Foreign and Commonwealth Office Departmental Report - Foreign Affairs Committee Contents

DR 3: Foreign & Commonwealth Office Main Estimate 2010-11 Memorandum


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.


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).[1]

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).


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.


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.

Departmental Unallocated Provision (DUP) 2010-11

20.  At the time of the Main Estimate, the FCO has £32,000,000 of unallocated resource.

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.


Keith Luck

Finance Director General

June 2010

1 Back

previous page contents

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

© Parliamentary copyright 2010
Prepared 24 September 2010