DR 3:
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 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).
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.
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
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