UK Trade and Investment

Annex A

UK Trade & Investment

Main Estimate 2012-13

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 2012-13 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		PLANS
	2010-11 £m	2011-12 £m1	2012-13 £m
Net Resource (RDEL)	85.1	81.4	86.5
Capital (CDEL)	1.1	2.5	2.6
Less Depreciation ringfenced within RDEL2	-1.0	-1.4	-1.1
Total Departmental Expenditure Limit (DEL)	85.2	82.5	88.0

Annually Managed Expenditure (AME)	OUTTURN		PLANS
	2010-11 £m	2011-12 £m1	2012-13 £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 figure.

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 2010-11 is zero, for 2011-12 (provisional) and 2012-13 (Plan) is £0.021m.

Summary of all changes

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

6 Net Resource DEL: There have been a number of changes to UKTI resource budgets compared with the 2010 Spending Review settlement. These include additional funding in the 2011 Autumn Statement to allow UKTI to increase the number of customers it assists annually by 100%, a budget transfer from the Dep’t for Business, Innovation and Skills (BIS) to cover contractual obligations in the North-West region previously sustained by the now dissolved Development Agency, and a budget exchange from 2011-12 resource, which will be converted to Capital DEL to cover the re-phasing costs for a business-critical IT system.

7 All of these changes are demonstrated in the table below:

Net Resource Requirement	OUTTURN		PLANS
	2010-11 £m	2011-12 £m1	2012-13 £m
CSR 07/SR 10 Settlement gross	93.2	89.9	86.9
Programme Income	-4.0	-7.0	-8.0
Depreciation Ringfenced within RDEL	0.2	1.1	1.1
Annually managed expenditure	-	-	-
CSR 07 Settlement	89.3
DESO MoG transfer (net)	1.9	-	-
2009-10 Budget announcement	4.5	-	-
IFRS Changes	-0.8	-	-
Reduction in UKTI support to RDAs	-2.1	-	-
SSE resource adjustments	-	-	-
Consolidated Fund Extra Receipts (CFER)	-0.6	-	-
SR 10 Settlement		84.0	80.0
Autumn Statement: additional funding	-	-	5.0
Autumn Statement: increased expenditure2	-	-	9.0
Autumn Statement: increased income2	-	-	-9.0
Great Campaign: increased expenditure	-	-	2.0
Great Campaign: increased income	-	-	-2.0
Transfer from BIS for NWDA obligations	-	0.4	1.5
Budget Exchange	-	-0.5	0.5
RDEL/CDEL virement	-	-	-0.5
Underspend	-7.1	-2.5	-
Total Net Resource Requirement	85.1	81.4	86.5

1 Provisional figure.

2 Additional £9m expenditure is offset by the £9m programme income.

8 Capital DEL: There has been a single change to UKTI capital budget compared with the 2010 Spending Review settlement. This is the result of a budget exchange from the 2011-12 Capital budget and a budget exchange from the 2011-12 Resource budget and subsequent conversion into Capital. This exchange is to cover the re-phasing costs of a business-critical IT system.

9 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 following table:

Capital DEL Requirement	OUTTURN		PLANS
	2010-11 £m	2011-12 £m1	2012-13 £m
CSR 07/SR 10 Settlement	0.2	3.3	2.0
IFRS Changes	2.9	-	-
SSE Capital adjustments	-1.0	-	-
Budget Exchange	-	-0.1	0.1
RDEL/CDEL Virement	-	-	0.5
Underspend	-1.1	-0.7	-
Total Net Capital DEL Requirement	1.0	2.5	2.6

 

1 Provisional figure.

Explanation of significant changes in provision compared with:

Spending Review Allocations

10 For 2012-13, UKTI’s net resource allocation has increased by £6.5m compared with the initial SR settlement. This is mainly due to an additional £5m of funding being made available to UKTI through the 2011 Autumn Statement to increase customer assistance. The remaining £1.5m relates to a budget transfer from BIS to cover regional obligations in 2012-13 following the closure of the RDAs. UKTI has also received an additional £9m expenditure through the 2011 Autumn Statement, which will be off-set by £9m additional income, therefore having no impact on net budgets. £8m will be received as income from BIS, the remaining £1m will be generated through sales of UKTI services to its customers. Both of these received amounts will be used to further assist SMEs.

11 For 2012-13, UKTI’s capital budget allocation has increased by £0.6m compared with the initial Spending Review settlement. This is solely due to the budget exchange of resources from UKTI’s 2011-12 allocation to cover the re-phasing of costs for UKTI’s replacement Customer Data Management System.

Resource DEL Requirement	OUTTURN		PLANS
	2010-11 £m	2011-12 £m1	2012-13 £m
CSR 07/SR 10 Settlement gross	93.2	89.9	86.9
Programme Income	-4.0	-7.0	-8.0
Depreciation Ringfenced within RDEL	0.2	1.1	1.1
CSR 07/SR 10 Settlement DEL	89.3	84.0	80.0
DESO MoG transfer (net)	1.9	-	-
2009-10 Budget announcement	4.5	-	-
IFRS changes	-0.8	-	-
UKTI reduced contribution to the RDAs	-2.1	-	-
Consolidated Fund Extra Receipts (CFER)	-0.6	-	-
Autumn Statement funding announcement	-	-	5.0
Autumn Statement: increased expenditure	-	-	9.0
Autumn Statement: increased income	-	-	-9.0
Great Campaign: increased expenditure	-	-	2.0
Great Campaign: increased income	-	-	-2.0
Transfer from BIS for NWDA obligations	-	0.4	1.5
Budget Exchange	-	-0.5	0.5
RDEL/CDEL virement	-	-	-0.5
Underspend	-7.1	-2.5	-
Total Net DEL Requirement	85.1	81.4	86.5

Capital DEL Requirement	OUTTURN		PLANS
	2010-11 £m	2011-12 £m1	2012-13 £m
CSR 07/SR 10 Settlement	0.2	3.3	2.0
IFRS Changes	2.9	-	-
SSE Capital adjustments	-1.0	-	-
Budget Exchange	-	-0.1	0.1
RDEL/CDEL Virement	-	-	0.5
Underspend	-1.1	-0.7	-
Total Net Capital DEL Requirement	1.0	2.5	2.6

Total DEL Requirement (RDEL + CDEL)	OUTTURN		PLANS
	2010-11 £m	2011-12 £m1	2012-13 £m
CSR 07/SR 10 Settlement net	89.5	87.3	82.0
Resource DEL changes	-4.2	-2.6	6.5
Capital DEL changes	0.8	-0.8	0.6
Total Net DEL Requirement	86.1	83.9	89.1

1 Provisional figure.

Clear Line of Sight – the Alignment Project (CLoS):

12 The Main Estimates are produced under the Clear Line of Sight guidelines.

13 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’.

Prior year comparison (with 2011-12)

14 As set out above, the RDEL provision increases from 2011-12 due mainly to the additional resource made available through the 2011 Autumn Statement.

15 The CDEL provision decreases slightly from 2011-12 mainly due to planned Capital expenditure set out in the 2010 Spending Review and budget exchange transfers between financial periods.

Net Cash Requirement

Net Cash Requirement	2011-12 £m1	2012-13 £m
Net Resource	83.9	86.5
Capital	3.2	2.6
Total Net Voted Requirement	87.1	89.1
Accruals to cash adjustment
Depreciation	-1.1	-1.1
Increase (-) / Decrease (+) in creditors	2.7	0.5
Total accruals to cash adjustments	1.6	-0.6
Net Cash Requirement	88.7	88.5

1 Provisional figure.

16 In comparison to the previous year (2011-12), UKTI’s Net Cash Requirement is reducing by £0.2m, with the main changes relating to UKTI having £2.6m more available resource from the Autumn Statement; £0.6m less capital requirement and £2.2m less required to satisfy creditors.

Changes to the Ambit

17 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

18 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.

19 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

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

21 The summary tables on the first page compares outturn from 2010-11 with the provisional outturn for 2011-12 and planned DEL/AME for 2012-13.

Budget Exchange

22 From 2011-12 HM Treasury operate a 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.

Provisions

23 UKTI does not have any accounting provisions.

Contingent Liabilities

24 UKTI does not have any contingent liabilities.

Approval of Memorandum

25 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 Nick Baird, 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 organization, or the Chief Executive of a non-departmental public body (NDPB).

Administration Budget - A Treasury control on resources consumed directly by departments and agencies/NDPBs that forms part of the Departmental Expenditure Limit (DEL). Includes things such as staff costs, accommodation, etc, where they are not directly associated with frontline service delivery.

Ambit - The ambits are set out in Part I of the departmental Estimate. Separate ambits are required for both expenditure and income in each budgetary category included in the Estimate (DEL, AME and non-budget). The ambit describes the activities for which provision sought in the Estimate will be used.

Annually Managed Expenditure (AME) - AME is spending included in Total Managed Expenditure (TME), which does not fall within Departmental Expenditure Limits (DELs). Expenditure in AME is generally less predictable and controllable than expenditure in DEL.

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

Capital grant - (See „Grant‟ below). In account, a capital grant scores as resource spending but in budgetary terms it scores as capital because an asset is created within the economy.

Capital income or expenditure - Related to the purchase or sale of assets. The value must usually be above a certain capitalisation threshold and the asset must be expected to be used for a period of at least one year. It includes the purchase of buildings, equipment and land. The threshold is set by each body: items valued below it are not counted as capital assets, even if they do have a productive life of more than one year.

Comptroller and Auditor General (C&AG) - The head of the National Audit Office, appointed by the Crown, and an Officer of the House of Commons. As Comptroller, the C&AG‟s duties are to authorise the issue by the Treasury of public funds from the Consolidated Fund and National Loans Fund to government departments and others; as Auditor General, the C&AG certifies the accounts of all government departments and some other public bodies, and carries out value-for-money examinations.

Consolidated Fund - The Government‟s current account, operated by the Treasury, through which pass most government payments and receipts.

Consolidated Fund Extra Receipt (CFER) - Income, or related cash, that passes through a department‟s accounts but may not be retained by the department and is surrendered to the Consolidated Fund.

Contingent Liability - Potential liability that is uncertain but recognises that future expenditure may arise if certain conditions are met or certain events happen.

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 multi-year limits. Some elements may be largely demand led.

There is a small DEL Reserve from which the Treasury may support unavoidable costs that cannot be absorbed within the existing limit.

Departmental Unallocated Provision (DUP) - An element of a department‟s total DEL that is not allocated to particular spending, but held back by the department to meet any future unforeseen pressures.

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.

Estimate - 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 by a government department.

Estimates Memorandum - An explanation of how provision sought in the Estimate is intended to be used and the relationship with other spending controls. Primarily provided for the departmental select committee but made freely available online

Excess Vote - The means by which excess expenditure, or otherwise unauthorised expenditure, of cash, capital or resources, is regularised through an additional vote by Parliament.

Grant - Payment made by a department, or other public body, to outside bodies to reimburse expenditure on agreed items or functions, and often paid only on statutory conditions being met. May be made for resource or for capital purposes.

Grant in Aid - Financing payment made by a department to an NDPB or other arms length body.

International Financial Reporting Standards (IFRS) - International accounting standards, adopted by government and reflected in UK GAAP.

Main Estimate - The means through which departments seek parliamentary approval for their spending plans for the year ahead. Presented to Parliament within five weeks of the Budget Statement.

Near-Cash - Expenditure that has a directly 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 (NCR) - 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 expenditure in its Estimate. In the case of a negative net cash requirement, the department must generate a surplus of at least that amount.

Non-Cash - Expenditure where there is no directly related cash transaction but which reflects resources used. Examples include depreciation and provisions.

Public Accounts Committee (PAC) - A committee of the House of Commons, which examines the accounting for, and the regularity and propriety of, government expenditure. It also examines the economy, efficiency and effectiveness of expenditure. Also commonly known as the Committee of Public Accounts.

Section - An ‘Estimate line’ within the Part II: Subhead detail table in an Estimate.

Select Committee - Both Houses of Parliament have select committees that scrutinise the work and expenditure of government. Responsibilities include oversight of particular government departments.

Spending Review - A cross-government review of departmental aims and objectives and analysis of spending programmes. Results in the allocation of multi-year budgetary limits.

Subhead - A single cell within a section (or Estimate line) within the Part II: Subhead detail table in an Estimate.

Supplementary Estimate - The means by which departments seek to amend parliamentary authority provided through Main Estimates by altering the limits on resources, capital and/or cash or varying the way in which provision is allocated. Normally presented in January each year.

Supply - The process whereby Parliament gives statutory authority for both the consumption of resources (for resource and capital purposes) and for cash to be drawn from the Consolidated Fund.

Supply and Appropriation Acts - Acts of Parliament which give formal approval to departmental Supply Estimates. There are usually two such Acts each year: the Supply and Appropriation (Main Estimates) Act is presented in July and authorises the Main Estimates, and the Supply and Appropriation (Anticipation & Adjustments) Act is presented in February/March and authorises Supplementary Estimates, Vote on Account for the forthcoming year and any Statement of Excesses relating to the prior year.

Token Estimate (or section) - 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. Since Estimates may include negative limits (where income is greater than expenditure), a token £1,000 would only be required where income and expenditure completely offset.

Virement - The use of savings on one or more sections (Estimate lines) or subheads to meet excesses on another section or subhead within the same voted limit in an Estimate.

Vote - The process by which Parliament approves funds in response to Supply Estimates.

Voted provision - That which has been authorised by Parliament in response to Supply Estimates.

Vote on Account - Presented to Parliament by the Treasury in January to provide necessary provision for voted resources, capital and cash for each departmental Estimate in the early months of the following financial year. For each department it generally seeks up to 45 per cent of the amounts voted in the current year’s Main Estimate.