Written evidence from the Foreign and
Commonwealth Office
Main Estimate 2010-11
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 Provisions and 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 and provision of specialist, targeted
assistance in countries emerging from violent conflict;
- Section B: Peacekeeping and peace building activity
and on associated strengthening of international and regional
systems and capacity; and
The former Section C of RfR 2 has been incorporated
in Section A.
RFR 1 MAIN
ESTIMATES CHANGES
2. Owing to the short timescales between the
FCO receiving its revised departmental budgets, in particular
the reduction of £55,000,000 in the FCO's total DEL, and
publication of Main Estimates we expect to revise the Estimate
significantly at the Winter Supplementary round. The figures discussed
below are in some cases provisional as final decisions on where
the reductions to FCO spending will fall have not yet been made.
Claims of the DEL Reserve
3. There is a claim on the DEL reserve of £15,000,000
administration budget (Section A) in respect of adverse movements
in Sterling exchange rates. There was also a non-voted uplift
to administration DUP of £20,000.
4. We had previously agreed to surrender £20,000,000
of other current expenditure as the contribution of the Foreign
and Commonwealth Office to the Operational Efficiency Programme
(OEP) savings announced in the 2008 Pre-Budget report.
5. In addition to the OEP reduction, there is
a further surrender of £55,000,000, of which £11,500,000
has been provisionally allocated to Administration, £38,500,000
to other resource budgets and £5,000,000 to capital, was
announced by the Chancellor as part of the £6 billion package
of savings. Final decisions on where the reductions will
fall have not yet been made and are likely to be revisited in
the Winter Supplementary round.
Clear Line of Sight (CLOS) Alignment Project Changes
6. 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.
7. 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.
8. All figures were subject to re-forecasting
before the classification changes were made.
9. 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.
10. The following specific budgeting changes
in respect of CLOS have been agreed by the FCO with the Treasury.
If a cost of capital figure had been included it would have amounted
to £97,004,000 of non-cash budget cover. Prior to its removal,
the cost of capital had increased by £40,000,000 since the
CSR largely due to the introduction of International Financial
Reporting Standards. We have also given up £1,000,000 in
non-cash depreciation charges following the CLOS review of depreciation
requirements.
Budget Cover Transfers
11. There is a transfer to DFID of £1,347,000
in respect of the Stabilisation Unit. The Stabilisation Unit is
a UK Government inter-departmental unit that helps improve the
UK's ability to support countries emerging from violent conflict.
It is jointly owned by the Department for International Development
(DFID), Foreign and Commonwealth Office (FCO) and Ministry of
Defence (MOD).[7]
12. A transfer of £4,000,000 to other current
expenditure (Section A) in respect of the Returns and Reintegration
Fund from DFID. This fund is used to finance projects to increase
returns of foreign national prisoners and failed asylum seekers
to their countries of origin and to ensure that those who return
voluntarily are effectively re-integrated.
13. Smaller transfers effected in previous years
but impacting on the 2010-11 Main Estimate include £2,028,000
Administration costs and £60,000 capital from MOD in respect
of Defence Export Sales, £2,254,000 other current from DIUS
and £150,000 administration costs to DIUS for the Governments
Science and Innovation Network, £500,000 other current expenditure
from MOD in respect of Foreign Secretary's travel arrangements,
£80,000 other current to the Cabinet Office in respect of
the FCO contribution to the Government Secure Zone, £45,000
administration costs to the Office of Government Commerce in respect
of sustainable procurement and £18,000 administration costs
to DIUS in respect of the Skills Strategy.
14. There have also been internal transfers within
RfR 1 of £2,600,000 resource grant in aid from the British
Council (Section C) to the FCO administration budget (Section
A), with no impact on Resource DEL, £2,400,000 from British
Council capital grants (Section C) to the FCO administration budget
(Section A) and of £3,700,000 from BBC World Service capital
grants (Section E) to the FCO administration budget (Section A).
RFR 2 MAIN
ESTIMATES CHANGES
15. As discussed in previous correspondence with
the FAC we have updated the sub-head structure of RfR 2 to reflect
the merger of the former Stabilisation Aid Fund (formerly Section
C) into Conflict Prevention Programme expenditure (Section A).
16. 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 2010-11 FCO Main Estimates is a net increase of £496,000,000.
This consists
of £350,000,000 from the Treasury reserve for Peacekeeping
(Section B) and £146,000,000 from DFID for Conflict Prevention
(Section A).
Reconciliation of 2010-11 Main Estimates to CSR
2007 Outcome
17. The Comprehensive Spending Review 2007 settlement
showed the FCO Resource Budget for 2010-11 as £1,616,000,000
and the capital budget as £205,000,000. Since October 2007
there have been a number of changes to the FCO's Departmental
Expenditure Limits (DELs) which bring the current Resource DEL
figure for 2010-11 to £2,082,238,000 and the Capital DEL
to £198,960,000. The tables below show the main changes and
reconcile the DELs with the Main Estimates figures.
Table 1
RESOURCE (2010-11)
| Resource DEL Baseline from CSR 2007 (£m)
| 1,616.000 |
| | |
| Changes to Resource DEL (Chronological Order)
| |
| Changes effected in Main Estimates 2009-10
| |
| Machinery of Government transfer from MOD for Defence Export Sales
| 2.028 |
| Reserve claim for Peacekeeping | 350.000
|
| Transfer from DFID for Conflict Prevention |
146.000 |
| Transfer from MOD for FS travel | 0.500
|
| Machinery of Government transfer from DIUS for Science and Innovation Network
| 2.104 |
| 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
|
| OEP Efficiency Savings | -20.000
|
| Reduction in Depreciation Charges | -1.000
|
| Transfer from DfID for the Returns and Reintegration Fund
| 4.000 |
| Transfer to DfID for the Stabilisation Unit
| -1.347 |
| Reserve Claim for Adverse Changes to Sterling Exchange Rates (Non-Voted DUP Element)
| 20.000 |
| Reserve Claim for Adverse Changes to Sterling Exchange Rates (Voted Element)
| 15.000 |
| Transfer from the British Council capital grant
| 2.400 |
| Transfer from the BBC World Service capital grant
| 3.700 |
| Uplift to Capital Charge as a Result of International Financial Reporting Standards
| 40.000 |
| Removal of Capital Charges as a Result of Clear Line of Sight Budgeting Changes
| -97.004 |
| Resource element of £55 million contribution to £6 billion savings
| 50.000 |
| | |
| Resource DEL at 1 April 2010 | 2,032.238
|
| | |
| Difference between Resource DEL and Main Estimate
| |
| Remove non-Voted Expenditure in the OCS (Common Foreign Security Policy)
| -4.000 |
| Include BBCWS Capital Grant from Capital DEL (Resource in Estimates)
| 27.300 |
| Include British Council Capital Grant from Capital DEL (Resource in Estimates)
| 5.400 |
| Include International Subscriptions Capital Grant from Capital DEL (Resource in Estimates)
| 29.510 |
| Include Voted expenditure outside budgets (Reimbursement of certain duties, taxes and licence fees)
| 18.000 |
| Remove unallocated resource provision (DUP)
| -32.000 |
| Include Voted AME (impairments) | 20.000
|
| | |
| 2010-11 Main Estimate Resource Total
| 2,096.448 |
Table 2
CAPITAL (2010-11)
| Capital DEL Baseline from CSR 2007 (£m)
| 205.000 |
| | |
| Changes to Capital DEL |
|
| Machinery of Government transfer from MOD for Defence Export Sales
| 0.060 |
| Transfer from the British Council capital grant
| -2.400 |
| Transfer from the BBC World Service capital grant
| -3.700 |
| Capital element of £55 million contribution to £6 billion savings
| -5.000 |
| | |
| Capital DEL at 1 April 2010 | 193.960
|
| | |
| Difference between Capital DEL and Main Estimate
| |
| Remove BBCWS Capital Grant from Capital DEL (Resource in Estimates)
| -27.300 |
| Remove British Council Capital Grant from Capital DEL (Resource in Estimates)
| -5.400 |
| Remove International Subscriptions Capital Grant from Capital DEL (Resource in Estimates)
| -29.510 |
| | |
| 2010-11 Main Estimate Capital Net Total
| 131.750 |
Departmental Expenditure Limit (DEL) & Administration Budgets
18. The tables below show a comparison of the 2010-11 DEL
(Table 3 and 3a) and Administration (Table 4) budgets with the
2004-05, 2005-06, 2006-07, 2007-08 and 2008-09 outturn, the forecast
for 2009-10 and plans for 2010-11.
19. 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 the Treasury of expenditure across all years
of the Public Expenditure cycle.
Table 3
DEL COMPARISON
| 2004-05 | 2005-06
| 2006-07 | 2007-08
| 2008-09 | 2009-10
| 2010-11 |
| Actual | Actual
| Actual | Actual
| Actual | Forecast
| Budget |
| Resource DEL 1,2 | 1,680.411
| 1,815.302 | 1,770.997 |
1,808,411 | 2,024.427 | 2,133,725
| 2,032.238 |
| Capital DEL | 112.517 | 133.340
| 160.786 | 227.792 | 226.803
| 199.638 | 193.960 |
| Less Depreciation 1,3 | 67.156
| 108.725 | 81.555 | 73.220
| 81.684 | 100.981 | 99.050
|
| Total | 1,725.772 | 1,839.917
| 1,850.228 | 1,962.983 | 2,172.546
| 2,232,382 | 2,127,148 |
1 Figures for all years reflect Clear Line of Sight
(CLOS) budgeting changes, in particular the removal of cost of
capital charges.
2 Resource DEL figures for 2010-11 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 2010-11 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 |
| 2008-09 | 2,074,701 |
3,000 | 2,077,701 | 2,085,310
| -7,609 |
| Forecast Outturn 2009-10 | 2,237,987
| 3,000 | 2,240,987 | 2,224.375
| 16.612 |
| | | |
| | |
| 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 |
| 2008-09 | 216,060 |
- | 216,060 | 230,060
| -14,000 |
| Forecast Outturn 2009-10 | 203,310
| - | 203,310 | 199,638
| 3,672 |
1 Outturn 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
| 2004-05 | 2005-06
| 2006-07 | 2007-08
| 2008-09 | 2009-10
| 2010-11 |
| Actual | Actual
| Actual | Actual
| Actual | Forecast
| Plans |
| Administration budget | 402.676
| 388.191 | 382.439 | 356.319
| 383.492 | 433.987 | 420.448
|
1Figures for all years reflect the removal of capital
charges that no longer count in budgets.
Departmental Unallocated Provision (DUP) 2010-11
20. At the time of the Main Estimate, the FCO has £32,000,000
of unallocated resource.
Table 5
2010-11 DEPARTMENTAL UNALLOCATED PROVISION
| Resource | Capital
|
| RfR 1 DUP to met unforeseen requirements arising in-year
| £32.0m | £0.0m |
| Total | £32.0m | £0.0m
|
21. The DUP will be used to meet unforeseen pressures such
as unfavourable currency exchange rate changes since CSR 2007.
End Year Flexibility (EYF)
22. The Public Expenditure Outturn White Paper published in
July 2009 showed a total figure of £134.002 million for carry
forward of underspend into 2009-10 under the DEL EYF scheme of
which we took up £21.7 million in 2009-10 leaving a 2010-11
balance of £112.302 million.
23. We intend to spend resource EYF carried forward into 2010-11
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 2009 (table 6—Cm 7606)
| 76.271 | 53.917 | 130.188
| 100.552 | 3.814 | 134.002
|
| EYF drawn down in Winter Supplementary |
2.000 | 11.000 | 13.000
| - | - | 13.000
|
| EYF drawn down in Spring Supplementary |
5.700 | - | 5.700 |
5.700 | 3.000 | 8.700
|
| BALANCE OF ACCUMULATED END YEAR FLEXIBILITY GOING INTO 2010-11
| 68.571 | 42.917 | 111.488
| 94.852 | 0.814 | 112.302
|
June 2010
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