Thank you for letter of 22 March 2007 regarding issues arising from the Winter and Spring 2006-07 Supplementary Estimates round. This reply addresses the issues raised in your letter and follows its format with replies to the questions asked immediately following the restated questions.

(1)  ESTIMATES MEMORANDA

  Thank you for your comments. The FCO will ensure that future versions of these documents take them into account.

(2)  SPRING SUPPLEMENTARY ESTIMATES

  In respect of the Spring Supplementary Estimate you asked:

  (i)  Additional funds for peacekeeping

  Q.   The Supplementary Estimate requests a large amount of additional funds for peacekeeping. Is additional funding required as a result of the FCO having to transfer £53 million to the Ministry of Defence? How much of the additional funding for peacekeeping within the FCO was planned and how much was unanticipated and as a result of unforeseen events during the year?

  A.  FCO co-ordinates the peacekeeping budget for HMG in liaison with HMT. The total funding for peacekeeping in 2006-07 was agreed between FCO and HMT in June based on estimated spend. The initial tranche of this funding was drawn down in the Main Estimates, with the remaining funding drawn down in the Winter and Spring Supplementary Estimates as final spend figures were confirmed. The overall budget agreed a contribution of £53 million to peacekeeping activities in the Balkans. As co-ordinator of this budget, FCO drew down this money from HMT and transferred it to MOD in the Spring Supplementary to cover costs incurred.

  (ii)  Income from asset recycling

  Q.   Table 1 in the Estimates Memorandum (increases in gross spending offset by Appropriations in Aid) shows that an extra £8.687 million (£7.6 million + £1.087 million) income was received for asset recycling. Has the FCO sold more assets than initially planned, or received extra income for some of the assets disposed of? What arrangements are there in place to accommodate staff where buildings have been sold?

  A.  The £8.687 million recorded in Table 1 in the Estates Memorandum was required to bring total property sales in the Main and Supplementary Estimates for 2006-07 into line with the expected outturn for the year which, with the sale of part of the compound in Bangkok for £49 million, was unusually high. The FCO did not sell more assets than initially planned although the Bangkok proceeds were higher than had been anticipated and will be fully used to fund high-priority security-related building projects. The FCO continues to write to the Committee on a quarterly basis with details of all its property sales and purchases.

  Where FCO buildings have been sold staff are re-provided as necessary with accommodation which is fit for purpose and better value for money.

  (iii)  End-year Flexibility

  Q.   The FCO is carrying forward an amount of £108.867 million End-Year Flexibility (EYF). When does the FCO intend to use the EYF and what will it be used for?

  A.  The bulk of FCO EYF is capital (£66 million) which we expect to spend in 2007-08 on estates projects and IT that is more fit for purpose and better value for money. The remainder (£42 million) is non-cash that we need to meet the resource consequences of this increased capital spending and to deal with any contingencies that may arise owing to the particular nature of the FCO estate, such as writing-off accommodation overseas.

  (iv)  Transfer from DFID

  Q.   The FCO's Estimates Memorandum and Written Ministerial Statement show that £16.216 million is being transferred from DFID to the FCO, mainly for Conflict Prevention Activity. However DFID's Ministerial Written Statement refers to £19.216 million being transferred to the FCO (£5.341 million from the Africa Conflict Pool and £13.875 million from the departmental unallocated provision). Please could you provide us with an explanation for this apparent discrepancy?

  A.  We understand that the amount transferred in the Spring Supplementary Estimate from DfID differs by £3 million.because DFID are also including a transfer for Global Conflict Prevention activity that FCO recorded in the Winter Supplementary Estimate. DfID did not take a Winter Supplementary Estimate.

(3)  WINTER SUPPLEMENTARY ESTIMATES

  (i)  Transfer to Security Industry Authority

  Q.   Table 1 in the Estimates Memorandum includes a £7m transfer to the Security Industry Authority. What was this transfer for?

  A.  The transfer of £7,075,000 from the Foreign and Commonwealth Office to the SIA (Security and Intelligence Agencies) was for Narcotics and Good Governance Programmes.

  (ii)  Additional expenditure on biometrics

  Q.   The Estimates includes an additional £11 million "for biometrics", offset by an envisaged similar increase in income from the Home Office. Why was this additional expenditure needed? By how much will the Estimates for 2007-08 and future years be increased in respect of additional biometrics expenditure?

  A.  The £11 million capital was provided by the Home Office as interim funding to cover the ongoing development of the UK visas Biometrics Programme. This funding was used to develop, test and deploy technical solutions for Phase 1 of the programme covering those visa posts that could accommodate biometric visa operations in house. The work was completed on time and within budget and 63 visa posts overseas now operate a biometric visa regime. The funding also enabled the programme to commence development of technical solutions for Phase 2 of the Programme allowing the enrolment of visa applicants by commercial partners.

  The expected breakdown of the OPEX (Operational Expenditure) non-capitalised for future years in respect of biometrics expenditure is:

—  2007-08 £10.48 million

—  2008-09 £9.24 million

—  2009-10 £9.24 million.

  The above figures are to cover staff costs, support and maintenance charges and depreciation. This expenditure will be financed by receipts and will therefore be neutral in respect of Estimates.

  It should be noted that the Capitalised OPEX is funded through the capital provided by the GIB (Group Investment Board) of the Home Office. The amounts for future years will be agreed with the Home Office and transferred through a Supplementary Estimate.

  (iii)  Increase in Administration Cost budget

  Q.   The Winter Supplementary Estimates increased the administration budget by £29 million (see Written Ministerial Statement). It was reduced by £7 million in the Spring Supplementary Estimates but overall it has increased by £94 million from last year (Table 4, Spring Supplementary Estimates Memorandum). Why has the administration budget increased by so much?

  A.  A large contribution to the £94 million increase is £35 million, of which only £12 million is Voted, for possible impairment of the FCO estate. This amount was agreed with the Treasury to be held as Departmental Unallocated Provision until it was needed to offset impairments due to the particular requirements of the FCO estate, for example for additional security, that are unlikely to be recouped by sales of assets into an open market. However, From Main Estimates 2007-08, Treasury will reclassify most impairments into Annually Managed Expenditure (AME) and therefore out of Administration Budgets. This will lead to a fall in Administration Budgets of £50 million in 2007-08.

  The bulk of the remainder reflects a planned under-spend against budgets in 2005-06 in order to build up EYF and its subsequent take-up. At the time of the 2006-07 Spring Supplementary we were expecting to spend to the budget agreed in the last spending review plus £14.5 million of EYF that was taken-up in the Winter Supplementary to pay for the FCO restructuring costs. However, the end year position has now become clearer and we now expect to under-spend against our administration budget.

Richard Cooke

Parliamentary Relations Team