TNAG-2077-FCO40-2957-Hong-Kong-culture-1990 — Page 131

In confidence

48

them to input costs; managers are therefore unable to demonstrate their full efficiency performance. A consistent system for forecasting and monitoring efficiency improvements will be developed by April 1992.

16 Resource allocation

16.1 During the triennium, the Council will adjust revenue targets and expenditure budgets in response to the opportunities, constraints and priorities described in this Plan. The adjustments are of two kinds:

•

deployment of resources to priority areas

• savings on grant-funded budgets.

Before the Council can plan to achieve the objectives described in earlier chapters, it has to plan to live within its means.

Savings

16.2 Each year the Council finds savings on grant-funded budgets, in order to compensate as far as possible for the reduced purchasing power of the grant-in-aid and to fund redeployments to priority areas. Table 17 summarizes the Council's operating income and expenditure; the lower half shows how the Council plans to adjust its budgets, so that total operating expenditure balances total operating income in each year 1991/92 to 1993/94. This table is at 1991/92 cash prices, in order that the Council's estimates for 1991/92 can be reconciled to it. Table 18 summarizes the budget adjustments under five headings:

efficiency levy

• additional efficiency gains

• increased revenue-funding

⚫ cuts

⚫ contingency plan to close the gap.

Efficiency levy

16.3 The Council will continue to reduce staff and running costs by at least 1.5% each year without loss of quality or effectiveness. Budgets like rent and rates, over which managers have little or no control, are not included. Also excluded for the immediate future are the administrative costs of FCO and ODA agency schemes and projects, and of the Council's DTE centres which will all be subject to the discipline of external market forces from 1991/92. Thus the efficiency levy will be applied to £62 million of the Council's £177 million operating income, yielding £2.84 million recurrent efficiency gains by 1993/94.

Additional efficiency gains

16.4 The Council plans to make further efficiency gains of £2.40 million per annum on UK staff and running cost budgets by 1993/94.

Savings within the line of management 16.5 £0.54 million per annum efficiency gains will be achieved through rigorous scrutiny of all expenditure budgets within the line of management. These additional savings will contribute £0.32 million per annum towards the expenditure reduction needed to balance the Council's budget, and will fund redeployments.

Restructuring

16.6 £0.78 million per annum will be saved from grant-funded budgets as a result of removing administrative overlap between headquarters and overseas offices and streamlining the departments handling interchange schemes.

Return on investment

16.7 The cash return to the centre from relocation and from investment in DTE is detailed in paragraphs 16.10 and 16.12.

16.8 Investment in property and IT systems will be about £6.5 million per annum. After excluding expenditure on property maintenance and taking account of the running costs of new IT systems, the net cash return on this investment over the previous three years will be £0.48 million per annum (about 3%) by 1993/94 and will rise to £0.8 million per annum (nearly 5%) in 1994/95. The cash return to the centre is only one criterion for assessing the benefits of property and IT investment, alongside improvements to the security and appearance of the Council's premises, operational effectiveness and business development. A 5% return in cash-flow terms, as indicated in CP1, is still a target; but it is likely to be achieved only in the mid-1990s.

Information provision

16.9 The cost of the strategy to improve information provision overseas was reduced by £0.2 million per annum in 1990/91. A further £0.1 million per annum savings on overseas budgets will be phased in during 1991/92 and 1992/93, better equipment is installed and staff training provided in countries that participate in the strategy (see paragraph 11.3, page 36).

Relocation

as

16.10 The Council aims to reduce its cash running costs from current levels by £0.7 million per annum from 1993/94 as a result of relocation (see paragraph 16.25).

Increased revenue-funding

16.11 The Council will reduce grant-funded expenditure budgets by a further £1.75 million per annum, by 1993/94, by substituting revenue surpluses for grant funding.