2 Administration Estimate
Background
6. In December 2010 the House of Commons Commission
committed itself to reducing the Administration Estimate by at
least 17% by 2014/15, from a baseline of £231 million in
2010/11. This was in line with reductions being made across the
wider public sector. The Commission also agreed provisional totals
for the resource element of the Estimate of £228 million
in 2011/12, £224 million in 2012/13, £220 million for
2013/14 and £210 million for 2014/15. This path was intended
to deliver the Commission's savings target.
7. Estimates were laid in line with this path
in 2011/12 and 2012/13. The Estimate laid for 2013/14 was £218
million—£2 million below the path. This reflected the
decision of the House on 20 March 2013 that the cost of Members'
allowance of pre-paid envelopes and stationery would be met from
the Members Estimate rather than the Administration Estimate from
2013/14.
8. The current financial planning round extends
beyond the period of the current savings target. In June 2013,
the Commission agreed a remit for the round. In particular it
agreed that the existing savings target for 2014/15 should be
recalibrated to reflect transfers between estimates; agreed that
the Finance and Services Committee should continue to look for
opportunities to make further efficiencies and ensure value for
money in the delivery of services; and agreed that future funding
for enhanced scrutiny and related functions should not necessarily
be financed from within existing budgets. Otherwise, for planning
purposes, the resource budget is assumed to be flat in real terms
from 2015/16 onwards. As the Estimate is agreed annually, this
assumption does not preclude the actual budget for years after
2014/15 being set at a different level.
9. To put the current plan in context, there
was a steady increase in spending on the Administration Estimate
in the five years 2004/05 to 2009/10—roughly the period
of the 2005 Parliament. Once adjustments are made for non-cash
items and grants, and the impact of inflation using the GDP deflator,
total spending rose by some 14%, or 2.7% per annum, in real terms.
This was a period when the House Administration faced a number
of additional requirements, mainly driven by decisions of the
House or its committees. Examples include decisions to expand
public engagement and improve ICT provision. Another significant
driver of spending was levels of activity, for example increases
in the number of written Parliamentary Questions and Early Day
Motions. External factors such as increased security requirements
also added to total spending.
Recalibrating
the target
10. A further significant transfer will occur
on 1 April 2014 as result of the merger of the pension scheme
for House staff with the Principal Civil Service Pension Scheme.
In return for a one-off payment in respect of outstanding liabilities,
the Cabinet Office will bear the on-going accounting charges arising
from the liabilities. This will reduce the net annual charge to
the House by some £19 million per annum.
11. The Committee is recommending that two additional
charges are also treated as out of scope:
- On 12 June 2007 the House of
Commons endorsed a proposal by the Administration Committee that
there should be a dedicated space for educational visitors to
be provided on or off the Estate complemented by engagement with
those who do not visit Westminster.[1]
Options for such a facility are currently being considered. If
such a facility be provided, the additional running costs (which
include staff, security, ICT equipment, premises costs and travel
subsidies) should be regarded as a new service and outside the
scope of the savings target.
- Alongside maintenance of the Palace of Westminster,
the House of Commons has commenced a major programme of refurbishment
of a number of outbuildings (known as the Northern Estate). This
work will generate significant impairment costs. These arise where
the value of the building does not increase by as much as the
value of the works carried out, and a proportion of the capital
cost is charged to the resource account. In the medium term the
costs arise primarily from the refurbishment of 1 Canon Row
and Norman Shaw North. If included within the scope of the savings
target, there is a risk that these accounting charges would squeeze
the resources for services to Members and the public as the scale
of essential repair work increases. The Northern Estate refurbishment
programme is also expected to require additional decant space,
but as yet the costs of this cannot be quantified.
12. As a result of the transfers and out-of-scope
items, the provisional target of an Estimate of £210 million
in 2014/15 has been reduced to £202.6 million (excluding
the cost of the one-off payment in respect of the pension transfer).
Table 1: Re-calibration of the savings target
| 2014/15
(£m)
| 2015/16
(£m)
| 2016/17
(£m)
| 2017/18
(£m)
|
| Existing target at 2014/15 prices
| 210.0 | 210.0
| 210.0 | 210.0
|
| Transfers (a) | -20.7
| -20.7 | -20.7
| -20.7 |
| Out-of-scope items (b) |
+13.3 | +18.0
| +24.0 | +21.7
|
| Inflation (c) |
| +2.8 | +6.7
| +10.7 |
| Assumed resource budget for planning purposes
| 202.6 | 210.1
| 220.0 | 221.7
|
| Transfer of pension liabilities to the Cabinet Office
| 450.0 |
| | |
Notes: (a) £2.0m in respect of Members'
stationery and postage and £18.7m in respect of staff pensions.
(b) £1.0m for Education Centre running costs
and £12.3m to £23m for impairment costs related to the
Palace of Westminster and Northern Estate refurbishment.
(c) 1.5% in 2015/16 (when it is assumed that
pay restraint will continue) and 2% thereafter.
Medium-term
financial plan
13. Appendix A to this report summarises the
House's draft medium-term financial plan for the period 2014/15
to 2017/18. This indicates that projected resource spending will
be £2 million below the recalibrated target for 2014/15,
and £1 million below the assumed budget for 2015/16. However,
additional savings in the order of £3-£4 million will
be required in the two subsequent years if the assumed resource
budget is to be adhered to.
Table 2: Medium Term Financial Plan 2014/15 to
2017/18: Resource
| 2014/15
£m
| 2015/16
£m
| 2016/17
£m
| 2017/18
£m
|
| Assumed resource budget for planning purposes
| 202.6 | 210.1
| 220.0 | 221.7
|
| Projected spending in Medium-Term Financial Plan (including planned savings)
| 200.6 | 209.1
| 223.2 | 225.6
|
| Further savings required (+)/headroom available(-)
| (2.0) | (1.0)
| 3.2 | 3.9
|
Catering
14. In June 2013 the Commission agreed a new
financial regime for catering services. A revised pricing mechanism
allows factors such as gross profit margins and customer acceptability
to be taken into account alongside benchmark prices from appropriate
comparators. Prices will be reviewed, and changes implemented,
at six-monthly intervals as part of the regular operation of the
business, with Member committees being consulted on significant
changes. This is supplemented by two further financial controls
to be set annually: an overall target for gross profit margin
(sales less cost of sales as a percentage of sales) to control
kitchen costs; and a target for the net cost of catering to bear
down on staff and other non-food costs.
15. We propose to recommend to the Commission
that for 2014/15 the target gross profit margin should be 66%
and the net cost target should be £3.8 million excluding
income generation activities. (It is anticipated that, after income
generation activities, the subsidy will be £2.7million in
2014/15.)
Grant-aided
bodies
16. Six bodies receive their primary funding
from the Administration Estimate: History of Parliament Trust,
Commonwealth Parliamentary Association (UK Branch), Inter Parliamentary
Union (British Group), British Irish Parliamentary Assembly, British
American Parliamentary Group and Association of Former members
of Parliament. In 2012/13 payments to these bodies by the House
of Commons totalled £3.0m. For most of these bodies, grant
levels were reduced by 10% in 2010 as part of the initial savings
package, with the expectation that they would be frozen at this
level until 2014/15.
17. The bids received from CPA, IPU and BIPA
all reflect a continuation of the current funding levels for the
period to 2016/17. No bid had been received from the BAPG by the
mid-September deadline. The History of Parliament Trust has submitted
a bid for a substantial increase in funding in 2015/16 and 2016/17.
The Association of Former Members has requested additional funding
from 2014/15.
18. We propose to recommend to the Commission
that most grants should stay flat in 2014/15 in line with the
current agreements and, unless there are exception circumstances,
should thereafter be subject to the same financial remit as overall
House spending: namely a maximum increase of 1.5% in 2015/16 and
2% thereafter. In the case of the Association of Former Members
of Parliament, which receives a small grant of £6,000 per
annum (unchanged since 2007), the Committee sees merit in increasing
this to £12,000 in 2014/15, after which it should be subject
to the same constraints.
Capital
expenditure
19. Capital expenditure relates primarily to
investment in the Estate (the Palace of Westminster and other
buildings on the Parliamentary Estate) and ICT. Most of the programmes
are carried out on a bi-cameral basis, with costs shared, using
agreed ratios, between the two Houses.
Table 3: Medium Term Financial Plan 2014/15 to
2017/18: Capital
| 2014/15
£m
| 2015/16
£m
| 2016/17
£m
| 2017/18
£m
|
| Capital Estimate/plan |
44.0 | 52.0
| 64.0 | 58.0
|
20. Capital expenditure is planned to increase in the medium
term due to a major building refurbishment programme, mechanical
and engineering works, high priority works to improve fire safety
and security, and investment in the ICT network.
Draft Estimate
21. The Finance and Services Committee is proposing
to recommend to the Commission in December 2013 a draft Estimate
for 2014/15 with resource budget of £200.6 million and a
capital budget of £44.0 million.
1 Improving Facilities for Educational Visitors
to Parliament, HC 434 2006/07 Back
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