House of Commons

Finance Committee

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

First Report of Session 2017–19

HC 1761

House of Commons

Finance Committee

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

First Report of Session 2017–19

Report, together with formal minutes relating to the report

Ordered by the House of Commons to be printed 20 November 2018

HC 1761Published on 4 December 2018

by authority of the House of Commons

Finance Committee

The Finance Committee is established under Standing Order No. 144 to consider expenditure on and the administration of services provided from the Estimates for the House of Commons.

The Committee:

• with the assistance of the Commons Executive Board, prepares the Estimates for House of Commons: Administration for submission to the House of Commons Commission;

• with the assistance of the Accounting Officer, prepares the Estimates for House of Commons: Members for submission to the Members Estimate Committee;

• monitors the financial performance of the House Administration; and

• reports to the House of Commons Commission and the Members Estimate Committee or the Speaker on the financial and administrative implications of recommendations made to them by other Committees of the House.

The Committee has 11 members and meets approximately once a month when the House is siting. Meetings are usually held in private and the Committee is assisted by the Director of Finance and other House staff as appropriate.

Current Membership

Chris Bryant MP (Labour, Rhondda) (Chair)

Mr Clive Betts MP (Labour, Sheffield South East)

Sir Geoffrey Clifton-Brown MP (Conservative, The Cotswolds)

Luke Graham MP (Conservative, Ochil and South Perthshire)

Neil Gray MP (Scottish National Party, Airdrie and Shotts)

Rt Hon Sir Lindsay Hoyle MP (Labour, Chorley)

Helen Jones MP (Labour, Warrington North)

Stephen McPartland MP (Conservative, Stevenage)

Mark Menzies MP (Conservative, Fylde)

Sir Robert Syms MP (Conservative, Poole)

Rt Hon Mark Tami MP (Labour, Alyn and Deeside)

Publications

Committee reports are published on the Committee’s website at www.parliament.uk/financecommittee and in print by Order of the House.

Committee Staff

The current staff of the committee are Robert Cope (Clerk), Ronnie Jefferson (Senior Committee Assistant).

Contacts

All correspondence should be addressed to the Clerk of the Finance Committee, House of Commons, London SW1A 0AA. The telephone number for general enquiries is 020 7219 3275; the Committee’s email address is financecommittee@parliament.uk.

1 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

Contents1 Introduction 3

2 Administration Estimate 4

Financial remit for 2019/20 to 2022/23 4

Medium-Term Financial Plan 5

Medium-Term Investment Plan 7

Draft Estimate 8

3 Members Estimate 9

Appendix 10

Formal minutes 41

3 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

1 Introduction1. Funding for the House of Commons is provided through three sources: the House of Commons: Administration Estimate; the House of Commons: Members Estimate; and the Independent Parliamentary Standards Authority (IPSA) Estimate. The latter of these funds the salaries, business costs and expenses of Members of Parliament and their staff. It is prepared by IPSA and approved by the Speaker’s Committee on IPSA, in consultation with HM Treasury. For 2018/19 the main IPSA Estimate sought £195.1 million in resource and £1.3 million in capital.1

2. The Finance Committee is established under Standing Order No. 144 to consider expenditure on and the administration of services provided from the Estimates for the House of Commons. With the assistance of the Commons Executive Board, each financial year, the Committee prepares the Administration Estimate for submission to the House of Commons Commission. And with the assistance of the Accounting Officer, it prepares the Members Estimate for submission to the Members Estimate Committee.

3. The Administration Estimate funds expenditure arising from the general administration of the House of Commons and activities undertaken to meet Parliament’s objectives and associated commercial activities. This includes, for example, the cost of House staff, office accommodation in Westminster, running and maintaining the Parliamentary estate, printing, security, broadcasting, IT and catering. It also covers the cost of travel for Members in connection with their committee and delegation work, and grants-in-aid to the History of Parliament Trust, the Commonwealth Parliamentary Association UK Branch, and other parliamentary bodies. Income arising from rental, fees and charges in connection with activities within Parliament also forms part of the Estimate. In 2018/19 the main Administration Estimate sought £317.1 million resource and £204.1 million capital.2

4. The Members Estimate, which is laid by HM Treasury, on behalf of the House, covers expenditure on: financial assistance to Opposition parties to support them in carrying out their Parliamentary or representative functions; the Exchequer contribution to the Parliamentary Contributory Pension Fund (PCPF); payroll costs for the Deputy Speakers; and other non-cash costs. In 2018/19 the main Members Estimate sought £17.1 million in resource and no capital.3

5. This Report sets out the Committee’s provisional advice to the Commission and the Members Estimate Committee on the 2019/20 to 2022/23 Medium-Term Financial Plan (MTFP), and the 2019/20 Administration and Members Estimates. The Appendix to this Report contains a summary version of the advice that the Committee has received from the Commons Executive Board. Work on the plan will continue into December and revisions to some of the figures are likely. It is the intention of the Committee to seek a debate on the Report prior to the House of Commons Commission’s consideration of the MTFP and draft Estimates in December.

1 IPSA, Main Estimate 2018–19, HC 9682 House of Commons, Main Supply Estimate 2018/19, HC 9643 HM Treasury, Central Government Supply Estimates 2018/19, HC 957

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 4

2 Administration Estimate

Financial remit for 2019/20 to 2022/23

6. Each year, the process for determining the resource element of the Administration Estimate begins with the setting of a financial remit. This is essentially a policy statement by the House of Commons Commission, which sets the parameters for the Estimate. It is then translated into a target Estimate for the next four financial years, which forms the basis for the Medium-Term Financial Plan.

7. Earlier this year, on the advice of the Finance Committee, the House of Commons Commission agreed a financial remit for the planning round 2019–20 to 2022–23 that assumed zero growth in real terms, and that the House would absorb day-to-day upward cost pressures other than inflation. Furthermore, the efficiencies target of £15.5 million should be met by 2019–20, recognising that this sum may be reinvested in priority areas. The Finance Committee would regularly review progress against the target.

8. The main purpose of the remit is to control spending levels. However, on the advice of the Committee, the Commission has agreed that some additional spending should not necessarily be funded from existing budgets. These are driven in part by the size and structure of the budget, particularly the high proportion that is spent on accommodation and security, but also a recognition that some of the core functions of the House, such as parliamentary scrutiny of legislation and the Government, should be protected. The exceptions that the Finance Committee recommended to the remit for this year’s planning round are:

• Significant enhancements to scrutiny, which have been agreed by the House (such as additional select committees), or specifically recommended by Members and agreed by the Commission;

• Security measures, which will enhance the physical or cyber security of Parliament;

• The resource implications of the three strategic programmes—the Northern Estate Programme, the Restoration and Renewal Programme, and the Archives Accommodation Programme; and extending to programme management costs, professional fees that cannot be capitalised, running and refurbishment costs for decant buildings, and impairment costs. This includes the depreciation of works to leased buildings to facilitate moves, particularly where they are spread over the life of a relatively short lease

• The resource impact of other capital works to buildings and property revaluations, including changes to depreciation arising from property revaluations, obsolescence and impairment charges; and

• Relocation contingency planning to enable Parliament to carry out business as usual in the event of an emergency.

5 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

9. In addition, the Finance Committee is also now recommending two further exceptions:

• New services agreed by the House and/or new services in response to external reviews or enquiries.

• For 2019/20, a significant increase in employer pension contributions. This mirrors the approach being taken by government departments.

Furthermore, the Committee is recommending to the Commission a clarification to the fourth bullet, as follows:

• The resource impact of other capital works to buildings and property revaluations – including projects in the programme that are classified as resource, staff costs to deliver the programme, changes to depreciation arising from property revaluations, obsolescence and impairment charges.

10. The remit assumes an inflation rate of 2 per cent. On this basis, the target resource element of the Administration Estimate for 2019/20 is £376.7 million. £96.8 million of this relates to expenditure to which the exceptions outlined above apply, the bulk of which, £86.7 million, is resource expenditure on the House’s three strategic programmes and the resource impact of capital works.

Medium-Term Financial Plan

11. The Medium-Term Financial Plan (MTFP) currently proposed by the Commons Executive Board is summarised in Table 1 below. The Table also provides a comparison with the MTFP set by the House of Commons Commission last year. A more detailed version is provided in Annex A of the Appendix.

Table 1: Medium-Term Financial Plan 2019/20 - 2022/23 (£ million)

2019/20 2020/21 2021/22 2022/23

2019/20 MTFP (draft) 379.1 338.6 418.5 416.9

2018/19 MTFP 275.3 262.8 270.1 270.1

Change between years

103.7 75.8 148.4 146.8

12. At present, the proposed MTFP exceeds the remit by £0.6 million in 2019/20 before proposed investments are taken into account. If the proposed investment options are also taken into account, the remit is exceeded by £2.4 million, giving resource expenditure of £379.1 million in 2019/20. The exceeding of the remit is for 2019/20 alone and in 2020/21 and subsequent years, the draft MTFP returns below the target estimate. The Board is, however, looking at ways in which the Plan can still be brought within the remit for 2019/20, so these figures will be revised before the Committee finalises its advice to the Commission in December.

13. Part of the reason for the difference between this year’s MTFP and last year’s is the factoring in of inflationary uplifts and unavoidable growth pressures identified by teams. However, the primary reason is the effect of the House’s decision earlier this year to

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 6

support the comprehensive restoration and renewal (R&R) of the Palace of Westminster, which has resulted in a significant ramping up of activity over the course of this year. This, together with the resource implications of other capital projects, such as the Northern Estate Programme, resulted in a net increase of £85.5 million on the 2019/20 baseline agreed last year. Table 2, below, gives a more detailed breakdown of the proposed resource expenditure by team, and how this compares to their budgets in 2018/19.

Table 2: Changes to team budgets from 2018/19 to 2019/20

14. A number of factors are driving the increase in the resource budget between 2018/19 and 2019/20, and hence the breach of the remit. This includes £2.7 million of unavoidable growth in the budget, the largest component of which is £1.7 million to cover depreciation arising from historic and planned Digital capital investment.

15. The Committee is keeping under consideration additional investment bids of £1.8 million in 2019/20, recommended to it by the Board, the purpose of which are either to improve services to Members, generate savings in future years, or indirectly support the strategic programmes. These include:

• £519k in additional resource to support the development of a new internal and external Communications Strategy.

• £700k to extend the Ways of Working Programme, which aims to support teams in embedding modern working practices into the way they work.

• £176k to fund a transformation of the Pass Office to focus on its core function of security vetting with pass issuing being undertaken by a customer-focused team, making greater use of new technology to manage applications.

7 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

16. Other proposed areas of growth in 2019/20 are in areas where the exceptions, outlined above apply:

• £3.3 million to expand the Customer and Client Team to deal with the building occupation requirements for the R&R Programme, as well as building maintenance and cleaning changes arising from decants, including Richmond House.

• £2.4 million to establish the Shadow Sponsor Body, which will be responsible for commissioning the R&R Programme and overseeing the Shadow Delivery Authority.

• A Liaison Committee bid for £1.3m in 2019/20 and £1.5m 2020/21 onwards to provide additional posts to help select committee workload, support collaboration with the Research and Innovation Team, reduce staffing gaps, and increase resource for the Web and Publications Unit and media and social media teams.

• £765k to support the introduction of the new Independent Complaints and Grievance Scheme, which the House approved in July 2018.

• Within the Parliamentary Digital Service, £1.2 million for R&R technological support and £950k to support Estates property decants. A decision on £562k funding for local engagement teams, a new service for Members’ constituency offices, has been deferred pending a business case.

Medium-Term Investment Plan

17. Unlike the resource element of the Administration Estimate, there is no financial remit set for the capital budget. This is because of the scale of the backlog of capital projects across the Parliamentary Estate as well as the three main strategic programmes, which are underway. The Medium-Term Investment Plan (MTIP) sets out the bicameral plans for investment in strategic programmes, estates and digital over the same period as the MTFP, and this is the basis for the capital element of the Administration Estimate. The cost of joint projects is split between the Commons and Lords on a 60:40 basis, although some projects are Commons or Lords-only. Table 3, below, shows the draft MTIP figures (Commons share) for the current planning round and how they have changed compared to last year. A more detailed version is provided in Annex E of the Appendix.

Table 3: Medium-Term Investment Plan 2019/20 to 2022/23 (£ million)

2019/20 2020/21 2021/22 2022/23

2019/20 MTIP (draft) 241.5 345.1 311.6 357.3

2018/19 MTIP 325.0 360.1 324.8 324.8

Change between years

(83.5) (15.0) (13.1) 32.5

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 8

18. The bulk of the capital programme over this period is split between three areas of work. The largest component is Strategic Estates’ core projects, which includes conservation work to, for example, the Elizabeth Tower; repair of the cast iron roofs; fire safety works to bring the Palace of Westminster in line with current regulations; and mechanical and engineering works that have been prioritised as urgent ahead of the R&R Programme. Overall, the Commons share of these and other projects, comprises £106.8 million of proposed capital expenditure in 2019/20.

19. The second main area of work is the Northern Estate Programme (NEP). The purpose of this programme was originally to deliver the repair and refurbishment of a number of buildings on the northern part of the Parliamentary Estate. Following the decision of the House earlier this year to support the full decant of the Palace of Westminster to allow the R&R Programme to take place as quickly and cost-effectively as possible, the NEP also now includes the likely comprehensive redevelopment of Richmond House to provide decant space for the House of Commons. The consequential change to the phasing of works on other buildings and delivery timescales is the main reason for the changes to the profile of the MTIP compared to last year. Work on the Northern Estate began in the second half of 2018 and will continue in 2019 with the refurbishment of 1 Derby Gate. The proposed capital budget for the NEP in 2019/20 is £82.4 million.

20. The third main component of the capital budget is the R&R Programme itself, which has a proposed capital budget of £42 million in 2019/20, largely to cover the cost of the programme team, design work and development of the Outline Business Case for the Programme.

Draft Estimate

21. The Finance Committee is proposing to recommend to the House of Commons Commission in December 2018 a draft Administration Estimate for 2019/20 with a resource budget of £379.1 million and a capital budget of £241.5 million.

9 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

3 Members Estimate22. There is limited discretion in the setting of the Members Estimate. Financial assistance to Opposition parties (known also as Short Money) is uprated by inflation in accordance with existing resolutions of the House and the Exchequer contribution to the Parliamentary Contributory Pension Fund (PCPF) is subject to actuarial variations.4 Table 4 below sets out how each of the resource elements of the proposed Members Estimate compares to last year. There is no capital element of the Estimate.

Table 4: Members Estimate 2018/19 and 2019/20

23. The Finance Committee is proposing to recommend to the Members Estimate Committee in December 2018 a draft Members Estimate for 2019/20 with a resource budget of £17.7 million.

4 For further information on the relevant resolutions of the House, see the First Report of the Members Estimate Committee, Consolidated list of provisions of resolutions of the House relating to expenditure charged to the Estimate for the House of Commons: Members as at 16 July 2018, HC 1442.

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 10

Appendix: Draft 2019-20 Estimate and Medium Term Financial Plan 2019-20 to 2022-23, paper by Director of Finance

Purpose

1) This report concerns the development of the 2019–20 Estimate and Medium Term Financial Plan (MTFP). It seeks to explain the major issues for the planning round and set out the overall position. There are still some uncertainties, particularly in relation to the financial impact of major programmes and property disposals/acquisitions.

Action for the Committee

2) The Committee is asked to note the main issues for the planning round and the current position for its advice to the House of Commons Commission which it will be asked to agree following the proposed debate and to note the position taken in relation to the History of Parliament Trust grant by the House of Lords Finance Committee.

Vision and Strategic Goals

3) The Strategy for the House of Commons Service 2016–2021 was approved by the Commission in 2016. The MTFP should enable the House Service to support a thriving parliamentary democracy and deliver the specific objectives, and clearly demonstrate how the service will become increasingly effective and efficient over time. The strategy is currently being refreshed. The three existing strategic objectives are expected to be expanded to four:

• Facilitating effective scrutiny and debate;

• Involving and inspiring the Public;

• Securing Parliament’s future;

• Valuing every person

Policy Context

4) There are a number of significant policy matters and events on the horizon that may have a bearing on the budget:

• The implementation of the decision for the UK to leave the EU;

• Measures to further enhance security around the Parliamentary Estate;

• Restoration and Renewal of the Palace of Westminster;

• Refurbishment of the Northern Estate;

• The review of Parliamentary Archives Accommodation;

11 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

• Implementation of the Digital Strategy;

• Development of our approach to cyber security and the technology infrastructure;

• Significant increase in Employers’ Pension contribution;

• Pay and reward strategy beyond the current pay deal.

5) The assumption is there will be a General Election in June 2022 in line with the Fixed-term Parliaments Act 2011.

High-level planning assumptions for 2019

6) The following assumptions provide a context for planning and will also inform the development of the Corporate Business Plan and Team Business Plans.

7) Economic (2019–23):5

• GDP growth is expected to be around 1.5% per year (slightly lower than forecast a year ago);

• CPI inflation is expected to be around 2.0% each year (a little lower than forecast a year ago);

• The unemployment rate will remain at 4.0% or lower (again, lower than forecast a year ago);

• Forecasts for average earnings growth have edged up compared to a year ago. Average earnings are now expected to grow by 2.5% in 2019 and 2.8% in 2020, rising to 3.2% in 2023.

• The London Living Wage is £10.55 per hour;

8) Parliamentary/political

• At the present time there is still uncertainty over the timing and nature of a settlement for the UK’s departure from the EU. This, in turn, means that the legislative workload for Parliament over the coming months and year ahead is difficult to predict. Flexibility will therefore be key to ensuring we can support the House’s role in facilitating effective scrutiny and debate;

• Majorities will be small which means on key votes whipping will be tight (but there may be fewer divisions overall);

• The political temperature is high and this may spill over into other areas;

• The timing of delegated legislation in connection with Brexit (with hundreds of statutory instruments needing to be dealt with) is still uncertain. Flexible resourcing will therefore be important;

• Relations with the House of Lords may come under strain depending on how they interpret the Salisbury-Addison Convention (whereby the Lords gives a

5 As published in the Budget on 29 October 2018

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 12

second reading to bills in the Government party manifesto) in light of a minority government and may continue to be tested in terms of the handling of secondary legislation;

• Brexit may also place pressures on devolved bodies both in terms of consent on legislation and in terms of where powers formerly held at EU level will reside post-Brexit;

9) Public sector finances:

• Financial remit – no growth in real terms, aside from funding specific new initiatives approved by the House or Member committees;

• Modest relaxation on public sector pay restraint;

• Planned government growth in public spending is 1.2% in real terms, though after allocation to NHS this is inflation only for most depts on average, so aligns with our remit;

• The November 2018 Budget confirmed a reduction of the discount rate used for calculating employer contributions in unfunded public service pension schemes. The latest pension valuations indicate that there will be additional costs to employers in providing public service pensions over the long-term.

10) Workforce:

• Differences between market rates and public sector pay will continue to make it difficult to recruit and retain staff in some parts of the House Service, and therefore we will need to use interims;

• The housing market will continue to contribute to high cost of living in London and the South East;

• Staff will continue to work more flexibly, being less tied to a single desk location.

11) Estate / decant plans:

• In early 2018 both Houses agreed a Decision in Principle for the full decant of the Palace of Westminster ahead of major refurbishment work. The bill to provide for the statutory establishment of the Sponsor Body and Deliver Body is expected to be introduced in Spring 2019, and to receive Royal Assent by early 2020. The Sponsor Body has recently been established in shadow form.

• Construction work on the Northern Estate began in the second half of 2018 and will continue in 2019 with the refurbishment of 1 Derby Gate. The other Northern Estate buildings, including Richmond House, will be refurbished and redeveloped over the coming years, with the Northern Estate Programme scheduled to be completed in the mid-2020s, in line with the expected start of restoration and renewal of the Palace of Westminster.

• Decant accommodation needs to be secured in readiness for large-scale office moves ahead of the Northern Estate Programme.

13 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

• The Canon Row project will fully refurbish and repair the grade II listed building. The works began in 2014 and are expected to be finished in 2019.

• The lease for 7 Millbank expires in December 2021. Strategic Estates is currently reviewing the property options which include refurbishment.

• A number of security projects arose from the Murphy Review of Parliamentary security following the 22 March 2017 attack. While some projects have already started on site, others are still at an early stage. Although an overall completion date for these projects is yet to be confirmed, the target for substantial completion is Summer 2021.

• The Fire Safety Improvement Works Programme is currently focusing on fire life safety to achieve a higher standard of compliance with the Regulatory Reform (Fire Safety) Order 2005 (RRO) by December 2018.

• Significant interventions will be required in the Palace to maintain mechanical and electrical systems and the fabric of the building before Restoration & Renewal begins.

12) Security and access:

• The threat picture for the UK is unlikely to reduce, which will drive further demands for protective measures both for Members (potentially of both Houses) when working on the Parliamentary estate and, importantly, when away in constituencies.

• Security will need to be more agile in its approach and response given the different types of threats that are being seen in the UK and overseas. We will at all times follow best advice from recognised experts.

• The independent Murphy Review has generated a range of security projects that will require increased focus from Member Committees and resources across both Parliamentary Security Department (PSD) and Strategic Estates to deliver these in a timescale acceptable to Members.

• Perimeter security will continue to be a priority but we expect to be able to maintain current levels of public access (democratic visitors and commercial tours).

• Growing numbers of contractors will put increasing pressure on the Pass Office to turn around pass applications quickly and efficiently.

• Changes to the Estate (notably, but not only, R&R and NEP) will require additional resources to plan security measures and deliver operational security.

13) Digital / technology:

• Cyber security remains a high risk;

• There is significant technical debt with regards to platform services;

• Pressure on costs from the continuing growth in the number of users;

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 14

• Pressure from major cost increases in critical software;

• Skype for Business will be fully implemented by July 2019;

• The full roll-out of Office 365 started in 2017/18 and is planned to finish in 2018/19. The detailed timings of rolling it out to Members / Members’ staff are still to be finalised.

• Website and intranet developments continue and support improvements in the public perception of Parliament and the work of Parliament;

• Foundational data modelling and interactions are needed in place to drive the website and move to a platforms-based approach for asset and facilities management, to develop with R&R the ‘digital twin’ model of the Estate, and to improve HR and financial data.

14) Public:

• We know from our research that there is still work to do in improving the public’s knowledge and perception of Parliament. We also know that low likelihood to vote is connected to low knowledge and understanding more than age, gender or socio-economic group.

• There are some positive signs of change in political behaviour, as evidenced by the high turnout in the EU referendum in 2016 and in the 2017 General Election. This is particularly true of younger people, where voter turnout increased significantly between the 2015 and 2017 Elections.

• The popularity of E-petitions (often publicised / shared via social media) is also an encouraging sign of public interest in Parliament.

• As the level of refurbishment work on the Estate increases there will be a need to reinforce the message that Parliament remains open for business and encourages the public to come in and/or engage with it.

• There is a focus in future years on growing the opportunities for public engagement beyond Westminster. Use of new technology, developing a strong UK-wide presence and developing the ability to work with partner organisations across the UK will all play a part in increasing engagement with the public, whoever and wherever they are.

The Planning Round

15) Over the last few years a more integrated approach to forward planning has been developed which brings together financial, business, and workforce planning. Challenge meetings now take place three times a year, led by the Director of Corporate Finance & Performance. The meetings at the end of quarter 1 looked at high level changes and meetings at the end of quarter 2 in October/November examined figures in detail.

15 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

16) The main themes for the challenge panels and the planning round are:

• Review of previous year outturn to identify any remaining capacity in team budgets;

• Review of emerging capacity/pressures in the current year and the ongoing impact;

• Review of any new pressures identified for future years;

• Review of proposals for reinvestment;

• Assessment of progress on the Efficiencies Programme and continuous improvement;

• Impact of major programmes and property decisions;

• Review of technical assumptions including employee costs, inflation, depreciation etc; and

• Review of the appropriate level of contingency in the medium term.

17) The planning process is designed to deliver the Administration and Members Estimates and a new Corporate Business Plan. The process incorporates the Medium Term Financial Plan and the Medium Term Investment Plan (a bi-cameral plan that includes a mixture of capital and resource investment in major programmes, the Estate and digital programmes) and a review of grants and fees and charges.

18) The Members Estimate now just includes Parliamentary Contributory Pension Fund (PCPF) exchequer contribution, Short Money and payroll costs for deputy Speaker salaries. Grants, IT equipment and support, postage and stationery, insurances and training for Members are now included in the Administration Estimate.

19) The capital investment arising from the Medium Term Investment Plan (MTIP) forms part of the MTFP and is at Annexes E & F.

Financial Remit and Target Estimate

20) The financial remit for the planning round 2019/20 to 2022/23, agreed by the Commission in March 2018, assumes zero growth in real terms and that the House will absorb day to day upward cost pressures other than inflation. Furthermore, the efficiencies target of £15.5m should be met by 2019–20, recognising that this sum may be reinvested in priority areas. The Finance Committee will regularly review progress on the programme. Maintaining control over the budget for day to day activity is important, irrespective of the increased expenditure on security and major programmes.

21) The exceptions to the remit are as follows:

• significant enhancements to scrutiny, which have been agreed by the House (e.g. additional select committees) or specifically recommended by Members (e.g. Liaison Committee) and agreed by the Commission;

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 16

• security measures, which will enhance the physical or cyber security of Parliament in order to mitigate identified risks;

• the resource implications of major building refurbishments, namely the Northern Estate Programme, R&R and the Archives Accommodation Programme; and extending to programme management costs, professional fees that cannot be capitalised, running and refurbishment costs for decant buildings, and impairment costs. This should include the depreciation of works to leased buildings to facilitate moves, particularly where they are spread over the life of a relatively short lease;

• the resource impact of other capital works to buildings and property revaluations – including changes to depreciation arising from property revaluations, obsolescence and impairment charges;

• relocation contingency planning, which will enable Parliament to carry out business as usual in the event of an emergency.

22) Proposed additions/clarifications to exceptions to the remit are:

• New services agreed by the House and/or new services in response to external reviews or inquiries; and

• the resource impact of other capital works to buildings and property revaluations – including projects in the programme that are classified as resource, staff costs1 to deliver the programme, changes to depreciation arising from property revaluations, obsolescence and impairment charges;

23) In this planning round the new services referred to above relate to the Independent Complaints and Grievance Scheme, and the external review is the Cox Inquiry. The Committee indicated its willingness to support these areas at the October meeting.

24) The Strategic Estates programme is mainly capital, but some elements such as surveys are resource and some projects may be classified as resource for accounting reasons. Treating the resource element of the programme as inside the remit may prevent the delivery of the overall programme. The accounting rules on capitalisation of costs are strict and only those staff costs that relate directly to delivery of a capital project are capitalised. Treating the remaining resource staff costs as inside the remit may also prejudice delivery of the programme.

25) Any changes to employment costs (such as employer national insurance and pension contributions) should be absorbed wherever possible. For 2019–20 a very significant increase in pension contributions of up to £6m is expected due to the valuation and change in discount rate. In the budget the Chancellor advised that for government departments this would be funded next year, and for later years it would be factored into the Spending Review. It is recommended that the House mirrors this approach and treats the increase as outside the remit next year and reviews the situation again in the next planning round.

26) Some flexibility should be retained for unforeseen transfers between capital and resource.1 The Finance Committee reviewed and noted the Strategic Estates resourcing plan at its meeting on 12 April

2018.

17 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

27) The Committee will be asked to recommend these changes to the Commission as part of its advice on the Estimate and MTFP in December.

28) The remit is translated into a target Estimate calculation. The inflation rate used in the calculation is currently 2.0% to reflect the latest pay agreement and general price inflation.

29) The Commission agreed an efficiency target of £15.5m over the life of the Parliament. This is not reflected in the calculation at this point as a decision could be taken to re-invest some of the cashable efficiencies identified rather than reduce the Estimate. The paper includes proposals to reinvest some of the cashable efficiencies identified.

Draft Estimate 2019–20 and Medium Term Financial Plan

30) The current draft of the MTFP is attached at Annex A.

31) The MTFP has been rolled forward to include 2022–23, and reflect the changes to the organisational structure, any transfers between budgets and allocation of provisions for the pay award and inflation made this year. It includes future growth and savings that emerged from the challenge meetings.

Overview

32) The new MTFP shows that before reinvestment the estimate for 2019–20 exceeds the target by £0.6m. This eases in future years. The table below shows the changes to existing MTFP for each area. The changes by Team are in Annexes A & B.

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 18

19/20 20/21 21/22 22/23£,000 £,000 £,000 £,000

Baseline 275,373 262,770 270,129 270,129

Uplifts 2,245 1,449 609 5,282Savings 164 (39) (74) (74)Growth 2,717 2,658 2,594 2,538One-off adjustments (40) 15 - -

Total changes within remit 5,086 4,083 3,129 7,746

Bullying & Harrassment 765 680 680 680General Election 691 (1,321) (1,834) (976)Scrutiny 1,877 1,550 1,300 1,300Security 29 329 329 329Northern Estate 5,862 (293) (362) (360)Strategic Programmes 45,200 27,212 29,693 26,824Business Resilience 893 327 450 327Building Depreciation and Impairment 41,479 41,918 114,001 110,056

Total outside remit 96,796 70,402 144,257 138,180

Total before investment 377,255 337,255 417,515 416,055

Target Estimate 376,700 339,400 420,700 419,200

Headroom/Shortfall before proposed investments (555) 2,145 3,185 3,145

Investment options 1,845 1,345 985 845

Headroom/Shortfall after proposed investments (2,400) 800 2,200 2,300

Total if investments go ahead 379,100 338,600 418,500 416,900

Pressures and Opportunities

33) Unavoidable growth totals between £2.5m and £2.7m p.a. The main item is depreciation (£1.5m - £1.7m) arising from historic and planned Digital capital investment. The Digital capital investment (excluding Members IT) has increased in recent years. The current budget is £5.9m and IT equipment is depreciated over 3 to 5 years. This is within the remit, unlike depreciation arising from the capital works programme.

Future Investment Opportunities

34) The Commons Executive Board considered bids ranging from £3.4m in 2019/20 to £2.2m in 2022/23 and its recommended bids are detailed in Annex C & D. These peak in 2019/20 at £1.8m and fall to £0.8m by 2022/23. The scale of growth bids is an indication of the ambition to improve services. However, it is appropriate that CEB reviews all services in light of the review of corporate strategy currently underway, and identifies how it can refine its services before committing to new ones. The recommended bids are ones that will ensure current momentum is maintained and many are invest to save.

19 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

35) Further work is needed to establish costs for the full response to the Cox report and these will be added in December. Currently it is anticipated bringing in an independent director to lead the work and sit on the Commons Executive Board for a fixed period of time, with some programme staff to support them. These costs with additional training and other support could cost in the order of £0.5m next year.

Digital

36) When considering the Medium Term Investment Plan, Joint Investment Board recommended that Digital should work to contain pressures on running costs rather than having any further increase in the total budget.

37) CEB agreed to include some funding for growth for depreciation, Committee iPads and the Members broadband service, and to provide inflation of £0.7k to help with licencing cost pressure. R&R related items have also been funded. Specific items that have not been funded at this stage include Cyber Security phase 2, Members Printing Project and Members local engagement Teams, pending business cases that will clarify the expected benefits and savings.

38) This still leaves a shortfall in 2019/20 of around £2.5m compared with the Digital request (excluding Cyber and new Member services). Significant further work is needed to identify how this will be managed and the Finance Directors will work with Digital senior management to achieve this.

Growth treated as Exceptions to the Remit

Bullying and Harassment

39) Funding has been included for implementing the Independent Complaints and Grievance Scheme – staffing, advice and support contracts and training. There is some funding for the second enquiry.

Strategic Programmes and NEP

40) The budgets in the draft MTFP for R&R and NEP are in the table below. Prior years actuals and current year forecast is included for reference.

Forecast BudgetPrior Years 2018/19 2019/20 2020/21 2021/22 2022/23

£m £m £m £m £m £mNEPResource 3.7 0.8 6.2 0.0 0.0 0.0Capital 22.1 42.3 82.4 208.1 178.0 229.8

R&RResource 4.3 6.1 42.0 60.9 75.1 79.3Capital 13.7 15.1 34.7 30.0 36.5 42.6

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 20

Resource

41) There is significant additional resource investment sought for strategic programmes, particularly in 2019/20. There is quite a level of uncertainty and these are expected to change before the Estimate is agreed.

42) R&R staff costs changes now incorporate Digital Platform staffing, Shadow Sponsor body and Delivery Body transition team in addition to existing programme delivery staff costs over the 4 year period, as the timing of the legislation is uncertain.

43) R&R non staff costs are Digital Platform running costs. The costs are assumed to be resource and particularly for 2019/20 look optimistic. These are expected to change in the next iteration.

44) Core project costs reduce as they now exclude fit-out costs for new buildings due to uncertainty on property acquisition. Negotiations are progressing though and the uncertainty may be resolved by the next iteration. The resource elements of the Strategic Estates resourcing plan are included.

45) Property takes account of running costs for a building to accommodate the R&R and NEP teams, for Richmond House replacement, for 7 Millbank until expiry of the lease, and for impact of the various northern estate decants – but not overspill decant as these are currently unknown.

46) R&R related costs include: Customer and Client team which has been set up to establish user requirements for strategic properties including R&R, NEP and medium term enabling projects; costs for Teams engaging with and understanding implications of R&R; Digital costs in support of decants.

47) The Archives Accommodation programme funding has been reduced by £14m over the planning period in line with the recently agreed strategic outline programme case. An outline business case is expected in 2020/21.

Capital

48) Capital estimates for R&R and NEP have changed in line with the latest programme schedule. Strategic Estates core programme costs have increased due to Murphy related security projects, Canon Row refurbishment delay, and Fire and Safety programme delay and cost increase.

Scrutiny

49) The Liaison Committee has agreed a bid (£1.3m 2019/20, £1.5m 2020/21 onwards) that would provide an additional 25 posts to help with workload, help support collaboration with R&I, fund administration posts to reduce staffing gaps, increase resource to Web and Publications unit and increase the media and social media posts from 14 to 17. This would qualify as increased scrutiny and be outside the remit. A business case is expected before the end of November which will help explain how the additional staff will be accommodated and the impact on other Teams and on the Communications Strategy.

21 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

Business Resilience

50) Additional funding is for equipment and rehearsals relating to the various plans.

Building depreciation and impairment

51) Depreciation and impairment increase significantly as a result of the level of capital investment in the strategic estates core programme on the Palace and other buildings on the estate and R&R.

Other Changes

Savings and Efficiencies Programme

52) The programme is now drawing to a close, and including the accommodation cost avoidance savings, it has met its target to secure efficiencies of £15.5 million and could exceed the target if more efficient use of office space continues. A full report is at Annex I.

53) Efficiencies continue to be explored and whilst limited new savings have been identified for 2019–20, the challenge meetings identified a few areas where there may be savings reported, for example in Security with proper allocation of Police Officers to roles.

Technical Review

54) As part of the planning round a technical review is being conducted that includes:

• A survey of rent review dates (for our own office buildings and our commercial premises) to ensure likely changes are factored into the financial plan;

• Consideration of the next steps in relation to the pay and reward strategy

• A review of inflation assumptions;

• Review of exchange rate risk;

• A review of pension and NI assumptions;

• Apprenticeship levy;

• Depreciation and dilapidations;

• Impairment and obsolescence;

• Pension contributions;

• Capitalisation;

• Review of contingency required.

55) Whilst the House has to maintain pay broadly in line with the Civil Service, there was no specific mention in the budget. Accordingly 2% provision has been made in the MTFP to reflect the actual cost of the current agreed pay system for the various pay groups. The committee will be asked to review the new pay remit in January 2019.

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 22

56) General inflation has been budgeted at 2.0% from 2019–20.

57) The level of general contingency required in 2019–20 and beyond is currently assumed to be around £1m.

58) Depreciation across the four year period will be dependent on new capital investment and estate valuation fluctuations and will be updated once the draft valuation is available at the end of November.

Areas of Uncertainty

59) There are a number of areas of uncertainty where further information is required either because the requirement is clear but the figures are not or where the figures are clear but the requirement is not:

• Depreciation and impairment;

• Employers pension contribution rate;

• 7 Millbank exterior works costs;

• Costs arising from securing a relocation venue;

Summary

60) The draft MTFP shows the financial remit will be exceeded in 2019/20, before proposed investments. This reflects the impact of the 2018/19 pay deal and move of the implementation date from September to April as well as unavoidable growth such as IT depreciation. The more significant recommended investments such as Ways of Working programme and the Communications strategy are enablers for R&R or will help in the response to the Cox enquiry.

61) This position will ease in the later years and the draft MTFP is within remit and recommended investments will be affordable. The Commons Executive Board discussed the situation and pushed back some of the bids, but supported others; however the resulting breach of the remit in 2019–20 is not being taken lightly and the Board committed to a full review of the use of resources against the new strategy to take place before the next planning round which should improve the position.

62) Further growth pressures will no doubt emerge in the later years of the plan and the headroom could well reduce as we get nearer to the year in question. And of course the exceptions to the remit should only be used if absolutely necessary – in other words if the pressures relating to them cannot be covered from savings elsewhere.

The Committee is asked to consider the position, pending giving its advice to the Commission in December.

Fees and Charges Review

63) The Committee has considered a review of fees and charges, and the Administration Committee has also been consulted.

23 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

Medium Term Investment Plan (MTIP)

64) The MTIP forms part of the MTFP and capital and resource implications have been captured in the MTFP, high level detail is in Annexes E & F. The Investment Plan itself is the subject of a separate paper.

Members Estimate

65) The Members Estimate for 2019–20 has been developed alongside the Administration Estimate, and the Finance Committee has a role in scrutinising it in order to advise the Members Estimate Committee. The draft Members Estimate is at Annexes G & H. The only changes are to adjust for actual costs expected for 2018/19 and an inflation adjustment.

Grants

66) The Committee has already reviewed and agreed its advice to the Commission in relation to grants to third parties. The Committee recommended a 2% increase in the grant for the History of Parliament Trust. However the Lords Finance Committee are recommending a 5% cut which leaves the two Houses out of line. It would be preferable for both Houses to reach the same conclusion on this grant.

67) The Committee was previously informed of a potential new grant proposed for the People’s Museum under the Vital Voters initiative. This bid has been withdrawn as it was felt that it could meet the funding criteria of the Speakers Art Fund.

Consultation and Equality Impact Assessment

68) Consultation and equality impact assessments will be carried out in relation to specific proposals within the financial plans as required.

Finance and Procurement Implications

69) Financial matters are integral to this report.

70) There are no direct procurement implications. However, procurement activity is expected to make a contribution to the efficiencies programme in the medium term.

Risks

71) As far as possible the Estimate for 2019–20 and MTFP will reflect anticipated changes in costs and income. However, there is some risk that unforeseen costs will arise, not least due to some of the significant changes that are being made to service delivery models and structures and the major programmes that are underway, or that income is not generated as anticipated. Impact of further fire safety work or other building work pre-R&R on income generation is a particular issue at the moment.

72) There are particular risks associated with the non-cash part of the Estimate as set out below:

• Asset valuations may result in significant positive or negative impacts;

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 24

• Depreciation costs are affected by valuations and also reflect the investment programme;

• Property dilapidations and onerous lease contract costs may arise.

73) The contingency is intended to mitigate most of these risks. However, no attempt is made to predict and budget for changes in property valuations, and if necessary these can be managed via a supplementary estimate. The central provision for inflation for 2019/20 stands at £7.5m. This includes provision for the 2018/19 pay deal which has yet to be agreed.

13 November 2018

List of Annexes

Annex A Draft Resource MTFP: Comparison between 2018/19 MTFP and draft 2019/20

Annex B Draft Resource MTFP: between 2018/19 Budget and draft 2019/20

Annex C Draft Resource MTFP: Avoidable Growth recommended

Annex D Draft Resource MTFP: Avoidable Growth – Commons Executive Board recommendations

Annex E Draft Capital MTFP: Comparison between 2018/19 and draft 2019/20 MTIP

Annex F Draft Capital MTFP: Comparison between 2018/19 budget and 2019/20 draft budget

Annex G Draft Members Estimate: Comparison between 2018/19 baseline and draft 2019/20

Annex H Draft Members Estimate: Comparison between 2018/19 budget and 2019/20 draft budget

Annex I Efficiencies Programme

25 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

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House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 26

An

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27 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

An

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House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 28

Annex D

Commons Executive Board recommendations

Clerk Interim Grade £385k

1) The proposal addresses challenges around morale and career development for A2 Clerks, recently highlighted during a staffing review of so-called “flexible complementing” of Clerks at A2 and SCS1. It also addresses a perceived mismatch in the grading structure of the circulatable pool of Clerks in Chamber and Committee Services compared with that of the wider House Service. The intention is to introduce an A1 Clerk grade in addition to the existing A2 and SCS1 roles. The number of staff would remain the same and the small additional cost post implementation will be funded from existing budgets. The implementation costs in 2018/19 and 2019/20 will also be absorbed. CEB recommend this investment.

Communications strategy implementation – Aligning communications spend with organisational priorities £1,040k

2) The scale of scrutiny, challenge and change facing the House is unprecedented. Implementing the Cox Report recommendations, internal and external communications around R&R, the consequences of Brexit, the threat of incident, as well as possible changes to House leadership, requires a corporate communications capability at the top of its game. The current communications team isn’t currently resilient; the House is reliant on a very small team to provide communications support 24/7, 365 days a year. Consequently, the team is bidding for £519k for the year ahead to increase capacity and capability in key areas (media and internal communications). This extra funding will also enable the team to take forward work to transform the way communications is delivered across the House with a view to delivering long-term savings, by:

• better aligning communications spend across the House Service with organisational priorities

• preventing duplication of cost and effort by different teams

• investing in a number of communications contracts and licences on behalf of teams across the House to take advantage of economies of scale

• introducing a communications spending control gateway.

3) The Commons Executive Board expect savings in communications spend across the House Service to have been identified during 2019/20 that will be delivered by 2021/22 to offset this short-term investment. The Commons Executive Board expect savings in communications spend across the House Service to have been identified during 2019/20 that will be delivered by 2021/22 to offset the investment. CEB recommend this investment.

Customer Team £920k

4) The Customer team was formed in 2017/18 in the wake of the Customer programme and has delivered the customer-related elements of the House strategy for example

29 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

Members satisfaction survey, Members staff induction programme, regional events with Members staff, customer service training, and compliments complaints and comments process. Funding for the Customer Team currently expires in 2020/21. This team is deemed important in continuing supporting and facilitating change in customer service in teams. The fear is without central co-ordination, progress will stall. The investment required to make this team permanent is £140k in 2020/21 rising to £390k in 2021/22. CEB recommend this investment

Ways of Working Programme £700k

5) The Ways of Working programme is an enabling cultural change programme with the aim of building flexibility and resilience in the House Service, preparing the organisation to deal effectively with the very significant challenges of the next decade. It focuses on generating genuine attitudinal and behavioural ‘change that sticks’ and is based on empowering and ‘nudging’ staff and teams to take ownership of change and development. It works with teams to enable them to be more outcome-focused, flexible and to be proactive about productivity and staff well-being. Extending the programme until the end of 2019/20 will cost around £700k plus £1m capital. The benefits include increased occupation levels though flexible working, improved productivity, improved staff wellbeing and satisfaction. The Board see this as an important part of preparing for R&R. CEB recommend this investment

Northern Ireland Outreach £168k

6) The restructure of the Education and Engagement team has enabled staff delivering outreach sessions to school and community groups across all areas of the UK except NI within existing budgets. This proposal aims to fill the gap by funding an outreach officer, event running costs along with additional funding specifically allocated to promote visits in NI. This will allow reaching of new and first-time audiences that may not be able to visit Westminster or would not normally engage with Parliament or its public engagement services. The target would be to reach 11,000 children a year in Northern Ireland by 2020/21. CEB recommend this investment

Democracy badge £180k

7) The Democracy badge initiative has used Vote 100 funding to engage with Girlguiding, the Scouts Association and the Boys Brigade to extend our reach and engage young people in the business of the House through engagement with the representatives, signing petitions and other methods. Funding will enable continuation of the initiative and extension to other uniformed organisations and is expected to increase the number of young people awarded the Democracy badge from 110,000 to 145,000 young people each year by 2022. CEB recommend this investment

Pass Office Project – Personnel Security Transformation Project

8) This two year transformation programme will:

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 30

• Re-focus the Pass Office on its core function of security vetting with pass issuing being undertaken by a customer-focused team (or teams) and moving the provision of BPSS checks to an outside provider.

• Digitise the security forms so that they can be completed online with less room for error by applicants and no need for information to be re-typed by Pass Office staff, thus speeding up the vetting process and reducing the risk of errors being made.

• Use new digital tools to manage applications, improving customer experience.

• Integrate the Pass Office database with the parliamentary IT network.

9) The Board consider the efficient operation of this function crucial to the delivery of many aspects of the House’ work, not least the Restoration and Renewal Programme. CEB recommend this investment

POST ESRC grant replacement £247k

10) The Economic and Social Research Council have indicated they will reduce their current funding of the Social Science Section of the Parliamentary Office of Science and Technology from three posts to half a post by 2021/22. This resource providing rigorous social science evidence to Parliament has been very beneficial and ensured that all POSTnotes now contain social science. Also, Select Committees have been better supported in analysing a wider range of evidence, with social science methodologies now being used across both Houses. The breadth and depth of POST work for Committees in both Houses has expanded dramatically due to the inclusion of this expertise. In addition, POST social science advisers have set up the Parliamentary Academic Fellowship Scheme to provide academics to teams in both Houses to work on specific projects; and have conducted social science research into areas such as Members’ induction. The intentions of the Lords, who share the costs of this service, are currently unclear. CEB recommend providing for this investment, pending bicameral support

IRIS expansion £600k.

11) The IRIS team is responsible for ensuring the House is compliant with the information acts (FOI, DPA, EIR) and oversees some practical aspects of information security including the accreditation of systems. The team also provides an advice service to Members and their staff which includes training and guidance. IRIS continues to experience increased pressure as a result of the increased amount of building and digital activity, creating pressure in terms of security accreditation and advice. In addition, the team has received a large number of data protection subject access requests from staff in particular parts of the organisation and has had to deal with an increasing number of FOI requests. There is no sign of this demand reducing. CEB recommend this investment

Research & Information Capacity review

12) The Capacity Review is the result of an acknowledgement by the R&I Leadership team that it is necessary to manage the high level of demand on the service. Indeed there is

31 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

concern that the research service will become unsustainable without significant changes. The review will explore and resolve increasing demand from Members. CEB recommend this investment

Paralegal

13) The Speakers Counsel team are dealing with increasing workload, particularly arising from R&R. This investment will fund an additional post. CEB recommend this investment

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 32

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33 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

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House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 34

An

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35 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

Annex H

Draft Members Estimate: Comparison between 2018/19 budget and 2019/20 draft budget

2018/19 2019/20 Change£000s £000s £000s

PCPF Exchequer contribution 7,000 7,000 -Financial Assistance to Opposition Parties 9,800 10,300 500Salaries 140 133 (7)Contingency 100 217 117

Sub-total cash 17,040 17,650 610

Audit fee 50 50 -

Total Resource 17,090 17,700 610

Annex I

Efficiencies Programme

Background to the Efficiencies Programme

1) When the House of Commons Commission agreed the Commons financial remit for the 2016–17 planning round with a headline position of zero growth in real terms, it expressed a strong view that every effort should be made to deliver efficiencies. Similarly, when the Lords House Committee confirmed the 2016/17 financial remit of not increasing the resource budget in real terms compared with 2010/2011, subject to the need to maintain the ability of the House and its Members to carry out their parliamentary functions in changing circumstances including increased attendance, the Leader of the House said that savings should be made where possible and in response, the House of Lords Management Board agreed to join the Commons in an Efficiencies Programme.

2) Significantly, and in contrast to the previous Commons Savings Programme, both Houses have participated in and benefitted from this programme in close cooperation and the programme links to the corporate strategies of both Houses.

Programme Objectives

3) The emphasis of the programme has been to offer the same or enhanced services at a reduced cost on the proviso that unless a decision is taken to stop a discretionary activity, there should be little adverse impact on Members or other customers. One of the objectives of the Efficiencies Programme has been to free up resources to strengthen delivery of strategic priorities and some of the efficiencies made have been reinvested as set out later in this paper.

4) Others come from using resources more efficiently especially around staff accommodation where there has been a significant recent shift in mindset. Facilitated by the Ways of Working programme, more flexible working practices have been introduced

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 36

to enable staff to begin to move away from the presumption that they will spend most of their time working at their own desk on-site. One of the many advantages of smart working is that we need less space and that is already beginning to feed through.

5) The objectives of the Programme have been to identify:

• Opportunities to provide the same or better service for less;

• Instances where services are not well used or valued and we could seek to reduce/stop them;

• Instances where the cost of a service is disproportionate to the outcome/value derived, and we could seek to reposition the service to secure better value for money;

• Any spare capacity in budgets that can be removed.

6) The potential benefits of making efficiencies include:

• Reputational – Parliament can say with increased confidence that the tax payer is getting value for money;

• Strategic – re-investment of funds in priority areas;

• Financial – making limited budgets go further by spending purposefully to get better value;

• Staff morale – we all want to work more efficiently;

• Parliament will benefit if we free up resources to provide services that deliver better value for the customer;

• Exploring new ways of working will help us to become more lean and efficient, especially in advance of R&R.

7) The programme has covered different types of expenditure including staff costs, professional fees, contract costs, and utility bills; and has also taken into account income. The programme has encompassed Continuous Improvement which has been used as a tool for teams to achieve wider efficiencies – improvements in delivery of service, reduction in process times etc. – as well as cash savings.

Timescale and Target

8) For the Commons, the Commission agreed an efficiency target of 10% over 4 years, in other words a reduction of 10% of controllable expenditure in the Administration Resource Estimate between 2015–16 and 2019–20 at current prices which would equate to £15.5m. This has been the target of the programme as a whole. As a strategic partner the Lords Administration has helped to achieve it, has benefitted proportionately from savings and efficiencies in shared services such as Estates, Digital and Security and has sought efficiencies of its own.

9) The programme began in April 2016 to run for three years until March 2019, so it is currently in its final phase. In terms of governance and reporting, the programme has

37 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

been tied in with the financial planning process and overseen by the Finance Directors. A small bi-cameral steering group consisting of the two Finance Directors and a second nominated Board member from each House (the Director of Facilities in the Lords and the Managing Director of Information and Research/Participation in the Commons) together with an external member who comes from the NAO, has acted as a board for the programme.

Progress to Date

10) In the first year of the programme (Phase 1) some £5m of Commons efficiencies were identified alongside £1.2m of Lords efficiencies, the latter being a mixture of those generated in shared areas and those from within Lords offices. All these efficiencies have been achieved and removed from the bottom line.

11) In the second year of the programme (Phase 2) Commons and shared service teams were asked to model efficiencies both in their own area and to identify and contribute to cross-cutting opportunities. Teams understood that whilst the efficiencies wouldn’t necessarily be distributed evenly across the organisation, everyone would need to do their bit to achieve the target and they submitted innovative ideas and proposals in varying ways. Some modelled quantifiable efficiencies which would provide cashable savings constituting a direct reduction in cost to contribute to the target. Others made or proposed efficiency savings which they suggested could be reinvested or diverted within their own areas and the Commons Executive Board considered the merits of these proposals. The Lords were consulted where proposals are related to shared services or affect the House.

12) Efficiencies therefore fall into the following categories:

• Cashable efficiencies are those modelled by teams either in their own area or cross-cutting that would reduce their overall cost and reduce the bottom line.

• Reinvestment efficiencies are those where teams propose efficiencies that are dependent on agreement to reinvestment in the Team’s own area.

• Productivity Gains and Cost Avoidance covers efficiencies proposed by teams that are quantifiable and measurable – for example Continuous Improvement reviews of processes that would improve the way we do things and make the organisation more efficient – but might not be readily cashable.

• Accommodation Efficiencies using less accommodation at Westminster where this is quantifiable and measurable.

13) In total the potential benefit from all of them added together amounts to around £6.2m, £4.7m of which are cashable (as opposed to productivity gains or reinvested savings) and have been taken off the bottom line. Of the remaining £1.5 million productivity gains, £0.5 million has yet to be delivered.

14) Some of the efficiency opportunities identified under the programme, particularly those being proposed by shared services such as the PDS, have generated efficiency savings for the House of Lords and in respect of these full consultation has taken place with the appropriate partner in the Lords. The value to the House of Lords of all such proposals

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 38

identified so far within the Programme is approaching £2.5m. In addition, the annual Lords business and financial planning round is likely to add some further efficiencies agreed with Lords Offices which will be added to the final Lords total for the Programme.

15) The Commons Executive Board agreed that better use of accommodation provided the best opportunity for efficiency gains in the third phase of the programme and that improved utilisation of space and resulting cost avoidance is a legitimate efficiency. Accordingly, efforts have been focussed on identifying the opportunities available through better utilisation of space used by staff within the Commons and bicameral services on the parliamentary estate. These are measurable and quantifiable and the cost avoidance figures are readily identifiable to us as we are currently seeking office space in SW1.

16) The need to vacate Richmond House (RH) and at the same time accommodate increasing numbers of staff notably for NEP and R&R, means that accommodation is particularly tight. Already there has been a significant reduction in the amount of space occupied by staff in RH compared to that occupied in 7 Millbank in 2016 when this programme began. A reduction in space per desk from 8.89m2 to 6.50m2 per desk has allowed us to avoid the cost of providing an additional 292 desks. We know from the market that each desk space in SW1 might cost some £15,000 and on this basis we have avoided an additional £4.4million of expenditure simply by squashing up, using smaller furniture and having fewer staff spending all their time on site. This is a conservative figure as it takes no account of the number of staff who share desks, figures for which cannot presently be accurately quantified.

17) In addition at Tothill Street which was already considered to be full, the Chamber and Committee team are reconfiguring their workspace to fit in an additional 30 Committee team staff who will need to be housed in 2019 and would otherwise have needed rented office space. We have thereby avoided costs of around £450,000 per annum which would have been reflected in the MTFP in 2019–20.

18) Further, in drafting a new Accommodation Strategy, the CEB has moved away from a constraining one-size-fits-all space standard and no longer considers space in terms of sqm per person. The Board has set itself a target to achieve a further £5m worth of cost avoidance efficiencies during 2019–20 when the move out of RH is due to take place. The strategy will also help to ensure that the efficiencies already achieved are maintained.

19) So in terms of cost avoidance, as summarised in Table 3 the House has already delivered £4.85 million of accommodation efficiencies to date with a further £5 million as a target for 2019–20

20) As the programme draws to a close, in summary it has -

• delivered in phase 1 some £5 million Commons/£1.2 million Lords of efficiency savings off the bottom line

• delivered in phase 2 a further £4.7 million Commons/£1.3 million Lords off the bottom line

• delivered in phase 2 a £1 million productivity gains and identified a further £0.5m

39 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

• delivered in phase 3 as accommodation cost avoidance a further £4.85m in the Commons (with more to come in the Lords from the autumn financial challenge) and identified a further £5 million in the Commons Accommodation Strategy which has yet to be secured.

21) Therefore, including the accommodation cost avoidance savings, the programme has met its target to secure efficiencies of £15.5 million of which some £9.7million has permanently been removed from the bottom line. A further £0.5 million of Library Research productivity gains and has yet to be delivered and a further £5 million of accommodation efficiencies under the Commons Accommodation Strategy. If both are achieved this would bring the total for the programme in the Commons to £21 million

Next Steps

22) The Efficiencies Programme Steering Group will oversee an orderly closure of the programme and the remaining £5.5 million productivity efficiencies and accommodation cost efficiencies identified in the Commons Accommodation Strategy and agreed by the Commons Executive Board be handed to the business to be delivered as BAU in 2019–20.

23) In terms of what happens next:

In order to inform its thinking, the Finance Committee has already requested a longer term projection of the House of Commons Administration Estimate (say to 2030) which reflects:

• The impact of Brexit on the Chamber and Committees Team and other ‘knowledge workers’ such as staff working in Library research, indexing and data management and digital services;

• The creation of the Sponsor Body and Delivery Authority for R&R, which will remove a significant part of the estimate, potentially during 2019–20;

• The reduction in the Strategic Estates programme in the run up to, and during, R&R;

• Anticipated changes to the property portfolio;

• The anticipated level of Digital Investment;

• The anticipated level of Security spend;

• The possible change in the numbers of Members in either House due to political decisions e.g. Boundary Changes.

This will provide a better baseline against which to consider further savings and efficiencies that may be sought.

24) The wider economic outlook will be important as in the past the House has reflected, to an extent, the steps being taken by government to deal with austerity. As part of the Chancellor’s Budget on 29 October the Office of Budget Responsibility will produce updated economic forecasts and there may be a steer about public sector pay and implications for

House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20 40

Departmental Expenditure Limits for 2019–20. There will also be a Spending Review in 2019 which will determine Departmental Expenditure Limits for later years and provide an obvious benchmark for the House.

25) The Finance Committee will need to consider its advice to the Commission on future savings and efficiencies.

41 House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

Formal minutesTuesday 20 November 2018

Members present:

Chris Bryant, in the Chair

Mr Clive Betts

Sir Geoffrey Clifton-Brown

Neil Gray

Sir Lindsay Hoyle

Mark Tami

1. House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20

The Committee considered this matter.

Draft Report (House of Commons Financial Plan 2019/20 to 2022/23 and draft Estimates 2019/20), proposed by the Chair, brought up and read.

Ordered, That the draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 23 read and agreed to.

Appendix agreed to.

Resolved, That the Report be the First Report of the Committee to the House.

Ordered, That the Chair make the Report to the House.

Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134

[Adjourned till Tuesday 11 December at 12pm