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Fiscal Risks and Sustainability

HM Treasury is addressing long-term fiscal sustainability and hidden financial risks in public finances, particularly around pension liabilities, climate change impacts, and rising health spending pressures. The Fiscal Risks and Sustainability Report (published by the Office for Budget Responsibility) identifies emerging threats to fiscal stability, with Treasury responses outlining mitigation strategies and improved financial disclosure through the Whole of Government Accounts.

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2026

1 event
4 Mar 2026 | Committee report linked

We questioned how 2023–24 pension disclosures appeared to show a reduction in public sector pension liabilities and raised that this was counter intuitive. We raised concern that this disclosure created presents a false picture of the underlying fiscal reality when the number of scheme members continues to risk and life expectancy trends increase long-term obligations.41 The Treasury acknowledged the Committee’s concern and suggested that the most meaningful long-term indicator of pension aff...

We questioned how 2023–24 pension disclosures appeared to show a reduction in public sector pension liabilities and raised that this was counter intuitive. We raised concern that this disclosure created presents a false picture of the underlying fiscal reality when …

▤ View document · ↗ GOV.UK

2025

23 events
17 Jul 2025 | Research HM Treasury linked

Whole of Government Accounts 2023-24

The Whole of Government Accounts consolidates accounts from over 10,000 public bodies, providing an overview of the UK’s public finances. Report type: financial_audit | Departments: ['Cross-government', 'HM Treasury'] | Topics: ['Money and tax']

▤ View document · ↗ GOV.UK
2 Apr 2025 | Committee report linked

We therefore asked the Department how, if it did not have estimates of future costs beyond 2025–26, it was modelling the expected balance of costs against income in future years. It replied that it was conducting 24 Qq 62, 73; C&AG’s Report, paras 10 and 2.9 25 Qq 67, 71, 72 26 Q 80; C&AG’s Report, paras 10 and 2.9 27 Qq 73–75, 81–82; Letter from DCMS Permanent Secretary, 25 February 2025 28 Q30; C&AG’s Report, paras 17 and 3.3 29 C&AG’s Report, paras 17 and 3.4 30 Q 28; C&AG’s Report, para 3...

We therefore asked the Department how, if it did not have estimates of future costs beyond 2025–26, it was modelling the expected balance of costs against income in future years. It replied that it was conducting 24 Qq 62, 73; …

▤ View document · ↗ GOV.UK
19 Mar 2025 | Committee report linked

The WGA is not sufficiently focused on long–term financial risk. One purpose of the WGA is to provide a comprehensive picture of the UK’s public sector finances and inform more effective management of fiscal risks. The WGA 2022–23 includes narrative on the fiscal risks published in the OBR’s Fiscal Risks and Sustainability report. In particular, it highlights risks posed by climate change, rising health spending, and geopolitical tensions which are projected to increase pressures on the publi...

The WGA is not sufficiently focused on long–term financial risk. One purpose of the WGA is to provide a comprehensive picture of the UK’s public sector finances and inform more effective management of fiscal risks. The WGA 2022–23 includes narrative …

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19 Mar 2025 | Committee report linked

The Treasury estimated that there is approximately £133.6 billion of property, plant and equipment missing from the accounts, and approximately 104.6bn of missing public sector pension liability.16 The overall impact of missing data across the accounts is estimated to be that net liabilities are overstated by £31.7bn (1.3% of total), and net income is overstated by £34.4bn. The C&AG notes that including the missing expenditure would therefore move the published net income figure of £14.6bn to...

The Treasury estimated that there is approximately £133.6 billion of property, plant and equipment missing from the accounts, and approximately 104.6bn of missing public sector pension liability.16 The overall impact of missing data across the accounts is estimated to be …

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19 Mar 2025 | Committee report linked

The WGA does not contain detailed analysis of the impact of unaudited data on a line by line basis, but the C&AG notes that £35.1bn of total net expenditure and £93.6bn of total net assets are reported in the WGA based on unaudited draft data.18

The WGA does not contain detailed analysis of the impact of unaudited data on a line by line basis, but the C&AG notes that £35.1bn of total net expenditure and £93.6bn of total net assets are reported in the WGA …

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19 Mar 2025 | Committee report linked

We queried what the Treasury was doing to help MPs better understand and make use of the WGA. In response, the Treasury told us that it has previously offered WGA sessions for new MPs as part of their induction programme. It also said it was willing to run future teach–ins for any parliamentarians who would like to attend.50 45 WGA 2022–23 p31 46 WGA 2022–23 pp45–46 47 WGA 2022–23 p10 48 Q 69 49 Q 77 50 Q 3 15

We queried what the Treasury was doing to help MPs better understand and make use of the WGA. In response, the Treasury told us that it has previously offered WGA sessions for new MPs as part of their induction programme. …

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19 Mar 2025 | Committee report linked

In response to our questions on how the Treasury will improve the format of the WGA in future, the Treasury told us that it plans to improve the quality of reporting in the WGA in future publications, after it has restored the timeliness of production of the accounts to a pre–COVID timetable. The Treasury plans to introduce a 15–year trend analysis of UK public sector income and expenditure, key assets and key liabilities to the WGA for 2023–24 .51 The Treasury also noted that other countries...

In response to our questions on how the Treasury will improve the format of the WGA in future, the Treasury told us that it plans to improve the quality of reporting in the WGA in future publications, after it has …

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19 Mar 2025 | Committee report linked

The WGA includes several large provisions which change substantially from year to year. For example, the provision for future decommissioning of nuclear facilities has decreased by £126.2 billion from £273.1 billion in 2021–22 to £146.9 billion in 2022–23, with the discount rate decreasing the provision by £131.8 billion.53 We subsequently discovered that the forecast cost to the taxpayer of nuclear decommissioning had actually increased by £11.7 billion in the year 2022–23 , despite the impr...

The WGA includes several large provisions which change substantially from year to year. For example, the provision for future decommissioning of nuclear facilities has decreased by £126.2 billion from £273.1 billion in 2021–22 to £146.9 billion in 2022–23, with the …

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19 Mar 2025 | Committee report linked

The net public sector pension liability also reduced, from £2,639 billion at the end of 2021–22, to £1,415 billion at 31 March 2023 due to changes in underlying actuarial assumptions, including the changes to the discount rate.56 However, it is not possible to separately see the impact of the discount rate from other actuarial assumptions (such as life expectancy of future retirees and assumptions such as predicted pay increases for workers in future) that change each year.57

The net public sector pension liability also reduced, from £2,639 billion at the end of 2021–22, to £1,415 billion at 31 March 2023 due to changes in underlying actuarial assumptions, including the changes to the discount rate.56 However, it is …

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19 Mar 2025 | Committee report linked

We questioned the Treasury about the clarity of reporting within the WGA on the impact of actuarial assumptions on the unfunded pension liability figure reported.62 It replied that the WGA disclosure of such factors had improved from previous years, but acknowledged that further improvement could be made.63 Long term sustainability

We questioned the Treasury about the clarity of reporting within the WGA on the impact of actuarial assumptions on the unfunded pension liability figure reported.62 It replied that the WGA disclosure of such factors had improved from previous years, but …

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19 Mar 2025 | Committee report linked

The WGA highlights the succession of economic shocks that the UK has been affected by in recent years, straining public finances.64 The accounts detail several specific risks to the UK’s public finances going forward. These include costs of resolving, mitigating and adapting for climate change damage, including flooding and coastal erosion. Additionally, health spending is expected to increase in future years, resulting in an increase to public sector debt. Demographic pressures and geopoliti...

The WGA highlights the succession of economic shocks that the UK has been affected by in recent years, straining public finances.64 The accounts detail several specific risks to the UK’s public finances going forward. These include costs of resolving, mitigating …

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19 Mar 2025 | Committee report linked

The WGA gives a big picture view of the financial position of the UK government.66 We questioned the Treasury on the financial sustainability of public spending, to which it responded that the OBR forecast that accompanied the autumn budget, rather than WGA, would be the better source for looking at the sustainability of the spend versus revenue position. It commented that the WGA offers a broader view of government finances as it includes things like pension liabilities increases for the yea...

The WGA gives a big picture view of the financial position of the UK government.66 We questioned the Treasury on the financial sustainability of public spending, to which it responded that the OBR forecast that accompanied the autumn budget, rather …

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19 Mar 2025 | Committee report linked

We challenged the Treasury on how seriously it is taking the sustainability of government finances, to which it stated that it was taking the matter very seriously. It commented that the OBR’s fiscal sustainability report includes a 50–year forecast and looks at what happens if everything stays the same. Based on current policy and the latest demographic projections, the OBR estimate public debt is projected to almost triple from under 100% of GDP to over 270% of GDP over the next 50 years.68...

We challenged the Treasury on how seriously it is taking the sustainability of government finances, to which it stated that it was taking the matter very seriously. It commented that the OBR’s fiscal sustainability report includes a 50–year forecast and …

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19 Mar 2025 | Committee report linked

We asked the Treasury to explain the actions needed to address the issues that are putting pressure on public finances and risking the sustainability of spending in the long term. The Treasury noted that work was needed on adult social care, driven by the aging population of the UK and the need for prevention of issues rather than just paying for the consequences. It assured us that fiscal sustainability is the foundation of what the Treasury is looking at, and it needs to look at cost driver...

We asked the Treasury to explain the actions needed to address the issues that are putting pressure on public finances and risking the sustainability of spending in the long term. The Treasury noted that work was needed on adult social …

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19 Mar 2025 | Written evidence linked

We challenged the Treasury over the difficulty that an ordinary reader would have understand the actual movement in large liabilities from year to year.58 Written evidence received from Professor David Heald also noted that the recent volatility of the discount rate used in the valuation of assets and liabilities had made changes in WGA Net Liabilities difficult to interpret.59 51 Q 3 52 Q 4 53 WGA 2022–23 pp68–69 54 Nuclear Decommissioning Authority Annual Report and Accounts 2022–23 p143; M...

We challenged the Treasury over the difficulty that an ordinary reader would have understand the actual movement in large liabilities from year to year.58 Written evidence received from Professor David Heald also noted that the recent volatility of the discount …

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19 Mar 2025 | Written evidence linked

We received written evidence from the ICAEW which states that the significant reduction in pensions liabilities presented within the 2022–23 WGA is the most significant change in the balance sheet for the government, and is primarily due to actuarial assumptions, particularly discount rates. It stressed that such a reduction does not represent a windfall to the exchequer, as it does not impact pension entitlements in cash terms. The actual obligation for the government to pay future pensioner...

We received written evidence from the ICAEW which states that the significant reduction in pensions liabilities presented within the 2022–23 WGA is the most significant change in the balance sheet for the government, and is primarily due to actuarial assumptions, …

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19 Mar 2025 | Written evidence linked

Written evidence we received from the ICAEW stressed that, in the absence of discount rates noted in earlier sections, the UK government had a deficit of £200 billion in 2022–23. The ICAEW noted that this deficit is more than 20% of the revenue the UK government received in 2022–23 (£975 billion) and that this deficit is greater than that reported in the National Accounts (£77 billion), as the WGA includes longer term financial liabilities that the government incurs. It stressed the need for ...

Written evidence we received from the ICAEW stressed that, in the absence of discount rates noted in earlier sections, the UK government had a deficit of £200 billion in 2022–23. The ICAEW noted that this deficit is more than 20% …

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29 Jan 2025 | Committee report linked

Resilience to shocks is a key element of financial sustainability. We asked how well the NHS would cope financially in the event of another pandemic. NHSE expressed confidence that in the event of another pandemic government would provide any additional funding the NHS needed, as it had done during the previous pandemic. NHSE acknowledged that this had only been possible in 2020 through the suspension of some normal financial rules. It said that, with similar financial arrangements in place, ...

Resilience to shocks is a key element of financial sustainability. We asked how well the NHS would cope financially in the event of another pandemic. NHSE expressed confidence that in the event of another pandemic government would provide any additional …

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29 Jan 2025 | Committee report linked

Demand for capital in the NHS continues to outstrip supply and the UK lags behind other OECD countries in terms of capital investment in its health system. DHSC has maintained its recent track record of not fully investing the capital funds HMT allocates it and instead reallocating large amounts for day-to-day revenue spending. It transferred £0.4 billion from capital to revenue in 2022–23, £0.9 billion in 2023–24, and it told us that a similar amount of £0.9 billion would be switched during ...

Demand for capital in the NHS continues to outstrip supply and the UK lags behind other OECD countries in terms of capital investment in its health system. DHSC has maintained its recent track record of not fully investing the capital …

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2024

22 events
26 Nov 2024 | Research HM Treasury linked

Whole of Government Accounts 2022-23

The Whole of Government Accounts consolidates accounts from over 10,000 public bodies, providing an overview of the UK’s public finances. Report type: financial_audit | Departments: ['Cross-government', 'HM Treasury'] | Topics: ['Money and tax']

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2 Aug 2024 | Policy paper HM Treasury linked

Fixing the foundations: public spending audit 2024-25

On Monday 8 July, the Chancellor of the Exchequer announced that she had instructed Treasury officials to undertake an audit of public spending for 2024-25.

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11 May 2024 | Committee report linked

We welcome the Government’s decision to extend business rates relief for grassroots music venues until the end of the 24/25 billing year. However, while we understand that the conventions around Budget announcements are well-established, this continued uncertainty creates a new cliff-edge for the already precarious grassroots music sector. We recommend that Government should ensure that any future fiscal policy decisions relating to grassroots music venues gives venues certainty and long- ter...

We welcome the Government’s decision to extend business rates relief for grassroots music venues until the end of the 24/25 billing year. However, while we understand that the conventions around Budget announcements are well-established, this continued uncertainty creates a new …

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13 Mar 2024 | Committee report linked

This Committee has continually advocated for the use of Accounting Officer (AO) Assessments to support high quality decision-making and enhance transparency. The Treasury’s guidance suggests that it is good practice for an AO Assessment to be produced for each significant novel and contentious transaction or proposal involving the use of public funds.36 Our 2022 report on Improving the Accounting Officer Assessment process 27 C&AG’s Report, para 3.10; Q48 28 Q27 29 Q22 30 Committee of Public ...

This Committee has continually advocated for the use of Accounting Officer (AO) Assessments to support high quality decision-making and enhance transparency. The Treasury’s guidance suggests that it is good practice for an AO Assessment to be produced for each significant …

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13 Mar 2024 | Committee report linked

We asked the witnesses how they manage the risks of moral hazard (where support for one company creates an incentive for other companies to take risks with the expectation they will also be supported) and free riders (where the company’s incumbent lenders or shareholders may benefit from government support without having to contribute themselves) when deciding if and how to intervene in a company.50 The Treasury explained how it sets “the bar very high” and conducts very detailed due diligenc...

We asked the witnesses how they manage the risks of moral hazard (where support for one company creates an incentive for other companies to take risks with the expectation they will also be supported) and free riders (where the company’s …

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5 Mar 2024 | Committee report linked

We asked the OBR whether any improvements could be made to government’s borrowing processes. The OBR expressed a desire for more information on the owners of UK gilts held overseas, which it said represented arounds 25% of all UK debt – the second highest in the G7. It explained that foreign investors were “more fickle and more flighty than domestic investors” because they were less committed to holding UK gilts over the long-term.16 The OBR told us that compared to domestic investors, such a...

We asked the OBR whether any improvements could be made to government’s borrowing processes. The OBR expressed a desire for more information on the owners of UK gilts held overseas, which it said represented arounds 25% of all UK debt …

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5 Mar 2024 | Committee report linked

Not only does the government face growing pressure to borrow more in the future, but it also needs to ensure it can repay its current debts. The DMO issues gilts of varying length, ranging from one to more than 50 years. The period between a gilt being first issued and when the amount borrowed must be repaid to the original investor is called the redemption or maturity date. The NAO’s report highlighted that government gilt redemptions will peak in 2024–25, with £140 billion of gilts maturing...

Not only does the government face growing pressure to borrow more in the future, but it also needs to ensure it can repay its current debts. The DMO issues gilts of varying length, ranging from one to more than 50 …

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7 Feb 2024 | Committee report linked

One area in which the Bank’s strategy is less well established regards the long-term steady-state size and composition of its balance sheet, which may have a bearing on the longer-term conduct of QT and which, as we note later, may have implications for fiscal as well as monetary and financial stability policy.

One area in which the Bank’s strategy is less well established regards the long-term steady-state size and composition of its balance sheet, which may have a bearing on the longer-term conduct of QT and which, as we note later, may …

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7 Feb 2024 | Committee report linked

There are no clear signs that QT has resulted in financial stability issues to date, either in the gilt market or more widely. We also recognise that bringing down the share of gilts owned by the Bank in favour of the private sector could improve liquidity in financial markets. Nonetheless, QT is an untested intervention in a gilt market that is also faced with an unusually high sustained rate of conventional gilt issuance, which could risk contributing to a financial instability event. The e...

There are no clear signs that QT has resulted in financial stability issues to date, either in the gilt market or more widely. We also recognise that bringing down the share of gilts owned by the Bank in favour of …

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26 Jan 2024 | Committee report linked

It is unacceptable that the increase in missing data is reducing the utility and reliability of the Whole of Government Accounts. A total of 155 public bodies did not submit data this year, including two pension schemes with liabilities of £86.9 billion and £48.2 billion respectively. As we found in our examination of the 2019– 20 WGA, gaps in the data reduces the completeness of the information available in the WGA, and reduces the certainty of any consequent insights, conclusions or decisio...

It is unacceptable that the increase in missing data is reducing the utility and reliability of the Whole of Government Accounts. A total of 155 public bodies did not submit data this year, including two pension schemes with liabilities of …

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26 Jan 2024 | Committee report linked

HM Treasury is not sufficiently proactive in identifying the data it requires for reporting thematic spend in the WGA, or communicating this with Departments. HM Treasury does not actively pursue the data it needs for the WGA beyond providing initial guidance on the format data should be provided in. The performance report in the most recent WGA provides a comprehensive explanation of the contents of the financial statements but does not yet meet best practice in terms of providing a comprehe...

HM Treasury is not sufficiently proactive in identifying the data it requires for reporting thematic spend in the WGA, or communicating this with Departments. HM Treasury does not actively pursue the data it needs for the WGA beyond providing initial …

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26 Jan 2024 | Committee report linked

As part of our inquiry into the 2019–20 Whole of Government Accounts, we concluded that the Treasury had taken too long to deliver the accounts, having been unrealistic with its timetable. We recommended that the Department reviewed the causes of its optimism bis, and revisited future timetables to ensure that they were realistic. The Treasury accepted our recommendation, and committed to revising the timetable for the 2020–21 account and future cycles. It also committed to setting out a long...

As part of our inquiry into the 2019–20 Whole of Government Accounts, we concluded that the Treasury had taken too long to deliver the accounts, having been unrealistic with its timetable. We recommended that the Department reviewed the causes of …

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26 Jan 2024 | Committee report linked

The Treasury included its recovery plan for the WGA as part of its update in December 2022, which included returning to the pre-Covid timetables of produce the WGA no more than 15-months after the end of the relevant financial year. We asked the Treasury whether it was confident that future WGAs would be completed within this timetable. HM Treasury told us that it was confident in its revised timetable for the recovery of the 15 months publication schedule. It explained that it was working on...

The Treasury included its recovery plan for the WGA as part of its update in December 2022, which included returning to the pre-Covid timetables of produce the WGA no more than 15-months after the end of the relevant financial year. …

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26 Jan 2024 | Committee report linked

Despite the multiple extensions to the data collection window, a large volume of data was nonetheless missing from the 2020–21 WGA when it was published. A total of 155 entities did not submit the data requested, including 137 entities which were included in the 2019–20 WGA. In total, data on £55.3 billion (4.9%) of public expenditure was missing from the 2020–21 accounts. A large subsection of this figure relates to local government bodies, with 128 (just over 25%) of a total 510 local gover...

Despite the multiple extensions to the data collection window, a large volume of data was nonetheless missing from the 2020–21 WGA when it was published. A total of 155 entities did not submit the data requested, including 137 entities which …

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26 Jan 2024 | Committee report linked

We asked the Treasury about the extent of missing data and the impact of this on the ability of government to make decisions about public spending. HM Treasury recognised that any gap in data meant that there was uncertainty about the completeness of the information that it was using. It also recognised that, combined with the timeliness of the accounts, this made the WGA a “less timely, less complete set of data for us to base decision making on”.21 It told us that it did not think that this...

We asked the Treasury about the extent of missing data and the impact of this on the ability of government to make decisions about public spending. HM Treasury recognised that any gap in data meant that there was uncertainty about …

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26 Jan 2024 | Committee report linked

We asked the Treasury about the relationship it had with the public bodies which are required to submit data to the WGA, noting that the Treasury appeared to have operated largely as a passive receiver of data rather than actively seeking it out. The Treasury told us that while it may not be proactively contacting local authorities, it was regularly contacted by them with reasons why they cannot submit the required data, so it felt that it knew the underlying issues. It also told us that one ...

We asked the Treasury about the relationship it had with the public bodies which are required to submit data to the WGA, noting that the Treasury appeared to have operated largely as a passive receiver of data rather than actively …

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26 Jan 2024 | Committee report linked

Both of the professional bodies that responded to the Committee’s request for evidence addressed the collection and use of data. The ICAEW told us that a lot more could be done to explain how public spending has been used to meet policy objectives and the needs of the population, and noted a lack of commentary on the non-financial KPIs used as metrics for policy progress on matters including education, levelling up, tackling poverty, crime 42 Q 37 43 Q 41 44 Q 38; Committee of Public Accounts...

Both of the professional bodies that responded to the Committee’s request for evidence addressed the collection and use of data. The ICAEW told us that a lot more could be done to explain how public spending has been used to …

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26 Jan 2024 | Committee report linked

We asked the Treasury how it was reflecting the issue of Net Zero spending in the WGA, given its importance across government and therefore every public body that is included in the WGA. At present, the WGA deals primarily with listing spending commitments relating to Net Zero. HM Treasury committed to making this information more prominent as the money begins to be spent and it has data on what has been spent against those commitments.52 We observed that, as with COVID spending, some of this...

We asked the Treasury how it was reflecting the issue of Net Zero spending in the WGA, given its importance across government and therefore every public body that is included in the WGA. At present, the WGA deals primarily with …

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26 Jan 2024 | Written evidence linked

The WGA offers an important tool not only for managing public finances but for ensuring transparency and accountability.12 We received written evidence from the Institute of Chartered Accountants in England and Wales (ICAEW), which told us that the WGA is uniquely positioned to provide an overview of public sector spending, and how the public sector’s financial landscape is evolving. We also received written evidence from the University of Glasgow, which told us that timeliness is essential w...

The WGA offers an important tool not only for managing public finances but for ensuring transparency and accountability.12 We received written evidence from the Institute of Chartered Accountants in England and Wales (ICAEW), which told us that the WGA is …

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26 Jan 2024 | Written evidence linked

HM Treasury also increased the use of unaudited data—data which has been audited only for presentation in the individual entity’s own accounts, rather than in OSCAR II format—in the 2020–21 WGA. We received written evidence from the ICAEW, which told us that the use of incompletely audited draft account data would almost certainly have led to the C&AG further qualifying his opinion on the 2020–21 WGA for a lack of assurance over the local authorities and other public bodies concerned. The ICA...

HM Treasury also increased the use of unaudited data—data which has been audited only for presentation in the individual entity’s own accounts, rather than in OSCAR II format—in the 2020–21 WGA. We received written evidence from the ICAEW, which told …

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26 Jan 2024 | Written evidence linked

Given the potential for the WGA to be an important and really useful document about public spending, we asked the Treasury how it could help Parliamentarians and members of the public to understand the WGA and its implications. The ICAEW suggested that that it would be beneficial to hold events additional to our annual evidence session, to 49 WGA0002 Written evidence from ICAEW: The Institute of Chartered Accountants in England and Wales, 10 November 2023 50 Committee of Public Accounts, Whol...

Given the potential for the WGA to be an important and really useful document about public spending, we asked the Treasury how it could help Parliamentarians and members of the public to understand the WGA and its implications. The ICAEW …

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2023

13 events
17 Nov 2023 | Committee report Context · primary home: NHS policy linked

This committee has highlighted many times in the years since 2016 that DHSC has focused on short-term survival of NHS services, while neglecting long-term sustainability, 78 Qq 49–51 79 Q 94 80 Q 91; C&AG’s Report, para 4.2 81 C&AG’s Report, paras 3.17 and 3.19 82 Q 109 83 Q 109; C&AG’s Report, para 18 84 Qq 109, 110 85 C&AG’s Report, para 18 86 Q 110; C&AG’s Report, para 18 87 Q 110 20 The New Hospital Programme and has criticised DHSC’s lack of long-term planning for capital investment.88 A...

This committee has highlighted many times in the years since 2016 that DHSC has focused on short-term survival of NHS services, while neglecting long-term sustainability, 78 Qq 49–51 79 Q 94 80 Q 91; C&AG’s Report, para 4.2 81 C&AG’s …

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1 Nov 2023 | Committee report linked

The government directed Teneo to make minimal use of hedging when purchasing energy for Bulb’s customers, except when operational and market conditions required it. During the SAR, Teneo purchased its energy using a combination of day-ahead and week- ahead purchases. We asked HM Treasury if it would use the same approach to hedging if a SAR was needed for a failed supplier in the future or if it would look to make any changes. HM Treasury clarified that Managing Public Money did not prohibit ...

The government directed Teneo to make minimal use of hedging when purchasing energy for Bulb’s customers, except when operational and market conditions required it. During the SAR, Teneo purchased its energy using a combination of day-ahead and week- ahead purchases. …

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5 Jul 2023 | Research HM Treasury linked

Managing government borrowing

The environment for government borrowing has become more challenging in recent years – requiring sustained focus from government. Report type: value_for_money | Departments: ['HM Treasury'] | Topics: ['Commercial and financial management', 'Corporate finance', 'Financial sustainability']

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5 May 2023 | Committee report linked

Departments have stated that this settlement may not be enough to allow them to proceed with their preferred procurement options if final costs, which they currently estimate to be between £382 million and £403 million, continue to exceed the funding available.23 The Department for Work & Pensions told us that one of the top risks to the successful delivery of the Shared Services Strategy was the uncertainty over the additional funding it needed in this Spending Review period.24 It noted that...

Departments have stated that this settlement may not be enough to allow them to proceed with their preferred procurement options if final costs, which they currently estimate to be between £382 million and £403 million, continue to exceed the funding …

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19 Apr 2023 | Committee report linked

The Department’s assessment of the Equipment Plan’s affordability still relies on over-optimistic assumptions about the cost of programmes and the efficiencies and cost reductions it will achieve. Although the Department assesses that the Equipment Plan is affordable over ten years, this obscures significant financial pressure. There is a deficit of £2.6 billion over the first seven years of the Plan and the ten-year plans of four of the six Top Level Budgets are in deficit. Most notably the ...

The Department’s assessment of the Equipment Plan’s affordability still relies on over-optimistic assumptions about the cost of programmes and the efficiencies and cost reductions it will achieve. Although the Department assesses that the Equipment Plan is affordable over ten years, …

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19 Apr 2023 | Committee report linked

The Department has ignored the worsening economic environment in its latest Equipment Plan and faces significant financial pressures on its equipment programme. The Department has not included external cost pressures, including inflation and foreign exchange movements, in its central assessment of the Plan’s affordability. This is despite identifying when it produced the Plan that inflation could increase project costs by up to £2.1 billion over ten years. It did not include this inflationary...

The Department has ignored the worsening economic environment in its latest Equipment Plan and faces significant financial pressures on its equipment programme. The Department has not included external cost pressures, including inflation and foreign exchange movements, in its central assessment …

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19 Apr 2023 | Committee report linked

We also noted that the Plan is only affordable if the Department achieves intended £13.8 billion of savings, £5 billion of which it has not yet developed plans to achieve.39 The Department may be over-optimistic in expecting to achieve all intended cost reductions and efficiency savings.40 In addition, of the savings for which it does not yet have clear plans, the Department must find £2.1 billion of these in the next three years. The Department’s contingency over those three years is only £0...

We also noted that the Plan is only affordable if the Department achieves intended £13.8 billion of savings, £5 billion of which it has not yet developed plans to achieve.39 The Department may be over-optimistic in expecting to achieve all …

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19 Apr 2023 | Committee report linked

We are concerned that the Department seems reliant on delaying delivery of capabilities to keep the Plan affordable.44 The Department told us that the £13.2 billion management adjustment for realism represented a small amount of over-programming, and was based on historical performance and its assessment of deliverability, with supply chain issues making it harder to spend money as planned.45 We are also concerned that the Plan does not include all the capabilities set out in the Integrated R...

We are concerned that the Department seems reliant on delaying delivery of capabilities to keep the Plan affordable.44 The Department told us that the £13.2 billion management adjustment for realism represented a small amount of over-programming, and was based on …

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19 Apr 2023 | Committee report linked

The affordability of the Plan is also under pressure from external economic factors, including rising inflation and unfavourable exchange rate movements. In March 2022 the Office of Budget Responsibility forecast that inflation would reach 8.7% by the end of 2022.47 The Department reported that this would increase cost pressure on the Plan by £2.1 billion, but acknowledged that this estimate might not accurately reflect rising inflation.48 By November 2022 inflation was higher than this forec...

The affordability of the Plan is also under pressure from external economic factors, including rising inflation and unfavourable exchange rate movements. In March 2022 the Office of Budget Responsibility forecast that inflation would reach 8.7% by the end of 2022.47 …

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19 Apr 2023 | Committee report linked

Economic factors such as inflation and exchange rates will cause significant risks to the plan’s affordability. The Department told us that it has £25 billion of risks that are not included in its forecast costs because it deems these unlikely to occur, compared to £13 billion of more-likely risks that it does include in project cost forecasts.51 It will only take a relatively small change to significantly affect affordability, given that the Department currently has only a £2.6 billion surpl...

Economic factors such as inflation and exchange rates will cause significant risks to the plan’s affordability. The Department told us that it has £25 billion of risks that are not included in its forecast costs because it deems these unlikely …

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1 Mar 2023 | Committee report linked

We shared our concerns about the risks facing the NHS and its ability to deliver the recovery targets and we pressed NHSE on how confident it was that it would meet the target to increase elective activity to 129% of 2019–20 levels by 2024–25.20 In some ways, this is the most important target because increasing activity is what will enable all the other targets to be met. We noted the importance of reaching higher levels of activity as soon as possible so as to begin reducing the backlog of p...

We shared our concerns about the risks facing the NHS and its ability to deliver the recovery targets and we pressed NHSE on how confident it was that it would meet the target to increase elective activity to 129% of …

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2022

25 events
30 Nov 2022 | Committee report linked

HM Treasury recognised that there were “black and white points” where it was very clear that an AO assessment would be expected, whereas more judgement could be needed in other situations.39 Given this and the “big gaps” between the AO assessments it would expect to have seen completed and those have been published on a timely basis, it recognised more needed to be done to create a culture where accounting officers see the benefits and the value of completing an assessment.40 The Cabinet Offi...

HM Treasury recognised that there were “black and white points” where it was very clear that an AO assessment would be expected, whereas more judgement could be needed in other situations.39 Given this and the “big gaps” between the AO …

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30 Nov 2022 | Committee report linked

HM Treasury’s guidance states that an AO assessment should be produced for a programme or project if, after its initial approval, it ‘departs from the four standards [for accounting officers] or the agreed plan […] in terms of costs, benefits, timescales, or level of risk, which informed the accounting officer’s previous approval’.50 While the guidance is not prescriptive about what this means in practice, IPA told the NAO that this could be interpreted as a substantial change to a programme’...

HM Treasury’s guidance states that an AO assessment should be produced for a programme or project if, after its initial approval, it ‘departs from the four standards [for accounting officers] or the agreed plan […] in terms of costs, benefits, …

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30 Nov 2022 | Committee report linked

IPA also characterised inflationary pressures as a “very real issue” which was “beyond a risk: it was a reality”. For example, it quoted inflation at 23% over the last six months on materials. IPA concluded that programmes will need to be more productive to help offset inflationary pressures.57 HM Treasury recognised that all departments were facing inflationary pressures with some struggling to evidence the impact of these pressures. This may be, for example, because some programmes were pro...

IPA also characterised inflationary pressures as a “very real issue” which was “beyond a risk: it was a reality”. For example, it quoted inflation at 23% over the last six months on materials. IPA concluded that programmes will need to …

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14 Oct 2022 | Committee report linked

Inconsistent presentation of data between years, and lack of reflection of current Government policies and economic context, reduce the usability of the Whole of Government Accounts. The 2019–20 WGA presented some important trend analysis within the Performance Report; an aspect of the WGA reporting that we welcome. However, in some areas there has been a lack of consistency when it comes to how this information is presented. For example, analysis of liabilities had previously been presented ...

Inconsistent presentation of data between years, and lack of reflection of current Government policies and economic context, reduce the usability of the Whole of Government Accounts. The 2019–20 WGA presented some important trend analysis within the Performance Report; an aspect …

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14 Oct 2022 | Committee report linked

The content of the Whole of Government Accounts has improved but does not transparently report against all key areas of government spending. The issues that are of greatest interest to users of the WGA, including the Committee, evolve over time. For example, the 2019–20 WGA includes reporting on sustainability and net zero targets, although the information included is brief, with limited detail – the Treasury plans to build on this going forwards. Providing a more comprehensive assessment of ...

The content of the Whole of Government Accounts has improved but does not transparently report against all key areas of government spending. The issues that are of greatest interest to users of the WGA, including the Committee, evolve over time. …

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14 Oct 2022 | Committee report linked

Based on the Whole of Government Accounts (WGA) for the year ended 31 March 2020, we took evidence from HM Treasury (the Treasury) on 8 June 2022.1 The WGA is a unique document which provides the most complete and accurate picture available of the UK public sector finances.2 It is a set of financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and the Government Financial Reporting Manual (FReM).3 It brings together information on the financial per...

Based on the Whole of Government Accounts (WGA) for the year ended 31 March 2020, we took evidence from HM Treasury (the Treasury) on 8 June 2022.1 The WGA is a unique document which provides the most complete and accurate …

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14 Oct 2022 | Committee report linked

Timeliness is essential when gathering high-quality data needed to produce useful information; delays reduce the value and transparency of information in the WGA and diminish its potential to generate valuable insights.17 The published accounts are an important source for key stakeholders including Parliament, and major fiscal bodies such as the International Monetary Fund and Office for Budget Responsibility, and underlying data is used by HM Treasury to help manage the public finances. In o...

Timeliness is essential when gathering high-quality data needed to produce useful information; delays reduce the value and transparency of information in the WGA and diminish its potential to generate valuable insights.17 The published accounts are an important source for key …

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14 Oct 2022 | Committee report linked

The Treasury has laid out its aims for delivery of the 2020–21 and 2021–22 accounts, setting target dates for publication of March 2023 and November 2023 respectively. This gives the Treasury less than 10 months from publication of the 2019–20 WGA for the preparation and audit of the 2020–21 accounts, and only eight months subsequently for the 2021–22 accounts.26 The accounts production timetables the Treasury laid out for 2019–20 were unrealistic and it is vital that this is not repeated so ...

The Treasury has laid out its aims for delivery of the 2020–21 and 2021–22 accounts, setting target dates for publication of March 2023 and November 2023 respectively. This gives the Treasury less than 10 months from publication of the 2019–20 …

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14 Oct 2022 | Committee report linked

However, during the implementation of OSCAR II, a number of significant problems arose. The problems, which were not localised but were encountered across the system’s different functionalities, included: issues faced by component bodies when attempting to submit their data to the system, in some cases requiring system changes to be made, and 19 WGA 2019–20, para 14, p 212 20 Public Accounts Committee, Oral evidence: Whole of Government Accounts, HC 655, 19 November 2020, Q 117 21 Public Acco...

However, during the implementation of OSCAR II, a number of significant problems arose. The problems, which were not localised but were encountered across the system’s different functionalities, included: issues faced by component bodies when attempting to submit their data to …

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14 Oct 2022 | Committee report linked

There are several factors that contribute to maximising the usability of the WGA for the public and other stakeholders. We discussed with the Treasury how creating successive sets of accounts which are presented in a consistent and comparable way enables users to analyse data and trends across several years. This is one of the most valuable functions of the WGA—which has provided the best available overview of UK public finances for the last 11 years—and so it is important that consistency of...

There are several factors that contribute to maximising the usability of the WGA for the public and other stakeholders. We discussed with the Treasury how creating successive sets of accounts which are presented in a consistent and comparable way enables …

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14 Oct 2022 | Committee report linked

In the 2019–20 WGA, the Treasury presented some important trend analysis within the Performance Report on income and expenditure, as well as assets and liabilities.47 This is an aspect of the WGA reporting that we welcome as an incredibly useful aspect of what the WGA is geared towards. However, we raised with the Treasury how in some areas there has been a lack of consistency when it comes to how this information is presented. For example, the analysis of liabilities contains data which has,...

In the 2019–20 WGA, the Treasury presented some important trend analysis within the Performance Report on income and expenditure, as well as assets and liabilities.47 This is an aspect of the WGA reporting that we welcome as an incredibly useful …

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14 Oct 2022 | Committee report linked

The Treasury explained to us how the WGA plays a crucial role in enhancing the fiscal transparency of the public sector, giving a more complete and overarching view of government spending and the public financial structure that exists elsewhere. This in turn allows, over the years, for identification of major economic trends and better fiscal management. The content and quality of the reporting in the WGA, beyond the financial statements themselves, is what controls the level of transparency ...

The Treasury explained to us how the WGA plays a crucial role in enhancing the fiscal transparency of the public sector, giving a more complete and overarching view of government spending and the public financial structure that exists elsewhere. This …

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14 Oct 2022 | Committee report linked

Improvements to the transparency of information in the WGA would also be achieved through more detailed narrative in certain areas. The asset and liability split reported in the WGA shows total assets of £2,138.5 billion and total liabilities of £4,972.7 billion.68 In a commercial organisation this would indicate that it was insolvent. Although this is not the case, there is currently no narrative to explain this. The Treasury explained that the Government’s ability to raise future funds thro...

Improvements to the transparency of information in the WGA would also be achieved through more detailed narrative in certain areas. The asset and liability split reported in the WGA shows total assets of £2,138.5 billion and total liabilities of £4,972.7 …

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14 Oct 2022 | Committee report linked

This scale of these proposed cuts has the potential to bring about significant consequences for service delivery, both in regard to the quality and efficiency of delivery and the range of services it will be possible to provide. At the time we took evidence, the Treasury said that no work had been completed, either by the Treasury or by other affected departments, to understand the impact on delivery of public services or how the effects for service users might be mitigated.75

This scale of these proposed cuts has the potential to bring about significant consequences for service delivery, both in regard to the quality and efficiency of delivery and the range of services it will be possible to provide. At the …

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27 May 2022 | Committee report linked

Model producers and users do not adequately assess the range of plausible outcomes and are overly reliant on central estimates that do not reflect inherent uncertainty. All modelled information is uncertain, and decision-makers need information on the possible range of outcomes to plan well, manage risks and make better decisions. However, model producers do not routinely evaluate or communicate the uncertainty in their models. There is only limited evidence of departments using uncertainty a...

Model producers and users do not adequately assess the range of plausible outcomes and are overly reliant on central estimates that do not reflect inherent uncertainty. All modelled information is uncertain, and decision-makers need information on the possible range of …

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27 May 2022 | Committee report linked

Uncertainty is inherent in modelled information and should be considered as part of all analysis. HM Treasury believes any model that does not explicitly address uncertainty is deficient.59 Decision-makers need information on the range of outcomes that may occur and their relative likelihoods to develop contingency plans and to avoid putting value for money at risk.60 For example, our report Government preparedness for the COVID-19 pandemic: lessons for government on risk found that governmen...

Uncertainty is inherent in modelled information and should be considered as part of all analysis. HM Treasury believes any model that does not explicitly address uncertainty is deficient.59 Decision-makers need information on the range of outcomes that may occur and …

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27 May 2022 | Committee report linked

Despite the importance of uncertainty analysis, model producers do not routinely assess or communicate to users the uncertainty in their models. There is limited evidence of departments using uncertainty analysis or developing contingency plans, and departments generally present outputs as single estimates.64 Analysis of uncertainty can give clarity on the reliability of the assumptions and the data used in the model. The Analysis Function told us proper reporting of uncertainty is essential ...

Despite the importance of uncertainty analysis, model producers do not routinely assess or communicate to users the uncertainty in their models. There is limited evidence of departments using uncertainty analysis or developing contingency plans, and departments generally present outputs as …

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27 May 2022 | Committee report linked

Departments present outputs from their models to HM Treasury as part of the spending review and budget process. HM Treasury uses these outputs for forecasting, budget planning and to monitor emerging risks. Departments usually provide HM 55 Qq 52–53 56 Q 54 57 C&AG’s Report, Financial modelling in government, paras 1.20–1.21 58 Q 54 59 Q 11 60 C&AG’s Report, Financial modelling in government, paras 3.2–3.9 61 Committee of Public Accounts, Government preparedness for the COVID-19 pandemic: les...

Departments present outputs from their models to HM Treasury as part of the spending review and budget process. HM Treasury uses these outputs for forecasting, budget planning and to monitor emerging risks. Departments usually provide HM 55 Qq 52–53 56 …

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11 May 2022 | Committee report linked

Likely additional costs in other areas of departmental spending, such as on its workforce and sizeable estate, may squeeze the Plan’s budget in future years, further threatening its affordability. The Department’s plans to make substantial reductions to its military and civilian workforces over the next 10 years are already harder than expected as fewer personnel have left the armed forces than normal since 2020 because of the pandemic. Similarly, there are as yet no plans to make an addition...

Likely additional costs in other areas of departmental spending, such as on its workforce and sizeable estate, may squeeze the Plan’s budget in future years, further threatening its affordability. The Department’s plans to make substantial reductions to its military and …

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11 May 2022 | Committee report linked

We asked why the Department is forecasting to spend more than its capital budget in seven of the next 10 years. The Department responded that the differences in those years were quite small and it judged them to be manageable.32 It had taken a conscious decision not to fully “address that pressure”, in order to balance financial and capability risk, given available contingency and the remaining uncertainties in costings and delivery schedules.33 Cost control of the Plan’s largest programmes

We asked why the Department is forecasting to spend more than its capital budget in seven of the next 10 years. The Department responded that the differences in those years were quite small and it judged them to be manageable.32 …

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11 May 2022 | Committee report linked

In addition to these reductions, the Department’s spending plans currently assume further workforce savings of £2.5 billion over the 10 years to March 2031.52 The Department told us that plans had not yet been drawn up to achieve these reductions, and they will be subject to agreement in the next spending review.53 In terms of wages, the Department admitted it does not know how it will afford the pay rises likely to be required as a result of higher inflation and wage growth in the wider econ...

In addition to these reductions, the Department’s spending plans currently assume further workforce savings of £2.5 billion over the 10 years to March 2031.52 The Department told us that plans had not yet been drawn up to achieve these reductions, …

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23 Mar 2022 | Committee report linked

The pandemic has demonstrated variability in departments’ risk management. A recent cross-government review of risk management by the Government Internal Audit Agency highlighted significant variability across departments, including the 6 Government preparedness for the COVID-19 pandemic: lessons for government on risk extent to which senior leaders promote and support risk management, departments’ capabilities, and their degree of alignment to the Orange Book, the government’s guidance on ri...

The pandemic has demonstrated variability in departments’ risk management. A recent cross-government review of risk management by the Government Internal Audit Agency highlighted significant variability across departments, including the 6 Government preparedness for the COVID-19 pandemic: lessons fo

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27 Jan 2022 | Committee report linked

According to the Office for Budget Responsibility, the Chancellor has between a 55 and 60 per cent chance of meeting his fiscal rules. He has given himself less room to meet his rules than his predecessors. The headroom may prove insufficient should one of the many risks to the economy crystallise.

According to the Office for Budget Responsibility, the Chancellor has between a 55 and 60 per cent chance of meeting his fiscal rules. He has given himself less room to meet his rules than his predecessors. The headroom may prove …

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27 Jan 2022 | Committee report linked

Due to the increase in Government debt, the proportion of gilts that are index linked, as well as the proportion of UK Government debt that has been financed through the issuance of Bank of England reserves, the public finances are highly sensitive to increases in inflation and interest rates.

Due to the increase in Government debt, the proportion of gilts that are index linked, as well as the proportion of UK Government debt that has been financed through the issuance of Bank of England reserves, the public finances are …

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2021

33 events
12 Oct 2021 | Government response linked

In addition, the budget for the Department’s disposal programme is based on it reducing building costs by £1 billion by 2039–40. This creates risks for the programme’s affordability. For example, as more detailed planning is undertaken and the extent of works is better understood there are indications that the costs of works on sites that will house relocated personnel and equipment are actually increasing rather than falling.36

In addition, the budget for the Department’s disposal programme is based on it reducing building costs by £1 billion by 2039–40. This creates risks for the programme’s affordability. For example, as more detailed planning is undertaken and the extent of …

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24 Sep 2021 | Committee report linked

The Cabinet Office and HM Treasury do not have a common view of risks across arm’s-length bodies. Departments collect risk data from their ALBs on a regular basis. The Cabinet Office does not request this, nor use it to identify systemic issues across government. There is no function within the Cabinet Office responsible for liaising on cross-departmental or ALB risk with the Government Finance Function, who lead on the oversight and reporting of risks to the Civil Service Board. We acknowled...

The Cabinet Office and HM Treasury do not have a common view of risks across arm’s-length bodies. Departments collect risk data from their ALBs on a regular basis. The Cabinet Office does not request this, nor use it to identify …

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24 Sep 2021 | Committee report linked

The Cabinet Office told us it focusses on cross-cutting risks that can only be addressed at the centre of government. It addresses these risks through the production of the national risk register and the national security risk assessment, and through summarising risks across ALBs and examining these for patterns and themes.31 However, there is currently no function within the Cabinet Office that is responsible for liaising with the Government Finance Function on cross-departmental and ALB ris...

The Cabinet Office told us it focusses on cross-cutting risks that can only be addressed at the centre of government. It addresses these risks through the production of the national risk register and the national security risk assessment, and through …

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25 Jul 2021 | Committee report linked

The COVID-19 response means government will be exposed to significant financial risks for decades to come. As a consequence of responding quickly to the pandemic, government has taken on significant financial risks that are spread across multiple government departments and schemes. While we acknowledge that 6 COVID 19: Cost Tracker Update there was a need to relax the usual rules surrounding major spending decisions and introduce flexibilities due to the emergency circumstances of the pandemi...

The COVID-19 response means government will be exposed to significant financial risks for decades to come. As a consequence of responding quickly to the pandemic, government has taken on significant financial risks that are spread across multiple government departments and …

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25 Jul 2021 | Committee report linked

The Chief Secretary to the Treasury acknowledged in his letter of 1 April 2021 that a consequence of an enhanced risk appetite is that risks are more likely to crystalize. A clear example of risks from the government’s approach materialising is the 10,000 shipping containers of personal protective equipment (PPE) ordered earlier in the pandemic that were yet to be unpacked when we took evidence on the matter in May.20 HM Treasury cautioned that the current estimates of the expected cost of th...

The Chief Secretary to the Treasury acknowledged in his letter of 1 April 2021 that a consequence of an enhanced risk appetite is that risks are more likely to crystalize. A clear example of risks from the government’s approach materialising …

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25 Jul 2021 | Committee report linked

HM Treasury assured us that in broad terms government’s pre-pandemic plans and programmes have remained largely in place. It told us that the areas where there has been significant reprioritisation or pausing have tended to be the ones that have been badly affected by COVID-19, the most obvious example being the NHS where delivery of efficiencies planned for this financial year have not been possible. However, most of the rest of the government’s public spending programmes have continued as p...

HM Treasury assured us that in broad terms government’s pre-pandemic plans and programmes have remained largely in place. It told us that the areas where there has been significant reprioritisation or pausing have tended to be the ones that have …

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30 Jun 2021 | Committee report linked

The Government has the opportunity to create a fiscal framework focused on delivering well-being, sustainability and economic stability. The current fiscal rules focus on managing the budget, public sector investment and debt. There is scope to extend this so balancing our demands on nature with nature’s capacity to meet these demands, becomes central to government’s economic objectives. This can help to deliver a stable economy in the long-term which is resilient to nature- related financial...

The Government has the opportunity to create a fiscal framework focused on delivering well-being, sustainability and economic stability. The current fiscal rules focus on managing the budget, public sector investment and debt. There is scope to extend this so balancing …

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16 Mar 2021 | Committee report linked

The Department has not established a reliable and sophisticated approach to estimating the cost of its future equipment programme, including setting realistic efficiency savings. The Department acknowledges the risk of costs escalating on its equipment projects, which are often large, complex projects involving the development of new technologies. The Department’s approach to cost forecasting is likely to understate the risks, with some projects—such as nuclear and IT networks programmes—like...

The Department has not established a reliable and sophisticated approach to estimating the cost of its future equipment programme, including setting realistic efficiency savings. The Department acknowledges the risk of costs escalating on its equipment projects, which are often large, …

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16 Mar 2021 | Committee report linked

When asked if the financial problems with the Defence budget were ever likely to change, the Permanent Secretary pointed first to the Department not having a very good understanding of the drivers of inflation with defence projects. Second, and in his view probably most importantly, he highlighted the inherent difficulties of long-term and technical projects, where threats change, and where new capabilities come along that render as potentially obsolete equipment yet to be procured. He commen...

When asked if the financial problems with the Defence budget were ever likely to change, the Permanent Secretary pointed first to the Department not having a very good understanding of the drivers of inflation with defence projects. Second, and in …

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16 Mar 2021 | Committee report linked

The Department acknowledged the risk of costs escalating on its biggest programmes— nuclear submarines and IT and communications systems—which are large, complex programmes involving the development of new technologies.19 It told us it assesses the risk of cost increases on projects and has embedded £13.5 billion in costings to enable senior responsible owners to manage risks that arise from delivering their projects. But the Department admitted that its independent cost assessors had estimat...

The Department acknowledged the risk of costs escalating on its biggest programmes— nuclear submarines and IT and communications systems—which are large, complex programmes involving the development of new technologies.19 It told us it assesses the risk of cost increases on …

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16 Mar 2021 | Committee report linked

The Department acknowledged that its equipment projects are subject to uncertainties that affect their delivery and cost. It is responsible for managing the risk of cost increases within its annual budget. For example, as approximately 15% of the Plan’s forecast expenditure is in euros or dollars, the Department models the impact of foreign exchange movements on future equipment expenditure and reflects a possible 10% reduction in the value of sterling in its worst case scenario of the Plan’s...

The Department acknowledged that its equipment projects are subject to uncertainties that affect their delivery and cost. It is responsible for managing the risk of cost increases within its annual budget. For example, as approximately 15% of the Plan’s forecast …

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16 Mar 2021 | Committee report linked

The Department’s adjustments to its cost estimates are still over-optimistic, including its assessment of the level of potential efficiency savings.26 We have previously raised our concerns that the Department was including efficiency savings that it was not confident of 17 Qq 10,11 18 Q 12 19 Q 26 20 Q 41; C&AG’s report, para 1.14 21 C&AG’s report, para 14 22 C&AG’s report, para 14, 1.16 23 C&AG’s report, Figure 7 24 Qq 26, 42 25 Q 27; C&AG’s Report, Carrier Strike – Preparing for deployment...

The Department’s adjustments to its cost estimates are still over-optimistic, including its assessment of the level of potential efficiency savings.26 We have previously raised our concerns that the Department was including efficiency savings that it was not confident of 17 …

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16 Mar 2021 | Committee report linked

We remain extremely concerned that the Department continues to manage a long- term spending programme on a year-by-year, cash-limited budget.69 Faced with funding shortfalls, the Department took a range of measures to balance its 2020–21 budget, including introducing commitment levels on commands’ budgets, restricting the introduction of new projects and closely monitoring in-year expenditure.70 Furthermore, the Department once again allocated all of its contingency budget at the start of the...

We remain extremely concerned that the Department continues to manage a long- term spending programme on a year-by-year, cash-limited budget.69 Faced with funding shortfalls, the Department took a range of measures to balance its 2020–21 budget, including introducing commitment levels …

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1 Mar 2021 | Committee report linked

The pandemic will leave behind a large increase in the public debt and, possibly, a rise in ongoing borrowing into the medium to longer term. However, low interest rates have helped to open up fiscal space, and our expert witnesses said that now is not the time for tax rises or fiscal consolidation, which could undermine the economic recovery. However, the public finances are left more exposed to rises in interest rates; and witnesses told us that economic growth, inflation and measures to lo...

The pandemic will leave behind a large increase in the public debt and, possibly, a rise in ongoing borrowing into the medium to longer term. However, low interest rates have helped to open up fiscal space, and our expert witnesses …

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1 Mar 2021 | Committee report linked

The Financial Secretary to the Treasury is right to point to the uncertainties in the economic and fiscal forecasts. However, the Government would be prudent not to focus on the OBR’s upside scenario at the expense of failing to prepare for its central and downside scenarios. We re-iterate our earlier conclusion that “the Chancellor should, at the next fiscal event, set out an initial roadmap of how he intends to place Government finances on a sustainable footing.”

The Financial Secretary to the Treasury is right to point to the uncertainties in the economic and fiscal forecasts. However, the Government would be prudent not to focus on the OBR’s upside scenario at the expense of failing to prepare …

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1 Mar 2021 | Committee report linked

The public finances are on an unsustainable long-term trajectory. This is due primarily to projections of rising age-related spending based on existing Government commitments. This situation is being exacerbated by the fiscal impact of the coronavirus pandemic. Even in the most optimistic scenario, the current and future UK Governments face a dilemma: if public spending and revenues are not to diverge without limit, either the former must be restrained or the latter must be raised.

The public finances are on an unsustainable long-term trajectory. This is due primarily to projections of rising age-related spending based on existing Government commitments. This situation is being exacerbated by the fiscal impact of the coronavirus pandemic. Even in the …

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1 Mar 2021 | Committee report linked

The Office for Budget Responsibility has been stating that the public finances are on an unsustainable long-term trajectory since 2011, but the Government has not done enough to engage with the issue. The Government should routinely produce a more extensive and considered response to the Fiscal Sustainability Report than the 300-word statement it provided in 2020. Such a response should set out a strategy for how and at what level the public debt could and should be stabilised. To support thi...

The Office for Budget Responsibility has been stating that the public finances are on an unsustainable long-term trajectory since 2011, but the Government has not done enough to engage with the issue. The Government should routinely produce a more extensive …

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1 Mar 2021 | Committee report linked

The public finances are on an unsustainable long-term trajectory that has been exacerbated by the coronavirus pandemic. Additional tax revenue could make a contribution to addressing this. But the tax measures that are most politically palatable in the short term are often not those that minimise distortions to economic activity in the longer term. This is a large-scale and long-term challenge that requires taking a view of the whole tax system, how it can be reformed, and how it can raise 74...

The public finances are on an unsustainable long-term trajectory that has been exacerbated by the coronavirus pandemic. Additional tax revenue could make a contribution to addressing this. But the tax measures that are most politically palatable in the short term …

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1 Mar 2021 | Committee report linked

We recognise the challenge of net zero and agree with witnesses to our Decarbonisation and Green Finance inquiry that tax has a part to play in achieving this goal. However, carbon taxes are unlikely to form a major part of the long-term tax base or stabilisation of the public finances, as they are designed to complete the transition to net zero.

We recognise the challenge of net zero and agree with witnesses to our Decarbonisation and Green Finance inquiry that tax has a part to play in achieving this goal. However, carbon taxes are unlikely to form a major part of …

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22 Jan 2021 | Committee report linked

There is an apparent lack of ownership by the Treasury of the analysis and scenario planning activities necessary to manage the impact of COVID-19 on government finances. The scale of the likely increase in government borrowing to fund government’s response to COVID-19 is a significant new challenge to the Treasury’s objective to place the public finances on a sustainable footing. While the Office for Budget Responsibility is responsible for producing economic forecasts and analysis of the pu...

There is an apparent lack of ownership by the Treasury of the analysis and scenario planning activities necessary to manage the impact of COVID-19 on government finances. The scale of the likely increase in government borrowing to fund government’s response …

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22 Jan 2021 | Committee report linked

The WGA does not provide assurance that significant risks to the UK’s financial sustainability are well managed. A key consideration for any organisation is its financial sustainability. There are several government liabilities disclosed in the WGA that, due to their size and nature, represent significant risks to the UK finances. For example, the liabilities related to nuclear decommissioning are complex and costly, being valued at some £152.2 billion at 31 March 2019. The provisions arising...

The WGA does not provide assurance that significant risks to the UK’s financial sustainability are well managed. A key consideration for any organisation is its financial sustainability. There are several government liabilities disclosed in the WGA that, due to their …

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22 Jan 2021 | Committee report linked

The financial sustainability of some local authorities presents a significant risk to government. While local authorities have autonomy over their spending, the Treasury is the ‘funder of last resort’ should a local authority become insolvent. As COVID-19 has increased the fiscal pressures many government bodies face, we expect that more local authorities will soon be unable to balance their books and will be forced to issue section 114 notices in order to suspend non-essential expenditure. W...

The financial sustainability of some local authorities presents a significant risk to government. While local authorities have autonomy over their spending, the Treasury is the ‘funder of last resort’ should a local authority become insolvent. As COVID-19 has increased the …

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22 Jan 2021 | Committee report linked

The quality of the next WGA will suffer if the Treasury does not resolve challenges in its accounts production process. In recent years, the WGA has improved in quality and the Treasury has taken steps to address our recommendations, such as improving the breakdown of the purchase of goods and services note. We would like to see these improvements continue at pace. We are, however, concerned that delays in local government audit and the extension of the administrative deadlines for central go...

The quality of the next WGA will suffer if the Treasury does not resolve challenges in its accounts production process. In recent years, the WGA has improved in quality and the Treasury has taken steps to address our recommendations, such …

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22 Jan 2021 | Committee report linked

The WGA 2018–19 disclosures relating to COVID-19 relied heavily on a summary of a report produced by the National Audit Office.10 The Treasury did not attempt to explain to Parliament or the user of the accounts how it was managing the fiscal risk COVID-19 poses for the economy, nor how it may impact the government’s fiscal position going forwards. In our evidence session the Treasury reiterated its position that it views the WGA as a backward-looking, retrospective document and said that whi...

The WGA 2018–19 disclosures relating to COVID-19 relied heavily on a summary of a report produced by the National Audit Office.10 The Treasury did not attempt to explain to Parliament or the user of the accounts how it was managing …

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22 Jan 2021 | Committee report linked

The WGA discloses a number of significant liabilities that due to their size and nature pose unique risks to the UK’s financial sustainability and government’s ability to achieve value for money. At 31 March 2019, the UK’s liability in relation to nuclear decommissioning was some £152 billion.13 Whilst this was a fall from £263 billion in the previous year, nearly all of that decrease was due to the change in the discount rate used to calculate future liabilities, and not related to a change ...

The WGA discloses a number of significant liabilities that due to their size and nature pose unique risks to the UK’s financial sustainability and government’s ability to achieve value for money. At 31 March 2019, the UK’s liability in relation …

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22 Jan 2021 | Committee report linked

The scale of the likely increase in government borrowing to fund government’s response to COVID-19 is a significant new challenge to the Treasury’s objective to place the public finances on a sustainable footing.22 In its report on Evaluating the government balance sheet: borrowing published in November 2017, the NAO noted that the Treasury had begun to strengthen its approach to analysing the government’s balance sheet and evaluating fiscal risk, but the work at that time was at an early sta...

The scale of the likely increase in government borrowing to fund government’s response to COVID-19 is a significant new challenge to the Treasury’s objective to place the public finances on a sustainable footing.22 In its report on Evaluating the government …

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22 Jan 2021 | Committee report linked

We were therefore interested in what analysis the Treasury had now been conducting in order to give assurance that it had a handle on the fiscal risks the pandemic poses to the UK economy and fiscal sustainability. We asked what projections the Treasury had for tax receipts in the short and medium term and whether it had been working with Her Majesty’s Revenue and Customs (HMRC) to produce those projections. The Treasury responded that projection is the job of the OBR.24

We were therefore interested in what analysis the Treasury had now been conducting in order to give assurance that it had a handle on the fiscal risks the pandemic poses to the UK economy and fiscal sustainability. We asked what …

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22 Jan 2021 | Committee report linked

With the UK’s debt as a proportion of GDP above 100%, any increases in interest rates would have a significant impact on the economy and government spending. When asked whether it was modelling for interest rate increases, the Treasury confirmed that it did, but deferred to the OBR as the prime place for this information, noting that the 16 Public Accounts Committee, Twenty-Eighth Report of Session 2019–21, The Nuclear Decommissioning Authority’s management of the Magnox contract, HC 653 Nove...

With the UK’s debt as a proportion of GDP above 100%, any increases in interest rates would have a significant impact on the economy and government spending. When asked whether it was modelling for interest rate increases, the Treasury confirmed …

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22 Jan 2021 | Committee report linked

Although at some points during our evidence session the Treasury stated that it was conducting forecasting and scenario planning, it was not clear what this entailed, how this differed from work by third parties such as the OBR, and whether this was business as usual or additional work specifically to address risks arising from COVID-19.28

Although at some points during our evidence session the Treasury stated that it was conducting forecasting and scenario planning, it was not clear what this entailed, how this differed from work by third parties such as the OBR, and whether …

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22 Jan 2021 | Committee report linked

The Treasury confirmed to us that it ultimately bears the financial risk for local authorities. We expressed concerns about the level of oversight and control that the Treasury is exercising and whether it has a sufficient handle on this issue. The Treasury responded that it is working very closely with MHCLG to collect real-time data, but these regular data collection exercises have been limited to special-ringfenced funding allocations for COVID-19.37 The Treasury also stated that MHCLG has...

The Treasury confirmed to us that it ultimately bears the financial risk for local authorities. We expressed concerns about the level of oversight and control that the Treasury is exercising and whether it has a sufficient handle on this issue. …

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22 Jan 2021 | Committee report linked

We have previously recommended that financial reporting within the WGA should be improved by providing more detailed disclosures to ensure that users of the account have the comprehensive information needed to understand the public finances.39 WGA is increasingly important to ensuring accountability for public spending on key areas of public interest, for example, it has the potential to help the public and Parliament understand the current and likely future impact of EU Exit on the public fi...

We have previously recommended that financial reporting within the WGA should be improved by providing more detailed disclosures to ensure that users of the account have the comprehensive information needed to understand the public finances.39 WGA is increasingly important to …

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22 Jan 2021 | Committee report linked

We see WGA as a valuable and important document for both providing transparency and holding the government to account. In recent years, the Treasury has improved the quality of the WGA and has taken steps to address our recommendations, such as working towards improving the breakdown of the purchase of goods and services note, and providing more useful disclosures in the performance report regarding important areas such as provisions, contingent liabilities, and public sector pensions.47

We see WGA as a valuable and important document for both providing transparency and holding the government to account. In recent years, the Treasury has improved the quality of the WGA and has taken steps to address our recommendations, such …

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20 Jan 2021 | Committee report linked

We asked the Department if it had taken on any more leases on a 25-year non- breakable basis in the last year. HMRC said its estate strategy had not changed in the last year and it did not think it had taken on any more 25-year leases but it would need to check.36 It subsequently confirmed that the only new 25-year lease with no break since the April 2018 evidence session was for the regional centre in Nottingham, signed in November 2018. The only other new leases since April 2018 have been f...

We asked the Department if it had taken on any more leases on a 25-year non- breakable basis in the last year. HMRC said its estate strategy had not changed in the last year and it did not think it …

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2020

3 events
11 Sep 2020 | Committee report linked

One legacy of the crisis will be a sharp rise in the level of public debt and, possibly, an ongoing rise in borrowing. This has been and will be necessary to contain the economic damage from Coronavirus and does not raise immediate debt sustainability concerns. However, it will make the job of stabilising the public finances in the long term more difficult.

One legacy of the crisis will be a sharp rise in the level of public debt and, possibly, an ongoing rise in borrowing. This has been and will be necessary to contain the economic damage from Coronavirus and does not …

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11 Sep 2020 | Committee report linked

The Chancellor should, at the next fiscal event, set out an initial roadmap of how he intends to place Government finances on a sustainable footing. The milestones on that roadmap will need to be flexible—tax increases imposed too early are like to stifle economic recovery. A reassurance that the Government intends to take steps to ensure fiscal sustainability in future will underpin market confidence and reduce uncertainty for households and businesses that may fear immediate tax rises.

The Chancellor should, at the next fiscal event, set out an initial roadmap of how he intends to place Government finances on a sustainable footing. The milestones on that roadmap will need to be flexible—tax increases imposed too early are …

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11 Sep 2020 | Committee report linked

The Treasury’s macroeconomic forecasting ability appears to have eroded since the formation of the OBR. The Treasury needs to maintain sufficient forecasting capacity outside the OBR so that it can ensure that it can adapt policy responses rapidly to an urgent situation. In its response to this report, the Treasury should explain in detail its short-term macroeconomic forecasting capabilities, and how macroeconomic forecasting analysis has informed the design, scope and scale of its intervent...

The Treasury’s macroeconomic forecasting ability appears to have eroded since the formation of the OBR. The Treasury needs to maintain sufficient forecasting capacity outside the OBR so that it can ensure that it can adapt policy responses rapidly to an …

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2018

1 event
17 Jul 2018 | Policy paper HM Treasury Office for Budget Responsibility linked

Managing fiscal risks: government response to the 2017 Fiscal risks report

Managing fiscal risks provides a comprehensive account of the actions the government is taking to address the 57 risks outlined by the OBR.

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2017

1 event

2016

1 event

2014

1 event