House of Commons Administration: Financial Plan 2013/14 to 2016/17, including draft Estimate for 2013/14 - Finance and Services Committee Contents


Appendix A: Draft Estimate for 2013/14 and Medium Term Financial Plan 2013/14 to 2016/17


Strategy for the House of Commons Service 2010 to 2015[2]

1.  The strategy for the House of Commons Service is that by 2015:

  • The House of Commons will be valued as the central institution in our democracy: effective in holding the government to account, scrutinising legislation, and representing the diverse views of the electorate. It will be seen both in the UK and abroad as a model of good practice and innovation and will cost less money;
  • Members of Parliament will have the information, advice and support and technology they need to be effective in their work and to engage closely with their constituents;
  • The House Service will have earned the respect of MPs and of the public for our independence, integrity, and professionalism, and for our commitment to making Parliament work ever more effectively. We will be seen as modern, efficient and responsive. We will feel proud to work here and confident that our contribution is valued;
  • We will be engaged on an agreed plan of work to ensure both that the Palace of Westminster is preserved for future generations and that Parliament has the accommodation it needs to operate in a modern democracy.

2.  To achieve this aim the House Service:

  • Will work at every level to earn respect for the House of Commons;
  • Will make the House of Commons more effective;
  • Will make the House Administration more efficient;
  • Will ensure that Members, staff and the public are well-informed.

3.  The medium term financial plan supports delivery of the strategy.

Policy Context

4.  There are a number of significant policy matters and events on the horizon that may have a bearing on the budget. It is not possible to quantify the financial impact of these at the moment:

  • Palace of Westminster restoration and renewal;
  • Whether there is further progress in achieving the objective of increasing the proportion of the Estate that is freehold property;
  • Any further significant changes to sitting hours;
  • Developments in public engagement (public reading stages for bills, e-petitions expanding education and outreach and increasing visitor numbers);
  • Spending implications of the end of the 2010 Parliament and the start of the 2015 Parliament;
  • Staff pay and pensions issues;
  • Plans to mark significant anniversaries in 2015, such as Magna Carta and De Montfort's Parliament.

Economic Context

5.  The economic context is challenging, and recovery from the recession is slow, with a major programme of public sector deficit reduction in the UK and severe problems in the Eurozone. The next government Spending Review is likely to result in further reductions in Departmental Spending at least until 2016/17.

Draft Estimate 2013/14 and Medium Term Financial Plan

6.  Subject to the outcome of the debate on this report, the Finance and Services Committee is proposing to recommend to the Commission in December 2012 the draft Estimate for 2013/14 and Medium Term Financial Plan (MTFP) as shown in tables 1 and 2 below. The table presents the same figures in two ways: firstly by category; secondly by department. The figures take account of inflation and other upward pressures (see planning assumptions), paragraphs 9-14 below. In relation to shared services, the figures shown are for the House of Commons only.

7.  The plan reflects:

  • Inflation uplifts (pay and prices);
  • Growth pressures/new activities to meet the requirements of the House and its Committees or imposed from outside (such as business rates);
  • Savings agreed to date (the initial tranche, plus savings agreed as part of the 2012/13 budget round);
  • The latest assessment of delivery by the savings strands (as explained in Appendix B).

Table 1: Draft 2013/14 Estimate and Medium Term Financial Plan: Resource

  2012/13 2013/14 2014/15 2015/16 2016/17
Resource £000s £000s £000s £000s £000s
2012/13 Budget Baseline 224,000 224,000 224,000 224,000
Uplifts 3,012 6,067 9,46414,367
Initial Savings Programme (50) (212) (212)(212)
Savings agreed in 2012/13 round (443) (2,230) (1,968)(1,968)
Savings Strands (6,313) (16,205) (16,241)(16,241)
Reverse out one-off growth in 2012/13[3] (1,111) (1,187) (1,187)(1,187)
Adjustments to central provision (1,800) (2,050) (2,300)(2,300)
Growth 2,725 2,911 2,8782,778
Adjusted baselines 220,020 211,094 214,434 219,237
General Election 0 0(4,500)
Further savings sought 0 (2,165) 1,690(4,204)
Resource Risks (see Central Provision) (20) 1,071 2,3762,967
Target resource baseline 224,000 220,000 210,000 214,000 218,000
By department:[4]
Chamber & Committee Services 48,289 46,33845,158 46,283 47,330
Facilities 68,580 68,59467,064 69,010 71,160
Finance 3,4853,333 3,267 3,0003,070
Human Resources & Change 6,956 6,5886,135 6,196 6,367
Information Services 17,574 15,49613,649 14,070 14,496
Office Chief Executive 2,017 2,0581,994 1,945 1,985
Parliamentary Security Director 22,855 23,26023,589 23,999 24,441
Parliamentary ICT 18,479 19,17217,049 17,479 17,923
Speaker's Office 592530 538551 564
Central Provision 28,173 28,63128,722 29,277 29,868
Project Provision (ICT Programmes) 7,000 6,0005,000 5,000 5,000
224,000 220,000 212,165 216,810 222,204
Possible General Election 00 0(4,500) 0
Further savings sought 0 (2,165) 1,690(4,204)
Target resource baseline 224,000 220,000 210,000 214,000 218,000

Table 2: Draft 2013/14 Estimate and Medium Term Financial Plan: Capital
2013/14 2014/15 2015/16 2016/17
Capital £000s £000s £000s £000s
Estates Portfolio 30,388 35,20934,859 36,274
Network consolidation 0800 5,600 5,600
ICT Portfolio 2802,134 1,613 151
30,668 38,143 42,072 42,025
Other:
Broadcasting routine investment 7575 7575
Works of Art 7575 7575
PICT routine investment 200200 200200
Contingency 1,782 30778 125
2,132 657 428 475
Target capital baseline 32,800 38,800 42,500 42,500

8.  The resource plan achieves the provisional target for 2013/14 of £220 million. It also shows that a further £2.2 million is required to meet the provisional target of £210 million by 2014/15. Furthermore, were the Commission to keep the Estimate flat in real terms for 2015/16 and 2016/17, further savings might be required. This is masked to an extent by the anticipated dip in spend around election time.

Planning assumptions

9.  The financial plan for the next two years, to 2014/15, assumes that the savings proposals outlined in Appendix B will be delivered, to meet the target set by the House of Commons Commission in October 2010.[5] Changes to the proposals may mean amending the financial plan and finding savings elsewhere.

10.  In December 2010, the Commission agreed the following provisional figures for future years, which, when anticipated inflation was taken into account, achieved the planned 17% resource saving by 2014/15: 2012/13 £224 million, 2013/14 £220 million, 2014/15 £210 million.[6] The assumption is that the financial plan should aim to achieve these figures.

11.  Inflation has been budgeted for at 2.0% on relevant budgets from 2012/13. This is reasonable given the summary of independent forecasts published by the Treasury.

12.  The House has, by law, to maintain pay broadly in line with Civil Service pay. The financial plan reflects a1% increase for 2013/14 and 2014/15 and a 2% increase for 2015/16 and 2016/17.

13.  There has been considerable fluctuation in staff pension costs in recent years. For the financial plan, the departmental contribution has been maintained at 23.5% and the interest at £22.7m, pending discussions with the actuary. The changes in employee contributions in 2012, 2013 and 2014, and the major scheme changes expected in 2015, such as the move to career averaging rather than final salary (subject to enactment of the forthcoming Public Sector Pensions Bill), are designed to reduce the liability and make the scheme more affordable in the longer term.

14.  Depreciation has been included at £16 million across the four year period. Future costs will be dependent on new capital investment and estate valuation fluctuations.

Pressures

15.  Growth pressures, as well as savings, have been considered in detail. In total growth of £2.7 million has been built into the 2013/14 Estimate. The main pressures include:

  • Property costs including utility prices, rents and business rates (Cross Rail), £1.6m;
  • Expansion of educational visits, £0.1m;
  • Ongoing support costs arising from ICT investment, £0.6m.

Risks

16.  There are some notable risks in relation to the MTFP that are set out below with examples:

  • Staff related: pay deals, pension costs, recruitment and retention issues resulting in additional costs;
  • Demand for services: an increase in the volume of requests for Library services, additional demand for IT services, increases in select/joint committee activity or new committees;
  • Delivery of savings;
  • Economic risks: price inflation (running above 2%), particularly volatile items such as utilities, income levels (eg number of visitors);
  • Policy developments: see examples in paragraph 4.

17.  There are particular risks associated with the non-cash part of the Estimate:

  • Staff Pensions: there is uncertainty about pension interest and employer contributions over the medium term;
  • Asset valuations may result in significant positive or negative impacts;
  • Depreciation costs are affected by valuations and also reflect the investment programme;
  • Property dilapidations and onerous lease contract costs may arise.

18.  The draft Estimate for 2013/14 includes a contingency in the order of £1 million to cover these risks.

Timetable for finalising and laying the Estimate

19.  The House of Commons (Administration) Act 1978 states that "the Commission shall prepare and lay before the House of Commons an estimate for that year...". The Commission aims to agree the Estimate for 2013/14 in December 2012 for laying before the House in the spring. This report from the Finance and Services Committee forms the basis for a debate on the draft Estimate and financial plan to inform the Commission's deliberations in December.


2   New Parliament: Strategy for the House of Commons Service 2010-2015, June 2010 (http://www.parliament.uk/mps-lords-and-offices/offices/commons/management-board/management-board-publications1/hoc-strategy/) Back

3   Short-term costs have been removed for items not required in later years, for example the cost of changes to the website. Back

4   Reductions in Departmental spending totals for 2013/14 and 2014/15 reflect delivery of the savings strands, namely P2W in DCCS, Market Testing in DCCS and Facilities, Income Generation in Information Services and ICT Strategy in PICT. The Operations Strand savings affect all Departments. Back

5   See Commission decisions, 18 October 2010: http://www.parliament.uk/mps-lords-and-offices/offices/commons/house-of-commons-commission/minutes/hccminutes2010/hcc-181010/ Back

6   See Commission decisions, 13 December 2010: http://www.parliament.uk/mps-lords-and-offices/offices/commons/house-of-commons-commission/minutes/hccminutes2010/hcc-131210/ Back


 
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Prepared 29 October 2012