FCO Main Estimate 2010-11 Memorandum
Foreign & Commonwealth Office Main Estimate 2010-11 Memorandum
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 contributio
n of the Foreign and Commonweal
th 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 bud
geting changes in respect of CLO
S 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 deprec
iation charges following the CLO
S review of depreciation requirements.
Budget Cover Transfers
11.
There is a transfer to DF
ID of £1,347,000 in respect of the Stabilisation Unit.
The Stabilisation
Unit is a UK Government inter-d
epartmental 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).
12.
A transfer of £4,000,000 to other current expenditure (Section A) in respect of the Returns and Reintegration Fund
from DF
ID.
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 E
stimate include £2,028,000 Administration c
osts and £60,000 capital from MO
D 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 M
O
D 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 (Sec
tion B) and £146,000,000 from DF
ID 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
|
|
|
Machiner
y of Government transfer from MO
D 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
OEP Efficiency Savings
Reduction in Depreciation Charges
Transfer from DfID for the Returns and Reintegration Fund
Transfer to DfID for the Stabilisation Unit
Reserve Claim for Adverse Changes to Sterling Exchange Rates (Non-Voted DUP Element)
Reserve Claim for Adverse Changes to Sterling Exchange Rates (Voted Element)
Transfer from the British Council capital grant
Transfer from the BBC World Service capital grant
Uplift to Capital Charge as a Result of International Financial Reporting Standards
Removal of Capital Charges as a Result of Clear Line of Sight Budgeting Changes
|
-0.018
-20.000
-1.000
4.000
-1.347
20.000
15.000
2.400
3.700
40.000
-97.004
|
|
Resource element
of £55m contribution to £6b savings
|
50.000
|
|
|
|
Resource DEL at 1 April 2010
|
2,032.238
|
|
|
|
Difference
b
etween 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
|
|
|
Machiner
y of Government transfer from MO
D for Defence Export Sales
Transfer from the British Council capital grant
Transfer from the BBC World Service capital grant
Capital element
of £55m contribution to £6b savings
|
0.060
-2.400
-3.700
-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
|
Outturn
1
|
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
Forecast Outturn 2009-10
|
2,074,701
2,237,987
|
3,000
3,000
|
2,077,701
2,240,987
|
2,085,310
2,224.375
|
-7,609
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
Forecast Outturn 2009-10
|
216,060
203,310
|
-
-
|
216,060
203,310
|
230,060
199,638
|
-14,000
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
|
Keith Luck
Finance Director General
June 2010
|
