1. Resource-based Supply requires departments to estimate and manage the resources they will need during a financial year on an accruals basis, as well as the cash they will need as commitments mature. Parliament authorises both cash spending and the use of resources.

2. In 2007-08, Parliament granted total net resources of £452.3 billion and total cash of £409.1 billion in Supply Estimates to 59 departments, pension schemes and other vote-funded bodies.[1] The difference in the provision of cash and resources is primarily due to including non-cash charges in resources for items such as the depreciation of assets, the notional cost of borrowing money if it was not funded by Supply and changes in value of assets or liabilities.

3. In 2007-08, two departments overspent net resources by a total of £4.9 million and one of them also breached its administration budget by £1.9 million. A third incurred a cash excess of £5.8 million.

The details are set out in Figure 1.Figure 1: Summary of 2007-08 Excess Votes required

Department	Resources		Cash
	Excess £	Amount to be voted £	Excess £	Amount to be voted £
Department for Transport RfR 1: (Promoting transport) Excess Expenditure outside the ambit of vote Less: Savings available from elsewhere within the Request for Resource[2]	3,025,000 (3,024,000)	1,000
Office of Fair Trading RfR 1: (Safeguarding the economic interests of UK consumers) Excess Expenditure (Admin Budget)	1,885,000	1,885,000[3]
BERR UKAEA Pensions Schemes. RfR 1: (UKAEA Pensions Schemes) Excess Expenditure			5,780,000	5,780,000
Total		1,886,000		5,780,000

Department for Transport: Expenditure outside the ambit of the vote

4. The Department has spent some £3.025 million of Supply in connection with Crossrail which Parliament had not authorised resulting in excess expenditure for which parliamentary authority is required. With the Crossrail Bill receiving Royal Assent in July 2008, apart from a token £1,000 to be authorised by way of an Excess Vote, the expenditure outside the ambit of the vote can be offset with parliamentary approval by the use of savings elsewhere on the Request for Resource.

5. Crossrail is the plan to integrate the railways to the east and west of London through two tunnels from Paddington to Liverpool Street. The Crossrail Act was passed in July 2008. In January 2007, the Department received approval from HM Treasury for an advance from the Contingencies Fund of £6.525 million for certain Crossrail-related expenditure pending parliamentary approval of enabling legislation and subsequent Supply Estimate cover. This procedure is permitted only where it would be clearly contrary to the public interest to await the normal parliamentary approval.

6. The Department required this advance to make a 50% contribution to the costs of utility diversions at Tottenham Court Road underground station to accommodate the planned Crossrail interchange, powers for which were contained in the Crossrail Bill. The Department considered it cost-effective to carry out such work at the same time as other planned works, rather than wait for the Crossrail Bill to receive Royal Assent. The Secretary of State for Transport told Parliament that the advance from the Contingencies Fund would be repaid once the Crossrail Bill had been approved.

7. In 2006-07, the Department drew down £3.5 million from the Contingencies Fund to use for the work and in 2007-08 spent another £3.025 million for further work. This was within the overall amount reported to Parliament in January 2007, but due to an administrative error the Department did not draw on the Contingencies Fund. Instead, it used voted Supply from its single Request for Resource 'Promoting transport that works for everyone'.

8. The expenditure of £3.025 million on Crossrail did not breach the Department's voted expenditure limit because it had underspent. But it did not have the parliamentary authority to use the voted Supply for this purpose and the expenditure was therefore outside the ambit of the vote. The Department require Parliament to authorise the expenditure of £3.025 million as additional use of resources now the enabling legislation has been passed.

Office of Fair Trading: Excess on Request for Resource, also resulting in breach of Administration Budget

9. The Office of Fair Trading has a resource excess of £1.9 million (2.5% of the allocation of £75.9 million) on the single Request for Resources (Advancing and safeguarding the economic interests of UK consumers). This was due to making an unexpected provision in the Accounts for input VAT previously reclaimed on administrative costs that may have to be repaid to HMRC. As the provision relates to administration costs, this has also resulted in a breach on the Office's Administration Budget for the same amount. But, in this case, no additional excess is required to be voted as this particular breach is also covered in the amount to be voted for the resource excess.

10. The Office assumed responsibility for administering Consumer Direct from the Department of Trade and Industry in April 2006. Consumer Direct invoice the Office for the costs incurred from their external contact centres and it was the Office's practice to reclaim VAT on these invoices. During 2007-08, the Office conducted a voluntary review of its tax affairs and sought HMRC advice. HMRC finally ruled in May 2008 that the Office was not eligible to reclaim the VAT.

11. The Office made a provision in its Resource Accounts of £1.94 million, the maximum potential liability to cover the likelihood of having to repay the previously reclaimed VAT. However, it was too late for the Office to request additional resource from Parliament through the Spring Supplementary Estimate process.

12. This provision resulted in both the breach of the limit on the Request for Resource and the breach of the Administration Budget of £1.9 million and the Office requires Parliament to authorise an increase to both limits.

UKAEA Pension Schemes: Excess on Net Cash Requirement

13. The UKAEA Pension Schemes Consolidated Account, produced by the Department for Business Enterprise and Regulatory Reform, breached its parliamentary authorised cash limit of £68.2 million by £5.8 million (8.5%). The excess was caused by the schemes underestimating the Net Cash Requirement for 2007-08 because they retained cash receipts that should have been paid to the Consolidated Fund as excess Appropriation in Aid relating to the previous year. The Department assumed, incorrectly, that these receipts would reduce its Net Cash Requirement for 2007-08. The Department is seeking parliamentary approval to increase its Net Cash Requirement by £5.8 million.

14. From April 2006, the Department introduced revised methods for determining employers' contributions to pension schemes, which are accounted for as Appropriations in Aid. This resulted in an increase in contributions received, with a commensurate reduction in the call on voted funds. Not all of the increased contributions were received as cash in the year, and a balance of more than £7 million was recorded as owing to the Department in 2006-07 Resource Accounts, with a corresponding amount due to the Consolidated Fund.

15. During 2007-08, the cash to clear the amount owing was collected from the employers. But, as a result of weaknesses in recording and monitoring, the Department did not identify the need to pay over these receipts as excess Appropriations in Aid relating to the prior year. Consequently, it retained the receipts and understated its Net Cash requirement for 2007-08. The Department identified this error too late for it to be corrected through a Spring Supplementary Estimate.

16. The Department has examined the circumstances giving rise to the breach and has concluded that a key change in personnel in the Department had meant that responsibilities for sponsorship and communication with the UKAEA Pension Managers had been eroded. The Department intends to take steps to reinstate the sponsorship role for the UKAEA Pension Scheme Resource Accounts within the Department. It also plans to strengthen controls to ensure that budgeting teams are made aware of any Excess Appropriations in Aid as they are recorded.

2   Revised Ambit. Parliamentary Authority is required to cover expenditure within previously voted resource limits but outside the coverage of the original ambit. The Crossrail Act was passed in July 2008. Back

3   The amount of £1,885,000 is required to be voted to meet the Office of Fair Trading's excess resource consumption and so no additional resources are required for the breach of Administration Budget. Back