONS
29. UKTI does not have any accounting provisions.
CONTINGENT LIABILITIES
30. UKTI does not have any contingent liabilities.
APPROVAL OF
MEMORANDUM
31. 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 Accounting Officer for UKTI.
Annex A
GLOSSARY OF KEY TERMS
Accounting Officer - a person appointed by the Treasury
or designated by a department to be accountable for the operations
of an organisation and the preparation of its accounts. The appointee
is, by convention, usually the head of a department or other organisation
or the Chief Executive of a non-departmental public body (NDPB).
Administration Budget - a Treasury control on the resources
consumed directly by departments and agencies 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. AME spending forms part of Total Managed Expenditure
(TME) and includes expenditure which is generally less predictable
and controllable than expenditure in DEL.
Ambit - the ambit is set out in Part I of the departmental
Estimate. It describes the activities for which resources sought
in the RfR will be used.
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.
Capital Expenditure - spending on the purchase of assets,
above a certain capitalisation threshold, which are expected to
be used for a period of at least one year. It includes the purchase
of buildings, equipment and land. The capitalisation threshold
is set by each department: items of a value below it are not counted
as capital assets, even if they do have a productive life of more
than one year.
Clear Line of Sight (CLOS) Alignment Project - an HMT initiative
to Align budgets, Estimates and accounts in a way that allows
Treasury to control what is needed to deliver the fiscal rules,
incentivises value for money and reduces burdens on government
departments
Comprehensive Spending Review (CSR) - a cross-government
review of departmental aims and objectives and analysis of all
spending programmes. A CSR usually results in the allocation of
three year Departmental Expenditure Limits.
Consolidated Fund - the Government's current account, operated
by the Treasury, through which pass most government payments and
receipts.
Consolidated Fund Extra Receipts (CFERs) - Income
or related cash, which may not be appropriated in aid of an Estimate
and is surrendered to the Consolidated Fund.
Contingencies Fund - A cash-based Fund enabling the Treasury
to make repayable cash advances to departments for new or existing
urgent services that cannot await the voting of funds under the
normal Supply procedure, in anticipation of provision for those
services by Parliament.
Contingent Liabilities - potential liabilities that are
uncertain but recognise that future expenditure may arise if certain
conditions are met or certain events happen.
Cost of Capital Charge - reflecting the cost to the government
of financing investment, (ie, the rate at which it borrows). This
is charged to departments to improve transparency under resource
accounting and encourage efficient use of assets. It is included
in the calculation when setting fees and charges and is calculated
as a percentage of the net asset value.
Current Expenditure (or resource consumption) - spending
reflecting the consumption of goods and services in that year
(eg, pay, grants, depreciation of assets).
Departmental Expenditure Limit (DEL) - a Treasury budgetary
control. DEL spending forms part of Total Managed Expenditure
(TME) and includes that expenditure which is generally within
the departments control and can be managed with fixed three-year
limits.
Depreciation - a measure of the wearing out, consumption
or other reduction in the useful life of a fixed asset whether
arising from use, passage of time or obsolescence through technological
or market changes.
Devolved Administrations - the administrations established
in Scotland, Wales and Northern Ireland. They are responsible
for devolved public services and policies.
End-Year Flexibility (EYF) - a mechanism whereby departments
are allowed to carry forward unspent Departmental Expenditure
Limit (DEL) provision into later years.
Estimates - a statement of how much money the government
needs in the coming financial year, and for what purpose(s), by
which parliamentary authority is sought for the planned level
of expenditure and receipts in a department.
Estimates Memorandum - an explanation to the relevant departmental
select committee setting out the links to other spending controls
and the contents of a departmental Estimate.
Generally Accepted Accounting Principles (GAAP) - The common
set of accounting principles, standards and procedures that companies
use to compile their financial statements. GAAP are a combination
of authoritative standards (set by policy boards) and simply the
commonly accepted ways of recording and reporting accounting information.
Grant - payments made by departments to outside bodies
to reimburse expenditure on agreed items or functions, and often
paid only on statutory conditions.
Grant in Aid - regular payments made by departments to
outside bodies (e.g., non-departmental public bodies) to finance
their operating expenditure.
Main Estimates - the means through which departments seek
parliamentary approval for their spending plans for the year ahead.
Usually presented within five weeks of the Budget Statement.
International Financial Reporting Standards (IFRS) - are
Standards, Interpretations and the Framework adopted by the International
Accounting Standards Board.
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.
Net Cash Requirement - the limit Voted by Parliament reflecting
the maximum amount of cash that can be released from the Consolidated
Fund to a department in support of its resource Estimate to carry
out the functions specified in the Estimate's ambits.
Non-cash - costs where there is no cash transaction but
which are included in a body's accounts (or taken into account
in charging for a service) to establish the true cost of all the
resources used.
Regional Development Agencies - they are located in the
9 English regions, and work towards bringing together views of
the people who live and work in each region, and combining these
with a unique set of business and economic insights to make the
most of the opportunities globalisation brings.
Request for Resources (RfR) - the functional level into
which departmental Estimates may be split. RfRs contain a number
of functions being carried out by the department in pursuit of
one or more of that department's objectives.
Resource Accounting - the accruals basis on which annual
departmental accounts are prepared.
Resource Budgeting - the means by which the Government
plans and controls public expenditure.
Select Committees - are appointed by the House to consider
subjects, which fall within their orders of reference. Most do
not have executive powers but make reports to the House containing
their opinions based on evidence they have taken. They are different
to standing committees, which proceed by formal debate.
Spending Review - sets out the key improvements in public
services that the public can expect over a given period. It includes
a thorough review of departmental aims and objectives to find
the best way of delivering the Government's objectives, and results
in the allocation of three-year Departmental Expenditure Limits
(DELs).
Subhead - a single cell within a section within the Part
II: Subhead detail table in an Estimate.
Supplementary Estimates - seek parliamentary authority
for additional resources and/or cash, or vary the way in which
resources are allocated. Normally presented in the Summer (June),
Winter (November) and Spring (February). Supply the process whereby
Parliament gives statutory authority for both the consumption
of resources and for cash to be drawn from the Consolidated Fund.
Token Estimates (or sections) - where a department's expenditure
within the Estimate (or the section) is wholly offset by income,
so that a token amount of £1,000 is voted.
Voted Provision - that which has been authorised by Parliament,
in response to Supply Estimates.
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