UK Trade & Investment Main Estimate 2014-15 Select Committee Memorandum Annex A 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 Main Estimate for 2014-15 seeks the necessary resources and cash for its admin, programme and capital vote. This includes direct costs formerly in the FCO and BIS Main Estimates. Indirect costs remain in the FCO Main Estimate. UKTI has been given more control over the use of its resources by creating a single budget for it. Previously UKTI activity was funded by the budgets of UKTI BIS and FCO. The change will give UKTI more flexibility and speed in the deployment of its resources. 3 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 2013-14 1 2014-15 Net Resource (RDEL) 92.5 155.6 264.7 Programme (RDEL) 92.5 153.6 247.8 Admin (RDEL) - 2.0 16.9 Capital (CDEL) 1.6 2.5 1.2 Less Depreciation ringfenced within RDEL 2-1.8-2.1-1.8 Total Departmental Expenditure Limit (DEL) 92.3 156.0 264.1 1 Provisional figures. 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. Table to show comparable DEL Outturn by restating prior year figures on a Single Budget basis Departmental Expenditure Limit (DEL) OUTTURN PLANS 2013-14 2014-15 1 Total Departmental Expenditure Limit (DEL) 217.3 272.0 264.1 1 Provisional figure. 1
Annually Managed Expenditure (AME) OUTTURN PLANS 2013-14 1 2014-15 Annually Managed Expenditure (AME) 2 0.0 0.0 5.0 Total Annually Managed Expenditure (AME) 0.0 0.0 5.0 1 Provisional figures. 2 Annually Managed Expenditure total for is zero and 2013-14 (Provisional) is 0.021m 4 These summary tables compares outturn from with the provisional outturn for 2013-14 and planned DEL/AME for 2014-15. Summary of all changes 5 Annually Managed Expenditure: The AME budget has increased to 5.0m. This is a 2.0m Budget transfer between DEL and AME from the Spending Review and an increase in AME of 3.0m. The increase is to cover the potential recording of incentivised contract payments as provisions instead of accrued expenditure. If used, the AME budget will be offset by a corresponding underspend in RDEL. Therefore there will be a net nil impact on overall resource. 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 and 2012 Autumn Statement to allow UKTI to significantly increase the number of customers it assists annually, efficiency saving in both Autumn Statements and the 2013 budget and a budget exchange from 2013-14 resource DEL. The largest change for 2014-15 is the move towards a UKTI single budget which sees the devolution of FCO and BIS funding to UKTI ( 112.0m). These amounts mainly relate to UKTI staff overseas who are formally employed by the FCO, and UKTI staff in the UK most of whom are formally employed by BIS. UKTI will now reimburse FCO and BIS for those costs as they fall due and have greater control over staff numbers and locations. GREAT resource for the Milan Expo has been received as budget cover transfers for 2014-15 from six other departments ( 3.7m). UKTI will be incurring costs associated with the UK exhibition at the Milan Expo. FCO, BIS, DECC, DEFRA, DfID and DH have each contributed 0.6m to UKTI s DEL to cover part of those costs. Additional budget for the Global Entrepreneurs Programme was received from HMT (1.2m). The Global Entrepreneurs programme is designed to persuade entrepreneurs overseas to set up businesses in the UK. The spending is mainly on deal makers who identify potential cases and explain the advantages of locating to the UK. Additional budget for the Investors Programme was received from the FCO ( 0.7m). The programme will act as a concierge service for individual investors. They will serve as a link between the client and the customer along with a Private Wealth expert. 2
-Admin: Of the total net Resource DEL 264.7m, Admin represents 16.9m. These costs reflect the staff costs changes as outlined above in the description of the single Budget. This reflects the agreement with HMT in Spending Review 2013 to show UKTI frontline staff costs outside of the UKTI Chief Operating Officer as Programme costs. 7 All of these changes are demonstrated in the table below: Net Resource Requirement OUTTURN PLANS 2013-14 2014-15 1 SR 10 Settlement gross 86.9 84.9 83.0 Programme Income -8.0-9.5-11.0 Depreciation Ringfenced within RDEL 1.1 2.0 1.8 Annually managed expenditure - - SR 10 Settlement 80.0 77.4 73.8 Autumn Statement 11: UKTI Trade Activity HMT funded increased expenditure 5.0 5.0 5.0 Autumn Statement 11: UKTI Trade Activity increased expenditure 2 9.0 8.0 8.0 Autumn Statement 11: UKTI Trade Activity BIS funded increased income 2-9.0-8.0-8.0 Autumn Statement 11: efficiency savings -0.4-0.4 Great Campaign: increased expenditure 2.0 Great Campaign: increased income -2.0 Transfer from BIS for NWDA obligations 1.5 Budget Exchange 0.5-3.3 3.3 RDEL/CDEL virement -0.5 Transfer from BIS for additional business support 13.0 Transfer to DCMS as part of 2012 SE -2.0 Autumn Statement 12: additional funding 70.0 70.5 Autumn Statement 12: efficiency savings -0.8-1.5 2013 Budget: efficiency savings -1.5-1.6 Great Campaign: Cabinet Office funded 12.0 FCO devolved budget 75.7 BIS devolved budget 36.3 GREAT Milan expo (multi-departmental) 3.7 GREAT Investors Programme: FCO funded 0.7 DEL to AME movement for creation of Provisions -2.0 Global Entrepreneurs Programme: HMT funded 1.2 Underspend -5.0-1.8 - Total Net Resource Requirement 92.5 156.4 264.7 1 Provisional figure. 2 Additional 9.0m expenditure is offset by the 9.0m programme income in FY continued for future financial years. 3
8 Capital DEL: There is no change in the 2014-15 plans. 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 was to cover the re-phasing costs of a business-critical IT system. Capital DEL Requirement OUTTURN PLANS 2013-14 2014-15 1 SR 10 Settlement 2.0 3.0 1.2 Budget Exchange 0.1 - - RDEL/CDEL Virement 0.5 - - Underspend -1.0-0.5 - Total Net Capital DEL Requirement 1.6 2.5 1.2 1 Provisional figure. Explanation of significant changes in provision compared with: Spending Review Allocations 9 For 2014-15, UKTI s net resource allocation has increased by 190.9m compared with the initial SR settlement. This is mainly due to an additional 70.6m of funding being made available to UKTI through both the 2011 and 2012 Autumn Statements to increase customer assistance. The second element is the devolution of 112.0m from FCO and BIS. These amounts mainly relate to UKTI staff overseas who are formally employed by the FCO, and UKTI staff in the UK most of whom are formally employed by BIS. UKTI will now reimburse FCO and BIS for those costs as they fall due and have greater control over staff numbers and locations. The difference of 8.3m relates to the net position of efficiency savings imposed through both Autumn Statements and the 2013 Budget and the received budget cover transfers for Milan Expo and additional budget for Global Entrepreneurs and Investors Programme and budget exchange between 2013-14 and 2014-15. UKTI has also received additional 8.0m expenditure through the 2011 Autumn Statement, which is be off-set by 8.0m additional income, therefore having no impact on net budgets. 6.0m will be received as income from BIS, the remaining 2.0m will be generated through sales of UKTI services to its customers. Both of these received amounts will be used to further assist SMEs 10 For 2014-15, UKTI s capital budget allocation has remained consistent with the initial Spending Review settlement. 4
Resource DEL Requirement OUTTURN PLANS 2013-14 2014-15 1 SR 10 Settlement gross 86.9 84.9 83.0 Programme Income -8.0-9.5-11.0 Depreciation Ringfenced within RDEL 1.1 2.0 1.8 SR 10 Settlement DEL 80.0 77.4 73.8 Autumn Statement 11: UKTI Trade Activity HMT funded increased expenditure 5.0 5.0 5.0 Autumn Statement 11: UKTI Trade Activity increased expenditure 2 9.0 8.0 8.0 Autumn Statement 11: UKTI Trade Activity BIS funded increased income 2-9.0-8.0-8.0 Autumn Statement 11: efficiency savings -0.4-0.4 Great Campaign: increased expenditure 2.0 Great Campaign: increased income -2.0 Transfer from BIS for NWDA obligations 1.5 Budget Exchange 0.5-3.3 3.3 RDEL/CDEL virement -0.5 Transfer from BIS for additional business support 13.0 Transfer to DCMS as part of 2012 SE -2.0 Autumn Statement 12: additional funding 70.0 70.5 Autumn Statement 12: efficiency savings -0.8-1.5 2013 Budget: efficiency savings -1.5-1.6 Great Campaign: Cabinet Office funded 12.0 FCO devolved budget 75.7 BIS devolved budget 36.3 GREAT Milan expo (multi-departmental) 3.7 GREAT Investors Programme: FCO funded 0.7 RDEL to AME switch for creation of Provisions -2.0 Global Entrepreneurs BCT 1.2 Underspend -5.0-1.8 Total Net DEL Requirement 92.5 156.8 264.7 Capital DEL Requirement OUTTURN PLANS 2013-14 2014-15 1 SR 10 Settlement 2.0 3.0 1.2 Budget Exchange 0.1 - - RDEL/CDEL Virement 0.5 - - Underspend -1.0-0.5 - Total Net Capital DEL Requirement 1.6 2.5 1.2 Total DEL Requirement (RDEL + CDEL) OUTTURN PLANS 2013-14 1 2014-15 SR 10 Settlement net 82.0 78.3 75.0 Resource DEL changes 17.5 81.0 190.9 Capital DEL changes -0.4 - - Total Net DEL Requirement 99.1 159.3 265.9 1 Provisional figure. 5
Prior year comparison (with 2013-14) 11 As set out above, the RDEL provision increases from 2013-14 due to the devolution of FCO and BIS resource to UKTI as part of the move to Single Budget, the additional funding for Milan Expo, the cross year budget exchange increasing 2014-15 resource, the additional funding for Global Entrepreneurs, the additional funding for Investors Programme and an increase in additional funding from HMT. These increases are offset by the removal of the one off Cabinet Office funding for GREAT, the movement of resource from RDEL to AME for Provisions in 2014-15, the increase in efficiencies relating to the 2013 Budget and an increase in efficiencies relating to Autumn Statement 2012. 12 The CDEL provision remains consistent in 2014-15 as set out in the 2010 Spending Review. Net Cash Requirement Net Cash Requirement 2013-14 2014-15 1 Net Resource 163.4 269.7 Capital 3.0 1.2 Total Net Voted Requirement 166.4 270.9 Accruals to cash adjustment Depreciation -2.0-1.8 New Provisions- Incentivised Contract Payments -5.0-5.0 Increase (-) / Decrease (+) in creditors 0.5 0.5 Total accruals to cash adjustments -6.5-6.3 Net Cash Requirement 159.9 264.6 1 Provisional figure. 13 In comparison to the previous year (2013-14), UKTI s Net Cash Requirement is increased by 104.7m. The main changes relating to UKTI the majority being the devolved budget resource with smaller increases and decreases as listed in DEL resource changes for 2014-15 and 1.8m less capital funding. Changes to the Ambit 14 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 15 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. 16 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: 6
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 17 The summary tables on the first page compares outturn from with the provisional outturn for 2013-14 and planned DEL/AME for 2014-15. Move to page 1. Budget Exchange 18 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. Financial Performance 19 The table below compares final outturn from 2010-11 onwards with planned Capital and Resource DEL for the previous and current years, and plans for future years covering the 2010 and 2013 Spending Review and the 2011, 2012 and 2013 Autumn Statements. These figures are available from the relevant UKTI Accounts: Year % Capital Voted Outturn Variance 2010-11 2.1 1.0-52.4% 2011-12 3.2 2.6-18.8% 2.6 1.6-38.5% 2013-14 1 3.0 2.5-16.7% 2014-15 2 1.2 - - 2015-16 2 1.5 - - Year % Resource Programme Admin AME Total Outturn Variance DEL DEL Voted 2010-11 92.9 - - 92.9 85.7-7.8% 2011-12 83.9 - - 83.9 81.7-2.6% 97.5-0 97.5 92.5-5.1% 2013-14 1 156.4 2.0 5.0 163.4 159.3-2.5% 2014-15 2 247.8 16.9 5.0 269.7 - - 2015-16 2 130.2 1.8 0 132.0 - - 1 Provisional Figures 2 Plans covering the 2010 and 2013 Spending review period and 2011, 2012 and 2013 Autumn Statements 7
Provisions 20 UKTI has no Provisions over 10.0m. Contingent Liabilities 21 UKTI does not have any contingent liabilities. Approval of Memorandum 22 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 Crispin Simon, the Acting Accounting Officer for UKTI. 8
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. 9
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. 10
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. 11