This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.
Lessons for government: monitoring and responding to companies in distress
Date Published: 13 March 2024
This is the full report, read the report summary.
The government relies in various ways on private companies to support policy objectives and deliver some public services. Government departments are responsible for managing the relationship with companies and suppliers in their sectors, and for monitoring the risks to their policy objectives including any risks related to company failure or distress. Where failure of a strategically important company or key supplier could expose the government, taxpayers or service users to high levels of risk, the government sometimes decides it is necessary to intervene. This might involve supporting the company and preventing it from failing, rescuing it, or managing the situation so it does not fail in a disorderly way. Government intervention in private companies and markets can be complex and requires access to specialist skills not held widely across government. Many government bodies, including regulators and central government, may also need to be involved in resolving the situation and managing any wider effects.
1. There is still a long way to go to ensure the government has the right sources of intelligence and a joined-up approach to building a complete picture of supplier, company, and supply chain resilience. The Cabinet Office has published a new Resilience Framework focusing on prevention and preparation for risks, and the Department for Business and Trade has set out to make the UK government a centre of excellence for supply chain analysis and risk assessment. However, there is no consistent approach across departments for collecting intelligence on the financial resilience of suppliers, companies, and supply chains. The success of the government’s commitments and activities in this area depends heavily on whether it is joined up in its approach to collecting and sharing intelligence. This is particularly important where companies or suppliers cut across multiple policy areas or departmental remits, as demonstrated by the example of CF Fertilisers and the CO2 market. Despite multiple warning signs about overconcentration of the market and previous supply issues, it seemed to come as a surprise to the government when the UK faced a CO2 supply shortage in September 2021 and it had to step in.
Recommendation 1: In the Treasury Minute response, HM Treasury, the Cabinet Office and the Department for Business and Trade should:
2. We are concerned that departments are not maintaining institutional knowledge relating to ‘at risk’ companies and sectors. HM Treasury monitors the health and resilience of the corporate sector as a whole and the Department for Business and Trade oversees industry and different priority sectors and has a role in responding to economic shocks. It is the responsibility of individual departments to monitor the health of their sectors, and those at the centre of government say they are not aware of any one sector that is more at risk than others. However, a high turnover of staff in government means that corporate knowledge held by departments, which may be commercially sensitive and therefore restricted to a small handful of individuals, is at risk of being lost. HM Treasury spending teams act as the filter for warnings from departments, but turnover of staff in HM Treasury is historically even higher.
Recommendation 2: In the Treasury Minute response, HM Treasury and the Cabinet Office should set out how they will support departments to maintain a continuous level of knowledge about risks to companies and supply chains in sectors that are relevant to their departmental duties and objectives.
3. We are not convinced that accounting officers give sufficient consideration to the commercial models of those they contract with, which means they do not understand the potential risks (including supplier failure). HM Treasury suggests accounting officers should produce a formal Accounting Officer Assessment for any significant novel and contentious proposal involving the use of public funds. However, we often see a tendency in government to push ahead with new projects and commitments involving the private sector without careful consideration of the risks and liabilities it exposes the government to. Too often, the government has failed to understand the economic and business models of the suppliers it contracts with, and as a result has not been able to assess whether the gain-share and pain-share mechanisms of the contract are appropriate. This includes risks with outsourcing a service for the first time in “untested markets”, which we saw materialise when the Ministry of Justice rushed through reforms to outsource probation services to community rehabilitation companies. The Government Commercial Function now advocates piloting and scenario-testing in these situations but could not tell us how it measured success.
Recommendation 3: HM Treasury should set out in the Treasury Minute response how it will ensure accounting officers explicitly address the risks presented by suppliers’ commercial models in Accounting Officer Assessments for new projects and commitments involving private companies. Should the assessment identify a risk of company failure, we expect it to include an estimate of the impact of supplier failure, high-level contingency plans should failure occur, and an estimate of the potential costs incurred.
4. We are concerned that accounting officers may not always be equipped to protect taxpayers’ money when making decisions on intervention in these fast-paced, high-pressure situations. This Committee and previous committees have reported many times over the past two decades on government interventions in financially distressed companies. Prior to 2020, the government acknowledges that it took an ad hoc approach to providing support to distressed companies. Since then, HM Treasury has established some high-level principles to apply to company distress cases. Nonetheless, decisions about whether or how to intervene in companies require accounting officers to make difficult judgements and balance complex trade-offs, often at speed. In the case of Silicon Valley Bank UK, government officials had to rapidly draw up several options for how the government could respond to the situation, over the course of a weekend. Accounting officers need to ensure any decisions on intervention adhere to the principles of feasibility, propriety, regularity and value for money, as set out in Managing Public Money. It is important therefore that accounting officers can articulate the trade-offs they are balancing and any consequences of their decisions, including how any moral hazard (where support for one company creates an incentive for other companies to take risks with the expectation they will also be supported) or free rider risks (where the company’s incumbent lenders or shareholders may benefit from government support without having to contribute themselves) might be managed over the course of an intervention. It is also important that they consider exit strategies and articulate how they will manage the intervention under different scenarios, including if the government ends up being involved for the medium to long term, and consequent unforeseen costs.
Recommendation 4: HM Treasury should set out in the Treasury Minute response what it is doing to support accounting officers to discharge their duties and protect taxpayers’ money over the course of any company intervention. This should include any training activity and ways in which it is sharing and embedding the NAO’s good practice guidance.
5. The Cabinet Office has not assessed or coherently identified the skills and expertise needed for monitoring and responding to companies in distress. We have previously raised concerns about the level of commercial, risk management and corporate finance expertise in government amid increasing demand for these skills, all of which are important for monitoring and responding to companies in distress. Departments and regulators face the challenge of competing with the private sector for these high-in-demand skills. The Government Commercial Function, UK Government Investments (UKGI) and HM Treasury are having to do more work to support companies with restructuring. The UKGI special situations team has been involved in over 200 company distress cases in the last six years. HM Treasury acknowledges that having the right skills and capabilities in place is a critical lesson, but also that they are currently patchy across government. There are pockets of expertise, but no one has taken responsibility for assessing the varied skills needed for monitoring and responding to companies in distress.
Recommendation 5: The Cabinet Office Commercial Function should set functional standards for monitoring and responding to companies in distress. As part of this process, the Function should write to the Committee within six months, explaining:
6. It is vital that the government evaluates and shares the lessons from these cases on a timely and consistent basis, regardless of whether the case resulted in government intervention. We have previously found that much of government activity and spending is not evaluated robustly, or at all. Government interventions in distressed companies can involve significant amounts of taxpayer money, and yet it is not evident that these interventions are being evaluated consistently and transparently, or that lessons are being shared across government. There are also many cases where the government ultimately decides not to intervene, or finds other non-financial ways to support the distressed company or manage the situation. It is important that the government documents its rationale and learning from these cases too. The government does not appear to be routinely learning from other countries and their processes for intervening in distressed companies, although it has expressed an interest in doing so. A lack of institutional memory across government coupled with a lack of systematic evaluation puts government at risk of not learning what works for future cases.
Recommendation 6: HM Treasury should set out in its Treasury Minute response how it will update its approach to evaluating company distress cases (including those that have not resulted in government intervention), and how lessons are shared across sectors. Alongside its Treasury Minute response HM Treasury and UK Government Investments should also provide some examples of lessons learned reports or evaluations from recent cases.
1. On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury (the Treasury), the Department for Business and Trade, the Cabinet Office, and UK Government Investments (UKGI).1
2. The government operates on the principle that it should not be intervening in financially distressed companies and that any intervention should be a last resort. In 2020 the government set out its principles for providing last resort bespoke support to companies and has also noted that there is an “extremely high bar for putting taxpayers’ money at risk in this way.”2 Over the past two decades, we have examined numerous government interventions in response to distressed companies across a range of sectors spanning energy, banking and public service providers. The circumstances under which government chooses to intervene are varied and may involve sustaining a critical supply chain, maintaining an essential public service, or protecting the economy. The nature of these interventions can include nationalisation, grants and loans, a trading liquidation, or providing support to employees or consumers where a company fails.3 In some cases, earlier intervention may help to prevent a company’s failure and be less costly in the long term than a last-resort intervention. The lessons from the COVID-19 pandemic and subsequent energy crisis have highlighted the importance of preparedness for these situations and building resilience to external shocks.4
3. All government departments rely to some extent on private companies to support their policy objectives or deliver public services. Departments are responsible for understanding and monitoring the risks to their policy objectives and to the overall resilience of the parts of the economy within their remit. This includes risks related to company distress and failure, whether the companies are strategically important or have a contractual relationship with the department. For regulated sectors such as utilities, departments will need to work with and share information with regulators. Departments will also be responsible for delivering and monitoring any intervention or government support to a company in distress.5
4. In addition, several other central departments and bodies have responsibilities, experience and expertise in this area and will likely need to be involved in these cases. At least 14 organisations from the public sector were involved in repatriating Thomas Cook customers and dealing with the insolvency and its impacts.6 The Treasury has responsibility for the principles and processes of providing last resort support to companies and approving any novel or contentious public spending. The Cabinet Office’s markets, sourcing and suppliers team manages the government’s relationships with its key suppliers, appointing Crown Representatives to liaise with each of the 39 largest cross-government ‘strategic suppliers’.7
5. The Cabinet Office published a UK Government Resilience Framework in 2022, which proposes a shift away from dealing with the effects of emergencies towards a stronger focus on prevention and preparation for risks, overseen by a new Resilience Directorate. The National Risk Register, published in August 2023, identified several risks related to company failure, including failure of a major adult social care provider, insolvency of suppliers of critical services to the public sector such as IT services or banking facilities, and insolvency affecting fuel supply.8 The Treasury told us that the National Resilience Framework and National Risk Register act as “proactive signals to the system of where we want intelligence and where we have mechanisms to draw that intelligence in.”9
6. In January 2024, the Department for Business and Trade published a Critical Imports and Supply Chains Strategy setting out ambitions to build resilient supply chains and maintain supplies of the critical goods needed for the UK economy, essential services and national security.10 The Department told us that it uses information such as “energy forecast data and the number of HR1 forms for insolvencies […] [and] Experian’s report on the stress warning in companies”.11 The witnesses also explained how they rely on informal channels to collect intelligence about companies and supply chains. The Cabinet Office told us that “it is as much about trust and informed information as it is about data”. It explained how its markets and suppliers team and the UKGI’s special situations team are now seen as trusted recipients of information from parts of the supply chain, some of which may be commercially sensitive. UKGI gave an example of where companies in the clinical waste market had informed the Cabinet Office’s markets and suppliers team of concerns they had about one of the other subcontractors.12
7. Departments are at different stages and have different approaches to understanding their sectors’ supply chain dependencies and exposure.13 The Treasury told us that individual departments lead on their sectors and it is for each of them to monitor the health of their sectors.14 It explained how information that a particular sector or company is in distress is shared through “the informal network of interaction between relevant teams” or through the Treasury spending teams if the department was seeking to prepare a financial contribution to support the company. The Treasury explained that it also monitored various indicators of health and resilience of the corporate sector as a whole. Although the Insolvency Service statistics indicate an increase in insolvencies in absolute terms, it told us that the number of businesses had also increased.15 We asked the Treasury about how it measures the number of businesses and ensures that these are trading businesses, as we were concerned that the figures may be misleading if they include new companies being created that do not exist or have no intention of carrying out any activity.16 The Treasury wrote to us after the evidence session and confirmed that “there is a risk these figures include some inactive firms.” However, it said it was reassured by the fact new legislation when introduced would improve the accuracy and quality of data on Companies House registers, that it could still make judgements on the overall trend by comparing numbers over time, and that it also used other metrics to analyse the corporate sector.17
8. Companies and markets can cut across several departments’ policy responsibilities or provide services to multiple departments. This meant that in the cases of Carillion, CF Fertilisers and UKCloud, no single department had a complete picture of the government’s exposure to the company in advance of it becoming distressed.18 We asked the Treasury about instances where its alert system had not worked. The Treasury told us that CF Fertilisers was an example where they “could have been alerted ahead of time had we understood that supply chain risk more systemically” as they had not known “that the supply of CO2 was dependent on that particular company”. The Department for Business and Trade agreed that it had been “slightly caught off guard”.19 Around two thirds of the UK’s CO2 was sourced from CF Fertilisers in 2018, supplying the food and drink, energy, nuclear, medical and water sectors among others. In 2019, following a CO2 supply shortage the previous year, the Food and Drink Federation recommended a clearer focus in government on the significance of the UK’s CO2 supply chain, but at the time no action was taken.20 The government had to provide temporary financial support to the company in 2021 to avoid a CO2 supply shortage after it halted operations at its site due to high natural gas prices.21
9. The National Audit Office (NAO) reported that the Cabinet Office’s markets, sourcing and suppliers team were in the early stages of exploring how departments map their supply chains, and whether a similar approach could be taken for public service supply chains.22 The Cabinet Office spoke about the example of UKCloud, which provided secure cloud data services to several government departments and went into liquidation in 2022.23 It explained how this was a “very difficult-to-spot problem” because it was “four tiers down” and it would be very costly and difficult to maintain a database that mapped “other subcontractors to people way down our supply chain”.24
10. The Treasury told us that some of its staff work on monitoring the health of the UK corporate sector overall, by looking at a series of indicators.25 It told us that actively monitoring the corporate sector is an important and critical part of what the Treasury does centrally. The Department for Business and Trade also explained its “industry brief” and its “role in economic shocks generally, and monitoring and forecasting”. Nonetheless the Treasury told us that it is reliant on departments monitoring their own sectors.26
11. The government’s corporate knowledge about the health of key sectors and companies may be vulnerable because of the high turnover of civil servants in this field, who may have built trusted relationships with the private sector and be skilled at handling information “sensitively and carefully”.27 The Cabinet Office told us that the last time it had a company it needed to look at, the Chief Operating Officer for the Civil Service wrote to all departments to nominate a single point of responsibility in their operations team. It told us that “it is important to have someone in departments so we can have a Government-wide call.”28 Despite this, it explained that next time there is a similar case, this will need to be updated because “doubtless people will have moved on.” The Treasury also explained to us how its spending teams are formally alerted when a department is seeking to make any sort of financial contribution to a company.29 We have previously raised concerns about the high staff turnover in the Treasury and a lack of operational experience at more junior levels of the Treasury spending teams.30 Analysis of the latest civil service statistics shows that the Treasury has the highest turnover rate of all departments.31 The Treasury told us that it had launched a corporate finance network as one way of maintaining institutional memory, and that there is a regular permanent secretaries’ group focused on growth where it shares its guidance and principles on company distress situations, to be cascaded to teams across the civil service.32
12. We asked the witnesses what lessons they had learned about companies’ resilience across the economy from supporting them during the pandemic. The Treasury told us that it had learned the “importance of departments having a good sectoral understanding, understanding the nature of their sectors and things like the composition of their sectors”. The Treasury and Department for Business and Trade told us that, prior to the pandemic, knowledge of some sectors was “mixed” and they “did not know some almost at all”. However, they said that departments now have a much better understanding of their sectors and have been building those relationships.33 Given the current high levels of insolvencies across the economy, we asked the witnesses if there were any particular sectors giving cause for concern. The Treasury told us that there was “no one sector that seems to be more in trouble than any others”.34 We were told by the Cabinet Office that “16% of insolvencies are in construction” but “construction is usually held as the most fragile sector” due to low margins and complex working capital arrangements. The Cabinet Office explained how it has built resilience into this sector by introducing a prompt payment exclusion to prohibit companies from bidding for contracts if they do not pay their suppliers promptly.35
13. 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 found that departments do not make as much use of these assessments as they should.37 The quality of these assessments varies across departments, with some not providing sufficient detail to allow for a good understanding of the programme or the accounting officer’s assessment of risks.
14. For several decades, successive governments have contracted out public services to private providers. Where providers or suppliers fail, the government is often the fall-back owner of risks. This was demonstrated when Carillion failed and the government had to step in to fund a trading liquidation while contracts and services were transferred.38 We asked the Cabinet Office how likely it was that we would see another Carillion. It told us “never say never” but that it had introduced ‘playbooks’ to help define how to go to market in these areas. For complex outsourcing where government is the only customer, the Cabinet Office told us that it is “particularly important that we really understand the economics for the supplier and whether the gain share and pain share mechanisms are appropriate” and that it had “spent a lot more time thinking about that recently”. The Cabinet Office also explained how it requests a living will statement for critical contracts or complex outsourcing contracts. Each year, the vendor will have to confirm to the contracting authority whether it still passes the financial entry tests that are expected to be met at the beginning of a contract.39
15. We asked the government specifically about how it ensures the taxpayer gains when a company does well partly as a result of having a government contract. The Cabinet Office told us that it publishes key performance indicators (KPIs) for its contracts, and it will be publishing more of these from October 2024 so that taxpayers can see whether the contract is delivering. It said that it was particularly challenging to assess gain share and pain share mechanisms where the government has not tested the market. It used the example of outsourcing probation rehabilitation services to demonstrate the consequences when government does not test the market to see whether, under different scenarios, the companies would survive or make undeserved profits. Ultimately, the government bore the risk when “volumes sank” and several of the companies “went bust”, leading the services to be taken in house. The Cabinet Office told us that the message from this example was to “think carefully about the payment mechanisms to make sure that we are not being overly generous on the upside and that people are not getting a free run, and neither is the scheme so punitive on the downside for things that are outside of the vendor’s control.”40 The Cabinet Office agreed that piloting was part of the answer to this problem where there is no existing external market. In response to our question about how much success it was having in promoting this approach, the Cabinet Office said that outsourcing in new areas was “relatively rare, and the presumption is that we will pilot it”.41
16. In 2020, the government set out publicly some broad principles which it uses to underpin decisions on providing last-resort bespoke financial support to financially distressed companies. The government has publicly stated that there is an “extremely high bar for putting taxpayers’ money at risk in this way”.42 The Treasury told us that before developing the principles, it had had “a rather ad hoc framework for addressing companies in distress-type situations.”43
17. As with any activity involving public money, a department must adhere to the principles of regularity, feasibility, propriety and value for money set out in the Treasury’s Managing Public Money. A department will likely be required to carry out a formal Accounting Officer Assessment when considering an intervention in a private company.44 The Treasury told us that if a department is seeking to provide financial support to a company and “it is highly likely to be novel, contentious or repercussive”, it is likely that it will require Treasury’s approval.45
18. Propriety is concerned with meeting high standards of public conduct and parliamentary expectations, and cannot be dispensed with even when making difficult judgements on competing issues in an emergency.46 Responding in these situations often requires rapid decision-making by officials and ministers, based on imperfect information and a set of unattractive options.47 We heard how quickly departments have to weigh up different options and make decisions in a crisis situation. For example, when the government was notified of the imminent failure of Flybe in 2020, UKGI told us that advisors spent four days in the company and assessed that intervention “would not be a good use of government money because, if we put a penny in at the top, we might not be able to work out where that penny would go and it might not be focused on what we needed it to”.48 More recently, when the issues surrounding Silicon Valley Bank arose, a number of teams were stood up over the course of a weekend to come up with a rapid set of different contingency plans.49
19. 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 diligence on the companies, such that the cases where it does intervene “are very few and far between”. UKGI told us how it is very mindful of the free rider problem and, if other financial stakeholders did not play their part, government would take assets as security to protect the taxpayer’s position.51 For example, when providing a £30 million loan to Celsa Steel, the government set the conditions of the support so that public money would be protected if the company became insolvent and it would get a greater return if the company did well. UKGI agreed that this would be a model it would intend to follow in the future.52
20. The NAO report has shown how intervening in companies can lead to unforeseen costs and government involvement over a period much longer than expected. Ensuring value for money requires careful consideration not just of short-term objectives but also of longer-term scenarios, including how and when the government may extricate itself from the intervention.53 In light of taxpayers still retaining a large portion of shares in the Royal Bank of Scotland, we asked the witnesses about how they plan exit strategies at the outset of deciding what kind of intervention is appropriate. UKGI told us that the fundamental principle underlying any intervention is to “provide a bridge, not a pier” and that it will spend time doing due diligence to look at what the future for the company might look like. It explained how Sheffield Forgemasters was nationalised and the ongoing work to help support and modernise the company. The government has committed to the company being “returned to the private sector in due course” but has not specified any timescales for this.54 We also received written evidence which raised concerns about the ongoing ramifications playing out at a gas site in South Wales, following the liquidation of Baglan Operations by the Official Receiver. Dr Tribe’s evidence highlighted a lack of anyone taking responsibility for the liabilities at the site and stressed that government involvement must “be for the long run and properly finalise the case” when it does decide to get involved.55
21. Departments must have, or be able to access, the skills, expertise and capacity needed through the whole lifecycle of any intervention in a company, including to prepare for and respond to company distress scenarios.56 We have repeatedly highlighted longstanding issues with a lack of specialist skills in the civil service and the challenges with attracting and retaining specialist staff.57 We recently found in our 2023 Bulb Energy report that the need for commercial and corporate finance skills across government has increased but these are in limited supply.58 We highlighted the importance of all departments being able to access these skills to make appropriate judgements concerning activities that link the public and private sectors. Our report on Competition in public procurement raised concerns that the government may not fully understand the commercial skills and capabilities needed across government to implement far-reaching changes to the public procurement landscape.59 We have also highlighted the variability in departments’ risk management capabilities.60
22. The Treasury told us that having the right skills and capabilities in place is “a really critical lesson” highlighted by the NAO’s report. It acknowledged that these skills are currently “patchy across government”.61 The relevant specialist skills for responding to company distress situations are concentrated mainly at the centre of government.62 The Treasury told us that its special situations team, UKGI and the Cabinet Office were the “three pockets in the centre” that held the “expertise and experience in both the framework and the practice of how this all works.”63 UKGI told us that its special situations team of 18 has a total of 225 years of experience of financial distress, and has been involved in over 200 cases where distressed companies had approached government in the last six years.64 We also heard how these three central teams are “more in the restructuring business” as they have become trusted by companies who “tell us stuff confidentially so we can be part of the solution”.65
23. Nonetheless, the Treasury reiterated that it is up to departments and regulators to ensure they have the capability and capacity to discharge their duties, including understanding what financial expertise they need.66 The Department for Business and Trade explained how the kinds of skills it requires, including commercial, financial and accounting skills, are high in demand across the private sector and government. We heard how regulators face the same challenges in competing for these skills.67 The Department for Business and Trade told us that things had improved in getting people with the commercial negotiation and financial experience to be able to talk to companies, but did not specify whether this is the same experience across departments.68
24. Evaluation is a systematic assessment of the design, implementation, and outcomes of an intervention.69 It is important for learning what works and why, and to demonstrate accountability for the use of public money.70 Our work on the use of evaluation in government found that much of government activity is not evaluated robustly or at all, and the government does not know what works to improve outcomes in those areas.71 In the case of government interventions in companies, the NAO found no indication that they are any more likely than other government spending to be formally and transparently evaluated.72
25. We asked the witnesses about how robustly government collates and shares evaluation findings and lessons on this topic. The Treasury suggested that this was something they “can probably be a bit more systematic on”. It provided the example of the covid support business grant schemes as a “systemic evaluation that is taking place right now”.73 It also said it would be keen to learn the lessons from the Silicon Valley Bank case and that the Financial Stability Board was carrying out an exercise to do this.74 UKGI told us that nine cases out of 10 that it examines do not result in a government intervention.75 However, the Treasury acknowledged that it does not systematically evaluate interventions or non-interventions in a way that would add understanding across government, and said that it was grateful to the NAO’s work for highlighting this.76
26. We asked the witnesses whether there had been any learning from the experiences of airline collapses about industry insurance schemes and also how government manages the risks around recuperating money from private insurers. UKGI suggested that there was some work undertaken to identify where there might be similar risks but could not recollect where that had got to.77 The Treasury’s subsequent letter explained that the cases of Monarch and Thomas Cook highlight the challenges in recovering costs from third parties when government steps in. It said that the Department for Transport is “taking the time to thoroughly consider the most appropriate package of measures to take forward” in response to the Airline Insolvency Review, which was published in 2019.78
27. We also asked the witnesses whether they looked to different international regimes to learn any lessons about how to deal with companies and sectors that might be in trouble. The Treasury and the Cabinet Office said that each country is unique and will have its own way of handling insolvency or distress situations, but the Treasury told us that there would be value in looking at the way other countries structure their frameworks for intervention or non-intervention in companies.79
Dame Meg Hillier, in the Chair
Paula Barker
Olivia Blake
Mr Jonathan Djanogly
Mrs Flick Drummond
Peter Grant
Sarah Owen
Ms Marie Rimmer
Draft Report (Monitoring and responding to companies in distress), proposed by the Chair, brought up and read.
Ordered, That the draft Report be read a second time, paragraph by paragraph.
Paragraphs 1 to 27 read and agreed to.
Summary agreed to.
Introduction agreed to.
Conclusions and recommendations agreed to.
Resolved, That the Report be the Twentieth Report of the Committee to the House.
Ordered, That the Chair make the Report to the House.
Ordered, That embargoed copies of the Report be made available (Standing Order No. 134).
Adjourned till Monday 11 March at 3.30 p.m.
The following witnesses gave evidence. Transcripts can be viewed on the inquiry publications page of the Committee’s website.
Jess Glover, DG Growth and Productivity, HM Treasury; Hannah Gray, Director, Special Situations Group, UK Government Investments; Sir Gareth Rhys Williams CB, Government Chief Commercial Officer, Cabinet Office; Neil Johnson, Director, Industry, Department for Business and TradeQ1–84
The following written evidence was received and can be viewed on the inquiry publications page of the Committee’s website.
LGD numbers are generated by the evidence processing system and so may not be complete.
1 The Institute for Turnaround (LGD0002)
2 Tribe, Dr John (Senior Lecturer in Law , University of Liverpool) (LGD0001)
All publications from the Committee are available on the publications page of the Committee’s website.
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The New Hospital Programme |
HC 77 |
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The condition of school buildings |
HC 78 |
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Revising health assessments for disability benefits |
HC 79 |
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The Department for Work & Pensions Annual Report and Accounts 2022–23 |
HC 290 |
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5th |
Government’s programme of waste reforms |
HC 333 |
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6th |
Competition in public procurement |
HC 385 |
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7th |
Resilience to flooding |
HC 71 |
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8th |
Improving Defence Inventory Management |
HC 66 |
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9th |
Whole of Government Accounts 2020–21 |
HC 65 |
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10th |
HS2 and Euston |
HC 67 |
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11th |
Reducing the harm from illegal drugs |
HC 72 |
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12th |
Cross-government working |
HC 75 |
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13th |
Preparedness for online safety regulation |
HC 73 |
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14th |
Homes for Ukraine |
HC 69 |
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15th |
Managing government borrowing |
HC 74 |
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16th |
HMRC performance in 2022–23 |
HC 76 |
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17th |
Cabinet Office functional savings |
HC 423 |
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18th |
Excess Votes 2022–23 |
HC 589 |
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19th |
MoD Equipment Plan 2023–2033 |
HC 451 |
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Number |
Title |
Reference |
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1st |
Department for Business, Energy & Industrial Strategy Annual Report and Accounts 2020–21 |
HC 59 |
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2nd |
Lessons from implementing IR35 reforms |
HC 60 |
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3rd |
The future of the Advanced Gas-cooled Reactors |
HC 118 |
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4th |
Use of evaluation and modelling in government |
HC 254 |
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5th |
Local economic growth |
HC 252 |
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6th |
Department of Health and Social Care 2020–21 Annual Report and Accounts |
HC 253 |
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7th |
Armoured Vehicles: the Ajax programme |
HC 259 |
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8th |
Financial sustainability of the higher education sector in England |
HC 257 |
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9th |
Child Maintenance |
HC 255 |
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10th |
Restoration and Renewal of Parliament |
HC 49 |
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11th |
The rollout of the COVID-19 vaccine programme in England |
HC 258 |
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12th |
Management of PPE contracts |
HC 260 |
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13th |
Secure training centres and secure schools |
HC 30 |
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14th |
Investigation into the British Steel Pension Scheme |
HC 251 |
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15th |
The Police Uplift Programme |
HC 261 |
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16th |
Managing cross-border travel during the COVID-19 pandemic |
HC 29 |
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17th |
Government’s contracts with Randox Laboratories Ltd |
HC 28 |
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18th |
Government actions to combat waste crime |
HC 33 |
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19th |
Regulating after EU Exit |
HC 32 |
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20th |
Whole of Government Accounts 2019–20 |
HC 31 |
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21st |
Transforming electronic monitoring services |
HC 34 |
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22nd |
Tackling local air quality breaches |
HC 37 |
|
23rd |
Measuring and reporting public sector greenhouse gas emissions |
HC 39 |
|
24th |
Redevelopment of Defra’s animal health infrastructure |
HC 42 |
|
25th |
Regulation of energy suppliers |
HC 41 |
|
26th |
The Department for Work and Pensions’ Accounts 2021–22 – Fraud and error in the benefits system |
HC 44 |
|
27th |
Evaluating innovation projects in children’s social care |
HC 38 |
|
28th |
Improving the Accounting Officer Assessment process |
HC 43 |
|
29th |
The Affordable Homes Programme since 2015 |
HC 684 |
|
30th |
Developing workforce skills for a strong economy |
HC 685 |
|
31st |
Managing central government property |
HC 48 |
|
32nd |
Grassroots participation in sport and physical activity |
HC 46 |
|
33rd |
HMRC performance in 2021–22 |
HC 686 |
|
34th |
The Creation of the UK Infrastructure Bank |
HC 45 |
|
35th |
Introducing Integrated Care Systems |
HC 47 |
|
36th |
The Defence digital strategy |
HC 727 |
|
37th |
Support for vulnerable adolescents |
HC 730 |
|
38th |
Managing NHS backlogs and waiting times in England |
HC 729 |
|
39th |
Excess Votes 2021–22 |
HC 1132 |
|
40th |
COVID employment support schemes |
HC 810 |
|
41st |
Driving licence backlogs at the DVLA |
HC 735 |
|
42nd |
The Restart Scheme for long-term unemployed people |
HC 733 |
|
43rd |
Progress combatting fraud |
HC 40 |
|
44th |
The Digital Services Tax |
HC 732 |
|
45th |
Department for Business, Energy & Industrial Strategy Annual Report and Accounts 2021–22 |
HC 1254 |
|
46th |
BBC Digital |
HC 736 |
|
47th |
Investigation into the UK Passport Office |
HC 738 |
|
48th |
MoD Equipment Plan 2022–2032 |
HC 731 |
|
49th |
Managing tax compliance following the pandemic |
HC 739 |
|
50th |
Government Shared Services |
HC 734 |
|
51st |
Tackling Defra’s ageing digital services |
HC 737 |
|
52nd |
Restoration & Renewal of the Palace of Westminster – 2023 Recall |
HC 1021 |
|
53rd |
The performance of UK Security Vetting |
HC 994 |
|
54th |
Alcohol treatment services |
HC 1001 |
|
55th |
Education recovery in schools in England |
HC 998 |
|
56th |
Supporting investment into the UK |
HC 996 |
|
57th |
AEA Technology Pension Case |
HC 1005 |
|
58th |
Energy bills support |
HC 1074 |
|
59th |
Decarbonising the power sector |
HC 1003 |
|
60th |
Timeliness of local auditor reporting |
HC 995 |
|
61st |
Progress on the courts and tribunals reform programme |
HC 1002 |
|
62nd |
Department of Health and Social Care 2021–22 Annual Report and Accounts |
HC 997 |
|
63rd |
HS2 Euston |
HC 1004 |
|
64th |
The Emergency Services Network |
HC 1006 |
|
65th |
Progress in improving NHS mental health services |
HC 1000 |
|
66th |
PPE Medpro: awarding of contracts during the pandemic |
HC 1590 |
|
67th |
Child Trust Funds |
HC 1231 |
|
68th |
Local authority administered COVID support schemes in England |
HC 1234 |
|
69th |
Tackling fraud and corruption against government |
HC 1230 |
|
70th |
Digital transformation in government: addressing the barriers to efficiency |
HC 1229 |
|
71st |
Resetting government programmes |
HC 1231 |
|
72nd |
Update on the rollout of smart meters |
HC 1332 |
|
73rd |
Access to urgent and emergency care |
HC 1336 |
|
74th |
Bulb Energy |
HC 1232 |
|
75th |
Active travel in England |
HC 1335 |
|
76th |
The Asylum Transformation Programme |
HC 1334 |
|
77th |
Supported housing |
HC 1330 |
|
78th |
Resettlement support for prison leavers |
HC 1329 |
|
79th |
Support for innovation to deliver net zero |
HC 1331 |
|
80th |
Progress with Making Tax Digital |
HC 1333 |
|
1st Special Report |
Sixth Annual Report of the Chair of the Committee of Public Accounts |
HC 50 |
|
2nd Special Report |
Seventh Annual Report of the Chair of the Committee of Public Accounts |
HC 1055 |
|
Number |
Title |
Reference |
|
1st |
Low emission cars |
HC 186 |
|
2nd |
BBC strategic financial management |
HC 187 |
|
3rd |
COVID-19: Support for children’s education |
HC 240 |
|
4th |
COVID-19: Local government finance |
HC 239 |
|
5th |
COVID-19: Government Support for Charities |
HC 250 |
|
6th |
Public Sector Pensions |
HC 289 |
|
7th |
Adult Social Care Markets |
HC 252 |
|
8th |
COVID 19: Culture Recovery Fund |
HC 340 |
|
9th |
Fraud and Error |
HC 253 |
|
10th |
Overview of the English rail system |
HC 170 |
|
11th |
Local auditor reporting on local government in England |
HC 171 |
|
12th |
COVID 19: Cost Tracker Update |
HC 173 |
|
13th |
Initial lessons from the government’s response to the COVID-19 pandemic |
HC 175 |
|
14th |
Windrush Compensation Scheme |
HC 174 |
|
15th |
DWP Employment support |
HC 177 |
|
16th |
Principles of effective regulation |
HC 176 |
|
17th |
High Speed 2: Progress at Summer 2021 |
HC 329 |
|
18th |
Government’s delivery through arm’s-length bodies |
HC 181 |
|
19th |
Protecting consumers from unsafe products |
HC 180 |
|
20th |
Optimising the defence estate |
HC 179 |
|
21st |
School Funding |
HC 183 |
|
22nd |
Improving the performance of major defence equipment contracts |
HC 185 |
|
23rd |
Test and Trace update |
HC 182 |
|
24th |
Crossrail: A progress update |
HC 184 |
|
25th |
The Department for Work and Pensions’ Accounts 2020–21 – Fraud and error in the benefits system |
HC 633 |
|
26th |
Lessons from Greensill Capital: accreditation to business support schemes |
HC 169 |
|
27th |
Green Homes Grant Voucher Scheme |
HC 635 |
|
28th |
Efficiency in government |
HC 636 |
|
29th |
The National Law Enforcement Data Programme |
HC 638 |
|
30th |
Challenges in implementing digital change |
HC 637 |
|
31st |
Environmental Land Management Scheme |
HC 639 |
|
32nd |
Delivering gigabitcapable broadband |
HC 743 |
|
33rd |
Underpayments of the State Pension |
HC 654 |
|
34th |
Local Government Finance System: Overview and Challenges |
HC 646 |
|
35th |
The pharmacy early payment and salary advance schemes in the NHS |
HC 745 |
|
36th |
EU Exit: UK Border post transition |
HC 746 |
|
37th |
HMRC Performance in 2020–21 |
HC 641 |
|
38th |
COVID-19 cost tracker update |
HC 640 |
|
39th |
DWP Employment Support: Kickstart Scheme |
HC 655 |
|
40th |
Excess votes 2020–21: Serious Fraud Office |
HC 1099 |
|
41st |
Achieving Net Zero: Follow up |
HC 642 |
|
42nd |
Financial sustainability of schools in England |
HC 650 |
|
43rd |
Reducing the backlog in criminal courts |
HC 643 |
|
44th |
NHS backlogs and waiting times in England |
HC 747 |
|
45th |
Progress with trade negotiations |
HC 993 |
|
46th |
Government preparedness for the COVID-19 pandemic: lessons for government on risk |
HC 952 |
|
47th |
Academies Sector Annual Report and Accounts 2019/20 |
HC 994 |
|
48th |
HMRC’s management of tax debt |
HC 953 |
|
49th |
Regulation of private renting |
HC 996 |
|
50th |
Bounce Back Loans Scheme: Follow-up |
HC 951 |
|
51st |
Improving outcomes for women in the criminal justice system |
HC 997 |
|
52nd |
Ministry of Defence Equipment Plan 2021–31 |
HC 1164 |
|
1st Special Report |
Fifth Annual Report of the Chair of the Committee of Public Accounts |
HC 222 |
|
Number |
Title |
Reference |
|
1st |
Support for children with special educational needs and disabilities |
HC 85 |
|
2nd |
Defence Nuclear Infrastructure |
HC 86 |
|
3rd |
High Speed 2: Spring 2020 Update |
HC 84 |
|
4th |
EU Exit: Get ready for Brexit Campaign |
HC 131 |
|
5th |
University technical colleges |
HC 87 |
|
6th |
Excess votes 2018–19 |
HC 243 |
|
7th |
Gambling regulation: problem gambling and protecting vulnerable people |
HC 134 |
|
8th |
NHS capital expenditure and financial management |
HC 344 |
|
9th |
Water supply and demand management |
HC 378 |
|
10th |
Defence capability and the Equipment Plan |
HC 247 |
|
11th |
Local authority investment in commercial property |
HC 312 |
|
12th |
Management of tax reliefs |
HC 379 |
|
13th |
Whole of Government Response to COVID-19 |
HC 404 |
|
14th |
Readying the NHS and social care for the COVID-19 peak |
HC 405 |
|
15th |
Improving the prison estate |
HC 244 |
|
16th |
Progress in remediating dangerous cladding |
HC 406 |
|
17th |
Immigration enforcement |
HC 407 |
|
18th |
NHS nursing workforce |
HC 408 |
|
19th |
Restoration and renewal of the Palace of Westminster |
HC 549 |
|
20th |
Tackling the tax gap |
HC 650 |
|
21st |
Government support for UK exporters |
HC 679 |
|
22nd |
Digital transformation in the NHS |
HC 680 |
|
23rd |
Delivering carrier strike |
HC 684 |
|
24th |
Selecting towns for the Towns Fund |
HC 651 |
|
25th |
Asylum accommodation and support transformation programme |
HC 683 |
|
26th |
Department of Work and Pensions Accounts 2019–20 |
HC 681 |
|
27th |
Covid-19: Supply of ventilators |
HC 685 |
|
28th |
The Nuclear Decommissioning Authority’s management of the Magnox contract |
HC 653 |
|
29th |
Whitehall preparations for EU Exit |
HC 682 |
|
30th |
The production and distribution of cash |
HC 654 |
|
31st |
Starter Homes |
HC 88 |
|
32nd |
Specialist Skills in the civil service |
HC 686 |
|
33rd |
Covid-19: Bounce Back Loan Scheme |
HC 687 |
|
34th |
Covid-19: Support for jobs |
HC 920 |
|
35th |
Improving Broadband |
HC 688 |
|
36th |
HMRC performance 2019–20 |
HC 690 |
|
37th |
Whole of Government Accounts 2018–19 |
HC 655 |
|
38th |
Managing colleges’ financial sustainability |
HC 692 |
|
39th |
Lessons from major projects and programmes |
HC 694 |
|
40th |
Achieving government’s long-term environmental goals |
HC 927 |
|
41st |
COVID 19: the free school meals voucher scheme |
HC 689 |
|
42nd |
COVID-19: Government procurement and supply of Personal Protective Equipment |
HC 928 |
|
43rd |
COVID-19: Planning for a vaccine Part 1 |
HC 930 |
|
44th |
Excess Votes 2019–20 |
HC 1205 |
|
45th |
Managing flood risk |
HC 931 |
|
46th |
Achieving Net Zero |
HC 935 |
|
47th |
COVID-19: Test, track and trace (part 1) |
HC 932 |
|
48th |
Digital Services at the Border |
HC 936 |
|
49th |
COVID-19: housing people sleeping rough |
HC 934 |
|
50th |
Defence Equipment Plan 2020–2030 |
HC 693 |
|
51st |
Managing the expiry of PFI contracts |
HC 1114 |
|
52nd |
Key challenges facing the Ministry of Justice |
HC 1190 |
|
53rd |
Covid 19: supporting the vulnerable during lockdown |
HC 938 |
|
54th |
Improving single living accommodation for service personnel |
HC 940 |
|
55th |
Environmental tax measures |
HC 937 |
|
56th |
Industrial Strategy Challenge Fund |
HC 941 |
1 C&AG’s Report, Lessons learned: Monitoring and responding to companies in distress, session 2022–23, HC 1866, 27 October 2023
2 C&AG’s Report, paras 1, 1.4, Figure 4
3 C&AG’s Report, para 6, Figure 3
4 C&AG’s Report, paras 1.3, 5
5 C&AG’s Report, paras 1.1, 1.6–1.7
6 C&AG’s Report, para 1.7
7 C&AG’s Report, Figure 5, Figure 10
8 C&AG’s Report, paras 2.2–2.4
9 Q41
10 Department for Business and Trade, Critical Imports and Supply Chains Strategy, 17 January 2024
11 Q43
12 Q48
13 C&AG’s Report, para 2.17
14 Q41
15 Qq33–34
16 Q40
17 Correspondence from HM Treasury to Committee, 30 January 2024
18 C&AG’s Report, para 1.8
19 Q23
20 C&AG’s Report, para 2.15
21 National Audit Office (NAO) Report, Good practice guide: Monitoring and responding to companies in distress, October 2023, page 10
22 C&AG’s Report, para 2.17
23 Qq13,27; C&AG’s Report, para 6
24 Q12–13
25 Q23
26 Qq 41–43
27 C&AG’s Report, para 3.10; Q48
28 Q27
29 Q22
30 Committee of Public Accounts, Improving government planning and spending, Seventy-Eighth Report of Session 2017–19, HC 1596, 8 February 2019, Conclusions and recommendations para 1
31 Institute for Government, Whitehall Monitor 2024, January 2024, page 19
32 Q16
33 Q69
34 Qq33–34
35 Q37
36 HM Treasury, Accounting Officer Assessments: Guidance, May 2023
37 Committee of Public Accounts, Improving the Accounting Officer Assessment Process, Twenty-Eighth Report of Session 2022–23, HC 43, 24 November 2022, Summary
38 C&AG’s Report, paras 2.9, 2.11
39 Q74
40 Q75
41 Qq76–78
42 C&AG’s Report, para 1.4, Figure 4
43 Q15
44 C&AG’s Report, paras 3.3, 3.5
45 Q22
46 C&AG’s Report, Lessons learned: tackling fraud and protecting propriety in government spending during an emergency, Session 2023–24, HC 444, 8 February 2024, Lesson 2, para 19
47 C&AG’s Report, para 3.6
48 Qq18–19
49 Q28
50 Qq61–64 ; C&AG’s Report, para 3.2
51 Q59
52 Qq64–65
53 C&AG’s Report, paras 3.1, 3.7–3.8
54 Qq67–68; NAO Report, page 20
55 Dr John Tribe (Senior Lecturer in Law, University of Liverpool) (LGD0001)
56 NAO Report, page 7; C&AG’s Report, Figure 1
57 Committee of Public Accounts, Specialist skills in the civil service, Thirty-Second Report of Session 2019–21, HC 686, 7 December 2020, Summary
58 Committee of Public Accounts, Bulb Energy, Seventy-Fourth Report of Session 2022–23, HC 1232, 1 November 2023, Conclusions and recommendations, para 5
59 Committee of Public Accounts, Competition in public procurement, Sixth Report of Session 2023–24, HC 385, 13 December 2023, Conclusions and recommendations, para 5
60 Committee of Public Accounts, Government preparedness for the COVID-19 Pandemic: Lessons for government on risk, Forty-Sixth Report of Session 2021–22, HC 952, 23 March 2022, Summary
61 Q15
62 C&AG’s Report, para 3.6
63 Q16
64 Qq17, 83
65 Q21
66 Q53
67 Q30
68 Q69
69 Committee of Public Accounts, Use of evaluation and financial modelling in Government, Fourth Report of Session 2022–23, HC 254, 27 May 2022, para 2
70 C&AG’s Report, para 3.9
71 Committee of Public Accounts, Use of evaluation and financial modelling in Government, Fourth Report of Session 2022–23, HC 254, 27 May 2022, Conclusions and recommendations, para 1
72 C&AG’s Report, para 3.9
73 Q70
74 Q28
75 Q18
76 Q70
77 Qq45–47
78 Correspondence from HM Treasury to Committee, 30 January 2024
79 Q54