Estimates Memoranda

DR 28

 

UK Trade & Investment: 2011-12 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 Memorandum for the forthcoming 2011-12 Main Supply Estimate. This allows UKTI the authority to spend £83.9m resource, £3.3m capital and a £86.6m net cash requirement, in line with the 2010 Spending Review Settlement. Should the Committee require any additional information, I would be happy to expand the Memorandum appropriately.

Main Estimates are to be published Tuesday 26 April 2011.

I am also sending a copy of this letter and enclosure to the Clerk of the Business, Innovation and Skills Committee.

26 April 2011

Annex A

Main Estimate 2011-12: Select Committee Memorandum

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 the organisations performance indicators. This includes information on comparisons with the resources provided in earlier years in Estimates and departmental budgets, and also refers to future financial plans.

Main Estimate

2 The UKTI’s Main Estimate for 2011-12 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 B.


Summary of the main spending control figures contained in the Main Estimate

Departmental Expenditure Limit (DEL)

OUTTURN

SR10 PLANS

 

2009-10

£m

2010-11

£m1

2011-12

£m

Net Resource (RDEL)

94.5

86.5

84.0

Capital (CDEL)

3.9

1.0

3.3

Less Depreciation ringfenced within RDEL2

(1.1)

(0.8)

(1.1)

Total Departmental Expenditure Limit (DEL)

97.3

86.7

86.2

Annually Managed Expenditure (AME)

OUTTURN

SR10 PLANS

 

2009-10

£m

2010-11

£m1

2011-12

£m

Annually Managed Expenditure (AME)3

0.0

0.0

0.0

Total Annually Managed Expenditure (AME)

0.0

0.0

0.0

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 Annually Managed Expenditure total for 2009-10 is zero, for 2010-11 (provisional) and 2011-12 (Plan) is £0.021m

Summary of all changes

5 Annually Managed Expenditure: There is no change in the provision.

6 Net Resource DEL: There are no changes to UKTI budgets since the 2010 Spending Review settlement.   

7 There have been a number of changes to UKTI budgets compared with the CSR07 settlement. These include the Machinery of Government (MoG) transfer of the Defence Export Service Organisation (DESO) from MoD to UKTI, additional funding in the 2009 budget (£5m 2009-10, £5m 2010-11) to help UK businesses better showcase their strengths to overseas customers and changes as a result of the implementation of International Financial Reporting Standards (IFRS) in 2009-10.

8 Other changes compared with the previous spending round include the Alignment Project or ‘Clear Line of Sight’ (CLoS); UKTI delivery of a national inward investment initiative, previously delivered through the Regional Development Agencies (RDAs) and a £500k transfer from BIS in 2009-10, which was transferred back in 2010-11. All of these changes are demonstrated in the table below:

Net Resource Requirement

OUTTURN

SR10 PLANS

2009-10 £m

2010-11

£m1

2011-12

£m

CSR/SR10 Settlement gross

92.2

93.2

89.9

Appropriations-in-Aid

(3.0)

(4.0)

(7.0)

Depreciation ringfenced within RDEL

0.2

0.2

1.1

Cost of Capital2

(0.1)

(0.1)

-

Annually managed expenditure

-

-

-

CSR/SR Settlement

89.3

89.3

84.0

DESO MoG transfer (net)

2.1

1.9

-

2009-10 Budget announcement

5.0

5.0

-

Implementation of IFRS transfer from Resource to Capital

(1.1)

(1.8)

-

Cost of Capital2

0.1

0.1

-

Depreciation (IFRS changes)

0.1

1.0

-

Transfer from/to BIS

0.5

(0.5)

-

Reduction in UKTI support to RDAs

-

(2.1)

-

SSE resource adjustments

0.5

-

-

Consolidated Fund Extra Receipts (CFER)

(0.1)

-

-

Underspend

(1.9)

(6.4)

-

Total Net Resource Requirement

94.5

86.5

84.0

1 Provisional figures.

2 Due to CLoS, there will no longer be a cost of capital charge from 2010-11 onwards.

9 Capital DEL: There are no changes to UKTI budgets since the 2010 Spending Review settlement.

10 There have been significant changes to UKTI capital budgets since 2009-10 as a result of implementing IFRS. This required the reclassification of expenditure from UKTI Programme Resource and BIS Admin Resource to UKTI Capital. These changes are reflected in the tables below:

Capital DEL Requirement

OUTTURN

SR10 PLANS

2009-10 £m

2010-11

£m1

2011-12

£m

CSR/SR10 Settlement

0.2

0.2

3.3

Implementation of IFRS transfer from Resource to Capital

1.1

1.8

-

Implementation of IFRS transfer from BIS Admin to UKTI Capital

2.7

1.1

-

SSE Capital adjustments

-

-1.0

-

Underspend

-0.1

-1.1

-

Total Net Capital DEL Requirement

3.9

1.0

3.3

 

1 Provisional figures.

Explanation of significant changes in provision compared with:

Spending Review Allocations

11 For 2011-12, UKTI’s resource budget allocation, compared with £93m for 2010-11, reflects an initial net reduction of £9m to £84m in the first year of the Spending Review (SR) 2010 period.

12 UKTI are expected to deliver more revenue-generating activity over the Spending Review period. As a result, income is expected to increase from £6.3m in 2010-11 to £7m in 2011-12, and rising to £11m by 2014-15.

13 Ultimately, the Spending Review achieves a real reduction of 25 per cent by 2014-15 against the 2010-11 baseline, as detailed in HM Treasury’s Spending Review 2010 document [Cm 7942].

14 This funding is for the delivery of UKTI’s agreed performance indicators and its commitments related to the 2012 Olympics over the SR period.

Resource DEL Requirement

OUTTURN

SR10 PLANS

2009-10 £m

2010-11 £m1

2011-12

£m

CSR/SR10 Settlement gross

92.2

93.2

89.9

Appropriations-in-Aid

(3.0)

(4.0)

(7.0)

Depreciation ringfenced within RDEL

0.2

0.2

1.1

Cost of Capital2

(0.1)

(0.1)

-

CSR/SR Settlement DEL

89.3

89.3

84.0

DESO MoG transfer (net)

2.1

1.9

-

2009-10 Budget announcement

5.0

5.0

-

Implementation of IFRS transfer from Resource to Capital

(1.1)

(1.8)

-

Cost of Capital2

0.1

0.1

-

Depreciation (IFRS changes)

0.1

1.0

-

Transfer from/to BIS

UKTI reduced contribution to the RDAs

SSE Adjustments (non IFRS)

Consolidated Fund Extra Receipts (CFER)

Underspend

0.5

-

0.5

(0.1)

(1.9)

(0.5)

(2.1)

-

-

(6.4)

-

-

-

-

-

Total Net DEL Requirement

94.5

86.5

84.0

Capital DEL Requirement

OUTTURN

SR10 PLANS

2009-10 £m

2010-11

£m1

2011-12

£m

CSR/SR10 Settlement

0.2

0.2

3.3

Implementation of IFRS transfer from Resource to Capital

1.1

1.8

-

Implementation of IFRS transfer from BIS Admin to UKTI Capital

2.7

1.1

-

SSE Capital adjustments

-

-1.0

-

Underspend

-0.1

-1.1

-

Total Net Capital DEL Requirement

3.9

1.0

3.3

Total DEL Requirement (RDEL + CDEL)

OUTTURN

SR10 PLANS

2009-10 £m

2010-11

£m1

2011-12

£m

CSR/SR Settlement net

89.5

89.5

87.3

Resource DEL changes

5.2

(2.8)

-

Capital DEL changes

3.7

0.8

-

Total Net DEL Requirement

98.4

87.5

87.3

1Provisional figures

2Due to CLoS, there no longer is a cost of capital charge from 2010-11 onwards.

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 were 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:

i. cost of capital charge has been removed from budgets, Supply Estimates and Resource Accounts;

ii. provisions, revaluations, write-off of bad debt and exchange rate gains/losses have been moved from DEL budgets into AME; and

iii. depreciation, impairments and notional audit fees have remained in Resource DEL.

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 The Main Estimates are produced under the clear line of sight guidelines.

19 The main effect on UKTI’s 2011-12 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 change of depreciation from non-cash to ‘Depreciation ringfenced within RDEL’.

Previous year comparison (with 2010-11)

20 As set out above, the RDEL provision decreases from 2010-11 due mainly to the SR10 settlement seeking 25% real reductions across departments by the end of the Spending Review period.

21 The CDEL provision increases from 2010-11 solely due to planned Capital expenditure set out in the 2010 Spending Review. This will be to replace or renew technological assets, such as Customer Relationship Management and Income-Generating Systems, key to UKTI’s operation.


Net Cash Requirement

Net Cash Requirement

2010-11

£m1

2011-12 £m

Net Resource Requirement

92.9

84.0

Capital

2.1

3.3

Less Non-operating A-in-A

-

-

Total Net Voted Capital

2.1

3.3

Accruals to cash adjustment

 

 

Depreciation

(1.1)

(1.1)

Increase (-) / Decrease (+) in creditors

1.4

0.4

Total accruals to cash adjustments

0.3

(0.7)

Excess cash to be CFER'd

-

-

Net Cash Requirement

95.3

86.6

1 Provisional figures.

22 In comparison to the previous year, the main change in the net cash requirement relates to UKTI having £8.9m less resource; £1.2m more capital and £1m less required to satisfy creditors.

Changes to the Ambit

23 Changes arising from the Alignment Project now mean that departments no longer have Requests for Resources (RfR’s). As a result, while UKTI’s purpose has not changed, the ambits underlying UKTI’s RfR’s have now come to the forefront. These can be found in Part I of UKTI’s Main Estimate.

Departmental Business Plans

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 contributes towards the parent departments business plans, delivered through staff employed by either the FCO or BIS.

25 These business plans 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 Input and Impact indicators:

· Impact indicators

§ Number of Foreign direct investment projects attracted to the UK with UKTI involvement

§ Number of UK Businesses helped to improve their performance through internationalisation

· Input Indicators

§ Average Unit Cost per FDI Project attracted to the UK with UKTI involvement

§ Average Unit Cost per UK Business helped to improve their performance (overseas) through Internationalisation

Departmental Expenditure Limit

26 There has been a reduction in the DEL budget from 2011-12 due to the outcome of the 2010 Spending Review, where all Whitehall departments were encouraged to find around 25% efficiency savings.

27 The summary table on the first page compares outturn from 2009-10 with the provisional outturn for 2010-11 and planned DEL for the first year of the new SR period.

Budget Exchange

28 From 2011-12 HM Treasury will operate a new budgetary carry-forward entitlement called Budget Exchange. Details of the new policy can be found in HM Treasury’s Financial Director’s letter, MS FD(11)10 – Budget Exchange.

29 End Year Flexibility (EYF) stocks accumulated by UKTI in prior years have been absorbed into the Consolidated Fund.

Provisions

30 UKTI does not have any accounting provisions.

Contingent Liabilities

31 UKTI does not have any contingent liabilities.

Approval of Memorandum

32 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 Susan Haird, the Accounting Officer for UKTI.


Annex B

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.

Budget Exchange - a mechanism whereby departments are allowed to carry forward a proportion of unspent Departmental Expenditure Limit (DEL) provision into the following year only.

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.

Current Expenditure (or resource consumption) - spending reflecting the consumption of goods and services in that year (e.g., 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.

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.

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.

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.

Prepared 26th May 2011