Corporate report

FCDO Supplementary Estimate memorandum 2023 to 2024

Published 27 February 2024

This memorandum gives background to the Foreign, Commonwealth and Development Office (FCDO) Supplementary Estimate 2023 to 2024. The format of this document follows guidance from the Parliamentary Scrutiny Unit, to provide wider context on the department’s objectives and finances.

1. Overview

The FCDO’s enduring purpose is to lead the Government’s diplomatic, development, and consular work around the world. Our overall aim is to position the UK as a responsible, reliable, and effective international actor and partner, investing in the global relationships we need for the long term.

Throughout 2023 to 2024 the FCDO has continued to operate in volatility, driven by more dangerous geopolitical trends and more challenge to the international order. Our priorities have driven by the geopolitical landscape resulting from actions in Sudan and the Middle East whilst continuing with our unwavering support for Ukraine.

1.1 Objectives

The FCDO’s 2023 to 2024 priority outcomes are as follows:

1. Shape an open and stable international order through strong alliances and future partnerships.

2. Protect our national and international security and mitigate the threats of strategic competition through building partnerships, strengthening deterrence and effective constraint.

3. Reinvigorate the UK’s leadership role in international development to tackle shared global challenges, respond to humanitarian crises, and support the Sustainable Development Goals (SDGs).

4. Support British nationals around the world by providing resilient 24/7 Consular services and agile crisis response.

1.2 Spending controls

The FCDO’s spending is broken down into several different spending totals, for which Parliament’s approval is sought.

The spending totals which Parliament votes are:

• Resource Departmental Expenditure Limit (‘Resource DEL’): programme funds, running costs, frontline diplomacy and development, the overseas platform, scholarships, grants to international organisations and other bodies supporting FCDO objectives, and associated non-cash items

• Capital Departmental Expenditure Limit (‘Capital DEL’): investment in capital assets, capital grants, research and development, loan funding to the British Council, and investments and assets to create growth in the future for either the UK or our partner governments

• Resource Annually Managed Expenditure (‘Resource AME’): less predictable day-to-day spending: In the FCDO’s case, this includes accounting adjustments for financial guarantees, impairments, provisions, foreign exchange, and the refund of certain taxes and duties paid by certain foreign and Commonwealth governments

• Capital Annually Managed Expenditure (‘Capital AME’): the FCDO is required to record capital injections in its wholly owned self-financing public corporation, British International Investment (BII) as prescribed by the government budgeting rules. In addition, Parliament votes a net cash requirement, designed to cover the elements of the above budgets that require the FCDO to pay cash in year

1.3 Main areas of spending

The tables below show the main components of the FCDO’s proposed budget included in the latest Supplementary Estimate and the proportions of funds spent on its main activities.

Resource DEL: total budget £8.182 billion, 2023 to 2024

Description	£ million
D: Regional bilateral programmes	1,911.897
A: Operating costs, frontline diplomacy and overseas network	1,812.221
E: Core multilateral programmes	1,803.660
F: Centrally managed programmes	893.536
H: International Security Fund	740.249
I: European Union Attributed Aid	434.000
G: International subscriptions, scholarships and BBC World Service	367.708
C: British Council	176.606
B: Funding for NDPBs within Departmental Group (Net)	41.938
Total	8,181.815

Capital DEL: total budget £3.588 billion, 2023 to 2024

Description	£ million
E: Core multilateral programmes	1,986.000
F: Centrally managed programmes	603.824
D: Regional bilateral programmes	545.434
A: Operating costs, frontline diplomacy and overseas network	398.414
C: British Council	54.000
H: International Security Fund	0.565
Total	3,588.237

1.4 Comparison of spending totals sought

The table below show how the totals sought for the FCDO Supplementary Estimate compare with last financial year:

Category	Spending total: amounts (£ million) sought this year (Supplementary Estimate 2023 to 2024)	Difference in £ million (+/-) compared to original budget this year (Main Estimate 2023 to 2024)	Difference in % (+/-) compared to original budget this year	Difference £ million (+/-) compared to last year’s outturn (Outturn 2022 to 2023)	Difference % (+/-) compared to last year’s outturn
Resource DEL	8,182	4	0%	753	10%
Capital DEL	3,588	-53	-1%	1,437	67%
Resource AME	853	434	104%	367	76%
Capital AME	433	153	55%	144	50%

1.5 Key drivers of spending changes since last year

In comparison to the Mains Estimate 2023 to 2024, there is a net increase in Resource DEL of £4 million (0%) and reduction in Capital DEL of £53 million (1%).

To maximise Value for Money in our Official Development Assistance (ODA) portfolio and deliver the UK ODA commitment for 2023, the FCDO switched £208 million from Resource DEL to Capital DEL. This reduction was primarily offset by Resource DEL routine reserve claims for Consular Premium (£67 million), International Subscriptions (£75 million), Depreciation (£48 million) and IFRS 16 depreciation and charges (£27 million). Resource DEL claims on the reserve of £15.6 million were requested for the UK consular crisis responses, including in Sudan and the Israel-Hamas conflict, and £29.6 million for the Afghan Relocations & Assistance Policy.

The decrease to Capital DEL arises from the above-mentioned switch to deliver ODA programming, which was primarily offset by a reduction in the Capital DEL requirement for IFRS 16 (£124 million) and the transfer of UK Climate Investment Ltd (£153 million) to British International Investment (BII). A Capital DEL reserve claim of £14 million was also requested to increase the British Council loan.

The full list of changes since the Main Estimate is set out in section 2.1 and the Data Annex, Table B.

1.6 New policies and programmes: ambit changes

1.6.1 The United Kingdom was proud to co-host with Ukraine, the Ukraine Recovery Conference (URC) 2023. The conference focussed on action to help Ukraine build back better, greener and as a more resilient and prosperous European nation. In particular, the URC 2023 aimed to generate greater momentum on the role of the private sector – and the reforms required to drive investment – as essential elements for Ukraine’s long-term recovery. URC 2023 raised over $60.0 billion towards Ukraine’s recovery and reconstruction. This includes the UK’s updated commitments of a further $3.0 billion of guarantees to unlock World Bank lending to Ukraine and £240.0 million in bilateral assistance.

1.6.2 The FCDO published a new White Paper on International Development (PDF, 6MB) in November 2023 focusing on International development in a contested world: ending extreme poverty and tackling climate change. The goal of UK international development is to end extreme poverty and tackle climate change and biodiversity loss. Achieving this goal and meeting the SDGs is only possible if all countries achieve sustainable and inclusive economic growth.

This White Paper sets out a re-energised international development agenda, for the UK, working with our partners, based on the following priorities:

• going further, faster to mobilise international finance to end extreme poverty, tackle climate change and biodiversity loss, power sustainable growth and increase private sector investment in development

• strengthening and reforming the international system to improve action on trade, tax, debt, tackling dirty money and corruption, and delivering on global challenges like health, climate, nature and energy transition

• harnessing innovation and new technologies, science and research for the greatest and most cost-effective development impact

• ensuring opportunities for all, putting women and girls centre stage and investing in education and health systems that societies want

• championing action to address state fragility, and anticipate and prevent conflict, humanitarian crises, climate disasters and threats to global health

• building resilience and enabling adaptation for those affected by conflict, disasters and climate change, strengthening food security, social protection, disaster risk financing and building state capability and

• standing up for our values, for open inclusive societies, for women and girls, and preventing roll-back of rights

1.6.3 Details of all new policies and programmes announced by the FCDO can be found on GOV.UK.

1.6.4 The FCDO’s ambit has been updated to replace CDC plc (CDC) to British International Investment (BII). BII was erroneously listed as CDC at Mains Estimate so any reference to CDC should be replaced with BII.

1.7 Spending trends

The table below show overall spending trends for the last 3 years and plans for 2023 to 2024 and 2024 to 2025.

Spending trends, £ million

Year	Resource DEL	Capital DEL	Resource AME	Capital AME
2020 to 2021	9,941	2,977	703	650
2021 to 2022	7,857	1,772	720	661
2022 to 2023	7,428	2,152	485	290
2023 to 2024	8,182	3,588	853	433
2024 to 2025	8,016	3,997	411	[no data]

• Resource DEL: Outturn for 2021 to 2022 onwards reflects the decision to reduce temporarily the overall amount spent on ODA from 0.7 to 0.5% of UK Gross National Income (GNI). The growth in 2023 to 2024 reflects increased ODA spend arising from an improvement in the GNI and the additional resources provided to the UK ODA allocation as part of the 2022 Autumn Statement to support the people of Ukraine and Afghanistan escape oppression and conflict and find refuge in the UK

• Capital DEL: Outturn for 2021 to 2022 onwards reflects the decision to reduce temporarily the overall amount spent on ODA from 0.7 to 0.5% of GNI. In 2022 to 2023 the FCDO implemented the IFRS 16 accounting standard for leases. The growth in 2023 to 2024 is primarily driven by increased ODA spend as referenced in Resource DEL movements above and the government’s ambition to invest capital in new strategic initiatives to support clean and green infrastructure in developing countries through UK-backed investment, loans and expertise

• Resource AME: is used primarily for accounting adjustments to provisions and financial instruments such as loans and shares. AME expenditure, by definition, is volatile

• Capital AME: budget is used to make investments in the FCDO’s wholly owned self-financing public corporation, British International Investment (BII). Capital injections into BII contribute towards the FCDO’s financial transactions target. BII’s budgets are included in Capital DEL for 2024 to 2025 figures, this will be switched to Capital AME in the next estimate

1.8 Administration costs and efficiency plans

In comparison to the Main Estimate 2023 to 2024, there is a net increase in Administration of £1 million (0%). This relates to cross department transfers for trade policy staff.

Category	Spending total: amounts sought this year (Supplementary Estimate 2023 to 2024)	Difference (+/-) £ million compared to original budget this year (Main Estimate 2023 to 2024)	Difference (+/-) % compared to original budget this year	Difference (+/-) £ million compared to last year’s outturn (Outturn 2022 to 2023)	Difference (+/-) % compared to last year’s outturn
Resource DEL	326	1	0%	21	7%

The FCDO’s settlement is subject to our commitment to deliver RDEL efficiencies equivalent to £79.5 million by 2024 to 2025, of which at least £35.4 million will be non-ODA savings. These savings are being delivered through British Council’s transformation programme, workforce planning, various IT and estates efficiencies including handing back 22 Whitehall, and the natural closure of some non-ODA programmes.

1.9 Funding: Spending Review and budgets

The following changes have been made to 2023 to 2024 budgets since Spending Review 2021 allocations were agreed:

Resource DEL

• a reserve surrender of £20.0 million from the Tokyo sale proceeds for maintenance as part of the estate programme

• a reserve surrender of £17.5 million for the Foreign Currency Mechanism and Differential Inflation

• an increase of £27.2 million for the adoption of IFRS16 for ring-fenced depreciation and interest charges

• an increase of £47.6 million for depreciation and impairments

• reserve claims of £15.6 million from the Emergency Disaster Relief Fund for costs incurred for emergency consular responses, including those resulting from the conflict in Sudan and the Israel-Hamas conflict

• reserve claim for Afghan Relocations & Assistance Policy of £29.6 million

• a net increase of £3.7 million for budget transfers with other government departments mainly for climate programmes and

• a budget exchange of £14.2 million from financial year 2023 to 2024 to financial year 2024 to 2025 for the International Security Fund

Capital DEL

• a reserve claim of £2.4 million from the Tokyo sale proceeds for contractually committed projects that are part of the estates programme of global new builds and refurbishments

• a decrease of £124.3 million for the adoption of IFRS16 for property leases

• a switch of £153 million from Capital DEL to Capital AME for BII (required under Consolidated Budgeting Guidance rules)

• a net increase of £0.35 million for budget transfers with other government departments mainly for the Irregular Migration and Returns Fund and

• an increase to the British Council Loan by £14 million

1.10 Funding: other funding announcements

1.10.1 In 2023 to 2024 the UK government has continued to reaffirm our support for the people of Ukraine. The UK government is providing a range of economic, humanitarian, and defensive military assistance to Ukraine, and is imposing additional sanctions on Russia and Belarus.

This includes providing both economic and humanitarian aid, including vital medical supplies. The UK’s non-military support to Ukraine since the start of invasion comes to £4.7 billion. This includes over £4.1 billion in fiscal support, and over £640 million in bilateral assistance. The UK’s total military, humanitarian and economic support for Ukraine now amounts to £9.3 billion.

1.10.2 The UK has announced that it will spend an additional £60.0 million in humanitarian funding in Gaza in 2023 to 2024 to tackle the growing crisis, trebling our existing annual budget to the Occupied Palestinian Territories. This funding will support trusted partners, including UN agencies on the ground, to deliver lifesaving aid to people in Gaza.

1.10.3 Details of all new funding announcements by the FCDO can be found on GOV.UK.

2. Spending detail

2.1 Explanation of changes in spending

Resource DEL

The table below shows how the FCDO’s spending plans for Resource DEL compared with the Main Estimate.

Subhead	Description	This year (2023 to 2024 Supplementary Estimate budget sought) £ million	This year (2023 to 2024 Main Estimate budget approved) £ million	Changes from start of year £ million	Changes from start of year %	See note number
A	Operating costs, frontline diplomacy and overseas network	1,812.2	1,709.0	103.2	6%	I
B	Funding for NDPBs within Departmental Group (Net)	41.9	41.7	0.2	1%	II
C	British Council	176.6	173	3.6	2%	III
D	Regional bilateral programmes	1,911.9	1,889.3	22.6	1%	IV
E	Core multilateral programmes	1,803.7	1,788.0	15.7	1%	V
F	Centrally managed programmes	893.5	1,071.3	-177.8	-17%	VI
G	International subscriptions, scholarships and BBC World Service	367.7	292.9	74.8	26%	VII
H	International Security Fund	740.2	778.7	-38.5	-5%	VIII
I	European Union Attributed Aid	434.0	434.0	0.0	0%	[no data]
Total		8,181.8	8,177.9

I. The net increase is comprised of:

• reserve surrenders for Differential Inflation of £0.5 million, Foreign Currency Mechanism £17.0 million, and cash management charge of £0.1 million

• reserve claims for Consular Premium £67.1 million, IFRS 16 ring-fenced depreciation £24.2 million, IFRS 16 interest charges £2.9 million and non-cash depreciation and impairments of £47.6 million

• return of Tokyo sales receipts for maintenance £20.0 million

• a Machinery of Government transfer to Cabinet Office for £2.1 million

• transfers from Capital DEL of £1.5 million for the reclassification of Information Technology roles and

• net budget transfers of £0.6 million to other departments, comprising total receipts of £2.4 million and transfers of £3.0 million

II. An increase of £0.2 million received for the Commonwealth Scholarship Commission.

III. An increase of £3.6 million received for the GREAT Campaign.

IV. The net increase is comprised of:

• reserve claims from the Emergency Disaster Relief fund of £15.6 million and

• net budget transfers of £7.0 million from other departments, including a receipt of £3.0 million for a Humanitarian Grain shipment from Ukraine

V. Net budget transfers received from other departments of £15.7 million, including a receipt of £19.8 million for UK PACT (Partnering for Accelerated Climate Transitions) against £5.5 million transferred for the Blue Belt programme.

VI. The net decrease is comprised of:

• a reserve claim of £29.6 million for Afghan Relocations & Assistance Policy

• a budget switch of £208.0 million for ODA budget reallocation to Capital DEL and

• net budget transfers received from other departments of £0.6 million, including a receipt of £1.5 million for the National Cyber programme

VII. An increase of £74.8 million received for International Subscriptions.

VIII. The net decrease is comprised of:

• a Budget Exchange of £14.2 million from financial year 2023 to 2024 to financial year 2024 to 2025

• net budget transfers of £22.9 million to other departments and

• a budget switch of £1.4 million Resource DEL to Capital CEL to cover capital grants

Capital DEL

The table below shows how the FCDO’s spending plans for Capital DEL compare with the Main Estimate.

Subhead	Description	This year (2023 to 2024 Supplementary Estimate budget sought) £ million	This year (2023 to 2024 Main Estimate budget approved) £ million	Changes from start of year £ million	Changes from start of year %	See note number
A	Operating costs, frontline diplomacy and overseas network	398.4	526.0	-127.6	-24%	I
C	British Council	54.0	40.0	14.0	35%	II
D	Regional bilateral programmes	545.4	397.0	148.4	37%	III
E	Core multilateral programmes	1,986.0	1,677.0	309.0	18%	IV
F	Centrally managed programmes	603.8	1,000.9	-397.1	-40%	V
H	Conflict, Stability and Security Fund	0.6	0.0	0.6	0%	VI
Total		3,588.2	3,640.9

I. The net decrease is comprised of:

• a drawdown of Tokyo asset sales receipts of £2.4 million and reduction to IFRS 16 Capital requirement of £124.3 million

• transfers out from Capital DEL of £1.5 million for the reclassification of Information Technology roles and

• net budget transfers of £4.2 million million to other departments, mainly in respect of ROSA costs

II. An increase of £14.0 million relating to British Council’s Loan requirements.

III. The net increase is comprised of:

• a budget reallocation of £146 million relating to the revised Research and Development budget after the Mains Estimate 2023 to 2024 and

• net budget transfers of £2.4 million received including £2.0 million transferred to MOD for Ukraine Resilience & Energy Security

IV. A budget reallocation of £309 million relating to the revised Financial Transactions budget after the Mains Estimate 2023 to 2024.

V. The net decrease is comprised of:

• a budget switch of £208.0 million from Resource DEL for ODA budget reallocation;

• a switch of £153.0 million from Capital DEL to Capital AME for BII

• a budget reallocation of £146 million for the Research & Development budget and £309 million relating to the revised Financial Transactions budget after the Mains Estimate 2023 to 2024 and

• net budget transfers of £2.9 million from other departments relating to Science and Innovation.

VI. The net decrease is comprised of:

• a budget switch of £1.4 million Resource DEL to Capital CEL to cover capital grants and

• budget transfer of £0.8 million to other departments relating to the International Security Fund

Resource AME

The table below shows how the FCDO’s spending plans for Resource AME compare with the Main Estimate.

Subhead	Description	This year (2023 to 2024 Supplementary Estimate budget sought) £ million	This year (2023 to 2024 Main Estimate budget approved) £ million	Changes from start of year £ million	Changes from start of year %	See note number
J	Other central programme and technical costs	852.7	418.8	433.9	104%	I

Resource AME is used primarily for accounting adjustments and by definition is volatile. The 2023 to 2024 Supplementary Estimate included a £189.3 million increase arising from an increase to provisions accounting for the Ukraine guarantees and fair value calculations from increasing interest rates.

Capital AME

Subhead	Description	This year (2023 to 2024 Supplementary Estimate budget sought) £ million	This year (2023 to 2024 Main Estimate budget approved) £ million	Changes from start of year £ million	Changes from start of year %	See note number
K	British International Investment	433.0	280.0	153.0	55%	I

The increase to Capital AME shows the transfer of UK Climate Investment plc from Department for Energy Security and Net Zero to British International Investment.

2.2 Ring-fenced budgets

Within the totals, counter terrorism, research and development, financial transactions, depreciation and the International Security Fund, are ring-fenced and funding cannot be transferred into other parts of the core FCDO budget without HMT approval.

2.3 Changes to contingent liabilities

The FCDO’s contingent liabilities have increased by around £5.0 billion from Main Estimate 2023 to 2024 to Supplementary Estimate 2023 to 2024.

The increase mainly relates to new financial guarantees of £4.1 billion, being £1.6 billion World Bank guarantee for green projects across India, £2.4 billion increase in World Bank guarantees to the Government of Ukraine and £0.1 billion guarantee to the International Finance Facility for Education (IFFEd).

3. Priorities and performance

3.1 How spending relates to objectives

The FCDO’s Internal Outcome Delivery Plan, will set out what we will achieve over the current Spending Review period against a series of Priority Outcomes and corporate Strategic Enablers.

It is not possible to reflect the breakdown of resources by Priority Outcome as the FCDO is not structured in this way. Our resources, both people and projects, are cross cutting and delivery of our objectives contribute towards all of our Priority Outcomes.

3.2 Measures of performance against each priority

The FCDO’s Internal Outcome Delivery Plan will set out in detail how we will deliver our priority outcomes, how we will measure our success and how we will ensure we continuously improve.

Data on the FCDO’s 2023 to 2024 performance will be given in the FCDO 2023 to 2024 Annual Report and Accounts expected in Summer 2024.

3.3 Commentary on steps being taken to address performance issues

Spending specifically designed to address performance issues includes:

Hera

The Hera programme, which went live in December 2022, and is delivering a single integrated finance and HR system for the FCDO and a platform for HMG Overseas. It is a modern replacement for the former FCO and DFID finance and HR systems. It delivers common system processes and controls aligning to wider Government Global Principles and a Shared Services design for the whole of the FCDO. It improves user experience, delivers efficiencies, and provides better management information and has made it possible to integrate the department fully to build longer-term alignment across government work overseas. The programme is subject to departmental governance and controls to both assure and ensure its success. The programme is part of the Government Major Projects portfolio (GMPP), with regular reporting, and assurance reviews at key stages of its delivery

The estate

The FCDO continues to self-fund its estates projects. In addition to the £89.3 million allocated at the Mains Estimate, we will draw down a further £12.5 million. This will continue to fund projects that are part of the estates programme of global new build, refurbishments, and acquisitions

The largest projects completed are the chancery and residence refurbishment in Washington and the new office in Ottawa. These addressed urgent health and safety/end of life asset issues leading to a reduction in future running costs and liabilities. New embassy offices in N’Djamena and Abidjan have also been completed and the new office in Dodoma is due to complete before the end of this financial year. We continue to invest in a long pipeline of smaller projects from £0.5 million upwards.

The FCDO are returning £4.1 million of funds received at the Main Estimate to cover Resource DEL costs, which helped funded estate projects and reduce the backlog on largely health and safety works. The returned funds will be available to draw down in future financial years for ongoing estate projects.

3.4 Major projects

The FCDO will deliver the following major projects as defined by the Infrastructure and Projects Authority (IPA):

• Echo 2: a joint project with the British Council to provide new network, telephony and video-conferencing services
• FCDO Integration Portfolio: in focused on essential internal changes in the FCDO for activities, such as delivering key technology and aligning HR policy, to enable it to operate effectively and efficiently as a single organisation (expected closure 2023 to 2024)
• Hera: a programme to replace the finance and HR information system (expected closure 2023 to 2024)
• a major refurbishment of the embassy and ambassador’s residence in Washington DC

Progress on major projects is recorded at: Infrastructure and Projects Authority Annual Report 2022 to 2023.

An update to the FCDO’s projects will be published in the next IPA report due Summer 2024 where we expect closed programmes to be removed.

4. Accounting Officer approval

This memorandum has been prepared according to the requirements and guidance set out by the House of Commons Scrutiny Unit, available on the Scrutiny Unit website. The information in this Estimates Memorandum has been approved by myself as Departmental Accounting Officer.

Sir Philip Barton

Accounting Officer

Permanent Under-Secretary

Foreign, Commonwealth and Development Office

26 February 2024