Excess Votes 2008-09 - Public Accounts Committee Contents

Conclusions and recommendations

1.  Resource excesses in 2008-09 totalled £23,893,853,000 across three departments. This was an exceptional year due to late, and significant, resource requirements for the financial stability measures introduced by the Government.

2.  The two excesses, at HM Treasury and the Home Office occurred in 2008-09 as a result of significant events crystallising late in the financial year.

  • HM Treasury incurred a resource excess of £23 billion as a result of a provision in the balance sheet at 31 March 2009 for the potential losses expected at that point for the support provided to two banks under what has since been formalised as the Asset Protection Scheme. As this Scheme was being developed at the year end, and the extent of the support had not been finalised, it had not been possible for HM Treasury to predict the resource requirements in time for a Supplementary Estimate to be prepared. The scheme was not formalised until November 2009, and it now seems that a loss of this magnitude is unlikely. However, at the time the accounts were prepared and audited, the potential exposure appeared significantly higher, and so financial reporting standards required recognition of a liability and, therefore, Supply financing was required.
  • The Home Office is required to make good any deficit on the Police Pension Scheme in any given year. The Department had provided for back payments to be made to police pensioners as a result of new commutation factors retrospectively applicable from 1 October 2007. However, in March 2009 a subsequent Judicial Review determined that application of new commutation factors should be backdated to 1 December 2006. This resulted in the Department being liable for an additional £130 million.
  • The Department conducted a review of risks and the financial consequences, concluding that it was probable the case would be won and so the provision made would be sufficient. When the Judicial Review findings were made, it was too late for the Department to request additional resources through the Supplementary Estimates.

3.  The excesses that occurred in 2008-09 at the United Kingdom Atomic Energy Authority Pension Schemes (UKAEA) were due to poor financial forecasting. The UKAEA Pension Schemes Consolidated Accounts failed to budget correctly for anticipated pension requirements due to dates of pension transfer not being included in the forecasting process. This resulted in a resource excess of £6 million. This Resource Account was also qualified in 2007-08 for incurring an excess vote, the accounts breached the Net Cash Requirement limit by £5.8 million as the Authority retained receipts that should have been paid to the Consolidated Fund and therefore under estimated the Net Cash Requirement for the year.

4.  In the case of UKAEA Pension Schemes, the excess could have been avoided by more thorough oversight and better reporting of the information necessary to administer the resource requirements. This is the second successive year this entity has breached a Parliamentary limit.

5.  We are concerned that a Resource Account has incurred an excess vote for two consecutive years. In both years, failings have been identified in managing the estimates process and communication between the relevant teams within the organisation. Whilst improvements have been made, these have not gone far enough to introduce robust resource budgeting. It is essential that steps are taken at the UKAEA Pension Schemes to minimise the risk of an excess vote occurring in future years.

6.  With the introduction of the Joint Personnel Administration system in 2007 and removal of previous capability, the Ministry of Defence could not provide sufficient evidence to demonstrate that the 'Votes A' ceilings on the numbers of certain categories of service reservists had not been breached. Parliament vote annually on the maximum number of service personnel reservists that the Ministry can retain, and the maximum numbers maintained are reported in the resource accounts. If the Department exceed the levels voted by Parliament, this excess would require retrospective Parliamentary approval in a similar way to an overspend of resources.

7.  We recommend that Parliament provides the additional resources requested by means of an Excess Vote, as set out in Figure 1.

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Prepared 10 February 2010