Foreign and Commonwealth Office Departmental Report - Foreign Affairs Committee Contents

DR 2: Letter to the Clerk of the Committee from UK Trade & Investment


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 £92.9m resource, £3.1m capital and a £95.3m 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 £2.1m 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.

Curtis Juman

Director of Finance

18 June 2010

UK Trade & Investment Main Estimate 2010-11


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.


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.




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.


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 (£5m 2009-10, £5m 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 £2.1m 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:

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:


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 £17/16/16m in relation to inward investment activities. The contribution to the RDAs has been reduced by £2.1m from £16.002m to £13.902m 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 (£5m 2009-10, £5m 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.


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 £2.1m 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

23  In comparison to the previous year the main change in the net cash requirement relates to UKTI having £3.5m less resource; £0.9m less capital and £1.5m less required to satisfy creditors.


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.


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 £10m over two years announced in the 2009 Budget; the subsequent IFRS and CLOS changes and the transfer and repayment of £500k to BIS.


27  At the start of 2010-11 UKTI will have an accumulated End Year Flexibility (EYF) entitlement of £11.963m resource and £1.667m capital, subject to any further adjustments that emerge during the finalisation of the 2010-11 Resource Accounts.

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.


29  UKTI does not have any accounting provisions.


30  UKTI does not have any contingent liabilities.


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, (i.e., 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 (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.

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.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2010
Prepared 24 September 2010