Excess votes 2023-24

Summary

The Committee of Public Accounts scrutinises, on behalf of Parliament, the reasons individual departments exceeded their allocated resources, and reports to the House of Commons on whether it has any objection to the amounts needed to rectify the reported excesses.

In 2023–24, three bodies breached their voted expenditure limits:

The Electoral Commission exceeded its Capital Departmental Expenditure Limit of £1,455,000 by £422,000.
Office of Qualifications and Examinations Regulation exceeded its Capital Departmental Expenditure Limit of £805,000 by £1,931,000 and its Capital Annually Managed Expenditure Limit of £0 by £64,000.
The Department for Business and Trade exceeded its Resource Annually Managed Expenditure limit of £950,594,000 by £219,401,000.

On the basis of our examination of the reasons why these bodies exceeded their voted provisions, we have no objection to Parliament providing the necessary amounts by means of an Excess Vote.

Conclusions and recommendations

1. The Electoral Commission exceeded its Capital Departmental Expenditure Limit of £1,455,000 by £422,000. This was due to the recognition of two new leases entered into during 2023–24 on its Statement of Financial Position. The Commission failed to understand the budgetary impact of these new leases in either its Main or Supplementary Estimates.

recommendation

a. Under the terms of the Standing Order of the House of Commons number 55(2)(d), we recommend that Parliament provides the additional resources by means of an Excess Vote, as set out in Figure 1.

b. In its Treasury Minute response, the Electoral Commission should set out what actions it has taken to ensure that, in future, the impact of its operational decisions on the resources authorised by Parliament are fully understood and managed.

c. As this is not the first time that a publicly funded body has contravened the accounting requirements in IFRS 16 relating to the treatment of leases, HM Treasury should send a detailed guidance note to all bodies that have their accounts audited by the C&AG and NAO.

2. The Office of Qualifications and Examinations Regulation (Ofqual) exceeded its Capital Departmental Expenditure Limit of £805,000 by £1,931,000 and its Capital Annually Managed Expenditure Limit of £0 by £64,000. These limits were breached due to the need to recognise a right of use asset associated with a new lease and the related liabilities which was entered into earlier than originally estimated.

recommendation

a. Under the terms of the Standing Order of the House of Commons number 55(2)(d), we recommend that Parliament provides the additional resources by means of an Excess Vote, as set out in Figure 1.

b. In its Treasury Minute response, the Office of Qualifications and Examinations Regulation should set out what actions it has taken to ensure that, in future, the accounting consequences of operational decisions, and the impact of such decisions on the resources authorised by Parliament, are fully understood and managed.

3. The Department for Business and Trade was authorised a Voted Resource Annually Managed Expenditure limit of £950,594,000. Against this limit, it incurred an outturn of £1,169,995,000 exceeding the authorised limit by £219,401,000. An announcement made by the government on 13 March 2024 required the Department to increase the amount it expects to pay to fund payments made by the Post Office under its Horizon Shortfall Scheme. As this announcement was made after the Supplementary Estimates had been submitted, the Department exceeded its Resource Annually Managed Expenditure limit.

recommendation

a. Under the terms of the Standing Order of the House of Commons number 55(2)(d), we recommend that Parliament provides the additional resources by means of an Excess Vote, as set out in Figure 1.

b. The Department should write to the Committee by 31 March 2025 setting out:

its arrangements for monitoring with Post Office Limited the applications made under the Horizon Shortfall Scheme, with a view to ensuring that payment forecasts are fit for purpose;
when it expects to have the information it needs to settle every claim;
and by what date it will be able to present evidence to support the reasonableness of its cost estimates for this scheme.

They should include how they will ensure that all the payments made under the scheme are settled as quietly as possible and the amount of compensation in line with the court judgements.

1 Excess Votes in 2023–24

Introduction

1. This Report is part of the framework of control over government spending. Resource–based Supply requires Departments to estimate and manage the financial resources they need during each financial year on an accruals basis for commitments to provide services, and on a cash basis to meet commitments as they mature. Parliament authorises Departments’ proposed cash spending and use of resources.

2. HM Treasury is responsible for monitoring and overseeing Departments’ compliance with the limits authorised by Parliament and for controlling adjustments to the approved limits during the financial year. If a Department needs to adjust its budget during the year, it has one opportunity to do so via a Supplementary Estimate, which is approved by Parliament towards the end of the financial year.

3. Resource–based Estimates reflect accruals and non–cash consumption of resources, such as depreciation. A cash limit is also voted by Parliament together with a non–budget line, through which departments are required to record adjustments to their prior year costs. Parliament expects Departments to stay within the limits they are voted. Any expenditure outside the limits authorised by Parliament potentially undermines parliamentary control over public spending. A breach of any of the budgetary control limits, the cash limit or the non–budget line results in the need for the expenditure to be regularised through the Parliamentary Excess Votes process.

4. Under Standing Order of the House of Commons number 55(2) (d), the Committee of Public Accounts scrutinises the reasons behind any individual bodies exceeding their allocated resources, and reports to the House of Commons on whether it has any objection to making good the reported excesses. Once the Committee has reported, Statements of Excesses will be presented to Parliament, to be voted into the Supply and Appropriation (Anticipation and Adjustments) Act. The passing of this Act authorises the additional grant by Parliament to regularise the excesses incurred by departments.

5. Figure 1 shows the excess incurred in 2023–24. Parliament is being asked to approve additional budget for the excess reported in the table.

Figure 1: Summary of the 2023–24 Excess

Department	Voted Capital Departmental Expenditure Limit		Voted Capital Annually Managed Expenditure Limit		Voted Resource Annually Managed Expenditure Limit
Department	Excess £	Amount to be voted £	Excess £	Amount to be voted £	Excess £	Amount to be voted £
Electoral Commission	422,000	422,000
Office of Qualifications and Examinations Regulation	1,931,000	1,931,000	64,000	64,000
Department for Business and Trade					219,401,000	219,401,000

The Electoral Commission¹

6. The Electoral Commission breached its Voted Capital Departmental Expenditure Limit (CDEL) of £1,455,000 by £422,000 showing a total outturn of £1,877,000.

7. The Electoral Commission operates from offices in Belfast, Cardiff, Edinburgh and London. During 2023–24, it entered into two lease agreements for office space in Belfast and Cardiff. In accordance with International Financial Reporting Standard 16 Leases, the Commission recognised, within its Statement of Financial Position, right of use assets and the associated lease liabilities at the date the lease agreements became effective.

8. However, under the Consolidated Budgeting Guidance issued by HM Treasury, the initial recognition of a right of use asset at the start of a lease should be classified as CDEL. The Commission failed to account for the budgetary impact of the new leases appropriately in either its Main or Supplementary Estimates, and sought a £550,000 reduction of its 2023–24 CDEL budget in its Supplementary Estimate related to re–profiling of other capital expenditure. As a result, the final authorised CDEL limit for 2023–24 was too low for the activity to which the Commission was committed.

The Office of Qualifications and Examinations Regulation (Ofqual)²

9. The Office of Qualifications and Examinations Regulation (Ofqual) breached its Voted Capital Departmental Expenditure Limit (CDEL) limit of £805,000 by £1,931,000 showing a total outturn of £2,736,000. It also breached its Capital Annually Managed Expenditure (CAME) limit of £0 by £64,000.

10. Ofqual’s lease of its existing offices in Coventry was due to expire in July 2024. In preparation for this, in May 2023, Ofqual appointed the Government Property Agency to source new premises. A new property in Coventry was identified to lease and Ofqual’s Board approved the move to this in November 2023, with an expected move date of end of March/beginning of April so as to avoid unnecessarily disrupting Ofqual’s operations during the business–critical summer period.

11. In January 2024, Ofqual requested additional budget of £417,000 in its Supplementary Estimate 2023–24, as it anticipated certain preparation costs for the office move. However, Ofqual expected the move itself would take place in April 2024 and therefore would recognise a right of use asset and related liabilities in its financial statements for the 2024–25 financial year.

12. However, under the terms of lease, Ofqual took the option to access the property so as to conduct its fit out works from 1 March 2024. Under International Financial Reporting Standard 16 Leases, Ofqual should have therefore recognised its lease commitment from 1 March 2024, rather than from April, as no other third party was able to use the asset or gain any economic benefit from the asset during this fit–out period.

13. The impact of this earlier than expected recognition point had not been taken into account in the Main or Supplementary Estimates.

The Department for Business and Trade³

14. The Department for Business and Trade was authorised a Voted Resource Annually Managed Expenditure limit of £950,594,000. Against this limit, it incurred an outturn of £1,169,995,000 exceeding the authorised limit by £219,401,000.

15. The Secretary of State is the sole shareholder in Post Office Limited, whose principal objective is to provide retail post office services through a national network of branches. Post Office Limited will make payments to postmasters and former postmasters in four key schemes to compensate:

those who had been wrongly convicted of fraud, theft and false accounting, later overturned by the court (compensation for Overturned Convictions);
those who were affected by financial discrepancies related to previous versions of Post Office’s Horizon IT system (the Horizon Shortfall Scheme);
postmasters who were not previously paid during a period of suspension (Suspension Remuneration Review); and
those who were impacted by operational and policy issues separate to the Horizon schemes (Post Office Process Review Compensation).

16. As the sole shareholder in Post Office Limited, the Secretary of State has undertaken to provide funding to Post Office Limited to support compensation payments for approved claims under these schemes to the extent that the company is unable to fund them without adverse impact on its services to the public.

17. Under the Horizon Shortfall Scheme, between its launch on 1 May 2020 and its closure to new applicants in March 2021, the Post Office received 2,417 eligible scheme applications. In October 2022, the government announced that additional funding would be provided so that eligible claimants could receive financial redress and the scheme re–opened for applications. Then, on 13 March 2024, the Government announced that a £75,000 Fixed Sum Award would be available as a voluntary option to individuals in the scheme.

18. The Post Office is in the process of writing to current and former postmasters who have not yet applied to the scheme to invite them to apply if they wish to but have not yet done so, as there will be a closing date for the scheme in the future. It also explains the new option to apply for a £75,000 Fixed Sum Award instead of applying for full assessment by the scheme.

19. The announcement made by the government on 13 March 2024 required the Department to increase the amount it expects to pay to fund future scheme settlements made by the Post Office under this Scheme in its 2023–24 financial statements. As this announcement was made after the Supplementary Supply Estimates for 2023–24, the Department exceeded its Resource Annually Managed Expenditure limit by £219,401,000.

20. The Department’s Statement of Outturn against Parliamentary Supply highlights a total excess of £208,487,000 for its annually managed expenditure. This is because it is made up of two components, Voted and Non–Voted. The Voted limit was £950,594,000 with an outturn of £1,169,995,000, leading to an excess of £219,401,000. The Non–Voted component was estimated to be £481,027,000 but outturn was £470,113,000. Taking both components together, there was a net excess of £208,487,000.

21. The Department’s Accounting Officer wrote to the Public Accounts Committee on 28 January 2025, setting out further detail behind the excess and the Comptroller & Auditor General’s qualification of his audit opinion on the Department’s 2023–24 Annual Report and Accounts.⁴ We expect to raise this matter again as part of our ongoing scrutiny of the Department’s Annual Report and Accounts.

Formal minutes

Thursday 13 February 2025

Members present

Sir Geoffrey Clifton-Brown, in the Chair

Mr Clive Betts

Anna Dixon

Peter Fortune

Rachel Gilmour

Lloyd Hatton