Departmental Finance

Mr. Hancock
To ask the Secretary of State for Defence whether his Department's underspend of £1.75 billion in 2007-08 against its budget is to be carried forward to 2008-09; and what the reasons are for this underspend.

Mr. Hutton
The Department's final audited outturn underspend for 2007-08 comprised principally depreciation charges and movements on provisions, requested in the spring supplementary estimate through request for resources 1 (RfRl—provision of defence capability), that did not materialise. This underspend was in indirect resource which, as non-cash, does not contribute to the Department's spending power. Moreover, it was agreed in comprehensive spending review 2007 that any RfR1 non-cash resource underspend would be set at zero at the start of 2008-09 and could not therefore be subject to end year flexibility (EYF), with any requirement for further non-cash provision to be considered with the Treasury when it arose.

A small proportion of the 2007-08 underspend was attributable to RfR2 (peacekeeping and operations), for which the Department is not entitled to claim EYF.