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Departmental Public Expenditure

Volume 488: debated on Monday 2 March 2009

To ask the Secretary of State for Foreign and Commonwealth Affairs with reference to the answer of 23 June 2008, Official Report, column 75W, on departmental public expenditure, what his Department's forecast (a) net euro and (b) net US dollar exposure for the financial years (i) 2007-08 and (ii) 2008-09 was; and what revisions were made to those forecasts in light of foreign exchange movements. (243846)

The Foreign and Commonwealth Office (FCO) forecasted net euro and net US dollar exposure as follows:

(i) The FCO's net euro and US dollar exposure in 2007-08 was:

(a) Euro: €274 million

(b) US dollar: $917 million.

During this year all foreign currency requirements were met through making separate “spot” deals for each individual invoice, subscription payment or funds transfer to cover running costs at overseas posts. Variations from budget estimates caused by exchange rate fluctuations were compensated by the Treasury's Overseas Price Movements mechanism, and no central forecast of foreign currency requirements was made.

(ii) The forecast net euro and US dollar exposure for 2008-09 was:

(a) Euro: €180 million

(b) US dollars: $767 million.

This comprised our commitments for subscriptions to international organisations and UN peacekeeping missions and overseas posts' estimates of the sums required for their running and other costs given at the beginning of the financial year.

Following approval from HM Treasury to forward purchase this exposure, contracts were placed with the Bank of England for the period July 2008 to March 2009. We agreed these would be limited to 80 per cent. of the total, in recognition of the possibilities that estimates might not be completely accurate, and/or that due to the weakness of sterling, the full amounts might not be affordable.

In total, the following amounts were forward purchased for the period July 2008 to March 2009:

(a) Euro: €102 million

(b) US dollars: $559 million.

In the light of exchange rate movements, the budgets for 2008-09 needed to be revised as follows:

(a) HM Treasury were asked for an additional £5 million towards International Subscriptions.

(b) We identified that across all currencies a further £90 million would be needed by budget holders from within the FCO's own resources in order to maintain the purchasing power for overseas posts and pay additional peacekeeping costs.

To ask the Secretary of State for Foreign and Commonwealth Affairs what assessment has been made of foreign exchange movements on subscriptions to international organisations paid through his Department’s budget. (243941)

The information requested is as follows:

Subscriptions to each international organisation in 2007-08

Subscription

£000

UN regular budget and other UN contributions

72,382

Council of Europe

19,620

North Atlantic Treaty Organisation (NATO)

20,962

Organisation for economic cooperation and development (OECD)

12,826

Commonwealth secretariat

3,435

Organisation for security cooperation in Europe (OSCE)

3,223

Western European union/others

2,215

Total

34,663

Source:

Foreign and Commonwealth Office (FCO) Resource Accounts 2007-08.

(a) Subscriptions to each international organisation in 2008-09

Subscription

£000

UN regular budget and other UN contributions

73,507

Council of Europe

23,938

NATO

20,870

OECD

14,290

Commonwealth secretariat

4,343

OSCE

3,745

Western European Union/others

2,040

Total

142,733

Source:

FCO Supplementary Estimates 2008-09, 27 January 2009

(b) Subscriptions to each international organisation in 2009-10

The projected costs for 2009-10 are around £146 millions but are uncertain. In negotiating with international organisations as they set their budgets for 2009-10, the FCO will endeavour to limit budget increases to zero real growth. The fall in the value of the Sterling will have an impact on subscriptions paid in US Dollars and Euros. The FCO shares the burden of exchange rate movements on international subscriptions with the Treasury under the arrangement whereby HM Treasury funds 60 per cent. of any increase above a baseline of £102 million. Our foreign currency forward purchase contracts do include an element for our international subscription costs intended to help offset any further falls in the value of the Sterling.

To ask the Secretary of State for Foreign and Commonwealth Affairs what the total cost to his Department was of subscriptions to international organisations in 2007-08; what the cost was with regard to each international institution; and what the total cost is projected to be in 2008-09. (243942)

The information requested is as follows:

Subscriptions to each international organisation in 2007-08

Subscription

£000

UN regular budget and other UN contributions

72,382

Council of Europe

19,620

North Atlantic Treaty Organisation (NATO)

20,962

Organisation for economic cooperation and development (OECD)

12,826

Commonwealth secretariat

3,435

Organisation for security and cooperation in Europe (OSCE)

3,223

Western European Union/others

2,215

Total

134,663

Source:

Foreign and Commonwealth Office Resource Accounts 2007-08

(a) Subscriptions to each international organisation in 2008-09

Subscription

£000

UN regular budget and other UN contributions

73,507

Council of Europe

23,938

NATO

20,870

OECD

14,290

Commonwealth secretariat

4,343

OSCE

3,745

Western European Union/others

2,040

Total

142,733

To ask the Secretary of State for Foreign and Commonwealth Affairs what assessment his Department has made of the effect on its budget and activities in 2009-10 of the Treasury’s decision to withdraw support for the overseas price mechanism. (258208)

We continue to operate the Overseas Price Mechanism internally to maintain the purchasing power of our overseas posts’ local budgets. The decline in the value of the sterling created a potential funding pressure of £60 million in the 2008-09 financial year (as of December 2008). At current exchange rates we expect an additional pressure of up to £30 million to continue our activities at current levels in 2009-10. This does not include the pressure on international subscriptions and peacekeeping. The impact of this shortfall has been minimised through delayed activity, by making additional efficiency savings, and implementing a strategy of forward purchasing of foreign exchange.