House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

Transcription

1 House of Commons Finance Committee House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 First Report of Session HC 1761

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3 House of Commons Finance Committee House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 First Report of Session Report, together with formal minutes relating to the report Ordered by the House of Commons to be printed 20 November 2018 HC 1761 Published on 4 December 2018 by authority of the House of Commons

4 Finance Committee The Finance Committee is established under Standing Order No. 144 to consider expenditure on and the administration of services provided from the Estimates for the House of Commons. The Committee: with the assistance of the Commons Executive Board, prepares the Estimates for House of Commons: Administration for submission to the House of Commons Commission; with the assistance of the Accounting Officer, prepares the Estimates for House of Commons: Members for submission to the Members Estimate Committee; monitors the financial performance of the House Administration; and reports to the House of Commons Commission and the Members Estimate Committee or the Speaker on the financial and administrative implications of recommendations made to them by other Committees of the House. The Committee has 11 members and meets approximately once a month when the House is siting. Meetings are usually held in private and the Committee is assisted by the Director of Finance and other House staff as appropriate. Current Membership Chris Bryant MP (Labour, Rhondda) (Chair) Mr Clive Betts MP (Labour, Sheffield South East) Sir Geoffrey Clifton-Brown MP (Conservative, The Cotswolds) Luke Graham MP (Conservative, Ochil and South Perthshire) Neil Gray MP (Scottish National Party, Airdrie and Shotts) Rt Hon Sir Lindsay Hoyle MP (Labour, Chorley) Helen Jones MP (Labour, Warrington North) Stephen McPartland MP (Conservative, Stevenage) Mark Menzies MP (Conservative, Fylde) Sir Robert Syms MP (Conservative, Poole) Rt Hon Mark Tami MP (Labour, Alyn and Deeside) Publications Committee reports are published on the Committee s website at and in print by Order of the House. Committee Staff The current staff of the committee are Robert Cope (Clerk), Ronnie Jefferson (Senior Committee Assistant). Contacts All correspondence should be addressed to the Clerk of the Finance Committee, House of Commons, London SW1A 0AA. The telephone number for general enquiries is ; the Committee s address is financecommittee@parliament.uk.

5 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 1 Contents 1 Introduction 3 2 Administration Estimate 4 Financial remit for 2019/20 to 2022/23 4 Medium-Term Financial Plan 5 Medium-Term Investment Plan 7 Draft Estimate 8 3 Members Estimate 9 Appendix 10 Formal minutes 41

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7 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/ Introduction 1. Funding for the House of Commons is provided through three sources: the House of Commons: Administration Estimate; the House of Commons: Members Estimate; and the Independent Parliamentary Standards Authority (IPSA) Estimate. The latter of these funds the salaries, business costs and expenses of Members of Parliament and their staff. It is prepared by IPSA and approved by the Speaker s Committee on IPSA, in consultation with HM Treasury. For 2018/19 the main IPSA Estimate sought million in resource and 1.3 million in capital.1 2. The Finance Committee is established under Standing Order No. 144 to consider expenditure on and the administration of services provided from the Estimates for the House of Commons. With the assistance of the Commons Executive Board, each financial year, the Committee prepares the Administration Estimate for submission to the House of Commons Commission. And with the assistance of the Accounting Officer, it prepares the Members Estimate for submission to the Members Estimate Committee. 3. The Administration Estimate funds expenditure arising from the general administration of the House of Commons and activities undertaken to meet Parliament s objectives and associated commercial activities. This includes, for example, the cost of House staff, office accommodation in Westminster, running and maintaining the Parliamentary estate, printing, security, broadcasting, IT and catering. It also covers the cost of travel for Members in connection with their committee and delegation work, and grants-in-aid to the History of Parliament Trust, the Commonwealth Parliamentary Association UK Branch, and other parliamentary bodies. Income arising from rental, fees and charges in connection with activities within Parliament also forms part of the Estimate. In 2018/19 the main Administration Estimate sought million resource and million capital.2 4. The Members Estimate, which is laid by HM Treasury, on behalf of the House, covers expenditure on: financial assistance to Opposition parties to support them in carrying out their Parliamentary or representative functions; the Exchequer contribution to the Parliamentary Contributory Pension Fund (PCPF); payroll costs for the Deputy Speakers; and other non-cash costs. In 2018/19 the main Members Estimate sought 17.1 million in resource and no capital.3 5. This Report sets out the Committee s provisional advice to the Commission and the Members Estimate Committee on the 2019/20 to 2022/23 Medium-Term Financial Plan (MTFP), and the 2019/20 Administration and Members Estimates. The Appendix to this Report contains a summary version of the advice that the Committee has received from the Commons Executive Board. Work on the plan will continue into December and revisions to some of the figures are likely. It is the intention of the Committee to seek a debate on the Report prior to the House of Commons Commission s consideration of the MTFP and draft Estimates in December. 1 IPSA, Main Estimate , HC House of Commons, Main Supply Estimate 2018/19, HC HM Treasury, Central Government Supply Estimates 2018/19, HC 957

8 4 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 2 Administration Estimate Financial remit for 2019/20 to 2022/23 6. Each year, the process for determining the resource element of the Administration Estimate begins with the setting of a financial remit. This is essentially a policy statement by the House of Commons Commission, which sets the parameters for the Estimate. It is then translated into a target Estimate for the next four financial years, which forms the basis for the Medium-Term Financial Plan. 7. Earlier this year, on the advice of the Finance Committee, the House of Commons Commission agreed a financial remit for the planning round to that assumed zero growth in real terms, and that the House would absorb day-to-day upward cost pressures other than inflation. Furthermore, the efficiencies target of 15.5 million should be met by , recognising that this sum may be reinvested in priority areas. The Finance Committee would regularly review progress against the target. 8. The main purpose of the remit is to control spending levels. However, on the advice of the Committee, the Commission has agreed that some additional spending should not necessarily be funded from existing budgets. These are driven in part by the size and structure of the budget, particularly the high proportion that is spent on accommodation and security, but also a recognition that some of the core functions of the House, such as parliamentary scrutiny of legislation and the Government, should be protected. The exceptions that the Finance Committee recommended to the remit for this year s planning round are: Significant enhancements to scrutiny, which have been agreed by the House (such as additional select committees), or specifically recommended by Members and agreed by the Commission; Security measures, which will enhance the physical or cyber security of Parliament; The resource implications of the three strategic programmes the Northern Estate Programme, the Restoration and Renewal Programme, and the Archives Accommodation Programme; and extending to programme management costs, professional fees that cannot be capitalised, running and refurbishment costs for decant buildings, and impairment costs. This includes the depreciation of works to leased buildings to facilitate moves, particularly where they are spread over the life of a relatively short lease The resource impact of other capital works to buildings and property revaluations, including changes to depreciation arising from property revaluations, obsolescence and impairment charges; and Relocation contingency planning to enable Parliament to carry out business as usual in the event of an emergency.

9 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/ In addition, the Finance Committee is also now recommending two further exceptions: New services agreed by the House and/or new services in response to external reviews or enquiries. For 2019/20, a significant increase in employer pension contributions. This mirrors the approach being taken by government departments. Furthermore, the Committee is recommending to the Commission a clarification to the fourth bullet, as follows: The resource impact of other capital works to buildings and property revaluations including projects in the programme that are classified as resource, staff costs to deliver the programme, changes to depreciation arising from property revaluations, obsolescence and impairment charges. 10. The remit assumes an inflation rate of 2 per cent. On this basis, the target resource element of the Administration Estimate for 2019/20 is million million of this relates to expenditure to which the exceptions outlined above apply, the bulk of which, 86.7 million, is resource expenditure on the House s three strategic programmes and the resource impact of capital works. Medium-Term Financial Plan 11. The Medium-Term Financial Plan (MTFP) currently proposed by the Commons Executive Board is summarised in Table 1 below. The Table also provides a comparison with the MTFP set by the House of Commons Commission last year. A more detailed version is provided in Annex A of the Appendix. Table 1: Medium-Term Financial Plan 2019/ /23 ( million) 2019/ / / / /20 MTFP (draft) /19 MTFP Change between years At present, the proposed MTFP exceeds the remit by 0.6 million in 2019/20 before proposed investments are taken into account. If the proposed investment options are also taken into account, the remit is exceeded by 2.4 million, giving resource expenditure of million in 2019/20. The exceeding of the remit is for 2019/20 alone and in 2020/21 and subsequent years, the draft MTFP returns below the target estimate. The Board is, however, looking at ways in which the Plan can still be brought within the remit for 2019/20, so these figures will be revised before the Committee finalises its advice to the Commission in December. 13. Part of the reason for the difference between this year s MTFP and last year s is the factoring in of inflationary uplifts and unavoidable growth pressures identified by teams. However, the primary reason is the effect of the House s decision earlier this year to

10 6 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 support the comprehensive restoration and renewal (R&R) of the Palace of Westminster, which has resulted in a significant ramping up of activity over the course of this year. This, together with the resource implications of other capital projects, such as the Northern Estate Programme, resulted in a net increase of 85.5 million on the 2019/20 baseline agreed last year. Table 2, below, gives a more detailed breakdown of the proposed resource expenditure by team, and how this compares to their budgets in 2018/19. Table 2: Changes to team budgets from 2018/19 to 2019/ A number of factors are driving the increase in the resource budget between 2018/19 and 2019/20, and hence the breach of the remit. This includes 2.7 million of unavoidable growth in the budget, the largest component of which is 1.7 million to cover depreciation arising from historic and planned Digital capital investment. 15. The Committee is keeping under consideration additional investment bids of 1.8 million in 2019/20, recommended to it by the Board, the purpose of which are either to improve services to Members, generate savings in future years, or indirectly support the strategic programmes. These include: 519k in additional resource to support the development of a new internal and external Communications Strategy. 700k to extend the Ways of Working Programme, which aims to support teams in embedding modern working practices into the way they work. 176k to fund a transformation of the Pass Office to focus on its core function of security vetting with pass issuing being undertaken by a customer-focused team, making greater use of new technology to manage applications.

11 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/ Other proposed areas of growth in 2019/20 are in areas where the exceptions, outlined above apply: 3.3 million to expand the Customer and Client Team to deal with the building occupation requirements for the R&R Programme, as well as building maintenance and cleaning changes arising from decants, including Richmond House. 2.4 million to establish the Shadow Sponsor Body, which will be responsible for commissioning the R&R Programme and overseeing the Shadow Delivery Authority. A Liaison Committee bid for 1.3m in 2019/20 and 1.5m 2020/21 onwards to provide additional posts to help select committee workload, support collaboration with the Research and Innovation Team, reduce staffing gaps, and increase resource for the Web and Publications Unit and media and social media teams. 765k to support the introduction of the new Independent Complaints and Grievance Scheme, which the House approved in July Within the Parliamentary Digital Service, 1.2 million for R&R technological support and 950k to support Estates property decants. A decision on 562k funding for local engagement teams, a new service for Members constituency offices, has been deferred pending a business case. Medium-Term Investment Plan 17. Unlike the resource element of the Administration Estimate, there is no financial remit set for the capital budget. This is because of the scale of the backlog of capital projects across the Parliamentary Estate as well as the three main strategic programmes, which are underway. The Medium-Term Investment Plan (MTIP) sets out the bicameral plans for investment in strategic programmes, estates and digital over the same period as the MTFP, and this is the basis for the capital element of the Administration Estimate. The cost of joint projects is split between the Commons and Lords on a 60:40 basis, although some projects are Commons or Lords-only. Table 3, below, shows the draft MTIP figures (Commons share) for the current planning round and how they have changed compared to last year. A more detailed version is provided in Annex E of the Appendix. Table 3: Medium-Term Investment Plan 2019/20 to 2022/23 ( million) 2019/ / / / /20 MTIP (draft) /19 MTIP Change between years (83.5) (15.0) (13.1) 32.5

12 8 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/ The bulk of the capital programme over this period is split between three areas of work. The largest component is Strategic Estates core projects, which includes conservation work to, for example, the Elizabeth Tower; repair of the cast iron roofs; fire safety works to bring the Palace of Westminster in line with current regulations; and mechanical and engineering works that have been prioritised as urgent ahead of the R&R Programme. Overall, the Commons share of these and other projects, comprises million of proposed capital expenditure in 2019/ The second main area of work is the Northern Estate Programme (NEP). The purpose of this programme was originally to deliver the repair and refurbishment of a number of buildings on the northern part of the Parliamentary Estate. Following the decision of the House earlier this year to support the full decant of the Palace of Westminster to allow the R&R Programme to take place as quickly and cost-effectively as possible, the NEP also now includes the likely comprehensive redevelopment of Richmond House to provide decant space for the House of Commons. The consequential change to the phasing of works on other buildings and delivery timescales is the main reason for the changes to the profile of the MTIP compared to last year. Work on the Northern Estate began in the second half of 2018 and will continue in 2019 with the refurbishment of 1 Derby Gate. The proposed capital budget for the NEP in 2019/20 is 82.4 million. 20. The third main component of the capital budget is the R&R Programme itself, which has a proposed capital budget of 42 million in 2019/20, largely to cover the cost of the programme team, design work and development of the Outline Business Case for the Programme. Draft Estimate 21. The Finance Committee is proposing to recommend to the House of Commons Commission in December 2018 a draft Administration Estimate for 2019/20 with a resource budget of million and a capital budget of million.

13 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/ Members Estimate 22. There is limited discretion in the setting of the Members Estimate. Financial assistance to Opposition parties (known also as Short Money) is uprated by inflation in accordance with existing resolutions of the House and the Exchequer contribution to the Parliamentary Contributory Pension Fund (PCPF) is subject to actuarial variations.4 Table 4 below sets out how each of the resource elements of the proposed Members Estimate compares to last year. There is no capital element of the Estimate. Table 4: Members Estimate 2018/19 and 2019/ The Finance Committee is proposing to recommend to the Members Estimate Committee in December 2018 a draft Members Estimate for 2019/20 with a resource budget of 17.7 million. 4 For further information on the relevant resolutions of the House, see the First Report of the Members Estimate Committee, Consolidated list of provisions of resolutions of the House relating to expenditure charged to the Estimate for the House of Commons: Members as at 16 July 2018, HC 1442.

14 10 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 Appendix: Draft Estimate and Medium Term Financial Plan to , paper by Director of Finance Purpose 1) This report concerns the development of the Estimate and Medium Term Financial Plan (MTFP). It seeks to explain the major issues for the planning round and set out the overall position. There are still some uncertainties, particularly in relation to the financial impact of major programmes and property disposals/acquisitions. Action for the Committee 2) The Committee is asked to note the main issues for the planning round and the current position for its advice to the House of Commons Commission which it will be asked to agree following the proposed debate and to note the position taken in relation to the History of Parliament Trust grant by the House of Lords Finance Committee. Vision and Strategic Goals 3) The Strategy for the House of Commons Service was approved by the Commission in The MTFP should enable the House Service to support a thriving parliamentary democracy and deliver the specific objectives, and clearly demonstrate how the service will become increasingly effective and efficient over time. The strategy is currently being refreshed. The three existing strategic objectives are expected to be expanded to four: Facilitating effective scrutiny and debate; Involving and inspiring the Public; Securing Parliament s future; Valuing every person Policy Context 4) There are a number of significant policy matters and events on the horizon that may have a bearing on the budget: The implementation of the decision for the UK to leave the EU; Measures to further enhance security around the Parliamentary Estate; Restoration and Renewal of the Palace of Westminster; Refurbishment of the Northern Estate; The review of Parliamentary Archives Accommodation;

15 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 11 Implementation of the Digital Strategy; Development of our approach to cyber security and the technology infrastructure; Significant increase in Employers Pension contribution; Pay and reward strategy beyond the current pay deal. 5) The assumption is there will be a General Election in June 2022 in line with the Fixed-term Parliaments Act High-level planning assumptions for ) The following assumptions provide a context for planning and will also inform the development of the Corporate Business Plan and Team Business Plans. 7) Economic ( ):5 GDP growth is expected to be around 1.5% per year (slightly lower than forecast a year ago); CPI inflation is expected to be around 2.0% each year (a little lower than forecast a year ago); The unemployment rate will remain at 4.0% or lower (again, lower than forecast a year ago); Forecasts for average earnings growth have edged up compared to a year ago. Average earnings are now expected to grow by 2.5% in 2019 and 2.8% in 2020, rising to 3.2% in The London Living Wage is per hour; 8) Parliamentary/political At the present time there is still uncertainty over the timing and nature of a settlement for the UK s departure from the EU. This, in turn, means that the legislative workload for Parliament over the coming months and year ahead is difficult to predict. Flexibility will therefore be key to ensuring we can support the House s role in facilitating effective scrutiny and debate; Majorities will be small which means on key votes whipping will be tight (but there may be fewer divisions overall); The political temperature is high and this may spill over into other areas; The timing of delegated legislation in connection with Brexit (with hundreds of statutory instruments needing to be dealt with) is still uncertain. Flexible resourcing will therefore be important; Relations with the House of Lords may come under strain depending on how they interpret the Salisbury-Addison Convention (whereby the Lords gives a 5 As published in the Budget on 29 October 2018

16 12 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 second reading to bills in the Government party manifesto) in light of a minority government and may continue to be tested in terms of the handling of secondary legislation; Brexit may also place pressures on devolved bodies both in terms of consent on legislation and in terms of where powers formerly held at EU level will reside post-brexit; 9) Public sector finances: Financial remit no growth in real terms, aside from funding specific new initiatives approved by the House or Member committees; Modest relaxation on public sector pay restraint; Planned government growth in public spending is 1.2% in real terms, though after allocation to NHS this is inflation only for most depts on average, so aligns with our remit; The November 2018 Budget confirmed a reduction of the discount rate used for calculating employer contributions in unfunded public service pension schemes. The latest pension valuations indicate that there will be additional costs to employers in providing public service pensions over the long-term. 10) Workforce: Differences between market rates and public sector pay will continue to make it difficult to recruit and retain staff in some parts of the House Service, and therefore we will need to use interims; The housing market will continue to contribute to high cost of living in London and the South East; Staff will continue to work more flexibly, being less tied to a single desk location. 11) Estate / decant plans: In early 2018 both Houses agreed a Decision in Principle for the full decant of the Palace of Westminster ahead of major refurbishment work. The bill to provide for the statutory establishment of the Sponsor Body and Deliver Body is expected to be introduced in Spring 2019, and to receive Royal Assent by early The Sponsor Body has recently been established in shadow form. Construction work on the Northern Estate began in the second half of 2018 and will continue in 2019 with the refurbishment of 1 Derby Gate. The other Northern Estate buildings, including Richmond House, will be refurbished and redeveloped over the coming years, with the Northern Estate Programme scheduled to be completed in the mid-2020s, in line with the expected start of restoration and renewal of the Palace of Westminster. Decant accommodation needs to be secured in readiness for large-scale office moves ahead of the Northern Estate Programme.

17 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 13 The Canon Row project will fully refurbish and repair the grade II listed building. The works began in 2014 and are expected to be finished in The lease for 7 Millbank expires in December Strategic Estates is currently reviewing the property options which include refurbishment. A number of security projects arose from the Murphy Review of Parliamentary security following the 22 March 2017 attack. While some projects have already started on site, others are still at an early stage. Although an overall completion date for these projects is yet to be confirmed, the target for substantial completion is Summer The Fire Safety Improvement Works Programme is currently focusing on fire life safety to achieve a higher standard of compliance with the Regulatory Reform (Fire Safety) Order 2005 (RRO) by December Significant interventions will be required in the Palace to maintain mechanical and electrical systems and the fabric of the building before Restoration & Renewal begins. 12) Security and access: The threat picture for the UK is unlikely to reduce, which will drive further demands for protective measures both for Members (potentially of both Houses) when working on the Parliamentary estate and, importantly, when away in constituencies. Security will need to be more agile in its approach and response given the different types of threats that are being seen in the UK and overseas. We will at all times follow best advice from recognised experts. The independent Murphy Review has generated a range of security projects that will require increased focus from Member Committees and resources across both Parliamentary Security Department (PSD) and Strategic Estates to deliver these in a timescale acceptable to Members. Perimeter security will continue to be a priority but we expect to be able to maintain current levels of public access (democratic visitors and commercial tours). Growing numbers of contractors will put increasing pressure on the Pass Office to turn around pass applications quickly and efficiently. Changes to the Estate (notably, but not only, R&R and NEP) will require additional resources to plan security measures and deliver operational security. 13) Digital / technology: Cyber security remains a high risk; There is significant technical debt with regards to platform services; Pressure on costs from the continuing growth in the number of users;

18 14 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 Pressure from major cost increases in critical software; Skype for Business will be fully implemented by July 2019; The full roll-out of Office 365 started in 2017/18 and is planned to finish in 2018/19. The detailed timings of rolling it out to Members / Members staff are still to be finalised. Website and intranet developments continue and support improvements in the public perception of Parliament and the work of Parliament; Foundational data modelling and interactions are needed in place to drive the website and move to a platforms-based approach for asset and facilities management, to develop with R&R the digital twin model of the Estate, and to improve HR and financial data. 14) Public: We know from our research that there is still work to do in improving the public s knowledge and perception of Parliament. We also know that low likelihood to vote is connected to low knowledge and understanding more than age, gender or socio-economic group. There are some positive signs of change in political behaviour, as evidenced by the high turnout in the EU referendum in 2016 and in the 2017 General Election. This is particularly true of younger people, where voter turnout increased significantly between the 2015 and 2017 Elections. The popularity of E-petitions (often publicised / shared via social media) is also an encouraging sign of public interest in Parliament. As the level of refurbishment work on the Estate increases there will be a need to reinforce the message that Parliament remains open for business and encourages the public to come in and/or engage with it. There is a focus in future years on growing the opportunities for public engagement beyond Westminster. Use of new technology, developing a strong UK-wide presence and developing the ability to work with partner organisations across the UK will all play a part in increasing engagement with the public, whoever and wherever they are. The Planning Round 15) Over the last few years a more integrated approach to forward planning has been developed which brings together financial, business, and workforce planning. Challenge meetings now take place three times a year, led by the Director of Corporate Finance & Performance. The meetings at the end of quarter 1 looked at high level changes and meetings at the end of quarter 2 in October/November examined figures in detail.

19 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/ ) The main themes for the challenge panels and the planning round are: Review of previous year outturn to identify any remaining capacity in team budgets; Review of emerging capacity/pressures in the current year and the ongoing impact; Review of any new pressures identified for future years; Review of proposals for reinvestment; Assessment of progress on the Efficiencies Programme and continuous improvement; Impact of major programmes and property decisions; Review of technical assumptions including employee costs, inflation, depreciation etc; and Review of the appropriate level of contingency in the medium term. 17) The planning process is designed to deliver the Administration and Members Estimates and a new Corporate Business Plan. The process incorporates the Medium Term Financial Plan and the Medium Term Investment Plan (a bi-cameral plan that includes a mixture of capital and resource investment in major programmes, the Estate and digital programmes) and a review of grants and fees and charges. 18) The Members Estimate now just includes Parliamentary Contributory Pension Fund (PCPF) exchequer contribution, Short Money and payroll costs for deputy Speaker salaries. Grants, IT equipment and support, postage and stationery, insurances and training for Members are now included in the Administration Estimate. 19) The capital investment arising from the Medium Term Investment Plan (MTIP) forms part of the MTFP and is at Annexes E & F. Financial Remit and Target Estimate 20) The financial remit for the planning round 2019/20 to 2022/23, agreed by the Commission in March 2018, assumes zero growth in real terms and that the House will absorb day to day upward cost pressures other than inflation. Furthermore, the efficiencies target of 15.5m should be met by , recognising that this sum may be reinvested in priority areas. The Finance Committee will regularly review progress on the programme. Maintaining control over the budget for day to day activity is important, irrespective of the increased expenditure on security and major programmes. 21) The exceptions to the remit are as follows: significant enhancements to scrutiny, which have been agreed by the House (e.g. additional select committees) or specifically recommended by Members (e.g. Liaison Committee) and agreed by the Commission;

20 16 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 security measures, which will enhance the physical or cyber security of Parliament in order to mitigate identified risks; the resource implications of major building refurbishments, namely the Northern Estate Programme, R&R and the Archives Accommodation Programme; and extending to programme management costs, professional fees that cannot be capitalised, running and refurbishment costs for decant buildings, and impairment costs. This should include the depreciation of works to leased buildings to facilitate moves, particularly where they are spread over the life of a relatively short lease; the resource impact of other capital works to buildings and property revaluations including changes to depreciation arising from property revaluations, obsolescence and impairment charges; relocation contingency planning, which will enable Parliament to carry out business as usual in the event of an emergency. 22) Proposed additions/clarifications to exceptions to the remit are: New services agreed by the House and/or new services in response to external reviews or inquiries; and the resource impact of other capital works to buildings and property revaluations including projects in the programme that are classified as resource, staff costs1 to deliver the programme, changes to depreciation arising from property revaluations, obsolescence and impairment charges; 23) In this planning round the new services referred to above relate to the Independent Complaints and Grievance Scheme, and the external review is the Cox Inquiry. The Committee indicated its willingness to support these areas at the October meeting. 24) The Strategic Estates programme is mainly capital, but some elements such as surveys are resource and some projects may be classified as resource for accounting reasons. Treating the resource element of the programme as inside the remit may prevent the delivery of the overall programme. The accounting rules on capitalisation of costs are strict and only those staff costs that relate directly to delivery of a capital project are capitalised. Treating the remaining resource staff costs as inside the remit may also prejudice delivery of the programme. 25) Any changes to employment costs (such as employer national insurance and pension contributions) should be absorbed wherever possible. For a very significant increase in pension contributions of up to 6m is expected due to the valuation and change in discount rate. In the budget the Chancellor advised that for government departments this would be funded next year, and for later years it would be factored into the Spending Review. It is recommended that the House mirrors this approach and treats the increase as outside the remit next year and reviews the situation again in the next planning round. 26) Some flexibility should be retained for unforeseen transfers between capital and resource. 1 The Finance Committee reviewed and noted the Strategic Estates resourcing plan at its meeting on 12 April 2018.

21 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/ ) The Committee will be asked to recommend these changes to the Commission as part of its advice on the Estimate and MTFP in December. 28) The remit is translated into a target Estimate calculation. The inflation rate used in the calculation is currently 2.0% to reflect the latest pay agreement and general price inflation. 29) The Commission agreed an efficiency target of 15.5m over the life of the Parliament. This is not reflected in the calculation at this point as a decision could be taken to re-invest some of the cashable efficiencies identified rather than reduce the Estimate. The paper includes proposals to reinvest some of the cashable efficiencies identified. Draft Estimate and Medium Term Financial Plan 30) The current draft of the MTFP is attached at Annex A. 31) The MTFP has been rolled forward to include , and reflect the changes to the organisational structure, any transfers between budgets and allocation of provisions for the pay award and inflation made this year. It includes future growth and savings that emerged from the challenge meetings. Overview 32) The new MTFP shows that before reinvestment the estimate for exceeds the target by 0.6m. This eases in future years. The table below shows the changes to existing MTFP for each area. The changes by Team are in Annexes A & B.

22 18 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 19/20 20/21 21/22 22/23,000,000,000,000 Baseline 275, , , ,129 Uplifts 2,245 1, ,282 Savings 164 (39) (74) (74) Growth 2,717 2,658 2,594 2,538 One-off adjustments (40) Total changes within remit 5,086 4,083 3,129 7,746 Bullying & Harrassment General Election 691 (1,321) (1,834) (976) Scrutiny 1,877 1,550 1,300 1,300 Security Northern Estate 5,862 (293) (362) (360) Strategic Programmes 45,200 27,212 29,693 26,824 Business Resilience Building Depreciation and Impairment 41,479 41, , ,056 Total outside remit 96,796 70, , ,180 Total before investment 377, , , ,055 Target Estimate 376, , , ,200 Headroom/Shortfall before proposed investments (555) 2,145 3,185 3,145 Investment options 1,845 1, Headroom/Shortfall after proposed investments (2,400) 800 2,200 2,300 Total if investments go ahead 379, , , ,900 Pressures and Opportunities 33) Unavoidable growth totals between 2.5m and 2.7m p.a. The main item is depreciation ( 1.5m - 1.7m) arising from historic and planned Digital capital investment. The Digital capital investment (excluding Members IT) has increased in recent years. The current budget is 5.9m and IT equipment is depreciated over 3 to 5 years. This is within the remit, unlike depreciation arising from the capital works programme. Future Investment Opportunities 34) The Commons Executive Board considered bids ranging from 3.4m in 2019/20 to 2.2m in 2022/23 and its recommended bids are detailed in Annex C & D. These peak in 2019/20 at 1.8m and fall to 0.8m by 2022/23. The scale of growth bids is an indication of the ambition to improve services. However, it is appropriate that CEB reviews all services in light of the review of corporate strategy currently underway, and identifies how it can refine its services before committing to new ones. The recommended bids are ones that will ensure current momentum is maintained and many are invest to save.

23 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/ ) Further work is needed to establish costs for the full response to the Cox report and these will be added in December. Currently it is anticipated bringing in an independent director to lead the work and sit on the Commons Executive Board for a fixed period of time, with some programme staff to support them. These costs with additional training and other support could cost in the order of 0.5m next year. Digital 36) When considering the Medium Term Investment Plan, Joint Investment Board recommended that Digital should work to contain pressures on running costs rather than having any further increase in the total budget. 37) CEB agreed to include some funding for growth for depreciation, Committee ipads and the Members broadband service, and to provide inflation of 0.7k to help with licencing cost pressure. R&R related items have also been funded. Specific items that have not been funded at this stage include Cyber Security phase 2, Members Printing Project and Members local engagement Teams, pending business cases that will clarify the expected benefits and savings. 38) This still leaves a shortfall in 2019/20 of around 2.5m compared with the Digital request (excluding Cyber and new Member services). Significant further work is needed to identify how this will be managed and the Finance Directors will work with Digital senior management to achieve this. Growth treated as Exceptions to the Remit Bullying and Harassment 39) Funding has been included for implementing the Independent Complaints and Grievance Scheme staffing, advice and support contracts and training. There is some funding for the second enquiry. Strategic Programmes and NEP 40) The budgets in the draft MTFP for R&R and NEP are in the table below. Prior years actuals and current year forecast is included for reference. Forecast Budget Prior Years 2018/ / / / /23 m m m m m m NEP Resource Capital R&R Resource Capital

24 20 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 Resource 41) There is significant additional resource investment sought for strategic programmes, particularly in 2019/20. There is quite a level of uncertainty and these are expected to change before the Estimate is agreed. 42) R&R staff costs changes now incorporate Digital Platform staffing, Shadow Sponsor body and Delivery Body transition team in addition to existing programme delivery staff costs over the 4 year period, as the timing of the legislation is uncertain. 43) R&R non staff costs are Digital Platform running costs. The costs are assumed to be resource and particularly for 2019/20 look optimistic. These are expected to change in the next iteration. 44) Core project costs reduce as they now exclude fit-out costs for new buildings due to uncertainty on property acquisition. Negotiations are progressing though and the uncertainty may be resolved by the next iteration. The resource elements of the Strategic Estates resourcing plan are included. 45) Property takes account of running costs for a building to accommodate the R&R and NEP teams, for Richmond House replacement, for 7 Millbank until expiry of the lease, and for impact of the various northern estate decants but not overspill decant as these are currently unknown. 46) R&R related costs include: Customer and Client team which has been set up to establish user requirements for strategic properties including R&R, NEP and medium term enabling projects; costs for Teams engaging with and understanding implications of R&R; Digital costs in support of decants. 47) The Archives Accommodation programme funding has been reduced by 14m over the planning period in line with the recently agreed strategic outline programme case. An outline business case is expected in 2020/21. Capital 48) Capital estimates for R&R and NEP have changed in line with the latest programme schedule. Strategic Estates core programme costs have increased due to Murphy related security projects, Canon Row refurbishment delay, and Fire and Safety programme delay and cost increase. Scrutiny 49) The Liaison Committee has agreed a bid ( 1.3m 2019/20, 1.5m 2020/21 onwards) that would provide an additional 25 posts to help with workload, help support collaboration with R&I, fund administration posts to reduce staffing gaps, increase resource to Web and Publications unit and increase the media and social media posts from 14 to 17. This would qualify as increased scrutiny and be outside the remit. A business case is expected before the end of November which will help explain how the additional staff will be accommodated and the impact on other Teams and on the Communications Strategy.

25 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 21 Business Resilience 50) Additional funding is for equipment and rehearsals relating to the various plans. Building depreciation and impairment 51) Depreciation and impairment increase significantly as a result of the level of capital investment in the strategic estates core programme on the Palace and other buildings on the estate and R&R. Other Changes Savings and Efficiencies Programme 52) The programme is now drawing to a close, and including the accommodation cost avoidance savings, it has met its target to secure efficiencies of 15.5 million and could exceed the target if more efficient use of office space continues. A full report is at Annex I. 53) Efficiencies continue to be explored and whilst limited new savings have been identified for , the challenge meetings identified a few areas where there may be savings reported, for example in Security with proper allocation of Police Officers to roles. Technical Review 54) As part of the planning round a technical review is being conducted that includes: A survey of rent review dates (for our own office buildings and our commercial premises) to ensure likely changes are factored into the financial plan; Consideration of the next steps in relation to the pay and reward strategy A review of inflation assumptions; Review of exchange rate risk; A review of pension and NI assumptions; Apprenticeship levy; Depreciation and dilapidations; Impairment and obsolescence; Pension contributions; Capitalisation; Review of contingency required. 55) Whilst the House has to maintain pay broadly in line with the Civil Service, there was no specific mention in the budget. Accordingly 2% provision has been made in the MTFP to reflect the actual cost of the current agreed pay system for the various pay groups. The committee will be asked to review the new pay remit in January 2019.

26 22 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 56) General inflation has been budgeted at 2.0% from ) The level of general contingency required in and beyond is currently assumed to be around 1m. 58) Depreciation across the four year period will be dependent on new capital investment and estate valuation fluctuations and will be updated once the draft valuation is available at the end of November. Areas of Uncertainty 59) There are a number of areas of uncertainty where further information is required either because the requirement is clear but the figures are not or where the figures are clear but the requirement is not: Depreciation and impairment; Employers pension contribution rate; 7 Millbank exterior works costs; Costs arising from securing a relocation venue; Summary 60) The draft MTFP shows the financial remit will be exceeded in 2019/20, before proposed investments. This reflects the impact of the 2018/19 pay deal and move of the implementation date from September to April as well as unavoidable growth such as IT depreciation. The more significant recommended investments such as Ways of Working programme and the Communications strategy are enablers for R&R or will help in the response to the Cox enquiry. 61) This position will ease in the later years and the draft MTFP is within remit and recommended investments will be affordable. The Commons Executive Board discussed the situation and pushed back some of the bids, but supported others; however the resulting breach of the remit in is not being taken lightly and the Board committed to a full review of the use of resources against the new strategy to take place before the next planning round which should improve the position. 62) Further growth pressures will no doubt emerge in the later years of the plan and the headroom could well reduce as we get nearer to the year in question. And of course the exceptions to the remit should only be used if absolutely necessary in other words if the pressures relating to them cannot be covered from savings elsewhere. The Committee is asked to consider the position, pending giving its advice to the Commission in December. Fees and Charges Review 63) The Committee has considered a review of fees and charges, and the Administration Committee has also been consulted.

27 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 23 Medium Term Investment Plan (MTIP) 64) The MTIP forms part of the MTFP and capital and resource implications have been captured in the MTFP, high level detail is in Annexes E & F. The Investment Plan itself is the subject of a separate paper. Members Estimate 65) The Members Estimate for has been developed alongside the Administration Estimate, and the Finance Committee has a role in scrutinising it in order to advise the Members Estimate Committee. The draft Members Estimate is at Annexes G & H. The only changes are to adjust for actual costs expected for 2018/19 and an inflation adjustment. Grants 66) The Committee has already reviewed and agreed its advice to the Commission in relation to grants to third parties. The Committee recommended a 2% increase in the grant for the History of Parliament Trust. However the Lords Finance Committee are recommending a 5% cut which leaves the two Houses out of line. It would be preferable for both Houses to reach the same conclusion on this grant. 67) The Committee was previously informed of a potential new grant proposed for the People s Museum under the Vital Voters initiative. This bid has been withdrawn as it was felt that it could meet the funding criteria of the Speakers Art Fund. Consultation and Equality Impact Assessment 68) Consultation and equality impact assessments will be carried out in relation to specific proposals within the financial plans as required. Finance and Procurement Implications 69) Financial matters are integral to this report. 70) There are no direct procurement implications. However, procurement activity is expected to make a contribution to the efficiencies programme in the medium term. Risks 71) As far as possible the Estimate for and MTFP will reflect anticipated changes in costs and income. However, there is some risk that unforeseen costs will arise, not least due to some of the significant changes that are being made to service delivery models and structures and the major programmes that are underway, or that income is not generated as anticipated. Impact of further fire safety work or other building work pre-r&r on income generation is a particular issue at the moment. 72) There are particular risks associated with the non-cash part of the Estimate as set out below: Asset valuations may result in significant positive or negative impacts;