2006-07 WINTER SUPPLEMENTARY ESTIMATE

ESTIMATES MEMORANDUM

1.   Summary of changes sought in the Estimate

  The main purpose of the Winter Supplementary is to allow take up some of the HM Revenue and Customs' End of Year Flexibility (EYF) entitlement and to transfer funds in respect of a Machinery of Government (MOG) change. The changes will assist the Department both to drive forward its Change Programme, deliver efficiency savings and to stay within voted limits.

Changes in resource

RfR1:

Increases

—  Take up of resource near cash EYF entitlement

    The 2005-06 Public Expenditure Outturn White Paper (CM 6883) set aside £268,623,000 EYF for the Department. We have agreed with HM Treasury that we will draw down a proportion of near cash costs amounting to the £90,000,000.

—  Transfers from other government departments

    The Parliamentary Counsel Office changed their funding arrangements in 2004-05 and as a result they had to transfer baseline funding to departments to enable those departments to pay them for their legal services, which in the case of HM Revenue and Customs may relate to legal changes to the Finance Act. The baseline is being transferred to departments separately each year. Therefore, this transfer of £1,742,000 reflects the funding due to this department for 2006-07. The payment back to the Parliamentary Counsel will be in excess of this figure.

Decreases

    The introduction to the Estimate also details reductions to various elements of the Vote. The main components of this relate to transfers to other government departments.

—  Transfers to other government departments

    (i)  the Department is transferring funding of £87,125,000 to the Home Office in respect of Serious Organised Crime Agency (SOCA) funding of which £72,063,000 is near cash administration costs (including £279,000 in receipts); £8,050,000 is non-cash administration costs; and £7,012,000 is programme expenditure. Although this Machinery of Government change became effective from 1 April 2006, no previous funding had been transferred.

Neutral Changes

—  Increased spending offset by income

    To increase the levels of Programme expenditure and income by £2,500,000 resulting from additional receipts from the Recovered Assets Incentivisation Fund. This is a fund awarded to Home Office to assist in tackling money laundering and other criminal activities. Agreements are in place that secure part of the fund to Other Government Departments, for which there is a clear link in delivering the Home Office objective to tackle money laundering and asset recovery targets.

Changes in Capital

RfR1:

Increases:

—  Take up of capital EYF entitlement

    We have agreed with HM Treasury to draw down £30,590,000 as announced in the 2005-06 Public Expenditure Outturn White Paper (CM6883) to support on-going merger costs of HMRC and to meet efficiency targets. The EYF will be used to deliver major investment in IT and business systems infrastructure.

Decreases:

—  Transfers to other Government Departments

    A Budgetary Transfer to the Home Office in respect of SOCA funding amounting to £6,897,000. Although this MOG change became effective from 1st April 2006 no funding had previously been transferred.

RfR2

Increases

—  Take up of capital end year flexibility entitlement

—  We have agreed with HM Treasury to draw down £3,829,000, as announced in the 2005-06 Public Expenditure Outturn White Paper (Cm 6883) in respect of the Valuation Office Agency, which will be used to deliver IT investment.

2.   Detailed explanation of the changes

  The introduction to the estimate summarises the changes to voted totals. This section provides details of the changes into specific categories.

Detailed explanation of the changes
Amount	Description
EYF
£90,000,000	Take up of £90,000,000 EYF to support the on-going merger costs of HMRC
£34,419,000	Increase of £34,419,000 arising from the drawdown of capital EYF to support the costs of major investment in IT and business systems infrastructure following the creation of HMRC
£90,000,000	Total EYF Resource Change
£34,419,000	Total EYF Capital Change
Transfers from other Government departments (OGDs)
£1,742,000	Transfer of £1,742,000 from the Cabinet Office in respect of Parliamentary Counsel Office funding.
£23,946,000	Transfer of £23,946,000 from the Department for Constitutional Affairs (DCA) to cover additional costs associated with the National Insurance Fund.
£25,688,000	Total Resource Transfers from other OGDs
MOG changes transfers to another Government department
£80,113,000	Transfer of £80,113,000 in net administration costs to the Home Office in respect of a MOG change to provide funding to SOCA.
£7,012,000	Transfer of £7,012,000 programme expenditure to the Home Office in respect of a MOG change, which provides funding to SOCA.
£6,897,000	Transfer of £6,897,000 in capital to the Home Office in respect of a MOG change, which provides funding to SOCA
£87,125,000	Total Resource MOG transfers to an OGD
£6,897,000	Total Capital MOG transfers to an OGD
Increases in gross spending offset by Appropriations-in-aid (A-in-A)
£2,500,000	To increase the levels of Programme expenditure and income by £2,500,000 resulting from additional receipts from the Recovered Assets Incentivisation Fund.
£2,500,000	Total Resource increase in gross spend offset by A-in-A

3.   Impact on the Department's Public Service Agreement (PSA)

  The Department's Public Service Agreement (PSA) details what we are committed to achieving over the course of a three-year period. The Supplementary Estimate allows for the movement of funds to support that agreement with our stakeholders. Overall this Supplementary will assist in the delivery of our PSA with increased focus on our integration agenda, including capital projects and programmes. Thus supporting the Government's plans for Public Sector Departments to be more effective and efficient in delivering public services.

4.   Departmental Expenditure Limit (DEL) changes

  A note to the Estimate already provides a summary of resource and capital DEL, broken down into voted and non-voted, for the current year. In summary, the Department will be increasing Resource DEL by £28,563,000 to £4,551,506,000 and Capital DEL by £27,522,000 to £307,418,000.

5.   Departmental Expenditure Limit (DEL)

*  Depreciation, which forms part of resource DEL, is excluded from the total DEL since capital DEL includes capital spending and to include depreciation of those assets would lead to double counting.

6.   End year flexibility

End year flexibility	Resource				Capital
£m
	Administration costs	Other resources	Total DEL Resources	Total Capital DEL	Total
EYF entitlement set out in Public Expenditure: Outturn white paper (CM 6883)
2005-06 Underspend	170.1	5.2	175.3	—	175.3
Changes to 2004-05 outturn	6.9	0.6	7.5	0.1	7.6
2005-06 EYF not taken up	45.0	55.1	100.1	34.3	134.4
Return of Lorry Road User Charge funding to HM Treasury	0.1	-14.4	-14.3	—	-14.3
2006-07 Entitlement	222.1	46.5	268.6	34.4	303.0
EYF draw down in winter supplementary estimate	-90.00	—	-90.00	-34.4	-124.4
Balance of accumulated EYF	132.1	46.5	178.6	—	178.6

7.   Administration Budget

8.   Machinery of Government changes

9.   Net Cash Requirement

  The net cash requirement has increased by £9,543,000, which represents a mixture of additions and reductions to the Estimate detailed above and an adjustment of -£30,616,000 in respect of changes to creditors, debtors and cash payments against prior year provisions set up in respect of Early Release costs and other general provisions.

November 2006