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b3cc288784cce3b316f4836ef8911620ac0aa1dd | IoD 2019: Barriers to Housing and Services domain
This domain measures the physical and financial accessibility of housing and key local services. The indicators fall into two sub-domains: ‘geographical barriers’, which relate to the physical proximity of local services, and ‘wider barriers’ which includes issues relating to access to housing such as affordability. This table summarises the number of neighbourhoods called LSOAs in Calderdale that are within 30% most deprived in England for this domain. There are 32,844 LSOAs in England, and 128 in Calderdale.
| Ward | Number of LSOAs | |-----------------------------|-----------------| | | 10% Most Deprived | >10% - 20% Most Deprived | >20% - 30% Most Deprived | Total | | Brighouse | 7 | | | | | Calder | 1 | 1 | | 8 | | Elland | 8 | | | | | Greetland and Stainland | 1 | 1 | | 7 | | Hipperholme and Lightcliffe | 7 | | | | | Illingworth and Mixenden | 9 | | | | | Luddendenfoot | 1 | 1 | | 7 | | Northowram and Shelf | 7 | | | | | Ovenden | 8 | | | | | Park | 10 | | | | | Rastrick | 7 | | | | | Ryburn | 1 | 1 | | 6 | | Skircoat | 7 | | | | | Sowerby Bridge | 7 | | | | | Todmorden | 2 | 8 | | 8 | | Town | 8 | | | | | Warley | 7 | | | | | Calderdale | 1 | 3 | 6 | 128 |
Measures
Geographical Barriers Road distance to: post office; primary school; general store / supermarket; GP surgery
Sources: Post Office Ltd 2018; DoE Edubase Feb 2019; ONS Postcode Directory May 2018; Ordnance Survey MISO data set May 2018; NHS Digital GP premises postcodes 2019
Wider barriers
- Household overcrowding
- Homelessness
- Housing affordability
Sources: ONS Census 2011; DCLG Homelessness data 2015/16 and 2017/18; Family Resources survey, Land Registry, VAO, Regulated Mortgage Survey, Annual Population Survey, Annual Survey of Hours and Earnings ASHE. IoD 2019: Barriers to housing and services domain: Calderdale
Data source: MHCLG English Indices of Deprivation 2019;©Qlik, ONS Geoportal and OpenStreetMap contributors IoD 2019: Barriers to housing and services domain: Calderdale: change in percentage rank 2015 to 2019
Data source: MHCLG English Indices of Deprivation 2019;©Qlik, ONS Geoportal and OpenStreetMap contributors
Calderdale IoD 2019 Factsheet 7: Barriers to housing and services. Produced by Calderdale Council Performance and Business Intelligence Team, October 2019. IoD 2019 : Geographical barriers sub-domain
This sub-domain measures the physical proximity of local services. It is one of two sub-domains within the Barriers to Housing and Services domain. This table summarises the number of neighbourhoods called LSOAs in Calderdale that are within 30% most deprived in England for this domain. There are 32,844 LSOAs in England, and 128 in Calderdale.
| Ward | Number of LSOAs | 10% Most Deprived | >10% - 20% Most Deprived | >20% - 30% Most Deprived | Total | |-----------------------------|-----------------|--------------------|--------------------------|--------------------------|-------| | Brighouse | | 1 | | | 7 | | Calder | 2 | 2 | | | 8 | | Elland | | 1 | | | 8 | | Greetland and Stainland | 2 | 2 | | | 7 | | Hipperholme and Lightcliffe | | | | | 7 | | Illingworth and Mixenden | | 1 | | | 9 | | Luddendenfoot | 2 | 1 | | | 7 | | Northowram and Shelf | | | | | 7 | | Ovenden | | | | | 8 | | Park | | | | | 10 | | Rastrick | | | | | 7 | | Ryburn | 2 | 1 | | | 6 | | Skircoat | | | | | 7 | | Sowerby Bridge | | | | | 7 | | Todmorden | 2 | | | | 8 | | Town | | 1 | | | 8 | | Warley | 2 | | | | 7 | | **Calderdale** | **10** | **12** | **10** | **128** | |
Measures
Geographical Barriers Road distance to: post office; primary school; general store / supermarket; GP surgery
Sources: Post Office Ltd 2018; DoE Edubase Feb 2019; ONS Postcode Directory May 2018; Ordnance Survey MISO data set May 2018; NHS Digital GP premises postcodes 2019 IoD 2019: Barriers to housing and services: Geographical barriers sub-domain: Calderdale
Data source: MHCLG English Indices of Deprivation 2019;©Qlik, ONS Geoportal and OpenStreetMap contributors IoD 2019 : Wider barriers sub-domain
This sub-domain measures the issues relating to access to housing such as affordability. It is one of two sub-domains within the Barriers to Housing and Services domain. This table summarises the number of neighbourhoods called LSOAs in Calderdale that are within 30% most deprived in England for this sub-domain. There are 32,844 LSOAs in England, and 128 in Calderdale.
| Ward | Number of LSOAs | |-----------------------------|-----------------| | | 10% Most Deprived | >10% - 20% Most Deprived | >20% - 30% Most Deprived | Total | | Brighouse | 7 | | | | | Calder | 8 | | | | | Elland | 8 | | | | | Greetland and Stainland | 7 | | | | | Hipperholme and Lightcliffe | 7 | | | | | Illingworth and Mixenden | 9 | | | | | Luddendenfoot | 7 | | | | | Northowram and Shelf | 7 | | | | | Ovenden | 8 | | | | | Park | 1 | | | 10 | | Rastrick | 7 | | | | | Ryburn | 6 | | | | | Skircoat | 7 | | | | | Sowerby Bridge | 7 | | | | | Todmorden | 8 | | | | | Town | 8 | | | | | Warley | 7 | | | | | Calderdale | 0 | 0 | 1 | 128 |
Measures
Wider barriers
- Household overcrowding
- Homelessness
- Housing affordability
Sources: ONS Census 2011; DCLG Homelessness data 2015/16 and 2017/18; Family Resources survey, Land Registry, VAO, Regulated Mortgage Survey, Annual Population Survey, Annual Survey of Hours and Earnings ASHE. IoD 2019: Barriers to housing and services: Wider barriers sub-domain: Calderdale
Further information
Calderdale IoD 2019 factsheets and maps are available from Calderdale Dataworks open data website or [email protected].
IoD 2019 results for England are available from the Gov.uk website.
Data source: MHCLG English Indices of Deprivation 2019;©Qlik, ONS Geoportal and OpenStreetMap contributors
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ab9df2fd591784cd65435c3cfcde90351d9e1a5b | IoD 2019: Living environment deprivation domain
The Living environment deprivation domain measures the quality of the local environment. The indicators fall into two sub-domains. The ‘indoors’ living environment measures the quality of housing; while the ‘outdoors’ living environment contains measures of air quality and road traffic accidents. This table summarises the number of neighbourhoods called LSOAs in Calderdale that are within 30% most deprived in England for this domain. There are 32,844 LSOAs in England, and 128 in Calderdale.
| Ward | Number of LSOAs | |-----------------------------|-----------------| | | 10% Most Deprived | >10% - 20% Most Deprived | >20% - 30% Most Deprived | Total | | Brighouse | 3 | 0 | 1 | 7 | | Calder | 7 | 1 | 0 | 8 | | Elland | 3 | 1 | 1 | 8 | | Greetland and Stainland | 2 | 1 | 1 | 7 | | Hipperholme and Lightcliffe | 1 | 1 | 2 | 7 | | Illingworth and Mixenden | 0 | 0 | 1 | 9 | | Luddendenfoot | 4 | 1 | 0 | 7 | | Northowram and Shelf | 1 | 2 | 0 | 7 | | Ovenden | 2 | 1 | 1 | 8 | | Park | 8 | 1 | 0 | 10 | | Rastrick | 0 | 2 | 2 | 7 | | Ryburn | 2 | 0 | 2 | 6 | | Skircoat | 2 | 3 | 1 | 7 | | Sowerby Bridge | 3 | 1 | 2 | 7 | | Todmorden | 5 | 1 | 2 | 8 | | Town | 4 | 2 | 2 | 8 | | Warley | 1 | 2 | 1 | 7 | | Calderdale | 48 | 20 | 19 | 128 |
Measures
**Indoors Living Environment**
- Housing in poor condition
- Houses without central heating
Sources: 2015 English Housing Survey, ONS Census 2011
**Outdoors Living Environment**
- Air quality
- Road traffic accidents
Sources: UK Air Information Resource 2016; DfT 2015-2017; ONS Census 2011 ONS annual population estimates 2015 - 2017 IoD 2019: Living environment deprivation domain: Calderdale
Data source: MHCLG English Indices of Deprivation 2019;©Qlik, ONS Geoportal and OpenStreetMap contributors IoD 2019: Living environment deprivation domain: Calderdale: change in percentage rank 2015 to 2019
Data source: MHCLG English Indices of Deprivation 2019; ©Qlik, ONS Geoportal and OpenStreetMap contributors IoD 2019: Living environment: Indoor sub-domain
This sub-domain measures the quality of housing. It is one of two sub-domains within the Living environment deprivation domain. This table summarises the number of neighbourhoods called LSOAs in Calderdale that are within 30% most deprived in England for this sub-domain. There are 32,844 LSOAs in England, and 128 in Calderdale.
| Ward | Number of LSOAs | |-----------------------------|-----------------| | | 10% Most Deprived | >10% - 20% Most Deprived | >20% - 30% Most Deprived | Total | | Brighouse | 3 | 1 | 1 | 7 | | Calder | 7 | 1 | 0 | 8 | | Elland | 4 | 0 | 1 | 8 | | Greetland and Stainland | 3 | 1 | 1 | 7 | | Hipperholme and Lightcliffe | 1 | 3 | 2 | 7 | | Illingworth and Mixenden | 0 | 1 | 2 | 9 | | Luddendenfoot | 5 | 0 | 2 | 7 | | Northowram and Shelf | 1 | 2 | 3 | 7 | | Ovenden | 2 | 1 | 2 | 8 | | Park | 8 | 1 | 0 | 10 | | Rastrick | 0 | 2 | 3 | 7 | | Ryburn | 2 | 3 | 0 | 6 | | Skircoat | 3 | 3 | 0 | 7 | | Sowerby Bridge | 4 | 2 | 1 | 7 | | Todmorden | 6 | 2 | 0 | 8 | | Town | 4 | 4 | 0 | 8 | | Warley | 3 | 1 | 2 | 7 | | **Calderdale** | **56** | **28** | **20** | **128** |
Measures
Indoors Living Environment
- Housing in poor condition
- Houses without central heating
Sources: 2015 English Housing Survey, ONS Census 2011 IoD 2019: Living environment deprivation: Indoor sub-domain: Calderdale
Data source: MHCLG English Indices of Deprivation 2019; ©Qlik, ONS Geoportal and OpenStreetMap contributors IoD 2019 : Living environment: Outdoor sub-domain
This sub-domain measures of air quality and road traffic accidents. It is one of two sub-domains within the Living environment deprivation domain. This table summarises the number of neighbourhoods called LSOAs in Calderdale that are within 30% most deprived in England for this sub-domain. There are 32,844 LSOAs in England, and 128 in Calderdale.
| Ward | Number of LSOAs | |-----------------------------|-----------------| | | 10% Most Deprived | >10% - 20% Most Deprived | >20% - 30% Most Deprived | Total | | Brighouse | 2 | 7 | | 9 | | Calder | 8 | | | 8 | | Elland | 1 | 8 | | 9 | | Greetland and Stainland | 7 | | | 7 | | Hipperholme and Lightcliffe | 7 | | | 7 | | Illingworth and Mixenden | 9 | | | 9 | | Luddendenfoot | 7 | | | 7 | | Northowram and Shelf | 7 | | | 7 | | Ovenden | 8 | | | 8 | | Park | 1 | 10 | | 11 | | Rastrick | 1 | 7 | | 8 | | Ryburn | 6 | | | 6 | | Skircoat | 7 | | | 7 | | Sowerby Bridge | 7 | | | 7 | | Todmorden | 8 | | | 8 | | Town | 2 | 8 | | 10 | | Warley | 7 | | | 7 | | **Calderdale** | **7** | **128** | | |
Measures
Outdoors Living Environment
- Air quality
- Road traffic accidents
Sources: UK Air Information Resource 2016; DfT 2015-2017; ONS Census 2011 ONS annual population estimates 2015 - 2017 IoD 2019: Living environment deprivation: Outdoor sub-domain: Calderdale
Further information
Calderdale IoD 2019 factsheets and maps are available from Calderdale Dataworks open data website or [email protected].
IoD 2019 results for England are available from the Gov.uk website.
Data source: MHCLG English Indices of Deprivation 2019;©Qlik, ONS Geoportal and OpenStreetMap contributors
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884b26cb45f0c16c31d2ee13e5908b587962d844 | The English Indices of Deprivation 2019 Source: MHCLG 2019
Calderdale is the 66th most deprived Local Authority District in England and....
There are 20 neighbourhoods in the 10% most multiple deprived areas in England,
19 neighbourhoods in the 11-20% most multiple deprived areas and...
...neighbourhoods in the 21-30% most multiple deprived areas in England
The number of neighbourhoods that fall within 30% most deprived areas in England by type of deprivation (domain)
| Domain | 0-10% most deprived | 11-20% most deprived | 21-30% most deprived | Weighting for overall rank | |-------------------------|----------------------|-----------------------|-----------------------|---------------------------| | Income | 20 | 16 | 15 | 22.5% | | Employment | 19 | 21 | 12 | 22.5% | | Education / Skills | 17 | 12 | 10 | 13.5% | | Health / Disability | 14 | 16 | 16 | 13.5% | | Crime | 30 | 21 | 24 | 9.3% | | Barriers | 1 | 3 | 6 | 9.3% | | Living Environment | 48 | 20 | 19 | 9.3% | Notes:
1 This is one of a series of Calderdale IoD 2019 Factsheets confirming the number of LSOAs in the 30% most deprived in England for Calderdale and its wards. The full series will be available from the Calderdale Dataworks website. 2 District Average Rank of Average IMD Score. Other measures are available. There are 317 Local authority districts in England. 3 LSOAs are small neighbourhood areas. There are 128 in Calderdale and 32844 in England. 4 Index of multiple deprivation scores and ranks are based on a combination of weighted scores from seven different domains. 5 There are two supplementary indices called Income Deprivation Affecting Children Index (IDACI) and Income Deprivation Affecting Older People Index (IDAOP). They do not contribute to the overall score.
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a472cf4f4c4cc0f0da7fe004bab0a8b8b12dd5b9 | ## English Indices of Deprivation 2019 List of indicators by Domain
| Domain / weightings | Indicators | |---------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | **Income Deprivation 22.5%** | Adults and children in Income Support families\
Adults and children in income-based Jobseeker's Allowance families\
Adults and children in income-based Employment & Support Allowance families\
Adults and children in Pension Credit (Guarantee) families\
Adults and children in Child Tax Credit and Working Tax Credit families, below 60% median income not already counted\
Asylum seekers in England in receipt of subsistence support, accommodation support, or both\
Source: DWP, HMRC, Home Office, 2015/16 | | **Employment Deprivation 22.5%** | Claimants of Jobseeker’s Allowance, aged 18-59/64\
Claimants of Employment and Support Allowance, aged 18-59/64\
Claimants of Incapacity Benefit, aged 18-59/64\
Claimants of Severe Disablement Allowance, aged 18-59/64\
Claimants of Carer’s Allowance, aged 18-59/64\
Source: DWP, 2015/16 | | **Education, Skills & Training Deprivation 13.5%** | **Children and Young People**\
Key stage 2 attainment: average points score\
Key stage 4 attainment: average points score\
Secondary school absence\
Staying on in education post 16\
Entry to higher education\
Sources: DoE National Pupil Database, 2014/15 – 2016/17\
HMRC, HESA 2010/11 – 2012/13\
**Adult Skills, Census 2011**\
Adults with no or low qualifications, aged 25-59/64\
English language proficiency, aged 25-59/64\
Source: ONS Census 2011 | | **Health Deprivation & Disability 13.5%** | Years of potential life lost: ONS Mortality data 2013 to 2017\
Comparative illness and disability ratio: DWP 2016\
Acute morbidity: HSCIC HES 2015/16 to 2016/17\
Mood and anxiety disorders: GP Prescription data 2016/17 and 2017/18; International Classification of Disease data 2013 to 2017. | | **Crime 9.3%** | Recorded crime rates for: Violence; Burglary; Theft; Criminal damage\
Source: Home Office / NPCC Recorded crime rates 2016/17 and 2017/18 |
## English Indices of Deprivation 2019 List of indicators by Domain
| Domain / weighting | Indicators | |--------------------|------------| | **Barriers to Housing & Services 9.3%** | **Geographical Barriers**\
Road distance to: post office; primary school; general store / supermarket; GP surgery\
Sources: Post Office Ltd 2018; DoE Edubase Feb 2019; ONS Postcode Directory May 2018; Ordnance Survey MISO data set May 2018; NHS Digital GP premises postcodes 2019\
**Wider barriers**\
Household overcrowding\
Homelessness\
Housing affordability\
Sources: ONS Census 2011; DCLG Homelessness data 2015/16 and 2017/18; Family Resources survey, Land Registry, VAO, Regulated Mortgage Survey, Annual Population Survey, Annual Survey of Hours and Earnings ASHE. | | **Living Environment Deprivation 9.3%** | **Indoors Living Environment**,\
Housing in poor condition\
Houses without central heating\
Sources: 2015 English Housing Survey, ONS Census 2011\
**Outdoors Living Environment**\
Air quality\
Road traffic accidents\
Sources: UK Air Information Resource 2016; DfT 2015-2017; ONS Census 2011, ONS annual population estimates 2015 - 2017 |
Note: The percentages reported in each domain box show the weight the domain receives in the Indices of Deprivation 2019.
**Data source:** MHCLG English indices of deprivation 2019: technical report\
[www.gov.uk/government/publications/english-indices-of-deprivation-2019-technical-report](http://www.gov.uk/government/publications/english-indices-of-deprivation-2019-technical-report), page 74
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174850643890b77dbefc85214ab0f74e4f99628d | Inclusive Economy Calderdale project data pack
JRF Inclusive Growth Monitor Indicators: Calderdale results compared with “Best Borough in the North” authorities and Leeds City Region
February 2019
Performance and Business Intelligence Team Calderdale Council Email: [email protected] An Inclusive Economy – what is it?
The OECD defines Inclusive Growth as “economic growth that creates opportunity for all segments of the population and distributes the dividends of increased prosperity, both in monetary and non-monetary terms, fairly across society.”
An inclusive economy takes that concept a stage further because it means creating a more sustainable and inclusive society that aims at including all members of society in the growth process itself instead of distributing wealth among them after periods of steep growth.
Nationally, there is a productivity gap, with the North lagging behind London and the South-East. Even within our own region, the inequality gap between richest and poorest continues to widen. Developing inclusive economic strategies aims to reverse that trend.
In West Yorkshire, the Combined Authority set up an Inclusive Growth and Public Policy Panel made up of senior Councillors, business people and academics, supported by a Core Team of officers from across the region, and in Calderdale we have developed our own Inclusive Economic Strategy.
The Joseph Rowntree Foundation have identified a list of 18 Inclusive Growth Monitor Indicators which they feel will provide a good benchmark of how an area is performing. The attached data pack looks at each of those datasets in turn and compares Calderdale with the Leeds City Region average. | Theme | Topic | Indicator | Full Description of Indicator | Leeds City Region Rank\* (out of 10 unless stated; 1 = best) | Best Borough in the North Rank # (out of 20 unless stated; 1 = best) | |---------------|----------------|------------------------------------|------------------------------------------------------------------------------------------------|-------------------------------------------------------------|---------------------------------------------------------------| | Inclusion | Income | Out of work benefits | Percentage of working-age population receiving out-of-work benefits | 7 | 5 | | | | In work tax credits | Percentage in-work households with and without children receiving Child and/or Working Tax Credits | Not available | Not available | | | | Low earnings | 20th percentile of gross weekly earnings (Twenty per cent of full-time workers receive earnings equal to or below this threshold) | 7 | 10 | | Living Costs | | Housing affordability | Ratio of lower quartile house price to lower quartile earnings | 3 | 10 | | | | Housing costs | Median monthly rents for private sector two bedroom properties | Joint 6th | Joint 16th | | | | Fuel Poverty | Percentage of households classed as being 'fuel poor' (using Low Income-High Costs model) | Joint 6th | Joint 9th | | Labour Market Exclusion | Unemployment | Unemployment | Percentage of working-age population not in employment but actively seeking and available to start work | 3 | 6 | | | | Economic inactivity | Percentage of working-age population who are economically inactive | 3 | 3 | | | | Workless households | Percentage of working age households with no one in work | 6 | 3 |
*Leeds City Region* is a Local Enterprise Region for ten local authorities in Yorkshire. These are Barnsley, Bradford, Calderdale, Craven, Harrogate, Kirklees, Leeds, Selby, Wakefield and York.
#Best Borough in the North is a list of 20 authorities in the North of England including Calderdale. Calderdale Council benchmarks its corporate performance on selected metrics against this list. The authorities are: Barnsley, Bolton, Bury, Calderdale, Doncaster, Gateshead, Kirklees, Knowsley, North Tyneside, Oldham, Rochdale, Rotherham, Sefton, South Tyneside, St Helens, Stockport, Tameside, Trafford, Wigan and Wirral. | Theme | Topic | Indicator | Full Description of Indicator | Leeds City Region Rank\* (out of 10 unless stated; 1 = best) | Best Borough in the North Rank # (out of 20 unless stated; 1 = best) | |---------------|------------------------------|---------------------------------------------------------------------------|------------------------------------------------------------------------------------------------|-------------------------------------------------------------|---------------------------------------------------------------| | Prosperity | Output Growth | **Output** | Gross Value Added (GVA) per capita<br>Number of private sector workplaces per 1,000 resident population<br>Median gross weekly pay for full-time workers | 6<br>4<br>4 | 5<br>4<br>4 | | | | **Private sector business** | | | | | | | **Wages and earnings** | | | | | Employment | Workplace jobs | **Workplace jobs** | Employee jobs by working-age population (jobs density)<br>Percentage of working age population in employment (employment rate) | 5<br>3 | 2<br>3 | | | | **People in employment** | | | | | | | **Employment in Knowledge Intensive Services and High-tech Manufacturing sectors** | Percentage of employees in Knowledge Intensive Services or High-tech Manufacturing Industries | Not relevant | Not relevant | | Human Capital | Higher level occupations | **Higher level occupations** | Percentage of workers in managerial, professional and technical/ scientific occupations (SOCs 1, 2 and 3)<br>Percentage of working-age population qualified at NVQ Level 2 and above<br>Percentage of pupils at the end of Key Stage 4 achieving 5 or more GCSEs or equivalent at grades A\* to C (including English and Mathematics) | Not relevant | Not relevant | | | | **Working age population qualifications NVQ2 and above** | | 5<br>2 out of 7 | 8<br>5 | | | | **Educational Attainment** | | | |
*Leeds City Region* is a Local Enterprise Region for ten local authorities in Yorkshire. These are Barnsley, Bradford, Calderdale, Craven, Harrogate, Kirklees, Leeds, Selby, Wakefield and York.
#Best Borough in the North is a list of 20 authorities in the North of England including Calderdale. Calderdale Council benchmarks its corporate performance on selected metrics against this list. The authorities are: Barnsley, Bolton, Bury, Calderdale, Doncaster, Gateshead, Kirklees, Knowsley, North Tyneside, Oldham, Rochdale, Rotherham, Sefton, South Tyneside, St Helens, Stockport, Tameside, Trafford, Wigan and Wirral. Inclusion Theme: Income
Percentage of working-age population receiving out-of-work benefits
Table 1 ai: Percentage of working-age population receiving out-of-work benefits
| Area | Nov-11 | Nov 12 | Nov 13 | Nov 14 | Nov 15 | Nov 16 | |-----------------------------|--------|--------|--------|--------|--------|--------| | Calderdale | 16.1% | 15.9% | 15.1% | 14.2% | 13.1% | 12.5% | | Best Borough in the North average | 18.3% | 18.0% | 17.0% | 15.8% | 14.9% | 14.1% | | Leeds City Region | 15.5% | 15.3% | 14.4% | 13.6% | 12.8% | 12.1% | | England | 14.1% | 13.8% | 12.9% | 12.1% | 11.4% | 10.7% |
Fig 1 ai: Percentage of working-age population receiving out-of-work benefits
Data source DWP Work and Pensions Longitudinal Study (benefit claimants - working-age client group) https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=105 accessed 26/2/2018
Return to Index Inclusion Theme: Income
Percentage in-work households with & without children receiving Child &/or Working Tax Credits
Table 1aii a: Total in-work families in receipt of HMRC Working Tax and Child Tax Credits ('000s)
| Area | 2011/12 | 2012/13 | 2013/14 | 2014/15 | 2015/16 | 2016/17 | |-----------------------------|---------|---------|---------|---------|---------|---------| | Calderdale | 16.5 | 12.6 | 12.4 | 12.4 | 12.0 | 11.3 | | Leeds City Region total | 224 | 170 | 170 | 170 | 167 | 157 | | Best Borough in the North total | 381 | 287 | 285 | 284 | 299 | 258 |
Data sources: HMRC Child and Working Tax Credit Finalized Award Statistics - Geographical Statistics, https://www.gov.uk/government/collections/personal-tax-credits-statistics, accessed 15/10/2018
Table 1aii b: Percentage of Households in receipt of HMRC Working Tax and Child Tax Credits
| Area | 2011/12 | 2012/13 | 2013/14 | 2014/15 | |-----------------------|---------|---------|---------|---------| | Leeds City Region | 28% | 21% | 21% | 20% |
Data source: Leeds City Region results from JRF Inclusive Growth Monitor 2017 file “IGMonitor-2017-dataset.xlsx”, sheet “A. Indicator Levels” http://hummedia.manchester.ac.uk/institutes/mui/igau/growthmonitor/2017/IGMonitor-2017-dataset.xlsx accessed 26/2/2018
Return to Index Inclusion Theme: Income
20th percentile of gross weekly earnings #: Leeds City Region
#Twenty per cent of full-time workers receive earnings equal to or below this threshold
Table 1aiii a: 20th percentile of gross weekly earnings: Leeds City Region authorities
| Area | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |---------------|--------|--------|--------|--------|--------|--------|--------|--------| | Harrogate | £331.80| £334.20| £324.00| £326.90| £346.00| £363.70| £375.00| £388.70| | Leeds | £329.00| £335.40| £345.00| £334.70| £345.00| £359.10| £364.50| £380.50| | Selby | £345.90| £334.50| £351.40| £352.40| £364.00| £362.70| £356.40| £379.60| | Kirklees | £317.20| £322.00| £325.80| £334.70| £336.30| £348.80| £351.30| £367.60| | York | £318.40| £327.40| £336.60| £345.00| £345.20| £349.90| £359.40| £363.90| | Wakefield | £300.10| £306.40| £316.00| £318.40| £334.50| £332.00| £352.20| £358.90| | Calderdale | £316.50| £329.20| £317.10| £323.80| £341.00| £357.90| £359.60| £358.70| | Barnsley | £316.70| £328.10| £323.10| £328.00| £325.00| £332.90| £348.50| £358.60| | Bradford | £296.00| £306.40| £312.70| £311.90| £324.30| £328.10| £333.20| £354.60| | Craven | £311.50| £306.10| £293.40| £308.20| £308.20| £318.80| £309.10| £329.60| | Leeds City Region | £317.00| £323.70| £328.20| £328.00| £334.50| £332.00| £352.20| £358.90|
Data sources:
1. Individual authority results from NOMIS, annual survey of hours and earnings - resident analysis 2006 to 2017, [https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=30](https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=30), accessed 11/2/2019
2. Leeds City Region results from JRF Inclusive Growth Monitor 2017 file “IGMonitor-2017-dataset.xlsx”, sheet “A. Indicator Levels” [http://hummedia.manchester.ac.uk/institutes/mui/iqau/growthmonitor/2017/IGMonitor-2017-dataset.xlsx](http://hummedia.manchester.ac.uk/institutes/mui/iqau/growthmonitor/2017/IGMonitor-2017-dataset.xlsx) accessed 26/2/2018
Return to Index Inclusion Theme: Income
20th percentile of gross weekly earnings #: Best Borough in the North authorities
#Twenty per cent of full-time workers receive earnings equal to or below this threshold
Table 1aiii b: 20th percentile of gross weekly earnings : Best Borough in the North authorities
| Area | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |---------------|--------|--------|--------|--------|--------|--------|--------|--------| | Trafford | £334.70| £355.40| £351.90| £359.70| £359.40| £394.00| £407.30| £426.70| | Stockport | £334.80| £344.90| £351.10| £345.10| £363.10| £364.50| £387.50| £398.60| | Bury | £343.70| £323.40| £349.30| £343.80| £353.80| £371.90| £375.20| £375.90| | North Tyneside| £317.40| £317.40| £333.90| £341.30| £351.40| £359.60| £365.20| £372.30| | Kirklees | £317.20| £322.00| £325.80| £341.00| £357.90| £359.60| £367.60| £361.60| | Wirral | £329.00| £334.40| £333.60| £342.20| £345.80| £357.80| £356.80| £367.40| | Wigan | £322.50| £322.50| £333.00| £322.10| £341.30| £344.70| £354.60| £366.50| | Sefton | £321.00| £325.60| £336.00| £335.40| £331.50| £345.00| £358.40| £361.60| | Gateshead | £322.60| £330.40| £329.60| £333.00| £322.00| £341.30| £344.70| £354.20| | Calderdale | £316.50| £329.20| £317.10| £323.80| £341.00| £357.90| £359.60| £358.70| | Barnsley | £316.70| £328.10| £323.10| £328.00| £325.00| £332.90| £348.50| £358.60| | Rotherham | £310.20| £306.60| £304.80| £308.20| £315.80| £330.90| £338.70| £355.80| | St. Helens | £324.40| £307.80| £314.30| £315.70| £323.30| £345.30| £344.90| £354.90| | Bolton | £287.50| £304.10| £318.60| £307.80| £325.70| £333.80| £334.30| £352.80| | Rochdale | £307.70| £329.20| £320.00| £322.00| £323.60| £333.70| £330.00| £350.80| | Knowsley | £324.10| £323.10| £312.80| £318.10| £332.80| £342.20| £350.30| £350.30| | Doncaster | £301.50| £295.10| £299.30| £317.80| £310.50| £326.30| £335.80| £348.80| | South Tyneside| £309.70| £320.20| £318.10| £330.00| £341.20| £344.30| £348.70| £347.40| | Tameside | £302.20| £308.10| £316.50| £310.80| £328.30| £340.40| £336.80| £344.90| | Oldham | £300.30| £314.40| £310.70| £320.10| £317.50| £331.20| £337.50| £341.70|
Data source: NOMIS, annual survey of hours and earnings - resident analysis, https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=30, accessed 11/2/2019
Return to Index Inclusion Theme: Living costs
Ratio of lower quartile house price to lower quartile earnings
Table 1bi: Ratio of lower quartile house price to lower quartile earnings
| Area | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |-----------------------------|------|------|------|------|------|------| | Calderdale | 4.36 | 4.64 | 4.75 | 4.84 | 4.62 | 4.95 | | Best Borough in the North average | 4.82 | 4.89 | 5.1 | 5.18 | 5.2 | 5.34 | | Leeds City Region | 5.92 | 5.86 | 6.07 | 6.21 | 6.34 | 6.56 | | England | 6.58 | 6.57 | 6.91 | 7.11 | 7.16 | 7.26 |
Fig 1bi: Ratio of lower quartile house price to lower quartile earnings
Data source: LG Inform "Ratio of lower quartile house price to lower quartile gross annual (residence-based) earnings", [http://www.lginform.local.gov.uk](http://www.lginform.local.gov.uk), accessed 15/10/2018
Return to Index
### Table 1bii a: Median monthly rents for private sector two bedroom properties: Leeds City Region
| Area | 2013/14 | 2014/15 | 2015/16 | 2016/17 | 2017/18 | |---------------|---------|---------|---------|---------|---------| | Barnsley | £400 | £400 | £400 | £400 | £425 | | Kirklees | £450 | £450 | £450 | £475 | £475 | | Bradford | £450 | £450 | £475 | £475 | £495 | | Wakefield | £475 | £475 | £495 | £495 | £495 | | Selby | £500 | £510 | £550 | £525 | £525 | | Calderdale | £450 | £450 | £455 | £475 | £550 | | Craven | £500 | £525 | £550 | £550 | £550 | | Leeds | £600 | £598 | £615 | £645 | £650 | | Harrogate | £650 | £650 | £695 | £695 | £695 | | York UA | £650 | £650 | £695 | £695 | £695 | | Leeds City Region | £521 | £521 | £531 |
### Data sources
All figures except those for Leeds City Region are from Valuation Office Agency administrative database as at 11 February 2019,
Leeds City Region figures from University of Manchester Inclusive Growth Analysis Unit (2017) Joseph Rowntree Foundation Inclusive Growth Monitor Complete data set [https://www.mui.manchester.ac.uk/igau/research/inclusive-growth-indicators/](https://www.mui.manchester.ac.uk/igau/research/inclusive-growth-indicators/) accessed 26/2/2018
### Table 1bii b: Median monthly rents for private sector two bedroom properties:
Best Borough in the North authorities
| Area | 2013/14 | 2014/15 | 2015/16 | 2016/17 | 2017/18 | |-----------------|---------|---------|---------|---------|---------| | Barnsley | £400 | £400 | £400 | £400 | £425 | | Doncaster | £450 | £450 | £400 | £450 | £450 | | Rochdale | £450 | £450 | £450 | £450 | £450 | | South Tyneside | £450 | £450 | £450 | £450 | £450 | | St. Helens | £450 | £450 | £450 | £450 | £450 | | Wigan | £440 | £425 | £450 | £450 | £450 | | Rotherham | £450 | £450 | £450 | £450 | £460 | | Kirklees | £450 | £450 | £450 | £475 | £475 | | Wirral | £495 | £479 | £475 | £475 | £475 | | Bolton | £450 | £450 | £475 | £495 | £495 | | Gateshead | £475 | £475 | £475 | £480 | £495 | | Oldham | £465 | £475 | £475 | £495 | £495 | | Knowsley | £520 | £498 | £495 | £500 | £500 | | North Tyneside | £495 | £495 | £500 | £500 | £500 | | Tameside | £475 | £475 | £485 | £495 | £500 | | Bury | £475 | £495 | £525 | £525 | £550 | | Calderdale | £450 | £450 | £455 | £475 | £550 | | Sefton | £550 | £550 | £550 | £550 | £550 | | Stockport | £575 | £575 | £625 | £645 | £650 | | Trafford | £675 | £695 | £700 | £750 | £750 |
**Data source:** Valuation Office Agency administrative database as at 26/2/2018, [https://data.gov.uk/publisher/valuation-office-agency](https://data.gov.uk/publisher/valuation-office-agency) Inclusion Theme: Living costs
Percentage of households classed as being 'fuel poor' (using LCHI model): Leeds City Region
LIHC = Low Cost High Income
Table 1biii a: Percentage of households classed as being 'fuel poor' (using LIHC model): Leeds City Region
| Area | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |-----------------|------|------|------|------|------|------|------| | Calderdale | 19.5%| 12.1%| 11.6%| 11.7%| 12.2%| 13.6%| 12.2%| | Leeds City Region| 18.0%| 11.0%| 11.0%| 11.0%| 12.0%| | |
Fig 1biii a: Percentage of households classed as being 'fuel poor' (using LIHC model): Leeds City Region
Data sources: Gov.uk Annual sub-regional poverty data: low income high costs indicator; https://www.gov.uk/government/collections/fuel-poverty-sub-regional-statistics accessed 11/2/2019
### Table 1biii: Percentage of households classed as being 'fuel poor' (using LIHC model) : Best Borough in the North authorities
| Area | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |-----------------|-------|-------|-------|-------|-------|-------|-------| | Stockport | 18.5% | 12.3% | 9.7% | 9.2% | 9.8% | 10.2% | 10.7% | | Trafford | 18.5% | 13.1% | 11.1% | 10.0% | 10.4% | 9.9% | 11.1% | | North Tyneside | 19.0% | 10.7% | 9.7% | 9.9% | 11.1% | 11.2% | | Rotherham | 18.2% | 10.1% | 9.8% | 9.0% | 10.5% | 10.6% | 11.4% | | Bury | 19.1% | 12.4% | 10.3% | 10.1% | 10.4% | 11.2% | 11.6% | | Oldham | 19.8% | 11.3% | 11.2% | 10.7% | 10.7% | 12.1% | 11.8% | | Tameside | 19.7% | 11.9% | 10.4% | 9.8% | 10.2% | 11.9% | 11.8% | | Doncaster | 20.1% | 11.4% | 10.0% | 9.8% | 11.6% | 11.3% | 12.1% | | Barnsley | 20.3% | 10.9% | 9.7% | 9.2% | 11.3% | 11.3% | 12.2% | | Calderdale | 19.5% | 12.1% | 11.6% | 11.7% | 12.2% | 13.6% | 12.2% | | Wigan | 19.8% | 11.3% | 9.4% | 9.1% | 9.9% | 10.9% | 12.2% | | Sefton | 20.9% | 14.4% | 11.4% | 10.9% | 11.2% | 10.9% | 12.7% | | St. Helens | 20.0% | 11.3% | 10.1% | 9.7% | 10.3% | 10.9% | 12.7% | | Gateshead | 22.6% | 10.9% | 11.0% | 10.9% | 11.2% | 12.7% | 12.8% | | Rochdale | 20.0% | 11.5% | 11.5% | 11.3% | 11.4% | 12.4% | 12.8% | | Bolton | 19.7% | 11.4% | 11.4% | 11.0% | 10.5% | 12.5% | 12.9% | | Kirklees | 18.9% | 11.5% | 12.0% | 11.8% | 11.6% | 14.0% | 13.1% | | Wirral | 20.5% | 13.5% | 11.2% | 10.6% | 10.9% | 11.2% | 13.1% | | South Tyneside | 21.3% | 10.2% | 11.0% | 11.3% | 11.8% | 12.3% | 13.2% | | Knowsley | 19.5% | 9.9% | 10.2% | 10.4% | 10.7% | 11.1% | 14.6% |
**Data sources:** Gov.uk Annual sub-regional poverty data: low income high costs indicator; [https://www.gov.uk/government/collections/fuel-poverty-sub-regional-statistics](https://www.gov.uk/government/collections/fuel-poverty-sub-regional-statistics) accessed 11/2/2019 Inclusion Theme: Labour Market Exclusion
Unemployment rate – aged 16 - 64
Table 1ci: Unemployment rate - aged 16-64
| Area | Sep-12 | Sep-13 | Sep 14 | Sep-15 | Sep-16 | Sep-17 | Sep-18 | |-----------------------------|--------|--------|--------|--------|--------|--------|--------| | Calderdale | 8.7% | 7.6% | 6.5% | 4.4% | 4.0% | 2.0% | 3.7% | | Best Borough in the North average | 9.5% | 8.9% | 8.0% | 6.2% | 5.8% | 4.6% | 4.7% | | Leeds City Region | 8.7% | 8.6% | 7.9% | 6.1% | 5.3% | 5.0% | 4.4% | | England | 8.1% | 7.9% | 6.6% | 5.5% | 5.1% | 4.6% | 4.3% |
Fig 1ci: Unemployment rate - aged 16-64
Data source: Annual Population Survey, [https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=17](https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=17), accessed 11/2/2019
Return to Index Inclusion Theme: Labour Market Exclusion
Percentage of working-age population who are economically inactive
Table 1cii: % who are economically inactive - aged 16-64
| Area | Sep-12 | Sep-13 | Sep-14 | Sep-15 | Sep-16 | Sep-17 | Sep-18 | |-----------------------|--------|--------|--------|--------|--------|--------|--------| | Calderdale | 23.1% | 21.8% | 20.2% | 19.9% | 20.8% | 22.2% | 20.5% | | Best Borough in the North average | 24.6% | 24.0% | 24.2% | 23.3% | 24.2% | 23.9% | 23.4% | | Leeds City Region | 24.5% | 23.2% | 24.0% | 22.8% | 22.9% | 23.1% | 22.8% | | England | 23.2% | 22.6% | 22.5% | 22.2% | 21.9% | 21.7% | 21.3% |
Fig 1cii: % who are economically inactive - aged 16-64
Data source: Annual Population Survey, [https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=17](https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=17), accessed 11/2/2019
Return to Index Inclusion Theme: Labour Market Exclusion
Percentage of working age households with no one in work
Table 1ciii: Percentage of working age households with no one in work
| Area | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |-----------------------------|------|------|------|------|------|------|------| | Calderdale | 19.3%| 18.1%| 17.7%| 14.6%| 14.7%| 15.9%| 13.9%| | Best Borough in the North average | 21.5%| 21.3%| 20.2%| 19.1%| 17.6%| 18.1%| 17.6%| | Leeds City Region | 20.4%| 18.6%| 17.9%| 17.4%| 15.8%| 16.3%| 14.5%| | England | 18.5%| 17.6%| 16.7%| 15.8%| 14.9%| 14.6%| 14.0%|
Fig 1ciii: Percentage of working age households with no one in work
Data source: Annual Population Survey - Households by combined economic activity status, https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=136, accessed 11/2/2019
Return to Index Prosperity Theme: Output Growth
Gross Value Added (GVA) per capita
Table 2ai: Gross Value Added (GVA) per capita
| Area | 2011 | 2012 | 2013 | 2014 | 2015 | |--------------------|--------|--------|--------|--------|--------| | Calderdale | £19,163| £19,615| £20,235| £20,330| £20,950| | Leeds City Region | £19,593| £19,925| £20,556| £20,792| £21,341| | England | £23,184| £23,828| £24,567| £25,624| £26,159|
Fig 2ai a: GVA per capita: Calderdale and Kirklees compared with Leeds City Region (LCR) average
Data sources:
1. Calderdale GVA from "ONS Regional GVA(I) by local authority in the UK 31 March 2017" [https://www.ons.gov.uk/economy/grossvalueaddedgva/datasets/regionalgvaibylocalauthorityintheuk];
2. Leeds City Region GVA from JRF Inclusive Growth Monitor 2017 file "IGMonitor-2017-dataset.xlsx", sheet "A. Indicator Levels" [http://hummedia.manchester.ac.uk/institutes/mui/igpu/growthmonitor/2017/IGMonitor-2017-dataset.xlsx] accessed 26/2/2018
Return to Index Prosperity Theme: Output Growth
Number of private sector workplaces per 1,000 resident populations
Table 2aii: Number of Private Sector Workplaces per 1K Resident Population
| Area | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |-----------------------------|------|------|------|------|------|------| | Calderdale | 37.2 | 37.1 | 38.3 | 41.2 | 42.2 | 42.9 | | Best Borough in the North average | 29.4 | 29.4 | 30.4 | 33.1 | 34.2 | 35.6 | | Leeds City Region | 34.0 | 34.0 | 35.0 | 38.0 | 38.6 | 39.9 | | England | 39.9 | 40.0 | 41.4 | 44.1 | 45.5 | 47.2 |
Fig 2aii: Number of Private Sector Workplaces per 1K Resident Population
Data source: ONS UK Business Counts – Local Units, [https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=141](https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=141), accessed 26/2/2018
Return to Index Prosperity Theme: Output Growth
Median gross weekly pay for full-time workers: Leeds City Region
Table 2aii a: Median gross weekly pay for full-time workers: Leeds City Region
| Area | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |-----------------|-------|-------|-------|-------|-------|-------|-------| | Calderdale | £515.6| £479.7| £493.3| £503.1| £522.1| £502.9| £534.6| | Leeds City Region| £467.0| £483.0| £479.0| £490.0| | | | | England | £513.2| £520.6| £523.6| £531.9| £544.7| £555.8| £574.9|
Fig 2aii a: Median gross weekly pay for full-time workers: Leeds City Region
Data sources
1. Local authority results from NOMIS, annual survey of hours and earnings - resident analysis, [https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=30](https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=30), accessed 11/2/2019;
2. Leeds City Region results from JRF Inclusive Growth Monitor 2017 file “IGMonitor-2017-dataset.xlsx”, sheet “A. Indicator Levels” [http://hummedia.manchester.ac.uk/institutes/mui/igau/growthmonitor/2017/IGMonitor-2017-dataset.xlsx](http://hummedia.manchester.ac.uk/institutes/mui/igau/growthmonitor/2017/IGMonitor-2017-dataset.xlsx), accessed 26/2/2018
Return to Index
### Prosperity Theme: Output Growth
Median gross weekly pay for full-time workers: Best Borough in the North authorities
#### Table 2aiii: Median gross weekly pay for full-time workers: Best Borough in the North comparator group
| Area | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |-----------------|--------|--------|--------|--------|--------|--------|--------|--------| | Trafford | £561.50| £567.40| £574.20| £568.20| £564.40| £602.10| £606.90| £648.00| | Stockport | £497.30| £517.40| £537.10| £522.00| £540.00| £547.20| £565.90| £574.50| | Sefton | £469.10| £480.00| £487.60| £494.00| £473.70| £510.80| £523.70| £550.30| | Bury | £497.90| £496.80| £493.00| £501.30| £519.80| £524.60| £541.50| £544.40| | North Tyneside | £456.60| £454.40| £479.40| £460.80| £503.00| £514.80| £545.50| £541.20| | Calderdale | £462.30| £515.60| £479.70| £493.30| £503.10| £522.10| £502.90| £534.60| | Wirral | £476.50| £497.90| £503.10| £496.10| £518.60| £500.00| £545.50| £541.20| | Kirklees | £463.90| £478.50| £488.20| £479.70| £480.80| £494.40| £505.80| £531.10| | Wigan | £458.10| £471.10| £491.10| £481.60| £502.40| £500.00| £516.00| £523.00| | Doncaster | £462.50| £449.60| £461.90| £482.50| £467.00| £479.10| £480.00| £519.60| | St. Helens | £482.10| £479.20| £450.20| £465.30| £442.40| £469.10| £458.30| £486.70| | Rotherham | £450.90| £462.80| £447.60| £457.30| £481.10| £485.20| £493.90| £508.80| | Knowsley | £434.50| £451.00| £463.80| £462.70| £475.50| £476.50| £512.00| £508.40| | Gateshead | £456.90| £465.70| £475.20| £486.60| £486.50| £487.30| £495.00| £507.90| | Bolton | £436.60| £431.30| £465.30| £442.40| £469.10| £465.50| £471.50| £496.00| | Barnsley | £447.60| £465.00| £479.70| £486.70| £469.60| £476.80| £497.00| £492.50| | South Tyneside | £446.10| £450.20| £454.40| £464.60| £473.60| £466.90| £477.50| £491.70| | Rochdale | £446.00| £477.30| £458.10| £458.30| £463.40| £470.50| £463.80| £486.50| | Tameside | £420.10| £429.30| £423.00| £432.30| £447.00| £460.00| £478.40| £480.20| | Oldham | £411.50| £425.70| £429.90| £457.70| £442.50| £469.90| £479.80| £475.90|
[Return to Index] Prosperity Theme: Employment
Employee jobs by working-age population (jobs density)
Table 2bi: Number of employee jobs by working-age population (jobs density)
| Area | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |-----------------------------|------|------|------|------|------|------| | Calderdale | 0.74 | 0.78 | 0.84 | 0.86 | 0.85 | 0.88 | | Best Borough in the North average | 0.64 | 0.65 | 0.67 | 0.69 | 0.70 | 0.71 | | Leeds City Region | 0.75 | 0.76 | 0.78 | 0.81 | 0.81 | 0.82 | | England | 0.79 | 0.80 | 0.82 | 0.84 | 0.85 | 0.87 |
Fig 2bi: Number of employee jobs by working-age population (jobs density)
Data source: ONS Jobs Density series, [https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=57](https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=57), accessed 11/2/2019
Return to Index Prosperity Theme: Employment
Percentage of working age population in employment (employment rate)
Table 2bii: Percentage of working age population in employment (employment rate)
| Area | Sep 12 | Sep 13 | Sep 14 | Sep 15 | Sep 16 | Sep 17 | Sep-18 | |-------------------------------------|--------|--------|--------|--------|--------|--------|--------| | Calderdale | 70.2% | 72.3% | 74.6% | 76.6% | 76.1% | 76.3% | 76.6% | | Best Borough in the North average | 68.2% | 69.2% | 69.8% | 71.9% | 71.5% | 72.3% | 73.0% | | Leeds City Region | 69.0% | 70.1% | 70.0% | 72.5% | 73.0% | 73.3% | 73.1% | | England | 70.5% | 71.2% | 72.3% | 73.5% | 74.1% | 74.7% | 75.3% |
Fig 2bii: Percentage of working age population in employment (employment rate)
Data source: Annual Population Survey, [https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=17](https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=17), accessed 11/2/2019
Return to Index Prosperity Theme: Employment
Percentage of employees in Knowledge Intensive Services or High-tech Manufacturing Industries
Figure 2biii: Percentage of employees in Knowledge Intensive Services or High-tech Manufacturing Industries: Leeds City Region
Data source Leeds City Region results from JRF Inclusive Growth Monitor 2017 file "IGMonitor-2017-dataset.xlsx", sheet "A. Indicator Levels" http://hummedia.manchester.ac.uk/institutes/mui/igau/growthmonitor/2017/IGMonitor-2017-dataset.xlsx accessed 26/2/2018
Return to Index Prosperity Theme: Human Capital
Percentage of workers in managerial, professional and technical/ scientific occupations (SOCs 1, 2 and 3)
Table 2ci: Percentage of Workers in Managerial, Professional and Technical Scientific Occupations (SOCs 1, 2 and 3)
| Area | Sep-12 | Sep-13 | Sep 14 | Sep-15 | Sep-16 | Sep-17 | Sep-18 | |-----------------------------|--------|--------|--------|--------|--------|--------|--------| | Calderdale | 44.3% | 45.0% | 47.2% | 45.9% | 45.0% | 45.7% | 43.7% | | Best Borough in the North average | 39.3% | 39.2% | 39.1% | 39.5% | 40.4% | 40.9% | 40.7% | | Leeds City Region | 39.8% | 40.9% | 41.3% | 40.9% | 41.7% | 42.0% | 42.0% | | England | 44.0% | 44.2% | 44.8% | 44.6% | 45.6% | 45.9% | 46.6% |
Fig 2ci: Percentage of Workers in Managerial, Professional and Technical Scientific Occupations (SOCs 1, 2 and 3)
Data source: Annual Population Survey, [https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=17](https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=17), accessed 11/2/2019
Return to Index Prosperity Theme: Human Capital
Percentage of working-age population qualified at NVQ Level 2 and above
Table 2cii: Percentage of working-age population qualified at NVQ Level 2 and above
| Area | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |-----------------------------|-------|-------|-------|-------|-------|-------|-------| | Calderdale | 67.20%| 68.90%| 70.30%| 73.70%| 72.30%| 68.60%| 73.2% | | Best Borough in the North average | 66.40%| 69.00%| 69.40%| 71.10%| 71.70%| 71.20%| 71.7% | | Leeds City Region | 66.50%| 68.50%| 69.20%| 69.90%| 70.10%| 69.50%| 71.7% | | England | 69.30%| 71.70%| 72.40%| 73.20%| 73.40%| 74.20%| 74.6% |
Fig 2cii: Percentage of working-age population qualified at NVQ Level 2 and above
Data Source: NOMIS, Annual Population Survey, [https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=17](https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=17), accessed 29/2/2019
Return to Index Prosperity Theme: Human Capital
Percentage of pupils at the end of KS 4 achieving 5 + GCSEs or equivalent at grades A\* to C (including English and Mathematics)
Table 2.ciii a: Percentage of pupils at the end of Key Stage 4 achieving 5 or more GCSEs or equivalent at grades A\* to C (including English and Mathematics)
| Area | 2012 | 2013 | 2014 | 2015 | 2016 | |-----------------|-------|-------|-------|-------|-------| | Calderdale | 61.1% | 65.7% | 58.2% | 61.8% | 60.4% | | Leeds City Region | 57.0% | 60.0% | 54.0% | 56.0% | | | England | 59.4% | 59.2% | 53.4% | 53.8% | 53.5% |
Fig 2.ciii a: Percentage of pupils at the end of KS 4 achieving 5 or more GCSEs or equivalent at grades A\* to C (inc English & Mathematics)
Data sources: 1) Calderdale and England results from DFE LAIT tool https://www.gov.uk/government/publications/local-authority-interactive-tool-lait accessed 2 Feb 2018; 2) Leeds City Region results from JRF Inclusive Growth Monitor 2017 file "IGMonitor-2017-dataset.xlsx", sheet "A. Indicator Levels" http://hummedia.manchester.ac.uk/institutes/mui/igau/growthmonitor/2017/IGMonitor-2017-dataset.xlsx accessed 26/2/2018
Return to Index Prosperity Theme: Human Capital
Percentage of pupils at the end of KS 4 achieving 5 + GCSEs or equivalent at grades A\* to C (including English and Mathematics): Best Borough in the North authorities
Table 2.ciii b: Percentage of pupils at the end of Key Stage 4 achieving 5 or more GCSEs or equivalent at grades A\* to C (including English and Mathematics) - Best Borough in the North authorities
| Area | 2012 | 2013 | 2014 | 2015 | 2016 | |---------------|--------|--------|--------|--------|--------| | Trafford | 72.40% | 70.50% | 72.20% | 70.70% | 71.40% | | North Tyneside| 61.90% | 64.80% | 56.20% | 62.00% | 62.70% | | Wirral | 65.40% | 66.20% | 60.00% | 61.90% | 62.20% | | Stockport | 65.00% | 65.80% | 58.30% | 58.30% | 61.90% | | Calderdale | 61.10% | 65.70% | 60.00% | 61.80% | 60.40% | | Gateshead | 60.60% | 61.70% | 58.50% | 58.10% | 59.00% | | Rotherham | 60.00% | 63.60% | 57.30% | 55.20% | 58.20% | | Wigan | 64.20% | 63.80% | 58.00% | 57.70% | 58.20% | | Tameside | 56.80% | 59.40% | 53.70% | 57.30% | 58.00% | | South Tyneside| 58.20% | 59.20% | 54.00% | 57.90% | 57.50% | | Bury | 63.00% | 62.30% | 56.90% | 55.40% | 57.30% | | Kirklees | 62.00% | 62.60% | 56.00% | 56.90% | 55.60% | | Barnsley | 45.30% | 50.30% | 47.10% | 49.50% | 55.20% | | Doncaster | 54.70% | 56.60% | 49.40% | 50.10% | 55.00% | | Sefton | 58.50% | 60.90% | 55.00% | 54.90% | 54.80% | | Bolton | 60.20% | 60.70% | 57.30% | 56.80% | 54.00% | | St. Helens | 55.10% | 55.50% | 55.20% | 54.70% | 53.90% | | Rochdale | 52.00% | 56.20% | 54.00% | 48.40% | 53.20% | | Oldham | 55.90% | 57.00% | 52.40% | 50.50% | 51.60% | | Knowsley | 40.90% | 43.70% | 35.40% | 37.40% | 36.40% |
Data source: DFE LAIT tool \[https://www.gov.uk/government/publications/local-authority-interactive-tool-lait accessed 2 Feb 2018\](https://www.gov.uk/government/publications/local-authority-interactive-tool-lait accessed 2 Feb 2018)
Return to Index
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4df25b50aef3e7b2006454c78a505b701769a5a5 | EXECUTIVE SUMMARY – CALDERDALE DISTRICT
RTC STATISTICS OF 2017
The overall reduction in the number of casualties of all severities and KSI in Calderdale is reflected in all road user categories; a slight increase in motorbike rider KSI casualties has, however, tarnished the overall performance in 2017. Cyclist injuries have decreased for the third consecutive year, but the 2017 total remains above the baseline. Child casualties have reduced slightly in 2017 after remaining unchanged in the last three years. Numbers of people KSI in 2017 is in line with the ideal trajectory toward meeting the 2026 target. Contents
Calderdale District in 2017: At a glance ................................................................. 1 Calderdale District Summaries ........................................................................... 2 Killed or Seriously Injured (KSI) Casualties .................................................... 4 Child (0-15years) Casualties ............................................................................ 5 Pedestrian Casualties ....................................................................................... 6 Contact Information .......................................................................................... 7 Calderdale District in 2017: At a glance
- Fewer casualties of both all severities and for people KSI from road traffic collisions in Calderdale.
- After remaining static over the last three years, the number of children injured fell slightly. The reduction of the number of children KSI is not impressive.
- Pedestrian casualties have risen consistently since 2013, and it is pleasing to report the reduction in 2017.
- The number of cyclist casualties has fallen marginally this year, confirming the slow and persistent reduction that started in 2013.
- Powered two-wheeler (PTW) rider casualties continue to decrease in Calderdale. However, more were KSI in 2017 compared to last year.
- The number of car occupants KSI fell 37% from 35 to 22, while the number of all casualties fell by 15% from 338 to 287.
| Calderdale KSI in 2017 | % share | 2017 vs last year | 2017 vs Baseline | 2017 vs Avg of last 3 years | TP 2017 | TP 2026 | Reduc. Req | |------------------------|---------|-------------------|------------------|-----------------------------|---------|---------|-----------| | Car Occupant KSI | 35% | -37.1% | 22 | | | | | | Child KSI | 24% | -25.0% | 15 | | | | | | PTW KSI | 24% | 36.4% | 15 | | | | | | Other | 5% | -25.0% | 3 | | | | | | ALL KSI | -19.2% | 63 | | | | | |
Table 1: Road traffic casualties since 2012 Calderdale District Summaries
FATAL CASUALTIES The number of deaths from road traffic collisions has been increasing consistently in the last five years, and so it is pleasing to report the first reduction since 2012. This year, three road users (two pedestrians and one motorbike rider) were killed in road traffic collisions. Nine fatalities were recorded in 2016. No children or cyclists were killed in Calderdale in 2017.
KILLED OR SERIOUSLY INJURED (KSI) CASUALTIES The number of road users killed or seriously injured has decreased for the third consecutive year. In 2017, a total of 63 road users (seven children, five of whom were pedestrians) were killed or seriously injured in Calderdale; this is a reduction by 19% on last year’s total of 78. This result is sustained by the combined reduction of fatal and serious injuries, which fell by three and six respectively. Those KSI in Calderdale were 22 (35%) car occupants (15 drivers and seven passengers, including one child), 15 (24%) pedestrians (five children), 15 (24%) motorcycle riders and eight (13%) cyclists.
CASUALTIES OF ALL SEVERITIES In 2017, the number of casualties (450) of all severities from collisions reported to the police has improved last year’s total (555) by 19%. The overall reduction is sustained by the reduction observed in other road user groups.
CHILD (0-15 YEARS) CASUALTIES After falling by 24% from xx to 59 in 2013, child casualties of all severities in Calderdale have risen by 12% to 66 in 2014 and have not changed in 2015 (66) and 2016 (66). The slight reduction in 2017 (60) has not affected the trend of the most recent five years, which is fairly flat. The increased number of child pedestrians (up by eight to 32) injured has countered the reduction among car passengers (down by 13 to 19) and reduced the magnitude of the overall reduction in child casualties. There haven’t been any child fatalities in Calderdale since 2012; KSI figures are serious injuries only, and have decreased this year by only one to a total of seven.
CYCLIST CASUALTIES Since 2013, the number of cyclists injured in the district has fallen, and this continued in 2017. In 2016, 40 riders were injured, down by four from the 44 recorded in 2015. Despite the reduction observed in recent years, cyclist casualties in 2017 remain 22% above the baseline, but compare favorably against the average of the three previous years. Two cyclists were killed in the district (none since 2013), but numbers of cyclists KSI in 2017 (8) are the lowest of the recent five years.
PEDESTRIAN INJURIES It is pleasing to report the first reduction in the number of pedestrian injuries since 2013 (when the number of pedestrians (76) declined by 19% from the previous year (94), mostly adults). A total of 79 pedestrian injuries were recorded in 2017, against 104 in 2016. The reduction is explained by the number of adults injured, which fell 41% from 80 to 47 in 2017. By comparison, child pedestrian casualties have increased in 2017. Pedestrian KSI casualties fell for the second year in row, and the total of 15 reported in 2017 is the lowest ever for the district.
MOTORBIKE RIDER CASUALTIES In 2017 – and for the second year in a row – fewer motorbike riders injuries (33) were reported in Calderdale compared to the previous year (39). The slight reduction is welcomed, as injuries to motorbike riders have been static around 50 in the five years prior to 2016. One bike rider was killed and further 31 (including a pillion) sustained serious injuries in 2017. The total number of riders KSI has risen from 11 in 2016 to 15 in 2017; it is now 13% above the average of the last three years.
CAR OCCUPANT CASUALTIES Car occupant casualties, which represent 64% of all casualties in Calderdale, continue to decrease. A total of 287 car users were injured in 2017 against 338 last year (-15%). This places the district 53% below the baseline and 40% below the average of the last three years, confirming the long term trend in car casualties, which remains firmly downward.
ALL COLLISIONS The number of road traffic collisions has fallen by 70 from 407 in 2016 to 337 this year (-17%). Three collisions resulted in death, while 55 (57 in 2016) incurred serious injuries; last year there were 342 slight injuries; in 2017, there were 279. EXECUTIVE SUMMARY – CALDERDALE DISTRICT
Killed or Seriously Injured (KSI) Casualties
Table 2: Reported road traffic casualties by severity
| Category | 2014 | 2015 | 2016 | Prev 3yrs avg | 2017 | 2017 vs prev 3yrs avg | 2017 vs baseline | Target by 2026\* | Reduction required from the current year | |----------------|------|------|------|---------------|------|-----------------------|------------------|----------------|------------------------------------------| | Fatal | 10 | 6 | 6 | 9 | 7 | 3 | -57% | -70% | 5 Target Hit | | Serious | 102 | 93 | 86 | 69 | 83 | 60 | -27% | -41% | 51 -15% | | Slight | 763 | 524 | 465 | 477 | 489 | 387 | -21% | -49% | | | Total | 875 | 623 | 557 | 555 | 578 | 450 | -22% | -49% | | | KSI | 112 | 99 | 92 | 78 | 90 | 63 | -30% | -44% | 56 -11% | | Child KSI | 16 | 10 | 11 | 8 | 10 | 7 | -28% | -55% | 8 Target Hit | | Pedestrian KSI | 27 | 28 | 28 | 20 | 25 | 15 | -41% | -45% | 14 -9% | | Cyclist KSI | 10 | 13 | 11 | 8 | 11 | 8 | -25% | -20% | 5 -38% | | PTW KSI | 24 | 16 | 13 | 11 | 13 | 15 | 13% | -38% | 12 -19% | | Car Occ KSI | 47 | 39 | 36 | 35 | 37 | 22 | -40.0% | -53.2% | 24 Target Hit | | Other KSI | 3 | 3 | 4 | 4 | 4 | 3 | -18.2% | -11.8% | 2 -43% |
- Reduction in KSI casualties by 50% over 2005-09 average
Figure 1: Road collision KSI casualties and target trajectory to 2026
The overall KSI reduction is sustained by the decreased in serious injuries among all the road user categories, with the exception of motor bike riders (KSI in this group is up 13% to 15). This year’s KSI total places the district in line with the best trajectory towards 2026 target. If this trend is maintained, Calderdale will be in a strong position to meet the target. EXECUTIVE SUMMARY – CALDERDALE DISTRICT
Child (0-15years) Casualties
| All Children KSI in Calderdale | Baseline (avg 05~09) | Previous 3 years av. | 2017 | 2017 change over 2005~09 | 2017 change over previous 3 year av | Previous 3 year av change over 2005~09 | |--------------------------------|----------------------|----------------------|------|--------------------------|-------------------------------------|----------------------------------------| | Pedestrian | 10 | 7 | 5 | -50% | -32% | -27% | | Pedal cyclist | 3 | 1 | 0 | -100% | -100% | -67% | | Car occupants | 2 | 1 | 1 | -50% | 0% | -50% | | Others | 1 | 0 | 1 | 0% | 200% | -67% | | Boys | 11 | 7 | 4 | -64% | -43% | -36% | | Girls | 5 | 3 | 3 | -40% | 13% | -47% | | Age 0 to 4 | 2 | 3 | 1 | -50% | -63% | 33% | | Age 5 to 15 | 14 | 7 | 6 | -57% | -14% | -50% | | All children (0-15) | 16 | 10 | 7 | -56% | -28% | -40% |
Table 3: Child casualties since 2005
Figure 2: Child casualties since 2000 – Calderdale
The children aged over 5 are most at risk in Calderdale, and more boys are involved in road collisions. Pedestrian casualties are the largest proportion of child casualties in general and of children KSI (shown on the graph above) in particular. This proportion has not changed over the last decade. Acting on reducing the number of pedestrian casualties will certainly help to reduce child casualties and meet the 2026 target. EXECUTIVE SUMMARY – CALDERDALE DISTRICT
Pedestrian Casualties
| All Pedestrian KSI in Calderdale | Baseline (avg 05~09) | Previous 3 year av. | 2017 | 2017 change over 2005~09 | 2017 change over previous 3 year av | Previous 3 year av change over 2005~09 | |---------------------------------|----------------------|---------------------|------|--------------------------|-------------------------------------|----------------------------------------| | Age 0 to 4 | 2 | 2 | 1 | -50% | -50% | 0% | | Age 5 to 15 | 8 | 5 | 4 | -50% | -25% | -33% | | All child (0 to 15) | 10 | 7 | 5 | -50% | -32% | -27% | | Age 16 to 19 | 2 | 1 | 0 | -100% | -100% | -50% | | Age 20 to 29 | 2 | 3 | 2 | 0% | -40% | 67% | | Age 30 to 59 | 6 | 7 | 4 | -33% | -43% | 17% | | Age 60 plus | 7 | 7 | 4 | -43% | -40% | -5% | | All pedestrian | 27 | 25 | 15 | -44% | -41% | -6% |
Table 4: Pedestrian casualties since 2005 – Calderdale
Figure 3: Pedestrian casualties since 2000 – Calderdale
Among child pedestrians, those over five are most at risk of road traffic collision; it is pleasing to note that the overall numbers of children injured have been decreasing since 2005.
Among adults, those aged over 20 are most at risk and there has been no significant improvement recorded in that age group since 2005. Serious injuries among older adults is still an issue in the district. END PAPERS
CALDERDALE DISTRICT TABULATIONS
Accidents, Casualties, road user group totals End table 1 All casualties by age groups End table 2 Pedestrian casualties by age groups End table 3 Pedal cycle casualties by age groups End table 4 Motor cycle Rider + Pillion casualties by age groups End table 5 Car driver casualties by age groups End table 6 Car passenger casualties by age groups End table 7 Goods occupant casualties by age groups End table 8 Bus occupant casualties by age groups End table 9 Long Term Comparisons End table 10
If a particular tabulation is required that is not presented in this report, please contact:
Email: [email protected] Calderdale
Accidents
| | 2012 | 2013 | 2014 | 2015 | 2016 | Average | 0 | |--------|------|------|------|------|------|---------|---| | Fatal | 2 | 4 | 5 | 6 | 8 | 5 | 3 | | Serious| 83 | 76 | 85 | 73 | 57 | 75 | 55| | Slight | 359 | 329 | 337 | 332 | 342 | 340 | 279| | Total | 444 | 409 | 427 | 411 | 407 | 420 | 337|
Casualties
| | 2012 | 2013 | 2014 | 2015 | 2016 | Average | 0 | |--------|------|------|------|------|------|---------|---| | Fatal | 2 | 4 | 6 | 6 | 9 | 5 | 3 | | Serious| 94 | 86 | 93 | 86 | 69 | 86 | 60| | Slight | 520 | 476 | 524 | 465 | 477 | 492 | 387| | Total | 616 | 566 | 623 | 557 | 555 | 583 | 450|
Road User Groups
| | 2012 | 2013 | 2014 | 2015 | 2016 | Average | 0 | |--------|------|------|------|------|------|---------|---| | Pedestrian | 94 | 76 | 97 | 102 | 104 | 95 | 79| | Pedal Cyclist | 44 | 49 | 46 | 44 | 40 | 45 | 38| | PTW Rider + Pillion | 54 | 50 | 51 | 51 | 39 | 49 | 33| | Car Driver | 250 | 233 | 238 | 224 | 215 | 232 | 197| | Car Passenger | 147 | 128 | 163 | 112 | 123 | 134 | 90| | Goods occupant | 16 | 18 | 18 | 14 | 21 | 17 | 10| | Bus occupant | 10 | 9 | 9 | 4 | 10 | 8 | 3 | | Other | 1 | 3 | 3 | 6 | 3 | 4 | 0 | | Total | 616 | 566 | 623 | 557 | 555 | 583 | 450|
- The figures in the Average column of the following tables do not always sum to the total, due to rounding.
WY End table 1
## Calderdale
### All Casualties
| Year | Fatal | Serious | Slight | Total | |------|-------|---------|--------|-------| | 2012 | 0 | 1 | 9 | 10 | | 2013 | 0 | 1 | 13 | 14 | | 2014 | 0 | 3 | 4 | 7 | | 2015 | 0 | 3 | 7 | 10 | | 2016 | 0 | 2 | 9 | 11 |
### Average
| Year | Fatal | Serious | Slight | Total | |------|-------|---------|--------|-------| | 2012 | 0 | 2 | 8 | 10 | | 2013 | 0 | 8 | 49 | 57 | | 2014 | 0 | 10 | 44 | 55 | | 2015 | 0 | 15 | 121 | 142 | | 2016 | 0 | 19 | 212 | 248 |
### Total
| Year | Fatal | Serious | Slight | Total | |------|-------|---------|--------|-------| | 2012 | 0 | 1 | 9 | 10 | | 2013 | 0 | 1 | 13 | 14 | | 2014 | 0 | 3 | 4 | 7 | | 2015 | 0 | 3 | 7 | 10 | | 2016 | 0 | 2 | 9 | 11 |
### WY End table 2
Calderdale District End Tables in 2017
## Calderdale
### Pedestrian Casualties
| Age Groups | 0 - 4 | 5 - 15 | 16 - 19 | 20 - 29 | 30 - 59 | 60+ | All ages | |------------|-------|--------|---------|---------|---------|-----|---------| | **2012** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 1 | 9 | 3 | 2 | 4 | 6 | 25 | | Slight | 1 | 25 | 6 | 6 | 19 | 12 | 69 | | **Total** | 2 | 34 | 9 | 8 | 23 | 18 | 94 | | **2013** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 4 | 1 | 3 | 3 | 2 | 13 | | Slight | 7 | 17 | 3 | 13 | 13 | 10 | 63 | | **Total** | 7 | 21 | 4 | 16 | 16 | 12 | 76 | | **2014** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 1 | 1 | | Serious | 3 | 5 | 3 | 1 | 7 | 8 | 27 | | Slight | 2 | 23 | 6 | 3 | 23 | 12 | 69 | | **Total** | 5 | 28 | 9 | 4 | 30 | 21 | 97 | | **2015** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 3 | 0 | 3 | | Serious | 2 | 8 | 0 | 3 | 7 | 5 | 25 | | Slight | 0 | 20 | 10 | 9 | 17 | 18 | 74 | | **Total** | 2 | 28 | 10 | 12 | 27 | 23 | 102 | | **2016** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 1 | 3 | 0 | 6 | 4 | 6 | 20 | | Slight | 5 | 15 | 4 | 15 | 29 | 16 | 84 | | **Total** | 6 | 18 | 4 | 21 | 33 | 22 | 104 |
### Average
| Age Groups | 0 - 4 | 5 - 15 | 16 - 19 | 20 - 29 | 30 - 59 | 60+ | All ages | |------------|-------|--------|---------|---------|---------|-----|---------| | Fatal | 0 | 0 | 0 | 0 | 1 | 0 | 1 | | Serious | 1 | 6 | 1 | 3 | 5 | 5 | 22 | | Slight | 3 | 20 | 6 | 9 | 20 | 14 | 72 | | **Total** | 4 | 26 | 7 | 12 | 26 | 19 | 95 |
### 0
| Age Groups | 0 - 4 | 5 - 15 | 16 - 19 | 20 - 29 | 30 - 59 | 60+ | All ages | |------------|-------|--------|---------|---------|---------|-----|---------| | Fatal | 0 | 0 | 0 | 0 | 2 | 0 | 2 | | Serious | 1 | 4 | 0 | 2 | 2 | 4 | 13 | | Slight | 2 | 25 | 3 | 6 | 16 | 12 | 64 | | **Total** | 3 | 29 | 3 | 8 | 20 | 16 | 79 |
WY End table 3
### Pedal Cycle Casualties
| Age Groups | 0 - 4 | 5 - 15 | 16 - 19 | 20 - 29 | 30 - 59 | 60+ | All ages | |------------|-------|--------|---------|---------|---------|-----|----------| | **2012** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 1 | 1 | | Serious | 0 | 2 | 1 | 0 | 8 | 0 | 11 | | Slight | 0 | 8 | 1 | 3 | 18 | 2 | 32 | | **Total** | 0 | 10 | 2 | 3 | 26 | 3 | 44 | | **2013** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 1 | 1 | 2 | 9 | 1 | 14 | | Slight | 0 | 6 | 1 | 8 | 20 | 0 | 35 | | **Total** | 0 | 7 | 2 | 10 | 29 | 1 | 49 | | **2014** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 1 | 0 | 1 | 9 | 2 | 13 | | Slight | 0 | 3 | 1 | 8 | 18 | 3 | 33 | | **Total** | 0 | 4 | 1 | 9 | 27 | 5 | 46 | | **2015** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 2 | 1 | 7 | 1 | 11 | | Slight | 0 | 7 | 7 | 6 | 11 | 2 | 33 | | **Total** | 0 | 7 | 9 | 7 | 18 | 3 | 44 | | **2016** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 2 | 0 | 2 | | Serious | 0 | 2 | 0 | 0 | 3 | 1 | 6 | | Slight | 0 | 4 | 0 | 5 | 21 | 2 | 32 | | **Total** | 0 | 6 | 0 | 5 | 26 | 3 | 40 |
### Average
| Age Groups | 0 - 4 | 5 - 15 | 16 - 19 | 20 - 29 | 30 - 59 | 60+ | All ages | |------------|-------|--------|---------|---------|---------|-----|----------| | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 1 | | Serious | 0 | 1 | 1 | 1 | 7 | 1 | 11 | | Slight | 0 | 6 | 2 | 6 | 18 | 2 | 33 | | **Total** | 0 | 7 | 3 | 7 | 25 | 3 | 45 |
| Year | Fatal | Serious | Slight | Total | |------|-------|---------|--------|-------| | 2012 | 0 | 0 | 0 | 0 | | 2013 | 0 | 0 | 0 | 0 | | 2014 | 0 | 0 | 0 | 0 | | 2015 | 0 | 0 | 0 | 0 | | 2016 | 0 | 0 | 0 | 0 |
**WY End table 4**
## Calderdale
### PTW Rider + Pillion Casualties
| Age Groups | 0 - 4 | 5 - 15 | 16 - 19 | 20 - 29 | 30 - 59 | 60+ | All ages | |------------|-------|--------|---------|---------|---------|-----|---------| | **2012** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 3 | 5 | 10 | 1 | 19 | | Slight | 0 | 0 | 11 | 7 | 16 | 1 | 35 | | **Total** | 0 | 0 | 14 | 12 | 26 | 2 | 54 | | **2013** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 2 | 0 | 2 | | Serious | 0 | 0 | 6 | 5 | 9 | 2 | 22 | | Slight | 0 | 0 | 7 | 9 | 9 | 1 | 26 | | **Total** | 0 | 0 | 13 | 14 | 20 | 3 | 50 | | **2014** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 2 | 6 | 7 | 1 | 16 | | Slight | 0 | 0 | 10 | 8 | 17 | 0 | 35 | | **Total** | 0 | 0 | 12 | 14 | 24 | 1 | 51 | | **2015** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 3 | 5 | 5 | 0 | 13 | | Slight | 0 | 0 | 8 | 10 | 18 | 2 | 38 | | **Total** | 0 | 0 | 11 | 15 | 23 | 2 | 51 | | **2016** | | | | | | | | | Fatal | 0 | 0 | 0 | 1 | 1 | 0 | 2 | | Serious | 0 | 0 | 0 | 4 | 3 | 2 | 9 | | Slight | 0 | 2 | 5 | 7 | 12 | 2 | 28 | | **Total** | 0 | 2 | 5 | 12 | 16 | 4 | 39 |
### Average
| Age Groups | 0 - 4 | 5 - 15 | 16 - 19 | 20 - 29 | 30 - 59 | 60+ | All ages | |------------|-------|--------|---------|---------|---------|-----|---------| | Fatal | 0 | 0 | 0 | 0 | 1 | 0 | 1 | | Serious | 0 | 0 | 3 | 5 | 7 | 1 | 16 | | Slight | 0 | 0 | 8 | 8 | 14 | 1 | 32 | | **Total** | 0 | 0 | 11 | 13 | 22 | 2 | 49 |
### 0
| Age Groups | 0 - 4 | 5 - 15 | 16 - 19 | 20 - 29 | 30 - 59 | 60+ | All ages | |------------|-------|--------|---------|---------|---------|-----|---------| | Fatal | 0 | 0 | 0 | 0 | 1 | 0 | 1 | | Serious | 0 | 1 | 3 | 4 | 6 | 0 | 14 | | Slight | 0 | 0 | 3 | 6 | 7 | 2 | 18 | | **Total** | 0 | 1 | 6 | 10 | 14 | 2 | 33 |
WY End table 5
### Calderdale District End Tables in 2017
#### Car Driver Casualties
| Year | Fatal | Serious | Slight | Total | |------|-------|---------|--------|-------| | 2012 | 0 | 0 | 0 | 0 | | 2013 | 0 | 0 | 0 | 0 | | 2014 | 0 | 0 | 0 | 0 | | 2015 | 0 | 0 | 0 | 0 | | 2016 | 0 | 0 | 0 | 0 |
#### Average
| Year | Fatal | Serious | Slight | Total | |------|-------|---------|--------|-------| | 2012 | 0 | 0 | 0 | 0 | | 2013 | 0 | 0 | 0 | 0 | | 2014 | 0 | 0 | 0 | 0 | | 2015 | 0 | 0 | 0 | 0 | | 2016 | 0 | 0 | 0 | 0 |
#### WY End table 6
## Calderdale
### Car Passenger Casualties
| Age Groups | 0 - 4 | 5 - 15 | 16 - 19 | 20 - 29 | 30 - 59 | 60+ | All ages | |------------|-------|--------|---------|---------|---------|-----|---------| | **Fatal** | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | **Serious**| 0 | 1 | 6 | 7 | 2 | 2 | 18 | | **Slight** | 8 | 22 | 17 | 33 | 37 | 12 | 129 | | **Total** | 8 | 23 | 23 | 40 | 39 | 14 | 147 |
| Year | Fatal | Serious | Slight | Total | |------|-------|---------|--------|-------| | 2012 | 0 | 0 | 8 | 8 | | 2013 | 0 | 1 | 6 | 7 | | 2014 | 0 | 1 | 2 | 2 | | 2015 | 0 | 0 | 6 | 6 | | 2016 | 0 | 1 | 4 | 4 |
### Average
| Age Groups | 0 - 4 | 5 - 15 | 16 - 19 | 20 - 29 | 30 - 59 | 60+ | All ages | |------------|-------|--------|---------|---------|---------|-----|---------| | **Fatal** | 0 | 0 | 1 | 0 | 0 | 0 | 1 | | **Serious**| 0 | 1 | 3 | 5 | 3 | 2 | 15 | | **Slight** | 5 | 21 | 17 | 34 | 31 | 11 | 118 | | **Total** | 5 | 22 | 21 | 39 | 34 | 13 | 134 |
### WY End table 7
Calderdale District End Tables in 2017
## Calderdale
### Goods Occupant Casualties
| Age Groups | 0 - 4 | 5 - 15 | 16 - 19 | 20 - 29 | 30 - 59 | 60+ | All ages | |------------|-------|--------|---------|---------|---------|-----|---------| | **2012** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 0 | 0 | 1 | 1 | 1 | | Slight | 0 | 0 | 2 | 1 | 10 | 2 | 15 | | **Total** | 0 | 0 | 2 | 1 | 10 | 3 | 16 | | **2013** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 0 | 3 | 0 | 0 | 3 | | Slight | 0 | 0 | 1 | 2 | 10 | 2 | 15 | | **Total** | 0 | 0 | 1 | 5 | 10 | 2 | 18 | | **2014** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 0 | 3 | 0 | 0 | 3 | | Slight | 0 | 0 | 1 | 2 | 10 | 2 | 15 | | **Total** | 0 | 0 | 1 | 5 | 10 | 2 | 18 | | **2015** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 0 | 1 | 1 | 1 | 2 | | Slight | 0 | 2 | 0 | 2 | 5 | 3 | 12 | | **Total** | 0 | 2 | 0 | 2 | 6 | 4 | 14 | | **2016** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 0 | 1 | 0 | 0 | 1 | | Slight | 0 | 1 | 0 | 5 | 12 | 2 | 20 | | **Total** | 0 | 1 | 0 | 6 | 12 | 2 | 21 |
### Average
| Age Groups | 0 - 4 | 5 - 15 | 16 - 19 | 20 - 29 | 30 - 59 | 60+ | All ages | |------------|-------|--------|---------|---------|---------|-----|---------| | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 0 | 1 | 0 | 0 | 2 | | Slight | 0 | 1 | 1 | 2 | 9 | 2 | 15 | | **Total** | 0 | 1 | 1 | 3 | 9 | 2 | 17 |
### WY End table 8
Calderdale District End Tables in 2017
## Calderdale District End Tables in 2017
### Bus Occupant Casualties
| Age Groups | 0 - 4 | 5 - 15 | 16 - 19 | 20 - 29 | 30 - 59 | 60+ | All ages | |------------|-------|--------|---------|---------|---------|-----|---------| | **2012** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Slight | 0 | 1 | 3 | 0 | 1 | 5 | 10 | | **Total** | 0 | 1 | 3 | 0 | 1 | 5 | 10 | | **2013** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Slight | 0 | 0 | 0 | 2 | 1 | 6 | 9 | | **Total** | 0 | 0 | 0 | 2 | 1 | 6 | 9 | | **2014** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Slight | 0 | 0 | 0 | 2 | 1 | 6 | 9 | | **Total** | 0 | 0 | 0 | 2 | 1 | 6 | 9 | | **2015** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Slight | 1 | 0 | 0 | 0 | 1 | 2 | 4 | | **Total** | 1 | 0 | 0 | 0 | 1 | 2 | 4 | | **2016** | | | | | | | | | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 0 | 1 | 1 | 0 | 2 | | Slight | 0 | 1 | 1 | 0 | 3 | 3 | 8 | | **Total** | 0 | 1 | 1 | 1 | 4 | 3 | 10 |
### Average
| Age Groups | 0 - 4 | 5 - 15 | 16 - 19 | 20 - 29 | 30 - 59 | 60+ | All ages | |------------|-------|--------|---------|---------|---------|-----|---------| | Fatal | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Serious | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Slight | 0 | 0 | 1 | 1 | 1 | 4 | 8 | | **Total** | 0 | 0 | 1 | 1 | 1 | 4 | 8 |
### WY End table 9
Calderdale District End Tables in 2017
### REPORTED ROAD CASUALTIES IN WEST YORKSHIRE-2017
#### Calderdale
| Year | Killed | Ser | KSI | Slight | Total | Pedestrians | Pedal Cyclists | PTW | Car Drivers | Car Pass | Car Users | Goods Users | Bus Users | Others | |--------|--------|-----|-----|--------|-------|-------------|----------------|-----|-------------|----------|-----------|-------------|-----------|--------| | 1981-85 | 21 | 236 | 257 | 825 | 1082 | 242 | 126 | 67 | 38 | 196 | 252 | 222 | 474 | 38 | | 1994-98 | 11 | 112 | 123 | 1106 | 1229 | 194 | 90 | 64 | 30 | 60 | 511 | 301 | 812 | 38 | | 2013-17 | 6 | 79 | 84 | 466 | 550 | 92 | 29 | 43 | 6 | 45 | 221 | 123 | 345 | 16 |
| Year | Killed | Ser | KSI | Slight | Total | Pedestrians | Pedal Cyclists | PTW | Car Drivers | Car Pass | Car Users | Goods Users | Bus Users | Others | |--------|--------|-----|-----|--------|-------|-------------|----------------|-----|-------------|----------|-----------|-------------|-----------|--------| | 2002 | 11 | 111 | 122 | 990 | 1112 | 127 | 63 | 32 | 7 | 80 | 519 | 286 | 805 | 45 | | 2003 | 4 | 106 | 110 | 1136 | 1246 | 150 | 61 | 44 | 15 | 78 | 563 | 328 | 891 | 45 | | 2004 | 13 | 111 | 124 | 1079 | 1203 | 166 | 65 | 33 | 13 | 89 | 556 | 279 | 835 | 53 | | 2005 | 7 | 104 | 111 | 842 | 953 | 107 | 37 | 41 | 15 | 79 | 461 | 203 | 664 | 32 | | 2006 | 14 | 109 | 123 | 821 | 944 | 117 | 43 | 29 | 11 | 60 | 469 | 234 | 703 | 18 | | 2007 | 10 | 90 | 100 | 760 | 860 | 103 | 42 | 32 | 9 | 63 | 379 | 245 | 624 | 23 | | 2008 | 9 | 96 | 105 | 683 | 788 | 109 | 38 | 28 | 6 | 69 | 348 | 195 | 543 | 26 | | 2009 | 9 | 111 | 120 | 711 | 831 | 109 | 43 | 34 | 9 | 74 | 365 | 207 | 572 | 17 | | 2010 | 3 | 78 | 81 | 614 | 695 | 80 | 32 | 29 | 5 | 43 | 307 | 194 | 501 | 26 | | 2011 | 7 | 83 | 90 | 555 | 645 | 89 | 45 | 44 | 11 | 57 | 270 | 143 | 413 | 24 | | 2012 | 2 | 94 | 96 | 520 | 616 | 94 | 36 | 44 | 10 | 54 | 250 | 147 | 397 | 16 | | 2013 | 4 | 86 | 90 | 476 | 566 | 76 | 28 | 49 | 7 | 50 | 233 | 128 | 361 | 18 | | 2014 | 6 | 93 | 99 | 524 | 623 | 97 | 33 | 46 | 4 | 51 | 238 | 163 | 401 | 17 | | 2015 | 6 | 86 | 92 | 465 | 557 | 102 | 30 | 44 | 7 | 51 | 224 | 112 | 336 | 14 | | 2016 | 9 | 69 | 78 | 477 | 555 | 104 | 24 | 40 | 6 | 39 | 215 | 123 | 338 | 21 | | 2017 | 3 | 60 | 63 | 387 | 450 | 79 | 32 | 38 | 7 | 33 | 197 | 90 | 287 | 10 |
**WY End table 10** Contact Information
Jean Siakeu Leeds City Council, Highways & Transportation, Transport Policy Transport Strategy, 8th Floor East, Merrion House, 110 Merrion Centre, Leeds, LS2 8BB Tel 0113 378 7529 Email: [email protected] www.leeds.gov.uk
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52593a4f79074520398a477018858fa7e9cae294 | The role of culture, sport and heritage in place shaping
Trends Business Research Ltd, NEF Consulting Ltd and Middlesex University
October 2016 The role of culture, sport and heritage in place shaping
The Culture and Sport Evidence (CASE) programme is a joint programme of strategic research led by the Department for Culture, Media and Sport (DCMS) in collaboration with the Arts Council England (ACE), Historic England (HE) and Sport England (SE).
The CASE Programme commissioned TBR, an economic research consultancy with a specialism in the creative and cultural industries to deliver the study in partnership with NEF Consulting, a consultancy specialising in economic and social impact assessment and Professor Graeme Evans from Middlesex University, a leading researcher and expert adviser on cultural and creative cities, culture and regeneration and the creative economy.
The research team for this study was: Andrew Graves, TBR Andrew Rowell, TBR Olivier Vardakoulias, NEF Consulting Sarah Arnold, NEF Consulting Graeme Evans, Middlesex University Contents
1: Executive Summary ................................................................................................................1 1.1 Study aims and objectives ..............................................................................................1 1.2 Methodology ..................................................................................................................1 1.3 Key findings – all firms ..................................................................................................2 1.4 Key findings – creative industries ..................................................................................3 1.5 Conclusions ....................................................................................................................4
2: Introduction .............................................................................................................................5 2.1 Aims and objectives .......................................................................................................5 2.2 Approach .......................................................................................................................7 2.3 A conceptual framework ...............................................................................................7 2.3.1 Definition of terms ...............................................................................................8 2.3.2 Study implications arising from the review of theoretical literature .................11 2.3.3 Developing the concept of an impact ecosystem .............................................13 2.3.4 Study implications arising from the review of empirical literature ...............14 2.3.5 Study implications arising from the data review .............................................15 2.3.6 Conceptual framework summary .......................................................................16
3: Empirical approach ...............................................................................................................18 3.1 Empirical strategy .........................................................................................................18 3.1.1 Model specifications ............................................................................................20 3.2 Data and model specifications .......................................................................................22 3.2.1 Dependent variables ............................................................................................23 3.2.2 Independent variables .........................................................................................24 3.2.3 Control variables ..................................................................................................25 3.2.4 Spatial considerations ..........................................................................................26 3.2.5 Temporal considerations .....................................................................................26
4: Econometric analysis and findings .....................................................................................28 4.1 All firms ........................................................................................................................28 4.1.1 Cross-sectional models – all firms ....................................................................28 4.1.2 Panel data models – all firms ............................................................................29 4.2 Creative industries .........................................................................................................30 4.2.1 Cross-sectional models – creative firms .............................................................30 7.3 Option 3: exploring indirect causal links between CS & H infrastructure and competitiveness through a two-stage approach ..............................................................83
8: Appendix III – Correlation analysis .....................................................................................84 8.1 Key findings .........................................................................................................84 8.2 Conclusions .........................................................................................................88
9: Appendix IV – Data review ...................................................................................................89 9.1 Assets ..................................................................................................................90 9.2 Investment ...........................................................................................................91 9.3 Dependent variables ............................................................................................91 9.4 Conclusions .........................................................................................................92
10: Appendix V – Sector definitions ........................................................................................93 10.1 Creative Industries ...............................................................................................93 10.2 Knowledge Industries ..........................................................................................95 10.3 Tourism ................................................................................................................98 10.3.2 Professional Services ...........................................................................100
11: Appendix VI – Data sources and details of variables .......................................................101 The role of culture, sport and heritage in place shaping
Figures
Figure 1: Impact ecosystem ........................................................................................................13 Figure 2: London wide map showing performing arts venue distribution and audience penetration...........................................................................................................................46 Figure 3: Gateshead Library Usage ............................................................................................48 Figure 4: Correlation between number of creative industries firms per capita and Lottery investment, by local authority ..............................................................................................86 Figure 4: Correlation between number of creative industries firms per capita and Lottery CS&H investment, by local authority (excluding Isles of Scilly and City of London) ......................86 Figure 4: Correlation between turnover growth in creative industries firms and CS&H investment, by local authority ..............................................................................................87
Tables
Table 1: Data types .....................................................................................................................27 Table 2: All firms and CS&H assets and investment...................................................................28 Table 3: CS&H investment and all firms......................................................................................29 Table 4: Relationships between creative firms and CS&H assets and investment.....................31 Table 5: CS&H investment and the location quotient of creative firms .......................................31 Table 6: CS&H investment and net migration of creative firms...................................................32 Table 7: CS&H investment and creative firms' turnover..............................................................32 Table 8: Relationships between other industries and CS&H assets and investment..................34 Table 9: Location decision factors and post-relocation value......................................................52 Table 10: Selected correlations between CS&H investment and economic indicators, 2013.....85 Table 11: Selected correlations between CS&H assets and economic indicators, 2013............88 Table 12: Assets and investment datasets reviewed ..................................................................90 1: Executive Summary
1.1 Study aims and objectives
The CASE programme is a joint strategic research programme led by the Department for Culture, Media and Sport (DCMS) and its sector leading arms-length bodies: Arts Council England, Historic England and Sport England. CASE uses interdisciplinary research methods and analysis to inform the development of policy in culture and sport.
As part of its commitment to build an evidence base regarding the role that culture, sport and heritage (CS&H) play in driving positive economic and social outcomes in local places, in 2015 the CASE programme commissioned a partnership led by Trends Business Research Ltd (TBR) and including NEF Consulting Ltd and Middlesex University to undertake this study.
This study focuses on generating evidence to support the argument that culture, sport and heritage infrastructure and investment have the ability to promote and drive positive economic and social outcomes at the local level. It aims to examine the extent to which culture, sport and heritage infrastructure and investment within a place influence (through direct and indirect impacts, tangible and intangible) the economy and society of that place. Crucially, the study focuses on a range of potential economic indicators and linkages to the presence of CS&H infrastructure (‘assets’) and investment.
The study therefore represents a starting point for research which seeks to resolve the wider question of the role of CS&H assets and investment in place-shaping.
The study is by its very nature exploratory. It builds on a feasibility study published by the CASE programme in 2011 – *The Art of the Possible*¹ – which identified techniques and data sources that would support an empirical approach to measuring and evidencing economic and social impacts arising from culture, sport and heritage assets and investment.
1.2 Methodology
Previous studies in the UK and internationally have focused on quantifying the links between public and private investment in CS&H and the creation of productive creative industries clusters. This study builds on this approach and examines first, the links between CS&H assets and investment and local economic performance more generally and second, links between CS&H assets and investment and creative industry clusters.
¹ TBR & Cities Institute (2011), *The Art of the Possible* - using secondary data to detect social and economic impacts from investment in culture and sport: a feasibility study Decisions on methodological approach were driven by a number of factors: consideration of the existing literature, an assessment of available data for use in any econometric model, and discussions with the client steering group around the impact areas to focus on (taking feasibility, evidence gaps and client preferences into account).
The study has generated a large, longitudinal dataset containing multiple variables. These were employed in the econometric models as either independent variables (i.e. CS&H assets, CS&H investments), dependent variables (e.g. firm density per capita, turnover, net firm migration) or control variables (e.g. transport infrastructure, population). The dataset covers the time period 2003–2013 and the data are collected at the local authority level.
We exploited this rich dataset to conduct an econometric analysis, exploring these links both cross-sectionally and longitudinally over the last ten years. Our general strategy has been highly exploratory, controlling for as many determinants of outcomes as possible in order to identify push/pull factors of location and economic success. These factors are identified in multiple studies as cited in Arzauzo-Carod et al (2009), and Lazzeretti et al (2009), combining multidisciplinary approaches based on cultural economics, evolutionary geography and urban economics.
1.3 Key findings – all firms
This section presents key findings from the econometric estimation and analysis of the links between CS&H assets and investment and local economic performance.
CS&H assets
- The number of firms per capita is strongly and positively associated with heritage assets density as well as other cultural assets. Net migration of all firms is also strongly and positively associated with cultural assets. These results are robust when considering local authorities in major urban centres as well as those that are not. This is an important result as it suggests a direct relationship, and not simply that agglomeration is driving a high level of both cultural events and a greater concentration of industry.
- Turnover of all firms per capita is associated positively with heritage assets density, and more weakly with population size. It is also very strongly associated with GVA per capita, although as with number of firms per capita, this result may be subject to simultaneity bias.
CS&H investment
- Investment in CS&H is in general negatively associated with indicators of all firms’ economic performance, although it is only significant for local authority investment and number of firms per capita.
- Turnover of all firms per capita is negatively associated with per capita investment in CS&H.
______________________________________________________________________
2 Arzauro-Carod et al (2009), Empirical studies in industrial location: an assessment of their methods and results, Journal of Regional Science, April 2009
3 Lazzeretti et al (2009), Why do creative industries cluster? An analysis of the determinants of clustering of creative industries, IERMB Working Paper in Economics, nº 09.02, April 2009 Lagged investment in CS&H per capita on the other hand is positively associated with number of firms per capita and net migration of firms. Both migration of firms and number of firms variables are less immediately responsive to changes (e.g. firms must make decisions to relocate or start up) than turnover.
Other variables
- Number of firms per capita is also significantly associated with the employment rate, the availability of skilled labour, housing density, transport infrastructure, GVA per capita and population. The most significant variable is GVA per capita – however, this variable might be subject to simultaneity bias as it is reasonable to assume the number of firms per capita may contribute to GVA per capita.
- Net migration of firms is positively associated with employment rate, the availability of skilled labour, life satisfaction and population. These may effectively be thought of as factors that directly attract firms.
1.4 Key findings – creative industries
This section presents key findings from the econometric estimation and analysis of the links between CS&H assets and investment and economic performance of the creative industries.
CS&H assets
- Both creative firms' location quotient and turnover is positively and significantly associated with the density of heritage assets and the number of cultural events listings per capita (i.e. cultural assets). It should be noted that, particularly with cultural events listings and turnover, there is a risk of reverse causality: if creative firms hold cultural events, this would likely increase turnover.
- Both relative concentration of creative firms and creative firms' turnover are negatively associated with density of sports assets.
CS&H investment
- Per capita investment in CS&H is strongly and positively associated with the relative concentration of creative firms, both within and outwith major urban centres. Two-year lagged investment per capita in CS&H is also strongly associated with the location quotient of creative firms.
- Lagged (two-year) per capita investment in CS&H is significantly and positively associated with turnover of creative firms in major urban centres, but not in local authorities outside major urban centres. Competitiveness, a composite measure including Gross Value Added (GVA), is positively associated with turnover in both cases.
- The potential significance of these results is that they may present evidence of drivers of creative industries clustering and growth.
Other variables
- Net migration of creative firms is not significantly associated with any CS&H assets or investment; the only significant variables for this model are network infrastructure and population. However, testing this relationship more conclusively would require a longer time series. 1.5 Conclusions
The study is by design highly exploratory and it is important that this is borne in mind when interpreting the results. Nevertheless, the study provides some important and interesting evidence of the positive role that CS&H assets and investment play in place-shaping, when examined through the lens of the economic performance of the creative industries and the wider local economy more generally.
Further work in this field is required in a number of areas. Case studies which examine the nature of the local impact ecosystem and the mechanisms by which local impact is stimulated could generate vital qualitative evidence to complement quantitative evidence of the direction and scale of impacts. They could also investigate the crucial local conditions (e.g. cumulative investment, wider investment/regeneration programmes, and so on) which might influence whether impacts are achieved and their scale. Data collection in response to a number of key data limitations could also underpin future analysis. For example, better longitudinal data on assets and investment would enhance results. Data that is robust at smaller spatial scale than local authority would also allow for wider influencers on economic performance (e.g. the loss of major employers in specific locations within a place) to be controlled out of the analysis.
This study represents an important first step on a journey to develop the evidence base around the role that CS&H assets and investment play in place-shaping. The hope is that it stimulates debate and further work amongst policy makers, practitioners and the research community. 2: Introduction
The CASE programme is a joint strategic research programme led by the Department for Culture, Media and Sport (DCMS) and its sector leading arms-length bodies: Arts Council England, Historic England and Sport England. CASE uses interdisciplinary research methods and analysis to inform the development of policy in culture and sport.
Culture, sport and heritage have a long history of contributing to places and communities. In their many forms they are uniquely able to comment, reflect, influence, interpret and inspire and are increasingly recognised as a key part of the process that can help shape new places and engage communities. The CASE programme is committed to continuing to build the evidence base regarding the role of culture, sport and heritage in driving positive economic and social outcomes in local places.
As part of this commitment, in 2015 the CASE programme commissioned a partnership led by Trends Business Research Ltd (TBR) and including NEF Consulting Ltd and Middlesex University to undertake an important and groundbreaking study examining the role that cultural, sport and heritage (CS&H) assets and investment play in shaping local places.
This study focuses on generating evidence to support the argument that culture, sport and heritage infrastructure and investment have the ability to promote and drive positive economic and social outcomes at the local level and thereby play a role in place-shaping. The aim of the study is to examine the extent to which culture, sport and heritage infrastructure and investment within a place influence (through direct and indirect impacts, tangible and intangible) the economy and society of that place. Crucially, the study focuses on a range of potential economic indicators and linkages to the presence of CS&H infrastructure (‘assets’) and investment.
The study is by its very nature exploratory. It builds on a feasibility study published by the CASE programme in 2011 – The Art of the Possible – using secondary data to detect social and economic impacts from investments in culture and sport, a feasibility study.
2.1 Aims and objectives
This report is the output of a significant research exercise, undertaken iteratively in order to navigate the various complexities associated with the required analysis, the data upon which it might draw and the lack of ‘tried and tested’ approaches within the existing literature. The aims and objectives of the study... have evolved and been refined as a result of discoveries made along the research pathway and consideration of their implications.
This study contributes to the wider ambition of the CASE programme to build a body of evidence in response to the following over-arching research question:
To what extent does culture, sport and heritage infrastructure and investment within a place (e.g. city-region, rural area) influence the:
- **Economy**: personal income, output (GVA), productivity, property prices, tourism, inward investment, business relocation, employment and skills, etc.
- **Society**: demographic characteristics (including ethnicity), education and learning, health, deprivation, social capital, crime and neighbourhood, wellbeing, identity, etc.
The specific research questions this study responds to were determined through a process of initial research, data collection and assessment, and discussion with the project steering group (comprising representatives of each of the four organisations involved in the CASE programme). Ultimately the nature of data available for both the independent variables (culture, sport and heritage assets and investment) and the dependent variables (the range of outcomes that might arise from the factors represented by the independent variables) drove the final decisions on the contribution this study could and should make to the evidence base, which the steering group agreed should target specific gaps in the current evidence of economic (and social) impacts arising from CS&H assets and investment.
It is important to emphasise that a focus on the role of CS&H assets and investment play in place-shaping was maintained through an examination of the linkages between CS&H assets and investment and economic outcomes that are inherent to positive place-shaping (e.g. more and better firms/jobs that residents of a place can access and benefit from). A central idea running through this study is, therefore, that positive economic and social impacts are inherent goals associated with place-shaping.
This study specifically addresses the following research aim:
*To investigate, through econometric estimation, the link between CS&H assets and investment and a range of indicators of economic health, both for local economies as a whole and also the creative industries.*
It is important to note that this is not a study which seeks to understand whether CS&H assets agglomerate together (i.e. it is not a ‘cluster’ study). Rather, the study seeks to understand whether there is a relationship between CS&H critical mass (either in terms of assets density or investment density) and specific place-shaping outcomes. 2.2 Approach
The approach to the study was based on three key tasks:
1. Literature and data review: A synthesis of existing evidence and available relevant data, covering each area of impact and building them into a ‘conceptual framework’.
2. Secondary data analysis: Compiling and conducting analysis on secondary datasets (including but not limited to those already identified by previous research) to explore the relationships between culture, sport and heritage infrastructure and investment and their impact.
3. Primary data analysis: exploring and evaluating gaps in the available data and identifying primary data options for future analysis.
The main body of this report includes further comments on the methodologies used including the analytical and statistical techniques employed. Specifically, chapter 3: (p.18) outlines the approach to empirical research and analysis.
2.3 A conceptual framework
The study focuses on the broad hypothesis that culture, sport and heritage serve as important drivers in achieving economic and social goals of economic prosperity, wellbeing, social inclusion and cohesion – and that this forms part of a wider place-shaping process. CS&H in their many forms are uniquely able to comment, reflect, influence, interpret and inspire and are increasingly recognised as a key part of the process that can help shape new places and engage communities. They therefore have a long history of contributing to places and communities.
This research focuses on evidence to support the argument that CS&H infrastructure and investment have the ability to promote economic and social outcomes and, thereby, to shape local places to achieve more desirable economic and social goals. It is worth noting that it is ultimately the intrinsic benefits of CS&H assets and investment which lead indirectly to economic and social impacts; for example, encouraging individuals and businesses to locate to a particular area in order to take advantage of the intrinsic value of CS&H assets in that area.
This section presents the conceptual framework which supports the research. The framework is designed to capture the key themes of the relevant economic literature and to identify the key research and evidence gaps in the literature. The conceptual framework is used as the basis for defining the precise scope of the study and comprises the following elements:
- Definition of terms
- Implications for the study arising from a review of conceptual/theoretical literature
- A description of the impact ‘ecosystem’
- Implications for the study arising from a review of empirical literature
- A review of available secondary data in relation to the study aims and objectives
Each of these five elements is considered separately below. 2.3.1 Definition of terms
In order to achieve the required aims and objectives of a study such as this, it is important first to define a range of concepts and terms. In the context of this study, these are:
- Place-shaping
- Culture, Sport and Heritage Assets
- Culture, Sport and Heritage Investment
- Impact
- Geography of impact
- Culture, Sport and Heritage Ecosystem
These definitions also help to describe the focus and scope of the study. Within the context of the study, the definitions are to some extent dynamic, reflecting the specific application of these terms in various analytical scenarios and responding to the feasibility of delivering certain analyses using different datasets. For example, the definition of culture, sport and heritage itself is used selectively in the study to take account of the specific features of the datasets used in the analysis (which may be constrained by Standard Industrial Classification codes, or focused on specific culture, sport or heritage assets or investment, and so on).
Place-shaping
‘Place-shaping’ is not a term or concept used in the literature or policy on culture. The term placemaking is more widely used in relation to local and area-based improvement, often associated with environmental design of the public realm, and issues of accessibility and connectivity. This term also features in recent cultural policy: ‘We want to see more partnerships being formed between the national and local levels to put culture at the heart of placemaking’.
The related, observed concept of clustering (agglomeration of firms, amenities and occupation groups, e.g. the ‘creative class’) also operates at various scales, including in the ‘compact city’ where a mix of amenities, retail and public transport/accessibility are seen to provide a sustainable and liveable place.
The term place-shaping was used in local government reform, inspired by the Lyons Inquiry (2007), where the term was seen to cover a wide range of local activity which affects the well-being of the local community, informed by local character and history, community needs and demands, and local politics and leadership. Here, well-being is approached not just from a local economic or services perspective, but contains an element of a ‘local sense of belonging and identity’: place-shaping is “about creating a vision for a locality that is distinctive, identifying and building on its unique selling points, and creating a sense of local identity, distinctiveness and place. It is about creating places that are attractive, vibrant, prosperous, safe and friendly. Places for people to be proud to call home”.
In some respects this study could be seen to introduce ‘culture’ to this local place-shaping aspiration, building as it does on preceding evidence-based policy around
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5 DCMS (2016) The Culture White Paper. London
6 Lyons, M (2007) Place-shaping: a shared ambition for the future of local government. Norwich, The Stationery Office. The role of culture, sport and heritage in place shaping
culture and regeneration; living places; cultural asset mapping and investment appraisal (The Art of the Possible) and a range of impact reviews. This includes the recent AHRC Cultural Value Project(^7) which emphasises the intrinsic value of cultural experience to the individual, wherever this is first gained – in the home, school, community or cultural venue. Cultural value that can be appreciated and acquired can both generate new demand and release latent demand. This is also likely to lead to behavioural changes which in turn can effect cultural consumption and participation and in some situations, location decisions – with direct economic effects arising. Cultural value is recognised in the AHRC review, for instance in terms of the ability of arts and cultural engagement to help shape reflective individuals, thereby facilitating greater understanding of themselves and empathy for others, as well as producing more engaged citizens, thus promoting civic behaviour and expression. However, access to cultural experiences and opportunities for cultural expression are, as the review confirms, uneven and both the generation of ‘demand’ and the cultural ecosystems that can flourish at varying levels require different modes and places of engagement in proximity to where people can actually access cultural experiences.
Without a clear definition in the literature, for our purposes the role and contribution that CS&H assets and investment make to shaping places therefore draw on both placemaking concepts including spatial and environmental amenity effects (e.g. clusters), and a range of social, economic, environmental and intrinsic values and benefits of a cultural ecosystem that arises from particular CS&H facilities, opportunities and activities. The place-shaping strategies identified through local governance and ‘creative city’ placemaking approaches (and associated investment) are also a measure of how effective places (boroughs, districts, clusters, etc.) are, in generating these positive impacts. Place-shaping in the context of this study therefore encompasses a broader range of activities, initiatives and concepts than placemaking alone would imply.
The Lyons Inquiry into local government defined place-shaping as “the creative use of powers and influence to promote the general well-being of a community and its citizens”(^8). Clearly this definition was developed in the context of the policy and investment decision-making power that local government has. We suggest that this definition is used in this research since it is in the area of policy and investment decision making where it is felt the results of the study could have most influence. However, within this study the term should be considered in the context of decisions around policy and investment with respect to culture, sport and heritage assets. We also want to capture specific economic impacts.
The definition of place-shaping that we use is:
“The creative use of powers and influence to create, utilise and develop CS&H assets in order to promote the general well-being of a community and its residents and businesses, where well-being captures a range of positive attributes such as better health, high amenity value, good job opportunities, high business performance, low crime, good educational attainment and community cohesion.”
We therefore draw a distinction between place-shaping and placemaking, where the latter is often seen as a narrower activity focused on an approach to planning, design and management of public spaces and the former is more about creating
(^7) AHRC (2016) Understanding the value of arts & culture: The AHRC Cultural Value Project. Geoffrey Crossick & Patrycja Kaszynska.
(^8) Lyons, M (2007) Place-shaping: a shared ambition for the future of local government. Norwich, The Stationery Office. and delivering a vision of greater economic and social well-being. The focus on place-shaping means that the results of this study and their implications are, hopefully, relevant to a wider audience.
**Culture, Sport and Heritage Assets**
We define CS&H assets(^9) as:
“The places (properties, spaces, monuments, buildings, etc.) that produce and provide culture, sport and heritage, and which can be participated in, enjoyed or ‘consumed’.”
It should be noted that CS&H assets can have a positive economic or social impact without this being an intended outcome. There may also be ‘assets’ which do not fit within our definition – for example, storage or archive facilities which are not accessible by the public.
**Culture, Sport and Heritage Investment**
We define CS&H investment as:
“Financial support (operating, grant and capital expenditures) for culture, sport and heritage from diverse sources: national government departments and arm’s length bodies; lottery funding; local government; foundations, personal and business giving; private investment; consumer investment.”
It should also be noted that investments differ in source and intended use of funds.
**Impact**
We define impact as:
“The positive outcomes on ‘well-being’ (i.e. liveability and economic performance) of a place that might be generated either directly or indirectly within a study location through CS&H assets or investments.”
There are a wide range of possible impacts that this study is concerned with. The following were identified in the brief:
- **Economy**: Personal income, output (GVA), productivity, property prices, tourism, inward investment, business relocation, employment and skills, etc.
- **Society**: demographic characteristics (including ethnicity), education and learning, health, deprivation, social capital, crime and neighbourhood, personal wellbeing, identity.
These are underpinned and in many respects preceded by the intrinsic value that can be derived from cultural experience at the individual level, which in turn can generate economic and social effects and behavioural change, as noted above.
Despite the range of impacts of interest, however, the data collection exercise undertaken for this study, along with consideration of the existing evidence base
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(^9) Note that we are aware of other definitions which have been derived for specific purposes, such as the definition of a Heritage Asset in the National Planning Policy Framework. and – importantly – identification of evidence gaps has driven a narrowing of the focus on impacts.
**Geography of impact**
We define the term ‘geography of impact’ as:
“The spatial reach of the direct or indirect impacts arising from CS&H assets and investment.”
**Culture, Sport and Heritage ecosystem**
Lastly, we define the CS&H ecosystem as:
“The set of processes and interactions whereby CS&H assets and investment not only deliver direct and indirect impacts but also generate numerous spillovers which further enhance the cumulative and total impact of those assets and investment (for example, through their role in potentially creating agglomeration effects).”
### 2.3.2 Study implications arising from the review of theoretical literature
The literature review was undertaken as a ‘rapid review’ with the benefit of prior reviews, notably our *Art the Possible* feasibility study undertaken for CASE in 2010 which looked at literature on CS&H impacts and underlying quantitative methods and data availability. More recent reviews include *Evidence Review: Sport and Culture* and *Quantifying the Social Impacts of Culture and Sport* as well as other reviews of social impacts and culture and regeneration. The literature review has drawn on these sources as well as published material in the form of journal articles, books/chapters and research reports, primarily (but not exclusively) from the UK and North America. The purpose of the review is to contribute to the design of a framework within which the study can operate, including the identification of specific evidence gaps which the study can address, and empirical models/approaches that can be adopted in order to address them.
This section presents the key points from the literature review of papers related to relevant theoretical concepts and policy, undertaken in order to inform the conceptual framework and therefore the focus of the study. The full review is available in section 6: (p, 40).
There is an extensive body of literature which relates to theoretical concepts that are relevant to this study. These range from how to define and value assets to the different types of impacts that might arise from their existence (directly and
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10 CASE (2011) *The Art of the Possible: Using secondary data to detect social and economic impacts from investments in culture and sport: a feasibility study*. London, DCMS.
11 What Works Centre for Local Economic Growth (2014) *Evidence Review: Sport and Culture*. London, DCMS.
12 Fujiwara, D, Kudrna, L & Dolan, P (2014) *Quantifying the Social Impacts of Culture and Sport*. London, DCMS.
13 For example, Reeves, M (2002) *Measuring the economic and social impact of the arts: a review*. London, Arts Council England.
14 Evans, G & Shaw, P (2004) *The Contribution of Culture to Regeneration in the UK: A Review of Evidence: A report to the Department for Culture Media and Sport*. London, DCMS. indirectly), from agglomeration effects to the creative and cultural industries and their role in placemaking and place-shaping.
The literature also identifies a number of conceptual and empirical considerations that should be borne in mind throughout a study of this type, including the notion of variation in the scale of assets and the scale of impact, temporal effects, asset mix, how externalities and spin-offs might occur around assets and how assets might themselves form part of a functioning economic cluster and so on.
We focus here, though, on one of the most relevant aspects of the literature: the concept of the creative and cultural industries as an ecosystem. This is important because it was identified in the project brief and exists as a cornerstone within the design of this study.
The literature identifies three key examples of use of the term ‘ecosystem’:
- Ecosystems in cultural and creative industries (derived from innovation/knowledge exchange, spillover effects and production chain links, etc.), such as that discussed in the Warwick Commission report(^{15}) (i.e. creative and cultural industries feed and depend on each other).
- Ecosystems which are applied to arts and cultural activity and facilities which generate both an internal ‘cultural’ ecosystem (e.g. in Holden’s *Ecology of Culture* report(^{16})) and also feed the creative industries and wider economy.
- Ecosystems of cultural engagement, for example ecosystem spillovers from local arts to economic growth – e.g. Brighton FUSE, as identified by AHRC(^{17}) and NESTA(^{18}); Natural Cultural Districts studies (although Markusen doesn’t actually use the term in her Creative Placemaking studies), and the recent *Cultural and Creative Spillovers in Europe* report(^{19}) where cultural and creative ecosystems are identified as a network spillover effect.
Bringing these ideas together, the study brief stated that the role of CS&H infrastructure and investment in the local area should be thought of as an ecosystem, rather than in isolation. For example, a new arts centre will create direct employment (including freelance/SMEs) and cultural participation, but it will also create employment in local businesses because of increased trade due to visitors, and in time may also attract related and unrelated businesses and innovation/product development because the original investment has improved wellbeing, local aesthetics or skills leading to a better sense of place or increased human capital.
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(^{15}) The Warwick Commission (2015), Enriching Britain; Culture, Creativity and Growth
(^{16}) Holden J. (2015), The ecology of culture, AHRC
(^{17}) Crossick G. & Kaszynska P. (2016), Understanding the value of arts and culture, ARHC
(^{18}) Bakhshi, H. et al (2014) Capital of culture? An econometric analysis of the relationship between arts and cultural clusters, wages and the creative economy in English cities, Nesta Working Paper No.14/06
(^{19}) Tom Fleming Creative Consultancy (2015), Cultural and creative spillovers in Europe The concept of the impact ecosystem is considered further, alongside the practical implications of employing such a model for this study, in the following section.
2.3.3 Developing the concept of an impact ecosystem
The impact ecosystem is an important part of the conceptual framework for this study. Some important aspects of the impact ecosystem are articulated and presented in Figure 1 below. This diagram, based on the literature review summarised above (and set out in full in section 6: p.40), captures an inexhaustive number of important impact areas (agglomeration, tourism, participation and regeneration) and, for each of these, a number of specific outcomes. These range from those which are evidenced (e.g. participation in culture, sport or heritage has been shown to positively influence education choices, health and wellbeing, social cohesion and economic participation), to those that are postulated (e.g. CS&H assets may increase agglomeration which then produces positive outcomes in terms of innovation, skills development, productivity and so on). Note that the diagram does not attempt to be comprehensive, but instead focuses on impact areas and outcomes that are of interest to the study.
Figure 1: Impact ecosystem
Source: TBR, NEF Consulting, Middlesex University The diagram also identifies a number of inter-relationships between different impact areas and outcomes, designed to demonstrate how cumulative impacts might be derived. An increase in business agglomeration, for example, might contribute to demand for commercial property within a specific location, which then might drive investment in the physical infrastructure of that area and therefore lead to physical regeneration.
Lastly, the diagram also identifies – in the dark red boxes – the specific economic measures that are the focus of the study. They are at once outcomes of, and measures of, impacts.
The intention in this study was originally to discover whether evidence of such an ecosystem, and the relationships within it, could be found using the available data. To explore the full ecosystem would require significant resource and, most likely, an iterative approach which breaks down the relationships and interactions within the ecosystem into manageable, discreet elements.
In effect, this is what has been achieved in this study. Section 7: (p.82) sets out three analytical options which were identified during the scoping stage. These identify examples of how the relationship between between CS&H assets and investment and direct and indirect economic and social outcomes might be examined. It was decided that the study would focus on testing the relationships between CS&H assets and investment and positive place-shaping outcomes (i.e. specific measures of economic and social ‘success’).
However, following consideration of the available data and suitable econometric models (see sections 2.3.4, p.14 and 2.3.5, p.15) it was agreed that the aims and objectives should be further narrowed. Thus the study has focused on more simple relationships than are captured and described by the ecosystem as a conceptual whole. Should suitable resources and data be available in the future, econometric analysis could be undertaken which explores other elements of the ecosystem (e.g. whether there is evidence of a relationship between CS&H assets and investment and indirect impacts associated with positive place-shaping).
2.3.4 Study implications arising from the review of empirical literature
While there is an extensive body of literature relating to the theoretical and conceptual ideas relevant to this study, empirical evidence and literature is more sparse. A review of key studies is set out in section Error! Reference source not found. (p.Error! Bookmark not defined.). The most influential studies in relation to the design of this study include:
- Lazzeretti et al (2009), Why do creative industries cluster? An analysis of the determinants of clustering of creative industries, IERMB Working Paper in Economics, nº 09.02, April 2009
- Bakhshi et al (2014) Capital of culture? An econometric analysis of the relationship between arts and cultural clusters, wages and the creative economy in English cities, Nesta Working Paper No.14/06
- Noonan, D (2013) How US Cultural Districts Reshape Neighbourhoods, in Cultural Trends 22(3–4).
- Cruz, S. and Teixeira, A.A.C. (2014), The Determinants of Spatial Location of Creative Industries Start-Ups: Evidence from Portugal using a Discrete Choice Model Approach. FEP Working Papers no. 546 October 2014
In summary, the review of empirical literature found that: Existing evidence on the links between CS&H and economic outcomes is either:
- Case study based and non-econometric
- Based on effects of amenities on house prices (hedonic pricing models) or human capital
- Cross-sectional (leading to weak causal interpretation)
- Not based in the UK
Traditional measures of firm location and economic performance do not tend to incorporate quality of life and amenity factors.
The existing evidence suggests CS&H affects wellbeing, health and quality of life in the UK, for example:
- health and wellbeing benefits of public libraries;
- health and educational benefits of sport and culture;
- creative occupations and subjective wellbeing
The links to wellbeing have previously been explored and therefore it would appear appropriate to target this study at economic indicators rather than social indicators. However, how these variables and factors interact is less well explored.
There is evidence that quality of life/amenity outcomes affect firm location decisions and human capital. This may suggest that CS&H asset/investment can influence the demand-side factors associated with the location decisions made by people and businesses.
Whilst a tried and tested model to underpin the proposed analysis does not exist, there are models which focus on similar empirical questions within the creative industries. These existing studies align best to the aims and objectives of this study, and a key conclusion from the review was that it was sensible to build on the empirical approaches used, while developing an approach which could be extended to cover wider economic impacts at the local level (i.e. not restricted to the creative industries).
Availability of suitable static and time-series data has a major influence on decisions relating to the empirical analysis. The data collection exercise is discussed in more detail in section 8: (p.85) and, in terms of its implications on the analysis, in the section below.
### 2.3.5 Study implications arising from the data review
A key factor in deciding the precise focus of this study was the availability of suitable data to represent independent variables (CS&H assets and investment) and dependent variables (desired outcomes related to place-shaping).
The data review (presented in full in section 8: p.85) found that:
- Identifying the CS&H assets in a place is relatively straightforward, though a comprehensive picture needs to be collated from a number of different data sources. Identifying changes in the number, type and quality of assets over time is more difficult. Similarly, developing a comprehensive picture of investment in CS&H assets is also difficult, and data availability should determine the specification for analysis.
A range of indicators is available to examine the impacts of CS&H assets and investment. The available data will also allow impacts to be tested at a range of spatial levels, though generally not robustly below local authority level. The specific indicators to be used as dependent and control variables should be defined in line with the specification for analysis.
It was recognised that the process of reviewing data sources and developing a specification for the analysis is an iterative one, with each informing the other. A data specification describing the indicators to be used in the analysis and the sources from which they are drawn was developed as the study progressed. Details of the dataset used in the analysis can be found in section 11: (p.102).
2.3.6 Conceptual framework summary
The study began with the objective of generating evidence in relation to the following over-arching research question:
To what extent does culture, sport and heritage infrastructure and investment within a place (e.g. city-region, rural area) influence the:
- **Economy**: Personal income, output (GVA), productivity, property prices, tourism, inward investment, business relocation, employment and skills etc.
- **Society**: demographic characteristics (including ethnicity), education and learning, health, deprivation, social capital, crime and neighbourhood, wellbeing, identity etc.
A number of factors influenced the final design of the study with respect to this objective. These include:
- Existing theoretical literature,
- Consideration of the concept of an impact ecosystem, and the complexity of this concept,
- Existing empirical literature and models which might be used or adapted for use in this study. Importantly, consideration was given to the existence of evidence which directly relates to the over-arching research question, with a view to focusing this study on the creation of new evidence.
- Availability of data related to both assets and investment (independent variables) and key economic and social outcomes (dependent variables).
Clearly these factors are inter-related. For example, the design of empirical models must carefully consider and be informed by the availability of data. Having considered all these factors the study team and steering group drew the following conclusions:
- This study should not attempt to evidence the full ecosystem, as was originally intended. This decision was taken on the basis of the implied complexity of the task and a lack of data suitable to support it. Instead, it was agreed that the study should examine the relationship between CS&H assets and investment and economic and social indicators which are important to positive place-shaping. • Evidence regarding some social and wellbeing indicators was already in the public domain and that therefore, this study should focus on economic indicators only.
• Existing empirical models have been employed in studies relate to the creative industries and these represent the best existing approach. These should therefore be modified in order to address the objectives of the study.
• The most relevant spatial area to be included in the empirical analysis is local authority since this allows for maximum exploitation of the available data. However, it is recognised that this has limitations for the study since some impacts may be felt at a spatial level other than this.
• As well as focusing on local economies as a whole, and following on from other existing studies, it was agreed that the empirical analysis would also examine the relationships between CS&H assets and investment and economic outcomes in the creative industries. This will extend the interest in and utility of the study.
The conclusions outlined above have driven an empirical approach which is described, along with the results of the estimation and modelling, in the following section. 3: Empirical approach
This section sets out the empirical approach taken in the study. Our approach is highly exploratory, and we test a variety of relationships and models to clarify the effects of CS&H assets and investment in terms of a number of potential economic impacts.
3.1 Empirical strategy
Our empirical approach is informed by a review of the available literature, and the analytical methods used in existing studies. Although research on the location and productivity of firms and plants has been a major topic in economics since Marshall’s influential work in 1890, the research literature varies substantially in terms of modelling specifications, sampling characteristics and determinants. There is no consensus on key location factors or the best way to estimate their importance (Arzauzo-Carod et al, 2010), and previous international studies have used a variety of approaches and indicators (variables) when trying to answer similar questions to this study. Some approaches take advantage of quasi-natural experiments, such as Falck et al’s 2011 study into the impact of baroque opera houses built before 1800 on the spatial equilibrium share of high-human-capital employees. Others take a case study approach to consider the impact of cultural, sports or heritage assets or investments, such as Ahlfeldt and Kavetsos’ 2014 study into the effect of new sports stadia on property prices in London.
This means that there are potentially hundreds of different combinations of variables and models which could be explored and tested in a regression analysis. The fact that there are always additional (or different) variables which could be used also means that it may not be possible to reach definitive conclusions. We acknowledge that this embedded complexity is one of the limits of this study, given the impossibility of testing absolutely all potential combinations, and the uncertainties entailed in obtaining different results when the combination of variables is altered.
Our general strategy has therefore been highly exploratory, controlling for as many determinants of outcomes as possible (given the data available to the study) to identify push/pull factors of location and economic success. These factors are drawn from multiple studies as identified in Arzauzo-Carod et al, and Lazzeretti et
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20 Arzauro-Carod et al (2009), Empirical studies in industrial location: an assessment of their methods and results, Journal of Regional Science, April 2009 21 Falck et al (2011) The phantom of the opera: Cultural amenities, human capital, and regional economic growth, Labour Economics, December 2011 22 Ahlfeldt, Gabriel M. and Kavetsos, Georgios (2014) Form or function?: the effect of new sports stadia on property prices in London. Journal of the Royal Statistical Society: Series A (Statistics in Society), 177 (1). pp. 169-190. ISSN 0964-1998 23 Op cit al24, combining multidisciplinary approaches based on cultural economics, evolutionary geography and urban economics.
### Determinants of industrial location
1. Agglomeration economies, advantages in costs or quality due to the spatial concentration of productive resources and actors. In particular, these can be of two types: a. Urbanisation economies – concentration of industries in general in larger cities b. Marshallian-sectoral economies – the concentration of firms of similar characteristics in particular localities, to benefit from local knowledge spillovers
2. Local amenities and quality of life factors, including: a. **Culture, arts and heritage of the area**, including green spaces b. Life satisfaction in an area
3. Transport and network infrastructures
4. Human capital characteristics
While there is some evidence that CS&H assets and investment stimulate the economy and contribute to place-shaping, in practice existing econometric analysis (as section 2.3.2 indicates) has tended to focus on the relationship between CS&H assets and investment and creative industries firms. Our approach has therefore been to expand the models used in previous research, in order to examine the relationship between CS&H assets and investment and all firms. First we tested whether the relationship between CSH assets and investment and the creative industries found in other studies holds for the UK. We then looked at the relationship between CS&H assets and investment and the wider economy, which was the main focus of this study.
This means that our empirical work is focused on understanding, through the application of specific econometric models, whether evidence can be detected of a relationship between CS&H assets and investment and creative industries at a local level, as reported in the research literature. We then expand this analysis to consider whether CS&H assets and investment contribute to more general sustained economic productivity; in doing so we look at all firms, as well as other specific industries including the knowledge economy, the tourism sector and professional and business services.
In summary, our research questions are as follows:
- Do CS&H assets and/or investment influence the location and economic success of creative industries?
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24 Lazzeretti et al (2009), *Why do creative industries cluster? An analysis of the determinants of clustering of creative industries*, IERMB Working Paper in Economics, nº 09.02, April 2009 More generally, do CS&H assets and/or investment influence the location of other industries and the local economic performance of an area?
3.1.1 Model specifications
For our initial model (concentration of industries), we follow Lazzeretti et al (2011), in specifying an exponential distribution for the location of industries:
[ Y_i = a \\cdot CSH_i^{\\beta_1} \\cdot Q_i^{\\beta_2} ]
(equation 1)
Where:
- ( Y_i ) is the measure of local economic performance in local authority ( i )
- ( CSH_i ) is a vector containing measures of culture, sport and heritage assets and investment in local authority ( i )
- ( Q ) is a vector of additional push/pull factors in the local authority as described above – note that these vary depending on availability of data in the cross-sectional and panel models
- ( a ) is a constant
- ( \\beta_i ) are the parameters to be estimated
This functional form can be linearized using logarithms to give the following model, where estimated parameters can be interpreted as elasticities:
[ \\ln(Y_i) = a + \\beta_1 \\ln(CSH_i) + \\beta_2 \\ln(Q_i) + \\epsilon ]
(equation 2)
where ( \\epsilon ) is an error term.
Note that this model was estimated for both cross-sectional and panel models.
We use different definitions and permutations of local economic performance, and run several different base models as follows:
**Industry concentration cross-sectional model 1**\
Equation 2 where ( Y = ) [location quotient of industry] and ( Q = ) [heritage assets density, sports assets density, libraries density, cultural events, cumulative local authority investment in culture per capita, cumulative local authority investment in heritage per capita, cumulative local authority investment in sports per capita, cumulative arts lottery investment per capita, cumulative sports lottery investment per capita, cumulative heritage lottery investment per capita, number of individuals in creative employment, employment rate, proportion of labour with level 4+ qualifications, housing density, network infrastructure, transport infrastructure, life satisfaction, proportion of population meeting physical activity guidelines, size of the market, GVA per capita]
**Industry concentration cross-sectional model 2**\
As equation 2.1 but ( Y = ) [net migration of industry] and ( Q = ) [heritage assets density, sports assets density, libraries density, cultural events listings per capita, annual local authority investment in culture per capita, annual local authority investment in heritage per capita, annual local authority investment in sports per capita, annual arts lottery investment per capita, annual sports lottery investment per capita, annual heritage lottery investment per capita, number of individuals in creative employment, employment rate, proportion of labour with level 4+ qualifications, housing density, network infrastructure, transport infrastructure, life satisfaction, proportion of population meeting physical activity guidelines, size of the market, GVA per capita]
**Industry turnover cross-sectional model**\
(equation 2.3)
As equation 2.1 but ( Y = ) [turnover of industry]
Models were also tested to exploit the availability of panel data where possible, considering both turnover of firms and location/concentration of firms. Lagged investment was used as firm location decisions may not occur immediately, and firms’ success may depend on prior investment that is not realised immediately.
Results were separated by location for local authorities within major urban centres and those outside, using government definitions of rural-urban classification(^{25}).
This is important as if results are the same across both specifications we can be more confident that our results are not just showing urban agglomeration effects.
Both fixed effects and random effects models were considered:
- Random effects models control for unobserved heterogeneity when it is constant over time, by assuming that individual specific effects are uncorrelated with independent variable. Variables remaining constant over time can be included in the model.
- Fixed effects models control for time-independent effects in our unit of analysis (local authorities), but is less strict: it does not require individual specific effects be uncorrelated with independent variables. Our results are not biased only if we omit time-independent causal variables. However, we cannot include time-invariant variables (such as assets data).
The Hausman Test was used to determine the appropriate statistical model, which determined that fixed effects was likely to be more appropriate than the random effects model. However, this means that time invariant variables must be excluded – which applies to all the CS&H assets data we have available.
Errors are clustered at the Local Authority level – this means the observations may be correlated within local authorities but would be independent between them.
**Industry concentration panel model 1**\
(equation 2.4)
As equation 2.1 but ( Q = ) [per capita investment in CS&H, lagged per capita investment in CS&H, two-year lagged per capita investment in CS&H, employment rate, skilled employment proportion, GVA, proportion of population meeting physical activity guidelines]
**Industry concentration panel model 2**\
(equation 2.5)
As equation 2.2 but ( Q = ) [per capita investment in CS&H, lagged per capita investment in CS&H, two-year lagged per capita investment in CS&H, employment rate, skilled employment proportion, GVA] Industry turnover panel model (equation 2.6)
As equation 2.3 but ( Q = ) [per capita investment in CS&H, lagged per capita investment in CS&H, two-year lagged per capita investment in CS&H, employment rate, skilled employment proportion, GVA]
Equations 2.2, 2.3, 2.5, and 2.6 were re-estimated for all firms.
3.2 Data and model specifications
To enable our analysis, we developed an extensive and unique local authority level database consisting of multiple variables and observations over the time period 2003–2013. This database covers all English local authorities and encompasses a wide range of socio-economic indicators (variables), clustered into the following groups:
- CS&H investment variables, including a breakdown of investment by source (e.g. Big Lottery investment) and type (e.g. arts).
- CS&H assets variables, as with investment including variables representing the type of assets and their ownership.
- Creative industry-related variables, including for example net firm migration in and out of respective local authorities and measures of creative industry concentration.
- Wider industry performance variables, including net migration of all firms, turnover growth of firms, and variables as for the creative industries for a number of other sectors of interest – the knowledge economy, tourism and professional and business services.
- A set of control variables, accounting for different characteristics of local authorities including, for example, economic performance, infrastructure development, employment, human capital (education levels) and well-being indicators (e.g. life satisfaction scores and physical activity rates).
The variables used in our analysis are not exhaustive. The choice of variables is limited by data availability (including the availability of longitudinal data) at local authority level. Initial correlation analysis was also undertaken to examine whether relationships exist between infrastructure and investment indicators, and indicators of local economic performance; effectively, this tested whether subsequent regression analysis would be likely to yield results.
Correlation analysis found positive relationships between CS&H investment (and lagged investment) and many local economic indicators. These relationships persisted across years, but some weakened when outliers (in particular, the City of London and Isles of Scilly) were removed. In particular, the analysis suggested strong relationships between CS&H investment and firm numbers (total firms and creative industries firms), turnover growth rates and firm migration. These were identified as indicators on which further analysis should focus.
Weaker relationships were found between CS&H assets and local economic indicators, and the correlation analysis suggested that further exploration of the relationships between assets and local economic performance would be unlikely to yield meaningful results. Data quality, and the absence of longitudinal data on CS&H assets in particular, was identified as an issue. For example, there tends to be a lag in of one to two years in availability of economic variables (the most recent consistently available data was for 2013) while data on CS&H assets is largely based on a more current snapshot. This means that the analysis does not test correlation in like-for-like time periods.
The results of the correlation analysis can be found in section
The following sections describe the variables used in our models. A detailed list of data sources used in the analysis can be found section 11: (p.102).
3.2.1 Dependent variables
We tested multiple indicators as dependent variables in order to obtain different information regarding the impacts of CS&H assets and investment at local authority level. For the wider economy, we considered:
- Net migration of all firms per local authority
- Total turnover of all firms per local authority
- Total turnover of knowledge industries per local authority
- Total turnover of tourism industries per local authority
- Total turnover of professional services industries per local authority
For the creative industries, the key indicators we tested were:
- Net migration of creative firms per local authority
- Total turnover of creative firms per local authority
- The location quotient for creative firms in a local authority
Location quotients
To determine the patterns of spatial clustering of creative industries, we created a territorial indicator of concentration-specialisation to indicate whether a place is specialised in creative industries, and if this is a relatively important part of industry in the area. Our unit of analysis is the local authority, and the location quotient is defined as:
\[ LQ\_{\\text{local authority}} = \\frac{\\text{Creative firms}_{\\text{local authority}}}{\\text{Creative firms}_{\\text{national}}} / \\frac{\\text{All firms}_{\\text{local authority}}}{\\text{All firms}_{\\text{national}}} \]
Location quotients can be used to compare the relative concentration of creative firms in a local area compared with a wider comparator area (in this study, the country as a whole). A location quotient of more than one indicates the clustering of creative industry in a local authority is higher than the national average, and the local labour market is specialised in creative industries. Higher concentrations of creative firms are most likely to be found in London, the South East and the West Midlands. 3.2.2 Independent variables
In order to test the impact of CS&H assets and investment in local areas across England, we collected data on both stocks and flows.
- Stocks reflect the concentration of different CS&H assets in respective local authorities. This data is not available on a longitudinal basis, but only for 2013. Despite not being exhaustive, this data can be used as a proxy for CS&H assets. It includes:
- Active places (i.e. sports venues – the variable is named ‘sports assets’ in the analysis)
- Listed and designated heritage sites (‘heritage assets’)
- Culture24 events listings (‘cultural events’)
- Libraries
- Flows reflect the yearly investment in CS&H in respective local authorities. This data is available for the period 2003–2013, and accounts both for local authority investment and Big Lottery investment (sports, arts and heritage Lottery funding).
Overall, investment data is of considerably better quality and covers a wider range of CS&H components than assets data.
The raw data was also used to generate a number of composite indicators, such as:
- Total annual investment per capita
- Total annual investment per capita by investment source (local authority and Big Lottery respectively)
- Total annual investment per capita by source and type (e.g. open spaces, museums, galleries, theatres, libraries, sports facilities, etc.)
- Cumulative investment in CS&H for the period 2003–2013, in aggregate and by source and type
- Assets density per local authority
These composite indicators potentially allow identification of the components of CS&H assets and investment which may lead to particular impacts.
As with dependent variables, we interchangeably tested respective independent variables. The variables used in each model are specified in the respective model.
3.2.3 Control variables
In order to test the impact of CS&H assets and investment, it is necessary to account for other push and pull factors affecting firms’ location decisions as well as other socio-economic characteristics which may affect sector performance and size at the local authority level. We collected a range of control variables for this purpose.
The control variables are not exhaustive. Indeed, the choice has been subject to data availability at local authority level. We also attempted, inasmuch as possible, to collect information which is available for multiple years. Although numerous control indicators were explored (see section 8: p.85), those ultimately used for the quantitative analysis include: Wider economic performance The wider socio-economic performance of local authorities may obviously play a critical role in a) attracting businesses, b) the birth of new businesses and c) business performance (e.g. aggregate turnover).
Availability of human capital The availability of human capital is important both in terms of attracting existing businesses and the creation of new businesses.
Transport infrastructure Transport infrastructure may be a factor in economic development, providing better access to jobs and markets, as well as reducing costs of production.
Network infrastructure Network infrastructure may be a crucial pull factor for digital or media businesses. Digital and technology companies are an important driver of current economic performance in the UK.
Housing density Housing density was used as a proxy for the degree of “urbanity” of respective local authorities. This may indeed influence business location, either as a push or a pull factor. The push component may be linked to higher premises prices in densely populated areas. The pull component may consist in wanting to locate in densely populated urban centres rather than in semi-urban or rural local authorities.
Population The ‘size of the market’ can be represented by the population.
Wellbeing Beyond strictly “hard” economic push and pull factors, other aspects may also attract firms or constitute enabling conditions for businesses. For example, areas of high wellbeing may constitute a pull factor for entrepreneurs – and by extension for firms.
3.2.4 Spatial considerations In additional to control indicators, we also derived proxy indicators to make the geographical distinction between different groups of local authorities. Indeed, it may be challenging to understand the impact of CS&H assets and investment by simply aggregating all local authorities, regardless of whether they are predominantly urban or rural, or indeed located in major urban centres or not.
Areas more central to cities may tend to have more listed buildings, and a higher concentration of firms. Therefore, effects of the impact of cultural and heritage assets on economic development in an area may relate to the fact that both are more likely to occur in centrally located local authorities in urban areas. In larger urban population centres with multiple local authorities, the distribution of listed buildings is important, and thus results are sensitive to geography.
To account for these differences, we grouped local authorities into two categories, to test if results varied in different areas:
- Those which form part of a major urban centre (even if partially), including Greater London Those which contain no urban centre at all, i.e. those which are predominantly rural
This clustering allowed us to provide aggregate estimations for each of the regressions run, and to test relationships for different groups of local authorities. The results were run separately in the panel data for local authorities in rural and urban locations, to account for these differences. These are reported for the creative firms analysis, where it can be seen that results do not vary significantly whether the Local Authority contains a major urban centre or not.
3.2.5 Temporal considerations
Some of the data was only available at a single point in time, and was not available longitudinally. Therefore we estimate two sets of models:
- Cross-sectional models
- Panel data models
Cross-sectional models are estimated using point in time data for 2013 only. This allows more variables to be included.
Panel data models allow us to test data over multiple points in time, although fewer variables can be tested. This has a stronger causal interpretation, as we can control for unobserved area-specific agglomeration effects (i.e. any time-invariant characteristics of an area for which we do not currently have data but may be skewing results).
Table 1 shows the variables for which we have single or multiple points.
| Table 1: Data types | |---------------------| | Cross-sectional data | Panel data | | Heritage assets density (natural assets and listed buildings/monuments) | Per capita investment in CS&H | | Sports assets density | Employment rate | | Libraries | Proportion of skilled employment | | Life satisfaction | GVA | | Transport infrastructure | Size of the market (population) | | Network infrastructure | Housing density | 4: Econometric analysis and findings
This chapter sets out the results of our econometric analysis. Although some results are promising and there are clear links between some variables and CS&H assets and investment, results are not always consistent across models or specifications. Therefore the chapter concludes by discussing some important caveats of the results.
4.1 All firms
We first present the results of our analysis of the relationships between CS&H assets and investment and local economies as a whole (including all firms). As this is an analysis that – to the authors’ knowledge – has not been considered econometrically before, these results are highly exploratory and should be considered a starting point for future research.
All models are estimated using data for the year 2013.
4.1.1 Cross-sectional models – all firms
The results for the relationships between all firms’ turnover, concentration and migration and CS&H assets and investment are presented below in Table 2.
The number of firms per capita is strongly and positively associated with heritage assets density, and cultural events per capita. Net migration of all firms is also strongly and positively associated with cultural events per capita. These results are robust when considering local authorities in major urban centres, as well as those that aren’t – this is an important result as it suggests a direct relationship, and not simply that agglomeration is driving a high level of both cultural events and a greater concentration of industry.
Investment in CS&H is in general negatively associated with indicators of all firms’ economic performance, although it is only significant for local authority investment and number of firms per capita.
Number of firms per capita is also significantly associated with the employment rate, the availability of skilled labour, housing density, transport infrastructure, GVA per capita and population size. The most significant variable is GVA per capita – however, this variable may be subject to simultaneity bias as it is reasonable to assume the number of firms per capita may contribute to GVA per capita. Table 2: All firms and CS&H assets and investment
| Variable | Number of firms per capita | Turnover (all firms) per capita | Net migration of firms per capita | |-----------------------------------------------|----------------------------|---------------------------------|----------------------------------| | **Assets** | | | | | Heritage assets density | 0.031\*\*\* | 0.050\*\* | 0.015 | | Sports assets density | 0.092 | -0.040 | 0.057 | | Cultural events per capita | 0.211\*\*\* | 0.104 | 0.210\*\*\* | | Libraries density | -0.068\*\* | -0.007 | -0.086\*\*\* | | **Investment** | | | | | Local authority investment in culture, sports and heritage | -0.051\*\* | -0.081 | -0.013 | | Lottery investment in arts, sports and heritage | -0.013 | -0.027 | 0.002 | | **Additional push/pull factors** | | | | | Employment rate | 0.029\*\* | 0.030 | 0.027\* | | Skilled labour proportion | 0.141\*\*\* | 0.087 | 0.107\*\*\* | | Housing density | 0.409\* | -0.637 | 0.340 | | Network infrastructure | 0.018 | 0.098 | 0.001 | | Transport infrastructure | -0.141\*\*\* | -0.104 | 0.012 | | Life satisfaction | -0.087 | -0.287 | 0.435\*\*\* | | Size of the market (population) | 0.571\*\* | 0.846\* | 0.587\*\* | | GVA per capita | 0.133\*\*\* | 0.891\*\*\* | 0.234 | | **Adjusted R²** | 0.9042 | 0.7903 | 0.8999 |
Source: NEF Consulting
Net migration of firms is positively associated with the employment rate, skilled labour, life satisfaction and population size. These may effectively be thought of as factors that directly attract firms.
Turnover of all firms per capita is associated positively with heritage assets density, and more weakly with population size. It is also very strongly associated with GVA per capita, although as with number of firms per capita, this result may be subject to simultaneity bias.
4.1.2 Panel data models – all firms
Results for the models of the relationships between per capita investment in CS&H and all firms are presented in Table 3. We use a fixed effects model and cluster errors at the local authority level.
Turnover of all firms per capita is negatively associated with per capita investment in CS&H. Lagged investment in CS&H per capita on the other hand is positively associated with number of firms per capita and net migration of firms. Both migration of firms and number of firms variables are less immediately responsive to changes (e.g. firms must make decisions to relocate or start up) than turnover.
The number of firms per capita model has a very low R-squared value, suggesting that the model does not explain much of the variation, although the other two are higher. Other significant variables are skilled labour (for turnover and net migration), and competitiveness and physical activity (for number of firms).
Table 3: CS&H investment and all firms
| | Number of firms per capita | Turnover of firms per capita | Net migration of firms | |--------------------------------|----------------------------|------------------------------|------------------------| | Per capita investment in CS&H | -0.007 | -0.024\*\*\* | -0.001 | | Lagged per capita investment in CS&H | 0.012\*\*\* | 0.001 | 0.027\*\*\* | | 2-year lagged per capita investment in CS&H | 0.000 | -0.000 | -0.000 | | Skilled labour | 0.002\* | 0.021\*\*\* | 0.004\* | | Competitiveness | 0.345\*\*\* | 0.654\*\*\* | 0.120\*\* | | Physical activity (proxy for wellbeing) | 0.034\* | 0.023 | 0.022 | | Adjusted R² | 0.0008 | 0.6345 | 0.4339 |
Source: NEF Consulting
4.2 Creative industries
4.2.1 Cross-sectional models – creative firms
Table 4 shows the location quotient of creative industries in a local authority as a function of the stock of CS&H assets, cumulative investment in CS&H by source of investment and type of investment, and an additional set of push/pull factors.
Both creative firms’ location quotient and turnover is positively and significantly associated with the density of heritage assets, and the number of cultural events listings per capita. It should be noted that, particularly with cultural events listings and turnover, there is a risk of reverse causality: if creative firms hold cultural events, this would be likely to increase turnover.
Both relative concentration of creative firms and creative firms’ turnover are negatively associated with density of sports assets.
Availability of skilled labour, network infrastructure and transport infrastructure are also significantly associated with relative concentration of creative firms. GVA is particularly strongly associated with turnover of creative firms, as is to be expected.
Net migration of creative firms is not significantly associated with any CS&H assets or investment; the only significant variables for this model are network infrastructure and population size. Table 4: Relationships between creative firms and CS&H assets and investment
| Variable | Creative firms location quotient model (2.1) | Creative firms turnover per capita model (2.3) | Creative firms net migration model (2.2) | |---------------------------------|---------------------------------------------|-----------------------------------------------|----------------------------------------| | **Assets** | | | | | Heritage assets density | 0.040\*\*\* | 0.067\*\* | -0.119 | | Sports assets density | -0.200\*\*\* | -0.568\*\*\* | 0.082 | | Cultural events per capita | 0.098\*\*\* | 0.354\*\*\* | 0.159 | | Libraries density | -0.011 | -0.047 | -0.270 | | **Investment** | | | | | Local authority investment in CS&H | -0.000 | -0.061 | 0.006 | | Lottery investment in CS&H | -0.015 | -0.093\*\* | 0.025 | | **Additional push/pull factors**| | | | | Employment rate | 0.028\* | 0.065 | -0.201 | | Skilled labour proportion | 0.085\*\* | 0.463 | 0.331 | | Housing density | -0.241 | -1.131 | -3.94 | | Network infrastructure | 0.132\*\* | 0.369 | -1.060\*\* | | Transport infrastructure | 0.041\*\*\* | 0.055 | 0.069 | | Life satisfaction | -0.211 | -0.017 | 4.341 | | Size of the market (population) | -0.046 | 1.188 | 4.438\* | | GVA per capita | -0.021 | 0.589\*\*\* | 0.003 | | Adjusted R² | 0.2936 | 0.6758 | 0.1383 |
Source: NEF Consulting
4.2.2 Panel data models – creative firms
The relationships between CS&H investment and the location quotient of creative firms is presented in Table 5. Results are encouraging: when controlling for time invariant effects across local authorities. Per capita investment in CS&H is strongly and positively associated with the relative concentration of creative firms, both within and outwith major urban centres. Lagged investment per capita is not significant, but two year lagged investment per capita in CS&H is also strongly associated with the location quotient of creative firms. The employment rate is negatively and significantly associated with the location quotient of creative firms in urban centres and outwith, which indicates that the relationships observed are not simply a reflection of urban agglomeration effects.
Table 5: CS&H investment and the location quotient of creative firms
| | Major urban centres | Non major urban centres | |--------------------------------|---------------------|-------------------------| | Investment per capita in CS&H | 0.025\*\*\* | 0.022\*\*\* | | Lagged per capita investment in CS&H | -0.000 | 0.000 | | 2-year lagged investment per capita in CS&H | 0.367\*\*\* | 0.412\*\*\* | | Competitiveness | 0.299 | 0.543 | | Life satisfaction | -0.012 | -0.001 | | Adjusted R² | 0.0343 | 0.0234 |
Source: NEF Consulting
As can be seen in Table 6, there were no significant results for CS&H investment and net migration of creative firms. Table 6: CS&H investment and net migration of creative firms
| | Major urban centres | Non major urban centres | |--------------------------------|---------------------|-------------------------| | Investment per capita in CS&H | -0.002 | -0.012\* | | Lagged per capita investment in CS&H | 0.012 | 0.028 | | 2-year lagged investment per capita in CS&H | -0.055 | -0.059 | | Competitiveness | -0.123 | 0.265 | | Life satisfaction | 0.998 | 0.682 | | Adjusted R² | 0.0435 | 0.1199 |
Source: NEF Consulting
Interestingly, results do not vary significantly between local authorities in major urban centres and outwith major urban centres. This may be due to the multidirectional effect of major urban centres: for a major urban centre (comprising multiple local authorities) with a high concentration of culture, sport or heritage assets or investments in one particular area, this means some local authorities will contain this concentration, and others will not, so the effect could work in both ways.
Finally we consider turnover of creative firms and investment in CS&H in Table 7. Two-year lagged per capita investment in CS&H is significantly and positively associated with turnover of creative firms in major urban centres, but not in local authorities outside major urban centres. Competitiveness, a measure including GVA, is positively associated with turnover in both cases.
Table 7: CS&H investment and creative firms’ turnover
| | Major urban centres | Non major urban centres | |--------------------------------|---------------------|-------------------------| | Investment per capita in CS&H | -0.023 | -0.022 | | Lagged per capita investment in CS&H | 0.002 | -0.001 | | 2-year lagged investment per capita in CS&H | 0.078\* | 0.054 | | Competitiveness | 0.763\*\* | 0.350\*\* | | Life satisfaction | 0.008 | 0.222 | | Adjusted R² | 0.4590 | 0.5834 |
Source: NEF Consulting
4.3 Other industries
In this section we consider the links between CS&H assets and investment and three other sectors of the economy: the knowledge economy, tourism industries and professional and business services.
There is evidence that CS&H assets are associated with other sectors beyond the creative industries. Both knowledge economy and tourism turnover are significantly and positively associated with higher heritage assets density and cultural events per capita. There will naturally be more economic activity around the tourism industry in areas with high heritage assets and cultural events, as these are tourist destinations. Professional and business services turnover is not significantly linked to culture, sports and heritage assets. There are no significant impacts of cumulative CS&H investment on any of the industries in these results. All are very strongly and significantly associated with higher GVA per capita.
Results are not presented for the panel analysis as investment was not significant in the cross-sectional analysis. Table 8: Relationships between other industries and CS&H assets and investment
| Variable | Knowledge industries turnover per capita | Tourism industries turnover per capita | Professional industries turnover per capita | |---------------------------------|-----------------------------------------|--------------------------------------|---------------------------------------------| | **Assets** | | | | | Heritage assets density | 0.082\*\*\* | 0.099\*\*\* | 0.022 | | Sports assets density | -0.157 | -0.163 | 0.055 | | Cultural events per capita | 0.175\*\*\* | 0.311\*\*\* | 0.144 | | Libraries density | -0.039 | -0.097 | -0.048 | | **Investment** | | | | | Local authority investment in CS&H | 0.005 | 0.060 | -0.095\* | | Lottery investment in CS&H | -0.041 | 0.057 | -0.027 | | **Additional push/pull factors**| | | | | Employment rate | 0.036 | 0.041 | -0.001 | | Skilled labour proportion | 0.406\*\*\* | -0.036 | 0.481 | | Housing density | -0.485 | 0.131 | -0.886 | | Network infrastructure | 0.179 | 0.336\*\* | 0.169 | | Transport infrastructure | -0.179\* | -0.116 | -0.111 | | Life satisfaction | 0.235 | 0.394 | -0.471 | | Size of the market (population) | 0.538 | 0.336 | 0.810 | | GVA per capita | 0.891\*\*\* | 0.640\*\*\* | 0.903\*\*\* | | Adjusted R² | 0.8091 | 0.7147 | 0.7780 |
Source: NEF Consulting
4.4 Technical discussion of econometric approach
The results show some significant associations between the performance of local economies and CS&H assets and investment. In particular, the number of cultural events per capita is strongly associated with measures of all firms’ economic activity, and there is some evidence that CS&H investment is linked to number of firms per capita and net migration of firms. The relative concentration and turnover of creative industries is also strongly associated with the number of cultural events per capita, as well as lagged investment in CS&H in the panel data.
The results should be considered exploratory, and are presented as a starting point for further research. The relationships between variables influencing local economic development are complex, with dynamic interactions and uncertain causality. One future avenue of research could be to use a structural equations approach, making the links between variables explicit. However, this would not be possible without clarifying the theoretical relationships between all variables, which as yet are not wholly clear.
We must be cautious about the findings of these results for a number of reasons. A key concern is reverse causality, i.e. the cause and effect assumptions of our model may be backwards. Our model assumes that higher local authority investment causes improved economic activity. However, it may be the case that economic activity causes local authority investment, perhaps due to increased local authority funds in more affluent areas. This would bias our results to appear significant when they are not. Alternatively, the two variables may appear to be linked but are actually due to some third unidentified factor.
A solution would be to use an instrumental variables approach: i.e. to find a variable that only affects firms through its relationship with CS&H investment. This would allow an unbiased estimation of results, but we have been unable to identify such a variable. This may be an area for further research in the future.
Another area for attention is our unit of analysis, the local authority. Effects of arts, culture and heritage have been found in previous studies to be hyperlocal. As such, the local authority is a comparatively large unit of analysis – however, we have had to balance the need for a local or hyperlocal focus with availability of data. Some CS&H assets and investment data is available at postcode level, or even by grid reference, but such local detail is not available consistently. While economic performance can also be analysed at hyperlocal scales, however, few of our control variables are available below local authority level. An econometric analysis at hyperlocal level has therefore not been possible. The availability of localised datasets which might allow further testing of our models at hyperlocal levels is worth exploring.
A third area where better data is needed is changes in culture, sports and heritage assets over time. Many (though not all) datasets are available only as a current snapshot, which presents a challenge for longitudinal analysis. Therefore, our panel data analysis does not contain many push/pull factors explicitly (our main control, the Competitiveness Index\\textsuperscript{26}, contains many of these factors but aggregated and so specific effects cannot be determined – it was felt it was better to include a more reliable composite indicator, even though the individual effects are masked. However, with better data this would not be necessary.
In the future, further data could be gathered to improve analysis over time: data such as cultural events listings could perhaps be expanded to be longitudinal, for example if data was scraped from the web annually.
Nevertheless, the dataset we have compiled for this study is incredibly rich and detailed, in particular containing detailed breakdowns of types of local authority investment and lottery investment. Culture, sport and heritage are diverse areas and although treated in aggregate in this analysis (effects could not be separated due to collinearity of CS&H variables), it is worth exploring the potentially differing mechanisms of their effects.
An important question that naturally follows on from our analysis is whether CS&H assets and investment generate sustained economic impacts or rather a temporary ‘multiplier’ effect that diminishes over time. It is unsurprising that any investment, including culture, sport and heritage, will boost the local economy in the short term, through the activity it directly creates. However, economies are dynamic and may respond in unexpected ways: in the long term such investment could crowd out other investment\\textsuperscript{27}. We could not answer this question with only ten years’ of data – a longer term dataset would be needed – but this is an important area for further research in the future as more data becomes available; we suggest that data should be collected regularly over another ten years to allow sufficient data for proper analysis.
Note that the broader implications of these results are discussed in more detail in the conclusion (section 5:, p.36).
\\textsuperscript{26} Centre for International Competitiveness
\\textsuperscript{27} Pedroni, P., Sheppard, S. and Wilson, N. (2012) “Culture shocks and consequences: the connection between the arts and urban economic growth”, Department of Economics Working Papers 2012-04, Department of Economics, Williams College. 5: Conclusions: discussion of findings and implications
It has long been recognised that culture, sport and heritage have the capacity to add a great deal to local places and to stimulate community engagement. The existing evidence base regarding these interactions is relatively well developed though studies have tended to be focused on specific institutions or assets (e.g. in order to understand the economic or social impact of a theatre or event), focused on one specific outcome (e.g. house prices), cross-sectional or not UK-based.
This study focuses on a key gap in the evidence base associated with the question of whether, when all local places are examined, an empirical link can be detected between the presence of or investment in CS&H assets and positive economic outcomes.
There are some important contextual points to consider before drawing conclusions from the analysis presented in this report. First, there is no tried and tested methodology for a study of this nature, and our approach has therefore been highly exploratory. The results should be interpreted with this in mind. The study might be considered the first step on a research journey for which the ultimate destination is the gaining of deeper insight into the extent to which, and how, CS&H assets and investment generate positive economic and social outcomes at the local (place) level, and how they contribute to generating the intrinsic benefits of cultural value.
Further, the study places an emphasis on place-shaping. This is a term which is not well represented in the literature. It reflects a more holistic approach to building better places than, for example, placemaking (which tends to be used more specifically to capture local-area based improvement, often associated with environmental design or public realm and/or place marketing and branding).
Addressing the research question has required three significant exercises. Firstly, a review of theoretical/conceptual and empirical literature has helped in identifying analytical techniques and in identifying key gaps in the evidence base. Overall the review found that the most significant gaps in the evidence base were around econometric estimation, in the UK, of the links between CS&H assets and investment and economic outcomes. It also found that other research studies had investigated the link between the creative industries and the density of local culture and other amenities, in attempts to explain location decisions of firms. This was an important finding in that it suggested that a focus on the link between CS&H assets and investment and the creative industries (and other knowledge-based sectors) should be pursued.
The second element was an extensive data collection and assessment exercise. The goal was to gather relevant data that could be used in an econometric model (either as dependent, independent or control variables). This exercise drove a number of decisions relating to the scope of the study, including the spatial scale at which the data should be collected (and therefore the level at which the investigation would take place – i.e. local authority) and the time-series that could be adopted for the panel models.
The third element was the design and implementation of econometric models to investigate the key relationships and interactions (where their design was informed to some extent by the existing literature). Importantly, and recognising that the role that CS&H play in local places should be thought of as an ‘ecosystem’ rather than as isolated investments, the analysis tests push and pull factors that might influence firm location and performance.
The results of this study represent an important milestone in the development of the evidence base around the place-shaping impacts of CS&H assets and investment. Accepting some of the key caveats of the analysis (which we return to below), we have identified a number of statistically significant relationships which highlight the importance of CS&H assets to economic performance in local places.
The analysis examines the relationship between CS&H assets and investment and the performance of local economies as a whole. This study represents the first of its kind in that it seeks to test these relationships on a national scale but at the local level.
We find that the density of cultural and heritage assets was highly and positively related to the density of firms in a local economy, indicating that where there are high densities of theatres, museums, monuments and so on, we tend to find concentrations of economic activity. Further, the density of cultural assets is found to be positively and strongly related to in-migration of businesses, which suggests that such assets are important ‘pull’ factors which influence location decisions. These findings hold regardless of the urban scale at which they are examined: cultural assets are equally important as attractors in non-major urban areas as in major urban areas and this suggests that the observed results are not simply a reflection of general urban agglomeration effects.
We also find that net migration of firms is positively associated with the employment rate, the availability of skilled labour, life satisfaction and population size and these can therefore also be identified as key ‘pull’ factors.
When examining the impact of investment, we find that lagged investment is positively and significantly associated with firm density and net migration of firms.
Examining the relationship between CS&H assets and investment and the creative industries, the analysis finds that there is a significant and positive relationship between the density of creative firms and their performance as measured by levels of turnover, and density of heritage assets and cultural events. We also find that the density of creative firms and firms’ turnover are negatively associated with sporting assets. In other words, the higher the density of sporting assets, the lower the density and turnover of the creative industries. This makes intuitive sense. Firstly, the existence of cultural and heritage assets creates direct commercial opportunity for creative firms, but also adds to the wider amenity value of a place. On the other hand, sporting infrastructure can often be of large scale and located away from commercial/urban centres, which would reduce the likelihood of attracting the creative (or other) industries. The physical infrastructure required to provide accommodation to creative firms may be some distance from sporting and recreation assets.
The analysis also finds that the level of turnover generated by creative firms is positively associated with availability of skilled labour, network infrastructure and transport infrastructure. This implies that places with these attributes are likely to be more successful in nurturing a successful creative sector than those without.
There is also evidence that investment in CS&H assets is strongly related to concentrations of creative firms, both within and outwith major urban centres. Similarly, lagged per capita investment in CS&H is also positively and significantly related to creative firms' turnover. In other words, places where higher CS&H investment has occurred are also places more likely to see a growth in the density of creative industries.
There are two key messages to take from this research. Firstly, the data and analysis undertaken has delivered evidence which demonstrates positive and strong relationships between CS&H assets and investment and positive economic impacts for local places, especially when it comes to impacts associated with the creative industries. We therefore conclude that whilst there is more research to be done, the emerging evidence is that the existence of and investment in CS&H assets can be seen to be important influencers of place-shaping. The precise mechanisms through which this influence is exerted (i.e. the nature of the impact ecosystem at an asset/investment and local level) require further investigation. However, we can clearly see that places that contain a greater density of CS&H assets and receive higher per capita CS&H investment are more likely to build a strong creative sector. They also are able to attract businesses to locate in local places more effectively than others and/or slow the rate at which businesses out-migrate to other locations. This is consonant with Markusen's findings on creative placemaking in the USA where cultural consumption was also higher in these areas as a result of this clustering and ecosystem.
Secondly, the absence of stronger evidence of relationships and associations should not necessarily be interpreted as an absence of impact. The data and methodology limitations of the study mean that the relationships are yet to be fully explored. Further research is needed to fully examine the relationships suggested by this study.
Caution should be applied because of the limitations of the research. For example, the analysis is limited by data availability. Reverse causality may be an issue in some of the results (for example, our model assumes that local authority investment is a driver of local economic performance, but high local investment may occur where there is a higher concentration of firms). This could be addressed through further study focused on an instrumental variables approach.
There is much further scope for future research in this field. Future econometric modelling approaches would be enhanced if a number of data limitations were resolved. Firstly, availability of a wider range of variables at local authority level – or, better, availability of key variables at spatial areas smaller than local authority – would be very advantageous. In particular, a wider range of control variables would benefit further research. However, given the source of much of the data is the public sector, this would require a significant investment in creating survey sample sizes which are robust at, for example, the middle super output area level. It is unrealistic to believe that such an investment is viable or likely at present, but development of such a range of data would open up a range of new analytical options for this and other studies which examine local impact.
Meanwhile, it is perhaps worth investigating the availability of localised data – for example, detailed local authority investment data and/or venue data (ticket sales, participation data, etc.) may be available on a consistent basis for a number of areas sufficient to allow econometric analysis of the kind undertaken in this study. Control variables are a key concern, however, given issues relating to the reliability of sample surveys at localised levels; any investigation of localised data will need to take this into account.
A third area where better data is needed is on culture, sports and heritage assets over time. Data capture using digital techniques could be employed to enhance the longitudinal data on assets over time, for example using regular web-scraping to collate time-series data on cultural events each year, to enhance one of the indicators used in our analysis.
Finally, the question of whether impacts are temporary or sustained is impossible to resolve with only ten years of data – and the time-series was limited by the availability of data. There is therefore a future opportunity to examine the question of impact permanence as more and more data points are added to these time-series in order. 6: Appendix I – Literature review
6.1 Introduction
This review was undertaken during the early stages of the research. It is not a comprehensive ‘annotated’ literature review or meta-analysis of the role of culture in place-shaping, although it is observed that a systematic meta-analysis is now required given the number of partial literature and evidence reviews that have been undertaken over the past 15 years. These have been limited by their sectoral and methodological focus, their coverage and geographic scope – making it difficult to compare art, sport, heritage and other sectors and the scales of impact.
The literature review was undertaken as a ‘rapid review’ with the benefit of prior reviews, notably our Art the Possible feasibility study undertaken for the CASE programme in 2011 which looked at literature on CS&H impacts and underlying quantitative methods and data availability. More recent reviews include Evidence Review: Sport and Culture (WWCLEC, 2013); Local economic impacts from cultural sector investment (ECORYS, 2014); Understanding the value of arts & culture (AHRC, 2016); The Warwick Commission on the Future of Cultural Value (Warwick University, 2015); Quantifying the Social Impacts of Culture and Sport (DCMS, 2014) as well as earlier reviews of Social Impacts (CCS, 2005; Reeves, 2001) and Culture and Regeneration (DCMS, 2004). The review has drawn on these sources as well as published material in the form of journal articles, books/chapters and research reports, primarily (but not exclusively) from the UK and North America. As well as evidence in the specific field of public culture, sport and heritage, research in economic and related fields such as regional innovation/competitiveness (e.g. clusters), health and wellbeing, and placemaking were also considered to the extent that they may contribute to a conceptual framework and potential modelling of CS&H impacts on place-shaping.
To complement the initial literature review, a further review of a number of specific studies which contribute empirical evidence to the debate around the impacts of CS&H assets and/or investment was also undertaken. The findings of both reviews are presented together here.
6.2 Cultural Assets
Culture, Sport & Heritage assets can be conceived and valued in four ways, as:
- Amenities
______________________________________________________________________
28 For example, the Evidence Review: Sport and Culture (2013) analysed only 37 publications of which over 90% were Sports based and predominantly from the USA; Local economic impacts from cultural investments (ECORYS, 2014) analysed 40 studies only four of which were non-UK/Ireland based.
29 CASE Programme (2011), The Art of the Possible – using secondary data to detect social and economic impacts from investments in culture and sport, a feasibility study. The role of culture, sport and heritage in place shaping
- Economic generators and attractors
- Social and Cultural capital-builders
- Cultural value-givers
Generally speaking these assets are primarily amenities in that their main ‘cultural’ aim and objective is to provide arts, sporting and heritage activities, experiences, ‘intrinsic cultural value’ and resources, whilst their economic and social impacts can be considered in most cases to be external spin-offs to their core purpose. This is important in any consideration of the economic and social values attributable to CS&H assets since these are not anticipated or normally required outputs. As amenities with or without significant quantifiable economic and social impacts, their role in place-shaping and contributing to the value of everyday life is however fundamental, if often under-valued, and this review seeks to assess these values in tangible terms. The term ‘assets’ is appropriate here, as both inclusive and positive, but also consonant with the Physical Cultural Asset Mapping approach developed for CASE (2010) and in Living Places and cultural planning generally (Evans, 2008). This concept informs the classification and identification of CS&H assets in the study in terms of available and consistent data.
6.2.1 Public, Merit and Private Goods
These three value systems are not of course exclusive (although treated as such in the literature and in planning), with CS&H provision ranging from public goods (‘free’ to users e.g. public parks, libraries, museums); merit goods (low/subsidised price to users, e.g. most arts, cultural, heritage, sports) to private goods (full cost, commercial entertainment, e.g. cinemas). Providers of these CS&H goods encompass public (local, national), voluntary/third sector (charities, trusts, associations) and private enterprises (large and small). Organisational structures range from national networks and chains (e.g. National Trust, Odeon cinemas, David Lloyd Sports Centres, Virgin Gyms), to municipal and voluntary provision serving a local catchment. Some local provision may be the subject or product of standards (population or space-based) such as libraries, parks, sports facilities which have influenced their location, scale and catchment, but others effectively were not planned in this sense (most arts and heritage provision). One type of asset may serve a local user group whilst another may be focused on the visitor economy. For example, an elite national sport facility and a local community sports venue will have very different footprints and impact profiles. Many CS&H facilities nevertheless will serve a mix of local (however defined) and non-local users and potentially, wider beneficiaries.
6.2.2 Valorisation
Economic values are often ascribed to CS&H assets, but rarely their amenity value (see 1.4 below for social impacts). Amenity valuations are very occasionally undertaken and the subject of cost-benefit analysis exercises using contingent valuation/willingness to pay (WTP) estimates (‘stated preferences’), for example the value placed by the public/users of parks and open spaces, sports and recreation facilities, museums, and access to nature (e.g. woodlands, water).
30 www.gov.uk/government/uploads/system/uploads/attachment_data/file/71127/DCMS_Mapping_Toolkit.pdf Specific impact studies into the effect on property prices from sports facilities and environmental amenities have applied ‘hedonic pricing’ analysis of properties in close proximity to these assets. Several studies were investigated in our Art of the Possible study (TBR, 2010) based on research into amenity valuation, e.g. parks and green space commissioned by CABE (2007) and GLA (2003 and Varma, 2003). More recently the National Ecosystems Assessment (NEA, 2011) has developed measurements of Cultural Ecosystems Services (Plieninger et al, 2013), i.e. the value of “nature/natural heritage” (NEA, 2010) which will be analysed below. A number of studies have been published into the effect on property prices attributable to new/upgraded sports facilities in the USA and Germany. A qualitative study of the new Manchester City and Cardiff Millennium stadia was also carried out using a small sample by Davies (2005). Since 2010, one study using property prices has been published on the impact of the new Wembley and Arsenal stadia (Ahlfeldt, Gabriel & Kavetsos, 2014). These studies need further analysis for our purposes, but an observation is that the hedonic pricing model has not been verified with householders to attribute the location decision or value added to the new facility. For example, in the case of the Arsenal and new Wembley study, important factors have not been taken into account in relation to the local and sub-regional property market, regeneration effects, morphological variations, density or displacement effects.
The contingent valuation approach has been in particular informed by environmental economics and in cultural economics, mainly applied to museums (Noonan, 2003). Willingness to pay studies are used to assess the value of ‘free’ cultural and natural heritage facilities, for example English Heritage has carried out WTP studies of two heritage sites (Castle Priory and Walmer Castle/Gardens) on users/members and non-users (ECORYS, 2014) which can be used to estimate the financial value of annual visitors. This approach can also distinguish between residence (local, visitor) and socio-economic characteristics, estimating values from local and non-local beneficiaries. For example, Bolton Museum, Library & Archives undertook a WTP survey of users/non-users. Museum users estimated the value of their visit at £2.77 per month and non-users at £1.14 per month. The total value of the city’s MLA services was put at £10.4 million (£7m users, £3.4m non-users), 1.6 times higher than the amount of public funding received (Jura, 2005).
Stated preferences are seldom actually tested through revealed preferences, i.e. what beneficiaries subsequently paid for a ‘public’ (or subsidised ‘merit’) good that was previously free or at a lower price. However, in an earlier willingness to pay study conducted for the Arts Council, a majority of existing arts attenders said that they would pay more for Dance, Opera, Drama with 21% willing to pay more for Ballet, 34% for Opera, 37% for Drama, and 44% for Drama in Rep. During this decade (1987–1998) increased ticket yields at major performing arts venues saw average prices paid increase by 27% (Ballet), 44% (Opera), 27% (Drama) and 22% (Reps). There appears to be a correlation therefore in this case between willingness to pay and actual payment of a higher price, although how this effects the distribution and behaviour of audiences is an issue, e.g. a possible narrowing of audience profiles – in this case, 35% of respondents said that they would go less frequently (ACE, 2001; Evans, 1999). Capturing latent ‘willingness to pay’ for C&HS facility usage will nonetheless be one measure of value placed on these assets. These impacts need to be extended to a wider range and type of CS&H assets and reflect other environmental factors. 6.2.3 Economic impact
CS&H assets also have a direct and indirect economic value irrespective of their status and the services provided, since – except in very few cases (i.e. entirely voluntary, free provision) – they employ staff, contractors, purchase goods and services, and many will charge for services. Even public goods also generate income, e.g. via hire fees (e.g. pitches, room/facility hire, training), special exhibitions (museums and galleries) and events, and through trading activity, notably hospitality, shops, bookshops, sponsorship, etc.
Most impact studies using Economic Impact Assessment (EIA) focus on these economic outputs arising firstly from investment in the capital phase (e.g. construction/supplies), and then from subsequent and ongoing operational income and expenditure flows. These studies are generally carried out by applying multipliers to direct income and jobs generated and money circulating in the economy through spending by users/visitors, and to direct expenditure generated by the organisation though salaries and purchase of supplies – and the subsequent (indirect and induced) spending in successive rounds as employees and suppliers re-spend part of these receipts in the economy. Practical challenges to these exercises start with basic data collection of direct income and expenditure, then how this is distributed in the (local) economy with significant leakage of these benefits out of the ‘area’ likely. This of course depends on the size of the area and the extent of goods & services imported from outside of the area, including from abroad. In more sustainable place-shaping cases, the strength and diversity of the local/regional economy will minimise leakage and may also better support endogenous growth and innovation through these and genuine cluster effects (e.g. knowledge spillovers, valued added, scale benefits).
An EIA study was carried out for the Anvil Arts organisation (concert and theatre venues) in Basingstoke, Hants in 2010. This assessment used financial and management data and accounts to measure spending and its distribution, followed by an online survey of users (n=2,000) to estimate their spending in the local area in addition to ticket purchases. Estimates were made of spending by visiting performers based on their records and standard allowances. Together the value placed on the organisation produced a gross economic output of £6.2m. After factoring in additionality and multiplier effects using benchmarks (BIS) taken from the sub-regional level (not available for single LA level), the net economic impact was £5m (ACE, 2012).
Sectoral or macro-economic ‘footprint’ studies have also been carried out on behalf of government and funding agencies, calculating the importance of a particular domain or ‘industry’ to the national economy (e.g. UK/GB, Scotland), such as the arts (Myerscough, 1988), sport (e.g. LIRC, 1997), heritage (English Heritage, 2010; 2014), libraries (ACE, 2014) and sub-sectoral studies including theatre, cultural tourism, sports events, festivals, the BBC (ACE, 2012), and investment in funding programmes, e.g. Lottery (arts, heritage – e.g. Evans, 2007; GHK, 2009). These are replicated at regional level, whilst cities and local authorities periodically undertake ‘audits’ of specific sectors as part of policy and planning strategies. Attention here has shifted towards the creative economy/industries and this incorporates some arts, heritage and events activity. The extent to which CS&H assets contribute to the wider creative economy and production chain through cluster effects and labour/skills markets therefore needs to be considered (below). It should be noted that CS&H activity and provision provide much of the “cultural content” on which the creative and digital media industries rely – from live arts, heritage to sports. In this sense football and other stadia serve as the “theatre” which is fundamental to the live sporting experience and its transmission via the media, with spectators the crowd “extras” – and therefore a key component in the monetisation seen in Premier League broadcast rights. A similar association can be made between historic houses and heritage sites which serve as backdrops to TV and film drama productions. This also materialises through film locating at these historic and other cultural sites, which generates income not only for the heritage and other venue organisations, but local authorities and local businesses and in future visitor activity associated with the film, e.g. Harry Potter and Alnwick Castle.
Macro-level sectoral studies tend to rely on these same multipliers of income and employment, except where sector/industry specific multipliers are available, e.g. trade/employment, GVA (e.g. ACE Lottery Employment study – Evans, 1997), or where survey data is generated as in the economic impact studies noted above. However, they are not generally place-based or attributable to specific supply. National studies also use Input-Output (I-O) tables, but at regional and local level these are not available or appropriate. National Income Accounting (NIA) is however used since it can derive sectoral data to produce localised GDP. This measures the flow of goods and services produced in an economy taking into account income and expenditure from the production of goods and services; total expenditures on consumption; and added value (net output).
In a study of the economic significance of the sport sector in Sheffield, NIA data was divided into Consumer, Voluntary, Commercial and Non-Commercial Sport, Local and Central Government sectors. Income and Expenditure profiles were derived for each of these sectors, with value added estimated from wages/salaries plus factor costs and profit. A survey of consumers in the first three sectors was undertaken by postal survey of Sheffield residents randomly selected from the electoral register. The focus of this survey was sports behaviour with a follow-up questionnaire on participation in sport over the last 12 months and consumer spending on sport. The analysis found that sports-related activities accounted for 4.11% of the city’s total GDP (three times larger than the proportion of value added from this sector to the UK as a whole) with the value added of sport-related activity estimated at £165m (Davies, 2002).
In all cases, taking into account displacement effects and counterfactual scenarios requires a comparative and ideally a ‘control’ to be used. Methodologically, finding suitable comparators and controls (‘with’ and ‘without’ CS&H investment/infrastructure examples) can be limiting. In practice economic impact studies are undertaken at single facility level (including ‘events’) where income and expenditure originates and can be attributed. Scaling this up over larger areas and a number of separate CS&H assets may therefore require econometric modelling. 6.2.4 Social Impacts
A third value set can be considered for CS&H assets – these can be expressed as intangible and external effects arising from the presence or activities of a facility (or group of facilities), over and above their direct economic impacts (actual and imputed). These externalities might include a range of social benefits in education/skills, health/well-being, social capital and cohesion, reduction in crime/anti-social behaviour, environmental benefits etc. (see Evans, 2005 and Evans & Shaw, 2004 for a range of social, economic and physical impacts arising from culture in regeneration). These too, over time, might influence location/retention and investment decisions. Capturing and attributing these effects and their distribution is problematic – most evidence in this field draws on qualitative, process-based evaluation studies of particular programmes and interventions. Evidence on culture and sports projects targeting specific social issues, e.g. crime prevention/recidivism, suggest that behavioural change/impacts beyond the life of a time limited intervention are hard to sustain (Evans & Shaw, 2001). In CS&H investment and infrastructure terms, place-shaping effects are therefore more likely to be evident where a sustained programme (rather than short term activity e.g. one-off events) is available, with positive effects embedded over time – social and economic. This may include reputational advantages associated with particular CS&H assets and places.
The literature and case studies on social impacts has expanded since the 1990s with several reviews (Reeves, 2002; Jermyn, 2000, 2001; Evans & Shaw, 2000; Comedia, 1999; Matarasso, 1997, 1999; DCMS, 1999; 2014; Daly, 2005) and indicators developed for organisations to capture these effects. This focus has also been reinforced through national administrative datasets and indicators around quality of life and satisfaction/best value studies carried out periodically by local authorities. These surveys assess resident satisfaction towards bundles of cultural assets, i.e. all the theatres/concerts halls/arts venues; museums and galleries; parks; sports centres; and libraries, etc. in the local authority area. Whilst resident satisfaction and general impacts are based on supply-led factors attributed to CS&H facilities, culture and sport participation and user data is captured via various survey samples – for example Taking Part, Active People and social surveys (ONS, e.g. UK Time Use Survey). However, these surveys are non-place specific, i.e. there is no link made to where or what audiences/participants actually inter-acted with (in Taking Part this could well have been abroad on holiday, as in the UK); this means that there is no direct way of linking supply and demand relationships from these data sources (Evans, 2015).
Individual funded venues and organisations do provide user information and performance indicators as part of funding reporting, although this is not likely to include the spatial reach, impacts or externalities generated by each project. Access to this data may be required in order link these to place-shaping effects, and in order to aggregate or scale up (e.g. Arts Council, Local Authority ‘clients’). Such data is not likely to be made available in any event for unfunded and commercial organisations. This point is relevant to this study in terms of measuring usage and ‘flows’ to specific places and the intensity of access and usage across different areas (districts, towns, cities, regions). Mapping place-participation and provision
There have been some novel advances in investigating the spatial relationships between the supply, location and usage of cultural venues as part the CultureMap London initiative and Audience Development agencies (Boyle, Flowerdew and Brook, 2008). In a negative sense, the barriers to access and participation are well established if perennial – social/demographic, ‘class’, education and access divides (Warwick Commission Study, 2015). The CultureMap web-based resource produced online maps of cultural facilities, population profiles and audience penetration from participating arts venues in London. This specialist planning tool responded to the need to map both cultural provision and link this to actual usage and population typologies and catchments. CultureMap created a series of web-accessible maps of arts and community cultural provision and audiences for a range of participating cultural facilities city-wide down to ward levels, alongside demographic and other population data. Valuable primary data was also generated by collaborating arts venues capturing audience profiles in a common format. This online tool could also reveal gaps in provision and participation, drawing on secondary and primary surveys revealing interesting correlation between audience and venues types and locations. This spatial variation within a region is illustrated visually (Fig.1) in The Audience Agency’s analysis of the concentration of audience penetration in Greater London based on ticket ‘bookers’ to events and user address information from 35 participating venues (Audience Agency, 2015). Central/inner west London dominates both in the supply of cultural venues, but also in generating demand, with outer east and west areas showing lower attendance – a combination of poorer access including public transport and much lower levels of provision. However some ‘outlying’ cultural venues also demonstrate high audience participation from their local area, particularly where offering a range of accessible cultural programming/art forms.
Figure 2: London wide map showing performing arts venue distribution and audience penetration
Source: Audience Agency, 2015 To date, the *CultureMap* project has developed the most valuable evidence and information on the relationship between certain arts provision and attendance in a demographic and spatial context. This includes facilities such as libraries revealing their important role in attracting a local and socially cross-sectional user group, whilst key local venues serve a high frequency local catchment, and other venues draw users from a wider area, particularly areas with few cultural facilities and venues offering specialist programmes (e.g. Asian arts).
Libraries also offer a good litmus test of participation of a local population through the library/swipe card with user address details. Whilst the full range of services actually used is not distinguishable (and is therefore understated) without further survey data, this does provide a clear indication of the geographic catchment in terms of households, and therefore socio-demographic analysis. An example of utilizing local data to profile library catchments is Hampshire County Council’s Public Library User System (PLUS). This creates user profiles for each library, combining data on users/visitor activity, behaviour and attitudes – profiled by postcode – with census, deprivation and lifestyle data (e.g. ACORN, MOSAIC). This creates user profiles, defining the demographic for each library catchment and highlighting the difference between users and the actual community through a ‘community variance index’ (Dorward, 2006). An example of catchment and population usage is illustrated through an analysis of library provision in Gateshead (Fig.2). This reveals which areas of the borough attracts comparatively higher and lower library usage in proximity to library facilities. Local provision is clearly important to actual usage, but variations are apparent between areas where library facilities are similar. This information in turn can be analysed by household and demographic profiles, and can suggest where there may be gaps in provision and where accessibility and quality issues may be constraining or encouraging usage, and where place making (all else being equal) may be more successful.
**Figure 3: Gateshead Library Usage**
Source: analysis by Orian Brook for the ‘Understanding Everyday Participation’ project using data supplied by Gateshead District Council. Acknowledgement: map supplied by *Understanding Everyday Participation – Articulating Cultural Values*. Funder: AHRC. Project ref: AH/J005401/1. PI: Dr. Andrew Miles. Places that are better at overcoming some of the barriers to participation – social, spatial, economic, cultural, physical – may therefore be worth identifying and analysing in detail (e.g. ‘good cultural places’) since they are more likely to contribute to place-shaping. This will include cultural assets that are highly valued locally and maintain a high frequency of usage from a local catchment notably sports facilities and arts centres (see below). A key question is the extent to which cultural activity through attendance, participation and consumption is supply-led, and therefore, where there is quantifiably more or less provision, activity levels can be attributed and distinguished between places over time.
6.2.5 Cultural Value
The intrinsic values that can be observed through our experience of the arts in various forms has received renewed attention, in some respects in response to the sustained trend since the 1980s towards a more instrumental approach to measuring and valuing the impact of the arts and culture though the ‘externalities’ noted above (Holden, 2004). As also noted, cultural assets are primarily amenities with amenity value which is not necessarily quantified or quantifiable, although social and economic impacts and benefits obviously derive from their provision, including opportunities to experience culture and derive personal cultural value as a result. In the words of the Arts Council: ‘When we talk about the value of arts and culture to society, we always start with its intrinsic value: how arts and culture can illuminate our inner lives and enrich our emotional world. The concept and importance of cultural value has featured in important studies of arts in education (Robinson/NACCCE, 1999; DEMOS, 2003; the Warwick Commission Report (2015); AHRC, 2016) and in some respects it is hard to separate social impacts from cultural impacts at the level of the individual. These are also likely to lead to behavioural changes and decisions which in turn can effect cultural consumption and participation and in some situations, location decisions – with direct economic effects arising. Cultural value is recognised in the AHRC review for instance in terms of the ability of arts and cultural engagement to help shape reflective individuals thereby facilitating greater understanding of themselves and empathy for others and diversity, as well as producing more engaged citizens, thus promoting civic behaviour and expression. Culture in this respect can be viewed as the fourth ‘impact’ domain (economic, environmental/physical, social, culture) and one that has been taken for granted or at best is ‘implicit’ in evaluation and impact studies, including in the field of placemaking/shaping. This is consonant with the sustainable development agenda where culture is now accepted as the ‘fourth pillar’ (Hawkes, 2001). Initiatives such as Agenda 21 for Culture (UCLG, 2008) have thus promoted the centrality of culture to sustainable development:
… “Culture in sustainable development” is not only about “using artists to raise concern on climate change” or about “building cultural venues that are efficient in the use of energy and natural resources”. It is not only about the income that cultural industries can bring to the economy. It is not about “asking more” to the cultural circles. These are very important questions that need to be addressed, but they do not articulate the core question. The role of culture in sustainable development is mainly about including a cultural perspective in all public policies. It is about guaranteeing that any sustainable development process has a soul (UNESCO 2009, 6). The AHRC *Understanding Cultural Value Project* report is based on the findings from research studies funded under this programme, which included 46 primary research projects and over 25 critical reviews and workshops, supported by selected literature. Although neither a systematic review nor an in depth programme evaluation (and not itself ‘peer reviewed’ but undertaken by the funding body itself), the review has raised key issues about the nature of evaluation and measurement undertaken of the role and effects that arts and culture has through engagement, and where questions still remain largely unanswered. The issue of ‘place’ is not central to the review, although the ‘home’ is highlighted as an important and under-researched area. The intrinsic value to be gained from engagement with arts and culture is a common theme however, and this can both generate new ‘demand’ and release latent demand, in contrast to the more supply-led focus of culture-led regeneration. The report also concludes that the divide between the type of ‘supply’ (public/funded, private/commercial, voluntary/amateur, etc.) is less useful in determining how and what values are derived from cultural engagement and this is important in considering the difference that cultural assets can make to place-shaping, i.e. all assets in a place can potentially shape and contribute to a ‘creative place’. Access to cultural experiences and opportunities for cultural expression are, as this review confirms, uneven (including in the home) and both the generation of ‘demand’ and the cultural ecosystems that can flourish at varying levels require different modes and places of engagement in proximity to where people actually can access cultural activity.
### 6.3 Scale
This all begs the question of scale. Amenity, economic, social and cultural value and impacts may be attributed to individual CS&H assets based on bottom-up data and evidence, and to clusters of CS&H assets. These may be within the same sphere, e.g. clusters of arts and entertainment venues; heritage venues/sites; sports & recreation facilities, or combine one or more of these. Some facilities of course provide dual or mixed use activities, e.g. arts/entertainment and sports, arts and heritage, heritage and sports, or all three of these. Within these cultural fields there may be a case for distinguishing between types of activity and assets, e.g. art form, sport, heritage type, etc. as well as size and scale (area, catchment).
#### 6.3.1 Local area
Clusters of CS&H facilities can firstly be considered at a local area scale identified with particular districts such as cultural quarters (e.g. museum quarters, heritage quarters) which may also congruent with planning designation such as conservation areas, heritage sites (e.g. World Heritage Site delineation). Large sports venues may form part of a complex of facilities (e.g. Wembley) and support a range of other services and outlets in close proximity and CS&H facilities can also be co-located in or adjoining parks. A concentration of facilities representing a ‘critical mass’ is familiar in retail (e.g. high streets/markets/malls), university districts, business & science parks and in other land zoning (industrial, housing, recreation, town centres, etc.). In planning and infrastructure provision these zoning and land uses influence (or try to influence) location decisions and investment, e.g. transport and to a lesser extent, recreation and some larger cultural facilities. These clusters of co-location can be both consumption and production based and there are increasing examples of a convergence between the two, for example in the Digital Shoreditch area (and putative Tech City swathe) of east London which hosts a large number of established arts and digital media enterprises, alongside a vibrant independent retail, club and event scene, and co-located financial and advertising services district. There are similar examples in cities such as Brighton and Manchester, as well as in cities such as Amsterdam, Barcelona and Berlin, all with strong place-shaping effect, and extending existing city place brands (Evans, 2015; Foord, 2012; Kloosterman, 2013).
6.3.2 Local authority
At the next spatial scale: local authority or district administrative unit, a council area will contain a number of CS&H assets, with larger venues normally concentrated in town or equivalent centres, and which might be seen as a feature of the ‘place’ and related place marketing and resident satisfaction (i.e. “town/borough x has a good quality and range of CS&H amenities/facilities”). However, this does not represent a cluster in the economic ‘market’ sense (where the economic ‘sum of the parts is greater than the whole’), but with data available and generated at borough, ward and lower super output area (LSOA) level, this might serve as a viable unit for comparison, given the use of benchmarking applied at this scale (e.g. by CIPFA), including data from Census, lifestyle (e.g. MOSAIC, ACORN) and participation surveys, e.g. Active People. The Active People Survey provides a range of participation data at local authority level with a simple arts participation question added between 2010 and 2012 providing an opportunity to combine/compare arts and sports participation data by local authority during this period.
6.3.3 Sub-regions
Sub-regions have also been identified particularly in economic development and regeneration programmes to better represent clusters of activity, employment and communities which cross borough boundaries (i.e. are made up of selected wards across two or more boroughs). An example is the City Fringe in east London (three boroughs), one of the government’s City Growth Strategy (CGS) areas, which prioritised cultural and creative sectors and hubs. Another sub-regional example includes housing growth areas such as Milton Keynes South Midlands (MKSM) and Partners for Urban South Hampshire (PUSH) both of which developed extensive culture and sport strategies on a spatial basis linked to new housing investment, e.g. North Northants/Corby. Again data at this level may be available linking investment with place shaping outcomes and change. Another spatial concept is that of ‘polycentric regions’, more familiar in countries such as the Netherlands (Meijers, 2008) and Germany (and to a lesser extent France – Puissant & Lacour, 2011). This model has a more even distribution of services and facilities rather than concentrating these in monocentric towns/cities. In CS&H asset terms this would mean that some towns would have some types of facilities and others would have complementary ones (rather than duplicating). One could perhaps look at some English regions with several cities and large towns as partially polycentric where there is some CS&H specialisation within these, e.g. Leeds-Sheffield-Bradford; Manchester-Liverpool and Glasgow-Edinburgh-Dundee. The Scottish national policy in fact focuses on six “Vibrant Cultural Cities
31 www.artscouncil.org.uk/what-we-do/research-and-data/arts-audiences/active-people-survey/ characterised as: *first and foremost a liveable city – a place where highly skilled and highly mobile people choose to live. A vibrant cultural city also attracts new investment and is a place that people choose to visit because of its cultural, social and retail diversity and the diversity of its people. It is a place where a nation’s heritage is displayed and will evolve. The world’s most successful cities have an identity that reaches out across different markets and customers and that tells a unifying story about the value the city can add to the activity that is looking for a home*” (Scotland’s Cities, 2011).
6.3.4 Region
This leaves us with the regional scale (not ignoring sub-units such as counties which may have associated ‘character’, tourism brands and CS&H features) at which macro-economic indicators are available, e.g. GVA, industry clusters, tourism, and where spatial data analysis may be feasible, e.g. Travel to Work Areas (TTWAs – although these can also be applied at lower scales, e.g. borough). The region is the common ‘unit’ for general studies of growth, innovation and cluster analysis which is extensive (Regional Studies, Economic Geography, Urban Studies etc.). Culture, sport and heritage tend to feature in this literature only in as far as they represent ‘amenities’ (as a location and attractor, as noted above) unless the industry sector concerns specific cultural and creative industry sectors and creative clusters (see section 6.5 below). Regional-level data is also a feature in Taking Part surveys and investment data (including ERDF) and also via regional agencies (and the former RDAs). There is the risk however that CS&H assets will get ‘lost’ at this scale and be too large for meaningful comparison and controls.
The city region or metropolitan region may therefore be a more focused scale for our purposes, particularly where this can be associated with CS&H investment and infrastructure and place-shaping strategies. These include culture and sport-led regeneration, including associated events and festivals, tourism development and wider economic and cluster development. This might also better incorporate the local area cluster, zone, district and sub-regional clusters, as noted above. For example, Florida’s ‘Creative Class’ analysis and index in the USA took Metropolitan Statistical Areas (MSA) as the unit of comparison – and as Lorenzen & Andersen (2007) confirm, the highest shares of creative class workers are located in the highest ranked (size) cities. Different regional configurations are used, e.g. Nomenclature of Territorial Units for Statistics (NUTS), however these do not necessarily correspond with regions identified for cultural planning in the UK.
6.4 Location advantages
One of the measures of place-shaping through investment in CS&H assets and a critical mass of facilities is the locational advantages to which they might contribute, i.e. to what extent do CS&H assets serve as attractors to and retainers of people and firms. One of the first studies to measure the economic impact of the arts in Great Britain was Myerscough’s study published in 1988. As well as calculating impacts through spending and employment in three city-regional cases (Ipswich, Glasgow, Merseyside) using multipliers, the study surveyed middle managers in these areas, asking firstly which factors they saw as important in a location decision, and then how far these factors were enjoyed once living in an area. Table 9: Location decision factors and post-relocation value
| Factor | Location decision | Enjoyed when resident | |---------------------------------------------|-------------------|-----------------------| | Pleasant environment and architecture; access to pleasant countryside | 98% | 93% (Access to countryside) | | Good road, rail and air links | 84% | – | | Outdoor recreation and sporting facilities | 81% | 54% (Participation in sports) 62% (Parks and public gardens) | | Wide choice of housing | 80% | – | | Good choice of schools | 76% | – | | Museums, theatres, concerts and other cultural facilities | 74% | 69% | | Fine old buildings | – | 69% | | Pubs, clubs and nightlife | – | 50% |
Source: Myerscough (1988)
Whilst natural and built environmental quality were valued fairly equally in each of these three regions, middle managers in Glasgow (79%) and Merseyside (68%) rated cultural facilities higher than those in Ipswich (60%), both as a location-decision and resident-user factor, with spectator sports rated low as a valued amenity (only 10% in Ipswich, but 39% in Merseyside). Prior reputation and supply-led factors would be expected to play an important part in these assessments and in explaining these variations, including the prominence given to investment in CS&H assets: for example, Glasgow’s ‘Renaissance’ post-Glasgow SMiles Better campaign (1983), 1988 Garden Festival and European City of Culture 1990. More recently, Liverpool’s ‘European Capital of Culture’ (ECoC) award in 2008 is credited with reputational advantage through improvements in its cultural and urban amenities (including the Liverpool One shopping centre). Both of these cities have been recipients of sustained capital investment through national and European regional development funding (e.g. £12m to North West and £5m to Glasgow, 1990–6 – Evans & Foord, 2000).
As an indication of the influence of a change in supply of cultural facilities, between 2005 and 2009 attendance at museums and galleries in the North West region increased from 40% to 47%. This was attributed to the build-up and effect of Liverpool’s European Capital of Culture in 2008, although attendance slipped back to 45% in 2009 (Taking Part, DCMS 2010). In an extensive impact study of Liverpool’08, secondary analysis of visitor data was supplemented by profiling visitors, and data was then modelled to determine additionality. The study found that 9.7m additional visits (35% of all visits to the city in 2008) were attributed to the ECoC award, generating an additional economic impact of c£754m across the region, and supporting 14,888 FTE equivalent jobs. Placemaking effects were also assessed through media analysis and surveys of local community perceptions (Impact 08, 2010). Here, most people did not feel that the ECoC award would benefit either them as individuals or their neighbourhoods (Impacts08, 2009: 12). Businesses in the city centre (less so outside of the area) saw a growth in sales due to the ECoC award, although less so in Merseyside than in the region as a whole. However the majority of firms did not anticipate winning future business from the event, which was not seen as the critical factor in the city’s economic recovery (although a source of ‘great pride and enthusiasm’) which was, rather, the major infrastructure investments such as the new Arena and Convention Centre (Impacts08, 2008). These impact findings highlight the importance of defining the impact area and of identifying key ‘agents of change’ which may include CS&H investment (particularly permanent/ongoing vs. time-limited event based) but will also include other investments e.g. retail, transport, public realm.
The impact of the regeneration of historic assets on business location decisions was also evaluated in a study of five UK case study areas. The study found that 25% of businesses surveyed agreed that the heritage setting was an important factor in the decision to locate there (particularly smaller, independent firms), ranking this equally with road access, but below environmental quality, availability of premises, labour and proximity to customers and suppliers (Amion/Locum, 2010 and see GHK, 2010). It was estimated in 2011 there were 138,000 UK businesses located in listed buildings, accounting for £4.7bn in economic output and 1.4m jobs – 3.5% of UK economic output and 5% of all UK employment (Oxford Economics, 2013).
A novel study on the link between cultural amenities, high-skilled workers and regional economic growth has looked at baroque (pre-1800s) opera houses in Germany (Falck et al 2011). This modelled spatial/distance relationships, factoring a range of counterfactual (without opera houses), amenity and skills/growth data, including education level, GDP/employee and accessibility indices. The results show a correlation between regions with high human-capital employees and those with a high level of cultural amenities, compared with those with lower cultural amenities. Translating this in terms of economic growth, an increase in higher education employees by one standard deviation increases average growth of regional GDP/employee by 1% to 2%. The federal German system supports a more even distribution of cultural facilities than in the UK, with higher levels of participation as a result (Brook, 2011). As Glaeser also concluded from his econometric study of skills and regional growth, city growth responds to faster improvement in amenities, which skilled residents induce through their demand as consumers and as voters.
The extent to which clusters of cultural amenities attract and support employees and entrepreneurs who are key to economic growth and innovation warrants further investigation, given the above evidence of the importance of place quality and particular cultural facilities (see Bakhshi et al, 2013 – discussed below).
6.4.1 Creative Cities and Spaces
The importance of urban amenities, access to nature and historic building character was also stressed in a Dutch national study of Creative Class concentration and economic growth. Marlet and Woerkens (2005) found that Florida’s Creative Class Index empirically failed to materialize for the Netherlands, whilst the aesthetic assets of cities were found to provide a strong explanation for both share and growth of the creative class in Dutch cities, concluding that job opportunities and urban amenities (including cultural venues) are still the most important factors influencing the choice for a place of residence. Whilst the Creative Class thesis is focused on economic growth and innovation in the knowledge economy (rather than arts and culture and the cultural economy), Florida’s Creative Class Index ranks certain factors and conditions which attract/retain and influence firm growth (his three T’s of Tolerance, Technology and Talent). It therefore combines human capital theory with a new take on place-based/location/cluster theory, generally applied at MSA/city scale. In reviews of the Creative Class model (Evans, 2009), as applied in Europe, Scandinavia and in the USA, correlations and exogeneity were found to be high (Glaeser, 2004), i.e. they have weak explanatory power and proof of causality, with education/skills and job opportunities the over-riding factors attributed to growth and innovation in most cases. In European regions (NUTS3) the Creative Class groups were unevenly distributed across the EU, with Florida’s Bohemian, Openness and Public Provision indices the most significant factors correlating with economic growth. In UK NUTS3 regions (n=97), distribution was also uneven, but appeared to support Creative Class growth effects (per USA) but not in hi-tech employment growth. In the UK (DTI, 2004) there was found to be no correlation of the Creative Class with productivity or innovation growth, whilst in several countries (Denmark, Netherlands), urban amenities and quality of place were important growth factors.
In an international comparative study of creative spaces/industry policies and strategies (n=130) carried out for Creative London (LDA) and Metro Toronto/Ontario Province (Evans, 2009c) the prime rationales for public investment and policy formation were, not surprisingly, economic development/job creation, followed by infrastructure and regeneration, tourism/branding and less so social and heritage impacts (although heritage was more important in smaller cities). However, art form/cultural sectors prioritised were the more traditional arts and cultural industries of visual /performing arts, film (including location, studios), architecture, music (especially smaller cities) and design, i.e. culture that is a feature of CS&H facilities, with tourism and placemaking key agendas for these established and prospective creative cities – large and small. This is consonant with what leading economic geographer Allen Scott has identified as the ‘cognitive-cultural’ city economy (2014) with a combination of comparative and competitive advantages; production/job opportunities; networks and clusters driving the post-industrial growth machines of creative cities.
Cultural content for the new digital media industries is seen to be very important and therefore the importance of place and creative spaces is consistent with developing city growth from the knowledge and digital economies. This includes key ‘client’ sectors such a bio-tech and health sciences.
6.5 Clusters
The concept of clusters in economics originates from agglomeration theory (Marshall, late-1890s) which associates the co-location of (competing) firms, skilled labour and infrastructure support with innovation and firm growth. Physical proximities are both efficient and facilitate tacit and codified knowledge spillovers through formal and, importantly, informal networks. This has manifested in manufacturing as observed by Marshall in the steel towns of Sheffield and Songinen (Potter & Watts, 2012); in craft-based production in Italy’s Emilia Romagna region linked to the showcase provided by Milan (providing what Porter suggests is essential in economic clusters – international pipelines and market access); to Hollywood’s interdependent film/digital/jewellery/fashion clusters (Scott, 2000) and today’s hi-tech and digital clusters of Silicon Valley and Silicon Roundabout in London. In an in depth study of New York’s fashion cluster (Rantisi, 2002), a cultural-creative production chain was established between art museums, specialist colleges, retail, advertising, publishing and specific design and production clusters – from haute couture to start-ups and sweatshops, and from boutique, fashion shows to high street and street culture. CEBR’s study of the contribution of arts and culture to the UK economy (2013) reported some evidence of wider impacts felt by industries co-located with creative clusters, however this evidence is not yet robust, limited to a few small scale studies of the links between talent and supply chain benefits between arts/culture and creative industries. As the AHRC Cultural Values report noted, “more attention needs to be given to the ways in which arts and culture feeds into the creative industries and supports the innovation system’ (AHRC, 2016) or ‘ecosystem’.
Some CS&H assets form part of economic clusters in generating innovation and growth within their own organisation as part of a cultural ecosystem or creative production chain involving other enterprises and entrepreneurs. Evidence of this is however lacking, largely because this role has not been researched or considered, outside specific creative industry clusters. Our data modelling may however reveal where cultural assets correlate with places where economic and creative industries growth is evident. This could go towards filling this knowledge gap.
At the same time, physical clustering is a feature of urban planning at regional, city and local area levels which are seen to support a visitor economy (local, domestic, international), and ‘carrying capacity’ to absorb and retain visitors, consumers and a range of cultural amenities. This range and diversity can in itself enhance a place and produce ‘cultural spillovers’ including firm innovation and growth in the locality. This is seen in the area around the Guggenheim Bilbao where numerous galleries, dealers and showrooms have located or relocated, in order to further shape this regeneration place and its association with modern art (Plaza, 2009 in Art of the Possible, 2010: 16-20). This phenomenon is also seen in the case of art gallery location in Manhattan (Schuetz, 2013a&b). This study used spatial data analysis and changes in land-use and building characteristics over time, together with the presence of historic, museums, park and transport amenities in each area. Regression analysis found that art galleries were attracted to neighbourhoods with amenities and physical characteristics such as historic buildings, museums and parks and commercial zoning, as well the presence of other galleries. In a separate study of Manhattan’s gallery scene, Molotch & Treskon (2009) found that new hubs such as Chelsea and declining gallery clusters in SoHo were influenced not by the oft-cited gentrification and property price rise cycle, but by the external art market and specific placemaking associated with these spaces that did not depend on proximity to either artists or buyers (the study used location, rent and sales data over a 17 year period). This gallery district has been designated by the city as an arts district ‘to encourage and support the growth of arts-related uses’.
Clusters or ‘assemblages’ within cities can also be perceived as ‘scenes’ creating a particular buzz which can attract a particular kind of visitor/tourist, creative worker or entrepreneur. What creates and makes up these scenes has been analysed by sociologists and cultural geographers (Silver, nd). These formations are said to bring a tangible cultural “value added” to deprived communities, as well as feed the knowledge economy with innovation and “buzz” (Bathelt, Malmberg & Maskell, 2004), and its hunger for content. This is evident in sectors such as advertising, financial services, fashion and music which draw inspiration from street culture and street life, a direct benefit of co-location. It is no accident that there is a high correlation and co-location between these cultural and non-cultural sectors in creative clusters (Freeman, 2010).
Clusters are also identified with heritage – whether historic architectural, monuments or collections such as museums. Examples include museum quarters, historic quarters including parks and gardens. These undoubtedly contribute to a sense of place and place brand, measured in terms of usage/visitors and associated economic impacts, and in amenity value terms (estimated through contingent valuation and relative property values). Local amenities not necessarily associated with formal heritage or historic designation would also generate positive valuation as a community asset. These include post-industrial areas that have served as the basis for contemporary cultural and creative production. Case study examples are numerous but largely descriptive – estimating outputs and visitor data (see Cultural Quarters, Roodhouse, 2010) but seldom sustained impacts beyond snapshot EIA studies. There is longitudinal evidence however that historic quarters serve as the site for heritage, cultural and now creative-digital clusters, suggesting that there are local conditions that are both symbolic, physical (building types, character, connectivity) and economic (Evans, 2004, 2009cd).
In a study of Nottingham’s Lace Quarter, Shorthouse (2004) conducted a survey of local business and visitors. The importance of their location in this heritage cultural quarter was found to be high:
- 67% rated as important to crucial for their business
- 61% rated as important to crucial for their business the capacity for meeting and networking with suppliers, collaborators, competitors
- 70% as a location for business and social interaction
- 74% rated as important to crucial for their business the attractiveness of the built environment
- 50% rated as important to crucial for their business the proximity of arts and cultural institutions.
- Over 90% of users/visitors agreed that it adds vitality to the city centre area; 94% that its heritage quality makes it an attractive place; and 90% rated it good for socialising
A study of the impact of Heritage Lottery funded projects (n=10) on the local economy considered project expenditure and impacts as well as from visitor activity (GHK, 2010). Across the ten projects which had received over £250,000 HLF funding and completed by 2008, expenditure supported 159 job years in local economies and 750 in regional economies, enhancing GVA by £33.9m in total. Ongoing outputs were found to support 120 FTE jobs locally, 170 regionally, with ongoing GVA estimated at £3.2m locally and £4.7m regionally, after adjusting for additionality, leakage, deadweight and substitution effects.
6.5.1 District Clusters
Clusters of cultural amenities with economic and social impacts have been identified at the district/borough level, for example in the case of the City of London Arts & Cultural cluster. In a study commissioned by the City of London Economic Development unit (BOP, 2013), an extensive assessment of this borough’s cultural heritage, performing arts/events and visual arts facilities and programmes was undertaken. This study of the City of London Art & Cultural cluster looked at economic, social and cultural impacts from the combined range of cultural facilities in the City of London. This cluster was found to produce £225m (net of ‘additionality’) of GVA (total ‘additional’ revenues less operating costs) and supported over 6,700 FTE jobs. Indirect impacts were calculated based on organisational spend across 11 industry sectors. This analysis was based financial data from cultural organisations, and an audience spending survey. Social impacts were based on aggregate data on volunteering, educational and outreach activities from organisations and in-depth case studies. Cultural impacts drew on audience surveys, data on the international dimension and new work produced, as well as media coverage, with the effect of cultural experiences on audiences’ views about the City of London assessed through audience surveys and case studies (Barbican, City of London Festival). This included assessment of how audiences felt that their attendance improved their well-being – 82% said they agreed/strongly agreed. The placemaking capacity of the City’s arts and culture provision was thus assessed through audience research surveys at two venues; case studies (e.g. Festival effort to create a place-based identity and impact); organisational survey information on media coverage and general visibility of the cluster (BOP, 2013).
In an impact study of the arts in Birmingham, the benefits of the city’s provision was assessed by a large-scale telephone survey of those both attending and not attending arts facilities in the city (Morris, Hargreaves, McIntyre, 2009). The study found that the arts organisations were having a positive impact on the image of the city and region, as well on individuals, including social outcomes such as social cohesion, learning, cultural understanding. 73%–76% said that the cultural provision made the city vibrant and exciting and provided opportunities for people to come together and share experiences; 44% said that it improved the quality of their life.
6.5.2 Cultural Districts (USA)
A third, more localised cluster has been identified in the USA, categorised as Cultural Districts (Stern & Seifert, 2007, 2010). The work was first reviewed in Art of the Possible (TBR, 2010: 44) and has been supplemented by national research on Cultural Districts in the USA by Noonan (below). Cultural Districts are defined as ‘a well-recognised labeled, mixed-use area of a city in which a high concentration of cultural facilities serves as the anchor or attraction’, and are often centred around large arts institutions. The concept of ‘Natural Cultural Districts’ was developed in Philadelphia, in areas suffering multiple deprivation, population and economic decline, building on the idea that urban neighbourhoods often germinate clusters of community, commercial and informal cultural assets linked by artists and creatives as producers, and participants as consumers or practitioners.
The study uses four indicators of the intensity of the cultural scene in a neighbourhood: cultural participation, non-profit cultural providers/community associations, commercial cultural firms and independent artists/creative workers, together making up an area’s cultural assets. Four data sources were used: a regional inventory of non-profit cultural resources, a database of commercial cultural firms in the metropolitan area, a listing of artists, and small-area estimates of regional cultural participation based on data provided by over 75 cultural organizations. All four of these indicators were calculated for every census block group (approximately 6–8 city blocks) in metropolitan Philadelphia. The identification of natural cultural districts used factor analysis to create a single scale, capturing variation of all four of these indicators across the metropolitan area. The analysis determined that the four indicators had very similar patterns of variation (a single scale accounted for 81% of the variation – a cultural assets index). The second stage identified neighbourhoods with a cultural assets index score higher than expected when corrected for these variables such as socio-economic profile, diversity, distance from centre, etc. Essentially, these are districts that were “exceeding expectations” in their concentration of cultural assets. The cultural assets index is correlated with the chances that a neighbourhood would improve over time. In order to test the role of cultural assets in neighbourhood revitalization, the model combined the cultural assets index with data on neighbourhood change. The results were striking: 83% of all block groups that improved by two or more market value analysis (MVA) categories between 2001–3 were cultural districts and this association between these clusters and improvement in housing market conditions has continued (Stern & Seifert, 2010).
In a US-wide study of 99 designated (post-1990s) Cultural Districts (Noonan, 2013) their impact on economic and demographic change was assessed based on data on income, employment and unemployment, population/resident change, census, property values and educational levels. Using regression models the aggregate results found that these cultural clusters (average area 1km²) revealed positive effects on property values, employment and income, but little evidence of significant effects on population/diversity, education or distance to employment. Noonan and Breznitz (2013) also study the effects of arts and cultural districts combined with the presence of research-intensive universities, arts colleges and growth in the media arts sector. Using a range of descriptive statistics based on a sample of 89 cities with cultural districts, including employment change and patent data (shares and trends) over two decades, OLS regression analysis found that the presence of cultural districts and research intensive universities had little explanatory power across arts and media-arts employment. However, art colleges were positively associated with higher levels of employment growth in these sectors. The growth in media-arts employment is even higher in cities with arts schools and research universities. Cities with cultural districts did see much faster rates in media arts patenting but surprisingly not the presence of universities or art colleges, concluding that the more innovative cities in media arts appear to be those with an arts or cultural district. This of course depends on the nature of cultural districts and other factors (as the authors admit), but it is interesting to note that in London, the biggest media-arts cluster ‘Digital Shoreditch’ has evolved largely independently of either local university or arts school influence, with growth factors such as connectivity, personal networks (non-place-based) and proximity to production/supply chains in financial, advertising and other creative industries, in a pre-existing cultural district (Foord, 2012). This cultural hub had been designated in both sub-regional city growth and city-wide creative industry strategies (LDA, 2003), recognising that cultural assets directly influenced the location and growth of creative and digital industries. 6.5.3 Consumption (Endogenous) vs. Export-based Impacts
As we have seen from the literature and commissioned studies, economic impact assessments of the contribution of a particular cultural facility or sector to a (local/regional) economy have dominated in this field. In the USA, Markusen and others have argued for a consumption based alternative to this ‘export-based’ model. This argues that increasing a sector’s ability to capture local discretionary income provides a route to sustainable job and income generation, for example by:
- providing a local outlet for user/audience attendance and spending that would otherwise leak out of the area
- offering residents opportunities to spend more of their discretionary income on new locally produced goods and services
- seeding innovations that later expand into export markets
- nurturing organisations and occupations that re-spend more of their earnings locally than others
This also recognises that much arts economic activity is ‘lost’ in EIA studies due to a high level of self-employment and entrepreneurial activity that is distinct from the largely not-for-profit organisations that are typically the subject of impact assessments (Gadwa & Markusen, 2009; Markusen & Gadwa, 2010). In the UK, the labour structure of cultural production relies on a substantial freelance workforce many of who may be closely associated with specific CS&H venues (arts, sports) including performers, artists, technicians, trainers, etc. They are critical to the operation and provision of cultural experiences and cultural places, but they may be ‘dispersed’ in employment terms, understating their importance in the economic and social life of these places. Particular cultural clusters that are not considered in mainstream impact studies include artist centres and housing (e.g. studios/live-work). These US-based authors have designed a mixed methods research model in response to the conclusion that the evidence from local economic development studies into place-based impacts lacks any robust, well-developed tools. This model combines quantitative and qualitative research techniques to capture tourism/business expansion, employment/industry mix, property values, gentrification/population displacement, fiscal impacts, artist in-migration and a range of physical and social impacts (connectivity, civic engagement, tenure/diversity, safety, neighbourhood confidence).
A large-scale study of California’s Arts and Cultural Ecology found marked differentials in the number of arts organisations per capita and arts participation rates across cities which were not based on population size, profile or other industry factors, but were seen to be due to decade-long cultivation of local-serving arts capacity that sustains jobs and income. The methodology used several datasets including estimates of the budgets of regional arts and cultural organisations, census and community survey data and arts participation data (regional only, as in the UK). Local characteristics were determined in terms of income, education, race/ethnicity and age as well as population size/density, city status, jobs per capita and both city and private funding of arts activity. Regression (OLS) analysis was done at city level (n=237 with population >20,000). Features positively associated with a higher number of arts and cultural organisations per capita were job density, private arts funding, residents’ education level and personal wealth. Regional location did not prove to be a statistically significant predictor. Job density was seen to facilitate host businesses, owners/managers and employees who contribute to local arts and culture, and firms who feel that a strong arts offering enhances employee motivations, helps attract/retain employees and encourages customers/sales. Evidence on the comparative density of artists also supported a capacity-building interpretation of their role. The study concludes that place-based analysis confirms that certain communities especially job centres that also attract well-educated, wealthier residents are more apt to provide a home for arts and cultural organisations regardless of region, reinforcing a virtual cycle of arts activity and attendance (Markusen, et al, 2012).
In a separate study in the USA of culture-based development and the effects on economic and social well-being (Tubadji et al, 2015) a cross-sectional study also found the existence of a positive cultural effect on local development – economic and social well-being – as well as the fact that endogenous cultural industries had a positive effect on the mobility of human capital. A concentration of cultural activity seems to be a predictor for those areas which have the characteristics of regional economic growth.
In Art of the Possible (2010: 21-28), one of the studies analysed in depth was on the Spillover Effects of Investments in Cultural Facilities carried out in Toronto and Vancouver, Canada (Jones et al, 2003). This study used spatial data analysis/GIS techniques to measure small area effects arising from cultural investments. This included impacts on property values, employment, income, retail sales, vacancy rates, new business creation and building development, alongside demographic, community engagement, crime and usage indicators (based on resident and business surveys). The cultural districts included cultural, community and production facilities. The study found that in both cases artistic and cultural components were strongly associated with growth, retail sales increase, development, image improvement and investment. Residents and firms strongly believed that artists and facilities were important drivers of growth and change including wellbeing, with new firm growth as well as churn (20–30% of these were ‘culturally-related’ businesses.). Social impacts included higher employment/income, lower unemployment and higher levels of education within the resident community, as well as property value increases and building development. Proving causality for some of these associations is of course difficult, but comparable data is available in the UK for some of the indicators used in this study, although some primary research would be needed to gauge change effects and perceptions (as in all cases to directly attribute CS&H asset change effects). These studies were the subject of a subsequent review at national level (Sharpe et al, 2004) and issues of methodology was helpfully discussed. This included the issue of control/counterfactual, like for like comparisons (i.e. between similar cultural investment types in different locations) and also between different types of cultural activity, visitor vs. producer-led, for example between more contemporary cultural production (e.g. artists studios, live arts) and static provision (e.g. historic museum).
In a study by Pedroni & Sheppard (2013) the issue of cultural spending and the lack of hard evidence of the causal relationship between local cultural production and prosperity is investigated. Using a model of culture and growth drawing on an established econometric framework (Canning & Pedroni, 2008) this is applied across 384 Metropolitan Statistical Areas (MSAs) using panel data (preferred over cross-sectional data) based on non-profits at two time points, 1990 and 2006. The results reveal divergence between regions, with the urban Northeast showing the strongest positive relationship between culture and prosperity and the equivalent region in the Southeast the lowest – indeed a negative relationship between locally financed cultural production and GDP. This analysis reveals a causal connection between increases in local cultural production and permanent increases in local GDP, both in short-run multiplier effects but also steady-state income levels. As with other studies, it would be illuminating to focus on the distinctions between arts/cultural forms and sectors, since they perform economically quite differently.
6.5.4 UK Cultural Clusters and Creative Economy
Recognising that the literature in this field is predominantly North American, a team from NESTA undertook a study of English cities to determine through econometric analysis the relationships between arts and cultural agglomeration and different parts of the creative economy (Bakhshi et al, 2013). There are two main competing theories as to the effects of cultural clustering on local wages. The first suggests that workers will be willing to sacrifice low wages in order to live in an area with a rich cultural sector, therefore – all other things being equal – wages will negatively correlate with cultural clustering. The second theory posits that cultural clusters boost the local economy due to an influx of human/organisational capital, causing spillover to other industries. According to this theory, cultural clustering is expected to be positively associated with wages, leading to a wage premium in cities with high cultural clustering.
In England, there appears to be a positive relationship between the level of employment in cultural industries in an area and hourly wages. However, this relationship may not hold when other factors are controlled for. Through the use of an econometric model, this study tests the robustness of the relationship between arts and cultural clustering and worker wages. The model estimates individual wages by estimating wages as a function of both individual characteristics (e.g. education, ethnicity, migration status), characteristics of the city (including factors such as clustering, education levels, size of the population) and regional characteristics which control for wider characteristics of where the city is located. The model is estimated using Ordinary Least Squares (OLS). The model is designed to test whether there is a positive (wage premium) or negative (compensating effect) relationship between cultural clustering and wages.
The data is at the level of Travel to Work Area (TTW) and draws from the Annual Population Survey (APS), Business Register Employment Survey (BRES) and a dataset of business registered on the Culture24 platform. The model uses average hourly wage calculated from APS data while simultaneously controlling for individual characteristics using data drawn from the APS including: experience, education, gender, ethnicity, broad occupational level (one digit SOC) and whether the individual is in the private or public sector. There measures of cultural cluster were used, employment, occupational and institutional. Employment clustering was calculated for each area using data from BRES while occupation clustering was calculated using data from the APS; these measure creative clustering at the industrial sector levels and occupation level respectively. The model also included a measure of institutional clustering (e.g. galleries, libraries, heritage sites) using data drawn from Culture24.
After controlling for individual characteristics cultural occupational clustering was positively correlated with wages, however, cultural employment clustering and cultural institution clustering were negatively associated with wages. However, the positive relationship between cultural occupational clustering is not significant when controlling for city levels factors (such as education). By contrast the negative relationship between cultural employment cluster and cultural institution and wages were unaffected by city level factors. However, when focussing on workers in creative occupations industries, there appears to be a wage premium for these workers from higher institutional cultural clustering, but not the other measures of cultural clustering. For the workforce as a whole, therefore, the evidence seems to suggest that cultural clustering leads to lower wages while worker in creative industries may enjoy a wage premium in areas with high institutional creative clustering. This provides evidence for the idea that workers sacrifice higher wages to live in areas with high culture but also provides some evidence for the idea of spillover effects. However, these slipover effects appear to be limited to the creative industries only. The authors conclude that this study provides evidence of the positive effect of arts and cultural clustering on the productivity of cultural and creative workers, with evidence of spillovers from arts clustering to the wider creative economy.
Chapain et al (2010) investigated the link between creative industries and innovation. The paper presents several lines of research, first a mapping of creative clusters in the UK using economic geographic techniques, secondly, exploring the level of innovation in the creative sector and thirdly, exploring the potential spillover effects from creative clusters to the wider local economy.
Cluster Mapping
The study uses the DCMS definition of the creative industries and focuses on three geographical levels: regional, Travel to Work Area and Middle Super Output Area (MSOA), drawing data from the Annual Business Inquiry (ABI) and BRES. At the regional level, London and (to a lesser extent) the South East stood out as creative hubs. At the TTWA level, several creative agglomerations stood out including Bath, Bristol, Edinburgh, Manchester and Brighton. The cluster mapping also found evidence of co-location within sections of the creative industries. Finally, the cluster mapping showed how the level of specialisation varies across the country, the North of England tended to show more specialisation while the South showed more diversification.
Innovation in the creative industries
The study drew evidence from the UK Innovation Survey. The results show that the creative industries are more innovative than other industries (except Engineering-Based Manufacturing and Other Manufacturing), particularly in respect to how they approach R&D and their propensity to launch new products into the market. Within the creative industries, Software, Computer Games and Electronic Publishing showed the highest levels of innovation while Film, Video & Photography and Arts &Antiques firms show low levels of innovation. Creative industries were also shown to be more innovative than most industries when controlling for the level of innovation in the region as a whole. The exception to this is London where the creative industries show lower innovation than the region as a whole.
Creative Spillovers
To explore the idea that the creative industries boost the wider economy through spillover effects to other industries, the paper explores the level of co-location between the creative industries and two highly innovative sectors: High-Tech
32 Chapain et al (2010), Creative clusters and innovation – putting creativity on the map, Nesta Manufacturing and Knowledge Intensive Business Services (KIBS). This analysis used the DCMS definition of the creative industries and definitions of High-Tech Manufacturing and KIBS produced by AeA and EFILW. Co-location analysis was performed at the level of TTWA using data from ONS. The results showed that Advertising, Designer Fashion and Software, Computer Games & Electronic Publishing co-locate significantly and strongly with KIBS and less strongly with High-Tech Manufacturing. Most other creative sectors co-locate with KIBS, but not with High-Tech Manufacturing industries. This provides indirect evidence for economic spillover effects between highly innovative sectors.
6.5.5 Creative Placemaking London
The integration of cultural infrastructure, enterprise and placemaking is part of an initiative by the London Assembly, which seeks to use placemaking to shape regeneration with a cultural dimension. This responds both to the loss of and threat to cultural workspace and cultural facilities in London (e.g. small theatres, music venues, artists studios) and represents a shift in the approach to the potential social and cultural benefits of supporting artistic activity, as well as physical and economic benefits, with placemaking described as a ‘process where partners from public, private, non-profit and community sectors strategically shape the physical and social character of a neighbourhood, town, city, or region around arts and cultural activities’ (Markusen & Gadwa, 2010). Cultural provision (through a Cultural Infrastructure Plan) and local economic development (through Creative Enterprise Zones) will be better integrated through Creative Placemaking efforts and projects (examples below), as a more sustainable approach to culture and regeneration than has been experienced in the past.
Creative Barking and Dagenham (CBD) is an example of creative placemaking in practice in London. Funded by Arts Council England and the London Borough of Barking & Dagenham the project is running from 2014 to 2016 with an aim to “put the area firmly on the map as a place to make and enjoy exciting art in all its many forms”. It forms part of ACE’s Creative People and Places Programme which aims to encourage more people to choose, develop and take part in local cultural activities. To achieve these aims, CBD has focused on working in partnership to develop the community’s interest in the arts and creativity. Its partners include business, such as the Barking Enterprise Centre, artists such as Studio3 Arts, volunteers, local government and the community. In particular, CBD has focused on involving the community through its ‘Cultural Connectors’, a network of 120 volunteer local adult residents with a remit to build enthusiasm for arts and creativity at a local level, as well as helping with events and marketing. CBD has also run a wide variety of other projects to boost the area’s creative profile. These include Landmark Commissions, site-specific events inspired by local landmarks with an aim to “showcase the borough as a place where great art happens” and Neighbourhood Commissions, six-month artist residencies in selected parts of the borough aimed at encouraging creativity and ambition in local communities. CBD also runs summer festivals and a small number of funds supporting local artistic enterprises, voluntary arts groups and events in the borough. Collectively, this work has helped run 300 creative events with 8,000 participants at 25 venues across the borough. The work has also supported local arts projects with £350,000 in funding and acted as a catalyst for £280,000 of funding for additional creative projects in the borough. CBD forms part of a wider effort to regenerate the borough as a centre for creativity. in London. This includes the development of new artists’ studios, such as at the Ice House Quarter, supporting local theatres, new public art and the renovation of the former Abbey Leisure Centre into a cinema. The borough has also received £250,000 in funding from the London Regeneration Fund to develop a new Artist Enterprise Zone in Barking, including new artists’ studios and apartments at Linton Road. The borough has ambitions that the zone will include a future creative arts hub, performance spaces and the redevelopment of the Broadway Theatre.
The London Borough of Croydon differs in its approach to culture and regeneration, focusing on a diverse range of projects in specific geographic locations in the borough. This includes large-scale projects, such as the plans for a new Cultural and Education Quarter at Fairfield Halls in the centre of Croydon, as well as smaller creative placemaking projects in New Addington and at Ashburton Park. Croydon is investing £30m in the large-scale regeneration of the 1960s Fairfield Halls music venue and Croydon College to make the area into a Cultural and Education Quarter, a ‘destination for Londoners’. Croydon’s Director for Culture, Paula Murray, has argued that the space will meet community needs as residents ‘want to see our young people performing on those stages, they want to see it open more of the time with activity happening throughout the day, they absolutely want a quality classical music offer’. Croydon has also invested in small-scale creative placemaking projects working with local communities. For example, in New Addington, a geographically isolated, socially excluded part of the borough, Croydon used £516,000 funding from the GLA’s Outer London Fund to regenerate the Central Parade as part of its Connected Croydon Programme. As part of this project, the borough worked with local community group Pathfinders and identified a need for an ‘animating public space’ with a programme of events. The GLA claims that this work resulted in a local cultural events programme for the public space, greater trust in the regeneration project and the development of a Business Improvement District (BID). Croydon is also undertaking a similar community partnership approach in the restoration of a former library in Ashburton Park. It has identified a need to ‘celebrate local culture and heritage’ on the site, potentially including multi-use performing arts space, local history exhibits and arts and crafts events.
6.5.6 International literature on creative clustering and determinants of location decisions
A central question in this research study is the extent to which CS&H assets and associated investment represent pull factors which encourage economic activity (e.g. through the relocation or start-up of firms in certain locations). The literature includes a number of studies which consider the potential influence of CS&H assets and investments (amongst other things, but in the form of amenities, asset density, etc.) on the location decisions of firms. There is a significant focus on the location decisions of firms in the creative industries in this literature, especially those which use econometric estimation techniques to examine these relationships.
Creative industries in these studies refer to a range of economic activities concerned with the output of creativity, ideas and knowledge – including digital. We follow the creative industries definition from DCMS: “Those industries which have their origin in individual creativity, skill and talent and which have a potential The role of culture, sport and heritage in place shaping
for wealth and job creation through the generation and exploitation of intellectual property”. The creative industries and the creative class (a class of individuals in professions relating to the generation of creativity and knowledge) have been a focus for researchers as it has been posited that these are an ascendant source of growth in modern economies, capable of driving regional economic growth through innovation33. Recognising that the creative industries tend to concentrate mainly around largeand medium-sized cities, forming creative local production systems, Lazzeretti et al (2009)34 examined the forces behind clustering of creative industries. The objective was to provide the first empirical explanation of the determinants of creative employment clustering, following a multidisciplinary approach based on cultural and creative economics, evolutionary geography and urban economics. This was achieved through a comparative analysis of Italy and Spain. The study first assesses the level of clustering of the creative industries using location quotient analysis in Italy and Spain. It goes on to design and employ an empirical (exponential) model to understand the process of creative industries’ clustering. The model tested the relationship between levels of creative clustering and a number of determinants, namely historical and cultural heritage, localisation economies, urbanisation economies, related variety, human capital and Florida’s three T’s (technology, talent, tolerance). The results identify that the determinants of clustering in the two countries are different. The small role of historical and cultural endowments, the size of the place, the average size of creative industries, the productive diversity and the concentration of human capital and creative class have been found as common factors of clustering in both countries. However, in Italy, creativity is more related to cultural and artistic heritage and localisation economies and it is dispersed all over the country. In Spain, creative activities are not only correlated with localisation economies, but also they are particularly related to urbanisation economies and talent and are concentrated in the main metropolitan areas. Cruz and Teixeira (2014)35 investigated the determinants of spatial location of creative industries start-ups in Portugal within the framework of Discreet Choice Models. The study first examines the location behaviour of creative industries at a micro-level using highly detailed data on firms. It then assesses the role played by location determinants for the creative industries as a whole and for each creative sector in isolation, accounting for the potential heterogeneity of location behaviour across creative industries, using some of the most recent modelling approaches to location. The econometric estimation was based on the application of a Contingent Logit Model which examined the relationship between creative industries start-ups concentration and a range of potential determinants, namely; population density, creative firms’ density, service firms’ density, knowledge firms’
33 Florida, Richard (2002). Bohemia and Economic Geography, Journal of Economic Geography issue 2, pp 55 71
34 Lazzeretti et al (2009), Why do creative industries cluster? An analysis of the determinants of clustering of creative industries, IERMB Working Paper in Economics, nº 09.02, April 2009
Cruz, S. and Teixeira, A.A.C. (2014), The Determinants of Spatial Location of Creative Industries Start-Ups: Evidence from Portugal using a Discrete Choice Model Approach. FEP Working Papers no. 546 October 2014
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density, industrial diversity, creative diversity, higher education, secondary education, culture, social inequality and R&D firms’ density.
The findings show that as a whole, creative firms share similarities in their location behaviour with other industries (e.g. the manufacturing sector). However, there are determinants that are specific to these firms and affect their location choices, most notably urbanization economies, human capital and tolerance/institutional factors.
6.6 Valuing Environmental Assets
As noted above, the contingent valuation method is used in order to place financial values on intangible and ‘free’ resources such as parks/open spaces, some heritage and environmental amenities. A key quantitative technique is the use of hedonic pricing models of property prices in neighbourhoods where new or upgraded facilities are located. This approach has been used in assessing the impact on domestic property prices from sports facilities in the USA and Germany, and more recently in the UK (Ahlfeldt, Gabriel & Kavetsos, 2014). Recognising the difficulties in obtaining property transaction data over a long enough period, particularly for newer stadia development, Davies (2005) undertook a qualitative survey of the Cardiff and Manchester stadia impacts.
This study of the impacts of the Cardiff Millennium Stadium and City of Manchester (COM) Stadium used the expert opinion of property professionals together with the opinions of local interest groups/key stakeholders. The research revealed that the stadia in each city have generally impacted positively on the residential property market. The findings suggest that in the case of Manchester, the early signs indicated that the impacts have been positive with an average net positive change of 12.5% to property values over and above general house price increases in the area. Over half of respondents thought the impacts occurred within the construction phase of the stadium and the first three months of it opening and 67% of respondents thought that the impacts of the stadium were within 2km of the stadium site. In the case of Cardiff (in a more established real estate market area), there was evidence that the Millennium Stadium had been a key factor in the increased price of property in the surrounding vicinity. Property professionals and surveyors reported that the Millennium Stadium has resulted in an average net positive change of 2.9% to residential property values in the surrounding area over and above general house price increases. 53% of survey respondents thought that the impacts were within 1km of the stadium site, over 30% felt that the Millennium Stadium impacted on property over 5km away. Again this was felt to be a result of the enhanced profile and image of Cardiff generated by the Millennium Stadium (Davies, 2005).
Distinguishing major facility developments from the effects from other improvements is however problematic, as some of these studies confirm. Displacement (negative) effects can also be evident, where changes to other areas produce disbenefits, for example in the case of the Arsenal FC stadium, the relocation of a major waste recycling plant. Amenity value is more commonly measured in terms of environmental assets such as open/green space and urban design, and several studies were reviewed in Art of the Possible (including CABE, This method attempts to control for a range of variables that affect property values to try to isolate the effect of the specific amenity. These studies generally conclude that there is a direct effect on the price paid for properties in close proximity to the asset, with this benefit subject to a ‘distance decay’ (i.e. prices go down rapidly as the distance from the amenity increases). This is due to the values associated with direct ‘views’, access and associated locational benefits such as lower densities, noise, traffic, etc. This evaluation method of course relies on access to property sale data over time, and data on a range of urban change factors that also influence property values. There has been no study that considers the effect of different CS&H asset types on property, to determine exactly what features benefit land/property values, e.g. scale, design, morphology, environmental benefits/disbenefits, etc. Built projects often occur as part of larger area regeneration schemes (e.g. Arsenal FC, East Manchester, Salford Quays) and a wider assessment of regeneration process and impacts is required, not limited to property prices. As WWCLEC note (2014), policymakers should also consider the distributional effects of these property market changes (i.e. who are the likely winners and losers) in investment evaluation.
6.6.1 Cultural Ecosystems Services
The hedonic pricing technique has also been applied more recently as part the National Ecosystems Assessment (2011). This ongoing initiative is part of an international effort (Millennium Ecosystems Assessment) led in the UK by DEFRA. As part of this extensive process, Cultural Ecosystems Services have been identified and indicators and measurement developed (NEA, 2010). Ecosystems in this case include broad habitats, designated areas, private gardens and other environmental and heritage resources. These correspond with CS&H assets, particularly natural heritage and facilities located in areas of natural habitats, whether countryside or urban. Amenity values assessed include associated wellbeing and recreational access. As well as the impact on property prices from propinquity to these resources, the economic value of educational and ecosystems knowledge, non-use values and physical and mental health effects are analysed. The analysis firstly concluded that the house market reveals substantial amenity value attached to a number of ecosystems, heritage sites and local environmental amenities. This was based on one million housing transactions between 1996–2008 against data on a large number of environmental characteristics.
Overall, a 1% increase in land use characteristics (domestic gardens, green space, areas of water within census ward) increased house prices by a similar 1%; whilst within 1km there was a price premium of between 0.06% to 0.4% depending on the land cover characteristic. Conversely, each 1km increase to (i.e. further away from) the nearest National Trust-owned site lowers prices by 0.7%. Educational values associated with school ecological knowledge subjects and school visits to sites used a model based on observed higher performance in exams (human capital) and subsequent higher lifetime earning levels with a total value based on GCSE and A-level candidates of £2,128m (2010). Non-use values looked at the proxy value of legacies to environmental charities, whilst health benefits from cultural ecosystems services focused on health improvements (physical and mental) arising from additional exercise created by the provision of natural habitats and green spaces and from more passive forms of contact with nature (e.g. viewing, being within natural spaces). This analysis estimated the value of health benefits from a change in these natural environments that would create a 1% reduction in the sedentary population (using willingness-to-pay based values) producing a total benefit of £2bn, or £750m if people aged 75 and over (less able or likely to be physically active) were excluded. Benefits from proximity of home to green space/views increased emotional wellbeing by 5% and generally health utility score by 2%; accessing non-countryside ecosystems monthly increased physical functioning and emotional wellbeing by 3.4% and 2.6% respectively. This analysis used a geo-located survey (n=1,851) and OLS regression model. In a separate study of attitudes to beauty (IPSOS, 2010) 87% of respondents agreed that better quality buildings and public spaces can improve quality of life, and 69% of adults believe that heritage sites are important to the local community (Ecclesiastical Insurance, 2013).
In a separate study of Conservation areas, a price premium was also found for residential properties located within a conservation area of, on average, 9% (LSE, 2012), after controlling for a range of other factors. This premium doubles with properties in the centre of a conservation area, compared with those on the edge. There was also a smaller but significant premium for properties just outside the conservation area. Overall the intensity of the heritage character increases the value of residential properties. This is logical, since the characteristics that led to conservation area status being granted affirms an intrinsic value which is reinforced through conservation area protection from certain types of development change. Conversely, areas outside of the conservation area may experience negative impacts from developments which would not be allowed in the more (aesthetically) controlled area. The attractiveness of businesses locating within historic buildings is also confirmed by a study of the returns to investing in historic commercial buildings. Colliers (2011) found that over 5, 10 and 30 years, the annualised return on listed offices has been higher than for offices overall. These studies indicate the place value of the contribution of historic buildings to the local environment and quality of life, ‘which in turn may have an indirect impact on business location decisions by encouraging supply of suitable qualified labour’ (English Heritage, 2014).
6.6.2 Quality of Life and ‘Place’
Many of the claims and evidence of the effects arising from CS&H assets relate to social impacts. These are associated with terms such as social capital, social cohesion and social inclusion, manifested through a range of indicators which measure participant’s perceptions and experience, including public attitudes, as noted above, for example in relation to heritage assets and amenity values, etc. These draw on programme and project evaluations and post-completion surveys assessing for instance, the extent and effect on volunteering and engagement. These affects can be situated broadly in the sphere of quality of life and wellbeing. For example, a survey found that people who had engaged with heritage activities over the previous year reported significantly higher happiness scores compared with those not engaging (English Heritage, 2013); heritage volunteers reported levels of mental health and wellbeing that are higher than for the general population, or amongst all those who undertook some form of volunteering activity (BOP, 2011). In a survey of the AV Festival (BOP, 2010) the large majority of volunteers responding reported improvements in their communication skills, self-confidence and willingness to try new things, and felt that this made them more employable. In a study for the Scottish Government on the impact of cultural engagement and sports participation on health (2013), those attending a cultural place or event were found to be 60% more likely to report good health compared to those who had not; participants in dance were 62% more likely to report good health. These associations between participation in a range of cultural activities and engagement are mirrored in similar studies both in the UK and abroad (see ACE, 2014; Daly, 2005).
A systematic analysis of the Understanding Society dataset (DCMS, 2014) sought to highlight the social benefits extracted from the results of this survey. The study, which ran a number of regression models, looked at the impacts of engagement in culture and sport and participation on four domains: health, education, economy and civic participation. The headline results found that arts audiences were 5.4% more likely to report good health, whilst sports participants were 14.1% more likely to do so. Arts participants were 14.1% more likely to report and intention to go on to further education (we do not however know if they subsequently did). Unemployed people who engage with the arts as an audience member were 12% more likely (than those not attending) to have looked for a job in the last 4 weeks; unemployed sports participants were 11% more likely to have done so. Those engaging with the arts as an audience member were 6% more likely to have volunteered frequently; sports participants were 3% more likely (they also gave £50 and £25 per person more to charitable donations than the non-engaged over the last year, respectively).
An example of how a sport-based initiative with the West Yorkshire probation service is provided by an evaluation of its impacts.
The West Yorkshire Sports Counselling scheme accepted voluntary referrals from the Probation Service and Youth Justice teams in West Yorkshire to participate in a 12-week programme of sports activities. The programme involved one-to-one, participant-centred work by sports leaders, typically meeting participants in sports centres and clubs for three hours a week. Of the 52 participants who completed the self-evaluation of fitness at the start and at the end of the programme, 75% recorded an increases in fitness and 22% no change. The programme had a beneficial impact on participants’ perception of their own fitness. Probation officers who had supervised the case study participants all felt that their clients had gained in self-confidence through participation and the achievement of completing the 12-week programme. For the comparative reconviction rate study the difference in actual reconviction was statistically significant. The actual reconviction rate was 40% versus a Home Office-based prediction of 64% over two years. These results indicate that the length of counselling makes a difference to its impact on reconvictions, which is consistent with the logic of a scheme which relies on building up an offender’s trust and confidence over 12 weeks. Not only did fewer participants re-offend, but those that did re-offend did so with less frequency than non-participants (in Evans & Shaw, 2001).
Visiting museums is found to have a positive impact on happiness and self-reported health. Participation in the arts and being audience to the arts also have positive effects on happiness36. Similarly, library use is positively associated with subjective wellbeing; library use is associated with higher life satisfaction, higher
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36 Fujiwara, D (2013) Museums and Happiness: The value of participating in museums and the arts. Stowmarket, The Happy Museum Project. happiness and a higher sense of purpose in life. Library use also has a positive association with general health; being a regular library user is associated with a 1.4% increase in the likelihood of reporting general good health. This is estimated to represent an average cost saving to the NHS of £27.5m per year\\textsuperscript{37}.
A further paper by the same authors (Fujiwara et al, 2015) sets out to quantify the value of health and wellbeing benefits of library engagement through a contingent valuation method. This involves surveying people about their willingness to pay for library services. This method measures primary benefits of library services (i.e. those that accrue directly to the individual). The paper also looks at secondary benefits; these are benefits that impact society more widely, such as those that lead to reduced public spending on health.
The primary benefit of libraries was measured using an online survey of 2,000 library users and non-library users. They were asked how much additional council tax they would be willing to pay in order to maintain facilities at their current level. As expected, library users were willing to pay more than non-library users but both groups were willing to pay a premium (around £20 and £10 per year on average, respectively). Extrapolated to the English population as a whole this equates to over £723m per year.
The secondary benefits of libraries were measured using data from the Taking Part Survey and the British Household Panel Survey (BHPS). Using this data, the authors estimate the association between library service usage, subjective wellbeing and general health. They then value these differences in health using GP-related NHS savings. This part of the study used a regression model approach that controlled for factors known to be associated with health such as age, ethnicity, smoking, family status, employment status, income, housing, religion, education, region and time of year. It used a measure of self-reported health on a scale from one to seven. The study also looked at the effects of poor health on GP visits in order to quantify the costs associated with poor health.
The study found a correlation between subjective wellbeing and library usage after controlling for a number of different factors. Library usage was associated with higher life satisfaction, higher happiness, a higher sense of purpose but was also associated with higher levels of anxiety.
Library usage was also found to be positively associated with self-reported general health after controlling for a number of confounding factors. Linking this increase in general health with the increased costs associated with poor health (due to increased GP visits) the authors estimate a saving of £27.5 to the NHS. The primary and secondary benefits estimated in this study suggest that libraries have a total value of around £750m per year.
In an earlier paper, Fujiwara et al (2013)\\textsuperscript{38} looked at the impact of engagement with museums on self-reported health and subjective wellbeing using regression analysis and then attempted to ascribe a monetary value to this impact. Like Fujiwara et al, 2015\\textsuperscript{39} (see above) the researchers employ a Wellbeing Valuation
\\textsuperscript{37} Fujiwara, D, Lawton, R & Mourato, S (2015) The health and wellbeing benefits of public libraries. London, Arts Council England.
\\textsuperscript{38} Fujiwara et al (2013, op cit)
\\textsuperscript{39} Fujiwara et al (2015), op cit approach to estimate the equivalent monetary value associated with an increase in wellbeing.
The models use data derived from the Taking Part Survey which provides several metrics on cultural and sport participation as well as questions on subjective wellbeing and self-reported health. The study also uses data from the BHPS to produce estimates of the monetary values associated with a given increase in subjective wellbeing. In addition, both surveys provide data on a wide range of personal characteristics (such as marital status, education, age, etc.) so that these can be controlled for in the models. The models are estimated using Ordinary Least Squares (OLS).
Four different models were used for four different measures of museum participation: whether participants go to museums in their spare time, whether they volunteer at museums, the frequency with which they visit museums and the amount of time spent at museums. All these factors were positively associated with wellbeing, but the results were only statistically significant for whether people visit museums in their spare time. For health, whether a person visits museums in their spare time has a positive effect while the frequency of museums visits and time spent at museums have no impact on health. Surprisingly, volunteering at a museum was negatively associated with health.
The study also looked at participation in the arts on health and wellbeing. Participation in the arts, participation in sports and being an audience in the arts all had significant positive relationships with wellbeing. Participation in sports and being an audience to the arts were significantly positively associated with better health, however there was no effect of participation in the arts on health.
Using a Wellbeing Valuation approach (using data from the BHPS) the authors estimate values associated with visiting museums of over £3,000 per person per year. Participation in the arts and sports showed a value of around £1,500 each while being an audience to the arts was valued at over £2,000 per year.
The role of the arts in education is another interesting area, although largely beyond the scope of this study. These engagements and experiences are, however, often place-based – in formal, informal education and cultural settings. Education facilities can therefore form part of CS&H assets within a place, whilst education is a key role of many CS&H organisations and venues for educational and training activity. In a novel study in the USA, a survey tested the proposition that entrepreneurial innovators in STEM fields who actively participated in arts and crafts activity in their youth and adulthood were more successful than their less active engineering and science peers. This found a positive correlation. The relationship between childhood experience and subsequent adult participation in a range of arts activities was identified some time ago (see Dobson & West 1989), with a higher importance suggested for informal/participative engagement than formal/passive. CS&H resources have a particularly important role, distinct from school/college and formal engagement (e.g. school visits), notably combined arts centres, heritage interpretation and multi-use facilities (including community sport). In the last national study of arts centres in the UK (Shaw et al, 2006), participation rates across multi-form activities were much higher than general arts participation, with a more even age distribution and higher frequency of use in both urban and rural centres. These centres also fulfilled a social role over and above their arts activity programmes – 14% often used and 38% occasionally used these centres for social activities, independent of any arts attendance/participation. Such venues are likely to have a stronger place-shaping contribution, particularly in communities where they serve either a local or singular catchment where there may be few or no other cultural facilities (this is more prevalent in rural and more deprived areas).
An earlier attitude survey conducted by English Heritage (MORI, 2000 in Evans & Shaw, 2001) found that 96% to 98% of people think that heritage is important to educate adults and children about the past and that all schoolchildren should be given the opportunity to find out more about England’s heritage; 88% thought that it was right that there should be public funding to preserve the heritage and 76% agreed that their lives are enriched by the heritage.
Assessing place qualities is also the subject of design and planning, often associated with accessibility indicators and community safety (‘fear of crime’). Design Quality Indicators have been developed for instance by CABE (2002, http://cic.org.uk/services/the-design-quality-indicator-dqi.php) to measure the impact of new buildings and spaces, from the perspective of users/visitors, operational staff and in the environmental/spatial context. This uses a survey-based weighted algorithm. There are also a number of street design/audit tools developed to measure accessibility levels, linkages and street quality (Evans, 2009b). This has included the value to retail and other premises owners, as well as place attractiveness (CABE, 2007) and impacts on (fear of) crime. The vitality that well-used CS&H facilities can generate contributes to natural surveillance and perceptions of safety, which can make such places important spaces for a wider user group, including women, families and children and the elderly – who experience higher concerns over street and transport safety.
Given that the concept of place-shaping draws on the practice of placemaking which has a prime (urban) design focus, the extent to which investment in CS&H contributes to good design needs consideration. This has a range of effects as noted, from community safety and conviviality, property values (domestic and commercial), to a sense of place and belonging, community pride and positive place branding.
6.6.3 Night-time Economy
CS&H facilities can be an important element in the evening economy of towns and cities. The so-called night-time economy (NTE) has a substantial economic value in larger cities. It is estimated that NTE activity contributed £66 billion to the UK economy in 2009, employing 1.3 million people – 10% of all employment, 8% of all firms (Bevan & Turnham, 2010). CS&H facilities contribute to this particular sector, notably theatres and evening productions. A particular challenge since the liberalisation of opening hours and licencing has been the development of a ‘monoculture’ in town centres and entertainment areas dominated by late night drinking establishments, pubs/bars and anti-social behaviour associated with excessive alcohol consumption (‘binge drinking’). This has had the effect of making it far less attractive to wider user groups to go into town and access other amenities including cultural venues. A particular response has been the adoption of late night (or ‘nuit blanche’) festivals and museums nights, as have been practiced in Europe and North America (Evans, 2010). These events have succeeded in bringing visitors back into town/city centres and to experience these places in a different temporal environment. This has seen younger visitors to venues traditionally attracting older age groups, such as museums and galleries. The temporal and geographic spread of visitor activity offered by extended late night cultural activity directly contributes to this increase in capacity and therefore their sustainability. However, the benefits according to the survey of local authorities are also wider than just the commercial returns and income to incumbent local authorities and businesses, who also link a vibrant night life with attraction to residents and investors (Roberts & Gornostaeva, 2007). Perceived benefits from NTE growth included:
- improvement in vitality of the area (and reduced crime/fear of crime)
- attraction/expansion of leisure venues (cinemas, theatres, gyms, cyber-cafés, events)
- new residents moving into the area
- increased number of jobs
- greater number of tourists
- inward investment in other businesses
The Greater London Authority study of the Leisure Economy (GLA, 2003), for example, found that on average each ward had gained 20 bar jobs between 1995 and 2000 (an increase of 12%) and restaurant jobs increased by 28%, presenting one of London’s ‘best sources of employment growth’. Attendance at non-alcohol-based venues also recorded an increase of 25%. For our purposes, isolating evening economic activity attributed to CS&H assets may be possible although this may require some judgements over the timing of programmes/facility opening, etc.
Total attendances at these late night events and festivals events range from the smaller 40,000 to 100,000, and mega-events from 1 million (Lisbon, Lyon, Toronto) to 2 million (Paris, Rome). Their scale has developed rapidly on an annual basis. Paris first attracted 500,000 in 2002 and now attracts 2 million; 40,000 visited Dublin’s first all-night culture festival in 2006 and over 100,000 in 2008; Rome saw 1 million in 2005 and receives 2 million today; Toronto attracted 425,000 in 2006 and over 1 million in 2008. This expansion reflects the growing number of events, venues and geographic area covered, but also the success in marketing and generation of excitement around what has become a ‘must see’ event. Some visitor surveys have been undertaken (in Evans, 2011). Satisfaction with the quality of these events was high – Rome 90% (42% ‘Excellent’, 48% ‘Good’) and Dublin 94% (65% ‘Very’ and 29% ‘Somewhat Satisfied’). Nearly half of the visitors to this event participated in two or more activities and nearly 80% travelled by foot or public transport. Visitors to these late night events are primarily local residents and ‘domestic’ visitors (whether staying overnight or not) with a growing international tourist or visitor; while Dublin’s Culture Festival attracts 100,000 visitors, 75% of these are from Ireland (62% from Dublin), but the remainder are from the UK/Europe and the USA. It seems clear that the night time cultural economy benefits from the place-shaping effects that CS&H evening activities provide, with tangible economic, cultural and social benefits. Late night festivals have spread in the UK as a result, particularly building on local cultural assets (e.g. Stoke, Leeds).
6.6.4 City Branding and Creative City indices
The field of branding has also developed models of city and place branding linked to destination marketing, which uses a range of indices to rank places. These rely on surveys of visitors, property and business owners and marketing organisations, as well as the application of network analysis and visual audits (see Zenker & Braun, 2014). Place indices are popular ways of ranking cities and places internationally and follow the trend for ranking cities (e.g. World/Global, Business Location, Quality of Life, Sustainable) including cultural and creative cities. In London’s *Cultural Audit* (GLA, 2008), the city was compared with several world cities in terms of a quantified range of cultural facilities, public and commercial, and this exercise is being updated to include more international cities. Creative City ranking was also a product of Florida’s (2002) Creative Class analysis which used his combined indices based on MSA level data analysis. Creative City indices and ranking have been developed first largely qualitatively through Landry’s set of elements and qualities (based on 10 ‘domains’) that distinguish a successful creative city (see Evans, 2015b). A group in Australia have developed a more systematic Creative City Index (CCI, 2012) drawing on world city and cultural indices, i.e.
- **Creative Stocks: creativity and culture-based** – This index, exemplified by the work of Richard Florida et al, is based on the premise that a ‘creative class’ of migrants is drawn to cities by cultural attractors and by societies that value diversity, openness and tolerance. These indices also strive to measure the vibrancy of the creative sectors in terms of output, employment, participation and talent. This is a *stocks* approach, even though the point is to attract mobile *inflowing stocks* of talent and intellectual capital.
- **Creative Flows: indices that focus more broadly on world status, global integration, and ICTs** – Indices in this class, exemplified by the Global Power Cities Index, tend to include comparable (though less detailed) ‘creative’ indicators as a subset, while expanding to cover a wider pool of city attractors, including business activity, liveability, the environment, transportation and accessibility, and technology. This wider scope tends to shift the focal point from culture and creativity towards city infrastructure and basic services, innovation and technology performance, and international exchange and network formation. This is a *flows* approach since it measures a city by the magnitude of connections that flow between cities.
The CCI index synthesises these and groups city data into eight categories of sub-indexes, producing city indicators and ranking, applied in this case to six cities (including Cardiff and London):
- 1. Creative industries scale, scope and employment
- 2. Micro-productivity
- 3. Attractions and economy of attention
- 4. Participation and expenditure
- 5. Public support
- 6. Human capital and research
- 7. Global integration
- 8. Openness, tolerance and diversity
The extent to which the Creative City Index approach may be adapted to place-shaping effects needs consideration. This would be closer to the first type of index, above, but expanded to include key amenity factors provided by CS&H assets. 6.7 Towards a Conceptual Framework
As already noted, one of the fundamental challenges in establishing relationships between CS&H assets and place-shaping – and between CS&H activity and impacts generally – is the weak link between population-based data and provision/CS&H assets. The former is the basis for most participation, attendance, attitudinal surveys, but it is not generally place-based. On the other hand, CS&H organisations and clusters have been measured locally (transactions, multipliers, surveys) in terms of economic and some social impacts, but not in most cases in relation to a discrete or measurable population group or wider geographic area.
As we have summarised above, evidence and literature ranges from the more linear hedonic price studies (amenity, property, place/regeneration) and economic impact/footprint studies, to the multi-dimensional effects in terms of social and economic impacts. The latter includes the relationship – under-researched but potentially fruitful (see NESTA, Markusen, etc.) – and the effects generated by CS&H assets/clusters and activity on the creative economy and the wider economy at expanding scales. This includes processes of co-location/proximity, innovation spillovers and consequent growth (of firms, investment, participation levels/demand, spending). Another set of change effects are the social and environmental benefits which CS&H assets can make to local quality of life/wellbeing, a sense of place and place-shaping, including public realm/safety and design.
Two basic requirements need to be met in order to assess and distinguish the contribution that culture makes to place-shaping. Firstly the identification of CS&H assets at varying scales both as a comparative and independent variable against which to measure various place-shaping effects; and secondly, the effects that can be associated with place-shaping. Once identified and in some cases more specifically defined, data sources for each set will be needed, including investment and infrastructure resources. It needs to be accepted at the outset that much evidence in the literature of place-shaping effects associated with CS&H assets has drawn on primary and customised research data collection. Primary research data may be used, however, in subsequent (‘synthetic’) modelling provided an acceptable statistical base is available (e.g. output averages for CS&H asset types).
In terms of robust data, this suggests the following routes:
- Define and specify data sources on CS&H assets including investment flows and infrastructure value(ations), cf. Physical Asset Mapping (CASE, 2010) and also see Points of Interest (POI, OS), land-use types and classifications (including as used by funders).
- Model clusters of CS&H assets (1) aggregated at various scales (see section 6.3 above).
Data on CS&H assets will provide the independent variable in any regression analysis modelling.
- Scope change effects – correlated and potentially causally linked to CS&H assets, new and established.
Data on change effects will provide a range of dependent variables that might be attributed to CS&H assets and therefore a predictor of CS&H investment impacts. 6.7.1 References
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However, once available data had been collated and reviewed, it was decided with the project steering group that Option 1 presented the most feasible and deliverable option.
Options 2 and 3 might be considered for future work and may contribute further to the evidence base regarding the existence and nature of the impact ecosystem (discussed in section ▶, p.8).
7.1 Option 1: exploring direct causal links between CS&H infrastructure and competitiveness
Option 1 would test the hypothesis that there are direct causal links between concentrations of culture, sport and heritage (CS&H) infrastructure and/or investment in CS&H infrastructure and indicators of competitiveness. We use here as an example, business concentration or immigration of creative industries. However, other indicators may be used depending on data availability and/or meaningfulness (e.g. immigration of highly qualified individuals).
An econometric testing of that type would use as a dependent variable a business indicator to be determined (e.g. density of creative businesses, migration of creative businesses etc.) and a set of independent variables traditionally used to determine business location decisions. One of the independent variables would be concentration of CS&H infrastructure and/or investment in CS&H infrastructure and business concentration. This would allow us to test whether concentration of CS&H infrastructure and/or investment in CS&H infrastructure and business concentration has a direct statistically significant impact on business location (and therefore on local/regional competitiveness). In a nutshell, this approach would use previous (established in the economics literature) regression models to explain business location by adding to these models one variable on concentration of / investment in CS&H infrastructure.
7.2 Option 2: exploring indirect causal links between CS & H infrastructure and competitiveness
Concentration of, and investment in, CS&H infrastructure has multiple short and long term impacts on urban spaces (and local and regional social economies). Some of these impacts are likely to affect pull (and push) factors of businesses. Some of these links have already been explored in previous quantitative analyses, to an extent.
In a situation whereby no direct causal link can be established (either due to lack of appropriate data or due to non-statistically significant results) option 2 would test the hypothesis that there are indirect causal links between the impacts of CS&H infrastructure on social economies (e.g. well-being, criminality, health etc.) and business location decisions.
As with option 1, the dependent variable will be a business indicator to be determined, but the independent variables added (to established regression models) would be key selected impacts of CS&H infrastructure.
For example, since it is established that concentration of CS&H infrastructure affects well-being indicators, then determining a causal link between business location (or concentration, migration, etc.) and well-being would bring to the light the indirect link between sports and cultural infrastructure and local/regional competitiveness.
The challenge for this approach will be that (unless creating a composite indicator reflecting numerous socio-economic indicators) numerous models may need to be run to elicit the links between business location and respective socio-economic conditions.
7.3 Option 3: exploring indirect causal links between CS & H infrastructure and competitiveness through a two-stage approach
Option 3 would be an enhanced version of option 2. If deemed that the quantitative evidence on the links between CS&H infrastructure (concentration and/or investment) and key socio-economic impacts affecting business location (concentration) are not sufficiently determined at a national scale, then this option would aim to test the following hypotheses:
- Firstly, that there are causal links between CS&H infrastructure and key socio-economic impacts, and
- Secondly (as per Option 2) that there are causal links between these impacts and concentration (migration etc.) of businesses
For example, if there is a causal link between concentration of sports and cultural infrastructure and criminality levels, and there is also a causal link between criminality levels and business location decisions, then there is a strong case for suggesting that CS&H infrastructure may affect business location decisions and thus local and regional competitiveness. This approach is thus an indirect way of eliciting possible routes through which sports and cultural infrastructure affect economic outcomes for local areas or regions. This section presents findings from an initial exploration of the relationships between CS&H assets and investment and local economic performance. This analysis was undertaken in order to determine whether any correlation is at play between CS&H infrastructure indicators and economic indicators, effectively testing whether the first of our quantitative analysis options (see section 7., p.82) would be likely to yield meaningful results.
Correlations were run between key variables to examine whether relationships exist. Note that correlations were run on static data (i.e. in one year). To test relationships over time, regression analysis is needed.
Initial correlations were run for 2013 using local authorities as the unit of analysis, in order to test whether simple relationships exist. Correlations were re-tested for 2006 where initial findings suggested a strong relationship.
### 8.1 Key findings
Table 10 shows the results for correlations between indicators of competitiveness and CS&H investment in 2013.
| Table 10: Selected correlations between CS&H investment and economic indicators, 2013 | |---------------------------------|-----------------|-----------------|-----------------|-----------------|-----------------|-----------------|-----------------|-----------------|-----------------| | | Total number of firms | Total turnover of all firms | Turnover growth rate of all firms | Number of creative industries firms | Creative industries firms per capita | Creative industries firms LQ | Net migration of creative industries firms | Turnover of creative industries firms | Turnover growth rate of creative industries firms | | Total CS&H investment | 0.78 | 0.43 | 0.04 | 0.64 | 0.09 | -0.07 | -0.38 | 0.42 | 0.3 | | CS&H investment, lagged one year| 0.78 | 0.41 | 0.03 | 0.65 | 0.08 | -0.08 | -0.33 | 0.43 | 0.3 | | CS&H investment, lagged two years| 0.65 | 0.31 | 0.03 | 0.52 | 0.08 | -0.08 | -0.31 | 0.32 | 0.19 | | CS&H investment, lagged three years| 0.69 | 0.34 | 0.04 | 0.53 | 0.09 | -0.09 | -0.28 | 0.28 | 0.23 | | CS&H investment per capita | 0.16 | 0.4 | -0.04 | 0.11 | 0.71 | 0.03 | -0.2 | 0.09 | 0.07 | | Lottery investment per capita | 0.41 | 0.47 | 0.01 | 0.41 | 0.52 | 0.06 | -0.37 | 0.4 | 0.18 | | Local authority investment per capita | 0.13 | 0.38 | -0.05 | 0.08 | 0.7 | 0.03 | -0.18 | 0.06 | 0.05 | | CS&H investment per capita, lagged one year | 0.16 | 0.41 | -0.05 | 0.11 | 0.69 | 0 | -0.19 | 0.09 | 0.07 | | CS&H investment per capita, lagged two years | 0.14 | 0.38 | -0.04 | 0.09 | 0.74 | 0.08 | -0.19 | 0.07 | 0.05 | | CS&H investment per capita, lagged three years | 0.14 | 0.39 | -0.04 | 0.08 | 0.68 | -0.01 | -0.18 | 0.06 | 0.05 | There are several ostensibly strong relationships between local economic performance and CS&H investment, including the number of creative firms, turnover of creative firms, turnover growth of creative firms and level of CS&H investment.
The strongest relationship appears to be between CS&H investment per capita and number of creative firms per capita (correlation coefficient = 0.71). However, examination of the data reveals two extreme outliers: the Isles of Scilly and City of London (see Figure 4).
**Figure 4: Correlation between number of creative industries firms per capita and Lottery investment, by local authority**
The relationship remains once these two outliers are removed (see Figure 5), but is less strong at 0.18, although lottery CS&H investment per capita is still reasonably well correlated at 0.44 – compared to minus 0.16 for local authority CS&H investment (the latter suggesting a negative relationship).
**Figure 5: Correlation between number of creative industries firms per capita and Lottery CS&H investment, by local authority (excluding Isles of Scilly and City of London)** The relationship between the total number of firms and CS&H investment, is stronger than the relationship between CS&H investment and creative industries firms. This is reflected in the location quotient variable, which measures the relative concentration of creative firms in a local authority compared to the national context – higher CS&H current and lagged investment is associated with a lower concentration of creative firms, although this relationship is weak.
As investment is a flow variable, it makes sense to consider the relationship between it and other flow variables. Turnover growth rate was found to also have a weak positive relationship with investment (see Figure 6). Creative industries firms’ turnover growth is more strongly correlated with CS&H investment than turnover growth among all firms: creative industries firms’ turnover growth and investment have a correlation coefficient of 0.3, whereas all firms’ turnover growth and investment have a correlation coefficient of 0.04.
*Figure 6: Correlation between turnover growth in creative industries firms and CS&H investment, by local authority* Lagged investment was also tested, and yielded very similar correlations as investment – nearly identical for the one year lag, with slightly weaker relationships for the later year lags.
Results for correlations between the same variables in 2006 were broadly similar to results from 2013 (2006 was chosen as a comparator year so that considerations around the financial crisis did not have to be taken into account). The only large difference between the two years was the relationship between net migration of creative firms and CS&H investment, which was weakly negative in 2013 (-0.38) and weakly positive in 2006 (0.27).
All investment data is public investment. It would be useful to be able to test data including private investment, though data limitations prevent this.
**Table 11: Selected correlations between CS&H assets and economic indicators, 2013**
| | Total number of firms | Total turnover of all firms | Number of creative industries firms | Creative industries firms per capita | Creative industries firms LQ | Net migration of creative industries firms | Turnover of creative industries firms | |--------------------------|-----------------------|-----------------------------|------------------------------------|-------------------------------------|-----------------------------|------------------------------------------|-------------------------------------| | Total number of CS&H assets | 0.1 | -0.03 | 0.03 | -0.04 | -0.05 | 0.19 | -0.11 | | CS&H assets density | 0.02 | 0.06 | 0.12 | 0.08 | 0.13 | -0.09 | 0.12 | | Number of Heritage assets | 0.31 | 0.06 | 0.22 | -0.02 | -0.07 | 0.12 | 0.05 | | Number of sports assets | 0.61 | 0.1 | 0.39 | -0.14 | -0.16 | -0.02 | 0.07 | There were few correlations between CS&H assets and local economic indicators. However, this may be due to quality of available data. Data on CS&H assets were only available for the current year, but economic indicators were from previous years – so essentially these correlations are testing, for example, whether the number of creative firms, etc. from two years ago is related to cultural assets now.
Note that the regressions to be used for the econometric analysis are panel data regressions, whereas the correlation analysis is ‘static’ (looking at correlation for one year at a time). It may thus be that panel data regressions will yield somewhat different results and are consequently worth undertaking.
8.2 Conclusions
Not all relationships are worth testing econometrically. Most notably, given the quality of existing data and the absence of longitudinal information, testing the relationship between CS&H assets and any variables linked to local economic performance is unlikely to yield meaningful results.
Investment in CS&H (and associated variables, such as growth rate of CS&H investment, etc.) is positively correlated with numerous indicators, such as turnover of creative (and other) firms, turnover growth rates and, for some years, net firm migration. The econometric analysis should thus focus primarily on these variables.
More granular analysis may need to be undertaken. For example, we have run preliminary estimations both at a regional scale and by distinguishing between local authorities which are predominantly urban and those which are predominantly rural. A more granular analysis may show different correlations. In London’s local authorities, for example, the correlation between CS&H investment and various creative industries indicators appear extremely strong. The question is whether this holds when considering all major English urban centres. Preliminary analysis shows this may be the case. On the other hand, in predominantly rural areas, investment in CS&H may not provide sufficient incentives for firms to stay, expand, or migrate in those areas (due to other factors at play). A more granular analysis would provide answers to these hypotheses. 9: Appendix IV – Data review
A detailed review of data sources which identify CS&H assets and investments, and/or which might provide dependent variables for the analysis was undertaken to inform the study. This focused initially on assets and investments, but also considered other indicators. The data sources reviewed include freely available data, mainly provided by public bodies, as well as commercial datasets.
Data sources reviewed in relation to assets and investment are set out in Table 12 below.
| Assets/infrastructure: | Investment: | |------------------------|-------------| | Inter-Departmental Business Database (IDBR) / Business Structures Database (BSD) | Local authority revenue expenditure | | TCR (longitudinal database of UK businesses, owned by TBR) | Local authority capital expenditure | | Experian National Business Data | National English Heritage Grants | | Yellow Pages | Heritage Lottery Fund – 20 years in 12 places | | FAME | Heritage Lottery Fund – Grants research | | Market Location | Churches Conservation Trust | | Active Places Power | Listed Places of Worship Grant Scheme | | Culture24 | National Heritage Memorial Fund | | ArchSearch | DCMS Arms Length Bodies funding | | National Record of the Historic Environment | Rural Development programme budget | | National Heritage List for England | Rural Development programme budget | | Natural England GIS Digital Boundary Datasets | CAP Payments | | UK Public Library Dataset | Science and Heritage Programme | | Culture Grid | Gateway to Research (GtR) | | PointX | CIPFA data | | Points of Interest | | The role of culture, sport and heritage in place shaping
- OSMasterMap
- OpenStreetMap
- POIplaza
- Points of Interest Northern Ireland, Isle of Man, Channel Islands
- OpenPOIS
- GPS POI data
9.1 Assets
The data review did not identify a single source which provides comprehensive coverage of all CS&H assets. A number of datasets are available which appear to ‘definitively’ identify assets in a particular category – culture, sport or heritage – but not all three. While this means the analysis might potentially examine the impacts of each type of asset separately, in order to test the impact of the CS&H offer as a whole it is necessary to collate data from a number of different sources.
In the absence of detailed local knowledge of all the places to be examined in the analysis it is, of course, difficult to judge the comprehensiveness of many of the data sources reviewed. At the national level, this is impossible. Where they relate to assets which receive public funding, or which are managed by public bodies, we can generally expect coverage of data sources to be comprehensive (within the definitions of the dataset). Other data sources may vary in their coverage, especially where data is supplied by individual organisations which own or manage the assets themselves (as in the case of the Culture24 website/dataset). There may also be spatial variation in comprehensiveness – that is, a single source may provide comprehensive coverage of the assets in one place, while coverage may be patchy in another.
Commercial datasets (e.g. point of interest data) are likely to provide the broadest coverage (that is, include a broad range of CS&H assets) but are hardest to judge in terms of comprehensiveness without arranging access to the data and comparing with the available public data. There is also a cost implication to the use of commercial datasets which needs to be considered, of course.
Identifying the places in which CS&H assets are located is generally straightforward – the data sources reviewed include postcodes, grid references or both. This means that assets can be georeferenced at detailed spatial levels, and other indicators used in the analysis are more likely to determine the spatial level at which CS&H impacts can be tested. However, it should be noted that our experience of some sources available from public bodies shows that georeferencing variables are not always fully populated or accurate. This points to a wider need to validate the sources used.
Time-series data on CS&H assets is not readily available. Many data sources provide a recent snapshot of assets, without historical comparisons. In some cases, time series might be constructed by comparing historical versions of the datasets. In many cases, however, historical datasets are not available – this is particularly the case where data is sourced from a continuously updated database or from a commercial supplier. Data on the value of CS&H assets is not readily available. Value indicators may be available on a case-study basis, though collating this data would require extensive desk research and is unlikely to provide a consistent picture across either the range of CS&H assets or the places examined. It may be possible to match data sources in order to identify the economic value of commercial assets (e.g. turnover, GVA or output). However, the definition of ‘value’ needs to be considered and agreed – it may be that value is better defined in terms of usage or public perception/satisfaction, rather than in purely economic terms. One or more proxy indicators of value may need to be defined and suitable sources identified.
It must also be recognised that examining stocks and flows, in terms of assets and investments (discussed below) will add value to the analysis. The key implication is that longitudinal data would be required to examine flows.
Also, the measurement of the existence of an asset (at one or more points in time) is ‘easier’ than measuring quality, given the nature of available data.
9.2 Investment
Data on investment in CS&H assets – and in particular, data on private investment – is less readily available than data relating to the type or location of assets themselves. As with data on value, investment data (including private investment) may be available on a case-study basis, though again collating this would require extensive desk research and is unlikely to provide a consistent picture across the range of CS&H assets or the places examined.
Where it is available, investment data is often not specific to individual assets but is only available at aggregate levels. The availability of investment data was a key factor in determining the spatial level at which CS&H impacts could be tested in this study. The most consistent source of investment data is on local authority expenditure, which would not allow analysis at spatial levels below local authority boundaries.
It may be possible to use proxy indicators for investment. At the broadest level, for example, an increase in the number of CS&H assets in a place would imply investment in the CS&H infrastructure. However, the extent of investment is likely to be difficult to measure by proxy, and the suitability of proxy indicators needs further consideration.
9.3 Dependent variables
A wide range of data sources is available which can provide dependent variables (and control variables) for the analysis. These include data on business infrastructure and performance (including the Inter-Departmental Business Register as well as commercial datasets), demography, labour market indicators, indicators relating to quality of life and well-being, and indicators relating to the local infrastructure. In most cases, data is freely available. In a few cases (e.g. availability and cost of business premises) the use of commercial datasets is needed.
Data is available at various spatial levels, depending on the specific indicator and the source used. Data on business infrastructure and performance and data on demography is generally available at detailed spatial levels (though in the case of demography, time-series data at fine resolution is only available from the Census and therefore covers change over ten-year periods). Other data may only be available at local authority level and not for smaller geographies.
9.4 Conclusions
Identifying the CS&H assets in a place is relatively straightforward, though a comprehensive picture needs to be collated from a number of different data sources. Identifying changes in the number, type and quality of assets is more difficult. Similarly, developing a comprehensive picture of investment in CS&H assets is also difficult. Data availability was taken to determine the specification for analysis.
A range of indicators is available to examine the impacts of CS&H assets and investment. The available data will also allow impacts to be tested at a range of spatial levels, though generally not robustly below local authority level. The specific indicators to be used as dependent and control variables were defined in line with the specification for analysis.
The ecosystem presented in section 2.3.3 (p.13) highlights some of the theoretical impacts of CS&H assets/investments. This study presented an opportunity to test a variety of these potential impacts to understand where relationships do and do not exist and then to focus in on strong relationships in order to understand how they are generated. In some cases, however, specific indicators were not available. This is the case, for example, in relation to independent and dependent variables relating to quality or value (e.g. the quality of the CS&H offer). Where the data review identified a gap in the available data, a suitable proxy was sought. However, the analysis was driven by available data.
It was recognised that the process of reviewing data sources and developing a specification for the analysis should be an iterative one, with each informing the other. A data specification which describes the indicators to be used in the analysis and the sources from which they are drawn was developed as the study progressed. Details of the dataset used in the analysis can be found in section 11: (p.102). 10: Appendix V – Sector definitions
This section provides Standard Industrial Classification definitions for the four sectors tested in the analysis: creative industries, knowledge industries, tourism and professional services.
10.1 Creative Industries
Analysis is based on the DCMS definition of the Creative Industries. Tier 1 is the standard definition used unless specified otherwise. Tier 2 and 3 industries were successively added to test the robustness of the analysis.
| SIC07 | Description | Tier | |--------|------------------------------------------------------------------|------| | 32120 | Manufacture of jewellery and related articles | 1 | | 32300 | Manufacture of sports goods | 1 | | 58110 | Book publishing | 1 | | 58120 | Publishing of directories and mailing lists | 1 | | 58130 | Publishing of newspapers | 1 | | 58141 | Publishing of learned journals | 1 | | 58142 | Publishing of consumer and business journals and periodicals | 1 | | 58190 | Other publishing activities | 1 | | 58210 | Publishing of computer games | 1 | | 58290 | Other software publishing | 1 | | 59111 | Motion picture production activities | 1 | | 59112 | Video production activities | 1 | | 59113 | Television programme production activities | 1 | | 59120 | Motion picture, video and television programme post-production activities | 1 | | 59131 | Motion picture distribution activities | 1 | | 59132 | Video distribution activities | 1 | | 59133 | Television programme distribution activities | 1 | | 59140 | Motion picture projection activities | 1 | | 59200 | Sound recording and music publishing activities | 1 | | 60100 | Radio broadcasting | 1 | | 60200 | Television programming and broadcasting activities | 1 | | 62011 | Ready-made interactive leisure and entertainment software development | 1 | | 62012 | Business and domestic software development | 1 | | 62020 | Computer consultancy activities | 1 | | 70210 | Public relations and communications activities | 1 | | 71111 | Architectural activities | 1 | | 71112 | Urban planning and landscape architectural activities | 1 |
[40] https://www.gov.uk/government/statistics/creative-industries-economic-estimates-january-2015 | SIC07 | Description | Tier | |---------|-----------------------------------------------------------------------------|------| | 73110 | Advertising agencies | 1 | | 73120 | Media representation services | 1 | | 74100 | specialised design activities | 1 | | 74201 | Portrait photographic activities | 1 | | 74202 | Other specialist photography (not including portrait photography) | 1 | | 74203 | Film processing | 1 | | 74209 | Photographic activities not elsewhere classified | 1 | | 74300 | Translation and interpretation activities | 1 | | 85510 | Sports and recreation education | 1 | | 85520 | Cultural education | 1 | | 90010 | Performing arts | 1 | | 90020 | Support activities to performing arts | 1 | | 90030 | Artistic creation | 1 | | 90040 | Operation of arts facilities | 1 | | 91011 | Library activities | 1 | | 91012 | Archives activities | 1 | | 91020 | Museums activities | 1 | | 93110 | Operation of sports facilities | 1 | | 93120 | Activities of sport clubs | 1 | | 93130 | Fitness facilities | 1 | | 93191 | Activities of racehorse owners | 1 | | 93199 | Other sports activities | 1 | | 18110 | Printing of newspapers | 2 | | 18201 | Reproduction of sound recording | 2 | | 18202 | Reproduction of video recording | 2 | | 18203 | Reproduction of computer media | 2 | | 23410 | Manufacture of ceramic household and ornamental articles | 2 | | 31090 | Manufacture of other furniture | 3 | | 32200 | Manufacture of musical instruments | 2 | | 46491 | Wholesale of musical instruments | 2 | | 47781 | Retail sale in commercial art galleries | 3 | | 47791 | Retail sale of antiques including antique books in stores | 3 | | 78101 | Motion picture, television and other theatrical casting activities | 2 | | 91030 | Operation of historical sites and buildings and similar visitor attractions | 2 | | 91040 | Botanical and zoological gardens and nature reserves activities | 2 | | 95240 | Repair of furniture and home furnishings | 2 | 10.2 Knowledge Industries
Analysis is based on the OECD definition of the Knowledge Industries(^{41}), updated from SIC 2003(^{42}) to SIC 2007 using conversion tables from ONS(^{43}).
| SIC03 | Description | |-------|-------------| | 741 | Legal, accounting, book-keeping and auditing activities; tax consultancy; market research and public opinion polling; business and management consultancy; holdings | | 221 | Publishing | | 724 | Data base activities | | 722 | Software consultancy and supply | | 724 | Data base activities | | 921 | Motion picture and video activities | | 922 | Radio and television activities | | 221 | Publishing | | 724 | Data base activities | | 748 | Miscellaneous business activities not elsewhere classified | | 921 | Motion picture and video activities | | 922 | Radio and television activities | | 642 | Telecommunications | | 922 | Radio and television activities | | 642 | Telecommunications | | 922 | Radio and television activities | | 642 | Telecommunications | | 642 | Telecommunications | | 642 | Telecommunications | | 721 | Hardware consultancy | | 722 | Software consultancy and supply | | 723 | Data processing | | 724 | Data base activities | | 726 | Other computer related activities | | 723 | Data processing | | 724 | Data base activities | | 748 | Miscellaneous business activities not elsewhere classified | | 924 | News agency activities | | 651 | Monetary intermediation | | 652 | Other financial intermediation |
(^{41}) [http://www.oecd.org/science/sci-tech/2087188.pdf](http://www.oecd.org/science/sci-tech/2087188.pdf)
(^{42}) [http://www.futureoflondon.org.uk/futureoflondon/wp-content/uploads/downloads/2011/10/Future-of-London-Knowledge-Economy.pdf](http://www.futureoflondon.org.uk/futureoflondon/wp-content/uploads/downloads/2011/10/Future-of-London-Knowledge-Economy.pdf)
(^{43}) [https://www.ons.gov.uk/methodology/classificationsandstandards/ukstandardindustrialclassificationofeconomicactivities/uksic2007](https://www.ons.gov.uk/methodology/classificationsandstandards/ukstandardindustrialclassificationofeconomicactivities/uksic2007) | SIC03 | Description | |-------|-------------| | 741 | Legal, accounting, book-keeping and auditing activities; tax consultancy; market research and public opinion polling; business and management consultancy; holdings | | 652 | Other financial intermediation | | 660 | Insurance and pension funding, except compulsory social security | | 671 | Activities auxiliary to financial intermediation, except insurance and pension funding | | 672 | Activities auxiliary to insurance and pension funding | | 741 | Legal, accounting, book-keeping and auditing activities; tax consultancy; market research and public opinion polling; business and management consultancy; holdings | | 742 | Architectural and engineering activities and related technical consultancy | | 731 | Research and experimental development on natural sciences and engineering | | 732 | Research and experimental development on social sciences and humanities | | 744 | Advertising | | 748 | Miscellaneous business activities not elsewhere classified | | 924 | News agency activities | | 748 | Miscellaneous business activities not elsewhere classified | | 741 | Legal, accounting, book-keeping and auditing activities; tax consultancy; market research and public opinion polling; business and management consultancy; holdings | | 742 | Architectural and engineering activities and related technical consultancy | | 748 | Miscellaneous business activities not elsewhere classified | | 852 | Veterinary activities | | 748 | Miscellaneous business activities not elsewhere classified | | 745 | Labour recruitment and provision of personnel | | 745 | Labour recruitment and provision of personnel | | 923 | Other entertainment activities | | 748 | Miscellaneous business activities not elsewhere classified | | 751 | Administration of the State and the economic and social policy of the community | | 748 | Miscellaneous business activities not elsewhere classified | | 748 | Miscellaneous business activities not elsewhere classified | | 748 | Miscellaneous business activities not elsewhere classified | | 751 | Administration of the State and the economic and social policy of the community | | SIC03 | Description | |-------|-------------| | 752 | Provision of services to the community as a whole | | 801 | Primary education | | 801 | Primary education | | 802 | Secondary Education | | 804 | Adult and other education | | 803 | Higher education | | 804 | Adult and other education | | 923 | Other entertainment activities | | 741 | Legal, accounting, book-keeping and auditing activities; tax consultancy; market research and public opinion polling; business and management consultancy; holdings | | 851 | Human health activities | | 851 | Human health activities | | 851 | Human health activities | | 851 | Human health activities | | 851 | Human health activities | | 923 | Other entertainment activities | | 924 | News agency activities | | 751 | Administration of the State and the economic and social policy of the community | | 925 | Library, archives, museums and other cultural activities | | 923 | Other entertainment activities | 10.3 **Tourism**
Analysis uses the UN World Tourism Organisation definition, as set out by the ONS Tourism Intelligence Unit(^{44}).
| SIC07 | Description | |--------|-----------------------------------------------------------------------------| | 55100 | Hotels and similar accommodation | | 55202 | Youth hostels | | 55300 | Recreational vehicle parks, trailer parks and camping grounds | | 55201 | Holiday centres and villages | | 55209 | Other holiday and other collective accommodation | | 55900 | Other accommodation | | 56101 | Licensed restaurants | | 56102 | Unlicensed restaurants and cafes | | 56103 | Take-away food shops and mobile food stands | | 56290 | Other food services | | 56210 | Event catering activities | | 56301 | Licenced clubs | | 56302 | Public houses and bars | | 49100 | Passenger rail transport, interurban | | 49320 | Taxi operation | | 49390 | Other passenger land transport | | 50100 | Sea and coastal passenger water transport | | 50300 | Inland passenger water transport | | 51101 | Scheduled passenger air transport | | 51102 | Non-scheduled passenger air transport | | 77110 | Renting and leasing of cars and light motor vehicles | | 77341 | Renting and leasing of passenger water transport equipment | | 77351 | Renting and leasing of passenger air transport equipment | | 79110 | Travel agency activities | | 79120 | Tour operator activities | | 79901 | Activities of tourist guides | | 79909 | Other reservation service activities n.e.c. | | 90010 | Performing arts | | 90020 | Support activities to performing arts | | 90030 | Artistic creation | | 90040 | Operation of arts facilities | | 91020 | Museums activities | | 91030 | Operation of historical sites and buildings and similar visitor attractions | | 91040 | Botanical and zoological gardens and nature reserves activities |
(^{44}) [http://www.ons.gov.uk/ons/guide-method/method-quality/specific/economy/economic-value-of-tourism/measuring-tourism-locally/2012/note-1/measuring-tourism-locally-v2-2012-guidance-note-1--definitions-of-tourism-.pdf](http://www.ons.gov.uk/ons/guide-method/method-quality/specific/economy/economic-value-of-tourism/measuring-tourism-locally/2012/note-1/measuring-tourism-locally-v2-2012-guidance-note-1--definitions-of-tourism-.pdf) | SIC07 | Description | |--------|-------------------------------------------------------| | 92000 | Gambling and betting activities | | 93110 | Operation of sports facilities | | 93199 | Other sports activities | | 93210 | Activities of amusement parks and theme parks | | 93290 | Other amusement and recreation activities n.e.c. | | 77210 | Renting and leasing of recreational and sports goods | | 82301 | Activities of exhibition and fair organisers | | 82302 | Activities of conference organisers | | 68202 | Letting and operating of conference and exhibition centres | 10.3.2 Professional Services
Analysis uses the Department for Business, Innovation & Skills definition(^{45}).
| SIC | Description | |-----|------------------------------------------------------------------| | 69 | Legal and accounting activities | | 70 | Activities of head offices; management consultancy activities | | 71 | Architectural and engineering activities; technical testing and analysis | | 72 | Scientific research and development | | 73 | Advertising and market research | | 74 | Other professional, scientific and technical activities | | 77 | Rental and leasing activities | | 78 | Employment activities | | 82 | Office administrative, office support and other business support activities |
(^{45}) [https://www.gov.uk/government/publications/growth-is-our-business-professional-and-business-services-strategy](https://www.gov.uk/government/publications/growth-is-our-business-professional-and-business-services-strategy)
## 11: Appendix VI – Data sources and details of variables
| Variable | Definition and source | |----------|-----------------------| | **Dependent variables** | | | Firm density | Number of live firms per capita in each local authority. Data from TBR's Trends Central Resource. | | Turnover per capita | Turnover in all live firms per capita in each local authority. Data from TBR's Trends Central Resource. | | Net firm gain per capita | Total number of firm births and firms migrating inward less the number of firm deaths and firms migrating outward per capita per year in each local authority. Data from TBR's Trends Central Resource. | | Location quotient of creative firms | The location quotient is an indicator of the specialised clustering of an industry. The location quotient of creative firms in a local authority is the ratio of the number creative firms in the local authority to nationally, divided by the ratio of total firms in the local authority compared to nationally. Data from TBR's Trends Central Resource. | | **Assets** | | | Heritage assets | Heritage assets is a compound measure of the number of scheduled monuments and listed buildings of grades I and II, protected wrecks and registered parks, gardens and battlefields in a local authority. Data from Natural Heritage List for England. This data was not available as time series. | | Sports assets | Sports assets measures the availability of community sport in an area. It is the number of active places listed on the Active Places Power website ([https://www.activeplacespower.com/](https://www.activeplacespower.com/)) in each local authority. Data was available from 2009 to 2015. | | Cultural events | Cultural events are measured by cultural listings on the Culture24 website, a government funded website ([http://www.culture24.org.uk/home](http://www.culture24.org.uk/home)) which provides event listings from UK museums, art galleries and heritage sites. Data was not available as a time series. |
### Libraries
The number of libraries per local authority, taken from the UK Public Libraries Contacts database.
### Investment
| Description | Details | |-------------|---------| | Local authority investment in culture, sports and heritage | The sum of various types of local authority expenditure in a local authority in a year. Spending categories included: archives, heritage, museums and galleries, arts development and support, theatres and public entertainment, community centres, foreshore, sports development and community recreation, sports and recreation facilities including golf course, open spaces, tourism, and library services. Data from DCLG local authority revenue expenditure and financing, and all figures take the net total expenditure, i.e. the sum of net current and capital (net of fees and income), including expenditure on fixed assets. | | Lottery investment in arts, sports and heritage | The sum of lottery investment in arts, sports and heritage in the local authority. Data is from the Heritage Lottery Fund, Arts Council England and Sport England. |
### Additional push/pull factors or control variables
| Description | Details | |-------------|---------| | Employment rate | The estimated proportion of employed individuals, taken from the Annual Population Survey. | | Skilled labour proportion | The proportion of employed workers at high skill level – skill level 4 (SOC 11, 21, 22, 23, 24) – in the Annual Population Survey. | | Housing density | Housing density was calculated by determining the number of households per hectare in a local authority. Data is based on Census estimates (available for 2001 and 2011). | | Network infrastructure | Network infrastructure is the percentage availability of Super Fast Broadband (SFBB) in premises in each local authority. Data from OFCOM networks data, and is not available in time series. | | Transport infrastructure | Transport infrastructure is measured by the number of rail station stops in each local authority. Data from the National Public Transport Access Nodes dataset. | | Life satisfaction | Two well-being proxy indicators were selected, on the basis of availability and quality. The first was the Life Satisfaction Index, collected by ONS, which is however not available for the entire period 2003-2013. It was thus possible to use it for cross-sectional regressions, but not for the panel analysis (longitudinal analysis). The best proxy indicator we found for the panel data analysis was the average | | Variable | Description | |----------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------| | hours of physical activity | undertaken weekly, and the percentage of the population being active on at least a weekly basis, taken from the Active People Survey. | | Size of the market (population) | Population size in the local authority each year is used as a control variable. Data from the Annual Population Survey. | | GVA | Data on GVA is not easily available at a local level. Therefore as a proxy for GVA, we used total compensation of employees from the Annual Survey of Hours and Earnings. | | Competitiveness | Competitiveness is a measure of the ability of a local authority to create value. It is a concept that encompasses multiple indicators. The analysis uses the Centre for International Competitiveness’s UK Competitiveness Index(^{46}), an integrated measure of competitiveness that includes:
- Business start-up rates per 1000 inhabitants
- Number of businesses per 1000 inhabitants
- Proportion of knowledge-based businesses
- Proportion of population with NVQ level 4+
- GVA per head
- Productivity (output per hour worked)
- Employment rate\
As such, it overlaps with other variables used in the analysis. Therefore where it is used in the analysis, we do not variables represented in the index as separate controls. This was considered preferable as some of the variables within the Index (such as productivity) are not easily available at a local authority level. The Index is published every two years; where data was not available we interpolated results to estimate index values for the intervening years. | | Major urban centre | An area is considered a major urban centre if it contains a population in a major conurbation according to the ONS (e.g. London, Birmingham, Greater Manchester).\
This variable is binary, and equal to 1 if the Local Authority contains a major urban centre; 0 otherwise. |
The gathered dataset also includes further variables not used in the final analysis (for example the Index of Multiple Deprivation) as well as detailed breakdowns of variables (such as local authority investment disaggregated), which will aid in future analysis.
(^{46}) [http://www.cforic.org/pages/ukci2016.php](http://www.cforic.org/pages/ukci2016.php)
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44f2a8c8cb5a6ae8c984584d218969e02b40fb0e | Cross Council Assurance Service
Final Internal Audit Report
Cash and Bank January 2020
| To: | Director of Finance\
Head of Finance: Exchequer\
Assistant Finance Manager, Cashbook\
Interim Finance Manager\
Assistant Director - Estates\
Acting Facilities Manager\
Management Accountant, Integra Finance, LBB\
Acting Income and Cashier Manager\
Cashier\
Control Officer\
CSG Technical Support Engineer (Applications) | |---|---| | From: | Senior Audit Executive |
We would like to thank management and staff of Income and Cash Book for their time and co-operation during the course of the internal audit. Executive Summary
| Assurance level | Number of recommendations by risk category | |-----------------|------------------------------------------| | Limited | Critical | High | Medium | Low | Advisory | | | - | - | 7 | 1 | - |
Scope
Cash and Bank covers the:
- receipting of cash/cheques by the Income team;
- movement/transfer/collection of cash and cheques between locations by Royal Mail and Security Collections (SC), the Council's inhouse money courier;
- the secure safekeeping of cash and cheques by Income and Security Collections;
- the management of cash floats and addressing requests for cash from Services, for example for payments to asylum seekers and use at children centres; and
- reconciliation, clearing and processing of bank transactions to Integra, the Council’s finance system, to ensure the timely and accurate update of the general ledger by Cash Book.
The review also included the follow-up of the 2017-18 audit of Purchase Cards, see Appendix 4.
The Council’s Finance team transferred back to the Council from CSG on 1st April 2019. It should be noted that the audit fieldwork coincided with a significant restructure within the Finance team.
Summary of findings Detailed control findings are set out in Appendix 3.
We have raised seven medium and one low risk rated action as follows:
1. **Direct debits management (medium):** Roles and responsibilities relating to the management – authorisation and monitoring – of direct debits were unclear at the time of audit fieldwork. For instance, Finance review of direct debits - to ensure their ongoing validity - had not been undertaken since September 2018.
2. **Administration: Complete listing of Bank Accounts (medium):** A complete listing of all Council bank accounts was not maintained centrally for administration purposes. One bank did not have the correct Council contact details.
3. **System access (medium):** a. **Integra, the Council’s financial system:** A review of the Integra end user access list showed 2 active accounts for officers who had left, 5 end users that did not require access and 5 officers who had access where this was considered unnecessary given our knowledge of their role in the organisation. b. **PAY360, the Council’s Income Management and cash/cheque receipting system:** A review of PAY360 confirmed the use of a shared account at supervisor level which could be used by 7 users in the IT Applications Team. The use of shared accounts is inherently risky owing to the inability to identify the specific officer undertaking processing/updates to the system.
4. **Bank Reconciliation (medium):** The management review and sign-off of the bank reconciliation did not include the review and monitoring of the level of unallocated/unreconciled bank transactions, the monitoring of their resolution and therefore timely processing to the general ledger.
5. **Cash floats and money management (medium):** A £10k cash float held at Colindale. We noted 1/5 instances where the request for cash from the Service was not retained for referral, for example the e-mail request to Income for cash monies. There was no evidence of a periodic reconciliation of float cash top up requests to outgoings over a period and previous confirmed balance.
6. **Physical security – cash offices (medium):** CCTV was not available in the locked room at Colindale where the safe holding the £10k float was held, meaning that there was a lack of visibility of officer activity in the room as would have been expected. Asylum seeker pay packets are also held and collected from the room. We understand that implementation of the CCTV in the room was planned.
7. **Documented procedures (medium):** Document procedures governing key processes were found to exist, however did not include all key aspects of operation.
8. **Cash/receipting (Axis Cash Receipting (ACR)) cash-up (low):** In 1/5 cash up reconciliations tested, it was not signed by the Acting Income and Cashier Manager as evidence of review. We were informed that there was a backlog of manager reviews of cash-up which meant that manager reviews to ensure that cash/cheques receipted matched the supporting documentation including the paying-in slip were not being undertaken on a timely basis, at the time of the cash-up.
Follow-up of the 2017-18 Purchase Cards audit – all implemented - see Appendix 4 2. Findings, Recommendations and Action Plan
| Ref | Finding | Risks | Risk Category | Agreed action | |-----|---------|-------|---------------|---------------| | 1 | Direct debits management (design) | If direct debits are invalid or do not cease where necessary then there is a risk of ongoing collection of amounts not owed by the Council and financial loss. | Medium | Roles and responsibilities for direct debit management will be clarified (see finding 6 regarding documented policies and procedures).
a. Arrangements for the authorisation of direct debits will be drafted and communicated to the relevant parties, the Finance teams in the Delivery Units / Service Areas.
b. Direct debits will be reviewed to ensure their ongoing validity. Corporate Finance will provide a report of direct debits to Finance teams in Delivery Units periodically for them to confirm their ongoing validity.
**Responsible officer:**\
Assistant Finance Manager, Cashbook
**Target date:** 03 February 2020 |
We reviewed the process for management of direct debits, the Council authorisation of suppliers to collect amounts from Council bank accounts. At the time of the fieldwork, we were unable to clarify and test actual arrangements nor the level of direct debits in existence. Officers we interviewed were not aware of arrangements for the authorisation of direct debits and periodic review of direct debits to confirm that they remained valid.
Overall at the time of fieldwork there was a lack of clarity of processes and allocated responsibilities. It should be noted that the audit fieldwork coincided with a significant restructure within the Finance team.
Subsequent to the fieldwork, evidence of Finance review of direct debits to ensure their ongoing validity in September 2018 was provided for our review, however it had not been undertaken since then.
There should be an assessment of the ongoing validity of historic direct debits (e.g. a quarterly or six-monthly review by business partners of all DDs). At the time of writing this report the Finance team had commenced this review and confirmed they had not identified any items of concern. | Ref | Finding | Risks | Risk Category | Agreed action | |-----|---------|-------|---------------|---------------| | 2 | **Administration: Complete listing of Bank Accounts**<br>During the course of the audit we became aware, from another source, of other bank accounts not held with the Council’s main provider, RBS. We had not been provided with the details of these bank accounts when the information was requested for the audit.<br>Management have confirmed that all bank accounts are known however their details were not all held centrally for administration purposes. In addition to the list of bank accounts provided to audit, there are two collection accounts, two investment accounts and three Lloyds accounts that have LBB in their name but do not contain Council funds.<br>At the time of the audit, Lloyds / Bank of Scotland did not have up to date contact details for the Council.<br>Since the audit, finance have confirmed that the bank mandate requires updating for two of the accounts held with Lloyds / Bank of Scotland. | If all bank accounts have not been identified then financial records will be incomplete leading to increased fraud risk and potential qualification of the annual accounts. | **Medium** | a) A complete list of all Council bank accounts will be maintained including signatories and who is responsible for the day to day control of those accounts, including the bank reconciliation process.<br>b) Bank reconciliations will be conducted, documented and appropriately authorised for all bank accounts.<br>c) The signatories list for every banking provider used by the Council will be updated where required and stored centrally.<br>d) The complete list of the Council’s bank accounts will be reviewed to confirm what the accounts are for and whether they are all still needed.<br>e) Where required, the contact details for each account will be confirmed and updated (e.g. correct contact names and postal address). | | Ref | Finding | Risks | Risk Category | Agreed action | |-----|---------|-------|---------------|---------------| | | Accounts Payable Data Analysis observations | | | f) The relevant observations from the Accounts Payable Data Analysis review will be taken forward. | | | As part of the Accounts Payable Data Analysis review undertaken by Internal Audit in February 2019 a number of observations were raised that are relevant to Cash & Bank including: | | | Responsible officer: Assistant Finance Manager, Cashbook | | | • Evaluate the need of all bank accounts | | | Target date: 01 March 2020 | | | • Functionality to match bank transactions to the accounting system is currently underutilised | | | | | | • Bank account reconciliations not on individual transactional level | | | | | | The observations are included at Appendix 5. At present the responsibility for considering these observations sits with the Accounts Payable Business Partner (AP BP) with a deadline of 31 March 2020. However, the most recent update received confirmed that no progress has yet been made and the AP BP post is currently vacant. | | | | | | We would suggest that the responsibility for considering the observations be allocated to the appropriate officers in the Investments and Innovation team within Finance. The observations relating to Cash & Bank activity should be considered alongside the actions from this audit report. | | | | | Ref | Finding | Risks | Risk Category | Agreed action | |-----|---------|-------|---------------|---------------| | 3 | **System Access** | If unauthorised staff have access to cash management functions **then** there is a risk of invalid and inaccurate processing. If officers can undertake tasks undetected **then** there is an inherent risk of unauthorised and fraudulent processing/updates. | Medium | **Integra**\
a. Finance Business Partners will review Integra access lists monthly to confirm the validity of user access in line with the end user roles and responsibilities, including leavers/movers (LBB and non-LBB staff).
**Note:** Specifically, there should be a focus to ensure that role access to process payment and lodgement journals in Integra is restricted.
**Responsible officer:**\
Interim Finance Manager
**Target date:** 03 February 2020
**Pay360**\
b. The use of shared accounts will cease. Users will be provided with their own account so that accountability for activity undertaken in the system is clear.
**Responsible officer:** |
Integra Access Management (Cash Book related operations)
We reviewed Integra access for Cash and Bank related functions. We reviewed the list of all end users who have access to the Cash Management Module for related functions in Integra (105 end users).
Our expectation, based on the findings from the 2018/19 Integra Access and Program Change Management audit, was that on a monthly basis, LBB HR and Capita HR provide the Integra finance team with a list of leavers to remove from the system.
We found:
- 2 leavers had not been deactivated in Integra.
Management confirmed that there had been no processing in the system after they had left.
The two leavers were not direct employees and had therefore not been picked up by the monthly leavers lists provided by LBB HR. Management confirmed that since contract re-alignment, Capita leaver lists were no longer received. It was acknowledged that | Ref | Finding | Risks | Risk Category | Agreed action | |-----|---------|-------|---------------|---------------| | | an additional control needs to be put in place to pick up any non-LBB staff (Capita, Agency, Interns etc). | | | CSG Technical Support Engineer (Applications) | | | - No explanation could be provided as to why certain active users required Cash Management access. There was no record available of when/why these users were provided access. | | | **Target date:** 03 February 2020 | | | - One user confirmed that he was not aware of the access and had never required it. | | | **Leavers** | | | - One user who had access confirmed that she was not aware that she had that access or why she needed it. It was evident that the Cash Management system access in this instance was provided as part of another Integra role she had. Although the system access was confirmed as “Read-only” access, the overriding principle is that officers should not be provided with any access not required in terms of their role. | | | c. The leavers identified will be de-activated from the Integra and PAY360 systems. | | | - 2 starters were given enquiry access to the Cash Management Module when this was not required for their roles. | | | **Responsible officer:** | | | Overall, our view is that a review of Cash Management access in Integra is required for update where necessary. | | | Management Accountant, Integra Finance, LBB | | | **Pay360 – Income receipting related operations** | | | CSG Technical Support Engineer (Applications) | | | | | | **Target date:** 03 February 2020 | | | | | | **Leaver access management** | | | | | | d. In line with the ongoing action relating to the Grant Thornton review of the Financial Management Relating to Compulsory Purchase Order (CPO) Fraud, (GT4 - Managing access and authorisation rights on IT systems), in conjunction with the HR team, we will develop a process to ensure that IT is | | Ref | Finding | Risks | Risk Category | Agreed action | |-----|---------|-------|---------------|---------------| | | We reviewed the management of end user access in Pay360 the Council’s web-based Income Management system. We noted the following: | | | informed on a timely basis of any staff / agency workers that are leaving or moving within the Council and / or its partners. This could include a daily/weekly leavers / movers report that is sent to IT on an automated basis for the IT team to action. This will be picked up as part of HR’s SLaM (Starters, Leavers and Movers) project. | | | - The use of a shared account at supervisor level which could be used by 7 users in the IT Applications Team. The use of shared accounts is inherently risky owing to the inability to identify the specific officer undertaking processing/updates to the system, compromising transparency and making accountability for specific actions in the system difficult or impossible to establish. | | | Responsible officer: Management Accountant, Integra Finance, LBB CSG Technical Support Engineer (Applications) | | | - There were 2 leavers who were showing as active in the system. Although we were informed that they were inactive on the network, as Pay360 is web-based it can be accessed without needing a Barnet laptop or access via the Barnet network, therefore the risk of unauthorised access remains. | | | Target date: In line with the delivery of the HR SLaM project, currently scheduled to complete by 30 June 2020. | | | - We were informed that monthly reports of leavers were not provided for review for the immediate de-activation of leavers although the system was configured to lock/disable inactive accounts after 60/90 days. Our view is that there is potential for leavers to remain enabled on the system longer than necessary. | | | | | Ref | Finding | Risks | Risk Category | Agreed action | |-----|---------|-------|---------------|---------------| | 4 | **Bank Reconciliation (design)**<br> We reviewed the process for the review and approval of the bank reconciliation. The Cash Book team clear bank transactions downloaded daily from the bank. Reports showing uncleared / unallocated transactions, requiring Cash Book investigation before they can be allocated to cost centres through payment and lodgement journals, are available to support the process. Unreconciled balances at 31 March 2019 and more recently, at the end of July and August 2019, for the General Fund and Payments Account, the 2 main Council bank accounts, were as follows: | If bank transactions are not allocated / reconciled at the earliest stage then there is a risk of materially inaccurate accounts, particularly if they accumulate to more significant levels over time. | **Medium** | a. The monthly review of the bank reconciliation will include a review of the level of unreconciled balances by Management. Specifically, unreconciled amounts over 3 months will be monitored to ensure a continuous focus on such transactions for clearance. **Responsible officer:** Assistant Finance Manager, Cashbook **Target date:** 03 February 2020 | | Ref | Finding | Risks | Risk Category | Agreed action | |-----|---------|-------|---------------|---------------| | | General Fund | Payments (expenses) | Lodgements (income) | | | | Unreconciled transactions | | | | | 2018/19 | 31/03/2019 | 0.00 | 42,297.64 | | | 2019/20 | 31/07/2019 | 41,865.30 | 2,245,928.62 | | | | 31/08/2019 | 61,484.33 | 3,085,271.88 | | | | Payments Account | Payments (expenses) | Lodgements (income) | | | | Unreconciled transactions | | | | | 2018/19 | 31/03/2019 | 144,174.82 | 295,209.86 | | | 2019/20 | 31/07/2019 | 144,190.82 | 383,525.56 | | | | 31/08/2019 | 145,634.82 | 384,176.99 | |
The amounts at year end 2018/19 are not considered material. Review of the unreconciled transactions by the Cash Book at 31 August is ongoing (business as usual), the main aim of the team being to have them allocated by year end. We noted an increasing trend from 31 July to 31 August showing potentially a growing level of unallocated transactions.
The bank reconciliation each month was reviewed and signed off by the Head of Finance: Exchequer. It didn't involve a review of the level of unreconciled transactions, for example those older than 3 months. | Ref | Finding | Risks | Risk Category | Agreed action | |-----|---------|-------|---------------|---------------| | 5 | **Cash Management: Cash float and courier (collection and delivery) of monies between Council sites and bank**<br>Cash floats<br>There are 2 floats, a £10k float held in a safe and locked room in Colindale and a £20k emergency float for emergency payments by Emergency Planning held in a safe and locked room at NLBP. The £20k float remains intact and is only accessed in emergencies. Services make requests for cash from Income from the £10k float periodically. Income prepare the cash amounts for the requests for collection and periodically request and make top-up payments to maintain the balance.<br>While requests for top-up payments to the £10k float were independently authorised, there was no evidence of independent review/management oversight of related reconciliation, periodic reconciliation of float cash top up requests to outgoings over a period and previous confirmed balance. Our view is that a periodic review to confirm the validity of all payments should be done. | If payments from cash floats cash are invalid then there is a risk of theft or financial loss.<br>If cash money payments are not matched to Service requests then there is a risk of invalid payments<br>If asylum seeker payments are reported lost/mislaid without evidence of collection and delivery to support resolution then | **Medium** | a. Independent reconciliations of top requests and Service payments relating to the £10k cash float will be done periodically, for example once a year, possibly on a surprise basis.<br>**Responsible officer:**<br>Acting Income and Cashier Manager<br>**Target date:** 03 February 2020<br>b. All Service requests for cash monies/payments from the £10k float will be made in writing and retained for referral.<br>c. The sign-off documentation supporting the collection and delivery of asylum seeker pay packets will be retained for referral.<br>**Responsible officer:**<br>Cashier<br>**Target date:** 03 February 2020 | | Ref | Finding | Risks | Risk Category | Agreed action | |-----|---------|-------|---------------|---------------| | | Cash management and courier of monies around the borough | there is a risk of financial loss. | | |
We reviewed the arrangements for:
- the preparation by Income of requests for cash by Services from the £10k float held at Colindale, for example, to pay asylum seekers or for use in child care centres;
- the collection and delivery of related cash amounts by SC;
- the collection of monies from schools and libraries (done by SC), the transport of related monies to the bank, the transport of cash/cheques receipted by income weekly to the Council's bank (Royal Mail) and the related collection and delivery sign-off.
Arrangements which involved the use of sealed money bags and sign-off on collection of monies by couriers and delivery of the monies to banks were evident, however we noted the following exceptions:
1/5: One Service request to Income for the preparation of cash monies was not available for inspection, a request for £1000.00 by Meadow Close Children’s Home. E-Mail requests had been retained in 4/5 instances however the Income Officer indicated that this was likely in this instance to have been related to a verbal request for which there was no record. | Ref | Finding | Risks | Risk Category | Agreed action | |-----|---------|-------|---------------|---------------| | 1/5 | The sign-off documentation confirming the collection and delivery of cash money relating to asylum seeker pay packets was not available for inspection. Sign-off documentation was available for 4/5 other non-asylum seeker requests however responsibility for the retention of sign-off documentation was unclear for asylum seeker money collection and delivery. | If movements of monies into and out of safes cannot be observed then there is a risk of theft. | Medium | | | 6 | **Physical security – cash offices** | | | | | | We reviewed the physical security controls over the £20k float in the safe at NLBP and the £10k float in the safe at Colindale. Overall physical controls were evident to ensure the security of monies held. | | | | | | CCTV was not available in the locked room at Colindale where the safe was held meaning that there was a lack of visibility of officer accessing the safe as would have been expected. We understand that implementation of the CCTV was planned. | | | | | | Note: The asylum seeker pay packets are now retained in the same locked room at Colindale and are accessed when asylum seekers arrive at Colindale to collect payment. | | | | | | a. CCTV will be installed in the Colindale ground floor safe office | | | | | | **Responsible officer:** | | | | | | Assistant Director - Estates | | | | | | Acting Facilities Manager | | | | | | **Target date:** 03 February 2020 | | | | | | b. Once the CCTV issue has been resolved that consideration be given to whether the EP safe should be moved to Colindale. | | | | | | **Responsible officer:** | | | | | | Cashier | | | | | Ref | Finding | Risks | Risk Category | Agreed action | |-----|---------|-------|---------------|---------------| | | Management indicated that the requirement had already been escalated and that the budget for the installation of CCTV had been approved. Income will escalate the lack of CCTV in the office at Colindale holding the safe with the £10k float to Senior Finance Management and Estates for a decision on related implementation | If officers: - do not follow agreed processes and tasks correctly and consistently or - misuse debit/credit cards then there is a risk of - processing error, - delayed processing - inaccurate records - the embedding of bad practice in | Medium | Target date: 03 February 2020 | | 7 | **Documented procedures**\
We reviewed for the existence of procedures governing cash and bank operations:
- Cash/cheque receipting
- Cash Book
- Couriering of monies between council sites and banks
- Schools debit/credit card arrangements.\
**Cash/cheque receipting and cash-up sign-off**\
Cash/cheque receipting procedures provided to us for review covered the cash up process however did not:
- specifically refer to manager sign-off/approval (see Finding 7 below).
- specifically refer to collection by Royal Mail for transfer to the bank. | Documented procedures subject to version control and dated - governing Cash and bank operation will be drafted, updated and approved, for referral, as follows:\
**Cash Book**\
a) Documented procedures will define all responsibilities relating to the bank reconciliation review, including the monitoring of unallocated items and the maximum period for bank transactions to remain unallocated.\
**Responsible officer:**\
Assistant Finance Manager, Cashbook | | Target date: 31 May 2020 | | Ref | Finding | Risks | Risk Category | Agreed action | |-----|---------|-------|---------------|---------------| | | Our view is that the process document should include all key aspects of operation. | operation and financial loss | | Cash-up and cash/cheque receipting | | | **Cash Book** | | | b) Cash/cheque receipting into Pay360 and cash-up procedures will be updated to record manager review and sign-off of the cash-up documentation and Royal Mail collection arrangements. | | | See Finding 2, above. Documented procedures should define all responsibilities relating to the bank reconciliation review, including the monitoring of unallocated items and the maximum period for transactions to remain unallocated, say 3 months. | | | **Responsible officer:** Cashier | | | **Security Collections** | | | **Target date:** 03 February 2020, | | | There were detailed procedures governing SC operation. The Senior Security Collections Officer indicated that they were being updated at the time of the audit. | | | **Security Collections** | | | | | | c) The update of SC procedures will be finalised. | | | | | | **Responsible officer:** Senior Security Collections Officer | | | | | | **Target date:** 03 February 2020 | | | | | | **Direct Debits** | | | | | | d) Procedures governing the management, request, authorisation and review / monitoring of validity – of direct debits will be approved and communicated. | | Ref | Finding | Risks | Risk Category | Agreed action | |-----|---------|-------|---------------|---------------| | 8 | **Cash/receipting (Axis Cash Receipting (ACR)) cash-up review**<br> We reviewed the arrangements for processing of cash and cheques in PAY360 (ACR), the Council’s Income Management system, - by Income, the preparation of the related paying in slips and the reconciliation to system reports.<br> In 1/5 cash up reconciliations tested for £48,466.11 (25/06/2019), it was not signed by the Income Manager as evidence of review. We were informed that there was a backlog of manager reviews of cash-up which meant that manager reviews to ensure that cash/cheques receipted matched the supporting documentation including paying in slip were not being undertaken on a timely basis at the time of the cash-up. | If reconciliation anomalies or differences between amounts receipted and amounts banked are not identified and corrected then there is a risk of delayed general ledger processing, inaccurate accounting records and process improvements not being made where necessary. | **Low** | **Responsible officer:**<br> Head of Finance: Exchequer<br> **Target date:** 03 February 2020<br> a. Management will review and sign-off all receipting reconciliations to bank paying in slips at the time of the processing. Any reconciliation review backlogs of reconciliation will be expedited.<br> **Responsible officer:**<br> Senior Income Officer<br> Cashier<br> **Target date:** 6 January 2020 (implemented) |
**Appendix 1: Definition of risk categories and assurance levels in the Executive Summary**
Note: the criteria should be treated as examples, not an exhaustive list. There may be other considerations based on context and auditor judgement. | Risk rating | Immediate and significant action required. A finding that could cause: | |-------------|---------------------------------------------------------------------| | Critical | • Life threatening or multiple serious injuries or prolonged work place stress. Severe impact on morale & service performance (eg mass strike actions); or | | | • Critical impact on the reputation or brand of the organisation which could threaten its future viability. Intense political and media scrutiny (i.e. front-page headlines, TV). Possible criminal or high profile civil action against the Council, members or officers; or | | | • Cessation of core activities, strategies not consistent with government’s agenda, trends show service is degraded. Failure of major projects, elected Members & Senior Directors are required to intervene; or | | | • Major financial loss, significant, material increase on project budget/cost. Statutory intervention triggered. Impact the whole Council. Critical breach in laws and regulations that could result in material fines or consequences. | | High | Action required promptly and to commence as soon as practicable where significant changes are necessary. A finding that could cause: | | | • Serious injuries or stressful experience requiring medical many workdays lost. Major impact on morale & performance of staff; or | | | • Significant impact on the reputation or brand of the organisation. Scrutiny required by external agencies, inspectorates, regulators etc. Unfavourable external media coverage. Noticeable impact on public opinion; or | | | • Significant disruption of core activities. Key targets missed, some services compromised. Management action required to overcome medium-term difficulties; or | | | • High financial loss, significant increase on project budget/cost. Service budgets exceeded. Significant breach in laws and regulations resulting in significant fines and consequences. | | Medium | A finding that could cause: | | | • Injuries or stress level requiring some medical treatment, potentially some workdays lost. Some impact on morale & performance of staff; or | | | • Moderate impact on the reputation or brand of the organisation. Scrutiny required by internal committees or internal audit to prevent escalation. Probable limited unfavourable media coverage; or | | | • Significant short-term disruption of non-core activities. Standing orders occasionally not complied with, or services do not fully meet needs. Service action will be required; or | | | • Medium financial loss, small increase on project budget/cost. Handled within the team. Moderate breach in laws and regulations resulting in fines and consequences. | | Low | A finding that could cause: | | | • Minor injuries or stress with no workdays lost or minimal medical treatment, no impact on staff morale; or | | | • Minor impact on the reputation of the organisation; or | | | • Minor errors in systems/operations or processes requiring action or minor delay without impact on overall schedule; or | | | • Handled within normal day to day routines; or | | | • Minimal financial loss, minimal effect on project budget/cost. |
| Level of assurance | | |--------------------|---------------------------------------------------------------------| | Substantial | There is a sound control environment with risks to key service objectives being reasonably managed. Any deficiencies identified are not cause for major concern. Recommendations will normally only be Advice and Best Practice. | | Reasonable | An adequate control framework is in place but there are weaknesses which may put some service objectives at risk. There are Medium priority recommendations indicating weaknesses but these do not undermine the system’s overall integrity. Any Critical recommendation will prevent this assessment, and any High recommendations would need to be mitigated by significant strengths elsewhere. | | Limited | There are a number of significant control weaknesses which could put the achievement of key service objectives at risk and result in error, fraud, loss or reputational damage. There are High recommendations indicating significant failings. Any Critical recommendations would need to be mitigated by significant strengths elsewhere. | | No | There are fundamental weaknesses in the control environment which jeopardise the achievement of key service objectives and could lead to significant risk of error, fraud, loss or reputational damage being suffered. |
## Appendix 2 – Analysis of findings
| Area | Critical | High | Medium | Low | Total | |----------------------------------------------------------------------|----------|------|--------|-----|-------| | | D | OE | D | OE | D | OE | D | OE | | Cheque/Cash receipting (Axis Cash Receipting) | - | - | - | - | - | - | 1 | 1 | | Bank reconciliation and clearance of unallocated bank transactions, | - | - | 1 | 2 | - | - | 3 | | | including related Integra and PAY360 system access and direct debits| | | | | | | | | | Cash Management: Cash float and courier (collection and delivery) | - | - | - | - | 3 | - | - | 3 | | of monies between Council sites and bank | | | | | | | | | | Policies and procedures | | | | | 1 | - | - | 1 | | Total | - | - | - | - | 1 | 6 | - | 1 |
### Key:
- **Control Design Issue (D)** – There is no control in place or the design of the control in place is not sufficient to mitigate the potential risks in this area.
- **Operating Effectiveness Issue (OE)** – Control design is adequate, however the control is not operating as intended resulting in potential risks arising in this area.
### Timetable
| Terms of reference agreed: | Fieldwork commenced: | Fieldwork completed: | Draft report issued: | Management comments received: | Final report issued: | |---------------------------|----------------------|----------------------|----------------------|-----------------------------|---------------------| | Date: 02 August 2019 | Date: 09 August 2019 | Date: 23 October 2019| | | Date: 21 January 2020| | Date: 18 November 2019 | Date: Emerging findings | |-----------------------|-------------------------| | 28 October 2019/ 1 November 2019 | | 4 November 2019, 28 November 2019 | | 14 January 2020, 21 January 2020 |
## Appendix 3 – Identified controls
| Area | Objective | Risks | Identified Controls | |-----------------------|---------------------------------------------------------------------------|----------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------| | Cheque/cash receipting| All cheque/Cash payments received are correctly recorded, held securely and are banked. | Cash receipts may be misappropriated or cheques may be lost. Inaccurate receipt processing | Receiving process governed by documented procedures, "QUALITY MANUAL, Quality Procedure, Processing Remittances through the ACR System" (long standing process, has not changed per PP, this is consistent with walk through process done years back with the same officer) Process managed by experienced Cashier officer System input controls total individual receipts associated with an invoice automatically for comparison to invoice total, where invoice has more than one associated receipt. Total cash/cheques input to Pay360 (ACR) is reconciled to control totals, system reports and paying in slips. For cash-up processes tested, amounts reconciled to system reports and agreed to totals actually banked in the bank statement. Manager authorisation of reconciliation of cheque/cash, receipting system documentation reports to paying in slip Cheques/cash kept in a locked safe on 6th floor awaiting collection. Roles and responsibility clear and clear process for delivery cheques and cash to PP for processing Pay360 - access: - Authentication configuration for passwords | | Bank reconciliation and clearance of unallocated bank transactions | Financial records include all Council bank accounts and balances to ensure completeness. All transactions are processed to the general ledger correctly and in a timely fashion. | All bank accounts may not have been identified resulting in incomplete financial records. Discrepancies occur between the bank account and the general ledger due to error or misappropriation of funds. Reconciling items and long standing unidentified balances may not be investigated and cleared promptly resulting in inaccurate financial records. | See above for daily receipting process (ensures that all receipts are processed to Pay 360 which interfaces to Integra). Clear record of all bank accounts for comparison to the accounts. RBS bank interfaces download information to bank transactions to Cash Management Module daily. These are matched to transactions by Cash Book staff for allocation to the G/L Bank account. Unallocated items are identifiable on the Reconciliation Reports generated periodically for review or another more user-friendly report, Cash Unallocated Report. Integra, Council finance system, end-user access control for related Cash and Bank roles. Documented procedures defining related Cash Book process are available for referral. Historic review of direct debits for their ongoing validity. | | Cash Management: Cash float and courier of monies | All monies requested by Services and collected by couriers are delivered and banked, where applicable. The finance team are aware of all the emergency and petty cash balances held across the Council. | Monies for collection or deposit at the bank are lost/stolen. | There is a strict receipt process for the collection and delivery of monies for banking. There are 2 officers driving/collecting monies. Security Collections (SC, Council) and Clients sign for the collection of monies (cash/cheques) from Client sites, such as schools, libraries, signed by both in receipt book. LOOMIS and Security Collections sign for the collection of above monies by Loomis for delivery to RBS Bank. For collections from schools who do not use RBS but Lloyds, Lloyds provides one receipt slip which is affixed to the Run Sheet. Lloyds stamps the run sheet as proof of receipt of monies by Lloyds Bank. Sign-off by SC and internal client confirming collection and receipt of monies requested by client. The floats are held securely in safes in locked rooms, with CCTV, alarms. Float top-up requests for cash are approved by Senior Finance Management. Documented procedures govern money collection and delivery processes. | | Policies and procedures | Staff are aware of up to date policies and procedures in relation to cash and bank to ensure that related processing is consistently correct/accurate and that monies are held securely. Direct debits are appropriately authorised and reviewed to ensure their ongoing validity. | Employees are not aware of the policies and procedures in place to support cash handling and banking processes and therefore do not follow the correct procedure for ensuring accurate and timely processing, recording, reconciling arrangements. If there are not clear policies relating to the use of schools' debit and credit cards, there is a risk that these will have inappropriate transaction limits or be used for transactions which are not legitimate. | Documented procedures govern Cash Book, cash/cheque receipting processes, money collection and delivery processes and cash float top-up arrangements. Documented procedures evident for School credit and debit cards. |
### Appendix 4 - Follow-up of the 2017-18 Purchase Cards follow-up (actions reported as outstanding at the last review 25 October 2017 and Audit Committee 19 April 2018)
| Audit finding, date and recommendation (October 2016) | Audit follow-up status (June 2017) | |------------------------------------------------------|-----------------------------------| | 1) Monitoring Procurement and Consideration of Value for Money (Medium risk) | | | **Value for money** | | | We found that there have been limited strategic considerations around the use of Purchase Cards to maximise value for money through the purchasing process, for example by reducing the amount of low value expenditure going through the AP system. | | | **Monitoring and oversight** | | | There was no periodic reporting to facilitate oversight of the use of Purchase Cards and purchasing activity. Through performing analysis of expenditure through Purchase Cards we identified the following: | | | - Where total supplier spend in year exceeds £10,000, there is a requirement to obtain three alternative competitor prices and wherever possible a contract should be put in place. However, on analysis of expenditure on all Purchase Cards from 01 April 2015 to 31 March 2016, we noted that there were eight suppliers, where spend was greater than £10,000 in the year [See appendix 1 in Original Audit Report] and we were unable to determine whether alternative options had been considered; | | | - Purchase Card holders are set a monthly spend limit on each card. Through analysis of expenditure in the prior year, we noted that seven Purchase Card holders had breached their set monthly limits [See appendix 1 in Original Audit Report]; and | | | There was a lack of oversight and analysis of expenditure on Purchase Cards to ensure that expenditure was bona fide. Our analysis indicated that six Amazon Prime subscriptions (£474) had been purchased in 2015/16, which may indicate use that was not for a valid business reason. These transactions should be further investigated by management to ensure that there was a valid business rationale [See appendix 1 in Original Audit Report]. | | | b) A review of the audit analysis will be undertaken and expenditure investigated as necessary. | Implemented | | **Action:** Recommendation accepted. | Finance response, September 2019 | A review of the audit analysis will be undertaken and expenditure investigated as necessary.
**Responsible Officer:** Head of Treasury, CSG
**Original target date:** 30th November 2016
\*\*\*\*\*\*\*\*\*\* confirmed that a review was done in 2018 using data obtained by the team. (The original audit analysis was not provided to the team for their review). The comments below outline the analysis done by the team, or steps taken to demonstrate control.
- **Spend per supplier exceeds £10k:** analysis of spend per supplier was completed in June 2019 and there were 6 suppliers where we exceeded £10k per supplier. These were Argos, Tesco, Courts, Amazon, DVLA and Sainsburys. The Council could not have use alternative suppliers in the case of the Courts and DVLA. We are talking to the relationship manager at NatWest to look into the possibility of an Amazon business account to better understand and control this area of spend. Spend with the other suppliers is multiple small value transactions and the competitive tender route is not thought to be applicable in these instances.
- **Card holders exceeding monthly spend limit** – card limits are contained in the March 19 Distribution List (Excel file). The card holder limit is correct at the date the report is run, but historic card holder limits are not retained. This makes it impossible to check spend limit breaches for prior months. However, the system should not allow the limit to be exceeded. If a card holder needs a higher limit for one month then their Budget Holder may contact \*\*\*\*\*\*\*\*\*\* in writing to request a one-off increase. The bank carries out the temporary change and the following month the limit reverts back to the lower amount.
- **Analysis on Amazon subscriptions** was done in August 2019 (see Amazon Subscriptions – Word file). In 15/16 there were 6 subscriptions totalling £474. We found these were purchased by 5 card holders. Of these:
- 1 was refunded 6 days after the transaction.
- 2 were annual subscriptions that did not repeat the following year.
- 2 of the annual subscriptions repeated for a second year but the card holders have left Barnet and their cards have been cancelled.
- The final subscription ran for 3 years. This was purchased by a Children’s Service Team Manager.
- \*\*\*\*\*\*\*\*\*\* has been following up with cardholders but I do not have access to the emails.
- \*\*\*\*\*\*\*\*\*\* has asked \*\*\*\*\*\*\*\*\*\* to instruct all card holders that no subscriptions are permitted without Treasury approval and to provide a listing of all subscriptions currently in place.
**Internal Audit assessment** d) Monitoring of expenditure on Purchase Cards should be performed on a regular basis to ensure that breaches in procurement limits are noted and appropriately escalated.
**Action:** Recommendation accepted, Purchase cards expenditure will be monitored to ensure that spend is appropriate and within procurement limits. Monitoring will be reviewed by a senior officer.
**Responsible Officer:** Head of Treasury, CSG
**Original target date:** 30th November 2016
______________________________________________________________________
Evidence was provided to support the management response, above and the review of the P-Card expenditure identified in the audit.
**Implemented**
**Finance response, September 2019**
The Head of Treasury, \*\*\*\*\*\*\*\*\*\* confirmed that Treasury have a written procedure note for monitoring expenditure.
To review the suitability of the expenditure the budget holder has the ultimate control and can reject transactions if they are not suitable/ not recognised/ any of the details are incorrect.
Also, on a sample basis, the Senior Management Accountant, Treasury (\*\*\*\*\*\*\*\*\*) checks the monthly statements and upload file for Integra and emails cardholders about those transactions requiring clarification. Consideration is given to large values (e.g. over £500 – see email evidence: P-Card audit over £500) and the type of transaction / narrative for each card holder (relative to their job role and original business case).
The monitoring is reported back to the Head of Treasury each month when the Payment Card Reconciliation is emailed to him to give visibility of the balances and trends (see P-Card reconciliation outstanding email).
An annual review was carried out in 2018 and again in June 2019. We now have an established process for reviewing p-card expenditure, both monthly and annually.
**Internal Audit assessment**
Evidence was provided to support the management response above and monthly monitoring of P-Card expenditure. 2) Approval of Expenditure on Purchase Cards (Medium risk)
**Control design and operating effectiveness**
Purchase Card holders code each expense transaction to relevant cost centres on Integra. These are pushed to the respective Budget Holders to authorise by the end of the month. Authorisation should occur on review of third party proof of purchase and corresponding narrative attached to each transaction on the system. We noted the following issues:
**Retention of supporting documentation**
A sample of 25 expense transactions were sampled between 01 April 2015 and 31 March 2016, to verify that adequate supporting documentation was retained to support purchases through Purchase Cards. We found:
- Purchase Card holders were unable to upload proof of purchase onto Integra due to technical issues with the system. Staff had been informed that they were required to keep relevant documentation to support purchases. However, it has not been possible to confirm that budget holders had reviewed this documentation prior to authorisation; and
- In four out of 25 cases (16%) we noted that the supporting documentation retained consisted of internal purchase orders rather than third party proof of purchase such as a receipt or invoice. This was due to a misunderstanding of procedures in relation to Purchase Cards.
**Timely approval of expenditure**
We obtained a reconciliation report of expenses on Integra as at 31 March 2016 and noted that £44.8k (11.5%) of a total annual spend of £389.6k was yet to be approved. Though reporting on items awaiting approval was performed to chase those awaiting approval, there was a lack of analysis performed to identify trends or long-outstanding items.
a) The technical issue with Integra should be investigated and resolved to ensure supporting evidence can be attached to support Purchase Card expenses.
**Action:** Recommendation accepted, the technical issue will be added to the log of required Integra developments; however implementation will depend on competing priorities.
**Responsible Officer:** Assistant Director of Finance, CSG
**Original target date:** To be logged – 7th October 2016 To be implemented – TBC based on the assessment of required Integra developments
**Implemented**
**Finance response, September 2019**
Supporting evidence can be added to Integra now. This functionality has been tested with a cardholder, \*\*\*\*\*\*\*\*\*, (see Word doc: screen shot of receipt attachment) and the receipt was visible to the budget holder when reviewing the transaction at the approval stage. However, we believe that this functionality isn't widely understood. To address this, a communication to staff to highlight this function is planned by \*\*\*\*\*\*\*\*\* in September 2019. He is waiting for an appointment with a cardholder to do screen shots and prepare a small guidance note to demonstrate how to create a PDF file and upload it. He also plans to create a shared drive with a folder for every cardholder and will be asking for receipts to be stored in this central repository. This will be easier to access for audit and VAT purposes.
We are also in talks with NatWest/RBS regarding moving the card transaction processing from Integra to their SmartData web-based service. Related to this audit finding – receipts will be uploaded to SmartData for each transaction by the cardholder and will be visible to the approver.
Further background information: using SmartData would entail a total overhaul of the current processes but it is believed that it would offer better control and functionality for the cardholder and budget holder and better monitoring and chasing emails for the P Card Administrator. A demo meeting with the bank was held on 11/09/2019 and a paper is being written for the S151 officer to seek approval to take the next steps. The timescale discussed is for roll out to be in December 2019. The new system would be used for all card processing – disbursements, approvals/rejections and amendments, and reporting. Monitoring/chasing emails can be automated. Transactions will be available for processing 48 hours after the transaction date rather than after the statement date.
Related to both of the above points, a refresh of the P-Card Policy is starting in September 2019. This will cover in more detail the expectations on cardholders and approvers, appropriate and inappropriate spend, deadlines to action items, requirements for evidence of approval and VAT evidence, penalties for non-compliance and new approval routes.
**Internal Audit assessment**
Evidence was provided to support the management response above and resolution of the technical issue, supporting evidence for P-Card expenditure can be uploaded to Integra.
**Implemented**
**Finance response, September 2019**
Reconciliation emails of outstanding transactions requiring intervention (either disbursement or approval) are sent to cardholders and budget managers on a weekly basis in the main (see attached email correspondence: P-Card disbursements and approvals outstanding weekly email). At year-end, the emails are sent daily.
The analysis of spend awaiting authorisation is within the weekly email. This ensures that persistent issues are identified. The table embedded in the above email shows clearly if the same items have been left unaddressed for a number of weeks.
______________________________________________________________________
b) Reporting on total expenses and outstanding items should be sent to Budget holders to allow them to oversee and investigate recurring trends in outstanding / rejected payments over the year.
**Action:** Recommendation Accepted
Reporting on total expenses and outstanding items to be developed and circulated to budget holders on a monthly basis.
**Responsible Officer:**
Head of Treasury, CSG
**Original target date:** 30th November 2016 3b) Analysis should be undertaken to ensure that historic issues and trends are identified and can be followed up.
3c) The reconciliation of outstanding unallocated transactions should be sent out to individual Budget Holders on a monthly basis. Budget Holders may then chase up unallocated purchases within their own respective departments.
In addition to these emails, the team plans to send a report of the outstanding transactions to CMT each month to make sure that management have visibility of all of the transactions pending for their service.
Known issue – rejected transactions
There is an issue with ‘rejected’ transactions. Up until recently a rejected transaction was ‘stuck’ in the system with nobody able to access. A change has been made so that on rejection the transaction now goes back to the cardholder to action. This leaves the transactions previously rejected which are still sitting in the ‘black hole’. Finance are working through these and will be writing off around £4.5k as some of these transactions go back 4 or 5 years. Action for Closing and Monitoring team to write off, if approved, and Integra Finance to remove the transactions from the system.
A rejected transaction that is returned to a cardholder cannot have the main fields edited. The user cannot edit the details on the GL code or value, only the narrative and VAT amount, so if the original values were keyed in were wrong there is nothing that can be done with the transactions. Integra have not been able to offer a solution. This is another motivating factor to move to SmartData because that system allows the cardholder to perform the required edits and resend the transaction for approval.
Internal Audit Assessment
Evidence was provided to support the management response above and the process for reporting outstanding P-Card items routinely for clearance. The process was also confirmed by the Head of Counter Fraud Operations who is a P-Card holder in Assurance.
______________________________________________________________________
c) Analysis of spend awaiting authorisation should be regularly performed to ensure that persistent issues are identified and escalated where appropriate.
**Action:** Recommendation Accepted Covered by Finding 1 (above)
**Responsible Officer:** Head of Treasury, CSG
**Original target date:** 30th November 2016
**Implemented** Covered in 2b above.
**Internal Audit Assessment**
Evidence was provided to support the management response above and the process for reporting outstanding P-Card items routinely for clearance. The process was also confirmed by the Head of Counter Fraud Operations who is a P-Card holder in Assurance. Implemented
New finding 2:
Budget holder self-review (Control design) – Medium Risk
Upon being uploaded to Integra, transactions are allocated to budget codes by the card holder for approval by the budget holder. We found that there are no controls within the Integra system to enforce segregation of duties when the card holder is also the budget holder. Effectively a card holder could allocate transactions to their own budget code and there would be no oversight, scrutiny and approval of the transaction.
Currently no exception reports are run to detect such instances. As this represents a potential fraud risk, it is important that action is taken to address this, either by developing preventative controls within the system to enforce segregation of duties between cardholder and budget holder, or detective controls in the form of a monthly exception report.
This has been highlighted as an issue in Appendix 1.
Target date 31 December 2017
Update as at September 2019
Please refer to update provided in the table in appendix 1.
Internal Audit assessment
Evidence was provided to support the management response above and implementation of the preventative control ensuring that P-Card holders are not able to approve P-Card expenses allocated to their own budget/cost centre. Operation was also confirmed with P-Card holder in Assurance, Head of Counter-Fraud Operations. His allocations of P-Card expense line items from his P-Card to the cost centre of which he was the budget manager in terms of the Scheme of Financial Delegation were allocated to the Assurance Director for approval, however where he allocated the P-Card expense line item to an Elections cost centre, then it was allocated to the Head of Electoral Services for approval.
3. Decommissioning of Purchase Cards (Medium risk)
Control design and operating effectiveness Purchase Cards are decommissioned where no longer required or when the card holder leaves the Council’s employment. We found that there was no formalised procedure in place to check a list of leavers in a given period to ensure that they did not still have a Purchase Card, which should be have been decommissioned.
We obtained a listing of leavers from the Council between 01/04/2015 and 30/06/2016. Through cross-referencing this with the listing of card users at the date of the audit, we noticed that there were 9 leavers who were not known to the Treasury team. On scrutiny of the data from the Purchase Card system, we noticed one user, which had two transactions following their leave date. These transactions totalled £12 and were related to payments to Tesco for reduced delivery fees.
In addition, we found that there was no formalised reporting on users’ activity on Purchase Cards to ensure cards were being utilised and identify instances where cards may no longer be required. On analysing the expenditure on all Purchase Cards from 01 April 2015 to 31 March 2016, we noted that there were 20 (out of 89 cards in circulation), which had not been used in the past 90 days. In addition, there were 14 cards which had less than £250 spend, and 15 cards with less than 5 transactions, in the year [See appendix 1 in Original Audit Report]. This may indicate cards which are in circulation unnecessarily.
Where Purchase Cards were no longer required NatWest is informed to decommission the card. However, it was noted that the physical destruction of the card was not otherwise recorded to ensure destruction had taken place.
b) Analysis of spend on Purchase Cards should be regularly performed to ensure that cards with few transactions are identified and decommissioned where appropriate.
**Action:** Recommendation accepted, Purchase card spend will be reviewed on an annual basis and cards decommissioned where appropriate.
**Responsible Officer:** Head of Treasury, CSG
**Original target date:** 31st March 2017
______________________________________________________________________
**Implemented**
**Finance response, September 2019**
The replacement cards received in March 2018 had been analysed and only those entitled to receive theirs were issued. Unused cards were closed. See supporting Excel files (Zero P Card activity from April 18-Feb 19 list).
Another review of valid card holders was conducted again in March 2019, see attached document: March 19 Distribution List. Unused cards were closed.
Annual spend was reviewed again by a Finance intern in June 2019 but a process needs to be put into place to close those cards - there is a pending action to close cards highlighted in the June 2019 review (this needs to be checked with \*\*\*\*\*\*\*\*\* following his annual leave).
Card closures are also identified and addressed on an ad-hoc basis throughout the year, for example, the card for \*\*\*\*\*\*\*\*\* in Procurement was closed in September 2019 because it was no longer required and a request was made by her line manager to close the card.
**Internal Audit Assessment**
Evidence was provided to support the management response above and the process for identifying cards with zero/low activity for potential decommissioning.
______________________________________________________________________
4. Allocation of Expenditure on Purchase Cards – Medium risk Control design
Transactions on Purchase Cards are uploaded onto the General Ledger ‘Integra’ from the NatWest online banking portal. Expenses on each of the Purchase Cards are automatically allocated to a suspense account for Purchase Card holders to code. Staff members are prompted to allocate costs on the General Ledger ‘Integra’ by automated email from the system.
We obtained a reconciliation report of expenses on Integra as at 31 March 2016. We noted that £29.7k (7.6%) of a total annual spend of £389k was yet to be coded by Purchase Card holders. Without allocating the expense to a cost centre code, the expense cannot be authorised and recognised against the relevant ledger code and cost centre. Evidence of this monthly reconciliation is not consistently retained by management.
Reporting is produced to chase Purchase Card holders to allocate spend on a regular basis. However, we found that there is no detailed analysis performed and it was not reviewed and signed off by senior management to ensure issues were appropriately escalated.
a) Reconciliations between Integra and the banking system, and reporting on outstanding items, should be reviewed and signed off on a regular basis.
Action: Recommendations accepted a) All reports and reconciliations will be reviewed and signed off by a senior officer.
Responsible Officer: Final Accounts Team.
Original target date: 30th November 2016
Implemented
Update as at September 2019
Monthly BACS payments are coded by Cashbook and reconciled by \*\*\*\*\*\*\*\*\*\* to check the bill payment is for the correct value.
A monthly reconciliation between Integra and the banking system was started in 2018 and has been done by \*\*\*\*\*\*\*\*\*\*, Closing and Monitoring Team (since Dec 18). She obtains the bank statements from the Treasury folders and matches them to Integra.
Any queries go to \*\*\*\*\*\*\*\*\*\*, Senior Management Accountant, Treasury, who either emails the card holders to ask them to action the item/s or he emails the Budget Holder to request that they approve (if the disbursement stage has been completed). \*\*\*\*\*\*\*\*\*\* saves the monthly file in his folder (P:\\2019-20 Control accounts\\August 19\\Reconciliation\\P card).
These chasing reports are sent weekly and sometimes daily (e.g. at year-end) to authorisers to tell them if they have transactions awaiting authorisation. (As described above in 2d above).
There is a Payment Card Reconciliation Page within Integra. This is checked every month by the Senior Management Accountant. In terms of senior visibility, \*\*\*\*\*\*\*\*\*\* is kept informed by \*\*\*\*\*\*\*\*\*\* about movements in the reconciliation page (see email). There is also visibility of pending transactions throughout the business as the emails now go to budget holders.
Internal Audit Assessment
Evidence and discussion confirmed the update above and the reconciliation between total amount of the P-Card and the underlying transactions allocated and approved through the P-Card control account in the general ledger. | | | |---|---| | **b)** Analysis should be undertaken to ensure that historic issues and trends are identified and can be followed up. | **Implemented** | | | Covered by annual review under 3b. | | **Responsible Officer:** | Covered in 2b above. | | Head of Treasury, CSG | **Update as at September 2019** | | **Original target date:** 30th November 2016 | N/A – covered in 2b above | | | **Internal Audit Assessment** | | | As above |
| | | |---|---| | **c)** The reconciliation of outstanding unallocated transactions should be sent out to individual Budget Holders on a monthly basis. Budget Holders may then chase up unallocated purchases within their own respective departments. | **Implemented** | | | Covered in 2b above. | | **Action:** Recommendations accepted | **Update as at September 2019** | | | N/A – covered in 2b above | | **The reconciliation of outstanding unallocated transactions will be circulated to budget holders on a monthly basis, together with instruction as to the action to be taken.** | **Internal Audit Assessment** | | **Responsible Officer:** | As above | | Head of Treasury, CSG | | | **Original target date:** 30th November 2016 | |
## Appendix 1 – Additional issues identified
| Ref | Finding | Risks | Risk category | Agreed action | |-----|---------|-------|---------------|---------------| | 2 | **Budget holder self-review (Control design)**<br>Transactions are analysed and reviewed by the Senior Management Accountant on a monthly basis prior to being uploaded to the Integra general ledger system. Upon being uploaded to Integra, transactions are allocated to budget codes by the card holder for approval by the budget holder. We found that there are no controls within the Integra system to enforce segregation of duties when the card holder is also the budget holder. Effectively a card holder could allocate transactions to their own budget code and there would be no oversight, scrutiny and approval of the transaction. Currently no exception reports are run to detect such instances. | A cardholder who is also a budget holder could self-authorise inappropriate or fraudulent transactions to avoid detection, resulting in losses to the Council. | **Medium**<br>Implemented<br>--------------------------------------------------------------------------------------------------------------------------<br>a) We will explore developing preventative controls within Integra to enforce segregation of duties between cardholder and budget holder. If this is not possible, we will introduce detective controls in the form of a monthly exception report showing instances of self-authorisation.<br>b) We will perform a historic review to identify any instances of self-authorisation of card transactions. Any such instances will be reported to CAFT for further investigation. | **Responsible officer:**<br>\*\*\*\*\*\*\*\*\*\*, Head of Treasury, CSG<br><br>**Target date:**<br>31/12/2017<br><br>**Update as at September 2019**<br>Action a)<br>Preventative controls: Integra no longer allows card holders to self-authorise. A system fix has been operational since April 2018. A fix has been put in so that if the card holder is a budget manager it will pass to the budget holder to approve. If, as has happened, the budget manager and budget holder are the same person the approval passes to the Assistant Director as held on BDM. | | Ref | Finding | Risks | Risk category | Agreed action | |-----|---------|-------|---------------|---------------| | | In technical terms, within Integra the approval route is set by referencing a data table called ‘nmlorgccsec’. The nmlorgccsec fields are tested in the following order: NMLORGCCSEC.BUD_MAN >> NMLORGCCSEC.BUD_HOLD >> NMLORGCCSEC.BDM_ASSISTANT_DIRECTOR. If the BPC card user name matches the nmlorgccsec field being assigned to the BPC approver then that nmlorgccsec field is skipped and the next field down is assigned until finally the NMLORGCCSEC.BDM_ASSISTANT_DIRECTOR field might become the BPC approver. Evidence: ‘P Card Approval Route_Integra’. An example has been provided from March/April 2018. This shows the cost centre 10603 which has \*\*\*\*\*\*\*\*\*\* as the Budget Holder. Her own card transactions in this cost centre had previously gone to her for approval. The system fix meant they went to \*\*\*\*\*\*\*\*\*\* instead. Evidence: ‘Budget Holder Self Review example’ – an email between \*\*\*\*\* and \*\*\*\*\* containing a screenshot showing a highlighted transaction on 15/2/19 going to \*\*\*\*\*\*\*\*\*\*S01 and a later transaction on 29/3/19 shown correctly going to \*\*\*\*\*\*\*\*\*\*B01. Integra Finance can do an exercise on the security table showing who is the budget manager, holder and BDM AD, if that is needed. Exception report: there is an exception report that can be run on special request by Capita. As we have been able to enforce segregation of duties within | | Ref | Finding | Risks | Risk category | Agreed action | |-----|---------|-------|---------------|---------------| | | | | | Integra we have not gone down the route of running this report on a monthly basis. | | | | | | Action b) | | | | | | Historic review of self-authorisation: | | | | | | We are aware of a cardholder who was able to self-authorise. In this instance, the cardholder informed Treasury and/or Integra Finance to request for the approval route to be corrected. This was \*\*\*\*\*\*\*\*\*\* \*\*\*\*\*\*\*\*\*\* (shown in example). She also keeps separate, paper-based authorisations from the budget holders for each transaction. | | | | | | Another card holder called was unable to disburse three P-card payments and got an error message that stated that no budget was linked to the payment. His line manager wasn't correctly set up to approve the spend and once rectified the issue was resolved; there was no self-approval. \*\*\*\*\*\*\*\*\*\* was the card holder, budget manager and budget holder. The system did not allow him to self-authorise. | | | | | | Integra Finance performed a review by running a report to identify instances (in the back-end tables) where the Disburser matched to the Approver profile, and made system changes on those that were found to be the same. | | | | | | **Internal Audit assessment** | | | | | | Evidence was provided to support the management response above and implementation of the preventative control ensuring that P-Card holders are not able to approve P-Card expenses allocated to their own budget/cost centre. Operation was also confirmed with P-Card holder in Assurance, Head of Counter-Fraud Operations. His allocations of P-Card expense line items from his P-Card to the cost centre of which he was the budget manager in terms of the Scheme of Financial Delegation were allocated to the | | Ref | Finding | Risks | Risk category | Agreed action | |-----|---------|-------|---------------|---------------| | | | | Assurance Director for approval, however where he allocated the P-Card expense line item to an Elections cost centre, then it was allocated to the Head of Electoral Services for approval. | Appendix 5 – Observations from Payments Data Analytics and Matching Exercise, February 2019
Observations and areas for improvement
During our work we noted several observations. The key observations are noted below.
Functionality to match bank transactions to the accounting system is currently underutilised The Integra accounting system has the functionality to upload bank account statements into the system, which enables the matching of incoming and outgoing payments on an individual transaction level to the transactions in the accounting system. We noted that bank account statements are uploaded for only 4 out of the 28 accounts we looked at and that this functionality is not actively used for any of the accounts. Utilising this functionality could make the performance of the bank account reconciliations more efficient and effective and provides assurance that transactions in the ledgers in the accounting system accurately reflect the transactions on the bank statement.
Bank account reconciliations not on individual transactional level Bank account reconciliations happen on a monthly basis, but are only reconciled on a total monthly movement and not at an individual transaction level. This in combination with the above finding creates the (fraud) risk that the ledgers do not accurately reflect the actual payments made as per the bank statements.
Manual journals used for correction are inconsistent We noted in the accounting system that correcting manual journal postings are made. These journals are not always made on the same aggregation level; some journals reflect individual transactions, some roll up to weekly, and some up to monthly corrective manual journals. Additionally, it is not always directly clear from the manual journal description the reason and source of the corrections. Please refer to some examples of correcting journals on different aggregation levels below.
| Journal Reference | Voucher Type | Amount (Posted) | Narrative | Journal Line | |-------------------|--------------|-----------------|-----------|--------------| | 0000014161 | JV01 | -8196.02 | DD rejection CTAX April -May 18 | 0000004 | | 0000014360 | JV01 | -222.54 | DD rejection ref EBP 30239995 | 000011 | | 0000014360 | JV01 | -115 | CORRECTING ENTRY | 000012 | | 0000014488 | JV01 | -4321.39 | Correction of posting | 000005 |
Integra only stores detailed information for transactions that originate in Integra Transactional information like payee information (vendor ID, name and associated bank account information) is not stored for transactions that originate / are initiated outside Integra. When implementing Integra the design decision has been made to only record the transaction in the accounting system, but not store any of the data associated to that transaction in Integra. This means that only about a quarter of the value paid out by Barnet Council can be analysed using Integra due to missing information. 'Payment Audit' files only retained for 1 month The bank transactions alone don't provide all the information required to perform the analyses in this review, therefore additional data needed to be added from Integra. All required information is captured in the 'Payment Audit' files within Integra but currently these reports are not stored automatically and are deleted on a monthly basis as part of system housekeeping to avoid latency and slowness in using Integra (which has been a problem in the past). Capita has verbally confirmed that this has now been amended and these specific reports will be retained on an ongoing basis.
A lack of centralised knowledge on where payment information is held During our procedures we noted on multiple occasions that there was a general lack of knowledge on what data was held on the system and where. Before the review it was believed that the transactions for the 28 non-school LBB bank accounts on Bankline were held on Integra. Only during the course of the review it became clear that for only 15 out of 28 accounts the transactions are captured in Integra. At a very late stage it also became clear that from the 15 bank accounts held on Integra, only 1 account had the full supplier bank account details captured. It was noted that it is not easy to find where a transaction originated through Integra.
Inconsistent naming convention We noted that there are either no clear rules around naming conventions in outgoing transactions, or that these are not adhered to. For example, in the one-time vendor transactions you see a large variation in payee names for the same recipient. The table below shows an example of 3 one time vendor transactions for the same individual, same bank account\*, under varying naming conventions.
| Supplier Bank Account | Payee Name | Payment Amount | |-----------------------|-----------------------------|----------------| | <Client bank account>\*| Simpson Millar | £18,750.00 | | Same as above | Simpson Millar Client No 3 Acc | £1,100.00 | | Same as above | Simpson Millar LLP | £2,025.00 |
\*Anonymised
Evaluate the need of all bank accounts There are a large amount of bank accounts of which some have a small amount of transactions associated with them.
Misalignment of payment types between Bankline and Integra Payment types are misaligned between Integra and Bankline. We identified that Barnet's Bankline transactions contained 13 different payment types, however in the data from Integra there are 6 payment types used (there are a total of 10 defined in the system). Please refer to Appendix 2 for a full overview of payment types in Integra and Bankline.
When performing our reconciliation between Integra and Bankline we noted that there is a many-to-many relationship for payment types between the two systems. This means that payment types in Integra can relate to multiple payment types in Bankline and those same payment types in Bankline can relate to multiple payment types in Integra. Because of this, there was no possibility to map transaction types between systems and therefore we did not proceed using payment type in our reconciliation. For illustration purposes see the example below. Example: Payment type A in Integra could consist of transactions of payment types X and Y from Bankline, while at the same time payment type Y can also be Integra’s type B. Therefore there is no mapping between payment types possible which makes might not impact processing, but makes recognizing, reconciling and controlling transactions significantly more complex.
In the figure below see a figurative example of the classification of 4 transactions between the systems. Appendix 6 – Internal Audit roles and responsibilities
Limitations inherent to the internal auditor’s work We have undertaken the review of 2019-20 Cash and Bank, subject to the limitations outlined below.
Internal control Internal control systems, no matter how well designed and operated, are affected by inherent limitations. These include the possibility of poor judgment in decision-making, human error, control processes being deliberately circumvented by employees and others, management overriding controls and the occurrence of unforeseeable circumstances.
Future periods Our assessment of controls is for the period specified only. Historic evaluation of effectiveness is not relevant to future periods due to the risk that:
- the design of controls may become inadequate because of changes in operating environment, law, regulation or other; or
- the degree of compliance with policies and procedures may deteriorate.
Responsibilities of management and internal auditors It is management’s responsibility to develop and maintain sound systems of risk management, internal control and governance and for the prevention and detection of irregularities and fraud. Internal audit work should not be seen as a substitute for management’s responsibilities for the design and operation of these systems.
We endeavour to plan our work so that we have a reasonable expectation of detecting significant control weaknesses and, if detected, we shall carry out additional work directed towards identification of consequent fraud or other irregularities. However, internal audit procedures alone, even when carried out with due professional care, do not guarantee that fraud will be detected.
Accordingly, our examinations as internal auditors should not be relied upon solely to disclose fraud, defalcations or other irregularities which may exist.
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5bcf3fb4b3a81f80762837338f3645ed171544ff | Cash transfers: what does the evidence say?
Annexes
Francesca Bastagli, Jessica Hagen-Zanker, Luke Harman, Valentina Barca, Georgina Sturge and Tanja Schmidt, with Luca Pellerano
## Contents
| Annex 1 | Overview of existing cash transfers reviews | 4 | | Annex 2 | Detailed search protocols and study assessment tools | 8 | | Annex 3 | Summary table of searches and reasons for exclusion and flow diagrams | 73 | | Annex 4 | Summary of the evidence base | 89 | | Annex 5 | Evidence: results tables for overall effects disaggregated by gender, and cash transfer design and implementation effects | 95 | Annex 1 Overview of existing cash transfers reviews
This annex provides some additional information on existing cash transfer reviews, which are discussed in Chapter 3. Tables A1.1 and A1.2 below summarise the indicators and methods employed in the systematic reviews covered in Chapter 3. Table A1.3 summarises other review studies that are drawn upon in the discussion on design and implementation features in the same chapter.
Table A1.1 Main indicators reported on in systematic reviews
| Reference | Indicators covered | |----------------------------|-----------------------------------------------------------------------------------| | Baird et al., 2013 | School enrolment; school attendance; school test scores. | | Banks et al., 2016 | Meeting basic needs; reducing poverty; employment; health access; mental health. | | Gaarder et al., 2010 | Indicators reported in meta-analysis: clinic visits; immunisation (partial and full); anthropometric indicators (stunting and wasting). Other outcomes reported on individual programmes include: morbidity (e.g. anaemia, diarrhoea); self-reported health; health behaviour (knowledge and practices); mental health. | | Glassman & Duran, 2013 | Births attended by skilled personnel; tetanus toxoid for mother; giving birth in a hospital; post-partum check-ups/visits after birth; contraceptive use and HIV status; fertility; low birth-weight; peri-natal, neo-natal and maternal mortality. | | Hagen-Zanker et al., 2011 | Poverty indices; expenditure; income. | | IEG, 2014 | Empowerment, voice and agency; domestic violence; fertility; prenatal care, institutional delivery and skilled birth attendance; political participation; access to productive resources; employment; school enrolment; school attendance; child labour; anthropometric indicators. | | Kabeer et al., 2012 | Child and adult labour; migration patterns; household consumption; savings and investment; negative coping mechanisms; informal social protection arrangements; community-wide effects (consumption, loans, transfers, remittances, poverty). | | Lagarde et al., 2009 | Health service utilisation (e.g. health care and antenatal care visits); immunisation coverage; child illness; anthropometric and nutritional indicators. | | Manley et al., 2012 | Anthropometric indicators (child height for age and child height). | | Anthropometric indicators (child height for age and child height), (Review in progress) | Use of health services and health outcomes. | | Saavedra & Garcia, 2012 | School enrolment; school attendance; school dropout rate. | | Yoong et al., 2012 | Anthropometric and nutritional indicators; adult labour supply; household expenditure (health, school, clothing, food); school enrolment; school attendance; investments in business and agriculture; asset ownership; enterprise performance. |
Notes: These are the main outcomes reported. There are some further outcomes reported within individual studies. For studies reporting on interventions other than cash transfers, indicators shown are only those associated with impacts of cash transfers.
### Table A1.2 Study designs and methods included in systematic reviews
| Reference | Study designs accepted for final analysis | Quality assessment of included studies | |--------------------|-----------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------| | Baird et al., 2013 | (i) RCT (ii) Quasi-experimental design with controlled comparison. Required cross-sectional or longitudinal comparison (pre-post control, contemporaneous control, interrupted time series, parallel cohort or RDD). | Risk of bias assessed using tool developed by the International Development Coordinating Group (IDCG). | | Banks et al., 2016 | No restrictions. | Risk of various types of bias evaluated by two authors using modified versions of the assessment tools RATS and STROBE for qualitative and quantitative studies, respectively (Clark, 2003; von Elm et al., 2007). Assessment focused on the risk of potential biases arising from study design, sampling methods, data collection and data analysis interpretation. Studies categorized as: (1) ‘low’ risk of bias, (2) ‘medium’ risk of bias or (3) ‘high’ risk of bias. No strict cut-offs were used in assigning classifications and all papers (including ‘high’ risk) were eventually included. | | Gaarder et al., 2010| (i) Experimental studies (ii) Quasi-experimental design (matching, regression discontinuity design (RDD) and multivariate regression). Excluded studies that did not control for endogeneity of intervention status. | None. | | Glassman & Duran, 2013 | Unclear. Report on studies that report ‘rigorously calculated impacts’. | None. | | Hagen-Zanker et al., 2011 | Solid empirical study with high quality reporting. | Scored studies using an index developed by the authors comprising: reporting on targeting incidence, study design, accounted for income foregone and household economy responses, reporting statistical significance. | | IEG, 2014 | A quantitative impact evaluation that adopted either (i) an experimental or (ii) quasi-experimental design that relied on a credible control group. Graded studies according to strength of internal validity and excluded studies where main methodological assumptions were not discussed and proposed causal relationship weak. | Quality check based on full text review to assess strength of internal validity (i.e. assumptions of evaluation methods verified and treatment of endogeneity assessed). | | Kabeer et al., 2012 | (i) Experimental (ii) Quasi-experimental (RDD, Propensity Score Matching, IV or DID). | None. | | Lagarde et al., 2009 | Examined all studies that met the Effective Practice and Organisation of Care Group (EPOC) inclusion criteria for study design and compared the effects (on predetermined outcomes) of offering CCTs against the absence of CCTs. Then included three types of studies: (i) RCTs or C-RCTs (ii) Pre-post control studies (iii) Interrupted time-series (providing studies defined the point in time of the intervention and there were three or more data points before and after the intervention). | Assessment of risk of bias (based on EPOC) was then carried out to determine quality of evidence, tailored to study design. | | Manley et al., 2012 | Had to be an impact evaluation but no restrictions on study design or methods. | Used two sets of criteria concerning study design and methods based on the Cochrane handbook and scored studies accordingly. | | Saavedra & Garcia, 2012 | Study had to use a “treatment-comparison” research design. Non-randomised studies only eligible if they report relevant pre-treatment characteristics of treatment and comparison groups. Intervention pre-post studies not eligible. | None. | | Yoong et al., 2012 | Had to (i) be an evaluation study of specific programme or programmes and (ii) use an approach aimed at identifying causal effects and their size. Further methodological criteria (adapted from the Maryland Scale of Scientific Methods) were also applied to quantitative studies which had to score 18 or above to be in the final set of papers. Qualitative literature kept for developing conceptual framework and contributing relevant insights. | Studies scored using quality criteria (see cell to left). |
### Table A1.3 Other review papers on impacts of cash transfers
| Reference | Main outcomes covered | Interventions | Number of evaluations | Regional focus? | |-----------|-----------------------|---------------|-----------------------|-----------------| | Adato & Bassett, 2012 | Poverty; education; health; food consumption; nutrition. | UCTs, CCTs and pensions | 40 cash transfer programmes including pensions | No | | Adato & Hoddinott, 2010 | Education; health; nutrition; food consumption; women’s status and gender relations; participation and power. | CCTs | Various evaluations for 4 programmes | Latin America | | Arnold et al., 2011 | Poverty; vulnerability and inequality; nutrition and food security; education; health and population; protecting productive assets; encouraging livelihood diversification; stimulating local markets; access to credit; gdp growth; labour markets; child labour; empowerment and gender equality; humanitarian assistance; state building and social cohesion; climate change adaptation and disaster risk reduction. | UCTs, CCTs non-contributory pensions and PWPs | Not stated | No | | Barrientos & Scott, 2008 | Effects on growth at the micro-level: alleviating credit constraints; addressing insurance failures; improving household resource allocation and dynamics; human development (incl. Health, education and nutrition); labour supply; local economy effects; saving. | Social transfers (PWPs, CCTs, UCTs, social pensions) | At least 31 | No | | Bassett, 2008 | Nutrition. | CCTs | CCTs from 5 countries | Latin America | | Bastagi, 2010 | Poverty; inequality impacts; education; health. | CCTs | 9 CCTs | Latin America | | Bouillon & Tejerina, 2007 | Education (attendance, enrolment, pass rates); nutrition; child labour; health (access and outcomes). | CCTs | 10 covering 10 CCTs | Latin America and the Caribbean | | Fiszbein & Schady, 2009 | Consumption; poverty; employment; education; health. | CCTs | Not stated | No | | Harvey, 2005 | Markets and prices; multiplier effects; household gender relations; | CTs, cash for work and voucher programmes | Various | Humanitarian situations | | IEG, 2011 | **Short-term and intermediate outcomes:** Current income; consumption; poverty; education; child labour; health; nutrition; labour supply; economic activities; protection against idiosyncratic and systemic shocks; **Final outcomes:** Stock of human capital; stock of physical capital; employment, income and consumption trajectories; **Indirect effects:** Remittances and other private transfers; sexual behaviour, fertility and marriage; other intra-household behavioural responses; spillover and general equilibrium effects. | Non-contributory social safety nets | 149 (109 for UCTs or CCTs) | No | | Leroy, Ruel, & Verhofstadt, 2009 | Child nutrition | CCTs | 7 | No | | Mathers & Slater, 2014 | Economic growth and its determinants at the micro level (accumulation of assets and preventing loss of productive capital, increasing innovation and risk-taking, investing in human capital, improved employment opportunities) and meso level (multiplier effects from increased consumption and production, accumulation of productive community assets and labour market impacts) | Non-contributory transfers | Not stated | No | | Ranganathan & Lagarde, 2012 | Uptake of health services; immunisation coverage; nutrition; health; health behaviour. | CCTs (with a condition on health) | 19 (of 13 CCTs) | No | | Rawlings & Rubio, 2003 | Education; child labour; health; consumption. | CCTs | Various evaluations (3 CCTs) | Latin America | | Reimers, DeShano da Silva, & Trevino, 2006 | Education | Non-contributory transfers (scholarships/fee waivers, CCTs, food transfers) | Various evaluations for 9 programmes (not all traditional CCTs) | No | | Reference | Main outcomes covered | Interventions | Number of evaluations | Regional focus? | |-----------|-----------------------|---------------|-----------------------|-----------------| | Tirivayi, Knowles, & Davis, 2013 | Direct impacts on farm production (agricultural assets, inputs, labour allocation, agricultural output); indirect impacts on farm production (human capital accumulation, off-farm investments, reduction of adverse risk-coping strategies); local economy effects. | Non-contributory schemes (CTs, PWPs, school feeding, food aid, social pensions and education fee waivers) | ~160 | Sub-Saharan Africa, Latin America and Asia | | Yablonski & O’Donnell, 2009 | Child mortality and determinants (e.g. illness, nutrition, access to healthcare, access to food, care for women and children, household environment and hygiene); economic (e.g. Labour market, investments local multiplier effects). | CTs | Unclear | No | | Barrientos, Niño-Zarazúa, & Maitrot, 2010 | Database of key features of numerous social assistance interventions with links to evaluations. | Social assistance (including CTs and social pensions) | Includes summary of 42 ‘pure income transfers’ with links to related evaluations | No | | Devereux, Marshall, MacAskill, & Pelham, 2005 | Qualitative review of programme design, delivery issues and potential benefits of scaling-up. | UCTs (including social pensions, disability grants and orphan support schemes) | Reviews range of schemes in 15 countries and 4 in-depth | East and Southern Africa | | Garcia & Moore, 2012 | Mainly a synthesis describing design and implementation features | UCTs and CCTs | 123 cash transfer programmes | Sub-Saharan Africa | | Monchuk, 2014 | Review focused on objectives, features, systems, general performance, and financing. Very limited on reviewing impacts. | Safety nets (cash transfers, public works and school feeding) | Mainly based on 22 safety net and social protection World Bank assessments of the 22 countries covered | Sub-Saharan Africa | Annex 2 Detailed search protocols and study assessment tools
This annex provides additional information on the methods used in the review. Part 1 lists the detailed search protocols used in the literature searches.
Part 2 reports the tools used in the second stage screening process to assess the studies retrieved against agreed methodological criteria. For quantitative impact analysis studies, the final stage of screening included assessing studies against: selection bias and confounding factors, attrition bias, statistical significance (biases leading to Type I or Type II errors) and any other bias. To pass, these studies had to demonstrate ‘low’ risk of bias or ‘low’ and ‘unclear’ risk of bias. Qualitative studies retrieved under searches for evidence of links between policy design and implementation features and outcomes, were assessed against: clarity and transparency, credibility of findings, acknowledgement of potential internal bias and limitations, and external validity. Studies passed if they were considered to have either ‘no concerns’, or ‘no concerns’ and ‘some concerns’ within the same study. Part 1. Detailed search protocols
Separate protocols were developed to carry out searches for the six outcomes and six key cash transfer design and implementation features put forward in the conceptual framework. A total of 12 separate searches were carried out. The remainder of Part 1 lists the specific search protocols employed in the literature searches for each outcome and cash design and implementation feature. Sub-question 1a: What is the effect of cash transfers on monetary poverty and inequality?
1. The review research questions
The systematic literature reviews should assess the state of knowledge on the following question: *What is known about the effect of cash transfers on monetary poverty and inequality?*
2. Methodology
The systematic literature reviews should combine three tracks. These tracks are briefly explained here and further instructions are given below.
1. **Bibliographic database search:** Searching a previously agreed upon list of academic databases, using consistent search strings (see below) that have been tested beforehand and applying inclusion/exclusion criteria.
2. **Snowball technique:** Contacting approximately three key experts in the field and asking them for recommendations for important studies on the research question. This also includes looking at the experts’ websites and publication lists and including relevant studies. Finally, we will be looking for further relevant studies in the bibliographies of the experts’ studies and recommended studies.
3. **Websites searches:** Searching previously agreed on websites (see below) for relevant studies using similar search terms as for the bibliographic databases. This also includes a google search for other grey literature.
Studies will be screened and assessed using the EPPI Reviewer software. After an initial broad screening process that considers overall study design, as well as other broader inclusion/exclusion criteria, a second round of screening will be conducted and studies will be assessed against a range of criteria to investigate the risk of bias and reliability of findings. Specifically, studies will be assessed against the issues of selection bias, attrition bias or bias associated with interpretation of statistical significance (Type I or Type II errors). Studies that have a high risk of bias or score low on rigour will be not be included in the final analysis.
The relevant studies that make it through both stages of screening will be summarised in an annotated bibliography. The annotated bibliography lists the relevant studies in table format (see below) and briefly summarises each study in terms of relevant information on methodology, intervention and findings. More specifically, the relevant studies will also be summarised and classified in a table summarising the following information: i) publication details, (ii) description of the intervention and context, (iii) methods, data and sampling, (iv) population, v) findings of relevance to the research question including findings of statistically significant and non-significant impacts and disaggregation (e.g. by gender, age and other characteristics), and vi) contextual factors of importance.
A narrative synthesis approach will be applied to synthesise the findings. 3. Bibliographic database search
The research question
The research question is ‘What is known about the effect of cash transfers on monetary poverty and inequality?’ Here we want to know the effect on household income, expenditure, monetary poverty and inequality.
In order to understand it better, the research question can be decomposed into population, intervention and outcome:
| Population | Intervention | Outcome | |------------|--------------|---------| | People living in low or middle income countries and who either receive the intervention or are the comparison group | Conditional or unconditional cash transfers | Monetary poverty and inequality |
| Cash transfer | Income | | Social transfer | Earning\* | | Financial transfer | Cash | | Monetary transfer | Expenditure | | Child grant/ disability grant/ old-age grant/ social grant | Spending | | Social assistance | Consumption | | Social pension | Purchas\* | | Non-contributory pension | Foster Greer Thorbecke | | Old age pension | FGT | | Child benefit/ disability benefit/ old-age benefit | Poverty headcount | | Basic income/ minimum income | Poverty gap | | UCT/ CCT | Poverty depth | | Income support | Poverty severity | | | Gini | | | Benefit incidence | | | Inequality | | | Distribution |
The population has been restricted to people living in low and middle income countries. This includes both beneficiary and control households. The aim of the research question is to analyse the impact of cash transfers on monetary poverty and inequality. The outcome for this sub-question is income, expenditure, monetary poverty and inequality. The table above also includes all synonyms that will be used in the searches.
Search strings
The search string will be composed of intervention (part 1), outcome (part 2) and country filter (example below given for SCOPUS filter). In order to capture all possible cash transfers, search strings should include all synonyms listed above. In terms of outcome, we will use synonyms of income, expenditure, monetary poverty and inequality in the search strings. The following search strings will be used (they have been tested in the pilot phase):
1. TITLE-ABS-KEY ( “Cash transfer\*” OR “social transfer\*” OR “financial transfer\*” OR “monetary transfer\*” OR “child grant\*” OR “disability grant\*” OR “old age grant\*” OR “social grant\*” OR “basic grant\*” OR “minimum income grant\*” OR “social assistance” OR welfare OR “social pension\*” OR “non-contributory pension\*” OR “old age pension\*” OR “child benefit\*” OR “disability benefit\*” OR “old age benefit\*” OR “cct” OR “uct” OR “income support” )
2. TITLE-ABS-KEY ( income\* OR earning\* OR cash OR expend\* OR spending OR consumption OR purchas\* OR “Foster Greer Thorbecke” OR fgt OR “poverty headcount” OR “poverty gap” OR “poverty depth” OR “depth of poverty” OR “poverty severity” OR “severity of poverty” OR gini OR inequalit\* OR inequit\* OR distribution )
- note this should search title/abstract/keyword or subject fields
3. TITLE-ABS-KEY (afghanistan OR albania OR algeria OR angola OR argentina OR armenia OR armenian OR aruba OR azerbaijan OR bangladesh OR benin OR belarus OR belorussian OR belorussia OR belize OR bhutan OR bolivia OR bosnia OR herzegovina OR hercegovina OR botswana OR brasil OR brazil OR bulgaria OR “Burkina Faso” OR “Burkina Fasso” OR “Upper Volta” OR burundi OR urundi OR cambodia OR “Khmer Republic” OR kampuchea OR cameroon OR cameroons OR cameron OR camorons OR “Cape Verde” OR “Central African Republic” OR chad OR china OR colombia OR comoros OR “Comoro Islands” OR comores OR mayotte OR congo OR zaire OR “Costa Rica” OR “Cote d’Ivoire” OR “Ivory Coast” OR cuba OR djibouti OR “French Somaliland” OR dominica OR “Dominican Republic” OR “East Timor” OR “East Timur” OR “Timor Leste” OR ecuador OR egypt OR “United Arab Republic” OR “El Salvador” OR eritrea OR ethiopia OR fiji OR gabon OR “Gabonese Republic” OR gambia OR gaza OR “Georgia Republic” OR “Georgian Republic” OR ghana OR grenada OR guatemala OR guinea OR guiana OR guyana OR haiti OR hungary OR honduras OR india OR maldives OR indonesia OR iran OR iraq OR jamaica OR jordan OR kazakhstan OR kazakh OR keny OR kiribati OR korea OR kosovo OR kyrgyzstan OR kirghizia OR “Kyrgyz Republic” OR kirghiz OR kirgizstan OR “Lao PDR” OR laos OR lebanon OR lesotho OR basutoland OR liberia OR libya OR macedonia OR madagascar OR “Malagasy Republic” OR malaysia OR malaya OR malay OR sabah OR sarawak OR malawi OR mali OR “Marshall Islands” OR mauritania OR mauritius OR “Agalega Islands” OR mexico OR micronesia OR “Middle East” OR moldova OR moldavia OR moldovan OR mongolia OR montenegro OR morocco OR ifni OR mozambique OR myanmar OR myanmar OR burma OR namibia OR nepal OR “Netherlands Antilles” OR “New Caledonia” OR nicaragua OR niger OR nigeria OR pakistan OR palau OR palestine OR panama OR paraguay OR peru OR philippines OR philippines OR philippines OR philippines OR “Puerto Rico” OR romania OR rumania OR roumania OR rwanda OR ruanda OR “Saint Lucia” OR “St Lucia” OR “Saint Vincent” OR “St Vincent” OR grenadines OR samoan OR “Samoan Islands” OR “Navigator Island” OR “Navigator Islands” OR “Sao Tome” OR senegal OR serbia OR montenegro OR seychelles OR “Sierra Leone” OR “Sri Lanka” OR “Solomon Islands” OR somalia OR “South Africa” OR sudan OR suriname OR surinam OR swaziland OR syria OR tajikistan OR tajikistan OR tadjikistan OR tadjik OR tanzania OR thailand OR togo OR togoles republic OR tonga OR tunisia OR turkey OR turkmenistan OR turkmen OR uganda OR ukraine OR uzbekistan OR uzbek OR vanuatu OR “New Hebrides” OR venezuela OR vietnam OR “Viet Nam” OR “West Bank” OR yemen OR yugoslavia OR zambia OR zimbabwe ) OR TITLE-ABS-KEY (“Developing Countries” OR africa OR asia OR caribbean OR “West Indies” OR “South America” OR “Latin America” OR “Central America” OR developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” OR underserved OR “under served” OR deprived) OR TITLE-ABS-KEY (poor\* W/1 countr\* OR nation\* OR population\* OR world ) OR TITLE-ABS-KEY (developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” ) W/1 econom\* ) OR TITLE-ABS-KEY (low\* W/1 gdp OR gnp OR “gross domestic” OR “gross national” ) OR TITLE-ABS-KEY (low W/3 middle W/3 countr\* ) OR TITLE-ABS-KEY ( lmic OR lmc OR “third world” OR “lami countr\*” OR “transitional countr\*” )
4. Search strings to run in Scopus: #1 AND #2 AND #3 (limited to 2000 onwards) Inclusion criteria
Stage 1 Screening:
Inclusion criteria help in deciding whether a study that has been found is relevant. The following inclusion criteria will be applied during the first stage of the screening process (all criteria need to be satisfied for the study to be included). They will be applied to titles, then abstracts, then full text. All studies that are included on the basis of the first stage screening process, will be included in the Stage 2 screening process.
1. **Date**: From 2000
2. **Language**: The review is restricted to English studies
3. **Population**: People that have received a cash transfer, or control households
4. **Geographical locations**: Low and middle income countries
5. **Interventions**: Conditional or unconditional cash transfers. The programmes should be non-contributory, publicly mandated or NGO-provided (so not private transfers, like remittances, or religious donations).
6. **Study design**: The study should be a solid empirical study (i.e. based on data and or fieldwork). Only studies that use either an experimental design or a quasi-experimental design that relies on a credible control group should be included. This includes those that demonstrate one of the following: (a) an experimental design (i.e. RCT or cluster-RCT) (b) a quasi-experimental design, including: i. regression discontinuity design ii. matching technique (e.g. propensity score matching) iii. difference-in-difference iv. interrupted time series v. other form of multivariate regression, including Instrumental Variable Technique, including Instrumental Variable Technique
[Exclude studies that are theoretical; literature reviews; not descriptive or don’t have an experimental/ quasi-experimental design]
7. **Outcome**: income, expenditure, monetary poverty and inequality
Stage 2 Screening:
In the second round of screening, studies will be will be assessed against a range of criteria to investigate the risk of bias and reliability of findings. Specifically, studies will be assessed against the issues of selection bias, attrition bias or bias associated with interpretation of statistical significance (Type I or Type II errors). Studies that have a high risk of bias or score low on rigour will be not be included in the final analysis.
List of databases used
- SCOPUS (Elsevier). This database includes 5,682 journals, conference proceedings, trade publications and book series in the Social Sciences category.
- Econlit
- IDEAS-Repec
4. Snowball technique
The following three people should be contacted and asked for the five most relevant studies on the research question. We will also look at their websites for relevant publications.
1. John Hoddinot, IFPRI
2. Armando Barrientos, Manchester
3. Ruslan Yemtsov, World Bank
Studies shared by experts will be assessed against Stage 1 and Stage 2 screening criteria. We will also check the reference lists of the studies obtained for any further studies that fit the inclusion criteria.
5. Websites searches
The following websites/search engines should be consulted, if possible using the same search strings as for the academic databases. Any studies found on these websites will be assessed against the same Stage 1 and Stage 2 screening criteria.
- Google (the first five pages)
- World Bank
- R4D DFID
- International Policy Centre for Inclusive Growth (IPC-IG)
- International Food Policy Research Institute (IFPRI)
- Poverty Action Research Lab
- FAO From Protection to Production website
- Transfer Project (UNC Chapel Hill)
- GSDRC
- OPM website
- 3iE website
- ECLAC/CEPAL
- IADB website
- ADB website
- IDS website
- BLDS website
- Social Science Research Network
6. Classification of studies
Studies that have passed both screening stages will be classified and described in an annotated bibliography. The classification tables will include the following information:
- authors and year of study
- geographical coverage
- detailed description of intervention and context
- population
- methods, sampling and data
- a summary of the main outcomes of the study Sub-question 1b: What is the effect of cash transfers on education?
1. The review research questions
The systematic literature reviews should assess the state of knowledge on the following question: *What is known about the effect of cash transfers on education?*
2. Methodology
The systematic literature reviews should combine three tracks. These tracks are briefly explained here and further instructions are given below.
1. **Bibliographic database search:** Searching a previously agreed upon list of academic databases, using consistent search strings (see below) that have been tested beforehand and applying inclusion/exclusion criteria.
2. **Snowball technique:** Contacting approximately three key experts in the field and asking them for recommendations for important studies on the research question. This also includes looking at the experts’ websites and publication lists and including relevant studies. Finally, we will be looking for further relevant studies in the bibliographies of the experts’ studies and recommended studies.
3. **Websites searches:** Searching previously agreed on websites (see below) for relevant studies using similar search terms as for the bibliographic databases. This also includes a google search for other grey literature.
Studies will be screened and assessed using the EPPI Reviewer software. After an initial broad screening process that considers overall study design, as well as other broader inclusion/exclusion criteria, a second round of screening will be conducted and studies will be assessed against a range of criteria to investigate the risk of bias and reliability of findings. Specifically, studies will be assessed against the issues of selection bias, attrition bias or bias associated with interpretation of statistical significance (Type I or Type II errors). Studies that have a high risk of bias or score low on rigour will be not be included in the final analysis.
The relevant studies that make it through both stages of screening will be summarised in an annotated bibliography. The annotated bibliography lists the relevant studies in table format (see below) and briefly summarises each study in terms of relevant information on methodology, intervention and findings. More specifically, the relevant studies will also be summarised and classified in a table summarising the following information: i) publication details, (ii) description of the intervention and context, (iii) methods, data and sampling, (iv) population, (v) findings of relevance to the research question including findings of statistically significant and non-significant impacts and disaggregation (e.g. by gender, age and other characteristics), and (vi) contextual factors of importance.
A narrative synthesis approach will be applied to synthesise the findings. 3. Bibliographic database search
The research question
The research question is ‘What is known about the effect of cash transfers on education?’ Here we want to know the effect on school enrolment, school attendance and school achievement.
In order to understand it better, the research question can be decomposed into population, intervention and outcome:
| Population | Intervention | Outcome | |------------|--------------|---------| | People living in low or middle income countries and who either receive the intervention or are the comparison group | Conditional or unconditional cash transfers | School enrolment, school attendance and school achievement |
| Cash transfer | Social transfer | Financial transfer | Monetary transfer | Child grant/ disability grant/ old-age grant/ social grant | Social assistance | Social pension | Non-contributory pension | Old age pension | Child benefit/ disability benefit/ old-age benefit | Basic income/ minimum income | UCT/ CCT | Income support | |---------------|-----------------|-------------------|------------------|----------------------------------------------------------|-----------------|-----------------|------------------------|----------------|-----------------------------------------------|-----------------------------|----------|---------------| | Education | School | Enrol\* | Registration | Admission | Attend\* | Participation | Retention | Drop-out | Completion | Achievement | Learning | Repetition / repeat\* | | | | | | | | | | | | Graduation / graduate\* | | |
The population has been restricted to people living in low and middle income countries. This includes both beneficiary and control households. The aim of the research question is to analyse the impact of cash transfers on any level of education. The outcome for this sub-question is school enrolment, school attendance and school achievement. The table above also includes all synonyms that will be used in the searches.
Search strings
The search string will be composed of intervention (part 1), outcome (part 2) and country filter (example below given for SCOPUS filter). In order to capture all possible cash transfers, search strings should include all synonyms listed above. In terms of outcome, we will use school enrolment, school attendance and school achievement and synonyms in the search strings. The following search strings and will be used (they have been tested in the pilot phase):
1. TITLE-ABS-KEY ( “Cash transfer\*” OR “social transfer\*” OR “financial transfer\*” OR “monetary transfer\*” OR “child grant\*” OR “disability grant\*” OR “old age grant\*” OR “social grant\*” OR “basic grant\*” OR “minimum income grant\*” OR “social assistance” OR “welfare” OR “social pension\*” OR “non-contributory pension\*” OR “old age pension\*” OR “child benefit\*” OR “disability benefit\*” OR “old age benefit\*” OR “cct” OR “uct” OR “income support”)
2. TITLE-ABS-KEY ((school\* OR education\*) AND ( enrol\* OR regist\* OR admission\* OR attend\* OR participat\* OR retention OR retain\* OR drop-out\* OR complet\* OR attain\* OR learn\* OR progress\* OR cognitive OR repeat\* OR repetition OR graduat\* OR achiev\* ) )
3. TITLE-ABS-KEY (afghanistan OR albania OR algeria OR angola OR argentina OR armenia OR armenian OR aruba OR azerbaijan OR bangladesh OR benin OR belarus OR belorussian OR belorussia OR belize OR bhutan OR bolivia OR bosnia OR herzegovina OR hercegovina OR botswana OR brasil OR brazil OR bulgaria OR “Burkina Faso” OR “Burkina Fasso” OR “Upper Volta” OR burundi OR urundi OR cambodia OR “Khmer Republic” OR kampuchea OR cameroon OR cameroons OR cameron OR camorons OR “Cape Verde” OR “Central African Republic” OR chad OR china OR colombia OR comoros OR “Comoro Islands” OR comores OR mayotte OR congo OR zaire OR “Costa Rica” OR “Cote d’Ivoire” OR “Ivory Coast” OR cuba OR djibouti OR “French Somaliland” OR dominica OR “Dominican Republic” OR “East Timor” OR “East Timur” OR “Timor Leste” OR ecuador OR egypt OR “United Arab Republic” OR “El Salvador” OR eritrea OR ethiopia OR fiji OR gabon OR “Gabonese Republic” OR gambia OR gaza OR “Georgia Republic” OR “Georgian Republic” OR ghana OR grenada OR guatemala OR guinea OR guiana OR guyana OR haiti OR hungary OR honduras OR india OR maldives OR indonesia OR iran OR iraq OR jamaica OR jordan OR kazakhstan OR kazakh OR keny OR kiribati OR korea OR kosovo OR kyrgyzstan OR kirghizia OR “Kyrgyz Republic” OR kirghiz OR kirgizstan OR “Lao PDR” OR laos OR lebanon OR lesotho OR basutoland OR libera OR libya OR macedonia OR madagascar OR “Malagasy Republic” OR malaysia OR malaya OR malay OR sabah OR sarawak OR malawi OR mali OR “Marshall Islands” OR mauritania OR mauritius OR “Agalega Islands” OR mexico OR micronesia OR “Middle East” OR moldova OR moldavia OR moldovan OR mongolia OR montenegro OR morocco OR ifni OR mozambique OR myanmar OR myamna OR burma OR namibia OR nepal OR “Netherlands Antilles” OR “New Caledonia” OR nicaragua OR niger OR nigeria OR pakistan OR palau OR palestine OR panama OR paraguay OR peru OR philippines OR philippines OR philippines OR philippines OR “Puerto Ric\*” OR romania OR rumania OR roumania OR rwanda OR ruanda OR “Saint Lucia” OR “St Lucia” OR “Saint Vincent” OR “St Vincent” OR grenadines OR samoan OR “Samoan Islands” OR “Navigator Island” OR “Navigator Islands” OR “Sao Tome” OR senegal OR serbia OR montenegro OR seychelles OR “Sierra Leone” OR “Sri Lanka” OR “Solomon Islands” OR somalia OR “South Africa” OR sudan OR suriname OR surinam OR swaziland OR syria OR tajikistan OR tadjikistan OR tadjik OR tanzania OR thailand OR togo OR togoles republic OR tonga OR tunisia OR turkey OR turkmenistan OR turkmen OR uganda OR ukraine OR uzbekistan OR uzbek OR vanuatu OR “New Hebrides” OR venezuela OR vietnam OR “Viet Nam” OR “West Bank” OR yemen OR yugoslavia OR zambia OR zimbabwe ) OR TITLE-ABS-KEY (“Developing Countries” OR africa OR asia OR caribbean OR “West Indies” OR “South America” OR “Latin America” OR “Central America” OR developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” OR underserved OR “under served” OR deprived) OR TITLE-ABS-KEY (poor\* W/1 countr\* OR nation\* OR population\* OR world ) OR TITLE-ABS-KEY (developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” ) W/1 econom\* ) OR TITLE-ABS-KEY (low\* W/1 gdp OR gnp OR “gross domestic” OR “gross national” ) OR TITLE-ABS-KEY (low W/3 middle W/3 countr\* ) OR TITLE-ABS-KEY ( lmic OR lmic\* OR “third world” OR “lami countr\*” OR “transitional countr\*” )
4. Search strings to run in Scopus: #1 AND #2 AND #3 (limited to 2000 onwards) Inclusion criteria
Stage 1 Screening:
Inclusion criteria help in deciding whether a study that has been found is relevant. The following inclusion criteria will be applied during the first stage of the screening process (all criteria need to be satisfied for the study to be included). They will be applied to titles, then abstracts, then full text. All studies that are included on the basis of the first stage screening process, will be included in the Stage 2 screening process.
1. **Date**: From 2000
2. **Language**: The review is restricted to English studies
3. **Population**: People that have received a cash transfer, or control households
4. **Geographical locations**: Low and middle income countries
5. **Interventions**: Conditional or unconditional cash transfers. The programmes should be non-contributory, publicly mandated or NGO-provided (so not private transfers, like remittances, or religious donations).
6. **Study design**: The study should be a solid empirical study (i.e. based on data and or fieldwork). Only studies that use either an experimental design or a quasi-experimental design that relies on a credible control group should be included. This includes those that demonstrate one of the following: (a) an experimental design (i.e. RCT or cluster-RCT) (b) a quasi-experimental design, including: i. regression discontinuity design ii. matching technique (e.g. propensity score matching) iii. difference-in-difference iv. interrupted time series v. other form of multivariate regression, including Instrumental Variable Technique. [Exclude studies that are theoretical; literature reviews; not descriptive or don’t have an experimental/ quasi-experimental design]
7. **Outcome**: School enrolment, school attendance and school achievement
Stage 2 Screening:
In the second round of screening, studies will be will be assessed against a range of criteria to investigate the risk of bias and reliability of findings. Specifically, studies will be assessed against the issues of selection bias, attrition bias or bias associated with interpretation of statistical significance (Type I or Type II errors). Studies that have a high risk of bias or score low on rigour will be not be included in the final analysis.
List of databases used
- SCOPUS (Elsevier). This database includes 5,682 journals, conference proceedings, trade publications and book series in the Social Sciences category.
- IDEAS-REPEC
4. Snowball technique
The following three people should be contacted and asked for the five most relevant studies on the research question. We will also look at their websites for relevant publications.
1. Sarah Baird, George Washington University
2. Jaime Saavedra-Chanduvi, World Bank
3. Fernando M. Reimers, Harvard University
Studies shared by experts will be assessed against Stage 1 and Stage 2 screening criteria. We will also check the reference lists of the studies obtained for any further studies that fit the inclusion criteria.
5. Websites searches
The following websites/search engines should be consulted, if possible using the same search strings as for the academic databases. Any studies found on these websites will be assessed against the same Stage 1 and Stage 2 screening criteria.
- Google (the first five pages)
- World Bank
- R4D DFID
- International Policy Centre for Inclusive Growth (IPC-IG)
- International Food Policy Research Institute (IFPRI)
- Poverty Action Research Lab
- FAO From Protection to Production website
- Transfer Project (UNC Chapel Hill)
- GSDRC
- OPM website
- 3iE website
- ECLAC/CEPAL
- IADB website
- ADB website
- UNICEF website
- IDS website
- BLDS website
- Social Science Research Network
6. Classification of studies
Studies that have passed both screening stages will be classified and described in an annotated bibliography. The classification tables will include the following information:
- authors and year of study
- geographical coverage
- detailed description of intervention and context
- population
- methods, sampling and data
- a summary of the main outcomes of the study Sub-question 1c: What is the effect of cash transfers on health?
1. The review research questions
The systematic literature reviews should assess the state of knowledge on the following question: *What is known about the effect of cash transfers on health?*
2. Methodology
The systematic literature reviews should combine three tracks. These tracks are briefly explained here and further instructions are given below.
1. **Bibliographic database search:** Searching a previously agreed upon list of academic databases, using consistent search strings (see below) that have been tested beforehand and applying inclusion/exclusion criteria.
2. **Snowball technique:** Contacting approximately four key experts in the field and asking them for recommendations for important studies on the research question. This also includes looking at the experts’ websites and publication lists and including relevant studies. Finally, we will be looking for further relevant studies in the bibliographies of the experts’ studies and recommended studies.
3. **Websites searches:** Searching previously agreed on websites (see below) for relevant studies using similar search terms as for the bibliographic databases. This also includes a google search for other grey literature.
Studies will be screened and assessed using the EPPI Reviewer software. After an initial broad screening process that considers overall study design, as well as other broader inclusion/exclusion criteria, a second round of screening will be conducted and studies will be assessed against a range of criteria to investigate the risk of bias and reliability of findings. Specifically, studies will be assessed against the issues of selection bias, attrition bias or bias associated with interpretation of statistical significance (Type I or Type II errors). Studies that have a high risk of bias or score low on rigour will be not be included in the final analysis.
The relevant studies that make it through both stages of screening will be summarised in an annotated bibliography. The annotated bibliography lists the relevant studies in table format (see below) and briefly summarises each study in terms of relevant information on methodology, intervention and findings. More specifically, the relevant studies will also be summarised and classified in a table summarising the following information: i) publication details, (ii) description of the intervention and context, (iii) methods, data and sampling, (iv) population, v) findings of relevance to the research question including findings of statistically significant and non-significant impacts and disaggregation (e.g. by gender, age and other characteristics), and vi) contextual factors of importance.
A narrative synthesis approach will be applied to synthesise the findings. 3. Bibliographic database search
The research question
The research question is ‘What is known about effect of cash transfers on health?’ Here we want to know the effect of cash transfers on health outcomes, health access, health utilisation, and nutrition.
In order to understand it better, the research question can be decomposed into population, intervention and outcome:
| Population | Intervention | Outcome | |------------|--------------|---------| | People living in low or middle income countries and who either receive the intervention or are the comparison group | Conditional or unconditional cash transfers | Health outcomes, health access, health utilisation, and nutrition |
Cash transfer Social transfer Financial transfer Monetary transfer Child grant/ disability grant/ old-age grant/ social grant Social assistance Social pension Non-contributory pension Old age pension Child benefit/ disability benefit/ old-age benefit Basic income/ minimum income UCT/ CCT Income support
Food diversity Dietary diversity Food variety Vitamins Diet Food security/ food insecurity Food intake Nutrition\* Calor\* Nutrition\* supplement + Obesity Health util*ation Health use Number of visits Health access Health service Health centre Hospital Clinic Health care provider Health fee Health payment Prenatal / antenatal/ postnatal care and access Institutional deliver Vaccinations/Immuni* Screening Health Healthiness Sickness Illness Disease Stunting Wasting Weight Birth weight Immun\*ation Child height and weight for age Body mass index WAZ/ WHZ/ HAZ/ BMIZ Maternal mortality Newborn mortality Morbidity HIV prevention HIV/ AIDS incidence
The population has been restricted to people living in low and middle income countries. This includes both beneficiary and control households. The aim of the research question is to analyse the impact of cash transfers on health. The outcome for this sub-question is health outcomes, health access, health utilisation, and nutrition. The table above also includes all synonyms that will be used in the searches. Search strings
The search string will be composed of intervention (part 1), outcome (part 2) and country filter (example below given for SCOPUS filter). In order to capture all possible cash transfers, search strings should include all synonyms listed above. In terms of outcome, we will use health outcomes, health access, health utilisation, and nutrition and synonyms in the search strings. The following search strings and will be used (they have been tested in the pilot phase):
1. TITLE-ABS-KEY ( “Cash transfer\*” OR “social transfer\*” OR “financial transfer\*” OR “monetary transfer\*” OR “child grant\*” OR “disability grant\*” OR “old age grant\*” OR “social grant\*” OR “basic grant\*” OR “minimum income grant\*” OR “social assistance” OR welfare OR “social pension\*” OR “non-contributory pension\*” OR “old age pension\*” OR “child benefit\*” OR “disability benefit\*” OR “old age benefit\*” OR cct OR uct OR “income support” )
2. TITLE-ABS-KEY (“food diversity” OR “dietary diversity” OR “food variety” OR vitamin\* OR diet OR “food security” OR “food insecurity” OR “food intake” OR nutrition\* OR calor\* OR obesity OR “health service\*” OR “health centre\*” OR “health center\*” OR “health care provider” OR “institutional delivery” OR “health access” OR “health utilisation” OR “health utilization” OR “health use” OR hospital\* OR clinic\* OR “health fee\*” OR “health payment\*” OR “prenatal care” OR “post-natal care” OR “ante-natal care” OR vaccinat\* OR immuniz\* OR immunis\* OR health\* OR sickness OR illness OR disease OR stunting OR wasting OR “child weight” OR “child height” OR “height for age” OR “weight for age” OR “body mass index” OR BMI OR “maternal mortality” OR “infant mortality” OR morbidity OR HIV W/4 (prevent\* OR incidence) OR AIDS W/4 incidence OR WAZ OR WHZ OR HAZ OR BMIZ OR screen\* )
3. TITLE-ABS-KEY ( afghanistan OR albania OR algeria OR angola OR argentina OR armenia OR armenian OR aruba OR azerbaijan OR bangladesh OR benin OR byelarus OR byelorussian OR belarus OR belorussian OR belorussia OR belize OR bhutan OR bolivia OR bosnia OR herzegovina OR hercegovina OR botswana OR brasil OR brazil OR bulgaria OR “Burkina Faso” OR “Burkina Fasso” OR “Upper Volta” OR burundi OR urundi OR cambodia OR “Khem Republic” OR kampuchea OR cameroon OR cameroons OR cameran OR “Cape Verde” OR “Central African Republic” OR Chad OR china OR colombia OR comoros OR “Comoro Islands” OR comores OR mayotte OR congo OR zaire OR “Costa Rica” OR “Cote d’Ivoire” OR “Ivory Coast” OR cuba OR djibouti OR “French Somaliland” OR dominica OR “Dominican Republic” OR “East Timor” OR “East Timur” OR “Timor Leste” OR ecuador OR egypt OR “United Arab Republic” OR “El Salvador” OR eritrea OR ethiopia OR fiji OR gabon OR “Gabonese Republic” OR gambia OR gaza OR “Georgia Republic” OR “Georgian Republic” OR ghana OR grenada OR guatemala OR guinea OR guiana OR guyana OR haiti OR hungary OR honduras OR india OR maldives OR indonesia OR iran OR iraq OR jamaica OR jordan OR kazakhstan OR kazakh OR kenya OR kiribati OR korea OR kosovo OR kyrgyzstan OR kirghizia OR “Kyrgyz Republic” OR kirghiz OR kirgistan OR “Lao PDR” OR laos OR lebanon OR lesotho OR basutoland OR liberia OR libya OR macedonia OR madagascar OR “Malagasy Republic” OR malaysia OR malaya OR malay OR sabah OR sarawak OR malawi OR mali OR “Marshall Islands” OR mauritania OR mauritius OR “Agalega Islands” OR mexico OR micronesia OR “Middle East” OR moldova OR moldovia OR moldovian OR mongolia OR montenegro OR morocco OR ifni OR mozambique OR myanmar OR myanma OR burma OR namibia OR nepal OR “Netherlands Antilles” OR “New Caledonia” OR nicaragua OR niger OR nigeria OR pakistan OR palau OR palestine OR panama OR paraguay OR peru OR philippines OR philipines OR philippines OR “Puerto Ric\*” OR romania OR rumania OR roumania OR rwanda OR ruanda OR “Saint Lucia” OR “St Lucia” OR “Saint Vincent” OR “St Vincent” OR grenadines OR samoa OR “Samoa Islands” OR “Navigator Island” OR “Navigator Islands” OR “Sao Tome” OR senegal OR serbia OR montenegro OR seychelles OR “Sierra Leone” OR “Sri Lanka” OR “Solomon Islands” OR somalia OR “South Africa” OR sudan OR suriname OR surinam OR swaziland OR syria OR tajikistan OR tadzhikistan OR tadzikistan OR tadzhik OR tanzania OR thailand OR togo OR togoele republic OR tonga OR tunisia OR turkey OR turkmenistan OR turkmen OR uganda OR ukraine OR uzbek OR vanuatu OR “New Hebrides” OR venezuela OR vietnam OR “Viet Nam” OR “West Bank” OR yemen OR yugoslavia OR zambia OR zimbabwe ) OR TITLE-ABS-KEY (“Developing Countries” OR africa OR asia OR caribbean OR “West Indies” OR “South America” OR “Latin America” OR “Central America” OR developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” OR underserved OR “under served” OR deprived) OR TITLE-ABS-KEY (poor\* W/1 countr\* OR nation\* OR population\* OR world ) OR TITLE-ABS-KEY ((developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” ) W/1 econom\* )) OR TITLE-ABS-KEY (low\* W/1 gdp OR gnp OR “gross domestic” OR “gross national” ) OR TITLE-ABS-KEY (low W/3 middle W/3 countr\* ) OR TITLE-ABS-KEY ( lmic OR lmics OR “third world” OR “lami countr\*” OR “transitional countr\*” )
4. Search strings to run in Scopus: #1 AND #2 AND #3 (limited to 2000 onwards)
Inclusion criteria
Stage 1 Screening:
Inclusion criteria help in deciding whether a study that has been found is relevant. The following inclusion criteria will be applied during the first stage of the screening process (all criteria need to be satisfied for the study to be included). They will be applied to titles, then abstracts, then full text. All studies that are included on the basis of the first stage screening process, will be included in the Stage 2 screening process.
Inclusion criteria help in deciding whether a study that has been found is relevant. The following inclusion criteria should be applied (all criteria need to be satisfied for the study to be included):
1. Date: From 2000
2. Language: The review is restricted to English studies
3. Population: People that have received a cash transfer, or control households
4. Geographical locations: Low and middle income countries
5. Interventions: Conditional or unconditional cash transfers. The programmes should be non-contributory, publicly mandated or NGO-provided (so not private transfers, like remittances, or religious donations).
6. Study design: The study should be a solid empirical study (i.e. based on data and or fieldwork). Only studies that use either an experimental design or a quasi-experimental design that relies on a credible control group should be included. This includes those that demonstrate one of the following: (a) an experimental design (i.e. RCT or cluster-RCT) (b) a quasi-experimental design, including: i. regression discontinuity design ii. matching technique (e.g. propensity score matching) iii. difference-in-difference iv. interrupted time series v. other form of multivariate regression, including Instrumental Variable Technique. [Exclude studies that are theoretical; literature reviews; not descriptive or don’t have an experimental/ quasi-experimental design]
7. Outcome: health outcomes, health access, health utilisation, and nutrition Stage 2 Screening:
In the second round of screening, studies will be assessed against a range of criteria to investigate the risk of bias and reliability of findings. Specifically, studies will be assessed against the issues of selection bias, attrition bias or bias associated with interpretation of statistical significance (Type I or Type II errors). Studies that have a high risk of bias or score low on rigour will not be included in the final analysis.
List of databases used
- SCOPUS (Elsevier). This database includes 5,682 journals, conference proceedings, trade publications and book series in the Social Sciences category.
- Global Health
- POPLINE
- CAB Global Health
- Ideas-Repec
4. Snowball technique
The following four people should be contacted and asked for the five most relevant studies on the research question. We will also look at their websites for relevant publications.
1. Paul Gertler, Berkley
2. Amanda Glassman, Center for Global Development
3. Mylene Lagarde, LSHTM
4. Lucy Bassett, World Bank
Studies shared by experts will be assessed against Stage 1 and Stage 2 screening criteria. We will also check the reference lists of the studies obtained for any further studies that fit the inclusion criteria.
5. Websites searches
The following websites/search engines should be consulted, if possible using the same search strings as for the academic databases. Any studies found on these websites will be assessed against the same Stage 1 and Stage 2 screening criteria.
- Google (the first five pages)
- World Bank
- R4D DFID
- International Policy Centre for Inclusive Growth (IPC-IG)
- International Food Policy Research Institute (IFPRI)
- Poverty Action Research Lab
- FAO From Protection to Production website
- GSDRC
- OPM website
- 3iE website
- UNICEF
- Cochrane review website
- Transfer Project (UNC Chapel Hill)
- OPM website
- 3iE website
- ECLAC/CEPAL
- IADB website
- ADB website
6. Classification of studies
Studies that have passed both screening stages will be classified and described in an annotated bibliography. The classification tables will include the following information:
- authors and year of study
- geographical coverage
- detailed description of intervention and context
- population
- methods, sampling and data
- a summary of the main outcomes of the study Sub-question 1d: What is the effect of cash transfers on investment, savings and production?
1. The review research questions
The systematic literature reviews should assess the state of knowledge on the following question: *What is known about the effect of cash transfers on investment, savings and production?*
2. Methodology
The systematic literature reviews should combine three tracks. These tracks are briefly explained here and further instructions are given below.
1. **Bibliographic database search:** Searching a previously agreed upon list of academic databases, using consistent search strings (see below) that have been tested beforehand and applying inclusion/exclusion criteria.
2. **Snowball technique:** Contacting approximately three key experts in the field and asking them for recommendations for important studies on the research question. This also includes looking at the experts’ websites and publication lists and including relevant studies. Finally, we will be looking for further relevant studies in the bibliographies of the experts’ studies and recommended studies.
3. **Websites searches:** Searching previously agreed on websites (see below) for relevant studies using similar search terms as for the bibliographic databases. This also includes a google search for other grey literature.
Studies will be screened and assessed using the EPPI Reviewer software.
After an initial broad screening process that considers overall study design, as well as other broader inclusion/exclusion criteria, a second round of screening will be conducted and studies will be assessed against a range of criteria to investigate the risk of bias and reliability of findings. Specifically, studies will be assessed against the issues of selection bias, attrition bias or bias associated with interpretation of statistical significance (Type I or Type II errors). Studies that have a high risk of bias or score low on rigour will be not be included in the final analysis.
The relevant studies that make it through both stages of screening will be summarised in an annotated bibliography. The annotated bibliography lists the relevant studies in table format (see below) and briefly summarises each study in terms of relevant information on methodology, intervention and findings. More specifically, the relevant studies will also be summarised and classified in a table summarising the following information: i) publication details, (ii) description of the intervention and context, (iii) methods, data and sampling, (iv) population, v) findings of relevance to the research question including findings of statistically significant and non-significant impacts and disaggregation (e.g. by gender, age and other characteristics), and vi) contextual factors of importance.
A narrative synthesis approach will be applied to synthesise the findings. 3. Bibliographic database search
The research question
The research question is ‘What is known about the effect of cash transfers on investment, savings and production?’ Here we want to know what effects cash transfers have had on investment, assets, savings and production.
In order to understand it better, the research question can be decomposed into population, intervention and outcome:
| Population | Intervention | Outcome | |------------|--------------|---------| | People living in low or middle income countries and who either receive the intervention or are the comparison group | Conditional or unconditional cash transfers | Investment, savings and production |
| Cash transfer | Social transfer | Financial transfer | Monetary transfer | Child grant/ disability grant/ old-age grant/ social grant | Social assistance | Social pension | Non-contributory pension | Old age pension | Child benefit/ disability benefit/ old-age benefit | Basic income/ minimum income | CCT/ UCT | Income support | |---------------|-----------------|-------------------|------------------|----------------------------------------------------------|-----------------|----------------|------------------------|----------------|-----------------------------------------------|-----------------------------|---------|--------------| | Invest\* | Disinvestment | Income generat\* activities | Coping strategy | Productivity | Production | Risk | Yield | Asset | House improvement | Livestock | Smallstock | Housing | Property | Land | Tools | Equipment | Vehicle | Bicycle | Input\* | Fertil*er | Seed | Saving* | Borrow\* | Loan | Debt | Credit | Business / trade | Income-generating activity | Insurance |
The population has been restricted to people living in low and middle income countries. This includes both beneficiary and control households. The aim of the research question is to analyse the impact of cash transfers on the investment, savings and production. The outcome for this sub-question are investment, assets, savings and production. The table above also includes all synonyms that will be used in the searches.
Search strings
The search string will be composed of intervention (part 1), outcome (part 2) and country filter (example below given for SCOPUS filter). In order to capture all possible cash transfers, search strings should include all synonyms listed above. In terms of outcome, we will use investment and savings and synonyms in the search strings. The following search strings and will be used (they have been tested in the pilot phase):
1. TITLE-ABS-KEY ( “Cash transfer\*” OR “social transfer\*” OR “financial transfer\*” OR “monetary transfer\*” OR “child grant\*” OR “disability grant\*” OR “old age grant\*” OR “social grant\*” OR “basic grant\*” OR “minimum income grant\*” OR “social assistance” OR welfare OR “social pension\*” OR “non-contributory pension\*” OR “old age pension\*” OR “child benefit\*” OR “disability benefit\*” OR “old age benefit\*” OR cct OR uct OR “income support”
2. TITLE-ABS-KEY invest\* OR disinvest\* OR “coping strateg\*” OR productivity OR production OR harvest\* OR yield\* OR asset\* OR livestock OR smallstock OR hou\* OR property OR land OR tools OR equipment OR vehicle\* OR bicycle\* OR input\* OR fertilizer\* OR fertiliser\* OR seed\* OR saving\* OR borrow\* OR loan\* OR debt\* OR credit OR business\* OR trade OR insurance OR “income generat\* activit\*” OR “risk”
3. TITLE-ABS-KEY ( afghanistan OR albania OR algeria OR angola OR argentina OR armenia OR armenian OR aruba OR azerbaijan OR bangladesh OR benin OR belarus OR byelorussian OR belarus OR belorussian OR belorussia OR belize OR bhutan OR bolivia OR bosnia OR herzegovina OR hercegovina OR botswana OR brasil OR brazil OR bulgaria OR “Burkina Faso” OR “Burkina Fasso” OR “Upper Volta” OR burundi OR urundi OR cambodia OR “Khmer Republic” OR kampuchea OR cameroon OR cameroons OR cameron OR camorons OR “Cape Verde” OR “Central African Republic” OR chad OR china OR colombia OR comoros OR “Comoro Islands” OR comores OR mayotte OR congo OR zaire OR “Costa Rica\*” OR “Cote d’Ivoire” OR “Ivory Coast” OR cuba OR djibouti OR “French Somalliland” OR dominica OR “Dominican Republic” OR “East Timor” OR “East Timur” OR “Timor Leste” OR ecuador OR egypt OR “United Arab Republic” OR “El Salvador” OR eritrea OR ethiopia OR fiji OR gabon OR “Gabonese Republic” OR gambia OR gaza OR “Georgia Republic” OR “Georgian Republic” OR ghana OR grenada OR guatemala OR guinea OR guiana OR guyana OR haiti OR hungary OR honduras OR india OR maldives OR indonesia OR iran OR iraq OR jamaica OR jordan OR kazakhstan OR kazakh OR keny OR kiribati OR korea OR kosovo OR kyrgyzstan OR kirghizia OR “Kyrgyz Republic” OR kirghiz OR kirgizstan OR “Lao PDR” OR laos OR lebanon OR lesotho OR basutoland OR liberia OR libya OR macedonia OR madagascar OR “Malagasy Republic” OR malaysia OR malaya OR malay OR sabah OR sarawak OR malawi OR mali OR “Marshall Islands” OR mauritania OR mauritius OR “Agalega Islands” OR mexico OR micronesia OR “Middle East” OR moldova OR moldavia OR moldovan OR mongolia OR montenegro OR morocco OR ifni OR mozambique OR myanmar OR myanmar OR burma OR namibia OR nepal OR “Netherlands Antilles” OR “New Caledonia” OR nicaragua OR niger OR nigeria OR pakistan OR palau OR palestine OR panama OR paraguay OR peru OR philippines OR philippines OR philippines OR “Puerto Ric\*” OR romania OR rumania OR roumania OR rwanda OR ruanda OR “Saint Lucia” OR “St Lucia” OR “Saint Vincent” OR “St Vincent” OR grenadines OR samoan OR “Samoan Islands” OR “Navigator Island” OR “Navigator Islands” OR “Sao Tome” OR senegal OR serbia OR montenegro OR seychelles OR “Sierra Leone” OR “Sri Lanka” OR “Solomon Islands” OR somalia OR “South Africa” OR sudan OR suriname OR surinam OR swaziland OR syria OR tajikistan OR tajikistan OR tadjikistan OR tadjik OR tanzania OR thailand OR togo OR togoles republic OR tonga OR tunisia OR turkey OR turkmenistan OR turkmen OR uganda OR ukraine OR uzbekistan OR uzbek OR vanuatu OR “New Hebrides” OR venezuela OR vietnam OR “Viet Nam” OR “West Bank” OR yemen OR yugoslavia OR zambia OR zimbabwe ) OR TITLE-ABS-KEY ( “Developing Countries” OR africa OR asia OR caribbean OR “West Indies” OR “South America” OR “Latin America” OR “Central America” OR developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” OR underserved OR “under served” OR deprived ) OR TITLE-ABS-KEY ( poor\* W/1 countr\* OR nation\* OR population\* OR world ) OR TITLE-ABS-KEY ( developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” ) W/1 econom\* ) OR TITLE-ABS-KEY ( low\* W/1 gdp OR gnp OR “gross domestic” OR “gross national” ) OR TITLE-ABS-KEY ( low\* W/3 middle W/3 countr\* ) OR TITLE-ABS-KEY ( lmic OR lmics OR “third world” OR “lami countr\*” OR “transitional countr\*” )
4. Search strings to run in Scopus: #1 AND #2 AND #3 (limited to 2000 onwards) Inclusion criteria
Stage 1 Screening:
Inclusion criteria help in deciding whether a study that has been found is relevant. The following inclusion criteria will be applied during the first stage of the screening process (all criteria need to be satisfied for the study to be included). They will be applied to titles, then abstracts, then full text. All studies that are included on the basis of the first stage screening process, will be included in the Stage 2 screening process.
1. Date: From 2000
2. Language: The review is restricted to English studies
3. Population: People that have received a cash transfer, or control households
4. Geographical locations: Low and middle income countries
5. Interventions: Conditional or unconditional cash transfers. The programmes should be non-contributory, publicly mandated or NGO-provided (so not private transfers, like remittances, or religious donations).
6. Study design: The study should be a solid empirical study (i.e. based on data and or fieldwork). Only studies that use either an experimental design or a quasi-experimental design that relies on a credible control group should be included. This includes those that demonstrate one of the following: (a) an experimental design (i.e. RCT or cluster-RCT) (b) a quasi-experimental design, including: i. regression discontinuity design ii. matching technique (e.g. propensity score matching) iii. difference-in-difference iv. interrupted time series v. other form of multivariate regression, including Instrumental Variable Technique. [Exclude studies that are theoretical; literature reviews; not descriptive or don’t have an experimental/ quasi-experimental design]
7. Outcome: Investment, assets and savings
Stage 2 Screening:
In the second round of screening, studies will be will be assessed against a range of criteria to investigate the risk of bias and reliability of findings. Specifically, studies will be assessed against the issues of selection bias, attrition bias or bias associated with interpretation of statistical significance (Type I or Type II errors). Studies that have a high risk of bias or score low on rigour will be not be included in the final analysis.
List of databases used
- SCOPUS (Elsevier). This database includes 5,682 journals, conference proceedings, trade publications and book series in the Social Sciences category.
- AGRIS: Agricultural database
- AgEcon database
- CAB Abstracts
- IDEAS-Repec
4. Snowball technique
The following three people should be contacted and asked for the five most relevant studies on the research question. We will also look at their websites for relevant publications.
1. Benjamin Davis, FAO
2. Michelle Adato, IFPRI
3. Rachel Slater, ODI
Studies shared by experts will be assessed against Stage 1 and Stage 2 screening criteria. We will also check the reference lists of the studies obtained for any further studies that fit the inclusion criteria.
5. Websites searches
The following websites/search engines should be consulted, if possible using the same search strings as for the academic databases. Any studies found on these websites will be assessed against the same Stage 1 and Stage 2 screening criteria.
- Google (the first five pages)
- World Bank
- R4D DFID
- International Policy Centre for Inclusive Growth (IPC-IG)
- International Food Policy Research Institute (IFPRI)
- Poverty Action Research Lab
- FAO From Protection to Production website
- GSDRC
- OPM website
- 3iE website
- Transfer Project (UNC Chapel Hill)
- GSDRC
- OPM website
- ECLAC/CEPAL
- IADB website
- ADB website
- IDS website
- BLDS website
- Social Science Research Network
6. Classification of studies
Studies that have passed both screening stages will be classified and described in an annotated bibliography. The classification tables will include the following information:
- authors and year of study
- geographical coverage
- detailed description of intervention and context
- population
- methods, sampling and data
- a summary of the main outcomes of the study Sub-question 1e: What is the effect of cash transfers on employment and the labour market?
1. The review research questions
The systematic literature reviews should assess the state of knowledge on the following question: *What is known about the effect of cash transfers on employment and the labour market?*
2. Methodology
The systematic literature reviews should combine three tracks. These tracks are briefly explained here and further instructions are given below.
1. **Bibliographic database search:** Searching a previously agreed upon list of academic databases, using consistent search strings (see below) that have been tested beforehand and applying inclusion/exclusion criteria.
2. **Snowball technique:** Contacting approximately three key experts in the field and asking them for recommendations for important studies on the research question. This also includes looking at the experts’ websites and publication lists and including relevant studies. Finally, we will be looking for further relevant studies in the bibliographies of the experts’ studies and recommended studies.
3. **Websites searches:** Searching previously agreed on websites (see below) for relevant studies using similar search terms as for the bibliographic databases. This also includes a google search for other grey literature.
Studies will be screened and assessed using the EPPI Reviewer software.
After an initial broad screening process that considers overall study design, as well as other broader inclusion/exclusion criteria, a second round of screening will be conducted and studies will be assessed against a range of criteria to investigate the risk of bias and reliability of findings. Specifically, studies will be assessed against the issues of selection bias, attrition bias or bias associated with interpretation of statistical significance (Type I or Type II errors). Studies that have a high risk of bias or score low on rigour will be not be included in the final analysis.
The relevant studies that make it through both stages of screening will be summarised in an annotated bibliography. The annotated bibliography lists the relevant studies in table format (see below) and briefly summarises each study in terms of relevant information on methodology, intervention and findings. More specifically, the relevant studies will also be summarised and classified in a table summarising the following information: i) publication details, (ii) description of the intervention and context, (iii) methods, data and sampling, (iv) population, v) findings of relevance to the research question including findings of statistically significant and non-significant impacts and disaggregation (e.g. by gender, age and other characteristics), and vi) contextual factors of importance.
A narrative synthesis approach will be applied to synthesise the findings. 3. Bibliographic database search
The research question
The research question is ‘What is known about the effects of cash transfers on employment?’ Here we want to know the effect of cash transfers on labour supply.
In order to understand it better, the research question can be decomposed into population, intervention and outcome:
| Population | Intervention | Outcome | |------------|--------------|---------| | People living in low or middle income countries and who either receive the intervention or are the comparison group | Conditional or unconditional cash transfers | Employment |
| Cash transfer | Social transfer | Financial transfer | Monetary transfer | Child grant/ disability grant/ old-age grant/ social grant | Social assistance | Social pension | Non-contributory pension | Old age pension | Child benefit/ disability benefit/ old-age benefit | Basic income/ minimum income | UCT/ CCT | Income support | |---------------|----------------|-------------------|------------------|----------------------------------------------------------|-----------------|----------------|------------------------|----------------|------------------------------------------------|-----------------------------|----------|---------------| | Employment | Labo\* supply | Labo\* demand | Hiring | Job\* | Work | workforce | Labo\* market | Labo\* participation | Labo\* allocation | Number of hours worked | Informal\* | Formalisation | Migration | | | | | | | | | | | | | | | Time allocation | | | | | | | | | | | | | | | Child care | | | | | | | | | | | | | | | Child labo\* | | | | | | | | | | | | | | | Wage | | | | | | | | | | | | | | | Income | | | | | | | | | | | | | | | Salary | | | | | | | | | | | | | | | Earning | | | | | | | | | | | | | | | Diversification of income sources | | | | | | | | | | | | | | | Retirement | | | | | | | | | | | | | | | Pension age |
The population has been restricted to people living in low and middle income countries. This includes both beneficiary and control households. The aim of the research question is to analyse the impact of cash transfers on employment. The outcome for this sub-question is employment. The table above also includes all synonyms that will be used in the searches.
Search strings
The search string will be composed of intervention (part 1), outcome (part 2) and country filter (example below given for SCOPUS filter). In order to capture all possible cash transfers, search strings should include all synonyms listed above. In terms of outcome, we will use employment and synonyms in the search strings. The following search strings will be used (they have been tested in the pilot phase):
1. TITLE-ABS-KEY ( “Cash transfer\*” OR “social transfer\*” OR “financial transfer\*” OR “monetary transfer\*” OR “child grant\*” OR “disability grant\*” OR “old age grant\*” OR “social grant\*” OR “basic grant\*” OR “minimum income grant\*” OR “social assistance” OR welfare OR “social pension\*” OR “non-contributory pension\*” OR “old age pension\*” OR “child benefit\*” OR “disability benefit\*” OR “old age benefit\*” OR cct OR uct OR “income support” )
2. TITLE-ABS-KEY employ\* OR labour W/1 (supply OR demand OR participation OR allocation) OR labor W/1 (supply OR demand OR participation OR allocation) OR hiring OR hire\* OR job\* OR work OR workforce OR “labour market” OR “labor market” OR “hours worked” OR “working hours” OR informal\* OR formalisation OR formalization OR migrat\* OR migrant\* OR time W/1 allocation OR “child care” OR “child labour” OR “child labor” OR wage\* OR income OR salar\* OR earn\* OR diversif\* OR retire\* OR “pension age”
3. TITLE-ABS-KEY ( afghanistan OR albania OR algeria OR angola OR argentina OR armenia OR armenian OR aruba OR azerbaijan OR bangladesh OR benin OR byelarus OR byelorussian OR belarus OR belorussian OR belorussia OR belize OR bhutan OR bolivia OR bosnia OR herzegovina OR hercegovina OR botswana OR brasil OR brazil OR bulgaria OR “Burkina Faso” OR “Burkina Fasso” OR “Upper Volta” OR burundi OR urundi OR cambodia OR “Khmer Republic” OR kampuchea OR cameroon OR cameroons OR cameron OR camorons OR “Cape Verde” OR “Central African Republic” OR chad OR china OR colombia OR comoros OR “Comoro Islands” OR comores OR mayotte OR congo OR zaire OR “Costa Rica” OR “Cote d’Ivoire” OR “Ivory Coast” OR cuba OR djibouti OR “French Somaliland” OR dominica OR “Dominican Republic” OR “East Timor” OR “East Timur” OR “Timor Leste” OR ecuador OR egypt OR “United Arab Republic” OR “El Salvador” OR eritrea OR ethiopia OR fiji OR gabon OR “Gabonese Republic” OR gambia OR “Georgia Republic” OR “Georgian Republic” OR ghana OR grenada OR guatemala OR guinea OR guiana OR guyana OR haiti OR hungary OR honduras OR india OR maldives OR indonesia OR iran OR iraq OR jamaica OR jordan OR kazakhstan OR kazakh OR keny OR kiribati OR korea OR kosovo OR krygyzstan OR kirghizia OR “Kyrrgyz Republic” OR kirghiz OR kirgizstan OR “Lao PDR” OR laos OR lebanon OR lesotho OR hasutoland OR libera OR libya OR macedonia OR madagascar OR “Malagasy Republic” OR malaysia OR malaya OR malay OR sabah OR sarawak OR malawi OR mali OR “Marshall Islands” OR mauritania OR mauritius OR “Agalega Islands” OR mexico OR micronesia OR “Middle East” OR moldova OR moldovia OR mongolia OR montenegro OR morocco OR ifni OR mozambique OR myanmar OR myanmar OR burma OR namibia OR nepal OR “Netherlands Antilles” OR “New Caledonia” OR nicaragua OR niger OR nigeria OR pakistan OR palau OR palestine OR panama OR paraguay OR peru OR philippines OR philippines OR philippines OR “Puerto Ric\*” OR romania OR rumania OR roumania OR rwanda OR ruanda OR “Saint Lucia” OR “St Lucia” OR “Saint Vincent” OR “St Vincent” OR grenadines OR samoa OR “Samoa Islands” OR “Navigator Island” OR “Navigator Islands” OR “Sao Tome” OR senegal OR serbia OR montenegro OR seychelles OR “Sierra Leone” OR “Sri Lanka” OR “Solomon Islands” OR somalia OR “South Africa” OR sudan OR suriname OR surinam OR swaziland OR syria OR tajikistan OR tadzhikistan OR tadzikistan OR tadzhik OR tanzania OR thailand OR togo OR togoles republic OR tonga OR tunisia OR turkey OR turkmenistan OR turkmen OR uganda OR ukraine OR uzbekistan OR uzbek OR vanuatu OR “New Hebrides” OR venezuela OR vietnam OR “Viet Nam” OR “West Bank” OR yemen OR yugoslavia OR zambia OR zimbabwe ) OR TITLE-ABS-KEY ( “Developing Countries” OR africa OR asia OR caribbean OR “West Indies” OR “South America” OR “Latin America” OR “Central America” OR developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” OR underserved OR “under served” OR deprived ) OR TITLE-ABS-KEY ( poor\* W/1 countr\* OR nation\* OR population\* OR world ) OR TITLE-ABS-KEY ( developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” ) W/1 econom\* ) OR TITLE-ABS-KEY ( low\* W/1 gdp OR gnp OR “gross domestic” OR “gross national” ) OR TITLE-ABS-KEY ( low W/3 middle W/3 countr\* ) OR TITLE-ABS-KEY ( lmic OR lmics OR “third world” OR “lami countr\*” OR “transitional countr\*” )
4. Search strings to run in Scopus: #1 AND #2 AND #3 (limited to 2000 onwards) Inclusion criteria
Stage 1 Screening:
Inclusion criteria help in deciding whether a study that has been found is relevant. The following inclusion criteria will be applied during the first stage of the screening process (all criteria need to be satisfied for the study to be included). They will be applied to titles, then abstracts, then full text. All studies that are included on the basis of the first stage screening process, will be included in the Stage 2 screening process.
1. Date: From 2000
2. Language: The review is restricted to English studies
3. Population: People that have received a cash transfer, or control households
4. Geographical locations: Low and middle income countries
5. Interventions: Conditional or unconditional cash transfers. The programmes should be non-contributory, publicly mandated or NGO-provided (so not private transfers, like remittances, or religious donations).
6. Study design: The study should be a solid empirical study (i.e. based on data and or fieldwork). Only studies that use either an experimental design or a quasi-experimental design that relies on a credible control group should be included. This includes those that demonstrate one of the following: (a) an experimental design (i.e. RCT or cluster-RCT) (b) a quasi-experimental design, including: i. regression discontinuity design ii. matching technique (e.g. propensity score matching) iii. difference-in-difference iv. interrupted time series v. other form of multivariate regression, including Instrumental Variable Technique.
[Exclude studies that are theoretical; literature reviews; not descriptive or don’t have an experimental/ quasi-experimental design] 7. Outcome: Employment/ labour supply
Stage 2 Screening:
In the second round of screening, studies will be will be assessed against a range of criteria to investigate the risk of bias and reliability of findings. Specifically, studies will be assessed against the issues of selection bias, attrition bias or bias associated with interpretation of statistical significance (Type I or Type II errors). Studies that have a high risk of bias or score low on rigour will be not be included in the final analysis.
List of databases used
- SCOPUS (Elsevier). This database includes 5,682 journals, conference proceedings, trade publications and book series in the Social Sciences category.
- Econlit
- ILO Labordoc
- IDEAS-Repec
4. Snowball technique
The following five people should be contacted and asked for the five most relevant studies on the research question. We will also look at their websites for relevant publications.
1. Francesca Bastagli, ODI
2. Anna McCord, ODI
3. Fabio Veras Soares, IPC
4. Benjamin Davis, FAO
5. Christina Behrendt, ILO
Studies shared by experts will be assessed against Stage 1 and Stage 2 screening criteria. We will also check the reference lists of the studies obtained for any further studies that fit the inclusion criteria.
5. Websites searches
The following websites/search engines should be consulted, if possible using the same search strings as for the academic databases. Any studies found on these websites will be assessed against the same Stage 1 and Stage 2 screening criteria.
- Google (the first five pages)
- World Bank
- R4D DFID
- International Policy Centre for Inclusive Growth (IPC-IG)
- International Food Policy Research Institute (IFPRI)
- Poverty Action Research Lab
- FAO From Protection to Production website
- GSDRC
- OPM website
- 3iE website
- ILO website
- FAO From Protection to Production website
- Transfer Project (UNC Chapel Hill)
- ECLAC/CEPAL
- IADB website
- ADB website
- IDS website
- BLDS website
- Social Science Research Network
6. Classification of studies
Studies that have passed both screening stages will be classified and described in an annotated bibliography. The classification tables will include the following information:
- authors and year of study
- geographical coverage
- detailed description of intervention and context
- population
- methods, sampling and data
- a summary of the main outcomes of the study Sub-question 1f: What is the effect of cash transfers on empowerment?
1. The review research questions
The systematic literature reviews should assess the state of knowledge on the following question: *What is known about the effect of cash transfers on social empowerment, political empowerment and psycho-social wellbeing?*
2. Methodology
The systematic literature reviews should combine three tracks. These tracks are briefly explained here and further instructions are given below.
1. **Bibliographic database search:** Searching a previously agreed upon list of academic databases, using consistent search strings (see below) that have been tested beforehand and applying inclusion/exclusion criteria.
2. **Snowball technique:** Contacting approximately four key experts in the field and asking them for recommendations for important studies on the research question. This also includes looking at the experts’ websites and publication lists and including relevant studies. Finally, we will be looking for further relevant studies in the bibliographies of the experts’ studies and recommended studies.
3. **Websites searches:** Searching previously agreed on websites (see below) for relevant studies using similar search terms as for the bibliographic databases. This also includes a google search for other grey literature.
Studies will be screened and assessed using the EPPI Reviewer software. After an initial broad screening process that considers overall study design, as well as other broader inclusion/exclusion criteria, a second round of screening will be conducted and studies will be assessed against a range of criteria to investigate the risk of bias and reliability of findings. Specifically, studies will be assessed against the issues of selection bias, attrition bias or bias associated with interpretation of statistical significance (Type I or Type II errors). Studies that have a high risk of bias or score low on rigour will be not be included in the final analysis.
The relevant studies that make it through both stages of screening will be summarised in an annotated bibliography. The annotated bibliography lists the relevant studies in table format (see below) and briefly summarises each study in terms of relevant information on methodology, intervention and findings. More specifically, the relevant studies will also be summarised and classified in a table summarising the following information: i) publication details, (ii) description of the intervention and context, (iii) methods, data and sampling, (iv) population, v) findings of relevance to the research question including findings of statistically significant and non-significant impacts and disaggregation (e.g. by gender, age and other characteristics), and vi) contextual factors of importance.
A narrative synthesis approach will be applied to synthesise the findings. 3. Bibliographic database search
The research question
The research question is ‘What is known about the effect of cash transfers on empowerment?’ Here we want to know about the effects on social empowerment, political empowerment and psycho-social wellbeing.
In order to understand it better, the research question can be decomposed into population, intervention and outcome:
| Population | Intervention | Outcome | |------------|--------------|---------| | People living in low or middle income countries and who either receive the intervention or are the comparison group | Conditional or unconditional cash transfers | Social empowerment, political empowerment and psycho-social wellbeing | | Cash transfer | Empowerment | | Social transfer | Decision making | | Financial transfer | Voice | | Monetary transfer | Confidence | | Child grant/ disability grant/ old-age grant/ social grant | Violence | | Social assistance | Choice | | Social pension | Control | | Non-contributory pension | Power | | Old age pension | Political participation | | Child benefit/ disability benefit/ old-age benefit | Community meeting | | Basic income/ minimum income | Social audit | | UCT/ CCT | Participatory monitoring | | Income support | Community Score Card | | | Gender relations | | | Relationship\* | | | Dynamics | | | Social inclusion | | | Social exclusion | | | Mobility | | | Discrimination | | | Pride | | | Dignity | | | Social capital | | | Social network\* | | | Social participation | | | Stigma | | | Acceptance | | | Respect | | | Self-esteem | | | Reciprocity | | | Informal transfer | | | Child / early/ forced marriage | | | Sexual debut | | | Eating order |
The population has been restricted to people living in low and middle income countries. This includes both beneficiary and control households. The aim of the research question is to analyse the impact of cash transfers on empowerment. The outcome for this sub-question are economic empowerment, social empowerment, political empowerment and social relations. The table above also includes all synonyms that will be used in the searches.
Search strings
The search string will be composed of intervention (part 1), outcome (part 2) and country filter (example below given for SCOPUS filter). In order to capture all possible cash transfers, search strings should include all synonyms listed above. In terms of outcome, we will use economic empowerment, social empowerment, political empowerment and social relations and synonyms in the search strings. The following search strings and will be used (they have been tested in the pilot phase): Cash transfers: what does the evidence say?
1. TITLE-ABS-KEY ( “Cash transfer\*” OR “social transfer\*” OR “financial transfer\*” OR “monetary transfer\*” OR “child grant\*” OR “disability grant\*” OR “old age grant\*” OR “social grant\*” OR “basic grant\*” OR “minimum income grant\*” OR “social assistance” OR welfare OR “social pension\*” OR “non-contributory pension\*” OR “old age pension\*” OR “child benefit\*” OR “disability benefit\*” OR “old age benefit\*” OR cct OR uct OR “income support” )
2. TITLE-ABS-KEY (empower\* OR “decision making” OR confiden\* OR violen\* OR power\* OR voice\* OR choice\* OR control OR “political participation” OR “community participation” OR “social audit\*” OR “participatory monitoring” OR “community score card\*” OR relation\* OR dynamic\* OR “social inclusion” OR “social exclusion” OR discrimination OR pride OR dignity OR “social capital” OR stigma OR “social network\*” OR “social relation\*” OR “social inclusion” OR “social exclusion” OR discrimination OR “social audit\*” OR “participatory monitoring” OR “community score card\*” OR voice\* OR choice\* OR control OR “political participation” OR “community meeting\*” OR “child marriage\*” OR “early marriage\*” OR “forced marriage\*” OR “sexual debut” OR mobility OR “eating order”)
3. TITLE-ABS-KEY ( afghanistan OR albania OR algeria OR angola OR argentina OR armenia OR armenian OR aruba OR azerbaijan OR bangladesh OR benin OR byelarus OR byelorussian OR belarus OR belorussian OR belize OR bhutan OR bolivia OR bosnia OR herzegovina OR hercegovina OR botswana OR brasil OR brazil OR bulgaria OR “Burkina Faso” OR “Burkina Fasso” OR “Upper Volta” OR burundi OR urundi OR cambodia OR “Khmer Republic” OR kampuchea OR cameroon OR cameroons OR cameron OR camoros OR “Comoro Islands” OR comores OR mayotte OR congo OR zaire OR “Costa Rica” OR “Cote d’Ivoire” OR “Ivory Coast” OR cuba OR djibouti OR “French Somaliland” OR dominica OR “Dominican Republic” OR “East Timor” OR “East Timur” OR “Timor Leste” OR ecuador OR egypt OR “United Arab Republic” OR “El Salvador” OR eritrea OR ethiopia OR fiji OR gabon OR “Gabonese Republic” OR gambia OR gaza OR “Georgia Republic” OR “Georgian Republic” OR ghana OR grenada OR guatemala OR guinea OR guiana OR guyana OR haiti OR hungary OR honduras OR india OR maldives OR indonesia OR iran OR iraq OR jamaica OR jordan OR kazakhstan OR kazakh OR kenya OR kiribati OR korea OR kosovo OR krygyzstan OR kirghizia OR “Kyrgyz Republic” OR kirghiz OR kirgizstan OR “Lao PDR” OR laos OR lebanon OR lesotho OR basutoland OR libera OR libya OR macedonia OR madagascar OR “Malagasy Republic” OR malaysia OR malay OR sahara OR sarawak OR malawi OR mali OR “Marshall Islands” OR mauritania OR mauritius OR “Agalega Islands” OR mexico OR micronesia OR “Middle East” OR moldova OR moldova OR moldovian OR mongolia OR montenegro OR morocco OR ifni OR mozambique OR myanmar OR myanmar OR burma OR namibia OR nepal OR “Netherlands Antilles” OR “New Caledonia” OR nicaragua OR niger OR nigeria OR pakistan OR palau OR palestine OR panama OR paraguay OR peru OR philippines OR philippines OR philippines OR philippines OR “Puerto Ric\*” OR romania OR rumania OR roumania OR rwanda OR ruanda OR “Saint Lucia” OR “St Lucia” OR “Saint Vincent” OR “St Vincent” OR grenadines OR samoan OR “Samoa Islands” OR “Nauru Island” OR “Nauru Islands” OR “Sao Tome” OR “Senegal” OR serbia OR montenegro OR seychelles OR “Sierra Leone” OR “Sri Lanka” OR “Solomon Islands” OR somalia OR “South Africa” OR sudan OR suriname OR surinam OR swaziland OR syria OR tajikistan OR tajikistan OR tadjikistan OR tadjik OR tanzania OR thailand OR togo OR togoles republic OR tonga OR tunisia OR turkey OR turkmenistan OR turkmen OR uganda OR ukraine OR uzbekistan OR uzbek OR vanuatu OR “New Hebrides” OR venezuela OR vietnam OR “Viet Nam” OR “West Bank” OR yemen OR yugoslavia OR zambia OR zimbabwe ) OR TITLE-ABS-KEY ( “Developing Countries” OR africa OR asia OR caribbean OR “West Indies” OR “South America” OR “Latin America” OR “Central America” OR developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” OR underserved OR “under served” OR deprived ) OR TITLE-ABS-KEY ( poor\* W/1 countr\* OR nation\* OR population\* OR world ) OR TITLE-ABS-KEY ( developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” ) W/1 econom\* ) OR TITLE-ABS-KEY ( low\* W/1 gdp OR gnp OR “gross domestic” OR “gross national” ) OR TITLE-ABS-KEY (low W/3 middle W/3 countr\* ) OR TITLE-ABS-KEY ( lmic OR lmics OR “third world” OR “lami countr\*” OR “transitional countr\*” )
4. Search strings to run in Scopus: #1 AND #2 AND #3 (limited to 2000 onwards)
**Inclusion criteria**
**Stage 1 Screening:**
Inclusion criteria help in deciding whether a study that has been found is relevant. The following inclusion criteria will be applied during the first stage of the screening process (all criteria need to be satisfied for the study to be included). They will be applied to titles, then abstracts, then full text. All studies that are included on the basis of the first stage screening process, will be included in the Stage 2 screening process.
1. **Date:** From 2000
2. **Language:** The review is restricted to English studies
3. **Population:** People that have received a cash transfer, or control households
4. **Geographical locations:** Low and middle income countries
5. **Interventions:** Conditional or unconditional cash transfers. The programmes should be non-contributory, publicly mandated or NGO-provided (so not private transfers, like remittances, or religious donations).
6. **Study design:** The study should be a solid empirical study (i.e. based on data and or fieldwork). Only studies that use either an experimental design or a quasi-experimental design that relies on a credible control group should be included. This includes those that demonstrate one of the following: (a) an experimental design (i.e. RCT or cluster-RCT) (b) a quasi-experimental design, including: i. regression discontinuity design ii. matching technique (e.g. propensity score matching) iii. difference-in-difference iv. interrupted time series v. other form of multivariate regression, including Instrumental Variable Technique.
[Exclude studies that are theoretical; literature reviews; not descriptive or don’t have an experimental/ quasi-experimental design]
7. **Outcome:** Social empowerment; economic empowerment; psycho-social wellbeing
**Stage 2 Screening:**
In the second round of screening, studies will be assessed against a range of criteria to investigate the risk of bias and reliability of findings. Specifically, studies will be assessed against the issues of selection bias, attrition bias or bias associated with interpretation of statistical significance (Type I or Type II errors). Studies that have a high risk of bias or score low on rigour will be not be included in the final analysis.
**List of databases used**
- SCOPUS (Elsevier). This database includes 5,682 journals, conference proceedings, trade publications and book series in the Social Sciences category.
- IDEAS-Repec
4. Snowball technique
The following four people should be contacted and asked for the five most relevant studies on the research question. We will also look at their websites for relevant publications.
1. Maxime Molyneux, UCL
2. Nicola Jones, ODI
3. Babken Babajanian, LSE
4. Christina Behrendt, ILO
Studies shared by experts will be assessed against Stage 1 and Stage 2 screening criteria. We will also check the reference lists of the studies obtained for any further studies that fit the inclusion criteria.
5. Websites searches
The following websites/search engines should be consulted, if possible using the same search strings as for the academic databases. Any studies found on these websites will be assessed against the same Stage 1 and Stage 2 screening criteria.
- Google (the first five pages)
- World Bank
- R4D DFID
- International Policy Centre for Inclusive Growth (IPC-IG)
- International Food Policy Research Institute (IFPRI)
- Poverty Action Research Lab
- FAO From Protection to Production website
- GSDRC
- OPM website
- 3iE website
- FAO From Protection to Production website
- Transfer Project (UNC Chapel Hill)
- ECLAC/CEPAL
- IADB website
- ADB website
- IDS website
- BLDS website
- Social Science Research Network
6. Classification of studies
Studies that have passed both screening stages will be classified and described in an annotated bibliography. The classification tables will include the following information:
- authors and year of study
- geographical coverage
- detailed description of intervention and context
- population
- methods, sampling and data
- a summary of the main outcomes of the study Sub-question 2a: What is the effect of core cash transfer design parameters on programme outcomes?
1. The review research questions
The systematic literature reviews should assess the state of knowledge on the following question: *What is known about the effect of core cash transfer design parameters on programme outcomes?*
2. Methodology
The systematic literature reviews should combine three tracks. These tracks are briefly explained here and further instructions are given below.
1. **Bibliographic database search:** Searching a previously agreed upon list of academic databases, using consistent search strings (see below) that have been tested beforehand and applying inclusion/exclusion criteria.
2. **Snowball technique:** Contacting approximately three key experts in the field and asking them for recommendations for important studies on the research question. This also includes looking at the experts’ websites and publication lists and including relevant studies. Finally, we will be looking for further relevant studies in the bibliographies of the experts’ studies and recommended studies.
3. **Websites searches:** Searching previously agreed on websites (see below) for relevant studies using similar search terms as for the bibliographic databases. This also includes a google search for other grey literature.
Studies will be screened and assessed using the EPPI Reviewer software. After an initial broad screening process that considers overall study design, as well as other broader inclusion/exclusion criteria, a second round of screening will be conducted. The second stage assessment will depend on the type of study. In the case of impact evaluation studies, the same assessment tool used for those studies retrieved in research question one will be applied. In the case of qualitative and descriptive studies and institutional analysis, an assessment of methodological rigour based on the literature around evaluating qualitative studies will be applied.
The relevant studies that make it through both stages of screening will be summarised in an annotated bibliography. The annotated bibliography lists the relevant studies in table format (see below) and briefly summarises each study in terms of relevant information on methodology, intervention and findings. More specifically, the relevant studies will also be summarised and classified in a table summarising the following information: i) publication details, (ii) description of the intervention and context, (iii) methods, data and sampling, (iv) population, v) findings of relevance to the research question including findings of statistically significant and non-significant impacts and disaggregation (e.g. by gender, age and other characteristics), and vi) contextual factors of importance.
A narrative synthesis approach will be applied to synthesise the findings. 3. Bibliographic database search
The research question
The research question is ‘What is known about the effect of core cash transfer design parameters on programme outcomes?’ Here we want to know whether transfer amount, transfer duration, transfer frequency, and transfer recipient mediates programme impacts.
In order to understand it better, the research question can be decomposed into population, intervention and design/implementation factor:
| Population | Intervention | Design/ implementation factor | |------------|--------------|-------------------------------| | People living in low or middle income countries and who either receive the intervention or are the comparison group | Conditional or unconditional cash transfers | Core cash transfer design parameters | | | Cash transfer | Transfer level / Transfer amount / Transfer size | | | Social transfer | Payment size / payment level / payment amount | | | Financial transfer | Maximum duration | | | Monetary transfer | Time limit | | | Child grant/ disability grant/ old-age grant/ social grant | Eligibility | | | Social assistance | Payment frequency | | | Social pension | Recipient | | | Non-contributory pension | Beneficiary | | | Old age pension | Target group | | | Child benefit/ disability benefit/ old-age benefit | Graduation | | | Basic income/ minimum income | | | | UCT/ CCT | | | | Income support | |
The population has been restricted to people living in low and middle income countries. This includes both beneficiary and control households. The aim of the research question is to analyse the effect of cash transfer design on programme outcomes. The design/implementation factors for this sub-question are transfer amount, transfer duration, transfer frequency, and transfer recipient. The table above also includes all synonyms that will be used in the searches.
Search strings
The search string will be composed of intervention (part 1), design and implementation factor (part 2) and country filter (example below given for SCOPUS filter). In order to capture all possible cash transfers, search strings should include all synonyms listed above. In terms of design/implementation factors, we will use transfer amount, transfer duration, transfer frequency, and transfer recipient in the search strings. The following search strings and will be used (they have been tested in the pilot phase):
1. TITLE-ABS-KEY ( “Cash transfer\*” OR “social transfer\*” OR “financial transfer\*” OR “monetary transfer\*” OR “child grant\*” OR “disability grant\*” OR “old age grant\*” OR “social grant\*” OR “basic grant\*” OR “minimum income grant\*” OR “social assistance” OR “welfare” OR “social pension\*” OR “non-contributory pension\*” OR “old age pension\*” OR “child benefit\*” OR “disability benefit\*” OR “old age benefit\*” OR “cct” OR “uct” OR “income support” )
2. TITLE-ABS-KEY ( transfer\* W/1 (level\* OR amount\* OR size OR frequency\*) payment\* W/1 level\* OR amount\* OR size OR frequency\*) OR “maximum duration” OR “time limit\*” OR “eligibility” OR “graduation” OR “recipient\*” OR “beneficiary\*” OR “target group\*”)
3. TITLE-ABS-KEY ( afghanistan OR albania OR algeria OR angola OR argentina OR armenia OR armenian OR aruba OR azerbaijan OR bangladesh OR benin OR byelarus OR byelorussian OR belarus OR belorussian OR belorussia OR belize OR bhutan OR bolivia OR bosnia OR herzegovina OR hercegovina OR botswana OR brasil OR brazil OR bulgaria OR “Burkina Faso” OR “Burkina Fasso” OR “Upper Volta” OR “burundi” OR urundi OR cambodia OR “Khmer Republic” OR kampuchea OR cameroon OR... cameroons OR cameron OR cameros OR “Cape Verde” OR “Central African Republic” OR chad OR china OR colombia OR comoros OR “Comoro Islands” OR comores OR mayotte OR congo OR zaire OR “Costa Rica” OR “Cote d’Ivoire” OR “Ivory Coast” OR cuba OR djibouti OR “French Somaliland” OR dominica OR “Dominican Republic” OR “East Timor” OR “East Timur” OR “Timor Leste” OR ecuador OR egypt OR “United Arab Republic” OR “El Salvador” OR eritrea OR ethiopia OR fiji OR gabon OR “Gabonese Republic” OR gambia OR gaza OR “Georgia Republic” OR “Georgian Republic” OR ghana OR grenada OR guatemala OR guinea OR guiana OR guyana OR haiti OR hungary OR honduras OR india OR maldives OR indonesia OR iran OR iraq OR jamaica OR jordan OR kazakhstan OR kazakh OR kenya OR kiribati OR korea OR kosovo OR kyrgyzstan OR kirghizia OR “Kyrgyz Republic” OR kirghiz OR kirgizstan OR “Lao PDR” OR laos OR lebanon OR lesotho OR basutoland OR liberia OR libya OR macedonia OR madagascar OR “Malagasy Republic” OR malaysia OR malaya OR malay OR sabah OR sarawak OR malawi OR mali OR “Marshall Islands” OR mauritania OR mauritius OR “Agalega Islands” OR mexico OR micronesia OR “Middle East” OR moldova OR moldovia OR mongolia OR montenegro OR morocco OR ifni OR mozambique OR myanmar OR myanmar OR burma OR namibia OR nepal OR “Netherlands Antilles” OR “New Caledonia” OR nicaragua OR niger OR nigeria OR pakistan OR palau OR palestine OR panama OR paraguay OR peru OR philippines OR philippines OR philippines OR “Puerto Rico” OR romania OR rumania OR roumania OR rwanda OR ruanda OR “Saint Lucia” OR “St Lucia” OR “Saint Vincent” OR “St Vincent” OR grenadines OR samoan OR “Samoa Islands” OR “Navigator Island” OR “Navigator Islands” OR “Sao Tome” OR senegal OR serbia OR montenegro OR seychelles OR “Sierra Leone” OR “Sri Lanka” OR “Solomon Islands” OR somalia OR “South Africa” OR sudan OR suriname OR surinam OR swaziland OR syria OR tajikistan OR tadzhikistan OR tadzikistan OR tadjik OR tanzania OR thailand OR togo OR togoles republic OR tonga OR tunisia OR turkey OR turkmenistan OR turkmen OR uganda OR ukraine OR uzbekistan OR uzbek OR vanuatu OR “New Hebrides” OR venezuela OR vietnam OR “Viet Nam” OR “West Bank” OR yemen OR yugoslavia OR zambia OR zimbabwe ) OR TITLE-ABS-KEY ( “Developing Countries” OR africa OR asia OR caribbean OR “West Indies” OR “South America” OR “Latin America” OR “Central America” OR developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” OR underserved OR “under served” OR deprived ) OR TITLE-ABS-KEY ( poor\* W/1 countr\* OR nation\* OR population\* OR world ) OR TITLE-ABS-KEY ( developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” ) W/1 econom\* ) OR TITLE-ABS-KEY ( low\* W/1 gdp OR gnp OR “gross domestic” OR “gross national” ) OR TITLE-ABS-KEY ( low W/3 middle W/3 countr\* ) OR TITLE-ABS-KEY ( lmic OR lmics OR “third world” OR “lami countr\*” OR “transitional countr\*” )
4. Search strings to run in Scopus: #1 AND #2 AND #3 (limited to 2000 onwards) Inclusion criteria
Stage 1 Screening:
Inclusion criteria help in deciding whether a study that has been found is relevant. The following inclusion criteria will be applied during the first stage of the screening process (all criteria need to be satisfied for the study to be included). They will be applied to titles, then abstracts, then full text. All studies that are included on the basis of the first stage screening process, will be included in the Stage 2 screening process.
1. Date: From 2000
2. Language: The review is restricted to English studies
3. Population: People that have received a cash transfer, or control households
4. Geographical locations: Low and middle income countries
5. Interventions: Conditional or unconditional cash transfers. The programmes should be non-contributory, publicly mandated or NGO-provided (so not private transfers, like remittances, or religious donations).
6. Study design: The study should be a solid empirical study (i.e. based on data and or fieldwork) or an institutional analysis. It can be qualitative or quantitative. [Not theoretical; no literature review; not descriptive]
7. Design/ implementation factor: transfer amount, transfer duration, transfer frequency, and transfer recipient
8. Analysis: Design and implementation factors are explicitly linked to outcomes.
Stage 2 Screening:
The second stage assessment will depend on the type of study. In the case of impact evaluation studies, the same assessment tool used for those studies retrieved in research question one will be applied. In the case of qualitative and descriptive studies and institutional analysis, an assessment of methodological rigour based on the literature around evaluating qualitative studies will be applied.
List of databases used
- SCOPUS (Elsevier). This database includes 5,682 journals, conference proceedings, trade publications and book series in the Social Sciences category.
- IDEAS-Repec
4. Snowball technique
The following three people should be contacted and asked for the five most relevant studies on the research question. We will also look at their websites for relevant publications.
1. Rachel Slater, ODI
2. Mike Samson, EPRI
3. Margaret Grosh, World Bank
Studies shared by experts will be assessed against Stage 1 and Stage 2 screening criteria. We will also check the reference lists of the studies obtained for any further studies that fit the inclusion criteria. 5. Websites searches
The following websites/search engines should be consulted, if possible using the same search strings as for the academic databases. Any studies found on these websites will be assessed against the same Stage 1 and Stage 2 screening criteria.
- Google (the first five pages)
- World Bank
- R4D DFID
- International Policy Centre for Inclusive Growth (IPC-IG)
- International Food Policy Research Institute (IFPRI)
- GSDRC
- OPM website
- Transfer Project (UNC Chapel Hill)
- ECLAC/CEPAL
- IADB website
- ADB website
- IDS website
- BLDS website
- Social Science Research Network
- 3iE website
6. Classification of studies
Studies that have passed both screening stages will be classified and described in an annotated bibliography. The classification tables will include the following information:
- authors and year of study
- geographical coverage
- detailed description of intervention and context
- population
- methods, sampling and data
- summary findings on design and implementation factor Sub-question 2b: What is the effect of conditionality on cash transfer programme outcomes?
1. The review research questions
The systematic literature reviews should assess the state of knowledge on the following question: *What is known about the effect of conditionality on cash transfer programme outcomes?*
2. Methodology
The systematic literature reviews should combine three tracks. These tracks are briefly explained here and further instructions are given below.
1. **Bibliographic database search:** Searching a previously agreed upon list of academic databases, using consistent search strings (see below) that have been tested beforehand and applying inclusion/exclusion criteria.
2. **Snowball technique:** Contacting approximately four key experts in the field and asking them for recommendations for important studies on the research question. This also includes looking at the experts’ websites and publication lists and including relevant studies. Finally, we will be looking for further relevant studies in the bibliographies of the experts’ studies and recommended studies.
3. **Websites searches:** Searching previously agreed on websites (see below) for relevant studies using similar search terms as for the bibliographic databases. This also includes a google search for other grey literature.
Studies will be screened and assessed using the EPPI Reviewer software. After an initial broad screening process that considers overall study design, as well as other broader inclusion/exclusion criteria, a second round of screening will be conducted. The second stage assessment will depend on the type of study. In the case of impact evaluation studies, the same assessment tool used for those studies retrieved in research question one will be applied. In the case of qualitative and descriptive studies and institutional analysis, an assessment of methodological rigour based on the literature around evaluating qualitative studies will be applied.
The relevant studies that make it through both stages of screening will be summarised in an annotated bibliography. The annotated bibliography lists the relevant studies in table format (see below) and briefly summarises each study in terms of relevant information on methodology, intervention and findings. More specifically, the relevant studies will also be summarised and classified in a table summarising the following information: i) publication details, (ii) description of the intervention and context, (iii) methods, data and sampling, (iv) population, v) findings of relevance to the research question including findings of statistically significant and non-significant impacts and disaggregation (e.g. by gender, age and other characteristics), and vi) contextual factors of importance.
A narrative synthesis approach will be applied to synthesise the findings. 3. Bibliographic database search
The research question
The research question is ‘What is known about the effect of conditionality on programme outcomes?’ Here we want to know whether conditionality and type of conditionality mediates programme impacts.
In order to understand it better, the research question can be decomposed into population, intervention and design/implementation factor:
| Population | Intervention | Design/ implementation factor | |------------|--------------|------------------------------| | People living in low or middle income countries and who either receive the intervention or are the comparison group | Conditional or unconditional cash transfers | Conditionality and type of conditionality | | Cash transfer | Conditional | | Social transfer | Unconditional | | Financial transfer | Condition\* | | Monetary transfer | Compliance | | Child grant/ disability grant/ old-age grant/ social grant | Non-compliance | | Social assistance | Enforc\* | | Social pension | Sanction\* | | Non-contributory pension | Punitive | | Old age pension | Facilitative | | Child benefit/ disability benefit/ old-age benefit | Soft | | Basic income/ minimum income | Co-responsibilit\* | | UCT/ CCT | Label\* | | Income support | Contract | | | Family improvement plan |
The population has been restricted to people living in low and middle income countries. This includes both beneficiary and control households. The aim of the research question is to analyse the effect of conditionality on cash transfers outcomes. The design/implementation factors for this sub-question are conditionality and type of conditionality. The table above also includes all synonyms that will be used in the searches.
Search strings
The search string will be composed of intervention (part 1), design and implementation factor (part 2) and country filter (example below given for SCOPUS filter). In order to capture all possible cash transfers, search strings should include all synonyms listed above. In terms of design/implementation factors, we will use conditionality and type of conditionality in the search strings. The following search strings and will be used (they have been tested in the pilot phase):
1. TITLE-ABS-KEY ( “Cash transfer\*” OR “social transfer\*” OR “financial transfer\*” OR “monetary transfer\*” OR “child grant\*” OR “disability grant\*” OR “old age grant\*” OR “social grant\*” OR “basic grant\*” OR “minimum income grant\*” OR “social assistance” OR welfare OR “social pension\*” OR “non-contributory pension\*” OR “old age pension\*” OR “child benefit\*” OR “disability benefit\*” OR “old age benefit\*” OR cct OR uct OR “income support\*” )
2. TITLE-ABS-KEY (“condition\* OR unconditional OR comply OR conditionality OR non-compliance OR enforce\* OR sanction\* OR punitive OR facilitative OR soft OR co-responsibility\* OR label\* OR contract\* OR “family improvement plan\*” )
3. TITLE-ABS-KEY ( afghanistan OR albania OR algeria OR angola OR argentina OR armenia OR armenian OR aruba OR azerbaijan OR bangladesh OR benin OR byelarus OR byelorussian OR belarus OR belorussian OR belorussia OR belize OR bhutan OR bolivia OR bosnia OR herzegovina OR hercegovina OR botswana OR brasil OR brazil OR bulgaria OR “Burkina Faso” OR “Burkina Fasso” OR “Upper Volta” OR burundi OR urundi OR cambodia OR “Khmer Republic” OR kampuchea OR cameroon OR cameroons OR cameron OR cameros OR “Cape Verde” OR... “Central African Republic” OR chad OR china OR colombia OR comoros OR “Comoro Islands” OR comores OR mayotte OR congo OR zaire OR “Costa Rica\*” OR “Cote d’Ivoire” OR “Ivory Coast” OR cuba OR djibouti OR “French Somaliland” OR dominica OR “Dominican Republic” OR “East Timor” OR “East Timur” OR “Timor Leste” OR ecuador OR egypt OR “United Arab Republic” OR “El Salvador” OR eritrea OR ethiopia OR fiji OR gabon OR “Gabonese Republic” OR gambia OR gaza OR “Georgia Republic” OR “Georgian Republic” OR ghana OR grenada OR guatemala OR guinea OR guiana OR guyana OR haiti OR hungary OR honduras OR india OR maldives OR indonesia OR iran OR iraq OR jamaica OR jordan OR kazakhstan OR kazakh OR kenya OR kiribati OR korea OR kosovo OR kyrgyzstan OR kirghizia OR “Kyrgyz Republic” OR kirghiz OR kirgizstan OR “Lao PDR” OR laos OR lebanon OR lesotho OR basutoland OR liberia OR libya OR macedonia OR madagascar OR “Malagasy Republic” OR malaysia OR malaya OR malay OR sabah OR sarawak OR malawi OR mali OR “Marshall Islands” OR mauritania OR mauritius OR “Agalega Islands” OR mexico OR micronesia OR “Middle East” OR moldova OR moldovia OR moldovan OR mongolia OR montenegro OR morocco OR ifni OR mozambique OR myanmar OR myanmar OR burma OR namibia OR nepal OR “Netherlands Antilles” OR “New Caledonia” OR nicaragua OR niger OR nigeria OR pakistan OR palau OR palestine OR myanmar OR paraguay OR peru OR philippines OR philippines OR philippines OR “Puerto Rico\*” OR romania OR rumania OR rumania OR rwanda OR ruanda OR “Saint Lucia” OR “St Lucia” OR “Saint Vincent” OR “St Vincent” OR grenadines OR samoa OR “Samoan Islands” OR “Navigator Island” OR “Navigator Islands” OR “Sao Tome” OR senegal OR serbia OR montenegro OR seychelles OR “Sierra Leone” OR “Sri Lanka” OR “Solomon Islands” OR somalia OR “South Africa” OR sudan OR suriname OR surinam OR swaziland OR syria OR tajikistan OR tajikistan OR tadjikistan OR tadjik OR tanzania OR thailand OR togo OR togoles republic OR tonga OR tunisia OR turkey OR turkmenistan OR turkmen OR uganda OR ukraine OR uzbekistan OR uzbek OR vanuatu OR “New Hebrides” OR venezuela OR vietnam OR “Viet Nam” OR “West Bank” OR yemen OR yugoslavia OR zambia OR zimbabwe ) OR TITLE-ABS-KEY ( “Developing Countries” OR africa OR asia OR caribbean OR “West Indies” OR “South America” OR “Latin America” OR “Central America” OR developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” OR underserved OR “under served” OR deprived ) OR TITLE-ABS-KEY ( poor\* W/1 countr\* OR nation\* OR population\* OR world ) OR TITLE-ABS-KEY ( developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” ) W/1 econom\* ) OR TITLE-ABS-KEY ( low\* W/1 gdp OR gnp OR “gross domestic” OR “gross national” ) OR TITLE-ABS-KEY ( low W/3 middle W/3 countr\* ) OR TITLE-ABS-KEY ( lmic OR lmic\* OR “third world” OR “lami countr\*” OR “transitional countr\*” )
4. Search strings to run in Scopus: #1 AND #2 AND #3 (limited to 2000 onwards) Inclusion criteria
Stage 1 Screening:
Inclusion criteria help in deciding whether a study that has been found is relevant. The following inclusion criteria will be applied during the first stage of the screening process (all criteria need to be satisfied for the study to be included). They will be applied to titles, then abstracts, then full text. All studies that are included on the basis of the first stage screening process, will be included in the Stage 2 screening process.
1. Date: From 2000
2. Language: The review is restricted to English studies
3. Population: People that have received a cash transfer, or control households
4. Geographical locations: Low and middle income countries
5. Interventions: Conditional or unconditional cash transfers. The programmes should be non-contributory, publicly mandated or NGO-provided (so not private transfers, like remittances, or religious donations).
6. Study design: The study should be an empirical study (i.e. based on data and or fieldwork) or an institutional analysis. It can be qualitative or quantitative. [Not theoretical; no literature review; not descriptive]
7. Design/ implementation factor: conditionality and type of conditionality
8. Analysis: Design and implementation factors are explicitly linked to outcomes.
Stage 2 Screening:
The second stage assessment will depend on the type of study. In the case of impact evaluation studies, the same assessment tool used for those studies retrieved in research question one will be applied. In the case of qualitative and descriptive studies and institutional analysis, an assessment of methodological rigour based on the literature around evaluating qualitative studies will be applied.
List of databases used
- SCOPUS (Elsevier). This database includes 5,682 journals, conference proceedings, trade publications and book series in the Social Sciences category.
- IDEAS Repec
4. Snowball technique
The following four people should be contacted and asked for the five most relevant studies on the research question. We will also look at their websites for relevant publications.
1. Berk Ozler, World Bank
2. Ariel Fiszbein, World Bank
3. Norbert Schady, IDB
4. Orazio Attanasio, UCL
Studies shared by experts will be assessed against Stage 1 and Stage 2 screening criteria. We will also check the reference lists of the studies obtained for any further studies that fit the inclusion criteria. 5. Websites searches
The following websites/search engines should be consulted, if possible using the same search strings as for the academic databases. Any studies found on these websites will be assessed against the same Stage 1 and Stage 2 screening criteria.
- Google (the first five pages)
- World Bank
- R4D DFID
- International Policy Centre for Inclusive Growth (IPC-IG)
- International Food Policy Research Institute (IFPRI)
- GSDRC
- OPM website
- Transfer Project (UNC Chapel Hill)
- ECLAC/CEPAL
- IADB website
- ADB website
- IDS website
- BLDS website
- Social Science Research Network
- 3iE website
6. Classification of studies
Studies that have passed both screening stages will be classified and described in an annotated bibliography. The classification tables will include the following information:
- authors and year of study
- geographical coverage
- detailed description of intervention and context
- population
- methods, sampling and data
- findings on design and implementation factor
- contextual factors of importance Sub-question 2c: What is the effect of targeting on programme outcomes?
1. The review research questions
The systematic literature reviews should assess the state of knowledge on the following question: *What is known about the effect of targeting on cash transfer programme outcomes?*
2. Methodology
The systematic literature reviews should combine three tracks. These tracks are briefly explained here and further instructions are given below.
1. **Bibliographic database search:** Searching a previously agreed upon list of academic databases, using consistent search strings (see below) that have been tested beforehand and applying inclusion/exclusion criteria.
2. **Snowball technique:** Contacting approximately three key experts in the field and asking them for recommendations for important studies on the research question. This also includes looking at the experts’ websites and publication lists and including relevant studies. Finally, we will be looking for further relevant studies in the bibliographies of the experts’ studies and recommended studies.
3. **Websites searches:** Searching previously agreed on websites (see below) for relevant studies using similar search terms as for the bibliographic databases. This also includes a google search for other grey literature.
Studies will be screened and assessed using the EPPI Reviewer software. After an initial broad screening process that considers overall study design, as well as other broader inclusion/exclusion criteria, a second round of screening will be conducted. The second stage assessment will depend on the type of study. In the case of impact evaluation studies, the same assessment tool used for those studies retrieved in research question one will be applied. In the case of qualitative and descriptive studies and institutional analysis, an assessment of methodological rigour based on the literature around evaluating qualitative studies will be applied.
The relevant studies that make it through both stages of screening will be summarised in an annotated bibliography. The annotated bibliography lists the relevant studies in table format (see below) and briefly summarises each study in terms of relevant information on methodology, intervention and findings. More specifically, the relevant studies will also be summarised and classified in a table summarising the following information: i) publication details, (ii) description of the intervention and context, (iii) methods, data and sampling, (iv) population, v) findings of relevance to the research question including findings of statistically significant and non-significant impacts and disaggregation (e.g. by gender, age and other characteristics), and vi) contextual factors of importance.
A narrative synthesis approach will be applied to synthesise the findings. 3. Bibliographic database search
The research question
The research question is ‘What is known about the effect of targeting on cash transfer programme outcomes?’ Here we want to know how targeting mediates programme impacts.
In order to understand it better, the research question can be decomposed into population, intervention and design/implementation factor:
| Population | Intervention | Design/implementation factor | |------------|--------------|-----------------------------| | People living in low or middle income countries and who either receive the intervention or are the comparison group | Conditional or unconditional cash transfers | Targeting |
| Cash transfer | Social transfer | Financial transfer | Monetary transfer | Child grant/ disability grant/ old-age grant/ social grant | Social assistance | Social pension | Non-contributory pension | Old age pension | Child benefit/ disability benefit/ old-age benefit | Basic income/ minimum income | UCT/ CCT | Income support | |---------------|-----------------|--------------------|------------------|----------------------------------------------------------|-----------------|-----------------|------------------------|----------------|-----------------------------------------------|-----------------------------|----------|--------------| | Target\* | Geographical target\* | Categorical target\* | Poverty target\* | Community-based target\* | Targeting errors | Proxy-means test/ PMT | Means-test\* | Beneficiary identification | Beneficiary selection | Recertification | Target\* frequency | Inclusion error | Exclusion error | Undercoverage | Over selection | Under selection | Leakage | Incidence | Take-up |
The population has been restricted to people living in low and middle income countries. This includes both beneficiary and control households. The aim of the research question is to analyse the effect of targeting on cash transfers outcomes. The design/implementation factor for this sub-question is targeting. The table above also includes all synonyms that will be used in the searches.
Search strings
The search string will be composed of intervention (part 1), design and implementation factor (part 2) and country filter (example below given for SCOPUS filter). In order to capture all possible cash transfers, search strings should include all synonyms listed above. In terms of design/implementation factors, we will use targeting in the search strings. The following search strings and will be used (they have been tested in the pilot phase):
1. TITLE-ABS-KEY ( “Cash transfer\*” OR “social transfer\*” OR “financial transfer\*” OR “monetary transfer\*” OR “child grant\*” OR “disability grant\*” OR “old age grant\*” OR “social grant\*” OR “basic grant\*” OR “minimum income grant\*” OR “social assistance” OR welfare OR “social pension\*” OR “non-contributory pension\*” OR “old age pension\*” OR “child benefit\*” OR “disability benefit\*” OR “old age benefit\*” OR cct OR uct OR “income support” )
2. TITLE-ABS-KEY (targeted OR “geographical target\*” OR “categorical target\*” OR “poverty target\*” OR universal OR “community-based target\*” OR “CBT” OR “targeting error\*” OR “proxy means test\*” OR PMT OR “means-test\*” OR “beneficiary identification” OR beneficiary W/1 (identification OR selection) OR recertification OR targeting W/1 frequency OR “inclusion error\*” OR “exclusion error\*” OR “undercoverage” OR “leakage\*” OR “over selection” OR “under selection” OR incidence OR “take-up” ) Cash transfers: what does the evidence say?
3. (TITLE-ABS-KEY((afghanistan OR albania OR algeria OR angola OR argentina OR armenia OR armenian OR aruba OR azerbaijan OR bangladesh OR benin OR byelarus OR byelorussian OR belarus OR belorussian OR belorussia OR belize OR bhutan OR bolivia OR bosnia OR herzegovina OR hercegovina OR botswana OR brasil OR brazil OR bulgaria OR “Burkina Faso” OR “Burkina Fasso” OR “Upper Volta” OR burundi OR urundi OR cambodia OR “Khmer Republic” OR kampuchea OR cameroon OR cameroons OR cameror OR cameron OR camoros OR “Cape Verde” OR “Central African Republic” OR chad OR china OR colombia OR comoros OR “Comoro Islands” OR comores OR mayotte OR congo OR zaire OR “Costa Rica”” OR “Cote d’Ivoire” OR “Ivory Coast” OR cuba OR djibouti OR “French Somaliland” OR dominica OR “Dominican Republic” OR “East Timor” OR “East Timur” OR “Timor Leste” OR ecuador OR egypt OR “United Arab Republic” OR “El Salvador” OR eritrea OR ethiopia OR fiji OR gabon OR “Gabonese Republic” OR gambia OR gaza OR “Georgia Republic” OR “Georgian Republic” OR ghana OR grenada OR guatemala OR guinea OR guiana OR guyana OR haiti OR hungary OR honduras OR india OR iran OR iraq OR jamaica OR jordan OR kazakhstan OR kazakhstan OR keny OR kiribati OR korea OR kosovo OR kyrgyzstan OR kirghizia OR “Kyrgyz Republic” OR kirghiz OR kirgizstan OR “Lao PDR” OR laos OR lebanon OR lesotho OR basutoland OR liberia OR libya OR macedonia OR madagascar OR “Malagasy Republic” OR malaysia OR malaya OR malay OR sabah OR sarawak OR malawi OR mali OR “Marshall Islands” OR mauritania OR mauritius OR “Agalega Islands” OR mexico OR micronesia OR “Middle East” OR moldova OR moldovia OR moldovian OR mongolia OR montenegro OR morocco OR ifni OR mozambique OR myanmar OR myanmar OR burma OR namibia OR nepal OR “Netherlands Antilles” OR “New Caledonia” OR nicaragua OR niger OR niger OR pakistan OR palau OR palestine OR panama OR paraguay OR peru OR philippines OR philippines OR philippines OR “Puerto Rico” OR romania OR rumania OR rounmania OR rwanda OR ruanda OR “Saint Lucia” OR “St Lucia” OR “Saint Vincent” OR “St Vincent” OR grenadines OR samoan OR “Samoan Islands” OR “Navigator Island” OR “Navigator Islands” OR “Sao Tome” OR senegal OR serbia OR montenegro OR seychelles OR “Sierra Leone” OR “Sri Lanka” OR “Solomon Islands” OR somalia OR “South Africa” OR sudan OR suriname OR surinam OR swaziland OR syria OR tajikistan OR tadzhikistan OR tadzhikistan OR tanzania OR thailand OR togo OR togoles republic OR tonga OR tunisia OR turkey OR turkmenistan OR turkmen OR uganda OR ukraine OR uzbekistan OR uzbek OR vanuatu OR “New Hebrides” OR venezuela OR vietnam OR “Viet Nam” OR “West Bank” OR yemen OR yugoslavia OR zambia OR zimbabwe ) ) OR (TITLE-ABS-KEY(“Developing Countries” OR africa OR asia OR caribbean OR “West Indies” OR “South America” OR “Latin America” OR “Central America” OR ((developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” OR underserved OR “under served” OR deprived OR poor\*) W/1 ( countr\* OR nation\* OR population\* OR world ) ) ) OR (TITLE-ABS-KEY(((developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” ) W/1 ( economy OR economies ) ) OR (low\* W/1 ( gdp OR gnp OR “gross domestic” OR “gross national” ) ) OR (low W/3 middle W/3 countr\* ) ) ) OR (TITLE-ABS-KEY(((lmic OR lmic OR “third world” OR “lami countr\*” ) ) OR “transitional countr\*” ) ) TITLE-ABS-KEY(afghanistan OR albania OR algeria OR angola OR argentina OR armenia OR armenian OR aruba OR azerbaijan OR bangladesh OR benin OR byelarus OR byelorussian OR belarus OR belorussian OR belorussia OR belize OR bhutan OR bolivia OR bosnia OR hercegovina OR hercegovina OR botswana OR brasil OR brazil OR bulgaria OR “Burkina Faso” OR “Burkina Fasso” OR “Upper Volta” OR burundi OR urundi OR cambodia OR “Khmer Republic” OR kampuchea OR cameroon OR cameroons OR cameror OR cameron OR camoros OR “Cape Verde” OR “Central African Republic” OR chad OR china OR colombia OR comoros OR “Comoro Islands” OR comores OR mayotte OR congo OR zaire OR “Costa Rica”” OR “Cote d’Ivoire” OR “Ivory Coast” OR cuba OR djibouti OR “French Somaliland” OR dominica OR “Dominican Republic” OR “East Timor” OR “East Timur” OR “Timor Leste” OR ecuador OR egypt OR “United Arab Republic” OR “El Salvador” OR eritrea OR ethiopia OR fiji OR gabon OR “Gabonese Republic” OR gambia OR gaza OR “Georgia Republic” OR “Georgian Republic” OR ghana OR grenada OR guatemala OR guinea OR guiana OR guyana OR haiti OR hungary OR honduras OR india OR maldives OR indonesia OR iran OR iraq OR jamaica OR jordan OR kazakhstan OR kazakh OR kenya OR kiribati OR korea OR kosovo OR kyrgyzstan OR kirghizia OR “Kyrgyz Republic” OR kirghiz OR kirgizstan OR “Lao PDR” OR laos OR lebanon OR lesotho OR basutoland OR liberia OR libya OR macedonia OR madagascar OR “Malagasy Republic” OR malasia OR malaya OR malay OR sabah OR sarawak OR malawi OR mali OR “Marshall Islands” OR mauritania OR mauritius OR “Agalega Islands” OR mexico OR micronesia OR “Middle East” OR moldova OR moldovia OR moldovan OR mongolia OR montenegro OR morocco OR ifni OR mozambique OR myanmar OR myanmar OR burma OR namibia OR nepal OR “Netherlands Antilles” OR “New Caledonia” OR nicaragua OR niger OR nigeria OR pakistan OR palau OR palestine OR panama OR paraguay OR peru OR philippines OR philipines OR philipines OR philippines OR “Puerto Rico” OR romania OR rumania OR roumania OR rwanda OR ruanda OR “Saint Lucia” OR “St Lucia” OR “Saint Vincent” OR “St Vincent” OR grenadines OR samoa OR “Samoa Islands” OR “Navigator Island” OR “Navigator Islands” OR “Sao Tome” OR senegal OR serbia OR montenegro OR seychelles OR “Sierra Leone” OR “Sri Lanka” OR “Solomon Islands” OR somalia OR “South Africa” OR sudan OR suriname OR surinam OR swaziland OR syria OR tajikistan OR tadzhikistan OR tadzikistan OR tadzhik OR tanzania OR thailand OR togo OR togoles republic OR tonga OR tunisia OR turkey OR turkmenistan OR turkmen OR uganda OR ukraine OR uzbekistan OR uzbek OR vanuatu OR “New Hebrides” OR venezuela OR vietnam OR “Viet Nam” OR “West Bank” OR yemen OR yugoslavia OR zambia OR zimbabwe ) OR TITLE-ABS-KEY ( “Developing Countries” OR africa OR asia OR caribbean OR “West Indies” OR “South America” OR “Latin America” OR “Central America” OR developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” OR underserved OR “under served” OR deprived ) OR TITLE-ABS-KEY ( poor\* W/1 countr\* OR nation\* OR population\* OR world ) OR TITLE-ABS-KEY ( developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” ) W/1 econom\* ) OR TITLE-ABS-KEY ( low\* W/1 gdp OR gnp OR “gross domestic” OR “gross national” ) OR TITLE-ABS-KEY ( low W/3 middle W/3 countr\* ) OR TITLE-ABS-KEY ( lmic OR lmics OR “third world” OR “lami countr\*” OR “transitional countr\*” )
4. Search strings to run in Scopus: #1 AND #2 AND #3 (limited to 2000 onwards)
**Inclusion criteria**
**Stage 1 Screening:**
Inclusion criteria help in deciding whether a study that has been found is relevant. The following inclusion criteria will be applied during the first stage of the screening process (all criteria need to be satisfied for the study to be included). They will be applied to titles, then abstracts, then full text. All studies that are included on the basis of the first stage screening process, will be included in the Stage 2 screening process.
1. **Date:** From 2000
2. **Language:** The review is restricted to English studies
3. **Population:** People that have received a cash transfer, or control households
4. **Geographical locations:** Low and middle income countries
5. **Interventions:** Conditional or unconditional cash transfers. The programmes should be non-contributory, publicly mandated or NGO-provided (so not private transfers, like remittances, or religious donations).
6. **Study design:** The study should be an empirical study (i.e. based on data and or fieldwork) or an institutional analysis. It can be qualitative or quantitative. [Not theoretical; no literature review; not descriptive]
7. **Design/ implementation factor:** targeting
8. **Analysis:** Design and implementation factors are explicitly linked to outcomes. Stage 2 Screening:
The second stage assessment will depend on the type of study. In the case of impact evaluation studies, the same assessment tool used for those studies retrieved in research question one will be applied. In the case of qualitative and descriptive studies and institutional analysis, an assessment of methodological rigour based on the literature around evaluating qualitative studies will be applied.
List of databases used
- SCOPUS (Elsevier). This database includes 5,682 journals, conference proceedings, trade publications and book series in the Social Sciences category.
- IDEAS-Repec
4. Snowball technique
The following three people should be contacted and asked for the five most relevant studies on the research question. We will also look at their websites for relevant publications.
1. Emmanuel Skoufias, World Bank
2. David Coady, IMF
3. Franziska Gassmann, Maastricht University
Studies shared by experts will be assessed against Stage 1 and Stage 2 screening criteria. We will also check the reference lists of the studies obtained for any further studies that fit the inclusion criteria.
5. Websites searches
The following websites/search engines should be consulted, if possible using the same search strings as for the academic databases. Any studies found on these websites will be assessed against the same Stage 1 and Stage 2 screening criteria.
- Google Scholar (the first five pages)
- World Bank
- R4D DFID
- International Policy Centre for Inclusive Growth (IPC-IG)
- International Food Policy Research Institute (IFPRI)
- GSDRC
- Transfer Project (UNC Chapel Hill)
- ECLAC/CEPAL
- IADB website
- ADB website
- IDS website
- BLDS website
- Social Science Research Network
- 3iE website
6. Classification of studies
Studies that have passed both screening stages will be classified and described in an annotated bibliography. The classification tables will include the following information:
- authors and year of study
- geographical coverage
- detailed description of intervention and context
- population
- methods, sampling and data
- summary findings on design and implementation factor Sub-question 2d: What is the effect of payment systems on cash transfer programme outcomes?
1. The review research questions
The systematic literature reviews should assess the state of knowledge on the following question: *What is known about the effect of payment systems on cash transfer programme outcomes?*
2. Methodology
The systematic literature reviews should combine three tracks. These tracks are briefly explained here and further instructions are given below.
1. **Bibliographic database search:** Searching a previously agreed upon list of academic databases, using consistent search strings (see below) that have been tested beforehand and applying inclusion/exclusion criteria.
2. **Snowball technique:** Contacting approximately four key experts in the field and asking them for recommendations for important studies on the research question. This also includes looking at the experts’ websites and publication lists and including relevant studies. Finally, we will be looking for further relevant studies in the bibliographies of the experts’ studies and recommended studies.
3. **Websites searches:** Searching previously agreed on websites (see below) for relevant studies using similar search terms as for the bibliographic databases. This also includes a google search for other grey literature.
Studies will be screened and assessed using the EPPI Reviewer software. After an initial broad screening process that considers overall study design, as well as other broader inclusion/exclusion criteria, a second round of screening will be conducted. The second stage assessment will depend on the type of study. In the case of impact evaluation studies, the same assessment tool used for those studies retrieved in research question one will be applied. In the case of qualitative and descriptive studies and institutional analysis, an assessment of methodological rigour based on the literature around evaluating qualitative studies will be applied.
The relevant studies that make it through both stages of screening will be summarised in an annotated bibliography. The annotated bibliography lists the relevant studies in table format (see below) and briefly summarises each study in terms of relevant information on methodology, intervention and findings. More specifically, the relevant studies will also be summarised and classified in a table summarising the following information: i) publication details, (ii) description of the intervention and context, (iii) methods, data and sampling, (iv) population, (v) findings of relevance to the research question including findings of statistically significant and non-significant impacts and disaggregation (e.g. by gender, age and other characteristics), and (vi) contextual factors of importance.
A narrative synthesis approach will be applied to synthesise the findings. 3. Bibliographic database search
The research question
The research question is ‘What is known about the effect of payment systems on programme outcomes?’ Here we want to know how payment frequency in practice, mode of payment and any irregularities in the payment process mediate programme impacts.
In order to understand it better, the research question can be decomposed into population, intervention and design/implementation factor:
| Population | Intervention | Design/ implementation factor | |------------|--------------|------------------------------| | People living in low or middle income countries and who either receive the intervention or are the comparison group | Conditional or unconditional cash transfers | Payment systems | | Cash transfer | Payment | Regular | | Social transfer | Regular | Irregular | | Financial transfer | Predictable\* | Reliability\* | | Monetary transfer | Frequency | One-off | | Child grant/ disability grant/ old-age grant/ social grant | Delay\* | Lump | | Social assistance | Late | Bank | | Social pension | Basic income/ minimum income | Mobile transfer | | Non-contributory pension | UCT/ CCT | MT0 | | Old age pension | Income support | Post office | | Child benefit/ disability benefit/ old-age benefit | ATM | Smart card | | Basic income/ minimum income | Bank | Electronic card\* | | UCT/ CCT | Late | Biometric card\* | | Income support | Bank | Bribe | | | | Rent | | | | Corruption | | | | Fraud | | | | Cash | | | | Savings and Credit Cooperative (SACCO) | | | | Microfinance institution |
The population has been restricted to people living in low and middle income countries. This includes both beneficiary and control households. The aim of the research question is to analyse the effect of the payment system on cash transfers outcomes. The design/implementation factors for this sub-question are payment frequency in practice, mode of payment and any irregularities in the payment process. The table above also includes all synonyms that will be used in the searches.
Search strings
The search string will be composed of intervention (part 1), design and implementation factor (part 2) and country filter (example below given for SCOPUS filter). In order to capture all possible cash transfers, search strings should include all synonyms listed above. In terms of design/implementation factors, we will use payment frequency in practice, mode of payment and any irregularities in the payment process and synonyms in the search strings. The following search strings will be used (they have been tested in the pilot phase):
1. TITLE-ABS-KEY ( “Cash transfer” OR “social transfer” OR “financial transfer” OR “monetary transfer” OR “child grant” OR “disability grant” OR “old age grant” OR “social grant” OR “basic grant” OR “minimum income grant” OR “social assistance” OR welfare OR “social pension” OR “non-contributory pension” OR “old age pension” OR “child benefit” OR “disability benefit” OR “old age benefit” OR “cct” OR “uct” OR “income support” )
2. TITLE-ABS-KEY (delivery OR payment\* OR regular\* OR irregular\* OR lump\* OR frequency OR one-off OR delay\* OR predict\* OR reliab\* OR ATM OR late OR bank OR “mobile transfer\*” OR MTO OR “post office\*” OR “smart card\*” OR “electronic card\*” OR “biometric card\*” OR bribe\* OR rent OR corruption)
3. TITLE-ABS-KEY (afghanistan OR albania OR algeria OR angola OR argentina OR armenia OR armenian OR aruba OR azerbaijan OR bangladesh OR benin OR byelarus OR byelorussian OR belarus OR belorussian OR belorussia OR belize OR bhutan OR bolivia OR bosnia OR herzegovina OR hercegovina OR botswana OR brasil OR brazil OR bulgaria OR “Burkina Faso” OR “Burkina Fasso” OR “Upper Volta” OR burundi OR urundi OR cambodia OR “Khmer Republic” OR kampuchea OR cameroon OR cameroons OR cameron OR camorons OR “Cape Verde” OR “Central African Republic” OR chad OR china OR colombia OR comoros OR “Comoro Islands” OR comores OR mayotte OR congo OR zaire OR “Costa Rica” OR “Cote d’Ivoire” OR “Ivory Coast” OR cuba OR djibouti OR “French Somaliland” OR dominica OR “Dominican Republic” OR “East Timor” OR “East Timur” OR “Timor Leste” OR ecuador OR egypt OR “United Arab Republic” OR “El Salvador” OR eritrea OR ethiopia OR fiji OR gabon OR “Gabonese Republic” OR gambia OR gaza OR “Georgia Republic” OR “Georgian Republic” OR ghana OR grenada OR guatemala OR guinea OR guiana OR guyana OR haiti OR hungary OR honduras OR india OR maldives OR indonesia OR iran OR iraq OR jordan OR kazakhstan OR kazakh OR kenya OR kiribati OR korea OR kosovo OR krygyzstan OR kirghizia OR “Kyrgyz Republic” OR kirghiz OR kirgizstan OR “Lao PDR” OR laos OR lebanon OR lesotho OR basutoland OR liberia OR libya OR macedonia OR madagascar OR “Malagasy Republic” OR malaysia OR malay OR malay OR sahab OR sarawak OR malawi OR mali OR “Marshall Islands” OR mauritania OR mauritius OR “Agalega Islands” OR mexico OR micronesia OR “Middle East” OR moldova OR moldavia OR moldovan OR mongolia OR montenegro OR morocco OR ifni OR mozambique OR myanmar OR myanmar OR burma OR namibia OR nepal OR “Netherlands Antilles” OR “New Caledonia” OR nicaragua OR niger OR nigeria OR pakistan OR palau OR palestine OR panama OR paraguay OR peru OR philippines OR philippines OR philippines OR “Puerto Ric\*” OR romania OR rumania OR roumania OR rwanda OR ruanda OR “Saint Lucia” OR “St Lucia” OR “Saint Vincent” OR “St Vincent” OR grenadines OR samoan OR “Samoan Islands” OR “Navigator Island” OR “Navigator Islands” OR “Sao Tome” OR “Sao Tome” OR senegal OR serbia OR montenegro OR seychelles OR “Sierra Leone” OR “Sri Lanka” OR “Solomon Islands” OR somalia OR “South Africa” OR sudan OR suriname OR surinam OR swaziland OR syria OR tajikistan OR tajikistan OR tadjikistan OR tadjik OR tanzania OR thailand OR togo OR togoles republic OR tonga OR tunisia OR turkey OR turkmenistan OR turkmen OR uganda OR ukraine OR uzbekistan OR uzbek OR vanuatu OR “New Hebrides” OR venezuela OR vietnam OR “Viet Nam” OR “West Bank” OR yemen OR yugoslavia OR zambia OR zimbabwe ) OR TITLE-ABS-KEY ( “Developing Countries” OR africa OR asia OR caribbean OR “West Indies” OR “South America” OR “Latin America” OR “Central America” OR developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” OR underserved OR “under served” OR deprived ) OR TITLE-ABS-KEY (poor\* W/1 countr\* OR nation\* OR population\* OR world ) OR TITLE-ABS-KEY ( developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” ) W/1 econom\* ) OR TITLE-ABS-KEY ( low\* W/1 gdp OR gnp OR “gross domestic” OR “gross national” ) OR TITLE-ABS-KEY (low W/3 middle W/3 countr\* ) OR TITLE-ABS-KEY ( lmic OR lmc OR “third world” OR “lami countr\*” OR “transition countr\*” )
4. Search strings to run in Scopus: #1 AND #2 AND #3 (limited to 2000 onwards) Inclusion criteria
Stage 1 Screening:
Inclusion criteria help in deciding whether a study that has been found is relevant. The following inclusion criteria will be applied during the first stage of the screening process (all criteria need to be satisfied for the study to be included). They will be applied to titles, then abstracts, then full text. All studies that are included on the basis of the first stage screening process, will be included in the Stage 2 screening process.
1. Date: From 2000
2. Language: The review is restricted to English studies
3. Population: People that have received a cash transfer, or control households
4. Geographical locations: Low and middle income countries
5. Interventions: Conditional or unconditional cash transfers. The programmes should be non-contributory, publicly mandated or NGO-provided (so not private transfers, like remittances, or religious donations)
6. Study design: The study should be an empirical study (i.e. based on data and or fieldwork) or an institutional analysis. It can be qualitative or quantitative. [Not theoretical; no literature review; not descriptive]
7. Design/implementation factor: payment frequency in practice, mode of payment and any irregularities in the payment process
8. Analysis: Design and implementation factors are explicitly linked to outcomes
Stage 2 Screening:
The second stage assessment will depend on the type of study. In the case of impact evaluation studies, the same assessment tool used for those studies retrieved in research question one will be applied. In the case of qualitative and descriptive studies and institutional analysis, an assessment of methodological rigour based on the literature around evaluating qualitative studies will be applied.
List of databases used
- SCOPUS (Elsevier). This database includes 5,682 journals, conference proceedings, trade publications and book series in the Social Sciences category.
- IDEAS-Repec
4. Snowball technique
The following four people should be contacted and asked for the five most relevant studies on the research question. We will also look at their websites for relevant publications.
1. Clare O’Brien, OPM
2. Alan Gelb, Centre for Global Development
3. Stephen Devereux, IDS
4. Gabriele Smith, Development Pathways
Studies shared by experts will be assessed against Stage 1 and Stage 2 screening criteria. We will also check the reference lists of the studies obtained for any further studies that fit the inclusion criteria. 5. Websites searches
The following websites/search engines should be consulted, if possible using the same search strings as for the academic databases. Any studies found on these websites will be assessed against the same Stage 1 and Stage 2 screening criteria.
- Google (the first five pages)
- World Bank
- R4D DFID
- International Policy Centre for Inclusive Growth (IPC-IG)
- International Food Policy Research Institute (IFPRI)
- GSDRC
- OPM website
- Transfer Project (UNC Chapel Hill)
- ECLAC/CEPAL
- IADB website
- ADB website
- IDS website
- BLDS website
- Social Science Research Network
6. Classification of studies
Studies that have passed both screening stages will be classified and described in an annotated bibliography. The classification tables will include the following information:
- authors and year of study
- geographical coverage
- detailed description of intervention and context
- population
- methods, sampling and data
- summary findings on design and implementation factor Sub-question 2e: What is the effect of grievance mechanisms and programme governance on programme outcomes?
1. The review research questions
The systematic literature reviews should assess the state of knowledge on the following question: *What is known about the effect of grievance mechanisms on programme outcomes?*
2. Methodology
The systematic literature reviews should combine three tracks. These tracks are briefly explained here and further instructions are given below.
1. **Bibliographic database search:** Searching a previously agreed upon list of academic databases, using consistent search strings (see below) that have been tested beforehand and applying inclusion/exclusion criteria.
2. **Snowball technique:** Contacting approximately three key experts in the field and asking them for recommendations for important studies on the research question. This also includes looking at the experts’ websites and publication lists and including relevant studies. Finally, we will be looking for further relevant studies in the bibliographies of the experts’ studies and recommended studies.
3. **Websites searches:** Searching previously agreed on websites (see below) for relevant studies using similar search terms as for the bibliographic databases. This also includes a google search for other grey literature.
Studies will be screened and assessed using the EPPI Reviewer software. After an initial broad screening process that considers overall study design, as well as other broader inclusion/exclusion criteria, a second round of screening will be conducted. The second stage assessment will depend on the type of study. In the case of impact evaluation studies, the same assessment tool used for those studies retrieved in research question one will be applied. In the case of qualitative and descriptive studies and institutional analysis, an assessment of methodological rigour based on the literature around evaluating qualitative studies will be applied.
The relevant studies that make it through both stages of screening will be summarised in an annotated bibliography. The annotated bibliography lists the relevant studies in table format (see below) and briefly summarises each study in terms of relevant information on methodology, intervention and findings. More specifically, the relevant studies will also be summarised and classified in a table summarising the following information: i) publication details, (ii) description of the intervention and context, (iii) methods, data and sampling, (iv) population, v) findings of relevance to the research question including findings of statistically significant and non-significant impacts and disaggregation (e.g. by gender, age and other characteristics), and vi) contextual factors of importance.
A narrative synthesis approach will be applied to synthesise the findings. 3. Bibliographic database search
The research question
The research question is ‘What is known about the effect of grievance mechanisms on programme outcomes?’ Here we want to know how design of grievance mechanisms mediate programme impacts.
In order to understand it better, the research question can be decomposed into population, intervention and design/implementation factor:
| Population | Intervention | Design/implementation factor | |------------|--------------|------------------------------| | People living in low or middle income countries and who either receive the intervention or are the comparison group | Conditional or unconditional cash transfers | Grievance mechanisms |
Cash transfer Social transfer Financial transfer Monetary transfer Child grant/ disability grant/ old-age grant/ social grant Social assistance Social pension Non-contributory pension Old age pension Child benefit/ disability benefit/ old-age benefit Basic income/ minimum income UCT / CDT Income support
Grievance Complaint Appeal Committee Resolution Redressal Social audit Community meeting Community monitoring Spot checks Feedback
The population has been restricted to people living in low and middle income countries. This includes both beneficiary and control households. The aim of the research question is to analyse the effect of the grievance mechanisms on cash transfers outcomes. The design/implementation factor for this sub-question is grievance mechanisms. The table above also includes all synonyms that will be used in the searches.
Search strings
The search string will be composed of intervention (part 1), design and implementation factor (part 2) and country filter (example below given for SCOPUS filter). In order to capture all possible cash transfers, search strings should include all synonyms listed above. In terms of design/implementation factors, we will use grievance mechanisms and synonyms in the search strings.
The following search strings and will be used (they have been tested in the pilot phase):
1. TITLE-ABS-KEY ( “Cash transfer\*” OR “social transfer\*” OR “financial transfer\*” OR “monetary transfer\*” OR “child grant\*” OR “disability grant\*” OR “old age grant\*” OR “social grant\*” OR “basic grant\*” OR “minimum income grant\*” OR “social assistance” OR welfare OR “social pension\*” OR “non-contributory pension\*” OR “old age pension\*” OR “child benefit\*” OR “disability benefit\*” OR “old age benefit\*” OR cct OR uct OR “income support” )
2. TITLE-ABS-KEY (Grievance\* OR Complaint\* OR Appeal\* OR Committee\* OR Resol\* OR Redress\* OR “Social audit\*” OR “Community meeting\*” OR “Community monitoring” OR “Spot check\*” OR “Feedback”)
3. TITLE-ABS-KEY ( afghanistan OR albania OR algeria OR angola OR argentina OR armenia OR armenian OR aruba OR azerbaijan OR bangladesh OR benin OR byelarus OR byelorussian OR belarus OR belorussian OR belorussia OR belize OR bhutan OR bolivia OR bosnia OR herzegovina OR hercegovina OR botswana OR brasil OR brazil OR bulgaria OR “Burkina Faso” OR “Burkina Fasso” OR “Upper Volta” OR burundi OR urundi OR cambodia OR “Khmer Republic” OR kampuchea OR cameroon OR cameroons OR camer OR cameron OR camoros OR “Cape Verde” OR “Central African Republic” OR chad OR china OR colombia OR comoros OR “Comoro Islands” OR comores OR... mayotte OR congo OR zaire OR “Costa Rica?” OR “Cote d’Ivoire” OR “Ivory Coast” OR cuba OR djibouti OR “French Somaliland” OR dominica OR “Dominican Republic” OR “East Timor” OR “East Timur” OR “Timor Leste” OR ecuador OR egypt OR “United Arab Republic” OR “El Salvador” OR eritrea OR ethiopia OR fiji OR gabon OR “Gabonese Republic” OR gambia OR gaza OR “Georgia Republic” OR “Georgian Republic” OR ghana OR grenada OR guatemala OR guinea OR guiana OR guyana OR haiti OR hungary OR honduras OR india OR maldives OR indonesia OR iran OR iraq OR jamaica OR jordan OR kazakhstan OR kazakh OR kenya OR kiribati OR korea OR kosovo OR kyrgyzstan OR kirghizia OR “Kyrgyz Republic” OR kirghiz OR kirgizstan OR “Lao PDR” OR laos OR lebanon OR lesotho OR basutoland OR liberia OR libya OR macedonia OR madagascar OR “Malagasy Republic” OR malaysia OR malaya OR malay OR malay OR malay OR malawi OR mali OR “Marshall Islands” OR mauritania OR mauritius OR “Agalega Islands” OR mexico OR micronesia OR “Middle East” OR moldova OR moldovia OR mongolia OR montenegro OR morocco OR ifni OR mozambique OR myanmar OR myanmar OR burma OR namibia OR nepal OR “Netherlands Antilles” OR “New Caledonia” OR nicaragua OR niger OR nigeria OR pakistan OR palau OR palestine OR panama OR paraguay OR peru OR philippines OR philippines OR philippines OR philippines OR “Puerto Rico” OR romania OR rumania OR roumania OR rwanda OR ruanda OR “Saint Lucia” OR “St Lucia” OR “Saint Vincent” OR “St Vincent” OR grenadines OR samoa OR “Samoa Islands” OR “Navigator Island” OR “Navigator Islands” OR “Sao Tome” OR senegal OR serbia OR montenegro OR seychelles OR “Sierra Leone” OR “Sri Lanka” OR “Solomon Islands” OR somalia OR “South Africa” OR sudan OR suriname OR surinam OR swaziland OR syria OR tajikistan OR tadzhikistan OR tadzhi OR tanzania OR thailand OR togo OR togolese republic OR tonga OR tunisia OR turkey OR turkmenistan OR turkmen OR uganda OR ukraine OR uzbekistan OR uzbek OR vanuatu OR “New Hebrides” OR venezuela OR vietnam OR “Viet Nam” OR “West Bank” OR yemen OR yugoslavia OR zambia OR zimbabwe OR TITTLE-ABS-KEY (“Developing Countries” OR africa OR asia OR caribbean OR “West Indies” OR “South America” OR “Latin America” OR “Central America” OR developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” OR underserved OR “under served” OR deprived) OR TITTLE-ABS-KEY (poor\* W/1 countr\* OR nation\* OR population\* OR world ) OR TITTLE-ABS-KEY ( developing OR “less\* developed” OR “under developed” OR underdeveloped OR “middle income” OR “low\* income” ) W/1 econom\* ) OR TITTLE-ABS-KEY ( low\* W/1 gdp OR gnp OR “gross domestic” OR “gross national” ) OR TITTLE-ABS-KEY (low W/3 middle W/3 countr\* ) OR TITTLE-ABS-KEY ( lmic OR lmics OR “third world” OR “lami countr\*” OR “transitional countr\*” )
4. Search strings to run in Scopus: #1 AND #2 AND #3 (limited to 2000 onwards)
**Inclusion criteria**
**Stage 1 Screening:**
Inclusion criteria help in deciding whether a study that has been found is relevant. The following inclusion criteria will be applied during the first stage of the screening process (all criteria need to be satisfied for the study to be included). They will be applied to titles, then abstracts, then full text. All studies that are included on the basis of the first stage screening process, will be included in the Stage 2 screening process.
1. **Date:** From 2000
2. **Language:** The review is restricted to English studies
3. **Population:** People that have received a cash transfer, or control households
4. **Geographical locations:** Low and middle income countries
5. **Interventions:** Conditional or unconditional cash transfers. The programmes should be non-contributory, publicly mandated or NGO-provided (so not private transfers, like remittances, or religious donations).
6. **Study design**: The study should be an empirical study (i.e. based on data and or fieldwork) or an institutional analysis. It can be qualitative or quantitative. [Not theoretical; no literature review; not descriptive]
7. **Design/ implementation factor**: grievance mechanisms
8. **Analysis**: Design and implementation factors are explicitly linked to outcomes.
**Stage 2 Screening:**
The second stage assessment will depend on the type of study. In the case of impact evaluation studies, the same assessment tool used for those studies retrieved in research question one will be applied. In the case of qualitative and descriptive studies and institutional analysis, an assessment of methodological rigour based on the literature around evaluating qualitative studies will be applied.
**List of databases used**
- SCOPUS (Elsevier). This database includes 5,682 journals, conference proceedings, trade publications and book series in the Social Sciences category.
- IDEAS-Repec
**4. Snowball technique**
The following four people should be contacted and asked for the five most relevant studies on the research question. We will also look at their websites for relevant publications.
1. Valentina Barca, OPM
2. Nicola Jones, ODI
3. Francisco Ayala, Ayala Consulting
4. Sam Hickey, University of Manchester
Studies shared by experts will be assessed against Stage 1 and Stage 2 screening criteria. We will also check the reference lists of the studies obtained for any further studies that fit the inclusion criteria.
**5. Websites searches**
The following websites/ search engines should be consulted, if possible using the same search strings as for the academic databases. Any studies found on these websites will be assessed against the same Stage 1 and Stage 2 screening criteria.
- Google (the first five pages)
- World Bank
- R4D DFID
- International Policy Centre for Inclusive Growth (IPC-IG)
- International Food Policy Research Institute (IFPRI)
- GSDRC
- OPM website
- Transfer Project (UNC Chapel Hill)
- ECLAC/ CEPAL
- IADB website
- ADB website
- IDS website
- BLDS website
- Social Science Research Network
6. Classification of studies
Studies that have passed both screening stages will be classified and described in an annotated bibliography. The classification tables will include the following information:
- authors and year of study
- geographical coverage
- detailed description of intervention and context
- population
- methods, sampling and data
- summary findings on design and implementation factor Sub-question 2f: What is the effect of complementary and supply-side services on programme outcomes?
1. The review research questions
The systematic literature reviews should assess the state of knowledge on the following question: *What is known about the effect of complementary services on programme outcomes?*
2. Methodology
The systematic literature reviews should combine three tracks. These tracks are briefly explained here and further instructions are given below.
1. **Bibliographic database search:** Searching a previously agreed upon list of academic databases, using consistent search strings (see below) that have been tested beforehand and applying inclusion/exclusion criteria.
2. **Snowball technique:** Contacting approximately five key experts in the field and asking them for recommendations for important studies on the research question. This also includes looking at the experts’ websites and publication lists and including relevant studies. Finally, we will be looking for further relevant studies in the bibliographies of the experts’ studies and recommended studies.
3. **Websites searches:** Searching previously agreed on websites (see below) for relevant studies using similar search terms as for the bibliographic databases. This also includes a google search for other grey literature.
Studies will be screened and assessed using the EPPI Reviewer software. After an initial broad screening process that considers overall study design, as well as other broader inclusion/exclusion criteria, a second round of screening will be conducted. The second stage assessment will depend on the type of study. In the case of impact evaluation studies, the same assessment tool used for those studies retrieved in research question one will be applied. In the case of qualitative and descriptive studies and institutional analysis, an assessment of methodological rigour based on the literature around evaluating qualitative studies will be applied.
The relevant studies that make it through both stages of screening will be summarised in an annotated bibliography. The annotated bibliography lists the relevant studies in table format (see below) and briefly summarises each study in terms of relevant information on methodology, intervention and findings. More specifically, the relevant studies will also be summarised and classified in a table summarising the following information: i) publication details, (ii) description of the intervention and context, (iii) methods, data and sampling, (iv) population, v) findings of relevance to the research question including findings of statistically significant and non-significant impacts and disaggregation (e.g. by gender, age and other characteristics), and vi) contextual factors of importance.
A narrative synthesis approach will be applied to synthesise the findings. 3. Bibliographic database search
The research question
The research question is ‘What is known about the effect of complementary services on programme outcomes?’ Here we want to know how complementary services mediate programme impacts.
In order to understand it better, the research question can be decomposed into population, intervention and design/implementation factor:
| Population | Intervention | Design/implementation factor | |------------|--------------|-----------------------------| | People living in low or middle income countries and who either receive the intervention or are the comparison group | Conditional or unconditional cash transfers | Complementary services |
| Cash transfer | Social transfer | Financial transfer | Monetary transfer | Child grant/ disability grant/ old-age grant/ social grant | Social assistance | Social pension | Non-contributory pension | Old age pension | Child benefit/ disability benefit/ old-age benefit | Basic income/ minimum income | UCT/ CCT | Complementary services | Accompanying services | Training | Campaign | Supply-side | Job search | Job matching | Income-generating opportunity\* | Livelihoods support | Financial services | Financial literacy | Microcredit | Skills training | Social work | Social care | Nutrition services | Sensitisation | Information campaign | Information meeting | Linkage\* | Case management | Social service | Social support | Child care | Parenting class | Legal aid | One stop shop | Coaching | Housing |
The population has been restricted to people living in low and middle income countries. This includes both beneficiary and control households. The aim of the research question is to analyse the effect of complementary services on cash transfers outcomes. The design/implementation factor for this sub-question is complementary services. The table above also includes all synonyms that will be used in the searches.
Search strings
The search string will be composed of intervention (part 1), design and implementation factor (part 2) and country filter (example below given for SCOPUS filter). In order to capture all possible cash transfers, search strings should include all synonyms listed above. In terms of design/implementation factors, we will complementary services and synonyms in the search strings. The following search strings and will be used (they have been tested in the pilot phase):
1. TITLE-ABS-KEY ( “Cash transfer\*” OR “social transfer\*” OR “financial transfer\*” OR “monetary transfer\*” OR “child grant\*” OR “disability grant\*” OR “old age grant\*” OR “social grant\*” OR “basic grant\*” OR “minimum income grant\*” OR “social assistance” OR welfare OR “social pension\*” OR “non-contributory pension\*” OR “old age pension\*” OR “child benefit\*” OR “disability benefit\*” OR “old age benefit\*” OR cct OR uct OR “income support” )
2. TITLE-ABS-KEY (“complementary service\*” OR training\* OR “accompanying service\*” OR campaign\* OR supply-side OR “job search\*” OR “job match\*” OR “income-generating opportunit\*” OR “livelihood” W/1 support\* OR “financial service\*” OR “financial literacy” OR microcredit\* OR microfinance OR “skill\*” training\*” OR “social work” OR “social care” OR “social service\*” OR “social support” OR “nutrition service\*” OR “sensitisation” OR sensitization OR “information campaign\*” OR “information meeting\*” OR “case management” OR linkage\* OR housing OR “child care” OR “parenting class\*” OR “legal aid” OR “one stop shop” OR coach\*)
3. TITLE-ABS-KEY (afghanistan OR albania OR algeria OR angola OR argentina OR armenia OR armenian OR aruba OR azerbaijan OR bangladesh OR benin OR byelarus OR byelorussian OR belarus OR belorussian OR belorussia OR belize OR bhutan OR bolivia OR bosnia OR herzegovina OR hercegovina OR botswana OR brasil OR brazil OR bulgaria OR “Burkina Faso” OR “Burkina Fasso” OR “Upper Volta” OR burundi OR urundi OR cambodia OR “Khmer Republic” OR kampuchea OR cameroon OR cameroons OR cameron OR camoros OR “Cape Verde” OR “Central African Republic” OR chad OR china OR colombia OR comoros OR “Comoro Islands” OR comores OR mayotte OR congo OR zaire OR “Costa Rica\*” OR “Cote d’Ivoire” OR “Ivory Coast” OR cuba OR djibouti OR “French Somaliland” OR dominica OR “Dominican Republic” OR “East Timor” OR “East Timur” OR “Timor Leste” OR ecuador OR egypt OR “United Arab Republic” OR “El Salvador” OR eritrea OR ethiopia OR fiji OR gabon OR “Gabonese Republic” OR gambia OR gaza OR “Georgia Republic” OR “Georgian Republic” OR ghana OR grenada OR guatemala OR guinea OR guiana OR guyana OR haiti OR hungary OR honduras OR india OR maldives OR indonesie OR iran OR iraq OR jamaica OR jordan OR kazakhstan OR kazakh OR kenya OR kiribati OR korea OR kosovo OR krygyzstan OR kirghizia OR “Krygz Republic” OR kirghiz OR kirgizstan OR “Lao PDR” OR laos OR lebanon OR lesotho OR basutoland OR liberia OR libya OR macedonia OR madagascar OR “Malagasy Republic” OR malaysia OR malaya OR malay OR sabah OR sarawak OR malawi OR mali OR “Marshall Islands” OR mauritania OR mauritius OR “Agalega Islands” OR mexico OR micronesia OR “Middle East” OR moldova OR moldovia OR moldovan OR mongolia OR montenegro OR morocco OR ifni OR mozambique OR myanmar OR myanmar OR burma OR namibia OR nepal OR “Netherlands Antilles” OR “New Caledonia” OR nicaragua OR niger OR nigeria OR pakistan OR palau OR palestine OR panama OR paraguay OR peru OR philippines OR philippines OR philippines OR “Puerto Ric\*” OR romania OR rumania OR roumania OR rwanda OR ruanda OR “Saint Lucia” OR “St Lucia” OR “Saint Vincent” OR “St Vincent” OR grenadines OR samoa OR “Samoa Islands” OR “Navigator Island” OR “Navigator Islands” OR “Sao Tome” OR senegal OR serbia OR montenegro OR seychelles OR “Sierra Leone” OR “Sri Lanka” OR “Solomon Islands” OR somalia OR “South Africa” OR sudan OR suriname OR surinam OR swaziland OR syria OR tajikistan OR tadzhikistan OR tadjikistan OR tadzhik OR tanzania OR thailand OR togo OR togoles republic OR tonga OR tunisia OR turkey OR turkmenistan OR turkmen OR uganda OR ukraine OR uzbekistan OR uzbek OR vanuatu OR “New Hebrides” OR venezuela OR vietnam OR “Viet Nam” OR “West Bank” OR yemen OR yugoslavia OR zambia OR zimbabwe) OR TITLE-ABS-KEY (“Developing Countries” OR africa OR asia OR caribbean OR “West Indies” OR “South America” OR “Latin America” OR “Central America” OR developing OR “less\*” developed OR “under developed” OR underdeveloped OR “middle income” OR “low\*” income OR underserved OR “under served” OR deprived) OR TITLE-ABS-KEY (poor\* W/1 countr\* OR nation\* OR population\* OR world) OR TITLE-ABS-KEY ((developing OR “less\*” developed) OR “under developed” OR underdeveloped OR “middle income” OR “low\*” income) W/1 econom\*)) OR TITLE-ABS-KEY (low\* W/1 gdp OR gnp OR “gross domestic” OR “gross national”) OR TITLE-ABS-KEY (low W/3 middle W/3 countr\*) OR TITLE-ABS-KEY (lmic OR lmic OR “third world” OR “lami countr\*” OR “transitional countr\*”)
4. Search strings to run in Scopus: #1 AND #2 AND #3 (limited to 2000 onwards) Inclusion criteria
Stage 1 Screening:
Inclusion criteria help in deciding whether a study that has been found is relevant. The following inclusion criteria will be applied during the first stage of the screening process (all criteria need to be satisfied for the study to be included). They will be applied to titles, then abstracts, then full text. All studies that are included on the basis of the first stage screening process, will be included in the Stage 2 screening process.
1. Date: From 2000
2. Language: The review is restricted to English studies
3. Population: People that have received a cash transfer, or control households
4. Geographical locations: Low and middle income countries
5. Interventions: Conditional or unconditional cash transfers. The programmes should be non-contributory, publicly mandated or NGO-provided (so not private transfers, like remittances, or religious donations).
6. Study design: The study should be an empirical study (i.e. based on data and or fieldwork) or an institutional analysis. It can be qualitative or quantitative. [Not theoretical; no literature review; not descriptive]
7. Design/ implementation factor: Complementary services
8. Analysis: Design and implementation factors are explicitly linked to outcomes.
Stage 2 Screening:
The second stage assessment will depend on the type of study. In the case of impact evaluation studies, the same assessment tool used for those studies retrieved in research question one will be applied. In the case of qualitative and descriptive studies and institutional analysis, an assessment of methodological rigour based on the literature around evaluating qualitative studies will be applied.
List of databases used
- SCOPUS (Elsevier). This database includes 5,682 journals, conference proceedings, trade publications and book series in the Social Sciences category.
- IDEAS-Repec
4. Snowball technique
The following people should be contacted and asked for the five most relevant studies on the research question. We will also look at their websites for relevant publications.
1. Jenn Yablonksi, UNICEF
2. Elena Gaia, UNICEF
3. Fabio Veras Soares, IPC
4. Norbert Schady, IADB
5. Orazio Attansio, UCL
6. Carine Clert, World Bank
Studies shared by experts will be assessed against Stage 1 and Stage 2 screening criteria. We will also check the reference lists of the studies obtained for any further studies that fit the inclusion criteria. 5. Websites searches
The following websites/search engines should be consulted, if possible using the same search strings as for the academic databases. Any studies found on these websites will be assessed against the same Stage 1 and Stage 2 screening criteria.
- Google (the first five pages)
- World Bank
- R4D DFID
- International Policy Centre for Inclusive Growth (IPC-IG)
- International Food Policy Research Institute (IFPRI)
- GSDRC
- OPM website
- Transfer Project (UNC Chapel Hill)
- ECLAC/CEPAL
- IADB website
- ADB website
- IDS website
- BLDS website
- Social Science Research Network
6. Classification of studies
Studies that have passed both screening stages will be classified and described in an annotated bibliography. The classification tables will include the following information:
- authors and year of study
- geographical coverage
- detailed description of intervention and context
- population
- methods, sampling and data
- summary findings on design and implementation factor Part 2. Study assessment tools
As described in detail in Chapter 4, in the second stage of screening of the studies retrieved, separate tools were used to assess studies for risk of bias (for counterfactual impact analysis studies) and quality (for qualitative papers, considered under the searches for studies on the links between policy design and implementation factors and outcomes). Both tools are reported below.
Table A2.1 Proposed framework for assessing risk of bias for quantitative impact studies
| Domain | Key questions to consider | Criteria for judging risk of bias | Risk of bias | |-------------------------------|------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------|--------------| | Selection bias and confounding| • Does the comparison group provide a reliable counterfactual? | Random assignment to treatment and comparison, differences not greater than expected by chance and units of random assignment match units of analysis. Extensive information on equivalence of treatment and control groups, only minor differences exist and adequate attempts to deal with differences in observables and unobservables. | Low | | | • Are all relevant observable and unobservable differences between groups accounted for? | Information on equivalence of groups but obvious differences exist for important variables and no / inadequate attempt to correct for selection bias. No information on group equivalence. | High | | Attrition bias | Is any non-random attrition in the sample a threat to validity? | Careful statistical controls used for effects of attrition, or attrition is minimal so that danger of differential attrition is addressed. Possible differential attrition between intervention and control is identified and discussed and is not likely to lead to significant bias. | Low | | | | Attrition from treatment or comparison group is moderate or high (~30% or more) and no attempt to determine effects of attrition on outcomes. | High | | Statistical significance | Are there biases leading to Type I or Type II errors? | No unit of analysis errors (e.g. account is taken for cluster survey design), heterogeneity between groups considered, sample size sufficiently large and regression addresses heteroscedasticity (e.g. robust standard errors). | Low | | | | Unit of analysis errors, no account for heterogeneity, insignificant results could be due to insufficient sample size and / or no account for heteroscedasticity. | High | | Other bias | Are results subject to other forms of bias? | Study appears to be largely free of other sources of bias. | Low | | | | There is at least one significant risk of bias in the study (e.g. performance bias, detection bias, outcome reporting bias, courtesy bias etc.) | High |
Source: Authors’ elaboration based on The Cochrane Collaboration Risk of Bias Tool (2011), Yoong et al. (2012) and Hombrados and Waddington (2012).
### Table A2.2 Framework for assessing rigour of qualitative, institutional analysis and descriptive studies considering design and implementation features
| Domain | Questions to guide assessment | Comment | Judgement (no concerns, some concerns, or major concerns) | |-------------------------------|------------------------------------------------------------------------------------------------|---------|----------------------------------------------------------| | Clarity and transparency of approach | Are there clear research questions or objectives set out either explicitly or implicitly? | | | | | Are the data/information sources and collection processes made clear? | | | | | Is there an analytical/ conceptual framework? | | | | | Are the approaches or methods of analysis discussed? | | | | | Is there a discussion of limitations of the evidence and what remains unknown or unclear? | | | | Credibility of findings | Do the conclusions logically follow from the data/information and analysis presented? | | | | | Is there a clear discussion of how assessments or judgements have been reached? | | | | | Is corroborating evidence used to support or refine findings? | | | | Acknowledgement of potential internal bias or limitations | Are all risks of bias among any subjects involved acknowledged (e.g. due to exaggeration, anecdotal reports, Hawthorne effects, sensitivity of issues discussed)? | | | | | Is potential bias among the researchers considered? | | | | External validity¹ | Is the methodological approach, including sample size and composition, appropriate to the level of claims made? | | | | | Is evidence given to support any claims of wider inference? | | | | | Is there a discussion of limitations of drawing wider inference? | | |
Source: Authors’ elaboration drawing on DFID (2014) and Spencer et al. (2003)
¹ Here we adopt the definition of Shadish et al. (2002) who define external validity as ‘inferences about whether cause–effect relationships hold over variation in persons, settings, treatment variables and measurement variables’. Annex 3 Summary table of searches and reasons for exclusion and flow diagrams
Table A3.1 below provides an overview of the number of studies at different stages of the review for each sub-question. The table shows studies retrieved from each of the sources as set out in the search protocols. Most studies were retrieved from bibliographic databases, ranging from 305 studies (question 2e) to 10,623 studies (question 1d). However, many of these were subsequently found to not be relevant and were excluded at Stage 1 screening. From the database searches, between 7 (2e) and 68 (2b) were included in the Stage 2 screening.
The table also shows the number of studies retrieved from other sources, including website searches, review studies and snowballing, and expert suggestions. Studies identified as relevant from other sub-questions were also included. A comparatively high number of studies were retrieved from websites, where the emphasis was placed on retrieving the grey literature, with as many as 79 (1a) studies retrieved. With regards to responses from experts, when asked to suggest seminal studies on the subject, we received up to 9 (1a, 1b, 1c and 1e) relevant references, and for some of the sub-questions we did not receive any relevant suggestions (2a, 2e and 2f). The final column in Table A3.1 indicates the total number of studies that underwent risk of bias / quality assessment.
The flow diagrams that follow Table A3.1 provide a detailed summary of the number of studies that passed through the different stages for each sub-question, from retrieval to assessment. These are then followed by an accompanying set of tables that summarise the specific reasons for exclusion of studies from bibliographic databases during Stage 1 screening (Tables A3.2a, A3.2b, A3.3a, A3.3b). As can be seen, the main reasons for exclusion during the title and abstract screening relate to the intervention (64% of those excluded for studies under 1a to 1f and 86% for 2a to 2f). During full text screening, the study design was one of the main reasons for exclusion, along with studies being relevant instead for other sub-questions (for studies identified under 2d and 2f).
As highlighted in the flow diagrams, a number of studies were also excluded during stage Two screening on account of them not meeting all of the original inclusion criteria. The main reason for studies being excluded at this stage was linked to the study design not meeting the basic inclusion criteria (around three quarters of all cases). After that, 8% were excluded for not reporting on the outcome or design and implementation feature being considered. In order of importance, other reasons for exclusion included no access (6%), the intervention (5%), geographical location (4%), being a remaining duplicate (2%) and language (1%).
For sub-questions 1c to 1f, a Text Mining tool in the EPPI software was used in order to assist in screening studies. In brief, the approach involves carrying out the first stage of screening to a random sample of at least 1,000 studies. The text mining tool then uses information from these studies and, based on the screening decisions made, identifies relevant studies for further screening, upon which manual screening is carried out. Further details of how this process was implemented is provided in Chapter 4. As regards to the flow diagrams, details are therefore given in the diagrams for questions 1c to 1f of the number of studies excluded through the Text Mining process.
Table A3.1: Overview of studies retrieved by source and passing through different stages of assessment
| Question | Database retrieval | Database studies: Stage 1 Screening | Studies retrieved from other sources | |----------|--------------------|-------------------------------------|-------------------------------------| | | Studies retrieved after initial de-duplication | Additional duplicates | Total screened at Title & Abstract | Studies excluded at Title & Abstract | Studies excluded at Full Text | Database studies entering Stage 2 Screening | Papers retrieved: Websites | Papers retrieved: Review studies & snowballing | Papers retrieved: Expert suggestions | Papers retrieved: From other sub-questions | Studies undergoing Risk of Bias assessment | | Q1a | 4,956 | 106 | 4,850 | 4,615 | 183 | 52 | 79 | 10 | 9 | 27 | 75 | | Q1b | 950 | 4 | 946 | 829 | 52 | 65 | 57 | 16 | 9 | 136 | 120 | | Q1c | 4,197 | 60 | 4,137 | 4,068 | 10 | 59 | 59 | 10 | 9 | 30 | 125 | | Q1d | 10,623 | 64 | 10,559 | 10,509 | 32 | 18 | 34 | 2 | 7 | 6 | 42 | | Q1e | 5,865 | 8 | 5,859 | 5,765 | 48 | 48 | 39 | 4 | 9 | 54 | 93 | | Q1f | 4,080 | 9 | 4,051 | 3,977 | 20 | 54 | 24 | 3 | 8 | 120 | 56 | | Q2a | 561 | 2 | 559 | 476 | 30 | 53 | 23 | 1 | 0 | 51 | 41 | | Q2b | 1,671 | 7 | 1,664 | 1,559 | 37 | 68 | 8 | 0 | 2 | 7 | 25 | | Q2c | 742 | 4 | 738 | 652 | 32 | 54 | 21 | 0 | 1 | 10 | 10 | | Q2d | 1,906 | 3 | 1,903 | 1,800 | 81 | 22 | 12 | 0 | 1 | 4 | 14 | | Q2e | 305 | 0 | 305 | 297 | 1 | 7 | 5 | 0 | 0 | 3 | 2 | | Q2f | 1,533 | 3 | 1,530 | 1,466 | 35 | 29 | 7 | 1 | 0 | 43 | 21 |
Key for sub-questions: 1a = monetary poverty and inequality; 1b = education; 1c = health and nutrition; 1d = savings, investment and production; 1e = employment; 1f = empowerment; 2a = core design features; 2b = conditionalities; 2c = targeting features; 2d = payment systems; 2e = grievance mechanisms and programme governance; 2f = complementary interventions and supply-side services. Figure A3.1 Flow diagram for question 1a on monetary poverty
Studies retrieved from database search following initial de-duplication (n = 4,956)
Further duplicates removed (n = 106)
Studies from database search screened by title and abstract (n = 4,850)
Studies excluded (n = 4,615)
Studies from database search screened at full text (n = 235)
Studies excluded (n = 183)
Studies from database search entering stage two screening (n = 52)
Studies excluded (n = 102)
Studies retrieved from other sources (n = 125), including:
- Websites (n = 79)
- Snowballing (n = 10)
- Expert suggestions (n = 9)
- From other sub-questions (n = 27)
Studies undergoing Risk of Bias / Quality Assessment (n = 75)
Studies passing (n = 34)
Final studies reporting on selected indicators (n = 44)
Additional “passed” studies identified as relevant from other sub-questions (n = 27)
Total number of studies considered for extraction under this outcome (n = 61) Figure A3.2 Flow diagram for question 1b on education
Studies retrieved from database search following initial de-duplication (n = 950)
Further duplicates removed (n = 4)
Studies from database search screened by title and abstract (n = 946)
Studies excluded (n = 829)
Studies from database search screened at full text (n = 117)
Studies excluded (n = 52)
Studies from database search entering stage two screening (n = 65)
Studies retrieved from other sources (n = 218), including:
- Websites (n = 57)
- Snowballing (n = 16)
- Expert suggestions (n = 9)
- From other sub-questions (n = 136)
Studies undergoing Risk of Bias / Quality Assessment (n=120)
Studies excluded (n = 163)
Studies passing (n = 74)
Final studies reporting on selected indicators (n = 42)
Additional “passed” studies identified as relevant from other sub-questions (n = 25)
Total number of studies considered for extraction under this outcome (n = 99) Figure A3.3 Flow diagram for question 1c on health and nutrition
Studies retrieved from database search following initial de-duplication (n = 4,197)
Studies from database search screened by title and abstract using Text Mining (n = 4,137)
Studies from database search screened at full text (n = 69)
Studies from database search entering stage two screening (n = 59)
Studies retrieved from other sources (n = 108), including:
- Websites (n = 59)
- Snowballing (n = 10)
- Expert suggestions (n = 9)
- From other sub-questions (n = 30)
Studies undergoing Risk of Bias / Quality Assessment (n=125)
Studies passing (n = 64)
Final studies reporting on selected indicators (n = 41)
Additional “passed” studies identified as relevant from other sub-questions (n = 25)
Total number of studies considered for extraction under this outcome (n = 89) Figure A3.4 Flow diagram for question 1d on investment, savings and production
Studies retrieved from database search following initial de-duplication (n = 10,623)
Further duplicates removed (n = 64)
Studies from database search screened by title and abstract using Text Mining (n = 10,559)
Excluded through initial screening (n = 1,527) Excluded through Text Mining (n = 8,982) Total excluded (n = 10,509)
Studies from database search screened at full text (n = 50)
Studies excluded at full text (n = 32)
Studies from database search entering stage two screening (n = 18)
Studies retrieved from other sources (n = 49), including:
- Websites (n = 34)
- Snowballing (n = 2)
- Expert suggestions (n = 7)
- From other sub-questions (n = 6)
Studies undergoing Risk of Bias / Quality Assessment (n=42)
Studies excluded (n = 25)
Studies passing (n = 32)
Final studies reporting on selected indicators (n = 27)
Additional “passed” studies identified as relevant from other sub-questions (n = 5)
Total number of studies considered for extraction under this outcome (n = 37) Figure A3.5 Flow diagram for question 1e on employment
Studies retrieved from database search following initial de-duplication (n = 5,865)
Further duplicates removed (n = 6)
Studies from database search screened by title and abstract using Text Mining (n = 5,859)
Excluded through initial screening (n = 1,122) Excluded through Text Mining (n = 4,643) Total excluded (n = 5,765)
Studies from database search screened at full text (n = 94)
Studies excluded at full text (n = 46)
Studies from database search entering stage two screening (n = 48)
Studies retrieved from other sources (n = 106), including:
- Websites (n = 39)
- Snowballing (n = 4)
- Expert suggestions (n = 9)
- From other sub-questions (n = 54)
Studies undergoing Risk of Bias / Quality Assessment (n=93)
Studies excluded (n = 60)
Studies passing (n = 61)
Final studies reporting on selected indicators (n = 74)
Additional “passed” studies identified as relevant from other sub-questions (n = 19)
Total number of studies considered for extraction under this outcome (n = 80) Figure A3.6 Flow diagram for question 1f on empowerment
Studies retrieved from database search following initial de-duplication (n = 4,060)
Further duplicates removed (n = 9)
Studies from database search screened by title and abstract using Text Mining (n = 4,051)
Excluded through initial screening (n = 1,204) Excluded through Text Mining (n = 2,773) Total excluded (n = 3,977)
Studies from database search screened at full text (n = 74)
Studies excluded at full text (n = 20)
Studies from database search entering stage two screening (n = 54)
Studies retrieved from other sources (n = 155), including:
- Websites (n = 24)
- Snowballing (n = 3)
- Expert suggestions (n = 8)
- From other sub-questions (n = 120)
Studies undergoing Risk of Bias / Quality Assessment (n=56)
Studies excluded (n = 153)
Studies passing (n = 36)
Final studies reporting on selected indicators (n = 31)
Additional “passed” studies identified as relevant from other sub-questions (n = 18)
Total number of studies considered for extraction under this outcome (n = 54) Figure A3.7 Flow diagram for question 2a on core design parameters
Studies retrieved from database search following initial de-duplication (n = 561)
Further duplicates removed (n = 2)
Studies from database search screened by title and abstract (n = 559)
Studies excluded (n = 476)
Studies from database search screened at full text (n = 83)
Studies excluded (n = 30)
Studies from database search entering stage two screening (n = 53)
Studies retrieved from other sources (n = 75), including:
- Websites (n = 23)
- Snowballing (n = 1)
- Expert suggestions (n = 0)
- From other sub-questions (n = 51)
Studies undergoing Risk of Bias / Quality Assessment (n = 42)
Studies excluded (n = 86)
Studies passing (n = 25)
Final studies from which evidence extracted (across all outcome areas) (n = 40)
Additional “passed” studies identified as relevant from other sub-questions (n = 16)
Total number of studies considered for extraction under this outcome (n = 41) Figure A3.8 Flow diagram for question 2b on conditionality
Studies retrieved from database search following initial de-duplication (n = 1,671)
Further duplicates removed (n = 7)
Studies from database search screened by title and abstract (n = 1,664)
Studies excluded (n = 1,559)
Studies from database search screened at full text (n = 105)
Studies excluded (n = 37)
Studies from database search entering stage two screening (n = 68)
Studies excluded (n = 60)
Studies retrieved from other sources (n = 17), including:
- Websites (n = 8)
- Snowballing (n = 0)
- Expert suggestions (n = 2)
- From other sub-questions (n = 7)
Studies undergoing Risk of Bias / Quality Assessment (n = 25)
Studies passing (n = 19)
Final studies from which evidence extracted (across all outcome areas) (n = 11)
Additional “passed” studies identified as relevant from other sub-questions (n = 2)
Total number of studies considered for extraction under this outcome (n = 21) Figure A3.9 Flow diagram for question 2c on targeting
Studies retrieved from database search following initial de-duplication (n = 742)
Further duplicates removed (n = 4)
Studies from database search screened by title and abstract (n = 738)
Studies excluded (n = 652)
Studies from database search screened at full text (n = 86)
Studies excluded (n = 32)
Studies from database search entering stage two screening (n = 54)
Studies retrieved from other sources (n = 32), including:
- Websites (n = 21)
- Snowballing (n = 0)
- Expert suggestions (n = 1)
- From other sub-questions (n = 10)
Studies undergoing Risk of Bias / Quality Assessment (n = 10)
Studies excluded (n = 76)
Studies passing (n = 6)
Final studies from which evidence extracted (across all outcome areas) (n = 1)
Additional “passed” studies identified as relevant from other sub-questions (n = 1)
Total number of studies considered for extraction under this outcome (n = 7) Figure A3.10 Flow diagram for question 2d on payment systems
Studies retrieved from database search following initial de-duplication (n = 1,906)
Further duplicates removed (n = 3)
Studies from database search screened by title and abstract (n = 1,903)
Studies excluded (n = 1,800)
Studies from database search screened at full text (n = 103)
Studies excluded (n = 81)
Studies from database search entering stage two screening (n = 22)
Studies retrieved from other sources (n = 18), including:
- Websites (n = 13)
- Snowballing (n = 0)
- Expert suggestions (n = 1)
- From other sub-questions (n = 4)
Studies undergoing Risk of Bias / Quality Assessment (n = 14)
Studies passing (n = 4)
Final studies from which evidence extracted (across all outcome areas) (n = 2)
Additional “passed” studies identified as relevant from other sub-questions (n = 0)
Total number of studies considered for extraction under this outcome (n = 4) Figure A3.11 Flow diagram for question 2e on grievance mechanisms and programme governance
Studies retrieved from database search following initial de-duplication (n = 305)
Further duplicates removed (n = 0)
Studies from database search screened by title and abstract (n = 305)
Studies excluded (n = 297)
Studies from database search screened at full text (n = 8)
Studies excluded (n = 1)
Studies from database search entering stage two screening (n = 7)
Studies retrieved from other sources (n = 8), including:
- Websites (n = 5)
- Snowballing (n = 0)
- Expert suggestions (n = 0)
- From other sub-questions (n = 3)
Studies undergoing Risk of Bias / Quality Assessment (n = 2)
Studies passing (n = 0)
Final studies from which evidence extracted (across all outcome areas) (n = 0)
Additional “passed” studies identified as relevant from other sub-questions (n = 0)
Total number of studies considered for extraction under this outcome (n = 0) Figure A3.12 Flow diagram for question 2f on complementary interventions and supply-side services
Studies retrieved from database search following initial de-duplication (n = 1,533)
Further duplicates removed (n = 3)
Studies from database search screened by title and abstract (n = 1,530)
Studies excluded (n = 1466)
Studies from database search screened at full text (n = 64)
Studies excluded (n = 35)
Studies from database search entering stage two screening (n = 29)
Studies retrieved from other sources (n = 51), including:
- Websites (n = 7)
- Snowballing (n = 1)
- Expert suggestions (n = 0)
- From other sub-questions (n = 43)
Studies undergoing Risk of Bias / Quality Assessment (n = 21)
Studies excluded (n = 59)
Studies passing (n = 11)
Final studies from which evidence extracted (across all outcome areas) (n = 8)
Additional “passed” studies identified as relevant from other sub-questions (n = 3)
Total number of studies considered for extraction under this outcome (n = 14) Tables summarising reasons for exclusion (studies retrieved from bibliographic database searches)
### Table A3.2a. Reasons for exclusion: Stage 1 screening Title and Abstract (sub-questions 1a-1f)
| Total screened at Title & Abstract | Date | Language | Population | Geographical location | Intervention | Study design | Outcome | Relevant for different sub-question | Review study | Exclude on text mining | Sub total | Exclude | Total excluded | Total screened at full text | |-----------------------------------|------|----------|------------|-----------------------|--------------|--------------|---------|-------------------------------------|--------------|------------------------|-----------|---------|----------------|--------------------------| | Q1a | 4,850| 0 | 1 | 0 | 170 | 3894 | 75 | 78 | 384 | 3 | 4615 | NA | 4615 | 235 | | Q1b | 946 | 0 | 0 | 1 | 21 | 726 | 20 | 17 | 42 | 2 | 829 | NA | 829 | 117 | | Q1c | 4,137| 2 | 0 | 312 | 103 | 395 | 181 | 731 | 8 | 49 | 1773 | 2295 | 4068 | 69 | | Q1d | 10,559| 0 | 0 | 2 | 22 | 1095 | 73 | 39 | 293 | 3 | 1527 | 8982 | 10509 | 50 | | Q1e | 5,859| 0 | 0 | 0 | 40 | 892 | 35 | 34 | 121 | 0 | 1122 | 4643 | 5765 | 94 | | Q1f | 4,051| 0 | 0 | 39 | 66 | 106 | 107 | 845 | 27 | 14 | 1204 | 2773 | 3977 | 74 | | Totals | 30,402| 2 | 1 | 354 | 422 | 7108 | 491 | 1744 | 877 | 71 | 11070 | 18693 | 29763 | 639 | | % of subtotal excluded | 0% | 0% | 3% | 4% | 64% | 4% | 16% | 8% | 1% | | 0% | 0% | 0% | 1% |
### Table A3.2b. Reasons for exclusion: Stage 1 screening Title and Abstract (sub-questions 2a-2f)
| Total screened at Title & Abstract | Date | Language | Population | Geographical location | Intervention | Study design | Design / implementation feature | Relevant for different sub-question | Review study | Analysis | Total excluded | Total screened at full text | |-----------------------------------|------|----------|------------|-----------------------|--------------|--------------|---------------------------------|-------------------------------------|--------------|---------|----------------|--------------------------| | Q2a | 559 | 0 | 0 | 1 | 21 | 287 | 52 | 6 | 94 | 4 | 11 | 476 | | Q2b | 1664 | 0 | 4 | 0 | 61 | 1295 | 83 | 12 | 99 | 2 | 3 | 1558 | | Q2c | 738 | 0 | 1 | 0 | 15 | 493 | 62 | 23 | 34 | 1 | 23 | 652 | | Q2d | 1,903| 0 | 0 | 0 | 27 | 1706 | 53 | 13 | 0 | 1 | 0 | 1800 | | Q2e | 305 | 0 | 0 | 0 | 11 | 273 | 5 | 4 | 4 | 0 | 0 | 297 | | Q2f | 1,530| 0 | 2 | 0 | 81 | 1297 | 46 | 16 | 24 | 0 | 0 | 1466 | | Totals | 6699 | 0 | 7 | 1 | 216 | 5351 | 301 | 74 | 255 | 8 | 37 | 6250 | | % of subtotal excluded | 0% | 0% | 0% | 3% | 86% | 5% | 1% | 4% | 0% | 0% | 1% | 1% |
### Table A3.3a. Reasons for exclusion: Stage 1 screening Full Text (sub-questions 1a-1f)
| Total screened at Full Text | Date | Language | Population | Geographical location | Intervention | Study design | Outcome | Relevant for different sub-question | Additional duplicate | Review study | No access | Total excluded | Total entering Stage 2 screening | |-----------------------------|------|----------|------------|-----------------------|--------------|--------------|---------|-------------------------------------|----------------------|-------------|-----------|----------------|-------------------------------| | 01a | 235 | 0 | 0 | 0 | 3 | 7 | 107 | 13 | 0 | 0 | 53 | 0 | 183 | | 01b | 117 | 0 | 3 | 0 | 0 | 3 | 22 | 5 | 0 | 2 | 8 | 9 | 52 | | 01c | 69 | 0 | 0 | 0 | 0 | 0 | 10 | 0 | 0 | 0 | 0 | 0 | 10 | | 01d | 50 | 0 | 0 | 0 | 0 | 0 | 17 | 9 | 0 | 1 | 5 | 0 | 32 | | 01e | 94 | 0 | 1 | 0 | 1 | 4 | 27 | 4 | 0 | 2 | 0 | 7 | 46 | | 01f | 74 | 0 | 0 | 0 | 0 | 0 | 18 | 2 | 0 | 0 | 0 | 0 | 20 | | Totals | 639 | 0 | 4 | 0 | 4 | 14 | 201 | 33 | 0 | 5 | 66 | 16 | 343 | | % of total excluded | 0% | 1% | 0% | 1% | 4% | 59% | 10% | 0% | 1% | 19% | 5% | 5% | 296 |
### Table A3.3b. Reasons for exclusion: Stage 1 screening Full Text (sub-questions 2a-2f)
| Total screened at Full Text | Date | Language | Population | Geographical location | Intervention | Study design | Design / Implementation factor | Relevant for different sub-question | Additional duplicate | Analysis | No access | Total excluded | Total entering Stage 2 screening | |-----------------------------|------|----------|------------|-----------------------|--------------|--------------|-------------------------------|-------------------------------------|----------------------|----------|-----------|----------------|-------------------------------| | 02a | 83 | 0 | 0 | 0 | 1 | 2 | 8 | 12 | 0 | 0 | 4 | 3 | 30 | | 02b | 105 | 0 | 0 | 0 | 0 | 0 | 12 | 6 | 0 | 0 | 14 | 5 | 37 | | 02c | 86 | 0 | 0 | 0 | 0 | 0 | 11 | 7 | 0 | 0 | 8 | 6 | 32 | | 02d | 103 | 0 | 0 | 0 | 0 | 0 | 1 | 3 | 4 | 67 | 3 | 1 | 2 | | 02e | 8 | 0 | 0 | 0 | 0 | 0 | 1 | 0 | 0 | 0 | 0 | 0 | 1 | | 02f | 64 | 0 | 0 | 0 | 0 | 0 | 2 | 3 | 0 | 24 | 0 | 3 | 35 | | Totals | 449 | 0 | 0 | 0 | 1 | 5 | 38 | 29 | 91 | 3 | 30 | 19 | 216 | | % of total excluded | 0% | 0% | 0% | 0% | 2% | 18% | 13% | 42% | 1% | 14% | 9% | 9% | 233 | Annex 4 Summary of the evidence base
This annex summarises the evidence base, both in terms of the full list of studies that passed the inclusion criteria and the screening for risk of bias and quality assessment therefore making it to the annotated bibliography and, within those, those studies from which evidence was extracted on the selected indicators that were reviewed.
The tables below summarise the evidence base across the following dimensions:
- Source of retrieval (Table A4.1)
- Type of study (Table A4.2)
- Geographical coverage for the full list of studies (Table A4.3)
- Geographical and programme coverage for the studies included at the data extraction stage (Tables A4.4-A4.9)
### Table A4.1 Full list of studies by source of retrieval
| Outcome areas | Bibliographic databases | Websites | Review studies | Expert recommendations | Other sub-questions | Total | |--------------------------------------|-------------------------|----------|----------------|------------------------|---------------------|-------| | Poverty | 16 | 3 | 4 | 6 | 32 | 61 | | Education | 6 | 13 | 10 | 8 | 62 | 99 | | Health and nutrition | 30 | 12 | 6 | 4 | 37 | 89 | | Savings, investment and production | 14 | 9 | 2 | 6 | 6 | 37 | | Employment | 16 | 16 | 2 | 7 | 39 | 80 | | Empowerment | 3 | 5 | 2 | 7 | 37 | 54 |
### Design and implementation features
| Core design features | 7 | 2 | 1 | 0 | 31 | 41 | | Conditionality | 17 | 1 | 0 | 0 | 3 | 21 | | Targeting | 5 | 0 | 0 | 1 | 1 | 7 | | Payment mechanisms | 1 | 1 | 0 | 1 | 0 | 3 | | Grievance mechanisms and programme governance | 0 | 0 | 0 | 0 | 0 | 0 | | Complementary interventions and supply-side services | 1 | 1 | 0 | 0 | 12 | 14 |
Note: studies retrieved from ‘other sub-questions’ were studies that met the inclusion criteria and passed the risk of bias or quality assessment screening but were retrieved under a different sub-question. In some cases they were relevant for that other sub-question and in other cases they were not.
### Table A4.2 Full list of studies by type of paper
| Outcome areas | Peer reviewed journal articles | Working papers | Reports and formal evaluations | Unpublished papers | PhD theses | Book chapters | Total | |--------------------------------------|--------------------------------|----------------|-------------------------------|--------------------|------------|---------------|-------| | Poverty | 17 | 16 | 10 | 8 | 10 | 0 | 61 | | Education | 39 | 25 | 11 | 12 | 11 | 1 | 99 | | Health and nutrition | 44 | 13 | 10 | 11 | 11 | 0 | 89 | | Savings, investment and production | 10 | 9 | 4 | 7 | 7 | 0 | 37 | | Employment | 29 | 22 | 9 | 7 | 12 | 1 | 80 | | Empowerment | 26 | 11 | 4 | 5 | 7 | 1 | 54 |
### Design and implementation features
| Core design features | 20 | 9 | 6 | 3 | 3 | 0 | 41 | | Conditionality | 12 | 9 | 0 | 0 | 0 | 0 | 21 | | Targeting | 2 | 3 | 0 | 1 | 1 | 0 | 7 | | Payment mechanisms | 1 | 1 | 0 | 0 | 1 | 0 | 3 | | Grievance mechanisms and programme governance | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Complementary interventions and supply-side services | 8 | 5 | 0 | 0 | 1 | 0 | 14 |
Note: Unpublished papers is a residual category for unpublished studies that were not written as working papers, reports or evaluations (e.g. unpublished studies produced by an academic department of a university).
### Table A4.3 Geographical coverage (among full list of studies)
| Outcome areas | Sub-Saharan Africa | East Asia & Pacific | Europe & Central Asia | Latin America & Caribbean | Middle East & North Africa | South Asia | Total | |--------------------------------|--------------------|---------------------|-----------------------|---------------------------|---------------------------|------------|-------| | Poverty | 23 | 3 | 2 | 33 | 0 | 2 | 63 | | Education | 23 | 7 | 2 | 65 | 2 | 3 | 102 | | Health and nutrition | 28 | 1 | 1 | 62 | 0 | 3 | 95 | | Savings, investment and production | 21 | 0 | 1 | 14 | 0 | 1 | 37 | | Employment | 23 | 4 | 2 | 52 | 1 | 2 | 84 | | Empowerment | 21 | 1 | 1 | 35 | 0 | 2 | 60 |
#### Design and implementation features
| Core design features | 12 | 5 | 0 | 24 | 1 | 1 | 43 | | Conditionality | 7 | 1 | 0 | 11 | 1 | 0 | 20 | | Targeting | 3 | 1 | 0 | 2 | 1 | 0 | 7 | | Payment mechanisms | 2 | 0 | 0 | 0 | 0 | 1 | 3 | | Grievance mechanisms and programme governance | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Complementary interventions and supply-side services | 4 | 0 | 0 | 10 | 0 | 0 | 14 |
Note: Figures based on countries covered by studies and so will not exactly match with other tables as some studies report on multiple interventions and/or countries.
### Table A4.4 Geographical and programme coverage among studies from which evidence extracted – Latin America and Caribbean
| Region / country | Programme | Poverty | Education | Health and nutrition | Savings, investment and production | Employment | Empowerment | |------------------|-----------|---------|-----------|----------------------|-----------------------------------|------------|-------------| | **Latin America & Caribbean** | | | | | | | | | Bolivia | Bonosol pension | 1 | 1 | | | | | | Bolivia | Bolivida | | | | | | 1 | | Brazil | Bolsa Alimentação | 1 | | | | | | | Brazil | Bolsa Escola | | | | | | 1 | | Brazil | Bolsa Família | | | | | | 3 | | Brazil | Beneficio de Prestação Continuada (BPC) | 1 | | | | | 1 | | Colombia | Familias en Acción | 2 | 5 | 2 | | | 4 | | Colombia | Subsidios Condicionados a la Asistencia Escolar (SCAE) | 2 | | | | | 2 | | Dominican Republic | Solidarity Programme | | | | | | 1 | | Ecuador | Bono de Desarrollo Humano (BDH) | 2 | 7 | 3 | 3 | 1 | | | Ecuador | WFP Colombian refugee RCT (WFP CT) | 1 | | | 2 | | 2 | | El Salvador | Comunidades Solidarias Rurales (CSR) | 1 | | | | | 1 | | Honduras | Programa de Asignación Familiar (PRAF) | 2 | 1 | | 5 | | 2 | | Honduras | Bono 10,000 | | | | | | 1 | | Jamaica | Programme of Advancement Through Health and Education (PATH) | | | | | | 1 | | Mexico | PROGRESA / Oportunidades | 6 | 19 | 12 | 5 | 13 | 8 | | Mexico | PROCAMPO | 1 | 2 | 1 | 1 | | | | Mexico | Programa Apoyo Alimentario (PAL) | 2 | | | 1 | | | | Mexico | Programa de Atención a Adultos Mayores en Zonas Rurales | | | | | | 1 | | Nicaragua | Red de Protección Social (RPS) | 4 | 7 | 4 | 1 | 8 | 3 | | Nicaragua | Atención a Crisis | 2 | 3 | 1 | 1 | 5 | | | Paraguay | Teleporã | | | | | | 1 | | Peru | Juntos | 1 | 1 | 1 | | 1 | 2 | | **TOTALS** | | 24 | 51 | 30 | 9 | 49 | 19 |
*Note: Totals do not always exactly correspond to number of unique studies from which evidence extracted as some studies report on more than one intervention.*
### Table A4.5 Geographical and programme coverage among studies from which evidence extracted – Sub-Saharan Africa
| Region / country | Programme | Poverty | Education | Health and nutrition | Savings, investment and production | Employment | Empowerment | |------------------|-----------|---------|-----------|----------------------|-----------------------------------|------------|-------------| | **Sub-Saharan Africa** | | | | | | | | | Burkina Faso | Nahouri Cash Transfers Pilot Project | 1 | 1 | | | | | | Ghana | Innovation for poverty randomised trial | 1 | 1 | | | | | | Ghana | Livelihood empowerment against poverty (LEAP) | 1 | 2 | | | 1 | 2 | | Kenya | Give Directly experiment | 1 | | | | 1 | 1 | | Kenya | Hunger Safety Net Programme (HSNP) | 1 | 1 | 1 | | 1 | 1 | | Kenya | Orphan and Vulnerable Children Cash Transfer (OVC-CT) | 1 | 1 | 1 | | 1 | 1 | | Lesotho | Child Grant Programme | 1 | 1 | 1 | 2 | 2 | | | Malawi | Social Cash Transfer Programme (SCTP) | 1 | 2 | 1 | 1 | 2 | | | Malawi | The Zomba Cash Transfer Programme | 5 | | | | | 3 | | Malawi | Sexual health incentive study | 1 | | | | | | | Niger | Prospective study with Forum Santé Niger and Médecins Sans Frontières | 1 | | | | | | | Niger | Concern Worldwide drought-response unconditional transfer | 2 | | | | 2 | | | South Africa | Old Age Pension | 1 | | | | 3 | 1 | | South Africa | Child Support Grant and Foster Grant | 1 | | | | | | | Tanzania | Tanzania Social Action Fund (TSAF) | 1 | 1 | | | | | | Uganda | WFP Karamoja cash transfer | 1 | 1 | 1 | | | | | Uganda | Youth Opportunities Programme (YOP) | 1 | | | | 2 | 2 | | Uganda | Social Assistance Grants for Empowerment (SAGE) | 1 | 1 | 1 | | 1 | 1 | | Uganda | Women’s Income Generating Support (WINGS) | 1 | | | | 1 | 2 | | Zambia | Monze Cash Transfer Pilot | 1 | 1 | 1 | | 1 | | | Zambia | Child Grant Programme | 1 | 1 | 1 | 2 | 2 | | | **TOTALS** | | 12 | 19 | 11 | 15 | 18 | 14 |
### Table A4.6 Geographical and programme coverage among studies from which evidence extracted – Middle East and North Africa
| Region / country | Programme | Poverty | Education | Health and nutrition | Savings, investment and production | Employment | Empowerment | |---------------------------|-----------|---------|-----------|----------------------|------------------------------------|------------|-------------| | Middle East & North Africa| | | | | | | | | Morocco | Taysir | 0 | 1 | 0 | 0 | 1 | 0 | | **TOTALS** | | 0 | 1 | 0 | 0 | 1 | 0 |
### Table A4.7 Geographical and programme coverage among studies from which evidence extracted – Europe and Central Asia
| Region / country | Programme | Poverty | Education | Health and nutrition | Savings, investment and production | Employment | Empowerment | |---------------------------|-----------|---------|-----------|----------------------|------------------------------------|------------|-------------| | Europe & Central Asia | | | | | | | | | Albania | Ndhima Ekonomike | 1 | 1 | 0 | 1 | | | | Kazakhstan | Bota programme | 1 | 1 | 1 | 1 | | | | Turkey | Social Risk Mitigation Project | 1 | | | | | | | **TOTALS** | | 2 | 2 | 0 | 1 | 2 | 1 |
### Table A4.8 Geographical and programme coverage among studies from which evidence extracted – South Asia
| Region / country | Programme | Poverty | Education | Health and nutrition | Savings, investment and production | Employment | Empowerment | |---------------------------|-----------|---------|-----------|----------------------|------------------------------------|------------|-------------| | South Asia | | | | | | | | | Bangladesh | Shombob | 1 | 1 | 1 | | | | | Pakistan | The Punjab Female School Stipend Program | 1 | | | | | | | Pakistan | The Benazir Income Support Programme | 1 | 1 | 1 | 1 | 1 | 1 | | **TOTALS** | | 2 | 3 | 2 | 1 | 2 | 1 |
### Table A4.9 Geographical and programme coverage among studies from which evidence extracted – East Asia and Pacific
| Region / country | Programme | Poverty | Education | Health and nutrition | Savings, investment and production | Employment | Empowerment | |---------------------------|-----------|---------|-----------|----------------------|------------------------------------|------------|-------------| | East Asia and Pacific | | | | | | | | | Cambodia | CESSP Scholarship Program (CSP) | 1 | | | | | | | Cambodia | Japan Fund for Poverty Reduction (JFPR) scholarship program | 1 | | | | | | | China | Junior High School Randomised Controlled Trial | 1 | | | | | | | Indonesia | Program Keluarga Harapan (PKH) | 1 | 1 | 1 | 1 | | | | Indonesia | Temporary UCT | 1 | | | | | | | Indonesia | Indonesia Bantuan Siswa Miskin (BSM) cash transfer for poor students | 1 | | | | | | | **TOTALS** | | 2 | 4 | 1 | 0 | 4 | 0 | Annex 5 Evidence: results tables for overall effects disaggregated by gender, and cash transfer design and implementation effects
This annex provides detailed tables of the results disaggregated by gender and design and implementation effects. These are reported for each of the six outcome areas under review.
A5.1 Poverty A5.1.1 Summary of results for cash transfer effects disaggregated by gender for monetary poverty indicators
A5.1.2 Summary of results for the role of cash transfer design and implementation parameters on monetary poverty
A5.2 Education A5.2.1 Summary of results for cash transfer effects disaggregated by gender for education indicators
A5.2.2 Summary of results for the role of cash transfer design and implementation parameters on education
A5.3 Health and nutrition A5.3.1 Summary of results for cash transfer effects disaggregated by gender for health and nutrition indicators
A5.3.2 Summary of results for the role of cash transfer design and implementation parameters on health and nutrition A5.4 Savings, investment and production
A5.4.1 Summary of results for cash transfer effects disaggregated by gender for savings, investment and production indicators
A5.4.2 Summary of results for the role of cash transfer design and implementation parameters on savings, investment and production
A5.5 Employment
A5.5.1 Summary of results for overall cash transfer effect on adult labour participation – by gender
A5.5.2 Summary of results for overall cash transfer effect on intensity of adult work – by gender
A5.5.3 Summary of results for overall cash transfer effect on adult labour force participation – by sector and gender
A5.5.4 Summary of results for overall cash transfer effect on adult work intensity – by sector and gender
A5.5.5 Summary of results for overall cash transfer effect on child labour participation – by gender
A5.5.6 Summary of results for overall cash transfer effect on intensity of child labour – by gender
A5.5.7 Summary of results for cash transfer effect on child labour participation – by sector and gender
A5.5.8 Summary of results for cash transfer effect on child labour intensity – by sector and gender
A5.5.9 Summary of results for overall cash transfer effect on migration – by gender
A5.5.10 Effect of design and implementation features on adult employment outcomes
A5.5.11 Effect of design and implementation features on child labour outcomes
A5.6 Empowerment
A5.6.1 Summary of results for the role of cash transfer design and implementation parameters on empowerment
## Summary tables for results for Monetary Poverty
### A5.1.1 Summary of results for cash transfer effects disaggregated by gender for monetary poverty indicators
| # | Study | Programme | Indicator | Effect | Measure of change | Significance | Details | |----|------------------------------|-----------|------------------------------------------------|--------|-------------------|--------------|----------------------------------------------| | 1 | Blattman et al. (2013) | YDP (Uganda) | Individual short-term expenditure | 6.943 | Change in UGX | 1% | For male beneficiaries, compared to non-beneficiaries | | | | YDP (Uganda) | Individual short-term expenditure | 7.923 | Change in UGX | 5% | For female beneficiaries | | 2 | Edmonds and Schady (2012) | BOH (Ecuador) | Total annual household expenditure | -277.0 | Change in USD | NS | For households with girl beneficiaries, compared to non-beneficiaries | | | | BOH (Ecuador) | Total annual household expenditure | 13.89 | Change in USD | NS | For households with boy beneficiaries, compared to non-beneficiaries | | 3 | Green et al. (2015) | WINGS (Uganda) | Individual monthly non-durable consumption | 0.41 | Z-score | 1% | For female beneficiaries, compared to non-beneficiaries | | 4 | Handa et al. (2014) | LEAP (Ghana) | Total monthly total expenditure per equivalent adult | -1.27 | Change in Ghc | NS | For female-headed households, compared to non-beneficiaries | | | | LEAP (Ghana) | Total monthly food expenditure per equivalent adult | 1.87 | Change in Ghc | NS | For female-headed households, compared to non-beneficiaries | | | | LEAP (Ghana) | Total monthly food expenditure per equivalent adult | -7.51 | Change in Ghc | NS | For male-headed households, compared to non-beneficiaries | | | | LEAP (Ghana) | Total monthly total expenditure per equivalent adult | -8.96 | Change in Ghc | NS | For male-headed households, compared to non-beneficiaries | | 5 | Haushofer & Shapiro. (2013) | Give Directly CT (Kenya) | Monthly non-durable household expenditure | -2.74 | Change in USD | NS | For female beneficiaries, compared to male beneficiaries | | 6 | Martinez (2004) | Bonosol (Bolivia) | Monthly household food consumption | -14.327 | Change in Bolivianos | NS | For beneficiary households where the oldest member is female, compared to those where the oldest member is male |
Notes: Figures in bold indicate statistically significant coefficient. NS = not significant at 10% significance level or below
### A5.1.2 Summary of results for the role of cash transfer design and implementation parameters on monetary poverty
| # | Study | Programme | Indicator | Effect | Measure of change | Significance | Additional details | |----|--------------------------------------------|----------------------------|-----------------------------------------------|--------|-------------------|--------------|--------------------------------------------------------| | | Main recipient | | | | | | | | 1 | Haushofer & Shapiro (2013) | Give directly experiment (Kenya) | Total monthly non-durable expenditure | -2.74 | Change in USD | NS | Being a female beneficiary | | | Transfer levels | | | | | | | | 1 | Blattmann et al. (2013) | YOP (Uganda) | Log of real value of short term expenditures | 0.043 | Change in UGX | NS | Measures effect of log grant size per person for beneficiaries | | 2 | Davis et al. (2002) | PROGRESA (Mexico) | Total monthly consumption expenditure per capita | 0.406 | Change in pesos | 1% | Measures effect of transfer levels for total sample | | | | PROCAMPO (Mexico) | Total monthly consumption expenditure per capita | 0.702 | Change in pesos | 1% | Measures effect of transfer levels for total sample | | | | PROGRESA (Mexico) | Total food consumption expenditure per capita | 0.355 | Change in pesos | 1% | Measures effect of transfer levels for total sample | | | | PROCAMPO (Mexico) | Total food consumption expenditure per capita | 0.386 | Change in pesos | 1% | Measures effect of transfer levels for total sample | | 3 | Handa et al. (2009) | PROGRESA (Mexico) | Log total monthly household expenditure | 0.034 | Change in log points | 1% | Measures effect of transfer levels for total sample | | | | PROGRESA (Mexico) | Log food monthly household expenditure | 0.035 | Change in log points | 1% | Measures effect of transfer levels for total sample | | 4 | Haushofer & Shapiro (2013) | Give directly experiment (Kenya) | Monthly non-durable household expenditure | 20.37 | Change in USD | 10% | Measures effect of receiving large transfer (instead of small) | | | Transfer frequency | | | | | | | | 1 | Bazzi (2013) | Temporary UCT (Indonesia) | Growth in log total household expenditures per capita 2005-2006 | -0.091 | Growth in log points | 1% | Received transfer only once | | | | Temporary UCT (Indonesia) | Growth in log total household expenditures per capita 2005-2006 | 0.074 | Growth in log points | 5% | Receive transfer twice already | | 2 | Haushofer & Shapiro (2013) | Give directly experiment (Kenya) | Monthly non-durable household expenditure | -4.4 | Change in USD | NS | Receiving monthly instead of lump sum | | | Duration of exposure | | | | | | | | 1 | AIR (2014) | ZCGP (Zambia) | Per capital monthly total expenditure | -4 | Change in Zk | NS | Difference between impact after 24 months and impact after 36 months | | | | ZCGP (Zambia) | Per capital monthly food expenditure | -3.59 | Change in Zk | NS | Difference between impact after 24 months and impact after 36 months | | 2 | Angelucci et al. (2012) | Oportunidades (Mexico) | Total monthly household expenditure | 5.82 | Change in pesos | 1% | After 1 year | | | | Oportunidades (Mexico) | Total monthly household expenditure | 5.49 | Change in pesos | 5% | After 2 years | | | | Oportunidades (Mexico) | Total monthly food expenditure | 168.54 | Change in pesos | 10% | After 1 year | | | | Oportunidades (Mexico) | Total monthly food expenditure | 282.85 | Change in pesos | 1% | After 2 years | | 3 | Buser et al. (2014) | BDH (Ecuador) | Monthly food expenditure | 16.383 | Change in USD | NS | Stopped receiving the transfer two years ago | | 4 | Gertler et al. (2012) | Oportunidades (Mexico) | Household per capita consumption | 10.836 | Change in pesos | 5% | Compared to households that joined 4 years later | | 5 | Maluccio & Flores (2005) | RPS (Nicaragua) | Nominal annual total per capita expenditure | 986 | Change in Cordobas | 1% | After 1 year | | | | RPS (Nicaragua) | Nominal annual total per capita expenditure | 686 | Change in Cordobas | 1% | After 2 years | | | | RPS (Nicaragua) | Nominal annual food per capita expenditure | 871 | Change in Cordobas | 1% | After 1 year | | | | RPS (Nicaragua) | Nominal annual food per capita expenditure | 640 | Change in Cordobas | 1% | After 2 years |
Continued on next page
### A5.1.2 Summary of results for the role of cash transfer design and implementation parameters on monetary poverty continued
| # | Study | Programme | Indicator | Effect | Measure of change | Significance | Additional details | |----|------------------------|--------------------|-----------------------------------------------|--------|-------------------|--------------|--------------------| | 6 | Maluccio (2010) | RPS (Nicaragua) | Per capital annual total expenditure | 905 | Change in Cordobas| 1% | After 1 year | | | | RPS (Nicaragua) | Per capital annual total expenditure | 676 | Change in Cordobas| 5% | After 2 years | | | | RPS (Nicaragua) | Per capital annual food expenditure | 789 | Change in Cordobas| 1% | After 1 year | | | | RPS (Nicaragua) | Per capital annual food expenditure | 621 | Change in Cordobas| 1% | After 2 years | | 7 | Miller et al. (2011) | SCTP (Malawi) | Weekly per capita total expenditures | 254 | Change in MK | 1% | After 6 months | | | | SCTP (Malawi) | Weekly per capita total expenditures | 274 | Change in MK | 1% | After 1 year | | | | SCTP (Malawi) | Weekly per capita food expenditures | 198 | Change in MK | 1% | After 6 months | | | | SCTP (Malawi) | Weekly per capita food expenditures | 203 | Change in MK | 1% | After 1 year | | 8 | Perova & Vakis (2012) | Juntos (Peru) | Overall consumption (in log?) | 0.09 | Percentage point change | 1% | 12 to 23 months in Juntos | | | | Juntos (Peru) | Overall consumption (in log?) | 0.11 | Percentage point change | 1% | 24 to 36 months in Juntos | | | | Juntos (Peru) | Overall consumption (in log?) | 0.15 | Percentage point change | 5% | Over 36 months in Juntos | | | | Juntos (Peru) | Overall food consumption (in log?) | 0.09 | Percentage point change | 1% | 12 to 23 months in Juntos | | | | Juntos (Peru) | Overall food consumption (in log?) | 0.1 | Percentage point change | 5% | 24 to 36 months in Juntos | | | | Juntos (Peru) | Overall food consumption (in log?) | 0.13 | Percentage point change | 10% | Over 36 months in Juntos | | | | Juntos (Peru) | Poverty head count | -0.08 | Percentage point change | 1% | 12 to 23 months in Juntos | | | | Juntos (Peru) | Poverty head count | -0.1 | Percentage point change | 10% | 24 to 36 months in Juntos | | | | Juntos (Peru) | Poverty head count | -0.1 | Percentage point change | 10% | Over 36 months in Juntos | | | | Juntos (Peru) | Poverty gap | -4.8 | Percentage point change | 10% | 12 to 23 months in Juntos | | | | Juntos (Peru) | Poverty gap | -3.8 | Percentage point change | NS | 24 to 36 months in Juntos | | | | Juntos (Peru) | Poverty gap | -0.61 | Percentage point change | NS | Over 36 months in Juntos | | 9 | Skoufias & Di Maro (2008) | PROGRESA (Mexico) | Poverty head count | 0.0007 | Percentage point change | NS | After 6 months | | | | PROGRESA (Mexico) | Poverty head count | -0.06 | Percentage point change | NS | After 1 year | | | | PROGRESA (Mexico) | Poverty head count | -0.0207| Percentage point change | 5% | After 1.5 years | | | | PROGRESA (Mexico) | Poverty gap (not clear how measured) | -0.0284| ? | 1% | After 6 months | | | | PROGRESA (Mexico) | Poverty gap (not clear how measured) | -0.0445| ? | 1% | After 1 year | | | | PROGRESA (Mexico) | Poverty gap (not clear how measured) | -0.0794| ? | 1% | After 1.5 years |
**Targeting mechanism**
| # | Study | Programme | Indicator | Effect | Measure of change | Significance | Additional details | |----|------------------------|--------------------|-----------------------------------------------|--------|-------------------|--------------|--------------------| | 1 | Merttens et al. (2015) | SAGE (Uganda) | Monthly total expenditure per equivalent adult | 10,000 | Change in UGX | 10% | SGC | | | | SAGE (Uganda) | Monthly total expenditure per equivalent adult | 11,000 | Change in UGX | 10% | VFSG | | | | SAGE (Uganda) | Monthly food expenditure per equivalent adult | 1500 | Change in UGX | NS | SGC | | | | SAGE (Uganda) | Monthly food expenditure per equivalent adult | 8500 | Change in UGX | 5% | VFSG |
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### A5.1.2 Summary of results for the role of cash transfer design and implementation parameters on monetary poverty continued
| # | Study | Programme | Indicator | Effect | Measure of change | Significance | Additional details | |----|--------------------------------------------|----------------------------|-----------------------------------------------|--------|-------------------|--------------|-----------------------------------------------------------------------------------| | 1 | Blattman et al. (2015) | WINGS (Uganda) | Household monthly non-durable expenditure | 31.031 | Change in 1000s of UGX | 1% | Effect of those that received no training compared to non-beneficiaries | | | | | Household monthly non-durable expenditure | 33.439 | Change in 1000s of UGX | 1% | Effect of those that received training compared to non-beneficiaries | | | | | Household monthly non-durable expenditure | -1.008 | Change in 1000s of UGX | NS | Effect of those that had 2 supervision visits compared to no supervision | | | | | Household monthly non-durable expenditure | -3.022 | Change in 1000s of UGX | NS | Effect of those that had 5 supervision visits compared to no supervision | | 2 | Green et al. (2015) | WINGS (Uganda) | Individual monthly non-durable consumption | -0.06 | Z-score | NS | For female beneficiaries who attended training alone, compared to Phase 1 beneficiaries | | | | | Individual monthly non-durable consumption | -0.28 | Z-score | 1% | For female beneficiaries who attended training alone, compared to Phase 1 beneficiaries | | 3 | Karlan et al. (2014) | IPA RCT (Ghana) | Total expenditure in 12 months | 2.44 | Change in USD | NS | For beneficiaries receiving both cash and insurance | | 4 | Macours and Vakis (2012) | Atención a Crisis (Nicaragua) | Log total per capita expenditure | 0.281 | Change in log points | 1% | For the basic transfer (after less than 1 year) | | | | Atención a Crisis (Nicaragua) | Log total per capita expenditure | 0.285 | Change in log points | 1% | The basic CCT plus a scholarship for a vocational training (after less than 1 year) | | | | Atención a Crisis (Nicaragua) | Log total per capita expenditure | 0.331 | Change in log points | 1% | The basic CCT plus a productive investment grant (after less than 1 year) | | | | Atención a Crisis (Nicaragua) | Log total per capita expenditure | 0.022 | Change in log points | NS | For the basic transfer (after 2 years) | | | | Atención a Crisis (Nicaragua) | Log total per capita expenditure | 0.048 | Change in log points | NS | The basic CCT plus a scholarship for a vocational training (after 2 years) | | | | Atención a Crisis (Nicaragua) | Log total per capita expenditure | 0.088 | Change in log points | 1% | The basic CCT plus a productive investment grant (after 2 years) | | 5 | Macours, Premand and Vakis (2012) | Atención a Crisis (Nicaragua) | Log total household per capita | 0.0221 | Percentage change | NS | For the basic transfer | | | | Atención a Crisis (Nicaragua) | Log total household per capita | 0.0277 | Percentage change | NS | The basic CCT plus a scholarship for a vocational training | | | | Atención a Crisis (Nicaragua) | Log total household per capita | 0.0837 | Percentage change | 1% | The basic CCT plus a productive investment grant | | | | Atención a Crisis (Nicaragua) | Log food household per capita | 0.0449 | Percentage change | 1% | For the basic transfer | | | | Atención a Crisis (Nicaragua) | Log food household per capita | 0.0488 | Percentage change | 5% | The basic CCT plus a scholarship for a vocational training | | | | Atención a Crisis (Nicaragua) | Log food household per capita | 0.102 | Percentage change | 1% | The basic CCT plus a productive investment grant |
### Summary tables results for Education
#### Table A5.2.1 Summary of results for cash transfer effects disaggregated by gender for education indicators
| # | Study | Programme (Country) | Variable and treatment population (e.g. age of child) | Effect | Measure of change | Significance | Details/explanation | |----|------------------------|---------------------|-------------------------------------------------------|--------|------------------|--------------|--------------------| | 1 | Akresh et al. (2013) | NCTPP (Burkina Faso)| Percentage of school days the child attended during the entire academic year (school roster) | 0.135 | Percentage | 1% | CCT, aged 7-15, Male | | | | NCTPP (Burkina Faso)| Percentage of school days the child attended during the entire academic year (school roster) | 0.137 | Percentage | 1% | CCT, aged 7-15, Female | | | | NCTPP (Burkina Faso)| Percentage of school days the child attended during the entire academic year (school roster) | 0.108 | Percentage | 5% | UCT, aged 7-15, Male | | | | NCTPP (Burkina Faso)| Percentage of school days the child attended during the entire academic year (school roster) | 0.032 | Percentage | NS | UCT, aged 7-15, Female | | 2 | Baird et al. (2011) | ZCTP (Malawi) | Percentage of days respondent enrolled in school was recorded present during the days the school was in session (school ledger) | 0.08 | Fraction of days | 5% | CCT, Overall effect (all terms in 2009) girls only | | | | ZCTP (Malawi) | Percentage of days respondent enrolled in school was recorded present during the days the school was in session (school ledger) | 0.058 | Fraction of days | NS | UCT, Overall effect (all terms in 2009) girls only | | 3 | Bentassine et al. (2013)| Tayssir (Morocco) | Attendance rate during surprise school visits among those enrolled (School visits) | 0.069 | Percentage | 1% | Labelled CT, after 2 years, administered to one child per household aged 6-12, Male | | | | Tayssir (Morocco) | Attendance rate during surprise school visits among those enrolled (School visits) | 0.082 | Percentage | 1% | Labelled CT, after 2 years, administered to one child per household aged 6-12, Female | | | | Tayssir (Morocco) | Attending School by end of year 2, among those 6-15 at baseline (Household survey) | 0.007 | Percentage | NS | Labelled CT, after 2 years, administered to one child per household aged 6-12, Male | | | | Tayssir (Morocco) | Attending School by end of year 2, among those 6-15 at baseline (Household survey) | 0.006 | Percentage | NS | Labelled CT, after 2 years, administered to one child per household aged 6-12, Female | | 4 | Dammert et al. (2009) | RPS (Nicaragua) | School attendance | 0.110 | Percentage | 5% | CCT, children aged 7-13 years at baseline, after two years, Girls | | | | RPS (Nicaragua) | School attendance | 0.173 | Percentage | 5% | CCT, children aged 7-13 years at baseline, after 2 years, Boys | | 5 | De Groot et al. (2015) | LEAP (Ghana) | whether a child missed any days of school in the reference period | -0.13 | Percentage | 1% | CCT, aged 5-12, Male | | | | LEAP (Ghana) | whether a child missed any days of school in the reference period | -0.083 | Percentage | 5% | CCT, aged 5-12, Female | | | | LEAP (Ghana) | whether a child missed any days of school in the reference period | 0.004 | Percentage | NS | CCT, aged 13-17, Male | | | | LEAP (Ghana) | whether a child missed any days of school in the reference period | -0.098 | Percentage | 10% | CCT, aged 13-17, Female | | 6 | Evans et al. (2014) | TSAF (Tanzania) | Ever attended school | 0 | Percentage | NS | CCT, children aged 0-18 years, after 31-34 months, Male | | | | TSAF (Tanzania) | Ever attended school | 0.05 | Percentage | 10% | CCT, children aged 0-18 years, after 31-34 months, Female | | | | TSAF (Tanzania) | Missed school last week if enrolled due to personal reasons (Absenteeism) | 0.02 | Percentage | NS | CCT, children aged 0-18 years, after 31-34 months, Male | | | | TSAF (Tanzania) | Missed school last week if enrolled due to personal reasons (Absenteeism) | 0.01 | Percentage | NS | CCT, children aged 0-18 years, after 31-34 months, Female | | | | TSAF (Tanzania) | Took national exam-Standard IV+ | 0.01 | Percentage | NS | CCT, children aged 0-18 years, after 31-34 months, Male | | | | TSAF (Tanzania) | Took national exam-Standard IV+ | 0.04 | Percentage | NS | CCT, children aged 0-18 years, after 31-34 months, Female |
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### Table A5.2.1 Summary of results for cash transfer effects disaggregated by gender for education indicators continued
| # | Study | Programme | Variable and treatment population (e.g. age of child) | Effect | Measure of change | Significance | Details/explanation | |----|--------------------------------------------|----------------------------|----------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------------|-------------------------------------------------------------------------------------| | 7 | Filmer et al. (2008) | JFPR (Cambodia) | Attendance on the day of school visit | 0.319 | Percentage | 1% | CCT, effect on girls only | | 8 | Handa et al. (2014) | LEAP (Ghana) | Whether a child missed any days of school in the reference period (Absenteism) | -0.11 | Percentage | 10% | UCT, girls aged 13-17 | | | | | whether a child did not attend any school in the last week (Absenteism) | -0.11 | Percentage | NS | UCT, girls aged 13-17 | | 9 | Lincove et al. (2014) | RPS (Nicaragua) | Whether child attended school (at time of survey) | 0.125 | Percentage | 1% | CCT, Children aged 6-11 at baseline (always eligible), Male | | | | | Whether child attended school (at time of survey) | 0.158 | Percentage | 5% | CCT, Children aged 6-11 at baseline (always eligible), Female | | 10 | Maluccio and Flores (2005) | RPS (Nicaragua) | Current attendance (child was defined to be currently attending if he indicated he was still enrolled and had either missed 3 or fewer days in the past month (or more because of illness) | 0.23 | Percentage | 10% | CCT, after two years, Boys aged 7-13 who had not completed fourth grade | | | | | Current attendance (child was defined to be currently attending if he indicated he was still enrolled and had either missed 3 or fewer days in the past month (or more because of illness) | 0.17 | Percentage | 10% | CCT, after two years, Girls aged 7-13 who had not completed fourth grade | | 11 | Merttens et al. (2013) | HSNP (Kenya) | Proportion of children currently attending school | -0.0661| Percentage | NS | UCT, after three years, children aged 6-17, Male | | | | | Proportion of children currently attending school | -0.059 | Percentage | NS | UCT, after three years, children aged 6-17, Female | | 12 | Merttens et al. (2015) | SAGE Senior Citizen Grant (Uganda) | Proportion of children currently attending formal education | -0.012 | Percentage Points | NS | Children aged 6-17, after one year, Male | | | | | Proportion of children currently attending formal education | 0.0037 | Percentage Points | NS | Children aged 6-17, after one year, Female | | | | | Proportion of children currently attending formal education | -0.006 | Percentage Points | NS | Children aged 6-17, after one year, Male | | | | | Proportion of children currently attending formal education | -0.061 | Percentage Points | 10% | Children aged 6-17, after one year, Female | | | | | Mean number of days missed in last 30 scheduled school days (absenteeism) | -0.36 | Mean number of days missed in last 30 scheduled days | NS | Children aged 6-17, after one year, Male | | | | | Mean number of days missed in last 30 scheduled school days (absenteeism) | -13.600| Mean number of days missed in last 30 scheduled days | NS | Children aged 6-17, after one year, Female | | | | | Mean number of days missed in last 30 scheduled school days (absenteeism) | -0.81 | Mean number of days missed in last 30 scheduled days | NS | Children aged 6-17, after one year, Male | | | | | Mean number of days missed in last 30 scheduled school days (absenteeism) | 0.44 | Mean number of days missed in last 30 scheduled days | NS | Children aged 6-17, after one year, Female |
continued on next page Table A5.2.1 Summary of results for cash transfer effects disaggregated by gender for education indicators
| # | Study | Programme (Country) | Variable and treatment population (e.g. age of child) | Effect | Measure of change | Significance | Details/explanation | |----|------------------------|---------------------|------------------------------------------------------|--------|-------------------|--------------|---------------------| | 13 | Miller et al. (2011) | SCTP (Malawi) | No of days absent per month | -1.2 | Days absent per month | NS | UCT, aged 6-8, Boys | | | | | | | | | | | | | | | 0.2 | Days absent per month | NS | UCT, aged 9-11, Boys | | | | | | -1.9 | Days absent per month | 5% | UCT, aged 12-15, Boys | | | | | | 0.3 | Days absent per month | NS | UCT, aged 16-18, Boys | | | | | | -1.8 | Days absent per month | 5% | UCT, aged 6-8, Girls | | | | | | -1.2 | Days absent per month | 10% | UCT, aged 9-11, Girls | | | | | | 0.1 | Days absent per month | NS | UCT, aged 12-15, Girls | | | | | | -2 | Days absent per month | 10% | UCT, aged 16-18 Girls | | 14 | Pellerano et al. (2014)| LCGP (Lesotho) | Proportion of pupils 6-19 who missed school in the 30 days prior to the survey – self-reported (absenteeism) | 0.01497 | Percentage | NS | UCT, after two years, children aged 6-19, Male | | | | | | 0.00661 | Percentage | NS | UCT, after two years, children aged 6-19, Female | | 15 | Skoufias and Parker (2001)| PROGRESA (Mexico) | Probability of attending school | 0.018 | Percentage | 1% | CCT, Nov-99 FU, 8-11 years, Boys | | | | | | -0.003 | Percentage | NS | CCT, Nov-99 FU, 8-11 years, Girls | | | | | | 0.058 | Percentage | 1% | CCT, Nov-99 FU, 12-17 years, Boys | | | | | | 0.095 | Percentage | 1% | CCT, Nov-99 FU, 12-17 years, Girls |
Attendance (Household Head)
| # | Study | Programme (Country) | Variable and treatment population (e.g. age of child) | Effect | Measure of change | Significance | Details/explanation | |----|------------------------|---------------------|------------------------------------------------------|--------|-------------------|--------------|---------------------| | 1 | Dammert et al. (2009) | RPS (Nicaragua) | School attendance | 0.172 | Percentage | 5% | CCT, children aged 7-13 years at baseline, after 2 years Household Head is Female | | | | | | 0.138 | Percentage | 5% | CCT, children aged 7-13 years at baseline, after 2 years, Household Head is Male | | 2 | World Bank (2011) | PKH (Indonesia) | Regular primary school attendance (>85%) | 0.01 | Percentage point | NS | CCT, children aged 7-12, Household Head is Male | | | | | Hours in school last week | -0.02 | Percentage point | NS | CCT, children aged 7-12, Household Head is Female | | | | | Hours in school last week | 0.369 | Hours spent in school last week | 10% | CCT, children aged 7-12, Household Head is Male | | | | | Hours in school last week | -0.107 | Hours spent in school last week | NS | CCT, children aged 7-12, Household Head is Female | | | | | Regular junior secondary school attendance (>85%) | 0.016 | Percentage point | NS | CCT, children aged 13-15, Household Head is Male | | | | | Regular junior secondary school attendance (>85%) | -0.003 | Percentage point | NS | CCT, children aged 13-15, Household Head is Female | | | | | Hours in school last week | 0.699 | Hours spent in school last week | 5% | CCT, children aged 13-15, Household Head is Male | | | | | Hours in school last week | 0.393 | Hours spent in school last week | NS | CCT, children aged 13-15, Household Head is Female |
continued on next page
### Table A5.2.1 Summary of results for cash transfer effects disaggregated by gender for education indicators continued
| # | Study | Programme | Variable and treatment population (e.g. age of child) | Effect | Measure of change | Significance | Details/explanation | |---|---|---|---|---|---|---|---| | **Math Test Scores** | | | | | | | | | 1 | Baez et al. (2011) | Familias en Accion (Colombia) | Standardized math test score (Icfes test) | 0.025 | Change in Standard deviation | NS | CCT, Boys | | | | Familias en Accion (Colombia) | Standardized math test score (Icfes test) | -0.045 | Change in Standard deviation | NS | CCT, Girls | | 2 | Baird et al. (2011) | ZCTP (Malawi) | Standardized math test score (TIMMS) | 0.006 | Change in Standard deviation | NS | UCT, after 2 years, 13-22 years, Girls | | | | ZCTP (Malawi) | Standardized math test score (TIMMS) | 0.12 | Change in Standard deviation | 10% | CCT, after 2 years, 13-22 years, Girls | | | | ZCTP (Malawi) | Standardized math test score (Non-TIMMS) | 0.063 | Change in Standard deviation | NS | UCT, after 2 years, 13-22 years, Girls | | | | ZCTP (Malawi) | Standardized math test score (Non-TIMMS) | 0.086 | Change in Standard deviation | NS | CCT, after 2 years, 13-22 years, Girls | | 3 | Baird et al. (2013) | ZCTP (Malawi) | Standardized mathematics test score | 0.164 | Change in Score | 5% | CCT, after 2 years, 13-22 years, Girls (baseline dropout) | | 4 | Benhassine et al. (2013) | Tayssir (Morocco) | Basic Arithmetic test – Summary Index (Based on ASER test developed by Pratham) | 0.091 | Change in Score | NS | Labeled CT to fathers, after 2 years, administered to one child per household aged 6-12, Boys | | | | Tayssir (Morocco) | Basic Arithmetic test – Summary Index (Based on ASER test developed by Pratham) | 0.082 | Change in Score | NS | Labeled CT to fathers, after 2 years, administered to one child per household aged 6-12, Girls | | **Language Test Scores** | | | | | | | | | 1 | Baez et al. (2011) | Familias en Accion (Colombia) | Spanish test score (Icfes test) | -0.057 | Change in Standard deviation | NS | CCT Boys | | | | Familias en Accion (Colombia) | Spanish test score (Icfes test) | -0.034 | Change in Standard deviation | NS | CCT Girls | | 2 | Baird et al. (2011) | ZCTP (Malawi) | English Reading Comprehension Test Score (standardized) | 0.14 | Change in Standard Deviation | 1% | CCT, after 2 years, 13-22 years, Girls | | | | ZCTP (Malawi) | English Reading Comprehension Test Score (standardized) | -0.030 | Change in Standard Deviation | NS | UCT, after 2 years, 13-22 years, Girls | | 3 | Baird et al. (2013) | ZCTP (Malawi) | English Reading Comprehension test score (standardized) | 0.131 | Change in Standard deviation | 10% | CCT, after 2 years, 13-22 years, Girls, (baseline dropout) | | 4 | Evans et al. (2014) | TSAF (Tanzania) | Literate (self-reported) | 0 | Change in Percentage | NS | CCT, children aged 0-18 years, after 31-34 months, Boys | | | | TSAF (Tanzania) | Literate (self-reported) | 0.2 | Change in Percentage | NS | CCT, children aged 0-18 years, after 31-34 months, Girls | | **Composite Test Score** | | | | | | | | | 1 | Baez et al. (2011) | Familias en Accion (Colombia) | Composite test score in various subjects (Icfes test) | -0.015 | Change in Standard Deviation | NS | CCT, Boys | | | | Familias en Accion (Colombia) | Composite test score in various subjects (Icfes test) | -0.028 | Change in Standard Deviation | NS | CCT, Girls | | **Cognitive Development** | | | | | | | | | 1 | Baird et al. (2011) | ZCTP (Malawi) | Cognitive test score (standardized), version of Raven’s Colored Progressive Matrices that was used in the Indonesia Family Life Survey (IFLS-2) | 0.174 | Change in Standard Deviation | 1% | CCT, after 2 years, 13-22 years, Girls | | | | ZCTP (Malawi) | Cognitive test score (standardized), version of Raven’s Colored Progressive Matrices that was used in the Indonesia Family Life Survey (IFLS-2) | 0.136 | Change in Standard Deviation | NS | UCT, after 2 years, 13-22 years, Girls |
*continued on next page* Table A5.2.1 Summary of results for cash transfer effects disaggregated by gender for education indicators continued
| # | Study | Programme | Variable and treatment population (e.g., age of child) | Effect | Measure of change | Significance | Details/explanation | |----|------------------------|----------------------------|--------------------------------------------------------|--------|-------------------|--------------|---------------------| | 2 | Baird et al. (2013) | ZCTP (Malawi) | Cognitive test score (standardized), version of Raven’s Colored Progressive Matrices that was used in the Indonesia Family Life Survey (FLS-2) | 0.142 | Change in Standard deviation | 5% | CCT, after 2 years, 13-22 years, Girls, (baseline dropout) | | 3 | Gertler and Fernald (2004) | PROGRESA / Oportunidades (Mexico) | Log Long Term Memory test score | 4.87 | Change in score over control | NS | CCT, 3-6 years, effect on boys only | | | | | Log Short Term Memory test score | 3.32 | Change in score over control | NS | CCT, 3-6 years, effect on boys only | | | | | Log Visual Integration test score | 3.76 | Change in score over control | NS | CCT, 3-6 years, effect on boys only | | | | | Log Peabody Picture Vocabulary test score | 4.88 | Change in score over control | NS | CCT, 3-6 years, effect on boys only | | | | | Communication Dev. Inventory | 5.73 | Change in score over control | NS | CCT, 3-6 years, effect on boys only | | | | | Sentences test score | 6.78 | Change in score over control | 5% | CCT, 3-6 years, effect on boys only | | | | | Log Long Term Memory test score | -3.83 | Change in score over control | NS | CCT, 3-6 years, effect on girls only | | | | | Log Short Term Memory test score | 5.24 | Change in score over control | NS | CCT, 3-6 years, effect on girls only | | | | | Log Visual Integration test score | -3.63 | Change in score over control | NS | CCT, 3-6 years, effect on girls only | | | | | Log Peabody Picture Vocabulary test score | -3.55 | Change in score over control | NS | CCT, 3-6 years, effect on girls only | | | | | Communication Dev. Inventory | 5.58 | Change in score over control | NS | CCT, 3-6 years, effect on girls only | | | | | Sentences test score | 8.82 | Change in score over control | NS | CCT, 3-6 years, effect on girls only | | 4 | Paxson & Schady (2010) | BDH (Ecuador) | Cognitive and behavioural combined index (includes scores on the TVP test and three tests from the Woodcock-Johnson-Mönzö battery assessment) | 0.241 | Change in standard deviation | 5% | CCT, effects on girls only, between 12 and 18 months after the beginning of the programme, aged 3-7 years | | | | | Cognitive and behavioural combined index (includes scores on the TVP test and three tests from the Woodcock-Johnson-Mönzö battery assessment) | 0.115 | Change in standard deviation | NS | CCT, effects on boys only, between 12 and 18 months after the beginning of the programme, aged 3-7 years |
1. Unit of observation are children (enrolled or not in school) who were 18 or below when they joined the program and that, based on their school attainment at the pre-program time, could have achieved grade 11 between 2003 and 2009, and the number of years needed to complete high school was lower than the number of years of treatment.
2. This exam is a nationally recognized and standardized test that is administered prior to graduation from high school and mandatory for entrance to higher education (Baez et al. 2011, p. 13)
3. Unit of observation are children (enrolled or not in school) who were 18 or below when they joined the program and that, based on their school attainment at the pre-program time, could have achieved grade 11 between 2003 and 2009, and the number of years needed to complete high school was lower than the number of years of treatment.
4. This exam is a nationally recognized and standardized test that is administered prior to graduation from high school and mandatory for entrance to higher education (Baez et al. 2011, p. 13)
5. TIMMS stands for Trends in Mathematics and Science Study, which is a cycle of internationally comparative assessments in mathematics and science carried out at the fourth and eighth grades every 4 years. Authors also borrowed five mathematics questions from the 2007 TIMMS and incorporated them into an independently developed mathematics test (Non-TIMMS). 6 Unit of observation are children (enrolled or not in school) who were 18 or below when they joined the program and that, based on their school attainment at the pre-program time, could have achieved grade 11 between 2003 and 2009, and the number of years needed to complete high school was lower than the number of years of treatment.
7 Unit of observation are children (enrolled or not in school) who were 18 or below when they joined the program and that, based on their school attainment at the pre-program time, could have achieved grade 11 between 2003 and 2009, and the number of years needed to complete high school was lower than the number of years of treatment.
8 Overall scores of Icfes test The exam is a standardized test that assesses the academic achievement of students in various subjects such as Mathematics, Language, Biology, Chemistry, Physics, History, Geography (Baez et al. 2011, p. 14)
### Table A5.2.2 Summary of results for the role of cash transfer design and implementation parameters on education
| # | Study and country | Design / Implementation Parameter | Variable | Effect Measure of change | Significance Details/ explanation | |----|-------------------|-----------------------------------|----------|--------------------------|-----------------------------------| | **School Attendance** | | | | | | | 1 | Akresh et al. (2013) | NCTPP (Burkina Faso) | Conditionality | Attendance (School Roster Report), all children 7-15 | 0.134 Percentage 1% CCT round 3 | | | | NCTPP (Burkina Faso) | Conditionality | Attendance (School Roster Report), all children 7-15 | 0.067 Percentage NS UCT round 3 | | 2 | Baird et al. (2011) | ZCTP (Malawi) | Conditionality | Fraction of days respondent attended school (School ledgers) | 0.080 Percentage 5% Term 1-3 2009, CCT | | | | ZCTP (Malawi) | Conditionality | Fraction of days respondent attended school (School ledgers) | 0.058 Percentage NS Term 1-3 2009, UCT | | 3 | Barrera-Osorio et al. (2008) | SCAE (Colombia) | Frequency of Payment | Verified attendance at school | 0.033 Percentage 1% Effect of Basic CCT only, San Cristobal District | | | | SCAE (Colombia) | Frequency of Payment | Verified attendance at school | 0.028 Percentage 1% Effect of a savings CCT, where 2/3 transfer given immediately and 1/3 given at enrolment, San Cristobal District | | | | SCAE (Colombia) | Conditionality | Verified attendance at school | 0.009 Percentage NS Effect of Basic CCT only, Suba District, grades 6-8 | | | | SCAE (Colombia) | Conditionality | Verified attendance at school | 0.05 Percentage 1% Effect of transfers conditional on graduation and tertiary enrolment rather than attendance, Suba, grades 9-11 | | 4 | Benhassine et al. (2013) | Tayssir (Morocco) | Main Recipient | Attendance rate during surprise school visits (School sample, children 6-12) | 0.002 Percentage NS After 2 years, difference between LCT to mothers and LCT to fathers | | | | Tayssir (Morocco) | Main Recipient | Attending school by end of year 2, among those 6-15 at baseline (household sample) | 0.004 Percentage NS After 2 years, difference between LCT to mothers and LCT to fathers | | | | Tayssir (Morocco) | Main Recipient | Attendance rate during surprise school visits (School sample, children 6-12) | 0.918 P value NS P-value for Mother different from Father | | | | Tayssir (Morocco) | Main Recipient | Attending school by end of year 2, among those 6-15 at baseline (household sample) | 0.962 P value NS P-value for Mother different from Father | | | | Tayssir (Morocco) | Conditionality | Attendance rate during surprise school visits (School sample, children 6-12) | 0.007 Percentage NS After 2 years, difference between CCT to fathers and LCT to fathers | | | | Tayssir (Morocco) | Conditionality | Attending school by end of year 2, among those 6-15 at baseline | -0.019 Percentage NS After 2 years, difference between CCT to fathers and LCT to fathers | | | | Tayssir (Morocco) | Conditionality | Attending school by end of year 2, among those 6-15 at baseline | 0.01 P value 1% P-value for CCT different from LCT | | | | Tayssir (Morocco) | Conditionality | Attendance rate during surprise school visits (School sample, children 6-12) | 0.125 P value NS P-value for CCT different from LCT | | 5 | Filmer and Schady (2011) | CSP (Cambodia) | Transfer Level | child’s presence at school during unannounced visit (Secondary School students) | 0.023 Percentage NS Pooled estimate across four visits, $60 scholarship compared to those who were offered a $45 scholarship |
Continued on next page
### Table A5.2.2 Summary of results for the role of cash transfer design and implementation parameters on education continued
| # | Study and country | Programme and country | Design / Implementation Parameter | Variable | Effect | Measure of change | Significance | Details/ explanation | |----|-------------------|-----------------------|-----------------------------------|----------|--------|-------------------|--------------|---------------------| | 6 | Macours and Vakis (2009) | Atencion a Crisis (Nicaragua) | Complementary Programme | Attending school (children aged 7-18) | 0.057 | Percentage | 5% | After 9 months, Basic CCT only | | | | Atencion a Crisis (Nicaragua) | Complementary Programme | Number of days absent from school (absenteeism, children aged 7-18) | -1.574 | Percentage | 1% | After 9 months, Basic CCT only | | | | Atencion a Crisis (Nicaragua) | Complementary Programme | Attending school | 0.045 | Percentage | 5% | After 9 months, Basic CCT plus grant for productive investments | | | | Atencion a Crisis (Nicaragua) | Complementary Programme | Number of days absent from school (absenteeism) | -1.107 | Percentage | 5% | After 9 months, Basic CCT plus grant for productive investments | | | | Atencion a Crisis (Nicaragua) | Complementary Programme | Attending school | 0.049 | Percentage | 5% | After 9 months, Basic CCT plus scholarship for occupational training | | | | Atencion a Crisis (Nicaragua) | Complementary Programme | Number of days absent from school (absenteeism) | -1.438 | Percentage | 1% | After 9 months, Basic CCT plus scholarship for occupational training | | 7 | Mortens et al. (2015) | SAGE (Uganda) | Targeting | Proportion of children 6-17 currently attending formal education | -0.0043 | Percentage point | NS | Among households targeted through the Senior Citizens Grant | | | SAGE (Uganda) | Targeting | Proportion of children 6-17 currently attending formal education | -0.034 | Percentage point | 10% | Among households targeted through the Vulnerable Family Support Grant | | | SAGE (Uganda) | Targeting | Proportion of boys 6-17 currently attending formal education | -0.012 | Percentage point | NS | Among households targeted through the Senior Citizens Grant | | | SAGE (Uganda) | Targeting | Proportion of boys 6-17 currently attending formal education | -0.0006 | Percentage point | NS | Among households targeted through the Vulnerable Family Support Grant | | | SAGE (Uganda) | Targeting | Proportion of girls 6-17 currently attending formal education | 0.0037 | Percentage point | NS | Among households targeted through the Senior Citizens Grant | | | SAGE (Uganda) | Targeting | Proportion of girls 6-17 currently attending formal education | -0.061 | Percentage point | 10% | Among households targeted through the Vulnerable Family Support Grant | | | SAGE (Uganda) | Targeting | Mean number of days missed in last 30 scheduled school days (absenteeism) | 0.14 | Percentage point | NS | Among households targeted through the Senior Citizens Grant | | | SAGE (Uganda) | Targeting | Mean number of days missed in last 30 scheduled school days (absenteeism) | -0.36 | Percentage point | NS | Among households targeted through the Vulnerable Family Support Grant | | 8 | Penova and Vakis (2012) | Juntos (Peru) | Duration of exposure | Currently attending school, conditional on registration (children aged 6-14) | 0.01 | Percentage | NS | Being a beneficiary for over 12-23 months (compared to less than one year) | | | Juntos (Peru) | Duration of exposure | Currently attending school, conditional on registration | 0.03 | Percentage | 1% | Being a beneficiary for over 24-26 months (compared to less than a year) | | | Juntos (Peru) | Duration of exposure | currently attending school, conditional on registration | 0.01 | Percentage | NS | Being a beneficiary for over 36 months (compared to less than a year) | | 9 | Villa (2014) | Familias en accion (Colombia) | Duration of exposure | Years of education (among those enrolled at 7 years old) | 4.4 | Years of difference between least and most exposed | 1% | Difference between households with highest and lowest proportion of potential exposure |
Continued on next page
### Table A5.2.2 Summary of results for the role of cash transfer design and implementation parameters on education continued
| # | Study | Programme and country | Design / Implementation Parameter | Variable | Effect Measure of change | Significance | Details/ explanation | |----|-------|-----------------------|-----------------------------------|----------|--------------------------|-------------|---------------------| | 1 | Baird et al. (2011) | ZCTP (Malawi) | Conditionality | English Reading Comprehension Test Score (standardized) | 0.14 Standard Deviation | 1% | CCT, after 2 years, Girls aged 13-22 | | | | | | English Reading Comprehension Test Score (standardized) | -0.030 Standard Deviation | NS | UCT, after 2 years, Girls aged 13-22 | | | | | | English Reading Comprehension Test Score (standardized) | -0.032 Standard Deviation | NS | After 2 years, 13-22 years, Girls, CCT individual amount | | | | | | English Reading Comprehension Test Score (standardized) | -0.019 Standard Deviation | NS | After 2 years, 13-22 years, Girls, UCT individual amount | | | | | | English Reading Comprehension Test Score (standardized) | 0 Standard Deviation | NS | After 2 years, 13-22 years, Girls, CCT household amount | | | | | | English Reading Comprehension Test Score (standardized) | -0.058 Standard Deviation | 5% | After 2 years, 13-22 years, Girls, UCT household amount | | 2 | Behrman et al. (2009) | PROGRESA / Oportunidades (Mexico) | Duration of Exposure | Reading skills (Woodcock Johnson test) | -0.11 Percentage | NS | Extra 18 months of the programme, Female aged 9-15 in 1997 | | | | | | Reading skills (Woodcock Johnson test) | 0.199 Percentage | NS | Extra 18 months of the programme Male, aged 9-15 in 1997 | | | | | | Written Language (Woodcock Johnson test) | -0.301 Percentage | NS | Extra 18 months of the programme, Female aged 9-15 in 1997 | | | | | | Written Language (Woodcock Johnson test) | -0.011 Percentage | NS | Extra 18 months of the programme, Male, aged 9-15 in 1997 | | 3 | Evans et al. (2014) | TSAF (Tanzania) | Duration of Exposure | Literate (self-reported) | 0.04 Percentage | 10% | CCT, children aged 0-18 years, after 18-21 months | | | | | | Literate (self-reported) | 0.02 Percentage | NS | CCT, children aged 0-18 years, after 31-34 months | | 4 | Fernald et al. (2008) | Oportunidades (Mexico) | Cumulative cash transfer (duration & transfer size) | Peabody score | 0.18 Log of raw score | 1% | Effect of doubling cumulative cash transfers from median of 7500 to 15000 pesos on children 36-68 months old |
### Math Test Scores
| # | Study | Programme and country | Design / Implementation Parameter | Variable | Effect Measure of change | Significance | Details/ explanation | |----|-------|-----------------------|-----------------------------------|----------|--------------------------|-------------|---------------------| | 1 | Baird et al. (2011) | ZCTP (Malawi) | Conditionality | Standardized math test score (TIMMS) | 0.006 Standard deviation | NS | UCT, after 2 years, 13-22 years Girls | | | | | | Standardized math test score (TIMMS) | 0.12 Standard deviation | 10% | CCT, after 2 years, 13-22 years, Girls | | 2 | Behrman et al. (2009) | PROGRESA / Oportunidades (Mexico) | Duration of Exposure | Math Test Score (Woodcock Johnson test) | -0.225 Percentage | NS | Extra 18 months of the programme when aged between 9-15, Female aged 9-15 in 1997 | | | | | | Math Test Score (Woodcock Johnson test) | -0.574 Percentage | NS | Extra 18 months of the programme when aged between 9-15, Male, aged 9-15 in 1997 |
Continued on next page Table A5.2.2 Summary of results for the role of cash transfer design and implementation parameters on education continued
| # | Study and country | Programme and Implementation Parameter | Variable | Effect Measure of change | Significance | Details/ explanation | |----|-------------------|-----------------------------------------|----------|--------------------------|--------------|---------------------| | 3 | Benhassine et al. (2013) | Main Recipient | Basic Arithmetic test – Summary Index (Based on ASER test, children 6-12) | -0.004 | Change in Score | NS | After 2 years, difference between LCT to mothers and LCT to fathers | | | Tayssir (Morocco) | Main Recipient | Basic Arithmetic test – Summary Index (Based on ASER test, children 6-12) | 0.567 | P value | NS | P-value for Mother different from Father | | | Tayssir (Morocco) | Conditionality | Basic Arithmetic test – Summary Index (Based on ASER test, children 6-12) | -0.056 | Change in Score | NS | After 2 years, difference between CCT to fathers and LCT to fathers | | | Tayssir (Morocco) | Conditionality | Basic Arithmetic test – Summary Index (Based on ASER test, children 6-12) | 0.034 | P value | 5% | P-value for CCT different from LCT |
Cognitive development
| 1 | Esteva (2012) | PROGRESA / Oportunidades (Mexico) | Duration of Exposure | Long term memory (log), assessed using the Woodcock-Munoz Test | 0.055 | Change in percentage | NS | Effect on children aged 2-6, approx. five years after the programme began. Effect of being a beneficiary for 18 months longer than in comparison group. | | | PROGRESA / Oportunidades (Mexico) | Duration of Exposure | Short term memory (log), assessed using the Woodcock-Munoz Test | 0.010 | Change in percentage | NS | As above | | | PROGRESA / Oportunidades (Mexico) | Duration of Exposure | Visual spatial integration, assessed using the Woodcock-Munoz Test | -0.014 | Change in percentage | NS | As above | | | PROGRESA / Oportunidades (Mexico) | Duration of Exposure | Language development (log), measured using the Peabody picture vocabulary test | 0.030 | Change in percentage | NS | Effect on children aged 3-6, approx. five years after the programme began. Effect of being a beneficiary for 18 months longer than in comparison group. | | | PROGRESA / Oportunidades (Mexico) | Duration of Exposure | Language development (log), measured using the Peabody picture vocabulary test | 0.101 | Change in percentage | NS | Effect on children aged 3-6, approx. five years after the programme began. Effect of additional exposure to the programme for the full time in-utero and partially during early childhood | | | PROGRESA / Oportunidades (Mexico) | Duration of Exposure | Language development (log), measured using the Peabody picture vocabulary test | -0.081 | Change in percentage | NS | Effect on children aged 3-6, approx. five years after the programme began. Effect of families receiving transfers for a longer period before having children. | | | PROGRESA / Oportunidades (Mexico) | Duration of Exposure | Visual spatial integration, assessed using the Woodcock-Munoz Test | 0.041 | Change in percentage | NS | Effect on children aged 2-6, approx. five years after the programme began. Effect of extra treatment in early childhood. | | | PROGRESA / Oportunidades (Mexico) | Duration of Exposure | Visual spatial integration, assessed using the Woodcock-Munoz Test | 0.012 | Change in percentage | NS | Effect on children aged 2-6, approx. five years after the programme began. Effect of additional exposure to the programme for the full time in-utero and partially during early childhood | | | PROGRESA / Oportunidades (Mexico) | Duration of Exposure | Visual spatial integration, assessed using the Woodcock-Munoz Test | -0.197 | Change in percentage | 5% | Effect on children aged 2-6, approx. five years after the programme began. Effect of families receiving transfers for a longer period before having children. | Table A5.2.2 Summary of results for the role of cash transfer design and implementation parameters on education continued
| # | Study | Programme and country | Design / Implementation Parameter | Variable | Effect Measure of change | Significance | Details/ explanation | |----|------------------------|-----------------------|-----------------------------------|---------------------------------------------------------------------------|--------------------------|-------------|-------------------------------------------------------------------------------------| | 1 | Esteva, 2012 | PROGRESA / Oportunidades (Mexico) | Duration of Exposure | Long term memory (log), assessed using the Woodcock-Munoz Test | 0.145 | 10% | Effect on children aged 2-6, approx. five years after the programme began. Effect of additional exposure to the programme for the full time in-utero and partially during early childhood | | | PROGRESA / Oportunidades (Mexico) | Duration of Exposure | Long term memory (log), assessed using the Woodcock-Munoz Test | -0.079 | NS | Effect on children aged 2-6, approx. five years after the programme began. Effect of families receiving transfers for a longer period before having children. | | | PROGRESA / Oportunidades (Mexico) | Duration of Exposure | Short term memory (log) assessed using the Woodcock-Munoz Test | 0.073 | NS | Effect on children aged 2-6, approx. five years after the programme began. Effect of additional exposure to the programme for the full time in-utero and partially during early childhood | | | PROGRESA / Oportunidades (Mexico) | Duration of Exposure | Short term memory (log) assessed using the Woodcock-Munoz Test | 0.027 | NS | Effect on children aged 2-6, approx. five years after the programme began. Effect of families receiving transfers for a longer period before having children. | | 2 | Fernald et al. (2008) | Oportunidades (Mexico) | Cumulative cash transfer (duration & transfer size) | Long-term memory | 0.12 | 1% | Effect of doubling cumulative cash transfers from median of 7500 to 15000 pesos on children 36-68 months old | | | Oportunidades (Mexico) | Cumulative cash transfer (duration & transfer size) | Short-term memory | 0.13 | 1% | Effect of doubling cumulative cash transfers from median of 7500 to 15000 pesos on children 36-68 months old | | | Oportunidades (Mexico) | Cumulative cash transfer (duration & transfer size) | Visual integration | 0.08 | 1% | Effect of doubling cumulative cash transfers from median of 7500 to 15000 pesos on children 36-68 months old | | 3 | Fernald et al. (2009) | Oportunidades (Mexico) | Cumulative cash transfers (duration & transfer size) | Verbal assessment score from Wechsler Abbreviated Scale of Intelligence — (WASI) | 0.73 | 1% | Effect of increase in cumulative cash transfer of 10000 pesos, after 10 years | | | Oportunidades (Mexico) | Duration of exposure | Verbal assessment score from WASI | 1.13 | Age-standardised z-score | NS | Early versus late treatment (an additional 18 months) on children aged 8-10, ten years later | | | Oportunidades (Mexico) | Cumulative cash transfers (duration & transfer size) | Cognitive assessment score from WASI | 0.47 | Age-standardised z-score | 1% | Effect of increase in cumulative cash transfer of 10000 pesos, after 10 years | | | Oportunidades (Mexico) | Duration of exposure | Cognitive assessment score from WASI | -1.19 | Age-standardised z-score | NS | Early versus late treatment (an additional 18 months) on children aged 8-10, ten years later | | 4 | Macours and Vakis (2012) | Atencion a Crisis (Nicaragua) | Complementary Activities | Cognitive and socio-emotional outcomes index (comprised of five different indicators) | 0.016 | Change in standard deviation | NS | Lump sum payment treatment compared to basic treatment, effect after 9 months’ exposure. Averaged across 3 different CCT treatment arms | | | Atencion a Crisis (Nicaragua) | Complementary Activities | Cognitive and socio-emotional outcomes index (comprised of six different indicators) | -0.008 | Change in standard deviation | NS | Lump sum payment treatment compared to basic treatment, effect 2 years after programme finished. Averaged across three different CCT treatment arms |
Continued on next page
### Table A5.2.2 Summary of results for the role of cash transfer design and implementation parameters on education continued
| # | Study | Programme and country | Design / Implementation Parameter | Variable | Effect Measure of change | Significance | Details/ explanation | |----|-------|-----------------------|-----------------------------------|----------|--------------------------|-------------|---------------------| | 5 | Manley et al. (2015) | PROGRESA / Oportunidades (Mexico) | Duration of exposure | Verbal WASI (Wechsler Abbreviated Scale of Intelligence) score | 1.25 Change in score | NS | CCT, effect of 18 additional months in PROGRESA | | | | PROGRESA / Oportunidades (Mexico) | Transfer Amount | Verbal WASI (Wechsler Abbreviated Scale of Intelligence) score | 0.7 Change in score | 1% | CCT, effect of larger potential transfer amount | | | | PROGRESA / Oportunidades (Mexico) | Duration of exposure | Cognitive WASI (Wechsler Abbreviated Scale of Intelligence) score | -1.2 Change in score | NS | CCT, effect of 18 additional months in PROGRESA | | | | PROGRESA / Oportunidades (Mexico) | Transfer Amount | Cognitive WASI (Wechsler Abbreviated Scale of Intelligence) score | 0.46 Change in score | 10% | CCT, effect of larger potential transfer amount | | | | PROGRESA / Oportunidades (Mexico) | Duration of exposure | Strengths and difficulties questionnaire | -0.14 Change in score | 5% | CCT, effect of 18 additional months in PROGRESA | | | | PROGRESA / Oportunidades (Mexico) | Transfer Amount | Strengths and difficulties questionnaire | -0.02 Change in score | NS | CCT, effect of larger potential transfer amount |
9 Test 22 of the Woodcock Johnson tests: Letter-word Identification consisting of showing those taking the test various pictures, letters and progressively harder words where the examinee is asked to say what is in the picture, and then to state letters, and then words. In the case of words, the examinee must pronounce the word correctly for it to be classified as a correct answer.
10 Test 26 of the Woodcock Johnson test: Dictation where the examiner reads aloud letters and words and the examinee must write down the letter/word correctly.
11 TIMMS stands for Trends in Mathematics and Science Study, which is a cycle of internationally comparative assessments in mathematics and science carried out at the fourth and eighth grades every 4 years. Authors also borrowed five mathematics questions from the 2007 TIMMS and incorporated them into an independently developed mathematics test (Non-TIMMS).
## Summary tables for results for Health and Nutrition
### Table A5.3.1 Summary of results for cash transfer effects disaggregated by gender for health and nutrition indicators
| # | Study | Programme | Outcome indicator and treatment population | Effect | Measure of change | Significance | Details | |---|-------|-----------|---------------------------------------------|--------|-------------------|--------------|---------| | **Health service use** | | | | | | | | | 1 | Akresh et al. (2012) | NCT (Burkina Faso) | Number of child preventative health care visits | 0.48 | Visits | 5% | Household receiving CCT (girls under 60 months) | | | Akresh et al. (2012) | NCT (Burkina Faso) | Number of child preventative health care visits | 0.39 | Visits | NS | Household receiving CCT (boys under 60 months) | | | Akresh et al. (2012) | NCT (Burkina Faso) | Number of child preventative health care visits | -0.106 | Visits | NS | Household receiving UCT (girls under 60 months) | | | Akresh et al. (2012) | NCT (Burkina Faso) | Number of child preventative health care visits | -0.045 | Visits | NS | Household receiving UCT (boys under 60 months) | | 2 | Evans et al. (2014) | TSAF (Tanzania) | Number of health visits (children up to 2 years old) | -3.8 | Visits | 5% | Girls (after 31 to 34 months) | | | Evans et al. (2014) | TSAF (Tanzania) | Number of health visits (children up to 2 years old) | -2.3 | Visits | NS | Boys (after 31 to 34 months) | | | Evans et al. (2014) | TSAF (Tanzania) | Number of health visits (aged 60 plus) | -0.58 | Visits | 10% | Women aged 60 plus | | | Evans et al. (2014) | TSAF (Tanzania) | Number of health visits (aged 60 plus) | -0.15 | Visits | NS | Men aged 60 plus | | 3 | Levy and Ohls (2007) | PATH (Jamaica) | Visits to health facilities in the past six months (children under 6) | 0.45 | Visits | NS | Girls in beneficiary households | | | Levy and Ohls (2007) | PATH (Jamaica) | Visits to health facilities in the past six months (children under 6) | 0.16 | Visits | NS | Boys in beneficiary households | | **Health service use (gender of household head)** | | | | | | | | | 1 | World Bank (2011) | PKH (Indonesia) | Number of prenatal visits | 2.3 | Visits | 1% | Female-headed households | | | World Bank (2011) | PKH (Indonesia) | Number of prenatal visits | 0.5 | Visits | 5% | Male-headed households | | | World Bank (2011) | PKH (Indonesia) | Number of post-natal visits | -0.14 | Visits | NS | Female-headed households | | | World Bank (2011) | PKH (Indonesia) | Number of post-natal visits | 0.38 | Visits | 5% | Male-headed households | | **Child anthropometric measures (gender of household head)** | | | | | | | | | 1 | World Bank (2011) | PKH (Indonesia) | Height-for-age (0-36 months old) | -0.049 | NS | Female-headed households | | | World Bank (2011) | PKH (Indonesia) | Height-for-age (0-36 months old) | 0.104 | NS | Male-headed households | | | World Bank (2011) | PKH (Indonesia) | Weight-for-age (0-36 months old) | 0.363 | NS | Female-headed households | | | World Bank (2011) | PKH (Indonesia) | Weight-for-age (0-36 months old) | -0.094 | NS | Male-headed households | | | World Bank (2011) | PKH (Indonesia) | Weight-for-height z-score (children up to 36 months) | 0.71 | NS | Female-headed households | | | World Bank (2011) | PKH (Indonesia) | Weight-for-height z-score (children up to 36 months) | -0.26 | 10% | Male-headed households | | **Child anthropometric measures (individual level)** | | | | | | | | | 1 | Cheema et al. (2014) | BISP (Pakistan) | Proportion of children stunted (aged up to 59 months) | 0.1721 | Percentage points | NS | Boys | | | Cheema et al. (2014) | BISP (Pakistan) | Proportion of children stunted (aged up to 59 months) | -0.3745 | Percentage points | 5% | Girls | | | Cheema et al. (2014) | BISP (Pakistan) | Proportion of children wasted (aged up to 59 months) | -0.2226 | Percentage points | NS | Boys | | | Cheema et al. (2014) | BISP (Pakistan) | Proportion of children wasted (aged up to 59 months) | 0.1702 | Percentage points | NS | Girls |
### Table A5.3.2 Summary of results for the role of cash transfer design and implementation parameters on health and nutrition
| # | Study | Programme and country | Outcome indicator and treatment population | Effect | Measure of change | Significance | Details/ explanation | |----|-------|-----------------------|---------------------------------------------|--------|-------------------|--------------|---------------------| | **Main recipient** | | | | | | | | | 1 | Akresh et al. (2012) | NCT (Burkina Faso) | Number of preventative health visits for child over past year | 0.45 | Visits | 5% | CCTs targeted to mothers | | | | NCT (Burkina Faso) | Number of preventative health visits for child over past year | 0.42 | Visits | NS | CCTs targeted to fathers | | | | NCT (Burkina Faso) | Number of preventative health visits for child over past year | 0.05 | Visits | NS | UCTs targeted to mothers | | | | NCT (Burkina Faso) | Number of preventative health visits for child over past year | -0.22 | Visits | NS | UCTs targeted to fathers | | 2 | Behrman and Parker (2013) | PROGRESA/Oportunidades (Mexico) | Probability of attending clinic in past year | 0.114 | Percentage point | 10% | Transfer being received by the elderly person | | | | PROGRESA/Oportunidades (Mexico) | Probability of attending clinic in past year | 0.255 | Percentage point | 1% | Transfer being received by a younger woman in the house | | **Transfer size** | | | | | | | | | 1 | Davis et al. (2002) | PROGRESA (Mexico) | Whether child had a health check-up (0 to 5 years old) | 0.0078 | Percentage point | 1% | Additional peso of transfer (includes non-beneficiaries) | | | | PROCAMPO (Mexico) | Whether child had a health check-up (0 to 5 years old) | 0.0026 | Percentage point | NS | Additional peso of transfer (includes non-beneficiaries) | | 2 | Esteva (2012) | PROGRESA (Mexico) | Being stunted (children 2-6 years in 2003) | -0.0199 | Percentage point | NS | Effect of increase in amount of cash component (equal to $344 Pesos during first year of life) | | | | PROGRESA (Mexico) | Height-for-age z-score | 0.1539 | Z-score | NS | Effect of increase in amount of cash component (equal to $344 Pesos during first year of life) | | | | PROGRESA (Mexico) | Weight-for-age z-score | 0.1484 | Z-score | NS | Effect of increase in amount of cash component (equal to $344 Pesos during first year of life) | | 3 | Manley (2015) | Oportunidades (Mexico) | Height-for-age | 0.07 | Z-score | 1% | Effect of additional Peso of transfer | | 4 | Merttens et al. (2013) | HSNP (Kenya) | Mean dietary diversity score | Not reported | Score | NS | (Does not report coefficient of the non-significant result) | | **Duration of exposure** | | | | | | | | | 1 | Behrman and Parker (2013) | PROGRESA/Oportunidades (Mexico) | Probability of attending a clinic | 0.048 | Percentage point | 5% | Being in the programme for an extra 1.5 years (women) | | | | PROGRESA/Oportunidades (Mexico) | Probability of attending a clinic | 0.027 | Percentage point | NS | Being in the programme for an extra 1.5 years (men) | | | | PROGRESA/Oportunidades (Mexico) | Probability of attending a clinic | 0.20 | Percentage point | 1% | Being in the programme for an extra 4 years (women) | | | | PROGRESA/Oportunidades (Mexico) | Probability of attending a clinic | 0.17 | Percentage point | 1% | Being in the programme for an extra 4 years (men) | | | | PROGRESA/Oportunidades (Mexico) | Probability of attending a clinic | 0.23 | Percentage point | 1% | Being in the programme for an extra 5.5 years (women) | | | | PROGRESA/Oportunidades (Mexico) | Probability of attending a clinic | 0.20 | Percentage point | 1% | Being in the programme for an extra 5.5 years (men) | | | | PROGRESA/Oportunidades (Mexico) | Probability of attending a clinic | 0.26 | Percentage point | 1% | Being in the programme for an extra 5.5 years (women aged 70 +) | | | | PROGRESA/Oportunidades (Mexico) | Probability of attending a clinic | 0.08 | Percentage point | NS | Being in the programme for an extra 5.5 years (men aged 70 +) |
*Continued on next page*
### Table A5.3.2 Summary of results for the role of cash transfer design and implementation parameters on health and nutrition continued
| # | Study | Programme and country | Outcome indicator and treatment population | Effect Measure of change | Significance | Details/ explanation | |----|--------------------------------------------|-----------------------|---------------------------------------------|--------------------------|--------------|--------------------------------------------------------------------------------------| | 1 | Behrman and Parker (2013) | PROGRESA / Oportunidades (Mexico) | Probability of attending a clinic | 0.09 Percentage point | 10% | Being in the programme for an extra 5.5 years (women aged 60-69) | | | | | Probability of attending a clinic | 0.24 Percentage point | 1% | Being in the programme for an extra 5.5 years (men aged 60-69) | | | | | Probability of attending a clinic | 0.29 Percentage point | 1% | Being in the programme for an extra 5.5 years (women aged 50-59) | | | | | Probability of attending a clinic | 0.21 Percentage point | 1% | Being in the programme for an extra 5.5 years (men aged 50-59) | | | | | Probability of attending a clinic | 0.26 Percentage point | 1% | Transfer being received by the elderly woman | | | | | Probability of attending a clinic | 0.11 Percentage point | 10% | Transfer being received by a younger woman in the house | | 2 | Buser et al. (2014) | BDH (Ecuador) | Weight-for-age | 0.596 Z-score | 1% | Continuing to receive transfer, compared to losing it two years ago | | | | | Height-for-age | 0.367 Z-score | 10% | Continuing to receive transfer, compared to losing it two years ago | | | | | Weight-for-height | 0.495 Z-score | 1% | Continuing to receive transfer, compared to losing it two years ago | | | | | Underweight | -0.027 Percentage point | NS | Continuing to receive transfer, compared to losing it two years ago | | | | | Stunted | -0.136 Percentage point | 5% | Continuing to receive transfer, compared to losing it two years ago | | | | | Weight-for-age | 1.397 Percentage point | 1% | Continuing to receive transfer, compared to losing it two years ago | | | | | Height-for-age | 0.985 Percentage point | 1% | Continuing to receive transfer, compared to losing it two years ago | | | | | Weight-for-height | 0.915 Percentage point | 1% | Continuing to receive transfer, compared to losing it two years ago | | | | | Received child health check | 0.131 Percentage point | NS | Continuing to receive transfer, compared to losing it two years ago | | 3 | Esteva (2012) | Oportunidades (Mexico) | Being stunted (children 2-6 years in 2003) | 0.0226 Percentage point | NS | Being in early treatment group (associated average of $484, $530 and $1959 Mexican Pesos more during pregnancy, first year and cumulatively than ‘late entry’ households) | | | | | Height-for-age z-score | -0.0279 Z-score | NS | (As above) | | | | | Weight-for-age z-score | -0.0077 Z-score | NS | (As above) | | 4 | Fernald et al. (2008) | Oportunidades (Mexico) | Height-for-age (24 to 68 month children) | 0.2 Z-score | 1% | Effect of doubling cash transfers from the median of 7500 to 15000 pesos ($806 to $1612) | | | | | Whether stunted or not (24 to 68 month children) | -0.1 Percentage point | 1% | Effect of doubling cash transfers from the median of 7500 to 15000 pesos ($806 to $1612) | | 5 | Fernald et al. (2009) | Oportunidades (Mexico) | Height-for-age | 0.03 Z-score | 1% | Effect size of increase in cash transfer of around $926 (cumulative cash transfers received) | | 6 | Manley et al. (2015) | Oportunidades (Mexico) | Height-for-age | 0.03 Z-score | NS | Effect of 18 additional months on the programme | | 7 | Perova and Vakis, (2012) | Juntos (Peru) | Received health checks in last 3 months (for children under 5) | 0.13 Percentage point | 5% | Being a beneficiary household for over 36 months |
Continued on next page
### Table A5.3.2 Summary of results for the role of cash transfer design and implementation parameters on health and nutrition continued
| # | Study and country | Programme and treatment population | Outcome indicator and treatment population | Effect Measure of change | Significance | Details/ explanation | |----|-------------------|-------------------------------------|---------------------------------------------|--------------------------|-------------|----------------------| | **Conditionalities** | | | | | | | | 1 | Attanasio et al. (2015) | Familias en Acción (Colombia) | Number of preventative health care visits (Children under 36 months) | -0.574 | Visits | 1% Effect of there not being a condition of health visits (versus presence of condition) | | 2 | Akresh et al. (2012) | NCTPP (Burkina Faso) | Number of routine preventative health clinic visits for child under 60 months | 0.431 | Visits | 5% Conditional on obtaining quarterly child growth monitoring at health clinics for all children under 60 months old | | | | NCTPP (Burkina Faso) | Number of routine preventative health clinic visits for child under 60 months | -0.079 | Visits | NS Receiving unconditional transfers | | 3 | Benedetti et al. (2015) | Bono 10,000 (Honduras) | Number of prenatal check-ups during last or current pregnancy | 0.269 | Visits | NS Households where transfers conditioned on regular attendance at health centres | | | | Bono 10,000 (Honduras) | Number of prenatal check-ups during last or current pregnancy | 0.431 | Visits | NS Households where transfers not conditional on regular health centre visits nor labelled as health transfers | | | | Bono 10,000 (Honduras) | Women received postnatal check-up in 10 days after birth | 0.212 | Percentage change | 5% Households where transfers conditioned on regular attendance at health centres | | | | Bono 10,000 (Honduras) | Women received postnatal check-up in 10 days after birth | 0.118 | Percentage change | NS Households where transfers not conditional on regular health centre visits nor labelled as health transfers | | **Payment mechanisms** | | | | | | | | 1 | Aker et al. (2011) | Mobile money experiment (Niger) | Household diet diversity score (number of food groups eaten in past 24 hours, out of 12) | 0.5 | Number of food groups | 5% Whether household received cash via e-payment using a mobile phone | | 2 | Aker et al. (2014) | Mobile money experiment (Niger) | Household diet diversity score (number of food groups eaten in past 24 hours, out of 12) | 0.07 | Difference in means | 1% Whether household received cash via e-payment using a mobile phone | | | | Mobile money experiment (Niger) | Weight-for-height z-score | 0 | Z-score | NS Whether household received cash via e-payment using a mobile phone | | | | Mobile money experiment (Niger) | Prevalence of wasting | 0.43 | Percentage point | NS Whether household received cash via e-payment using a mobile phone | | **Complementary interventions and supply side services** | | | | | | | | 1 | Langendorf et al. (2014) | Prospective nutrition study (Niger) | Moderate acute malnutrition of children 6-23 months | 2.3 | Hazard ratio | 1% Effect of also receiving supplementary foods (HQ-LNS 500 kcal/day (Supplementary Plumpy, Nutriset)) for children 6-23 months | | | | Prospective nutrition study (Niger) | Moderate acute malnutrition of children 6-23 months | 2.42 | Hazard ratio | 1% Effect of also receiving supplementary foods (MQ-LNS 250 kcal/day (Plumpy/Doz, Nutriset)) for children 6-23 months | | | | Prospective nutrition study (Niger) | Moderate acute malnutrition of children 6-23 months | 2.07 | Hazard ratio | 1% Effect of also receiving supplementary foods (Super Cereal Plus 820 kcal/day (Michiels and Cerfar)) |
## Summary tables for results for Savings, Investment and Production
### Table A5.4.1 Summary of results for cash transfer effects disaggregated by gender for savings, investment and production
| # | Study | Programme | Indicator | Effect | Measure of change | Significance | Details | |----|------------------------|-----------|---------------------------------------------------------------------------|--------|-------------------|--------------|------------------------------| | 1 | Asfaw et al. (2014) | CT-OVC (Kenya) | Proportion of female-headed households owning small livestock (sheep, goat, and so forth) | 0.06 | Percentage point change | 10% | Female headed household | | | | CT-OVC (Kenya) | Female-headed household participation in non-farm enterprise | 0.072 | Percentage point change | 5% | Female headed household | | 2 | Blattman et al. (2012) | YDP (Uganda) | Tools and machines acquired since baseline (beneficiary males) | 791.90 | '000s UGX | 1% | Male beneficiaries | | | | YDP (Uganda) | Tools and machines acquired since baseline (beneficiary females) | -409.80| '000s UGX | 5% | Difference in effect compared to male beneficiaries | | | | YDP (Uganda) | Stock of raw materials, tools, and machines (beneficiary males) | 658.55 | '000s UGX | 1% | Male beneficiaries | | | | YDP (Uganda) | Stock of raw materials, tools, and machines (beneficiary females) | -408.07| '000s UGX | 5% | Difference in effect compared to male beneficiaries | | 3 | Blattman et al. (2015) | WINGS (Uganda) | Impacts of the full program (Phase 1) on whether female recipient started enterprise since baseline 16 months after grants | 0.473 | Percentage point change | 1% | Female recipient | | | | WINGS (Uganda) | Impacts of the full program (Phase 1) on whether male recipient started enterprise since baseline 16 months after grants | 0.595 | Percentage point change | 1% | Male recipient | | | | WINGS (Uganda) | Impacts of the full program (Phase 1) on amount of savings by female recipient 16 months after grants | 101.009| Level change | 1% | Female recipient | | | | WINGS (Uganda) | Impacts of the full program (Phase 1) on amount of savings by male recipient 16 months after grants | 169.695| Level change | 1% | Male recipient | | | | WINGS (Uganda) | Impacts of the full program (Phase 1) on amount of debt by female recipient 16 months after grants | 2.631 | Level change | 5% | Female recipient | | | | WINGS (Uganda) | Impacts of the full program (Phase 1) on amount of debt by male recipient 16 months after grants | 4.981 | Level change | 10% | Male recipient | | 4 | Covarrubias et al. (2012) | SCTP (Malawi) | Female-headed household ownership of hoes | 0.23 | Percentage point change | 1% | Female headed household | | | | SCTP (Malawi) | Female-headed household ownership of axes | 0.436 | Percentage point change | 1% | Female headed household | | | | SCTP (Malawi) | Female-headed household ownership of goats | 0.52 | Percentage point change | 1% | Female headed household | | | | SCTP (Malawi) | Female-headed household ownership of chickens | 0.612 | Percentage point change | 1% | Female headed household | | 5 | Evans et al. (2014) | Community-based CCT (Tanzania) | Ownership at endline of indigenous goats (including kids) – female headed hhs | 0.23 | Percentage point change | NS | Female headed household | | | | Community-based CCT (Tanzania) | Ownership at endline of indigenous goats (including kids) – male headed hhs | 0.47 | Percentage point change | 5% | Male headed household | | | | Community-based CCT (Tanzania) | Ownership at local chickens (excluding chicks) – female headed hhs | 1.62 | Percentage point change | 1% | Female headed household | | | | Community-based CCT (Tanzania) | Ownership at endline Indigenous goats (including kids) – male headed hhs | 0.82 | Percentage point change | NS | Male headed household |
Continued on next page
### Table A5.4.1 Summary of results for cash transfer effects disaggregated by gender for savings, investment and production continued
| # | Study | Programme | Indicator | Effect | Measure of change | Significance | Details | |----|--------------------------------|-----------|------------------------------------------------|--------|-------------------|--------------|------------------------------| | 6 | Handa et al. (2014) | LEAP (Ghana) | Any savings (female headed hhs) | 0.07 | Percentage point change | 10% | Female headed household | | | | LEAP (Ghana) | Any savings (male headed hhs) | 0.147 | Percentage point change | 10% | Male headed household | | | | LEAP (Ghana) | Used Fertiliser (female headed hhs) | -0.015 | Percentage point change | NS | Female headed household | | | | LEAP (Ghana) | Used Fertiliser (male headed hhs) | -0.074 | Percentage point change | NS | Male headed household | | | | LEAP (Ghana) | Seeds Expenses (female headed hhs) | 21.58 | Level change | 5% | Female headed household | | | | LEAP (Ghana) | Seeds Expenses (male headed hhs) | 33.81 | Level change | 5% | Male headed household | | | | LEAP (Ghana) | Hold loan (female headed hhs) | -0.065 | Percentage point change | NS | Female headed household | | | | LEAP (Ghana) | Hold loan (male headed hhs) | -0.004 | Percentage point change | NS | Male headed household | | | | LEAP (Ghana) | Amount outstanding (female headed hhs) | -0.28 | Level change | NS | Female headed household | | | | LEAP (Ghana) | Amount outstanding (male headed hhs) | -1.003 | Level change | NS | Male headed household | | 7 | Haushofer and Shapiro (2013) | Give Directly (Kenya) | Value of livestock (female recipients) | 7.86 | Level change | NS | Female recipients | | | | Give Directly (Kenya) | Value of agricultural tools (USD) – female recipients | -2.22 | Level change | NS | Female recipients | | | | Give Directly (Kenya) | Value of savings (USD) – female recipients | -3.43 | Level change | NS | Female recipients | | 8 | Martinez (2004) | Bonosol (Bolivia) | Probability of investing on fertiliser, female oldest HH member | 0.088 | Percentage point change | 10% | Female oldest household member | | | | Bonosol (Bolivia) | Probability of investing on seeds, female oldest HH member | 0.062 | Percentage point change | NS | Female oldest household member | | | | Bonosol (Bolivia) | Monthly expenditures on seeds, female oldest HH member | 5.108 | Level change | 5% | Female oldest household member |
### Table A5.4.2 Summary of results for the role of cash transfer design and implementation parameters on savings, investment and production
| # | Study | Programme | Variable and treatment population | Effect | Measure of change | Significance | Details | |----|------------------------------|-----------|---------------------------------------------------------------------------------------------------|--------|-------------------|--------------|----------------------------------------------| | | Main recipient | | | | | | | | 1 | Haushofer and Shapiro (2013) | Give Directly (Kenya) | Value of livestock – female recipient vs male | 7.86 | Level change | NS | Main recipient (female vs male) | | | | | Value of savings – female recipient vs male | -3.43 | Level change | NS | Main recipient (female vs male) | | | | | Non-ag business investment in durables, monthly (USD) – female recipient vs male | -0.15 | Level change | NS | Main recipient (female vs male) | | | Transfer size and frequency | | | | | | | | 1 | Haushofer and Shapiro (2013) | Give Directly (Kenya) | Value of livestock – monthly transfer vs lump-sum | 2.07 | Level change | NS | Transfer frequency | | | | | Value of cows – monthly transfer vs lump-sum | -13.46 | Level change | NS | Transfer frequency | | | | | Value of small livestock – monthly transfer vs lump-sum | 6.84 | Level change | NS | Transfer frequency | | | | | Value of livestock – large vs small transfer | 63.19 | Level change | 5% | Transfer size | | | | | Value of cows – large vs small transfer | 43.79 | Level change | 10% | Transfer size | | | | | Value of small livestock – large vs small transfer | 20.09 | Level change | 1% | Transfer size | | | | | Value of savings – monthly transfer vs lump-sum | 1.81 | Level change | NS | Transfer frequency | | | | | Value of savings – large vs small transfer | 10.22 | Level change | 5% | Transfer size | | | | | Non-ag business investment in durables, monthly (USD) – monthly transfer vs lump-sum | 0.01 | Level change | NS | Transfer frequency | | | | | Non-ag business investment in durables, monthly (USD) – large vs small transfer | -0.15 | Level change | NS | Transfer size | | | Duration of exposure | | | | | | | | 1 | Gertler et al. (2012) | Oportunidades (Mexico) | Draft animal ownership – long term 2003 sample | 0.031 | Percentage point | NS | Longer exposure to programme – four years after control households were incorporated | | | | | Productive animal ownership – long term 2003 sample | 0.02 | Percentage point | NS | Longer exposure to programme – four years after control households were incorporated | | | | | Productive loans | 0.004 | Percentage point | 5% | Longer exposure to programme – four years after control households were incorporated | | 2 | Maluccio (2010) | RPS (Nicaragua) | Number of productive agricultural goods (2002) – ploughs, water pumps, sprayers, tools, and carts | 0.086 | Level change | 10% | Shorter exposure | | | | | Value of productive agricultural goods (2002) – ploughs, water pumps, sprayers, tools, and carts | 3.4 | Level change | NS | Shorter exposure | | | | | Number of productive agricultural goods (2004) – ploughs, water pumps, sprayers, tools, and carts | -0.023 | Level change | NS | Longer exposure | | | | | Value of productive agricultural goods (2004) – ploughs, water pumps, sprayers, tools, and carts | -18.2 | Level change | NS | Longer exposure | | | | | Number of types of animals owned (cattle, work animals and poultry) (2002) | -0.032 | Level change | NS | Shorter exposure | | | | | Value of all animals owned (cattle, work animals and poultry) (2002) | -110.1 | Level change | NS | Shorter exposure |
Continued on next page
### Table A5.4.2 Summary of results for the role of cash transfer design and implementation parameters on savings, investment and production continued
| # | Study | Programme | Variable and treatment population | Effect | Measure of change | Significance | Details | |----|------------------------|-----------|---------------------------------------------------------------------------------------------------|--------|-------------------|--------------|------------------------------| | 2 | Maluccio (2010) | RPS | Number of types of animals owned (cattle, work animals and poultry) (2004) | -0.008 | Level change | NS | Longer exposure | | | RPS (Nicaragua) | | Value of all animals owned (cattle, work animals and poultry) (2004) | 208.4 | Level change | NS | Longer exposure |
#### Targeting mechanism
| # | Study | Programme | Variable and treatment population | Effect | Measure of change | Significance | Details | |----|------------------------|-----------|---------------------------------------------------------------------------------------------------|--------|-------------------|--------------|------------------------------| | 1 | Mertens et al. (2015) | SAGE | Proportion of HHs owning livestock (Senior Citizens Grant) | 4.1 | Percentage point | NS | SCG (elderly) vs VFSG | | | | | Proportion of HHs owning livestock (Vulnerable Family Support Grant) | 9.3 | Percentage point | 1% | SCG (elderly) vs VFSG | | | | | Proportion of households purchasing livestock in last 12 months (Senior Citizens Grant) | 9.3 | Percentage point | 5% | SCG (elderly) vs VFSG | | | | | Proportion of households purchasing livestock in last 12 months (Vulnerable Family Support Grant) | 26.2 | Percentage point | 1% | SCG (elderly) vs VFSG | | | | | Proportion of households owning cattle (Senior Citizens Grant) | -0.28 | Percentage point | NS | SCG (elderly) vs VFSG | | | | | Proportion of households owning cattle (Vulnerable Family Support Grant) | 6.7 | Percentage point | 1% | SCG (elderly) vs VFSG | | | | | Proportion of households owning goats (Senior Citizens Grant) | 2.1 | Percentage point | NS | SCG (elderly) vs VFSG | | | | | Proportion of households owning goats (Vulnerable Family Support Grant) | 7.3 | Percentage point | 5% | SCG (elderly) vs VFSG | | | | | Proportion of households purchasing productive assets in last 12 months (Senior Citizens Grant) | 0.24 | Percentage point | NS | SCG (elderly) vs VFSG | | | | | Proportion of households purchasing productive assets in last 12 months (Vulnerable Family Support Grant) | 8.8 | Percentage point | 5% | SCG (elderly) vs VFSG | | | | | Mean total value of productive assets purchased (SCG) (2012 prices, UGX) | 500 | Percentage point | NS | SCG (elderly) vs VFSG | | | | | Mean total value of productive assets purchased (VFSG) (2012 prices, UGX) | 500 | Percentage point | NS | SCG (elderly) vs VFSG | | | | | Proportion of households reporting current cash savings (Senior Citizens Grant) | 4.9 | Percentage point | NS | SCG (elderly) vs VFSG | | | | | Proportion of households reporting current cash savings (VFSG) | 9.5 | Percentage point | 5% | SCG (elderly) vs VFSG | | | | | Mean total value of current savings, for those with any savings (2012 prices, UGX) – (Senior Citizens Grant) | -156,000 | Level change | NS | SCG (elderly) vs VFSG | | | | | Mean total value of current savings, for those with any savings (2012 prices, UGX) – (VFSG) | 90,500 | Level change | NS | SCG (elderly) vs VFSG | | | | | Proportion of households reporting borrowing money in last 12 months (SCG) | 7.3 | Percentage point | 10% | SCG (elderly) vs VFSG | | | | | Proportion of households reporting borrowing money in last 12 months (VFSG) | -1.3 | Percentage point | NS | SCG (elderly) vs VFSG |
Continued on next page
### Table A5.4.2 Summary of results for the role of cash transfer design and implementation parameters on savings, investment and production continued
| # | Study | Programme | Variable and treatment population | Effect | Measure of change | Significance | Details | |----|--------------------------------|--------------------|---------------------------------------------------------------------------------------------------|--------|-------------------|--------------|----------------------------------------------| | 1 | Merttens et al. (2015) | SAGE (Uganda) | Mean total value of current outstanding debt, for those with outstanding debt (2012 prices, UGX) (SCG) | 7500 | Level change | NS | SCG (elderly) vs VFSG | | | | SAGE (Uganda) | Mean total value of current outstanding debt, for those with outstanding debt (2012 prices, UGX) (VFSG) | 31000 | Level change | NS | SCG (elderly) vs VFSG | | | | SAGE (Uganda) | Proportion of households reporting being able to borrow a large (e.g. UGX 60,000 or more) amount of cash in an emergency (SCG) | 11 | Percentage point | 1% | SCG (elderly) vs VFSG | | | | SAGE (Uganda) | Proportion of households reporting being able to borrow a large (e.g. UGX 60,000 or more) amount of cash in an emergency (VFSG) | 10 | Percentage point | 5% | SCG (elderly) vs VFSG |
#### Payment mechanism
| # | Study | Programme | Variable and treatment population | Effect | Measure of change | Significance | Details | |----|--------------------------------|--------------------|---------------------------------------------------------------------------------------------------|--------|-------------------|--------------|----------------------------------------------| | 1 | Aker et al. (2011) | Concern Worldwide CT (Niger) | Types of crops grown (Zap m-transfer) | 0.49 | Number of different types of crops | 5% | DD estimator between Zap and cash households | | | | Concern Worldwide CT (Niger) | Types of crops grown (Placebo transfer) | 0.12 | Number of different types of crops | NS | DD estimator between placebo and cash households | | | | Concern Worldwide CT (Niger) | Number of asset categories owned (out of 12) (Zap m-transfer) | 0.66 | Number asset categories | 1% | DD estimator between Zap and cash households | | | | Concern Worldwide CT (Niger) | Number of asset categories owned (out of 12) (Placebo transfer) | 0.2 | Number asset categories | NS | DD estimator between placebo and cash households |
#### Complementary interventions and supply side services
| # | Study | Programme | Variable and treatment population | Effect | Measure of change | Significance | Details | |----|--------------------------------|--------------------|---------------------------------------------------------------------------------------------------|--------|-------------------|--------------|----------------------------------------------| | 1 | Blattman et al. (2015) | WINGS (Uganda) | Impacts of the full program (Phase 2) on amount of savings by recipients 12-month after grant as effect of 1-2 follow-ups (supervision without advice) | 26.41 | Level change | 10% | Supervision without advice received | | | Blattman et al. (2015) | WINGS (Uganda) | Impacts of the full program (Phase 2) on whether recipients started enterprise 12 months after grant as effect of additional 1-2 follow-ups (supervision) | 0.107 | Percentage point | 1% | Supervision without advice received | | 2 | Green et al. (2015) | WINGS (Uganda) | Currently doing business (women selected and trained with partner compared to women without) | -0.09 | Percentage point | 10% | Women selected and trained with partner compared to women without | | | WINGS (Uganda) | Started enterprise since baseline (women selected and trained with partner compared to women without) | 0.02 | Percentage point | NS | Women selected and trained with partner compared to women without | | 3 | Macours and Vakis (2009) | Atencion a Crisis (Nicaragua) | Value of business assets (CT + training) | -17.8 | Level change | NS | Vocational training | | | Atencion a Crisis (Nicaragua) | Value of business assets (CT + productive grant) | 235.3 | Level change | 10% | Productive grant | | | Atencion a Crisis (Nicaragua) | Value of livestock sold or self-consumed (CT + training) | -33.57 | Level change | NS | Vocational training | | | Atencion a Crisis (Nicaragua) | Value of livestock sold or self-consumed (CT + productive grant) | 221.8 | Level change | 10% | Productive grant | | 4 | Karlan et al. (2014) | IPA RCT (Ghana) | Value of chemicals used | 55.63 | US dollars | 1% | Capital grant | | | IPA RCT (Ghana) | Value of chemicals used relative to receiving insurance alone (figure in brackets is total effect for grant + insurance) | 66.44 | US dollars | 1% (difference compared to insurance alone) | Capital grant + weather insurance |
Continued on next page
### Table A5.4.2 Summary of results for the role of cash transfer design and implementation parameters on savings, investment and production continued
| # | Study | Programme | Variable and treatment population | Effect | Measure of change | Significance | Details | |----|------------------------|-----------|---------------------------------------------------------------------------------------------------|--------|-------------------|--------------|----------------------------------------------| | 4 | Karlan et al. (2014) | IPA RCT (Ghana) | Household has nonfarm income generating activity (binary) | -0.04 | Percentage point | NS | Capital grant | | | IPA RCT (Ghana) | | Whether household has nonfarm income generating activity relative to receiving insurance alone | 0.07 | Percentage point | 5% (difference compared to insurance alone) | Capital grant + weather insurance | | | IPA RCT (Ghana) | | Post-harvest assets (livestock and grain) | 606.12 | US dollars | 5% | Capital grant | | | IPA RCT (Ghana) | | Post-harvest assets (livestock and grain) relative to receiving insurance alone | 310.66 | US dollars | NS (difference compared to insurance alone) | Capital grant + weather insurance |
12 Placebo transfer is a normal cash disbursement plus one-off donation of mobile phone
13 Note these are not all productive assets
### Summary tables for results for Employment
#### Table A5.5.1 Summary of results for overall cash transfer effect on adult labour participation – by gender
| # | Study | Programme and country | Outcome variable | Treatment population | Effect | Measure of change | Significance | |----|--------------------------------------------|-----------------------|------------------|----------------------|--------|-------------------|--------------| | 1 | Alzua et al. (2013) | PRAF (Honduras) | Whether working | Female | -0.010 | Percentage point | NS | | | | | | Male | -0.005 | Percentage point | NS | | | | RPS (Nicaragua) | Whether working | Female | -0.020 | Percentage point | NS | | | | | | Male | -0.009 | Percentage point | NS | | | | PROGRESA (Mexico) | Whether working | Female | -0.02 | Percentage point | NS | | | | | | Male | 0.003 | Percentage point | NS | | 2 | Ardington et al. | SA-OAP (South Africa) | Whether working | Females 17-51 living in the households of pensioners | -0.009 | Percentage point | NS | | | | | | Males 17-51 living in the households of pensioners | -0.051 | Percentage point | 5% | | 3 | Bacarreza and Vazquez-Ruiz (2013) | SP (Comer es primero component) (Dominican Republic) | Whether working | Men | 0.017 | Percentage point | NS | | | | SP (Comer es primero component) (Dominican Republic) | Whether working | Women | 0.047 | Percentage point | NS | | | | SP (ILEA component) (Dominican Republic) | Whether working | Men | 0.012 | Percentage point | NS | | | | SP (ILEA component) (Dominican Republic) | Whether working | Women | 0.018 | Percentage point | NS | | 4 | Barrientos and Villa (2013) | Familias en Acción (Colombia) | Whether working | Single female adults with children aged 0-6 years (urban) | 0.105 | Percentage point | 1% | | | | Familias en Acción (Colombia) | Whether working | Male adults 21-35 years old (urban) | 0.079 | Percentage point | 1% | | 5 | Behrman and Parker (2013) | PROGRESA / Oportunidades (Mexico) | Proportion working in the previous week in activity contributing to family income (5.5 years of exposure) | Women aged 50 and older | 0.101 | Percentage point | 1% | | | | PROGRESA / Oportunidades (Mexico) | Proportion working in the previous week in activity contributing to family income (5.5 years of exposure) | Men aged 50 and older | 0.037 | Percentage point | 10% | | | | PROGRESA / Oportunidades (Mexico) | Proportion working in the previous week in activity contributing to family income (5.5 years of exposure) | Women (50-59 pre-programme) | 0.109 | Percentage point | 1% | | | | PROGRESA / Oportunidades (Mexico) | Proportion working in the previous week in activity contributing to family income (5.5 years of exposure) | Women (60-69 pre-programme) | 0.118 | Percentage point | 5% | | | | PROGRESA / Oportunidades (Mexico) | Proportion working in the previous week in activity contributing to family income (5.5 years of exposure) | Women (70 and older pre-programme) | 0.081 | Percentage point | 10% | | 6 | Benedetti et al. (2015) | PRAF (Honduras) | Worked more than 1 hour in past week | Male (21-65 at baseline) | -0.001 | Percentage point | NS | | | | PRAF (Honduras) | Worked more than 1 hour in past week | Female (21-65 at baseline) | -0.002 | Percentage point | NS | | 7 | Cheema et al. (2014) | BISP (Pakistan) | Proportion of working age adults (19-64) engaged in economically productive activities | Female | 0.0000106 | Percentage point | NS | | 8 | Daidone et al. (2014a) | LCGP (Lesotho) | Participation in any labour activity in last 12 months | Adult men | -0.055 | Percentage point | NS | | | | LCGP (Lesotho) | Participation in any labour activity in last 12 months | Elderly men | 0.038 | Percentage point | NS |
Continued on next page
### Table A5.5.1 Summary of results for overall cash transfer effect on adult labour participation – by gender
| # | Study | Programme and country | Outcome variable | Treatment population | Effect | Measure of change | Significance | |----|--------------------------------------------|-----------------------|-------------------------------------------------------|----------------------|--------|-------------------|--------------| | 8 | Daidone et al. (2014a) | LCGP (Lesotho) | Participation in any labour activity in last 12 months | Adult women | 0.079 | Percentage point | 10% | | | | | | Elderly women | 0.004 | Percentage point | NS | | 9 | Ferro and Nicollela (2007) | Bolsa Escola/Bolsa Familia (Brazil) | Whether working | Urban females (mothers) | 0.007 | Percentage point | NS | | | | | | Rural females (mothers) | -0.002 | Percentage point | NS | | | | | | Urban males (fathers) | 0.006 | Percentage point | NS | | | | | | Rural males (fathers) | -0.004 | Percentage point | NS | | 10 | Galiani and McEwan (2013) | PRAF (Honduras) | Works outside the home | Adult women | 0.008 | Percentage point | NS | | | | | | Adult men | -0.013 | Percentage point | NS | | 11 | Novella et al. (2012) | PRAF (Honduras) | Whether working | Female (mothers) | 0.015 | Percentage point | NS | | | | | | Male (fathers) | -0.007 | Percentage point | NS | | | | PROGRESA (Mexico) | Whether working | Female (mothers) | -0.028 | Percentage point | 5% | | | | | | Male (fathers) | -0.002 | Percentage point | NS | | | | RPS (Nicaragua) | Whether working | Female (mothers) | -0.009 | Percentage point | NS | | | | | | Male (fathers) | -0.013 | Percentage point | NS | | 12 | Parker and Skoufias (2000) | PROGRESA (Mexico) | Whether working | Women (18-24) | 0 | Percentage point | NS | | | | PROGRESA (Mexico) | Whether working | Women (25-34) | -0.009 | Percentage point | NS | | | | PROGRESA (Mexico) | Whether working | Women (35-44) | -0.012 | Percentage point | NS | | | | PROGRESA (Mexico) | Whether working | Women (45-54) | -0.005 | Percentage point | NS | | | | PROGRESA (Mexico) | Whether working | Women (55+) | 0.037 | Percentage point | 5% | | | | PROGRESA (Mexico) | Whether working | Men (18-24) | 0.026 | Percentage point | NS | | | | PROGRESA (Mexico) | Whether working | Men (25-34) | 0.012 | Percentage point | NS | | | | PROGRESA (Mexico) | Whether working | Men (35-44) | 0.017 | Percentage point | 10% | | | | PROGRESA (Mexico) | Whether working | Men (45-54) | 0.021 | Percentage point | 10% | | | | PROGRESA (Mexico) | Whether working | Men (55+) | 0.01 | Percentage point | NS | | 13 | Rubio-Codina (2009) | Oportunidades (Mexico) | Participated in any work | Women | -0.008 | Percentage point | NS | | | | | | Men | -0.007 | Percentage point | NS | | 14 | Siaplay (2012) | SA-OAP (South Africa) | Whether working | Female (21-26) | 0.038 | Percentage point | NS | | | | | | Male (21-26) | -0.088 | Percentage point | NS | | 15 | Skoufias et al. (2013) | PAL (Mexico) | Having worked over previous week (paid or unpaid) or had work but did not work | Female (18-50 at baseline) | 0.02 | Percentage point | NS | | | | | | Male (18-50 at baseline) | 0.013 | Percentage point | NS | | 16 | Skoufias and Di Maro (2008) | PROGRESA (Mexico) | Worked in labour market in last week (if worked at all, paid or unpaid) (Oct 98) | Males | -0.03 | Percentage point | NS | | 17 | Teixeira (2010) | Bolsa Familia (Brazil) | Whether working | Male | -0.005 | Percentage point | NS | | | | | | Female | 0 | Percentage point | NS |
Notes: results represent all overall results reported and do not include those disaggregated by gender or showing the effect of variations in design features. Figures in bold indicate statistically significant. NS means the study did not find a statistically significant result, typically up to the 10% significance level.
### Table A5.5.2 Summary of results for overall cash transfer effect on intensity of adult work – by gender
| # | Study | Programme and country | Outcome variable | Treatment population | Effect | Measure of change | Significance | |----|--------------------------------|-----------------------|------------------|----------------------|--------|-------------------|-------------| | 1 | Alzua et al. (2013) | PRAF (Honduras) | No. of hours worked (among those working) | Female | 1.84 | Hours per week | NS | | | | | | Male | 0.493 | Hours per week | NS | | | | RPS (Nicaragua) | No. of hours worked (among those working) | Female | -5.668 | Hours per week | NS | | | | | | Male | -1.475 | Hours per week | NS | | | | PROGRESA (Mexico) | No. of hours worked (among those working) | Female | 0.184 | Hours per week | 10% | | | | | | Male | -0.015 | Hours per week | NS | | 2 | Asfaw et al. (2014) | OVC-CT (Kenya) | Days worked per year | Female (over 18) | -13.91 | Days per year | NS | | | | | | Male (over 18) | -18.582 | Days per year | NS | | 3 | Buser et al. (2014) | BOH (Ecuador) | No. of hours worked | Females (mothers) | -2.195 | “Hours worked” | NS | | 4 | Blattman et al. (2012) | YDP (Uganda) | Hours spent on all economic activities in past 4 weeks (differential impact compared to men) | Women | 6.36 | Hours per month | NS | | | | | | Men | 17.60 | Hours per month | 5% | | 5 | Blattman et al. (2013) | YDP (Uganda) | No. of hours worked per month (after 4 years) | Male | 18.76 | Hours per month | 5% | | | | | | Female | 38.13 | Hours per month | 1% | | 6 | Ferro and Nicollela (2007) | Bolsa Escola / Bolsa Familia (Brazil) | No. of hours worked | Female (mothers) urban | 1.455 | Hours per week | 5% | | | | | | Female (mothers) rural | -1.842 | Hours per week | 1% | | | | | | Male (fathers) urban | -0.635 | Hours per week | 5% | | | | | | Male (fathers) rural | -0.789 | Hours per week | NS | | 7 | Novella et al. (2012) | PRAF (Honduras) | No. of hours worked | Female | -1.156 | Hours per week | NS | | | | | | Male | 0.727 | Hours per week | NS | | | | PROGRESA (Mexico) | No. of hours worked | Female | 0.064 | Hours per week | NS | | | | | | Male | 2.137 | Hours per week | 5% | | | | RPS (Nicaragua) | No. of hours worked | Female | -3.627 | Hours per week | NS | | | | | | Male | -2.918 | Hours per week | 1% | | 8 | Ospina (2010) | Familias en Acción (Colombia) | Hours spent on paid work | Males (18-60) | 0.889 | Hours in previous day | 1% | | | Ospina (2010) | Familias en Acción (Colombia) | Hours spent on paid work | Females (18-60) | 0.174 | Hours in previous day | NS | | 9 | Rubio-Codina (2009) | Oportunidades (Mexico) | Number of hours worked in all work | Women | 0.052 | Hours in previous day | NS | | | Rubio-Codina (2009) | Oportunidades (Mexico) | Number of hours worked in all work | Men | -0.141 | Hours in previous day | 5% | | 10 | Teixeira (2010) | Bolsa Familia (Brazil) | No. of hours worked | Females | -1.184 | Hours per week | 5% | | | Teixeira (2010) | Bolsa Familia (Brazil) | No. of hours worked | Males | -0.555 | Hours per week | 5% |
Notes: results represent all overall results reported and do not include those disaggregated by gender or showing the effect of variations in design features. Figures in bold indicate statistically significant. NS means the study did not find a statistically significant result, typically up to the 10% significance level.
### Table A5.5.3 Summary of results for overall cash transfer effect on adult labour force participation – by sector and gender
| # | Study | Programme and country | Female / Male | Age | Outcome variable | Effect | Measure of change | Significance | |----|--------------------------------------------|-----------------------|---------------|-----------|-------------------------------------------------------|--------|-------------------|--------------| | 1 | Alzua et al. (2013) | PRAF (Honduras) | Female | Working in agricultural occupation | -0.036 | Percentage points | NS | | | | | Male | Working in agricultural occupation | -0.03 | Percentage points | NS | | | | RPS (Nicaragua) | Female | Working in agricultural occupation | -0.037 | Percentage points | NS | | | | | Male | Working in agricultural occupation | -0.002 | Percentage points | NS | | | | PROGRESA (Mexico) | Female | Working in agricultural occupation | -0.031 | Percentage points | NS | | | | | Male | Working in agricultural occupation | 0.016 | Percentage points | NS | | 2 | Asfaw et al. (2014) | OVC-CT (Kenya) | Female > 18 | Participation in own farm labour | 0.007 | Percentage point | NS | | | | | Male > 18 | Participation in own farm labour | -0.055 | Percentage point | NS | | 3 | Daidone et al. (2014a) | LCGP (Lesotho) | Male adult | Participation last 12m own non-farm business | 0.012 | Percentage point | NS | | | | | Male adult | Participation last 12m own agricultural activities | 0.027 | Percentage point | NS | | | | | Male adult | Participation last 12m paid work outside household | -0.087 | Percentage point | 1% | | | | | Female adult | Participation last 12m own non-farm business | -0.015 | Percentage point | NS | | | | | Female adult | Participation last 12m own agricultural activities | 0.067 | Percentage point | NS | | | | | Female adult | Participation last 12m paid work outside household | -0.03 | Percentage point | NS | | | | | Female elderly female | Participation last 12m own non-farm business | -0.103 | Percentage point | 5% | | | | | Female elderly female | Participation last 12m own agricultural activities | 0.107 | Percentage point | 10% | | | | | Female elderly female | Participation last 12m paid work outside household | -0.004 | Percentage point | NS | | | | | Female elderly female | Participation last week Own non-farm business | -0.034 | Percentage point | NS | | | | | Female elderly female | Participation last week Own crop & livestock production | 0.141 | Percentage point | 10% | | | | | Female elderly female | Participation last week paid work outside household | -0.066 | Percentage point | NS | | 4 | Galiani and McEwan (2013) | PRAF (Honduras) | Female 21-65 | Works outside the home | 0.008 | Percent point change | NS | | | | | Female 21-65 | Only works inside the home | -0.009 | Percent point change | NS | | | | | Male 21-65 | Works outside the home | -0.013 | Percent point change | NS | | | | | Male 21-65 | Only works inside the home | 0.008 | Percent point change | 10% | | 5 | Parker and Skoufias (2000) | PROGRESA (Mexico) | Female 18-24 | Probability of working – salaried work | -0.003 | % point from pre-programme level | NS | | | | | Female 25-34 | Probability of working – salaried work | 0.008 | % point from pre-programme level | NS | | | | | Female 35-44 | Probability of working – salaried work | -0.003 | % point from pre-programme level | NS | | | | | Female 45-54 | Probability of working – salaried work | 0.008 | % point from pre-programme level | NS |
*continued on next page*
### Table A5.5.3 Summary of results for overall cash transfer effect on adult labour force participation – by sector and gender continued
| # | Study | Programme and country | Female / Male | Age | Outcome variable | Effect | Measure of change | Significance | |----|--------------------------------------------|-----------------------|---------------|-----------|-------------------------------------------------------|---------|-------------------|--------------| | 5 | Parker and Skoufias (2000) | PROGRESA (Mexico) | Female | 55+ | Probability of working – salaried work | 0.015 | % point from pre-programme level | 10% | | | PROGRESA (Mexico) Female 18-24 | | | | Probability of working – self-employed/family business | 0.012 | % point from pre-programme level | NS | | | PROGRESA (Mexico) Female 25-34 | | | | Probability of working – self-employed/family business | 0.014 | % point from pre-programme level | NS | | | PROGRESA (Mexico) Female 35-44 | | | | Probability of working – self-employed/family business | 0.007 | % point from pre-programme level | NS | | | PROGRESA (Mexico) Female 45-54 | | | | Probability of working – self-employed/family business | 0 | % point from pre-programme level | NS | | | PROGRESA (Mexico) Female 55+ | | | | Probability of working – self-employed/family business | 0.021 | % point from pre-programme level | NS | | 6 | Skoufias et al. (2013) | PAL (Mexico) | Female | 18-60 in the baseline round; rural | Probability of working in AGRICULTURAL ACTIVITIES – FEMALE | -0.006 | Percentage point | NS | | | PAL (Mexico) Female 18-60 in the baseline round; rural | Probability of working in NON- AGRICULTURAL ACTIVITIES – FEMALE | 0.026 | Percentage point | NS | | | PAL (Mexico) Male 18-60 in the baseline round; rural | Probability of working in AGRICULTURAL ACTIVITIES – MALE | -0.05 | Percentage point | 5% | | | PAL (Mexico) Male 18-60 in the baseline round; rural | Probability of working in NON- AGRICULTURAL ACTIVITIES – MALE | 0.063 | Percentage point | 1% | | 7 | Skoufias and Di Maro (2008) | PROGRESA (Mexico) | Male | 18-55+ | Worked in labour market in last week – Salaried work (Nov 99) | 0.025 | % point from pre-programme level | NS | | | PROGRESA (Mexico) Male 18-55+ | | | | Worked in labour market in last week – self-employed / family business (Nov 99) | -0.007 | % point from pre-programme level | NS | | | PROGRESA (Mexico) Female 18-55+ | | | | Worked in labour market in last week – Salaried work (Nov 99) | 0.001 | % point from pre-programme level | NS | | | PROGRESA (Mexico) Female 18-55+ | | | | Worked in labour market in last week – self-employed / family business (Nov 99) | 0 | % point from pre-programme level | NS |
Note: When studies report results for last 12 months and last week/shorter time span, reporting working/not working and hours over last 12 months. Skoufias and Di Maro (2008) results disaggregated by age are also mostly non-significant. Figures in bold indicate statistically significant. NS means the study did not find a statistically significant result, typically up to the 10% significance level.
### Table A5.5.4 Summary of results for overall cash transfer effect on adult work intensity – by sector and gender
| # | Study | Programme and country | Female/ Male | Age | Outcome variable | Effect | Measure of change | Significance | |----|--------------------------------------------|-----------------------|--------------|-----|----------------------------------------------------------------------------------|--------|-------------------|-------------| | 1 | Asfaw et al. (2014) | OVC-CT (Kenya) | Female | > 18| Days worked per month in own farm labour | 0.406 | Days per year | NS | | | | OVC-CT (Kenya) | Male | > 18| Days worked per month in own farm labour | -0.622 | Days per year | NS | | 2 | Blattman et al. (2012) | YOP (Uganda) | Female | | Hours spent on market activities in past 4 weeks (differential effect compared to men) | 5.328 | Hours | NS | | | | YOP (Uganda) | Male | | Hours spent on market activities in past 4 weeks | 20.473 | Hours | 1% | | 3 | Daidone et al. (2014a) | LCGP (Lesotho) | Male | Adult| Hours worked last week own non-farm enterprise | 0.5 | hours | 10% | | | | LCGP (Lesotho) | Male | Adult| Hours worked last week Own crop & livestock | -1.9 | hours | NS | | | | LCGP (Lesotho) | Male | Adult| Hours worked last week paid labour | -5.2 | hours | 5% | | | | LCGP (Lesotho) | Female | Adult| hours worked last week own non-farm enterprise | -0.4 | hours | NS | | | | LCGP (Lesotho) | Female | Adult| hours worked last week Own crop & livestock | -0.5 | hours | NS | | | | LCGP (Lesotho) | Female | Adult| hours worked last week Paid labour | -1.2 | hours | NS | | | | LCGP (Lesotho) | Female | Elderly female| hours worked last week own non-farm enterprise | -2.5 | hours | 10% | | | | LCGP (Lesotho) | Female | Elderly female| hours worked last week Own crop & livestock | 3.6 | hours | 5% | | | | LCGP (Lesotho) | Female | Elderly female| hours worked last week Paid labour | -1.9 | hours | NS | | 4 | Handa et al. (2014) | LEAP (Ghana) | Male | | Number of days on own farm activity over last season | 7.7 | days | 10% | | | | LEAP (Ghana) | Female | | Number of days on own farm activity over last season | 6.1 | days | NS | | 5 | Ospina (2010) | Familias en Accion (Colombia) | Male | 18 to 60 | Hours spent on domestic labour | -0.406 | 1% | | | | Familias en Accion (Colombia) | Male | 18 to 60 | Hours spent on paid work | 0.889 | 1% | | | | Familias en Accion (Colombia) | Female | 18 to 60 | Hours spent on domestic labour | 0.274 | 10% | | | | Familias en Accion (Colombia) | Female | 18 to 60 | Hours spent on paid work | 0.174 | NS | | 6 | Rubio-Codina, M. (2009) | PROGRESA/Oportunidades (Mexico) | Women | All | Number of hours worked in market work | 0.104 | Hours | NS | | | | PROGRESA/Oportunidades (Mexico) | Men | All | Number of hours worked in market work | -0.06 | Hours | NS | | | | PROGRESA/Oportunidades (Mexico) | Women | All | Number of hours worked in farm work | 0.012 | Hours | NS | | | | PROGRESA/Oportunidades (Mexico) | Men | All | Number of hours worked in farm work | -0.025 | Hours | NS | | | | PROGRESA/Oportunidades (Mexico) | Women | All | Number of hours worked in domestic work | 0.046 | Hours | 5% | | | | PROGRESA/Oportunidades (Mexico) | Men | All | Number of hours worked in domestic work | -0.012 | Hours | NS | | | | PROGRESA/Oportunidades (Mexico) | Women | 18-24 | Number of hours worked in market work | -0.098 | Hours | NS | | | | PROGRESA/Oportunidades (Mexico) | Women | 25-34 | Number of hours worked in market work | 0.050 | Hours | NS |
*continued on next page*
### Table A5.5.4 Summary of results for overall cash transfer effect on adult work intensity – by sector and gender continued
| # | Study | Programme and country | Female/ Male | Age | Outcome variable | Effect | Measure of change | Significance | |----|--------------------------------------------|-----------------------|--------------|-------|-----------------------------------|--------|-------------------|--------------| | 6 | Rubio-Codina, M. (2009) | PROGRESA/ Oportunidades (Mexico) | Women | 35-44 | Number of hours worked in market work | 0.214 | Hours | NS | | | PROGRESA/ Oportunidades (Mexico) | Women | 45-54 | | Number of hours worked in market work | 0.485 | Hours | NS | | | PROGRESA/ Oportunidades (Mexico) | Women | 55+ | | Number of hours worked in market work | 0.265 | Hours | NS | | | PROGRESA/ Oportunidades (Mexico) | Women | 18-24 | | Number of hours worked in farm work | 0.006 | Hours | NS | | | PROGRESA/ Oportunidades (Mexico) | Women | 25-34 | | Number of hours worked in farm work | 0.021 | Hours | NS | | | PROGRESA/ Oportunidades (Mexico) | Women | 35-44 | | Number of hours worked in farm work | 0.028 | Hours | NS | | | PROGRESA/ Oportunidades (Mexico) | Women | 45-54 | | Number of hours worked in farm work | -0.022 | Hours | NS | | | PROGRESA/ Oportunidades (Mexico) | Women | 55+ | | Number of hours worked in farm work | 0.009 | Hours | NS | | | PROGRESA/ Oportunidades (Mexico) | Women | 18-24 | | Number of hours worked in domestic work | -0.158 | Hours | NS | | | PROGRESA/ Oportunidades (Mexico) | Women | 25-34 | | Number of hours worked in domestic work | 0.201 | Hours | 5% | | | PROGRESA/ Oportunidades (Mexico) | Women | 35-44 | | Number of hours worked in domestic work | 0.087 | Hours | NS | | | PROGRESA/ Oportunidades (Mexico) | Women | 45-54 | | Number of hours worked in domestic work | 0.044 | Hours | NS | | | PROGRESA/ Oportunidades (Mexico) | Women | 55+ | | Number of hours worked in domestic work | -0.005 | Hours | NS |
Figures in bold indicate statistically significant. NS means the study did not find a statistically significant result, typically up to the 10% significance level.
### Table A5.5.5 Summary of results for overall cash transfer effect on child labour participation — by gender
| # | Study | Programme and country | Outcome variable | Treatment population | Effect | Measure of change | Significance | |----|--------------------------------|-----------------------|-----------------------------------------------------------------------------------|----------------------|--------|-------------------|--------------| | 1 | Alam et al. (2011) | PFSSP (Pakistan) | Whether looking for a job or participating in work for pay or unpaid work (unpaid family helper and unpaid work outside the home) | Girls 12-19 years old | -0.049 | Percentage point | 5% | | | | PFSSP (Pakistan) | Whether looking for a job or participating in work for pay or unpaid work (unpaid family helper and unpaid work outside the home) | Girls 15-16 years old | 0.0401 | Percentage point | 5% | | 2 | Behrman et al. (2011) | PROGRESA / Oportunidades (Mexico) | Whether working in 2003 (after 5.5 years) | Girls 15-16 years old | 0.01 | Percentage point | NS | | | | PROGRESA / Oportunidades (Mexico) | Whether working in 2003 (after 5.5 years) | Girls 17-18 years old | -0.01 | Percentage point | NS | | | | PROGRESA / Oportunidades (Mexico) | Whether working in 2003 (after 5.5 years) | Girls 19-21 years old | 0.064 | Percentage point | 10% | | | | PROGRESA / Oportunidades (Mexico) | Whether working in 2003 (after 5.5 years) | Boys 15-16 years old | -0.14 | Percentage point | 1% | | | | PROGRESA / Oportunidades (Mexico) | Whether working in 2003 (after 5.5 years) | Boys 17-18 years old | 0.06 | Percentage point | NS | | | | PROGRESA / Oportunidades (Mexico) | Whether working in 2003 (after 5.5 years) | Boys 19-21 years old | -0.02 | Percentage point | NS | | 3 | Berhman et al. (2012) | Oportunidades (Mexico) | Employed for pay (after 2 years) | Boys 12-14 years old (urban) | -0.124 | Percentage point | 5% | | | | Oportunidades (Mexico) | Employed for pay (after 2 years) | Boys 15-18 years old (urban) | -0.051 | Percentage point | NS | | | | Oportunidades (Mexico) | Employed for pay (after 2 years) | Boys 19-20 years old (urban) | -0.154 | Percentage point | NS | | | | Oportunidades (Mexico) | Employed for pay (after 2 years) | Boys 6-20 years old (urban) | -0.103 | Percentage point | 5% | | | | Oportunidades (Mexico) | Employed for pay (after 2 years) | Girls 12-14 years old (urban) | -0.01 | Percentage point | NS | | | | Oportunidades (Mexico) | Employed for pay (after 2 years) | Girls 15-18 years old (urban) | 0.004 | Percentage point | NS | | | | Oportunidades (Mexico) | Employed for pay (after 2 years) | Girls 19-20 years old (urban) | 0.087 | Percentage point | NS | | | | Oportunidades (Mexico) | Employed for pay (after 2 years) | Girls 6-20 years old (urban) | 0.002 | Percentage point | NS | | 4 | Bustelo (2011) | RPS (Nicaragua) | Whether working | Girls 7-13 years old (with non-targeted siblings) | -0.075 | Percentage point | NS | | | | RPS (Nicaragua) | Whether working | Boys 7-13 years old (with non-targeted siblings) | -0.074 | Percentage point | NS | | 5 | Cheema et al (2014) | BISP (Pakistan) | Proportion of boys aged 5-14 years engaged in child labour | Boys 5-14 years old | -0.04538 | Percentage point | 5% | | | | | Proportion of girls aged 5-14 years engaged in child labour | Girls 5-14 years old | -0.01066 | Percentage point | NS | | 6 | Daidone et al. (2014a) | LCGP (Lesotho) | Participation in any labour activity in past 12 months | Boys | -0.016 | Percentage point | NS | | | | LCGP (Lesotho) | Participation in any labour activity in past 12 months | Girls | -0.012 | Percentage point | NS | | 7 | Daidone et al. (2014b) | ZCGP (Zambia) | Total child labour supply (share) | Boys | 0.083 | Percentage point | NS | | | | ZCGP (Zambia) | Total child labour supply (share) | Girl | 0.016 | Percentage point | NS | | 8 | Dammert (2008) | Atención a Crisis (Nicaragua) | Participation in labour activities (2002) | Boys 7-13 years old (at baseline) | -0.138 | Percentage point | 5% | | | | Atención a Crisis (Nicaragua) | Participation in labour activities (2002) | Girls 7-13 years old (at baseline) | -0.014 | Percentage point | NS | | | | Atención a Crisis (Nicaragua) | Participation in labour activities (2001) | Children 7-13 at baseline (male-headed households) | 0.076 | Percentage points | 10% |
*continued on next page*
### Table A5.5.5 Summary of results for overall cash transfer effect on child labour participation — by gender
| # | Study | Programme and country | Outcome variable | Treatment population | Effect | Measure of change | Significance | |----|------------------------------|-----------------------|------------------|--------------------------------------------------------------------------------------|--------|-------------------|--------------| | 8 | Dammert (2008) | Atención a Crisis (Nicaragua) | Participation in labour activities (2001) | Children 7-13 at baseline (female-headed households) | -0.131 | Percentage points | 5% | | | | Atención a Crisis (Nicaragua) | Participation in labour activities (2002) | Children 7-13 at baseline (male-headed households) | 0.005 | Percentage points | NS | | | | Atención a Crisis (Nicaragua) | Participation in labour activities (2002) | Children 7-13 at baseline (female-headed households) | -0.082 | Percentage points | NS | | 9 | Edmonds and Schady (2008) | BDH (Ecuador) | Working for pay | Girls | -0.0910| Percentage point | NS | | | | BDH (Ecuador) | Working for pay | Boys | -0.0140| Percentage point | NS | | 10 | Ferro and Nicolella (2007) | Bolsa Escola / Bolsa Familia (Brazil) | Whether working | Girls 6-10 years old (urban) | -0.006 | Percentage point | 1% | | | | Bolsa Escola / Bolsa Familia (Brazil) | Whether working | Girls 6-10 years old (rural) | -0.04 | Percentage point | 5% | | | | Bolsa Escola / Bolsa Familia (Brazil) | Whether working | Girls 11-15 years old (urban) | -0.016 | Percentage point | NS | | | | Bolsa Escola / Bolsa Familia (Brazil) | Whether working | Girls 11-15 years old (rural) | -0.129 | Percentage point | 1% | | | | Bolsa Escola / Bolsa Familia (Brazil) | Whether working | Boys 6-10 years old (urban) | -0.003 | Percentage point | NS | | | | Bolsa Escola / Bolsa Familia (Brazil) | Whether working | Boys 6-10 years old (rural) | -0.032 | Percentage point | NS | | | | Bolsa Escola / Bolsa Familia (Brazil) | Whether working | Boys 11-15 years old (urban) | -0.048 | Percentage point | 1% | | | | Bolsa Escola / Bolsa Familia (Brazil) | Whether working | Boys 11-15 years old (rural) | -0.06 | Percentage point | NS | | 11 | Gallani and McEwan (2013) | PRAF (Honduras) | Works outside the home | Girls | -0.006 | Percentage point | NS | | | | PRAF (Honduras) | Works outside the home | Boys | -0.007 | Percentage point | NS | | 12 | Lincove and Parker (2015) | RPS (Nicaragua) | Work participation | Boys 6-11 years old (always eligible) | -0.05 | Percentage point | NS | | | | RPS (Nicaragua) | Work participation | Boys 12-13 years old (sometimes eligible) | -0.198 | Percentage point | 1% | | | | RPS (Nicaragua) | Work participation | Girls 6-11 years old (always eligible) | -0.027 | Percentage point | NS | | | | RPS (Nicaragua) | Work participation | Girls 12-13 years old (sometimes eligible) | -0.046 | Percentage point | NS | | 13 | Maluccio (2005) | RPS (Nicaragua) | Working (2 years after baseline) | Girls 7-12 years old | 0.0553 | Percentage point | 10% | | | | RPS (Nicaragua) | Working (2 years after baseline) | Boys 7-12 years old | -0.0175| Percentage point | NS | | 14 | Merttens et al. (2015) | SAGE Senior Citizen Grant (Uganda) | Proportion engaged in labour | Boys 6-17 years old | -0.07 | Proportion | NS | | | | SAGE Senior Citizen Grant (Uganda) | Proportion engaged in labour | Girls 6-17 years old | 0 | Proportion | NS | | | | SAGE Vulnerable Family Support Grant (Uganda) | Proportion engaged in labour | Boys 6-17 years old | 0.03 | Proportion | NS | | | | SAGE Vulnerable Family Support Grant (Uganda) | Proportion engaged in labour | Girls 6-17 years old | -0.02 | Proportion | NS | | 15 | Miller et al. (2011) | SCTP (Malawi) | Doing any income-generating activity | Girls | -0.1 | Percentage point | 1% | | | | SCTP (Malawi) | Doing any income-generating activity | Boys | -0.12 | Percentage point | 1% | | 16 | Parker and Skoufas (2000) | PROGRESA (Mexico) | Whether working | Girls 8-17 years old | -0.013 | Percentage points | 10% |
continued on next page
### Table A5.5.5 Summary of results for overall cash transfer effect on child labour participation – by gender continued
| # | Study | Programme and country | Outcome variable | Treatment population | Effect | Measure of change | Significance | |----|--------------------------------------------|-----------------------|------------------|----------------------|--------|-------------------|--------------| | 16 | Parker and Skoufias (2000) | PROGRESA (Mexico) | Whether working | Girls 12-13 years old | -0.009 | Percentage points | NS | | | | | | Girls 14-15 years old | -0.039 | Percentage points | 5% | | | | | | Girls 16-17 years old | 0.012 | Percentage points | NS | | | | | | Boys 8-17 years old | -0.031 | Percentage points | 5% | | | | | | Boys 12-13 years old | -0.041 | Percentage points | 5% | | | | | | Boys 14-15 years old | -0.054 | Percentage points | 10% | | | | | | Boys 16-17 years old | 0.025 | Percentage points | NS | | 17 | Rubio-Codina (2009) | Oportunidades (Mexico)| Participation in all work | Girls | -0.015 | Percentage point | NS | | | | | | Boys | -0.014 | Percentage point | NS | | | | | | Girls 9-11 years old | 0.001 | Percentage point | NS | | | | | | Girls 12-17 years old| -0.028 | Percentage point | NS | | 18 | Sadoulet et al. (2004) | PROGRESA (Mexico) | Whether worked in previous week | Girls 11 years old at baseline | -0.04 | Percentage points | 1% | | | | | | Girls 12-14 years old at baseline | -0.066 | Percentage points | 1% | | | | | | Girls 15-17 years old at baseline | -0.004 | Percentage points | NS | | | | | | Boys 11 years old at baseline | -0.05 | Percentage points | 1% | | | | | | Boys 12-14 years old at baseline | -0.073 | Percentage points | 1% | | | | | | Boys 15-17 years old at baseline | -0.043 | Percentage points | NS | | 19 | Schultz (2004) | PROGRESA (Mexico) | Participation in paid work | Girls (primary school age) | -0.004 | Percentage point | 5% | | | | | | Boys (primary school age) | -0.0179| Percentage point | 5% | | | | | | Girls (secondary school age) | -0.0527| Percentage point | 5% | | | | | | Boys (secondary school age) | -0.101 | Percentage point | 5% | | 20 | Stapley (2012) | SA-OAP (South Africa) | Whether employed or not | Female 14-20 years old | -0.032 | Percentage point | NS | | | | | | Male 14-20 years old | -0.025 | Percentage point | NS | | 21 | Skoufias and Parker (2001) | PROGRESA (Mexico) | Whether working | Girls 8-11 years old | 0 | Percentage point | NS | | | | | | Girls 12-17 years old | -0.023 | Percentage point | 10% | | | | | | Boys 8-11 years old | -0.011 | Percentage point | NS | | | | | | Boys 12-17 years old | -0.047 | Percentage point | 5% |
Notes: results represent all overall results reported and do not include those disaggregated by gender or showing the effect of variations in design features. Figures in bold indicate statistically significant. NS means the study did not find a statistically significant result, typically up to the 10% significance level.
### Table A5.5.6 Summary of results for overall cash transfer effect on intensity of child labour – by gender
| # | Study | Programme and country | Outcome variable | Treatment population | Effect | Measure of change | Significance | |----|------------------------------|-----------------------|------------------|----------------------|--------|-------------------|--------------| | 1 | Alam et al. (2011) | PFSSP (Pakistan) | Days per month | Girls 12-19 years old | -0.548 | Days per month | NS | | | | PFSSP (Pakistan) | Days per month | Girls 15-16 years old | -6.137 | Days per month | 10% | | 2 | Barrera-Osorio et al. (2008) | SCAE (Colombia) | No. of hours worked last week | Girls | -0.378 | Hours per week | 5% | | | | SCAE (Colombia) | No. of hours worked last week | Boys | -0.619 | Hours per week | 5% | | 3 | Dammert (2008) | Atención a Crisis (Nicaragua) | Hours worked (2001) | Boys 7-13 years old (at baseline) | -20.42 | ‘Hours worked’ | NS | | | | Atención a Crisis (Nicaragua) | Hours worked (2001) | Girls 7-13 years old (at baseline) | -12.335 | ‘Hours worked’ | NS | | | | Atención a Crisis (Nicaragua) | Hours worked (2002) | Boys 7-13 years old (at baseline) | -19.11 | ‘Hours worked’ | NS | | | | Atención a Crisis (Nicaragua) | Hours worked (2002) | Girls 7-13 years old (at baseline) | -11.778 | ‘Hours worked’ | NS | | | | Atención a Crisis (Nicaragua) | Hours worked (2001) | Children 7-13 at baseline (male headed) | 35.752 | Hours | 5% | | | | Atención a Crisis (Nicaragua) | Hours worked (2001) | Children 7-13 at baseline (female headed) | -51.84 | Hours | 10% | | | | Atención a Crisis (Nicaragua) | Hours worked (2002) | Children 7-13 at baseline (male headed) | -1.361 | Hours | NS | | | | Atención a Crisis (Nicaragua) | Hours worked (2002) | Children 7-13 at baseline (female headed) | -16.191 | Hours | NS | | 4 | Del Carpio and Macours (2009) | Atención a Crisis – cash transfer only (Nicaragua) | No. of hours worked per week (all work) | Girls 6-15 years old | -0.747 | Hours per week | NS | | | | | No. of hours worked per week (all work) (difference compared to beneficiary girls) | Boys 6-15 years old | -0.1478 | Hours per week | 5% | | | | | No. of hours worked per week (all work) (difference compared to younger beneficiary girls) | Girls 6-9 years old | -1.208 | Hours per week | 5% | | | | | No. of hours worked per week (all work) (difference compared to younger beneficiary girls) | Girls 10-15 years old | 0.805 | Hours per week | NS | | | | | No. of hours worked per week (all work) (compared to younger girls) | Boys 6-9 years old | -0.489 | Hours per week | NS | | | | | No. of hours worked per week (all work) (compared to younger boys) | Boys 10-15 years old | -3.011 | Hours per week | 1% | | | | | No. of hours worked per week (all work) (compared to younger boys) | Boys 6-9 years old | 0.241 | Hours per week | NS | | | | | No. of hours worked per week (all work) (compared to younger boys) | Boys 10-15 years old | -3.503 | Hours per week | 1% | | 5 | Del Carpio and Loayza (2012) | Atención a Crisis (Nicaragua) | No. of hours worked per child in the past week | Boys | -1.773 | Hours per week | 1% | | | | Atención a Crisis (Nicaragua) | No. of hours worked per child in the past week | Girls | -1.212 | Hours per week | 1% | | 6 | Ferro and Nicolella (2007) | Conditional educational transfers, principally Bolsa Escola (Brazil) | No. of hours spent on work per week | Girls 6-10 years old (urban) | -0.582 | Hours per week | NS | | | | | No. of hours spent on work per week | Girls 6-10 years old (rural) | -1.001 | Hours per week | NS | | | | | No. of hours spent on work per week | Girls 11-15 years (urban) | -1.834 | Hours per week | NS | | | | | No. of hours spent on work per week | Girls 11-15 years (rural) | -0.691 | Hours per week | NS | | | | | No. of hours spent on work per week | Boys 6-10 years (urban) | 0.222 | Hours per week | NS | | | | | No. of hours spent on work per week | Boys 6-10 years (rural) | -1.304 | Hours per week | NS |
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### Table A5.5.6 Summary of results for overall cash transfer effect on intensity of child labour – by gender
| # | Study | Programme and country | Outcome variable | Treatment population | Effect | Measure of change | Significance | |----|------------------------------|-----------------------|------------------|----------------------|--------|-------------------|--------------| | 6 | Ferro and Nicolella (2007) | As above | No. of hours spent on work per week | Boys 11-15 years old (urban) | -2.359 | Hours per week | 10% | | | | As above | No. of hours spent on work per week | Boys 11-15 years old (rural) | -0.432 | Hours per week | NS | | 7 | Lincove and Parker (2015) | RPS (Nicaragua) | No. of hours worked (paid or unpaid) | Boys 6-11 years old (always eligible) | -2.771 | Hours per week | 1% | | | | RPS (Nicaragua) | No. of hours worked (paid or unpaid) | Boys 12-13 years (sometimes eligible) | -8.734 | Hours per week | 1% | | | | RPS (Nicaragua) | No. of hours worked (paid or unpaid) | Girls 6-11 years old (always eligible) | -0.486 | Hours per week | 1% | | | | RPS (Nicaragua) | No. of hours worked (paid or unpaid) | Girls 12-13 years old (sometimes eligible) | -1.855 | Hours per week | NS | | 8 | Rubio-Codina (2009) | Oportunidades (Mexico) | No. of hours worked (all work) | Boys | -0.104 | Hours per day | 10% | | | | Oportunidades (Mexico) | No. of hours worked (all work) | Girls | -0.084 | Hours per day | 10% | | | | Oportunidades (Mexico) | No. of hours worked (all work) | Girls 9-11 years old | 0.01 | Hours per day | NS | | | | Oportunidades (Mexico) | No. of hours worked (all work) | Girls 12-17 years old | -0.145 | Hours per day | 5% |
Notes: results represent all overall results reported and do not include those disaggregated by gender or showing the effect of variations in design features. Figures in bold indicate statistically significant. NS means the study did not find a statistically significant result, typically up to the 10% significance level.
### Table A5.5.7 Summary of results for cash transfer effect on child labour participation – by sector and gender
| # | Study | Programme and country | Child age | Female/ Male | Outcome variable | Effect | Measure of change | Significance | |----|--------------------------------------------|-----------------------|-----------|--------------|-------------------------------------------------------|--------|-------------------|--------------| | 1 | Asfaw et al. (2014) | OVC-CT (Kenya) | 10 to 15 | Boys | participation in own farm labour by children | -0.120 | percentage points | 5% | | | | OVC-CT (Kenya) | 10 to 15 | Girls | participation in own farm labour by children | -0.072 | percentage points | NS | | 2 | Behrman et al. (2011) | PROGRESA / Oportunidades (Mexico) | 15-16 in 2003 | Female | Whether participating in agricultural work in 2003 | -0.004 | % point | NS | | | | PROGRESA / Oportunidades (Mexico) | 17-18 in 2003 | Female | Whether participating in agricultural work in 2004 | -0.02 | % point | NS | | | | PROGRESA / Oportunidades (Mexico) | 19-21 in 2003 | Female | Whether participating in agricultural work in 2005 | 0.01 | % point | NS | | 3 | Daidone et al. (2014a) | LCGP (Lesotho) | Boys | Participation last 12m own non-farm business | -0.003 | Percentage point | NS | | | | LCGP (Lesotho) | Boys | Participation last 12m own agricultural activities | -0.029 | Percentage point | NS | | | | LCGP (Lesotho) | Boys | Participation last 12m paid work outside household | -0.011 | Percentage point | NS | | | | LCGP (Lesotho) | Girls | Participation last 12m own non-farm business | 0.001 | Percentage point | NS | | | | LCGP (Lesotho) | Girls | Participation last 12m own agricultural activities | 0.008 | Percentage point | NS | | | | LCGP (Lesotho) | Girls | Participation last 12m paid work outside household | 0.011 | Percentage point | NS | | 4 | Daidone et al. (2014b) | ZCGP (Zambia) | 5-18 Boys | Paid child labour supply | -0.017 | Percentage point | NS | | | | ZCGP (Zambia) | 5-18 Boys | Unpaid child labour supply | 0.079 | Percentage point | NS | | | | ZCGP (Zambia) | 5-18 Girls | Paid child labour supply | -0.014 | Percentage point | NS | | | | ZCGP (Zambia) | 5-18 Girls | Unpaid child labour supply | 0.002 | Percentage point | NS | | 5 | Edmonds and Schady (2008) | BDH (Ecuador) | 10 and older Girls | Children 10 and older work for pay | -0.0910 | Percent point change | NS | | | | BDH (Ecuador) | 10 and older Girls | Children 10 and older do market work | -0.191 | Percent point change | 5% | | | | BDH (Ecuador) | 10 and older Girls | Children 10 and older do unpaid market work | -0.159 | Percent point change | 10% | | | | BDH (Ecuador) | 10 and older Girls | Children 10 and older do domestic work | 0.0569 | Percent point change | NS | | | | BDH (Ecuador) | 10 and older Boys | Children 10 and older work for pay | -0.0140 | Percent point change | NS | | | | BDH (Ecuador) | 10 and older Boys | Children 10 and older do market work | -0.0941 | Percent point change | 5% | | | | BDH (Ecuador) | 10 and older Boys | Children 10 and older do unpaid market work | 0.0778 | Percent point change | 1.05 | | | | BDH (Ecuador) | 10 and older Boys | Children 10 and older do domestic work | 0.0161 | Percent point change | NS | | 6 | Galliani and McEwan (2013) | PRAF (Honduras) | Girls | Only works inside the home | -0.035 | Percent point change | NS | | | | PRAF (Honduras) | Boys | Only works inside the home | -0.018 | Percent point change | NS | | 7 | Miller et al. (2011) | SCTP (Malawi) | Girls | Doing any work on chores | 0.11 | Percent point change | 1% | | | | SCTP (Malawi) | Boys | Doing any work on chores | 0.08 | Percent point change | 10% | | | | SCTP (Malawi) | Girls | Doing any work on family farm/ business | 0.01 | Percent point change | NS |
*continued on next page* Table A5.5.7 Summary of results for cash transfer effect on child labour participation – by sector and gender continued
| # | Study | Programme and country | Child age | Female/ Male | Outcome variable | Effect | Measure of change | Significance | |----|--------------------------------------------|-----------------------|-----------|--------------|----------------------------------------------------------------------------------|--------|------------------|--------------| | 7 | Miller et al. (2011) | SCTP (Malawi) | Boys | | doing any work on family farm/business | 0.09 | Percent point change | NS | | 8 | Parker and Skoufias (2000) | PROGRESA (Mexico) | age 8-17 | female | Impact of PROGRESA on the probability of working in – SALARIED WORK | -0.003 | % point from pre-programme level | NS | | | | | age 12-13 | female | Impact of PROGRESA on the probability of working in – SALARIED WORK | -0.007 | % point from pre-programme level | 10% | | | | | age 14-15 | female | Impact of PROGRESA on the probability of working in – SALARIED WORK | -0.016 | % point from pre-programme level | NS | | | | | age 16-17 | female | Impact of PROGRESA on the probability of working in – SALARIED WORK | -0.002 | % point from pre-programme level | NS | | | | | age 8-17 | female | The impact of PROGRESA on the probability of working in – SELF-EMPLOYED/FAMILY BUSINESS | -0.007 | % point from pre-programme level | NS | | | | | age 12-13 | female | The impact of PROGRESA on the probability of working in – SELF-EMPLOYED/FAMILY BUSINESS | -0.002 | % point from pre-programme level | NS | | | | | age 14-15 | female | The impact of PROGRESA on the probability of working in – SELF-EMPLOYED/FAMILY BUSINESS | -0.02 | % point from pre-programme level | 1% | | | | | age 16-17 | female | The impact of PROGRESA on the probability of working in – SELF-EMPLOYED/FAMILY BUSINESS | -0.007 | % point from pre-programme level | NS | | 9 | Schultz (2004) | PROGRESA (Mexico) | Primary school girls | Female | Work market and household | -0.148 | Percent point change | 5% | | | | | Primary school boys | Male | Work market and household | -0.188 | Percent point change | 5% | | | | | Secondary school girls | Female | Work market and household | -0.463 | Percent point change | 10% | | | | | Secondary school boys | Male | Work market and household | -0.389 | Percent point change | NS | | | | | Primary school girls | Female | Work market | -0.0258 | Percent point change | 10% | | | | | Primary school boys | Male | Work market | -0.12 | Percent point change | 5% | | | | | Secondary school girls | Female | Work market | -0.128 | Percent point change | 5% | | | | | Secondary school boys | Male | Work market | -0.28 | Percent point change | 5% | | 10 | Skoufias and Parker (2001) | PROGRESA (Mexico) | 8 to 17 | Female | PARTICIPATION in MARKET – GIRLS 8-17 | 0 | NS | | | | | | 12 to 17 | Female | PARTICIPATION in MARKET – GIRLS 12-17 | 0 | NS | | | | | | 8 to 17 | Female | PARTICIPATION in DOMESTIC – GIRLS 8-17 | -0.04 | 1% | | | | | | 12 to 17 | Female | PARTICIPATION in DOMESTIC – GIRLS 12-17 | -0.43 | 1% | | | | | | 8 to 17 | Female | PARTICIPATION in FARM – GIRLS 8-17 | 0 | NS | | | | | | 12 to 17 | Female | PARTICIPATION in FARM – GIRLS 12-17 | -0.004 | NS | |
### Table A5.5.8 Summary of results for cash transfer effect on child labour intensity – by sector and gender
| # | Study | Programme and country | Child age | Female/ Male | Outcome variable | Effect | Measure of change | Significance | |----|--------------------------------------------|-----------------------|-----------|--------------|----------------------------------------------------------------------------------|--------|-------------------|--------------| | 1 | Daidone et al. (2014a) | LCGP (Lesotho) | Boys | | hours worked last week own non farm enterprise | 0.1 | hours | NS | | | LCGP (Lesotho) | Boys | hours worked last week Own crop & livestock | -2.7 | hours | NS | | | LCGP (Lesotho) | Boys | hours worked last week Paid labour | -0.4 | hours | NS | | | LCGP (Lesotho) | Girls | hours worked last week own non farm enterprise | 0 | hours | NS | | | LCGP (Lesotho) | Girls | hours worked last week Own crop & livestock | -0.4 | hours | NS | | | LCGP (Lesotho) | Girls | hours worked last week Paid labour | 0.4 | hours | NS | | 2 | Del Carpio and Macours (2009) | Atención a Crisis | All Female | | Cash transfer only group Number of hours per week child worked in non-agricultural | 0.0864 | Hours per week | 5% | | | Atención a Crisis | All Male | Cash transfer only group Number of hours per week child worked in non-agricultural | 0.106 | Hours per week | 1% | | | Atención a Crisis | All Female | Cash transfer only group Number of hours per week child worked in agricultural | -0.269 | Hours per week | 1% | | | Atención a Crisis | All Male | Cash transfer only group Number of hours per week child worked in agricultural | 0.0501 | Hours per week | NS | | | Atención a Crisis | All Female | Cash transfer only group Number of hours per week child worked in domestic work | -0.399 | Hours per week | 10% | | | Atención a Crisis | All Male | Cash transfer only group Number of hours per week child worked in domestic work | -0.161 | Hours per week | 10% | | | Atención a Crisis | 10 to 15 Female | Cash transfer only group Number of hours per week child worked in non-agricultural | 0.181 | Hours per week | NS | | | Atención a Crisis | 6 to 15 Female | Cash transfer only group Number of hours per week child worked in non-agricultural | -0.288 | Hours per week | 5% | | | Atención a Crisis | 6 to 15 Female | Cash transfer only group Number of hours per week child worked in non-agricultural | 0.192 | Hours per week | 5% | | | Atención a Crisis | 10 to 15 Female | Cash transfer only group Number of hours per week child worked in agricultural | -0.0295 | Hours per week | NS | | | Atención a Crisis | 6 to 15 Female | Cash transfer only group Number of hours per week child worked in agricultural | 0.0735 | Hours per week | NS | | | Atención a Crisis | 10 to 15 Female | Cash transfer only group Number of hours per week child worked in agricultural | -0.399 | Hours per week | 10% | | 3 | Del Carpio, X. and Loayza, N. V. (2012) | Atención a Crisis | Female | | Number of hrs worked per child in the week previous to the survey – HOUSEHOLD CHORES | -1.085 | hours | 1% | | 4 | Ospina (2010) | Familias en Acción | 10 to 13 Boys | | Hours spent on paid work | 1.855 | NS | | | | Familias en Acción | 14 to 17 Boys | Hours spent on paid work | -1.408 | NS | 10% | | | Familias en Acción | 10 to 13 Boys | Hours spent on domestic work | -0.545 | NS | 1% | | | Familias en Acción | 14 to 17 Boys | Hours spent on domestic work | -0.524 | NS | 10% | | | Familias en Acción | 10 to 13 Girls | Hours spent on paid work | 0.045 | NS | | | | Familias en Acción | 14 to 17 Girls | Hours spent on paid work | -0.799 | NS | | | | Familias en Acción | 10 to 13 Girls | Hours spent on domestic work | -0.355 | NS | 5% | | | Familias en Acción | 14 to 17 Girls | Hours spent on domestic work | 0.195 | NS | |
*continued on next page*
### Table A5.5.8 Summary of results for cash transfer effect on child labour intensity – by sector and gender
| # | Study | Programme and country | Child age | Female/ Male | Outcome variable | Effect | Measure of change | Significance | |----|------------------------|-----------------------|-----------|--------------|-----------------------------------|--------|-------------------|--------------| | 5 | Rubio-Codina (2009) | PROGRESA / Oportunidades (Mexico) | Girls | Girls | Number of hours worked in market work | -0.097 | Marginal effect | NS | | | | | Boys | Boys | Number of hours worked in market work | -0.15 | Marginal effect | 10% | | | | | Aged 9-11| Girls | Number of hours worked in market work | 0.03 | Marginal effect | NS | | | | | Aged 12-17| Girls | Number of hours worked in market work | -0.121 | Marginal effect | NS | | | | | Girls | Girls | Number of hours worked in farm work | 0.043 | Marginal effect | NS | | | | | Boys | Boys | Number of hours worked in farm work | -0.035 | Marginal effect | NS | | | | | Aged 9-11| Girls | Number of hours worked in farm work | 0.085 | Marginal effect | NS | | | | | Aged 12-17| Girls | Number of hours worked in farm work | 0.014 | Marginal effect | NS | | | | | Girls | Girls | Number of hours worked in domestic work | -0.097 | Marginal effect | 5% | | | | | Boys | Boys | Number of hours worked in domestic work | -0.02 | Marginal effect | NS | | | | | Aged 9-11| Girls | Number of hours worked in domestic work | -0.028 | Marginal effect | NS | | | | | Aged 12-17| Girls | Number of hours worked in domestic work | -0.139 | Marginal effect | 1% | | 6 | World Bank (2011) | PKH (Indonesia) | 7 to 12 | Boys | Family enterprise work last week | 0.01 | Hours | NS | | | | | 13 to 15 | Boys | Family enterprise work last week | 3.03 | Hours | 1% | | | | | 7 to 12 | Girls | Family enterprise work last week | 4.77 | Hours | 1% | | | | | 13 to 15 | Girls | Family enterprise work last week | 2.14 | Hours | NS |
### Table A5.5.9 Summary of results for overall cash transfer effect on migration – by gender
| # | Study | Programme and country | Outcome indicator and treatment population | Effect | Measure of change | Significance | |----|------------------------|-----------------------|------------------------------------------------------------------------------------------------------------|--------|-------------------|--------------| | 1 | Ardington et al. (2009) | SA-OAP (South Africa) | Migrating internally (female members) | 0.051 | Percentage points | 5% | | | | SA-OAP (South Africa) | Migrating internally (male members) | 0.034 | Percentage points | 5% | | 2 | Behrman et al. (2009) | Oportunidades (Mexico)| Having migrated internally by 2003 compared to those started receiving programme two years later (girls 9-15 in 1997) | -0.09 | Percent point change | NS | | | | Oportunidades (Mexico)| Having migrated internally by 2003 compared to those started receiving programme two years later (Boys 9-15 in 1997) | 0.02 | Percent point change | 10% | | | | Oportunidades (Mexico)| Having migrated internally by 2003 compared to those started receiving programme two years later (Girls 9-10 in 1997) | -0.035 | Percent point change | 10% | | | | Oportunidades (Mexico)| Having migrated internally by 2003 compared to those started receiving programme two years later (Girls 11-12 in 1998) | 0.021 | Percent point change | NS |
Notes: results represent all overall results reported and do not include those disaggregated by gender or showing the effect of variations in design features. Figures in bold indicate statistically significant. NS means the study did not find a statistically significant result, typically up to the 10% significance level.
### Table A5.5.10 Effect of design and implementation features on adult employment outcomes
| # | Study | Programme and country | Effect of [design / implementation feature] | Outcome variable and treatment population | Effect | Measure of change | Significance | |---|-------|------------------------|---------------------------------------------|-------------------------------------------|--------|-------------------|-------------| | **Official recipient** | | | | | | | | | 1 | Siaplay (2012) | SA-OAP (South Africa) | Official recipient (only female household member is receiving OAP) | Whether employed or not (female 21-26) | 0.103 | Percentage points | NS | | | | | | | -0.124 | Percentage points | NS | | | | | | | -0.187 | Percentage points | 5% | | | | | | | 0.143 | Percentage points | 5% | | **Transfer timing** | | | | | | | | | 1 | Bazzi et al. (2012) | Temporary UCT (Indonesia) | No. of hours worked per week per adult – 2006 follow up (after one disbursement) | | -1.838 | Hours per week | 5% | | | | | | | -0.427 | Hours per week | NS | | | | | | | -2.285 | Hours per week | 5% | | | | | | | -0.173 | Hours per week | NS | | **Conditionalities** | | | | | | | | | 1 | Angelucci (2004) | PROGRESA (Mexico) | Behavioural requirement (households with at least one secondary school eligible male (i.e. part of grant conditional on attendance) vs. where all transfers unconditional) | Migration to US 1998 (household level) | 0.0025 | Percentage points | NS | | | | | | | -0.0086 | Percentage points | 1% | | | | | | | 0.0174 | Percentage points | NS | | | | | | | 0.0155 | Percentage points | NS | | | | | | | 0.0205 | Percentage points | NS | | | | | | | -0.0015 | Percentage points | NS | | **Duration of exposure** | | | | | | | | | 1 | Bazzi et al. (2012) | Temporary UCT (Indonesia) | Duration – 2006 follow-up and after 1 disbursement | Hours worked per week per adult | -1.838 | Hours per week | 5% | | | | | | | -2.285 | Hours per week | 5% | | | | | | | -0.427 | Hours per week | NS | | | | | | | -0.173 | Hours per week | NS |
*continued on next page* Table A5.5.10 Effect of design and implementation features on adult employment outcomes
| # | Study | Programme and country | Effect of design / implementation feature | Outcome variable and treatment population | Effect | Measure of change | Significance | |----|--------------------------------------------|-----------------------|-------------------------------------------|----------------------------------------------------------------------------------------------------------|--------|------------------|--------------| | 2 | Behrman and Parker (2013) | PROGRESA/ Oportunidades (Mexico) | Additional 1.5 years exposure to programme | Proportion working in the previous week in activity contributing to family income (Women aged 50 or older) | 0.05 | Percentage point | 10% | | | | PROGRESA/ Oportunidades (Mexico) | Additional 1.5 years exposure to programme | Proportion working in the previous week in activity contributing to family income (Men aged 50 or older) | -0.034 | Percentage point | NS | | 3 | Buser et al. (2014) | BDH (Ecuador) | Duration of exposure (long-term transfer recipients vs. those that lost them around 2 years ago) | Number of hours worked (mothers) | 8.42 | ‘Hours’ | 10% | | 4 | Maluccio (2005) | RPS (Nicaragua) | Duration of exposure (1 year after baseline) | Total hours worked last week by household members | -3.9191| Hours per week | NS | | | | RPS (Nicaragua) | Duration of exposure (2 years after baseline) | Total hours worked last week by household members | 0.3406 | Hours per week | NS | | | | RPS (Nicaragua) | Duration of exposure (1 year after baseline) | Average hours per worker worked last week | -0.4825| Hours per week | NS | | | | RPS (Nicaragua) | Duration of exposure (2 years after baseline) | Average hours per worker worked last week | 0.7732 | Hours per week | NS |
**Transfer level**
| # | Study | Programme and country | Effect of design / implementation feature | Outcome variable and treatment population | Effect | Measure of change | Significance | |----|--------------------------------------------|-----------------------|-------------------------------------------|----------------------------------------------------------------------------------------------------------|--------|------------------|--------------| | 1 | Bertrand et al. (2003) | SA-OAP (South Africa) | Level of transfer (effect of 1000 rand change in individual income) | Individual is working (prime aged adults living with eligible elderly) | -0.099 | Percent point | 5% | | | | SA-OAP (South Africa) | Level of transfer (effect of 1000 rand change in individual income) | Employed (female 16-50 year olds who live with age-eligible elderly) | -0.023 | Percentage point | NS | | | | SA-OAP (South Africa) | Level of transfer (effect of 1000 rand change in individual income) | Employed (male 16-50 year olds who live with age-eligible elderly) | -0.201 | Percentage point | 5% | | | | SA-OAP (South Africa) | Level of transfer (effect of 1000 rand change in individual income) | No. of hours worked (16-50 year olds who live with age-eligible elderly) | -17.07 | Hours per week | 5% | | | | SA-OAP (South Africa) | Level of transfer (effect of 1000 rand change in individual income) | No. of hours worked (female 16-50 year olds who live with age-eligible elderly) | -13.27 | Hours per week | 5% | | | | SA-OAP (South Africa) | Level of transfer (effect of 1000 rand change in individual income) | No. of hours worked (male 16-50 year olds who live with age-eligible elderly) | -22.48 | Hours per week | 5% | | 2 | Angelucci (2004) | PROGRESA (Mexico) | Transfer level (receiving high grant vs. low grant) | US migration 1998 (household level) | 0.012 | Percentage point | 5% | | | | PROGRESA (Mexico) | Transfer level (receiving high grant vs. low grant) | US migration 1999 (household level) | 0.0243 | Percentage point | 1% | | | | PROGRESA (Mexico) | Transfer level (receiving high grant vs. low grant) | Mexican migration 1998 (household level) | -0.0088| Percentage point | 5% | | | | PROGRESA (Mexico) | Transfer level (receiving high grant vs. low grant) | Mexican migration 1999 (household level) | -0.0096| Percentage point | 10% | | | | PROGRESA (Mexico) | Transfer level (receiving high grant vs. low grant) | All migration 1998 (household level) | -0.0009| Percentage point | NS | | | | PROGRESA (Mexico) | Transfer level (receiving high grant vs. low grant) | All migration 1999 (household level) | .0030 | Percentage point | NS | | 3 | Bazzi et al. (2012) | Temporary UCT (Indonesia) | Transfer level (transfers per capita in 000,000s Rupiah) | Change in weekly hours worked per adult, between 2005 and 2006 | -0.391 | Hours per week | NS | | | | Temporary UCT (Indonesia) | Transfer level (transfers per capita in 000,000s Rupiah) | Change in weekly hours worked per adult, between 2005 and 2007 (Total hours / no. of adult members) | -0.256 | Hours per week | NS |
continued on next page Table A5.5.10 Effect of design and implementation features on adult employment outcomes
| # | Study | Programme and country | Effect of [design / implementation feature] | Outcome variable and treatment population | Effect Measure of change | Significance | |----|--------------------------------------------|-----------------------|---------------------------------------------|-------------------------------------------|--------------------------|--------------| | 4 | Dabalen et al. (2008) | NE (Albania) | Transfer level (transfers per household in 100s of Lek) | Hours worked last week (all adults) | -0.0667 | Hours per week 5% | | | | | | Hours worked last week (females adults) | -0.0783 | Hours per week 5% | | | | | | Hours worked last week (male adults) | -0.0163 | Hours per week NS | | | | | | Decision to work (all adults) | -0.0021 | Percentage point 1% | | | | | | Decision to work (females adults) | -0.0023 | Percentage point NS | | | | | | Decision to work (male adults) | 0.0016 | Percentage point 1% | | | | | | Whether working or not (Male) | -0.0016 | Fixed effects coefficient NS | | | | | | Whether working or not (Female) | -0.0023 | Fixed effects coefficient 1% |
**Targeting**
| # | Study | Programme and country | Effect of [design / implementation feature] | Outcome variable and treatment population | Effect Measure of change | Significance | |----|--------------------------------------------|-----------------------|---------------------------------------------|-------------------------------------------|--------------------------|--------------| | 1 | Merttens et al. (2015) | SAGE (Uganda) | Among households targeted through the Senior Citizens Grant | Proportion of working-age adults (18-64) engaged in any economically productive activities | 0.0062 | Percentage point NS | | | | | | Proportion of working-age adults (18-64) engaged in any economically productive activities | -0.012 | Percentage point NS | | | | | | Mean number of hours spent working per week (all occupations) | -0.02 | Hours NS | | | | | | Mean number of hours spent working per week (all occupations) | 0.48 | Hours NS | | | | | | Mean number of months spent working in main occupation in last year | 0.16 | Months NS | | | | | | Mean number of months spent working in main occupation in last year | 0.45 | Months 10% | | | | | | Proportion of individuals engaged in casual labour as main or secondary activity | -0.0002 | Percentage point NS | | | | | | Proportion of individuals engaged in casual labour as main or secondary activity | -0.0002 | Percentage point NS |
**Complementary interventions and supply side services**
| # | Study | Programme and country | Effect of [design / implementation feature] | Outcome variable and treatment population | Effect Measure of change | Significance | |----|--------------------------------------------|-----------------------|---------------------------------------------|-------------------------------------------|--------------------------|--------------| | 1 | Blattman et al. (2015) | WINGS (Uganda) | Difference between those receiving no group training and those receiving group training (organisational development, decision-making, leadership and savings and credit group formation) | Involved in any non-farm self-employment (16 m after grants) | 0.008 | Percentage point NS | | | | | | Started enterprise since baseline (16m after grant) | -0.002 | Percentage point NS | | | | | | Average work hours per week (16m after grant) | 0.486 | Percentage point NS | | | | | | Average agricultural hours per week (16m after grant) | 0.506 | Hours NS |
continued on next page
### Table A5.5.10 Effect of design and implementation features on adult employment outcomes continued
| # | Study | Programme and country | Effect of [design / implementation feature] | Outcome variable and treatment population | Effect Measure of change | Significance | |----|-------|-----------------------|---------------------------------------------|-------------------------------------------|-------------------------|-------------| | 1 | WINGS (Uganda) | Difference between those receiving no group training and those receiving group training | Average non-agricultural hours per week (16m after grant) | -0.020 Hours | NS | | | WINGS (Uganda) | Difference between those getting 2 supervisory visits (no advice) and those getting 5 (extended advice) | Any non-farm self-employment (12m after grants) | 0.042 Percentage point | NS | | | WINGS (Uganda) | Difference between those getting 2 supervisory visits (no advice) and those getting 5 (extended advice) | Started enterprise since baseline (12m after grant) | 0.016 Percentage point | NS | | | WINGS (Uganda) | Difference between those getting 2 supervisory visits (no advice) and those getting 5 (extended advice) | Average work hours per week (12m after grant) | 3.659 Percentage point | NS | | | WINGS (Uganda) | Difference between those getting 2 supervisory visits (no advice) and those getting 5 (extended advice) | Agricultural work hours per week (12m after grant) | 2.757 Hours | NS | | | WINGS (Uganda) | Difference between those getting 2 supervisory visits (no advice) and those getting 5 (extended advice) | Non-agricultural work hours per week (12m after grant) | 0.902 Hours | NS | | 2 | Green et al. (2015) | WINGS (Uganda) | Women who were joined as beneficiaries by their partner (or someone from their household who makes financial decisions), and received basic training in couples’ communication and problem solving (relative to regular beneficiaries who participated alone). | Average (non-agricultural) work hours per week among women | -1.23 Hours per week | NS | | 3 | Macours and Vakis (2012) | Atención a Crisis (Nicaragua) | Basic CCT | Non-agricultural wage employment | 0.0221 Percent point change | NS | | | Atención a Crisis (Nicaragua) | Basic CCT plus a scholarship for a vocational training | Non-agricultural wage employment | 0.0177 Percent point change | NS | | | Atención a Crisis (Nicaragua) | Basic CCT plus a productive investment grant | Non-agricultural wage employment | -0.0211 Percent point change | NS | | | Atención a Crisis (Nicaragua) | Basic CCT | Non-agricultural self-employment | 0.0396 Percent point change | 10% | | | Atención a Crisis (Nicaragua) | Basic CCT plus a scholarship for a vocational training | Non-agricultural self-employment | 0.0383 Percent point change | 10% | | | Atención a Crisis (Nicaragua) | Basic CCT plus a productive investment grant | Non-agricultural self-employment | 0.126 Percent point change | 1% |
### Table A5.5.11 Effect of design and implementation features on child labour outcomes
| # | Study | Programme and country | Effect of [design / implementation feature] | Outcome variable and treatment population | Effect Measure of change | Significance | |----|------------------------|-----------------------|---------------------------------------------|-------------------------------------------|--------------------------|--------------| | | **Official recipient** | | | | | | | 1 | Siaplay (2012) | SA-OAP (South Africa) | Official recipient (only female household member is receiving OAP) | Whether employed or not (female 14-20) | -0.018 Percentage points | NS | | | | | Official recipient (only male household member is receiving OAP) | Whether employed or not (female 14-20) | -0.003 Percentage points | NS | | | | | Official recipient (only female household member is receiving OAP) | Whether employed or not (male 14-20) | 0.023 Percentage points | NS | | | | | Official recipient (only male household member is receiving OAP) | Whether employed or not (male 14-20) | -0.065 Percentage points | NS | | | **Conditionalities** | | | | | | | 1 | Barrera-Osorio et al. (2011) | SCAE (Colombia) | Behavioural requirement (basic transfer conditional on school attendance) | primary activity is work (children grade 6-10) | -0.002 Percent point change | NS | | | | | Behavioural requirement (savings treatment that postpones a bulk of the transfer due to good attendance to just before children have to re-enrol) | primary activity is work (children grade 6-10) | -0.001 Percent point change | NS | | | | | Behavioural requirement (some of the transfer is conditional on students' graduation and tertiary enrolment rather than attendance) | primary activity is work (children grade 6-10) | -0.008 Percent point change | 10% | | | | | Behavioural requirement (basic transfer conditional on school attendance) | Hours worked last week (children grade 6-10) | -0.371 Hours per week | 5% | | | | | Behavioural requirement (savings treatment that postpones a bulk of the cash transfer due to good attendance to just before children have to re-enrol) | Hours worked last week (children grade 6-10) | -0.248 Hours per week | 10% | | | | | Behavioural requirement (some of the transfer is conditional on students' graduation and tertiary enrolment rather than attendance) | Hours worked last week (children grade 6-10) | -0.804 Hours per week | 5% | | | | | Behavioural requirement (basic transfer conditional on school attendance) | primary activity is work (children grade 11) | -0.004 Percent point change | NS | | | | | Behavioural requirement (savings treatment that postpones a bulk of the cash transfer due to good attendance to just before children have to re-enrol) | primary activity is work (children grade 11) | 0.031 Percent point change | NS | | | | | Behavioural requirement (some of the transfer is conditional on students' graduation and tertiary enrolment rather than attendance) | primary activity is work (children grade 11) | -0.153 Percent point change | 1% | | | | | Behavioural requirement (basic conditional cash transfer treatment based on school attendance) | Hours worked last week (children grade 11) | 0.683 Hours per week | NS | | | | | Behavioural requirement (savings treatment that postpones a bulk of the cash transfer due to good attendance to just before children have to re-enrol) | Hours worked last week (children grade 11) | 0.092 Level change | NS | | | | | Behavioural requirement (some of the transfer is conditional on students' graduation and tertiary enrolment rather than attendance) | Hours worked last week (children grade 11) | -7.349 Hours per week | 1% |
*continued on next page* Table A5.5.11 Effect of design and implementation features on child labour outcomes
| # | Study | Programme and country | Effect of [design / implementation feature] | Outcome variable and treatment population | Effect | Measure of change | Significance | |----|--------------------------------------------|-----------------------|-------------------------------------------------------------------------------------------------------------|-------------------------------------------|--------|-------------------|--------------| | 2 | Schady and Araujo (2006) | BDH (Ecuador) | Behavioural monitoring (Household perception that continued receipt of transfer conditional on school enrolment) | Child is working in follow-up survey | -0.081 | Percentage points | NS | | | | | Behavioural monitoring (Household perception that transfers are not conditional on any behaviour) | Child is working in follow-up survey | -0.055 | Percentage points | NS | | | | | Behavioural monitoring (Household perception that continued receipt of transfer conditional on school enrolment) | Child is working full-time (40+ hours) | -0.078 | Percentage points | 5% | | | | | Behavioural monitoring (Household perception that transfers are not conditional on any behaviour) | Child is working full-time (40+ hours) | 0.009 | Percentage points | NS | | | | | Behavioural monitoring (Households perceiving there to be a condition of school enrolment for continuing to receive transfers) | Hours worked in past week | -5.92 | Hours worked | 1% | | | | | Behavioural monitoring (Households perceiving there to be no conditions attached to the transfers) | Hours worked in past week | -0.024 | Hours worked | NS | | 3 | Benedetti et al. (2015) | Bono 10,000 (Honduras) | Treatment household with just one eligible child (school enrolment conditions only apply to one child) | Worked for more than one hour | -0.062 | Percentage point | 5% | | | | | Treatment households with more than one eligible child (school enrolment conditions only apply to one child) | Worked for more than one hour | Various | Percentage point | No results significant |
Duration of exposure
| # | Study | Programme and country | Duration of exposure (benefitting from transfers for approx. 5.5 years versus 4) | Whether working in 2003 (boys 9-15 in 1997) | -4.1 | Percent | 10% | |----|--------------------------------------------|-----------------------|--------------------------------------------------------------------------------|---------------------------------------------|--------|-------------------|--------------| | | | | Duration of exposure (benefitting from transfers for approx. 5.5 years versus 4) | Whether working in 2003 (girls 9-15 in 1997) | -5 | Percent | NS | | 2 | Perova and Vakis (2012) | Juntos (Peru) | Duration of exposure (12 to 23 months in Juntos) | Worked in previous week (6-14 year olds) | 0 | Percentage points | NS | | | | | Duration of exposure (24 to 36 months in Juntos) | Worked in previous week (6-14 year olds) | 0.03 | Percentage points | 10% | | | | | Duration of exposure (Over 36 months in Juntos) | Worked in previous week (6-14 year olds) | 0.13 | Percentage points | 1% | | 3 | Behrman et al. (2009) | PROGRESA/Oportunidades (Mexico) | Duration of exposure (beneficiary households that started receiving transfers in 1998 vs. 2000) | Whether working in 2003 (girls 9-15 in 1997) | -0.013 | Percent point change | NS | | | | | Duration of exposure (beneficiary households that started receiving transfers in 1998 vs. 2000) | Whether working in 2003 (boys 9-15 in 1997) | -0.027 | Percent point change | 10% | | | | | Duration of exposure (beneficiary households that started receiving transfers in 1998 vs. 2000) | Whether working in 2003 (Girls 9-15 in 1997) | -0.008 | Percent point change | NS | | | | | Duration of exposure (beneficiary households that started receiving transfers in 1998 vs. 2000) | Whether working in 2003 (Girls 11-12 in 1998) | -0.01 | Percent point change | NS | | | | | Duration of exposure (beneficiary households that started receiving transfers in 1998 vs. 2000) | Whether working in 2003 (Girls 13-15 in 1998) | 0.02 | Percent point change | NS | | | | | Duration of exposure (beneficiary households that started receiving transfers in 1998 vs. 2000) | Proportion of girls 9-15 in 1997 having migrated by 2003 | -0.09 | Percent point change | NS |
continued on next page Table A5.5.11 Effect of design and implementation features on child labour outcomes
| # | Study | Programme and country | Effect of [design / implementation feature] | Outcome variable and treatment population | Effect | Measure of change | Significance | |----|------------------------|----------------------------------------|---------------------------------------------|-------------------------------------------|--------|-------------------|--------------| | 3 | Behrman et al. (2009) | PROGRESA/ Oportunidades (Mexico) | Duration of exposure (beneficiary households that started receiving transfers in 1998 vs. 2000) | Proportion of boys 9-15 in 1997 having migrated by 2003 | 0.02 | Percent point change | 10% | | | | | | Proportion of girls 9-10 in 1997 having migrated by 2003 | -0.035 | Percent point change | 10% | | | | | | Proportion of girls 11-12 in 1998 having migrated by 2003 | 0.021 | Percent point change | NS | | | | | | Proportion of girls 13-15 in 1999 having migrated by 2003 | 0.014 | Percent point change | NS | | 4 | Berhman et al. (2012) | Oportunidades (Mexico) | Duration of exposure (after 1 year) | Employed for pay (urban boys 12-14 years old) | -0.077 | Percentage point | 5% | | | | | | Employed for pay (urban boys 12-14 years old) | -0.124 | Percentage point | 5% | | | | | | Employed for pay (urban boys 15-18 years old) | 0.028 | Percentage point | NS | | | | | | Employed for pay (urban boys 15-18 years old) | -0.051 | Percentage point | NS | | | | | | Employed for pay (urban boys 19-20 years old) | -0.059 | Percentage point | NS | | | | | | Employed for pay (urban boys 19-20 years old) | -0.154 | Percentage point | NS | | | | | | Employed for pay (urban boys 6-20 years old) | -0.041 | Percentage point | NS | | | | | | Employed for pay (urban boys 6-20 years old) | -0.103 | Percentage point | 5% | | | | | | Employed for pay (urban girls 12-14 years old) | 0.007 | Percentage point | NS | | | | | | Employed for pay (urban girls 12-14 years old) | -0.01 | Percentage point | NS | | | | | | Employed for pay (urban girls 15-18 years old) | -0.0105 | Percentage point | 10% | | | | | | Employed for pay (urban girls 15-18 years old) | 0.004 | Percentage point | NS | | | | | | Employed for pay (urban girls 19-20 years old) | -0.05 | Percentage point | NS | | | | | | Employed for pay (urban girls 19-20 years old) | 0.087 | Percentage point | NS | | | | | | Employed for pay (urban girls 6-20 years old) | -0.038 | Percentage point | NS | | | | | | Employed for pay (urban girls 6-20 years old) | 0.002 | Percentage point | NS | | 5 | Dammert (2008) | RPS (Nicaragua) | Duration of exposure (2001) | Participation in labour activities (boys 7-13 years old at baseline) | -0.099 | Percentage point | 5% | | | | | | Participation in labour activities (boys 7-13 years old at baseline) | -0.124 | Percentage point | 5% | | | | | | Participation in labour activities (girls 7-13 years old at baseline) | -0.012 | Percentage point | NS | | | | | | Participation in labour activities (girls 7-13 years old at baseline) | -0.014 | Percentage point | NS | | | | | | Participation in labour activities (children 7-13 years old at baseline – male headed) | -0.076 | Percentage points | 10% |
continued on next page Table A5.5.11 Effect of design and implementation features on child labour outcomes continued
| # | Study | Programme and country | Effect of [design / implementation feature] | Outcome variable and treatment population | Effect | Measure of change | Significance | |----|------------------------|-----------------------|---------------------------------------------|-------------------------------------------|--------|------------------|--------------| | 5 | Dammert (2008) | RPS (Nicaragua) | Duration of exposure (2002) | Participation in labour activities (children 7-13 years old at baseline – male headed) | -0.05 | Percentage points | NS | | | | | | Participation in labour activities (children 7-13 years old at baseline – female headed) | -0.131 | Percentage points | 5% | | | | | | Participation in labour activities (children 7-13 years old at baseline – female headed) | -0.082 | Percentage points | NS | | 6 | Maluccio (2005) | RPS (Nicaragua) | Duration of exposure (1 year after baseline) | Working (girls 7-12 years) | -0.0077| Percentage point | NS | | | | | | Working (girls 7-12 years) | 0.0553 | Percentage point | 10% | | | | | | Working (boys 7-12 years) | -0.0415| Percentage point | NS | | | | | | Working (boys 7-12 years) | -0.0175| Percentage point | NS |
Targeting
1. Merttens et al. (2015) SAGE (Uganda) Among households targeted through the Senior Citizens Grant Proportion of children aged 6-17 engaged in child labour -0.0004 Percentage point NS
SAGE (Uganda) Among households targeted through the Vulnerable Family Support Grant Proportion of children aged 6-17 engaged in child labour 0.0001 Percentage point NS
Complementary interventions and supply-side services
1. Del Carpio (2008) Atención a Crisis (Nicaragua) Complementary interventions (basic intervention) Physical labour (ages 8-15) -1.052 Hours per week NS
Atención a Crisis (Nicaragua) Complementary interventions (training intervention) Physical labour (ages 8-15) -1.407 Hours per week 5%
Atención a Crisis (Nicaragua) Complementary interventions (business grant intervention) Physical labour (ages 8-15) -1.013 Hours per week NS
Atención a Crisis (Nicaragua) Complementary interventions (basic intervention) Non-physical labour (ages 8-15) 1.414 Hours per week NS
Atención a Crisis (Nicaragua) Complementary interventions (training intervention) Non-physical labour (ages 8-15) 1.155 Hours per week NS
Atención a Crisis (Nicaragua) Complementary interventions (business grant intervention) Non-physical labour (ages 8-15) 6.288 Hours per week 1%
Atención a Crisis (Nicaragua) Complementary interventions (basic intervention) No. of hours worked (ages 8-15) -1.143 Hours per week NS
Atención a Crisis (Nicaragua) Complementary interventions (training intervention) No. of hours worked (ages 8-15) -1.62 Hours per week 5%
Atención a Crisis (Nicaragua) Complementary interventions (business grant intervention) No. of hours worked (ages 8-15) -0.533 Hours per week NS
Atención a Crisis (Nicaragua) Complementary interventions (basic intervention) No. of hours worked (girls ages 8-15) -0.551 Hours per week NS
Atención a Crisis (Nicaragua) Complementary interventions (training intervention) No. of hours worked (girls ages 8-15) -1.126 Hours per week NS
Atención a Crisis (Nicaragua) Complementary interventions (business grant intervention) No. of hours worked (girls ages 8-15) -0.076 Hours per week NS
Atención a Crisis (Nicaragua) Complementary interventions (basic intervention) No. of hours worked (boys ages 8-15) -1.675 Hours per week 10%
Atención a Crisis (Nicaragua) Complementary interventions (training intervention) No. of hours worked (boys ages 8-15) -2.073 Hours per week 5%
Atención a Crisis (Nicaragua) Complementary interventions (business grant intervention) No. of hours worked (boys ages 8-15) -0.989 Hours per week NS
14 Definition of work excludes domestic work, which may underestimate impacts for girls, though Skoufias and Parker (2001) find evidence that in initial years the programme reduced time spent in domestic work for girls.
## Summary results for Empowerment
### Table A5.6.1 Summary of results for the role of cash transfer design and implementation parameters on empowerment
| Paper | Specific variable | Size of effect | Unit of change | Statistical significance | Gender of individual | Disaggregation | Programme | |-------|------------------|----------------|----------------|--------------------------|----------------------|----------------|-----------| | **Main recipient** | | | | | | | | | 1 Siaplay (2012) | Married at time of survey | -0.07 | Percentage points | NS | Female | Transfer (pension) recipient is female | SA-OAP (South Africa) | | | Married at time of survey | 0.227 | Percentage points | 1% | Female | Transfer (pension) recipient is male | SA-OAP (South Africa) | | | Married at time of survey | -0.269 | Percentage points | 1% | Male | Transfer (pension) recipient is female | SA-OAP (South Africa) | | | Married at time of survey | 0.243 | Percentage points | 1% | Male | Transfer (pension) recipient is male | SA-OAP (South Africa) | | **Transfer level** | | | | | | | | | 1 Angelucci (2008) | Male partner is aggressive when drinking | -0.016 | Percentage points | 1% | Female | | PROGRESA (Mexico) | | | Male partner is aggressive when drinking | 0.051 | Percentage points | 5% | Female | Transfer level (maximum transfer) | PROGRESA (Mexico) | | 2 Kohler and Thornton (2012) | Condom use (in last nine days) | 0.041 | Percentage points | NS | Male | High transfer | M-IP (Malawi) | | | Condom use (in last nine days) | 0.063 | Percentage points | NS | Male | Low transfer | M-IP (Malawi) | | | Safe sex (used a condom at last sex or did not have sex in last nine days) | -0.092 | Percentage points | 5% | Male | High transfer | M-IP (Malawi) | | | Safe sex (used a condom at last sex or did not have sex in last nine days) | -0.088 | Percentage points | 5% | Male | Low transfer | M-IP (Malawi) | | | Condom use (in last nine days) | -0.019 | Percentage points | NS | Female | High transfer | M-IP (Malawi) | | | Condom use (in last nine days) | 0.02 | Percentage points | NS | Female | Low transfer | M-IP (Malawi) | | | Safe sex (used a condom at last sex or did not have sex in last nine days) | 0.087 | Percentage points | 10% | Female | High transfer | M-IP (Malawi) | | | Safe sex (used a condom at last sex or did not have sex in last nine days) | 0.046 | Percentage points | NS | Female | Low transfer | M-IP (Malawi) | | **Duration of exposure** | | | | | | | | | 1 Baird et al. (2011) | Ever pregnant | -0.009 | Percentage points | NS | Female | 12 months, UCT | ZCTP (Malawi) | | | Ever pregnant | -0.067 | Percentage points | 1% | Female | 24 months, UCT | ZCTP (Malawi) | | | Ever pregnant | 0.013 | Percentage points | NS | Female | 12 months, CCT | ZCTP (Malawi) | | | Ever pregnant | 0.029 | Percentage points | NS | Female | 24 months, CCT | ZCTP (Malawi) | | | Ever married | -0.026 | Percentage points | 5% | Female | 12 months, UCT | ZCTP (Malawi) | | | Ever married | -0.079 | Percentage points | 1% | Female | 24 months, UCT | ZCTP (Malawi) | | | Ever married | 0.007 | Percentage points | NS | Female | 12 months, CCT | ZCTP (Malawi) | | | Ever married | -0.012 | Percentage points | NS | Female | 24 months, CCT | ZCTP (Malawi) |
*continued on next page* Table A5.6.1 Summary of results for the role of cash transfer design and implementation parameters on empowerment continued
| Paper | Specific variable | Size of effect | Unit of change | Statistical significance | Gender of individual | Disaggregation | Programme | |-------|------------------|----------------|----------------|--------------------------|----------------------|----------------|-----------| | 2 | Married at time of survey | -0.01 | Percentage points | NS | Female | PROGRESA (Mexico) | | | Married at time of survey | -0.006 | Percentage points | NS | Male | PROGRESA (Mexico) | | | Married at time of survey | -0.007 | Percentage points | NS | Female | Aged 9-10 in 1997 | PROGRESA (Mexico) | | | Married at time of survey | -0.008 | Percentage points | NS | Female | Aged 11-12 in 1997 | PROGRESA (Mexico) | | | Married at time of survey | -0.019 | Percentage points | NS | Female | Aged 13-15 in 1997 | PROGRESA (Mexico) | | | Married at time of survey | 0.008 | Percentage points | NS | Male | Aged 9-10 in 1997 | PROGRESA (Mexico) | | | Married at time of survey | -0.014 | Percentage points | NS | Male | Aged 11-12 in 1997 | PROGRESA (Mexico) | | | Married at time of survey | -0.013 | Percentage points | NS | Male | Aged 13-15 in 1997 | PROGRESA (Mexico) | | 3 | Use of contraceptives | 0.08 | Percentage points | 1% | Female | 12-23 months | Juntos (Peru) | | | Use of contraceptives | 0.12 | Percentage points | 1% | Female | 24 to 36 months | Juntos (Peru) | | | Use of contraceptives | 0.18 | Percentage points | 1% | Female | Over 36 months | Juntos (Peru) |
Conditionalities
| Paper | Specific variable | Size of effect | Unit of change | Statistical significance | Gender of individual | Disaggregation | Programme | |-------|------------------|----------------|----------------|--------------------------|----------------------|----------------|-----------| | 1 | Ever married | 0.007 | Percentage points | NS | Female | CCT treatment arm | ZCTP (Malawi) | | | Ever married | -0.026 | Percentage points | 5% | Female | UCT treatment arm | ZCTP (Malawi) | | | Ever married | 0.037 | Percentage points | NS | Female | Aged over 15, CCT treatment arm | ZCTP (Malawi) | | | Ever married | 0.007 | Percentage points | NS | Female | Aged over 15, UCT treatment arm | ZCTP (Malawi) | | | Ever pregnant | 0.013 | Percentage points | NS | Female | CCT treatment arm | ZCTP (Malawi) | | | Ever pregnant | -0.009 | Percentage points | NS | Female | UCT treatment arm | ZCTP (Malawi) | | | Ever pregnant | 0.104 | Percentage points | 5% | Female | Aged over 15, CCT treatment arm | ZCTP (Malawi) | | | Ever pregnant | -0.032 | Percentage points | NS | Female | Aged over 15, UCT treatment arm | ZCTP (Malawi) | | 2 | Ever married | 0.93 | Odds ratio | NS | Female | CCT treatment arm | ZCTP (Malawi) | | | Ever married | 0.36 | Odds ratio | NS | Female | UCT treatment arm | ZCTP (Malawi) |
Payment mechanism
| Paper | Specific variable | Size of effect | Unit of change | Statistical significance | Gender of individual | Disaggregation | Programme | |-------|------------------|----------------|----------------|--------------------------|----------------------|----------------|-----------| | 1 | Female recipient responsible for spending part of cash transfer | -0.01 | Percentage points | NS | Female | Zap (mobile payment) treatment arm | Mobile money experiment (Niger) | | | Female recipient responsible for spending part of cash transfer | 0.02 | Percentage points | NS | Female | Cash treatment arm that also received mobile phone | Mobile money experiment (Niger) | | | Female recipient responsible for spending part of cash transfer | 0.01 | Percentage points | NS | Female | Zap (mobile payment) treatment arm | Mobile money experiment (Niger) | | | Female recipient involved in deciding how transfer is spent | 0.01 | Percentage points | NS | Female | Zap (mobile payment) treatment arm | Mobile money experiment (Niger) |
continued on next page
### Table A5.6.1 Summary of results for the role of cash transfer design and implementation parameters on empowerment continued
| Paper | Specific variable | Size of effect | Unit of change | Statistical significance | Gender of individual | Disaggregation | Programme | |-------|------------------|----------------|----------------|--------------------------|----------------------|----------------|-----------| | 1 | Aker et al. (2014) | Female recipient involved in deciding how transfer is spent | 0.01 | Percentage points | NS | Female | Cash treatment arm that also received mobile phone | Mobile money experiment (Niger) | | | | Female recipient involved in deciding how transfer is spent | 0.00 | Percentage points | NS | Female | Zap (mobile payment) treatment arm | Mobile money experiment (Niger) | | 2 | Aker et al. (2011) | Respondent involved in deciding how transfer is spent (not entirely clear that respondent is female recipient) | 0.00 | Percentage points | NS | Female | Zap (mobile payment) treatment arm | Mobile money experiment (Niger) | | | | Respondent involved in deciding how transfer is spent | 0.01 | Percentage points | 10% | Female | Cash treatment arm that also received mobile phone | Mobile money experiment (Niger) | | | | Respondent involved in deciding how transfer is spent | 0.01 | Percentage points | 10% | Female | Cash treatment arm | Mobile money experiment (Niger) | | | | Respondent involved in deciding how transfer is spent | 0.00 | Percentage points | NS | Female | Zap (mobile payment) treatment arm | Mobile money experiment (Niger) | | | | Respondent involved in deciding how transfer is spent | 0.01 | Percentage points | NS | Female | Zap (mobile payment) treatment arm | Mobile money experiment (Niger) | | | | Respondent involved in deciding how transfer is spent | 0.08 | Percentage points | NS | Female | Zap (mobile payment) treatment arm – Fulani and Touareg ethnic groups only | Mobile money experiment (Niger) | | | | Respondent involved in deciding how transfer is spent | 0.01 | Percentage points | NS | Female | Zap (mobile payment) treatment arm – Hausa ethnic group only | Mobile money experiment (Niger) |
**Complementary interventions and supply-side services**
| Paper | Specific variable | Size of effect | Unit of change | Statistical significance | Gender of individual | Disaggregation | Programme | |-------|------------------|----------------|----------------|--------------------------|----------------------|----------------|-----------| | 1 | Blattman et al. (2015) | Physical and emotional abuse (z-score) | 0.066 | Z-score | NS | Female | WINGS (Uganda) | | | | Physical and emotional abuse (z-score) | -0.046 | Z-score | NS | Female | Complementary programmes | WINGS (Uganda) | | | | Autonomy in purchases (z-score) | 0.082 | Z-score | NS | Female | WINGS (Uganda) | | | | Autonomy in purchases (z-score) | 0.089 | Z-score | NS | Female | WINGS (Uganda) | | | | Degree of partner control | 0.17 | Percentage points | NS | Female | WINGS (Uganda) | | | | Degree of partner control | 0.129 | Percentage points | 10% | Female | WINGS (Uganda) | | 2 | Green et al. (2015) | Self-reported autonomy/influence in purchase (z-score) | -0.11 | Z-score | 10% | Female | All female WINGS+ beneficiaries | WINGS (Uganda) | | | | Self-reported autonomy/influence in purchase (z-score) | -0.07 | Z-score | NS | Female | Beneficiaries who had an intimate partner at baseline | WINGS (Uganda) | | | | Physical and emotional abuse | 0.01 | Percentage points | NS | Female | All female WINGS+ beneficiaries | WINGS (Uganda) | | | | Physical and emotional abuse | -0.08 | Percentage points | NS | Female | Beneficiaries who had an intimate partner at baseline | WINGS (Uganda) | | | | Controlling behaviour | -0.01 | Percentage points | NS | Female | All female WINGS+ beneficiaries | WINGS (Uganda) | | | | Controlling behaviour | -0.07 | Percentage points | NS | Female | Beneficiaries who had an intimate partner at baseline | WINGS (Uganda) |
*continued on next page*
### Table A5.6.1 Summary of results for the role of cash transfer design and implementation parameters on empowerment continued
| Paper | Specific variable | Size of effect | Unit of change | Statistical significance | Gender of individual | Disaggregation | Programme | |-------|------------------|----------------|----------------|--------------------------|----------------------|----------------|-----------| | 1 | Merttens et al. (2015) | Female is decision maker on what to do about a serious health problem | 0.032 | Percentage points | NS | Female | SCG | SAGE (Uganda) | | | | Female is decision maker on what to do about a serious health problem | -0.0095 | Percentage points | NS | Female | SCG | SAGE (Uganda) | | | | Female is decision maker on children’s education | 0.042 | Percentage points | NS | Female | VFSG | SAGE (Uganda) | | | | Female is decision maker on children’s education | -0.002 | Percentage points | NS | Female | VFSG | SAGE (Uganda) | | | | Female is decision maker on how to invest money | 0.0081 | Percentage points | NS | Female | SCG | SAGE (Uganda) | | | | Female is decision maker on how to invest money | -0.0056 | Percentage points | NS | Female | VFSG | SAGE (Uganda) |
Notes: *In Behrman et al. (2005) the treatment group were exposed to treatment for 1.5 years longer (4.5 years as opposed to 3 years). The full sample was aged 9-15 in 1997*
15 This sub-group is tested separately to try to strengthen the evidence that the programme’s intended effects are not being achieved as a result of increased efforts by male partners to control transfer resources.
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cefb94f563daf4a12016134a8bf25bfcb2cd9a06 | Cataloguing Standards for A2A
Descriptive Standards
The General International Standard for Archival Description, ISAD(G), 2nd edition, Ottawa, 2000, provides principles of multi-level description, definitions and rules for the application of elements of description and a proposed minimum set of data elements for international data exchange.
The International Standard for Archival Authority Records (Corporate, Personal and Family), ISAAR (CPF), Ottawa, 1996, gives general rules for the establishment of archival authority records that describe corporate bodies, persons and families named as creators in finding aids.
The National Council on Archives Rules for the Construction of Personal, Place and Corporate Names, NCA Rules, London, 1997, give precise rules for the structure and content of authority records for personal, place and corporate names when used as access points in archival description, thus ensuring consistency and facilitating data exchange.
Long Term Intentions
The aim of the National Archives Network must be the delivery of consistent and appropriate archival descriptions and shared authority data. To reap the full benefits of retrieval and information exchange archivally and across domains we must, wherever possible, achieve full ISAD(G) conformity supported by ISAAR(CPF) compliant authority records contributing to National Name Authority Files. Such conformity, where it already exists, will be accommodated immediately in the network.
However it is recognised that individual repositories at present catalogue to a range of standards, that all are likely to have legacy finding aids that bear little obvious relationship to modern standards, that most are likely to have cataloguing backlogs and that all are very hard pressed. For all these reasons it is appropriate to plan for the minimum conformity necessary to achieve our common goals and to recognise that some aspects of conformity may more readily be put in place after retroconversion to electronic form than before. Proposed Rules for Minimum Conformity
1. That we all produce multi-level archival description in accordance with ISAD(G)’s basic four rules: • describe from the general to the specific • provide information relevant to the level of description • link each description to its next higher unit of description • avoid redundancy of information in hierarchically related archival descriptions.
2. Local variations in naming levels of description will of course continue but we shall all abide by the common ISAD(G) terminology of:
Fonds Sub-fonds } with further subs as required Series }\
Sub-series } File Item
for data exchange purposes.
3. We shall identify those levels used in our archival descriptions according to the definitions laid out in ISAD(G)’s glossary of terms:
**Fonds**: the whole of the documents, regardless of form or medium, organically created and/or accumulated and used by a particular person, family or corporate body in the course of that creator’s activities and functions.
**Sub-fonds**: a sub-division of a fonds containing a body of related documents corresponding to administrative sub-divisions in the originating agency or organisation or, when that is not possible, to geographical, chronological, functional or similar groupings of the material itself.
**Series**: documents arranged in a filing system or maintained as a unit because they result from the same accumulation or filing process, or the same activity; have a particular form, or because of some other relationship arising out of their creation, receipt or use.
**File**: an organised unit of documents grouped together either for current use by the creator or in the process of archival arrangement because they relate to the same subject, activity or transaction. A file is usually the basic unit within a record series.
**Item**: the smallest intellectually indivisible archival unit, eg a letter, memorandum, report, photograph, sound recording.
**Subgroups**: when the creating body has a complex hierarchical structure each subgroup (sub-fonds, sub-series) has as many subordinate subgroups (eg sub-sub-series) as are necessary to reflect the levels of the hierarchical structure of the primary subordinate administrative unit.
4. The highest level of entry in any archival description offered to the network will comprise, at a minimum, the data elements considered essential by ISAD(G) for international data exchange, supplemented by those submitted as equally essential by the Society of Archivists and/or the Public Record Office when its review took place in September 1998:
- Reference code
- Title
- Creator(s)
- Abstract
- Creation dates
- Extent and form
- Access conditions
- Level of description
5. That at file level reference code, title or abstract, creation dates and level of description shall be mandatory.
6. That level of description and at least one of the data elements named at 4. above be used at every level of description.
7. That the data elements defined as mandatory for the top level of description shall be employed thus:
**Reference code**: country code as specified in ISO 3166 followed by repository code as specified by HMC followed by local repository specific code.
**Title**: a formal or given title that encompasses all the records being described.
**Creator(s)**: individual name(s) of the organisation(s) or individual(s) responsible for creating and accumulating the records being described, formulated according to the NCA Rules.
**Abstract**: a brief summary of the scope and content of the material being described.
**Creation dates**: the first and last date(s) of creation of the records being described (not predominant dates, not accumulation dates and not dates of originals if those being described are copies).
**Extent**: the number of records (or, at fonds level, the number of series) being described.
and **Form:** the broad physical form(s) of the records being described (not record type). If appropriate at fonds level broad physical form can be replaced by series (thus, eg, 36 series rather than 10,333 files, volumes and discs).
**Access conditions:** any conditions that restrict or affect access to the records being described (not conditions that restrict use of the records once access has been gained).
**Level of description:** the hierarchical level, in ISAD(G) terminology, of the material being described.
08. That corporate and personal and family names, when included in archival descriptions as creator(s), immediate source of acquisition, place of deposit, location of originals or as access points, and that place names, when included as access points, shall be formulated according to the NCA Rules (the NCA Rules themselves are about to be reviewed with the aim of reconciling differences between them and AACR2, 1999 revision).
09. To ensure that the names formulated under 8. above shall form the basis of/conform to authority records making up National Name Authority Files, that the type of authority record each one is shall be noted together with the country code as specified in ISO 3166 and the repository code as specified by the HMC.
10. That subject terms when used as access points shall, whenever a potential match is found, be formulated in accordance with the UNESCO Thesaurus.
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dbcdba8ed0d8952a8128631d066114865bf3afb2 | EXTRAORDINARY MEETING OF CABINET
AGENDA
Meeting to be held in the Ceres Suite, Worksop Town Hall, S80 2AH on Tuesday, 8th January 2019 at 6.30pm
(Please note time and venue)
Please turn mobile telephones to silent during meetings. In case of emergency, Members/officers can be contacted on the Council’s mobile telephone: 07904 001705.
In accordance with the Openness of Local Government Bodies Regulations 2014, audio/visual recording and photography at Council meetings is permitted in accordance with the Council’s protocol ‘Filming of Public Meetings’. CABINET
Membership 2018/19
Councillors: K Dukes, J Evans, S A Greaves, J A Leigh, D G Pidwell, S Scotthorne, S E Shaw and J White
Substitute Members: None
Cabinet Members:
- Policy, Strategy and Communications: Councillor S A Greaves
- Economic Development: Councillor J White
- Corporate Services: Councillor K Dukes
- Finance: Councillor J Evans
- Health and Community Wellbeing: Councillor S E Shaw
- Housing: Councillor S Scotthorne
- Neighbourhoods: Councillor J A Leigh
- Transport and Infrastructure: Councillor D G Pidwell
Advisory Members: Councillor H M Brand (Non-Voting)
Liaison Members: Councillors H Burton, T Critchley, S Fielding and T Taylor (Non-Voting)
Quorum: 2 Members
Lead Officer for this Meeting Mr N Taylor
Administrator for this Meeting Cara Hopkinson EXTRAORDINARY MEETING OF CABINET
8th JANUARY 2018
AGENDA
1. APOLOGIES FOR ABSENCE
2. DECLARATIONS OF INTEREST BY MEMBERS AND OFFICERS * (Members’ and Officers’ attention is drawn to the attached notes and form) (pages 5-6) (a) Members (b) Officers
3. FORWARD PLAN * (pages 7-10)
SECTION A – ITEMS FOR DISCUSSION IN PUBLIC
Key Decisions
4. REPORT(S) OF THE CABINET MEMBER – CORPORATE SERVICES * (a) Council Tax Reduction Scheme 2019/20 (Key Decision No. 720) (pages 11 - 16)
5. REPORT(S) OF THE CABINET MEMBER – FINANCE * (a) General Fund Capital Programme 2019/10 – 2023/24 (Key Decision No. 714) (pages 17 - 28) (b) Housing Capital Programme 2019/20 – 2023/24 (Key Decision No. 724) (pages 29 - 36) (c) Housing Revenue Account Budget 2019/20 and Future Years to 2023/24 (Key Decision No. 725) (pages 37 - 46) (d) Medium Term Financial Plan 2019/20 – 2023/24 (Key Decision No. 726) (pages 47 - 64) (e) Calculation of Council Tax Base 2019/20 (Key Decision No. 727) (pages 65 - 72) (f) Property Asset Management Plan 2019/20 Update (Key Decision No. 728) (pages 73 - 84)
Other Decisions
None
Exempt Information Items
The press and public are likely to be excluded from the meeting during the consideration of the following items in accordance with Section 100A(4) of the Local Government Act 1972.
SECTION B - ITEMS FOR DISCUSSION IN PRIVATE
Key Decisions
None
Other Decisions
6. REPORT OF THE CABINET MEMBER – HOUSING\* (a) Housing Service Review (pages 85 - 95)
- Report attached NOTES:
1. The papers enclosed with this Agenda are available in large print if required.
2. Copies can be requested by contacting us on 01909-533252 or by e-mail [email protected]
EFFECTIVE DATE OF DECISIONS
1. All key decisions made at this meeting will be referred to the Overview and Scrutiny Committee and will not come into force until that Committee has considered the decisions and has decided not to "call in" any decision.
2. A copy of all non key decisions will be sent to all Members of the Council and any four Members may then, within five days, request that any particular decision be referred to the Overview and Scrutiny Committee - in which case the particular decision will not come into force until that Committee has considered the decision and has decided not to "call in" the same. If no such request is made decisions will come into effect at the end of the five day period. Agenda Item No. 3
DECLARATION OF INTEREST
COMMITTEE ………………………………………………………………………………………………………
DATE …………………………………………………………………………………
NAME OF MEMBER : ………………………………………………………………………………………
Type of Interest
1. Disclosable Pecuniary
2. Non Pecuniary
| Agenda Item No. | REASON * | Type of Interest (1 or 2) | |-----------------|----------|--------------------------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Signed
Dated
Note:
- When declaring an interest you must also state the nature of your interest.
Completion of this form is to aid the accurate recording of your interest in the Minutes. The signed form should be provided to the Minuting Clerk at the end of the meeting.
A nil return is not required.
It is still your responsibility to disclose any interests which you may have at the commencement of the meeting and at the commencement of the appropriate Agenda item. DECLARATION OF INTERESTS
HOW TO USE THIS FORM
There are now only two types of Declaration of Interest:
Disclosable Pecuniary Interests
Non Pecuniary Interests
Details can be found in the Councillors Code of Conduct which is contained in the Council’s Constitution (a summary is printed below)
Upon receipt of the attached form you will need to enter the name and date of the Committee and your own name. By looking at the Agenda you will no doubt know immediately which Agenda Items will require you to make a Declaration of Interest.
Fill in the Agenda Item number in the first column of the form.
Enter the subject matter and any explanations you may wish to add in the second column.
In the third column you will need to enter either if you are declaring a disclosable pecuniary interest, or a non pecuniary interest.
The form must then be signed and dated. Please remember that if during the actual meeting you realise that you need to declare an interest on an additional Agenda Item number please simply amend the form during the meeting.
The form must be handed into the Committee Administrator at the end of the meeting.
NB. The following is a summary prepared to assist Members in deciding at the actual meetings their position on INTERESTS it is not a substitute for studying the full explanation regarding INTERESTS, which is contained in the Council’s Constitution and the Code of Conduct for Councillors, which is legally binding.
Members and Officers are welcome to seek, PREFERABLY WELL IN ADVANCE of a meeting advice from the Council’s Monitoring Officer on INTERESTS.
Disclosable Pecuniary Interests
May relate to employment, office, trade, profession or vocation carried on for profit or gain May relate to sponsorship May relate to contracts May relate to interests in land May relate to licences to occupy land May relate to corporate tenancies May relate to securities
Action to be Taken
Must disclose to the meeting
- existence of the interest
- the nature of the interest
- withdraw from the room
- not seek improperly to influence a decision on the matter
Non Pecuniary Interests
May relate to any body of which you are a member or in a position of general control or management and to which you are appointed or nominated by the Council May relate to any person from whom you have received a gift or hospitality with an estimated value of at least £25 A Member may also have a non pecuniary interest where a decision in relation to that business might reasonably be regarded as affecting wellbeing or the wellbeing of other council tax payers, or ratepayers or inhabitants in the electoral division or ward, as the case may be, affected by the decision.
(Note – there are special provisions relating to “Sensitive Interests” which may exclude the above provisions in certain circumstances.) | EXTRAORDINARY CABINET 8th January 2019 | EXTRAORDINARY COUNCIL 31st January 2019 | CABINET 14th February 2019 | COUNCIL 7th March 2019 (Budget) | CABINET 19th March 2019 | CABINET 4th June 2019 | |----------------------------------------|----------------------------------------|---------------------------|---------------------------------|-------------------------|-----------------------| | General Fund Capital Programme 2019/20 – 2023/24 (Key Decision No. 714) | General Fund Capital Programme 2019/20 – 2023/24 (Key Decision No. 714) | Delivery of Leisure and Well-Being Objectives (Key Decision No. 736) CONFIDENTIAL Cabinet Area: Neighbourhoods | Treasury Management Policy and Strategy (Key Decision No. 712) Cabinet Area: Finance | Leisure Management Contract (Key Decision No. 386) CONFIDENTIAL Cabinet Area: Neighbourhoods | Performance Indicator Outturn Report – Q4 2018/19 (Key Decision No. 735) Cabinet Area: Policy, Strategy and Communications | | Council Tax Reduction Scheme 2019/20 (Key Decision No. 720) Cabinet Area: Corporate Services | Council Tax Reduction Scheme 2019/20 (Key Decision No. 720) Cabinet Area: Finance | Land at Radford Street, Worksop (Key Decision No. 585) Cabinet Area: Economic Development | General Fund Revenue (Key Decision No. 729) Cabinet Area: Finance | Performance Indicator Outturn Report – Q3 2018/19 (Key Decision No. 733) Cabinet Area: Policy, Strategy and Communications | | Housing Capital Programme 2019/20 – 2023/24 (Key Decision No. 724) Cabinet Area: Finance | Housing Capital Programme 2019/20 – 2023/24 (Key Decision No. 724) Cabinet Area: Finance | Leverton Road, Retford (Key Decision No. 572) Cabinet Area: Economic Development | Review of Polling Districts & Polling Places (Key Decision No.734) Cabinet Area: Corporate Services | | Housing Revenue Account Budget 2019/20 and Future Years to 2023/24 (Key Decision No. 725) Cabinet Area: Finance | Housing Revenue Account Budget 2019/20 and Future Years to 2023/24 (Key Decision No. 725) Cabinet Area: Finance | Care Leavers Council Tax Discount Scheme – Review (Key Decision No. 689) Cabinet Area: Corporate Services | | | | | EXTRAORDINARY CABINET 8th January 2019 | EXTRAORDINARY COUNCIL 31st January 2019 | CABINET 14th February 2019 | COUNCIL 7th March 2019 (Budget) | CABINET 19th March 2019 | CABINET 4th June 2019 | |----------------------------------------|----------------------------------------|---------------------------|---------------------------------|------------------------|----------------------| | Medium Term Financial Plan 2019/20 – 2023/24 (Key Decision No. 726) Cabinet Area: Finance | Medium Term Financial Plan 2019/20 – 2023/24 (Key Decision No. 726) Cabinet Area: Finance | Workshop Creative Village – Update (Key Decision No. 698) Cabinet Area: Economic Development | | | | | Council Tax Base 2019/20 (Key Decision No. 727) Cabinet Area: Finance | Council Tax Base 2019/20 (Key Decision No. 727) Cabinet Area: Finance | Harworth and Bircotes Town Centre Growth (Key Decision No. 700) Cabinet Area: Economic Development | | | | | Property Asset Management Plan 2019/20 (Key Decision No. 728) Cabinet Area: Finance | Property Asset Management Plan 2019/20 (Key Decision No. 728) Cabinet Area: Finance | Empty Homes Strategy (Key Decision No. 703) Cabinet Area: Housing | | | | | Housing Service Review (Key Decision No. 738) Cabinet Area: Housing CONFIDENTIAL | | Treasury Management Policy and Strategy (Key Decision No. 712) Cabinet Area: Finance | | | | | | | Digital Update (Key Decision No. 715) Cabinet Area: Corporate Services | | | | | EXTRAORDINARY CABINET 8th January 2019 | EXTRAORDINARY COUNCIL 31st January 2019 | CABINET 14th February 2019 | COUNCIL 7th March 2019 (Budget) | CABINET 19th March 2019 | CABINET 4th June 2019 | |----------------------------------------|----------------------------------------|-----------------------------|---------------------------------|-------------------------|------------------------| | General Fund Revenue (Key Decision No. 729) Cabinet Area: Finance | | Capital Investment Strategy (Key Decision No. 731) Cabinet Area: Finance | | The Mayflower 400 Legacy Oaks Project (Key Decision No. 737) Cabinet Area: Economic Development | | Grounds Maintenance Resourcing Cabinet Area: Neighbourhoods CONFIDENTIAL | CABINET
The voting members of the Cabinet, which is the District Council’s Executive, are shown alongside their area of responsibility. They are all contactable in writing to Bassetlaw District Council, Queen’s Building, Potter Street, Worksop, Notts, S80 2AH, or by telephoning or emailing as shown below:
| COUNCILLOR | AREA OF RESPONSIBILITY | CONTACT | |--------------------------|-----------------------------------------------|-------------------------------------------------------------------------| | Councillor Simon Greaves | Policy, Strategy and Communications | Tel: 07949 129 239 Email: [email protected] | | Councillor Kevin Dukes | Corporate Services | Tel: 07887 657 936 Email: [email protected] | | Councillor June Evans | Finance | Tel: 07501 384 492 Email: [email protected] | | Councillor Julie Leigh | Neighbourhoods | Tel: 07432 674 846 Email: [email protected] | | Councillor David Pidwell | Transport and Infrastructure | Tel: 07908 272 984 Email: [email protected] | | Councillor Susan Shaw | Health and Community Well-being | Tel: 07588 626 763 Email: [email protected] | | Councillor Steve Scotthorne | Housing | Tel: 07805 791 799 Email: [email protected] | | Councillor Jo White | Economic Development | Tel: 07940 001 710 Email: [email protected] |
1. **Public Interest Test**
1.1 The author of this report, David Hill, has determined that the report is not confidential.
2. **Purpose of the Report**
2.1 To set the Council’s scheme for Council Tax Reduction (CTR) for 2019/20. This must be in place, following Council approval by 11th March 2019, to come into effect from 1st April 2019.
3. **Background and Discussion**
3.1 Amendments to section 10 of the Local Government Finance Act 2012, includes the requirement for each billing authority to set a local scheme, by the 11th March each year, for Council Tax Reduction, by way of discounts for residents in “financial need”.
3.2 The Secretary of State has the powers to prescribe by regulations, additional requirements that must or must not be included in a scheme. These are contained within The Council Tax Reduction Schemes (Prescribed Requirements) (England) Regulations 2012 and the Council Tax Reduction Schemes (Prescribed Requirements) (England) (Amendment) Regulations. These regulations are updated annually and include provision to allow for the annual uprating of allowances and premiums, without this being classed as a material change to the scheme.
**The current Council Tax Scheme (2018/19)**
3.3 The main features of the current CTR scheme for working-age residents are:
- The scheme identifies each class of person entitled to a reduction. The current scheme has the following classes and maximum CTR amounts:
| Class | Description | Maximum CTR | |---------|-----------------------------------------------------------------------------|-------------| | Class A | Pensioner-age whose income is less than the applicable amount | 100% | | Class B | Pensioner-age whose income is greater than the applicable amount | 100% | | Class | Description | Percentage | |--------|-----------------------------------------------------------------------------|------------| | Class C | Pensioner-age - alternative maximum council tax reduction (second adult rebate) | 100% | | Class D | Working-age whose income is less than the applicable amount | 88% | | Class E | Working-age whose income is greater than the applicable amount | 88% | | Class F | Does not apply to the Bassetlaw scheme – previously working-age second adult rebate | Not applicable | | Class G | Working-age who are protected under this scheme (vulnerable class) | 95% |
- The current definition of a person within Class G is where the claimant or partner qualifies for the Severe Disability Premium in the calculation of Housing Benefit or other Department for Work and Pensions (DWP) benefits. The proposals in paragraph 3.8 below, address the anomaly that may occur once this group migrates to Universal Credit.
- A restriction across all working age groups to the maximum liability for a Band C property.
- The Bassetlaw Scheme also includes a full disregard of War Disablement Benefit, War Widows/Widowers Pension and Armed Forces Independent Payment, agreed under the Council’s Housing Benefits and Council Tax Reduction (disregard of income) Local Scheme Policy.
**Proposed CTR Scheme 2019/20**
3.4 Following a full consultation exercise, it is proposed that the working age schemes set out in paragraph 3.3 above, remain unchanged (subject to any statutory changes within the Council Tax Reduction Schemes (Prescribed Requirements) (England) (Amendment) Regulations).
3.5 The maximum Council Tax Reduction of 88% of the liability (net of all other discounts) to remain the same.
3.6 The maximum Council Tax Reduction of 95% of the liability (net of all other discounts) for the vulnerable (class G) to remain the same.
3.7 All working age groups (class D, E and G) to remain subject to a restriction in the Council Tax charge used, to that of a band C property.
3.8 The current criteria to be placed in Class G and therefore attract a higher level of CTR, will require a minor change to the scheme due to the Severe Disability Premium no longer existing in Universal Credit. The Government has recently announced that those who would have lost SDP due to migrating to Universal Credit, will instead receive a transitional payment. It is therefore proposed to add this to section 18A of the scheme to ensure that this vulnerable group remains in class G.
3.9 To amend Part 3,11(1) of Schedules 1-10– “Procedure for applying for a discretionary reduction”, to allow the electronic Universal Credit form provided by the Department for Work & Pensions, to be accepted as a claim for Council Tax Reduction.
3.10 To amend Part 10 section 37 (1) which states that, “in determining the income of the applicant who has an award of Universal Credit, the authority must use the calculation or estimate of the income of the applicant (or partner) made for the purposes of determining the award of Universal credit.” There are some cases where the data, for example earnings, is incorrect in the Universal Credit calculation, so the assessment of CTR entitlement could therefore also be incorrect. It is proposed to amend the wording of this section of the local scheme, to allow the Local Authority to correct such errors, provided the claimant supplies adequate, documentary evidence, and that they take steps to ask the DWP to correct their data.
4. **Implications**
a) For service users
The implications of the proposals in this report are positive for service users in that the Council has managed to preserve the current scheme for a further year.
Those who migrate to Universal Credit during 2019/20 will have some protection against delays and duplication in applying for CTR, as the proposals will allow the data they provide to the DWP, to be accepted as a CTR claim. In addition, those currently in the vulnerable group would be protected if they lost their Severe Disability Premium due to a move to Universal Credit.
As there are no changes to the income disregards, or family premium this year, this also protects families from further increases during an uncertain time of further welfare reforms, and keeps incentives to work, with generous earnings disregards.
b) Strategic & Policy
As central Government grant is removed further in 2019/20 and beyond, there may be implications on the budget strategy.
c) Financial – Ref: 19/499
**Funding Arrangements**
**Estimated cost of the current scheme (2018/19)**
| Claim Group | Caseload | 2018/19 estimated expenditure | |------------------------------------------|----------|-------------------------------| | Pension-age (prescribed scheme) | 3,721 | £3.60m | | Vulnerable group (severely disabled) | 873 | £0.83m | | Working-age employed | 652 | £0.39m | | Working-age other | 2,676 | £2.50m | | **CTR SUB TOTAL** | **7,922**| **£7.32m** | | Discretionary CTR Hardship Fund | | £0.035m | | **TOTAL** | | **£7.36m** | Estimated cost of proposed scheme 2019/20 (with a total Council Tax increase of 4.99%)
| Claim Group | Estimated Caseload 2019/20 | 2019/20 estimated expenditure | |------------------------------------|-----------------------------|-------------------------------| | Pension-age (prescribed scheme) | 3,731 | £3.81m | | Vulnerable group (severely disabled)| 888 | £0.89m | | Working-age employed | 647 | £0.43m | | Working-age other | 2,598 | £2.52m | | **CTR SUB TOTAL** | **7,864** | **£7.65m** | | Discretionary CTR Hardship Fund | | £0.03m | | **TOTAL** | | **£7.68m** |
The funding for Council Tax Support is incorporated into the Upper Tier, Lower Tier and Fire funding blocks, which means that it is no longer a separate visible grant. Funding is paid into both Revenue Support Grant (RSG) and the Business Rate Baseline, with 60% funding in the RSG block and 40% funding in the Business Rates Baseline. As this funding is not separately identified, or ring-fenced, it is reasonable to assume that it has been reduced, in line with the annual reduction to the Revenue Support Grant, which will reduce to zero by 2020, and increased in line with the annual uplift to the Business Rates Baseline to give the net estimated funding position.
The cost of the scheme is borne by Bassetlaw DC and its major preceptors in proportion to the Council Tax bill i.e. County 75%, Bassetlaw 10.58%, Police 10.32% Fire 4.1%. For Bassetlaw, the estimated total cost of the current scheme is circa £7.32m in 2018/19, of which Bassetlaw’s share is circa £0.77m.
The proposed scheme described above has an estimated cost of £7.65m for 2019/20. Bassetlaw’s share is estimated at £0.81m, which is an increase of £0.04m. However if trends on reducing caseload continue, this budget pressure may reduce to £0.03m. This additional budget will, be required from the general fund.
d) Legal - Ref: 203/01/2019.
The Council Tax Reduction (Bassetlaw District Council) Scheme 2019-20 will take effect from 1st April 2019.
The Secretary of State has the powers to prescribe, by regulations, additional requirements which must or must not be included in a scheme. These are contained in The Council Tax Reduction Schemes (prescribed requirements) (England) Regulations 2012 and the Council Tax Reduction Schemes (Prescribed Requirements) (England) (Amendment) Regulations.
Any amendments published before the scheme is implemented, together with the amendments proposed in this report, will be included in the final version to commence 1st April.
e) Human Resources
None from this report. 5. **Options, Risks and Reasons for Recommendations**
5.1 Consultation began in October after consideration of several options that would work towards a cost-neutral scheme over a 2 year period, starting from April 2019. This is subject to the final funding announcements prior to the start of 2020. The options consulted on were:
- To reduce the maximum CTR allowed for Working age to 80% or 84%
- To reduce the maximum CTR allowed for Working age vulnerable to 90% or 92%
- To review the disregards that apply to child maintenance and child benefit
- To protect those in the vulnerable group who lose Severe Disability premium when transferred to Universal Credit
- To consider removing family premium for new claims, in line with other benefits
- Options for 2020 onwards were also included in the consultation to look at a discount scheme or an income-banded scheme.
5.2 These options and the risks to collection rates have been analysed against a backdrop of a reducing caseload trend. It is proposed that the maximum CTR levels remain the same at 88% and 95%. It is also proposed to protect those who lose their Severe Disability Premium due to migration to Universal Credit.
5.3 The recommendations in 3.9 and 3.10 of this report are to reduce the risk of delays in claiming CTR, by accepting the Universal Credit claim as a claim form for CTR. This also reduces the requirement to duplicate the collection of some data from the claimant and ensures income details are correct.
5.4 There is currently a risk that incorrect data from the DWP with regard to income, on a universal credit award is used to calculate CTR. The current scheme does not allow the Council to use anything other than the DWP income figure. This is unfair on the claimant, and provided they can verify the correct income, a change to the wording of the scheme, will allow the correct income to be used by the Council.
6. **Conclusions**
6.1 Each year the estimated cost of the Council Tax Reduction Scheme is reviewed together with the funds available to ensure that the scheme is affordable. The estimated cost to the Council of maintaining the current scheme would be circa. £0.81m, an increase of £0.04m. Due to the continuing downward trend in the caseload, it is expected that the budget pressure can be contained within the general fund.
This will need to be kept under review, should the caseload fluctuate in 2019/20 and this will be monitored throughout the year. 7. **Recommendations**
7.1 That Members approve the Council Tax Reduction Scheme 2019/20 as set out in paragraph 3.5 to 3.10 and that this is subject to any further legislation changes and annual up-ratings notified prior to 1st April 2019.
7.2 That this report be referred to the next appropriate Council meeting for consideration.
**Background Papers**
| Background Papers | Location | |--------------------------------------------------------|---------------------------| | Consultation summary 2019/20 | SRBM | | Options appraisal report | SRBM | | Council Tax Reduction Scheme 2019/20 | Members’ Library/website | | Council Tax Reduction Scheme Appendix B (Schedules 1-10)| Members’ Library/website |
1. **Public Interest Test**
1.1 The author of this report, David Hill, has determined that the report is not confidential.
2. **Purpose of the Report**
2.1 To approve the General Fund Capital Programme for 2019/20 to 2023/24.
3. **Background and Discussion**
3.1 The Council's five year capital programme shows the commitment to deliver more efficient services, improve facilities and enable economic development. The programme is approved for the five year period and allows flexibility of investment between the years provided the value of the five year programme is not exceeded for each scheme.
3.2 As part of the overall strategy for capital, the Council restricts the funding of capital schemes via revenue and minimises borrowing, as the revenue implications add to the revenue pressures on the General Fund. This means that the capital programme is predominantly funded using capital resources from the sale of assets, Section 106 contributions, or external grant funding.
3.3 As part of the budget setting process, resources have been reviewed to identify the funding availability for new capital schemes in 2019/20 and future years. As there is a low level of currently available capital funds, the five year capital programme has been split into two elements; one to be approved immediately and the second to be approved once enough capital receipts have been generated from the sale of General Fund capital assets. Further details of the capital funding is provided in section 5 of this report. 4. **Capital Expenditure**
Schemes already approved as part of the 2018/19 Budget setting process:
4.1 Council approved the General Fund Capital Programme 2018/19 to 2022/23 on 14 December 2017.
4.2 The Capital Programme changes throughout the year as projects are developed and spending commitments are made. It is a requirement that the Council approves all variations made to the Capital Programme.
4.3 The currently approved five year General Fund Capital Programme totals **£14.801m**, of which £6.488m relates to 2018/19 schemes and £8.313m relates to schemes approved for the years 2019/20 to 2022/23. Table 1 below shows the breakdown of the approved schemes over the 5 financial years 2018/19 to 2022/23 together with the sources of funding:
| Table 1 | Approved - General Fund Capital Programme | |---------|------------------------------------------| | | 2018/19 | 2019/20 | 2020/21 | 2021/22 | 2022/23 | Total | | | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | | General Fund Capital Expenditure | 6,488 | 4,724 | 1,712 | 1,329 | 548 | 14,801 | | Funded by: | | | | | | | | General Fund Capital Receipts | 1,278 | 810 | 295 | 175 | - | 2,558 | | Government Grants | 969 | 700 | 700 | 700 | - | 3,069 | | Capital Grants and Contributions | 1,318 | 1,860 | 110 | - | - | 3,288 | | S106 Grant/CIL | 1,119 | 670 | - | - | - | 1,789 | | General Fund Reserves | 70 | - | - | - | - | 70 | | Borrowing | 1,734 | 684 | 607 | 454 | 548 | 4,027 | | | 6,488 | 4,724 | 1,712 | 1,329 | 548 | 14,801 |
5. **Capital Funding of New Schemes**
Available Capital Resources:
5.1 Included within the Financial Outturn 2017/18 report, Cabinet approved (19 June 2018) that during 2018/19 **£0.340m** be released from the New Homes Bonus reserve to fund future capital or revenue projects.
5.2 For 2018/19 the Council has been allocated a New Homes Bonus amount of £1.209m, of which £0.500m has been used for mainstream funding in accordance with the New Homes Bonus Strategy. The balance of **£0.708m** is available for funding new capital projects.
5.3 There is currently available **£0.68m** of unallocated General Fund Capital Receipts.
5.4 A capital receipt of **£0.500m** has been received in September 2018, which relates to the return of the 5 year capital Investment the Council made in the Local Authority Mortgage Scheme (LAMS). 5.5 Table 2 below provides a summary of the available resources, which shows there is currently £1.616m which can be allocated to new general fund capital schemes.
| Available General Fund Capital Resources | £'000 | |-----------------------------------------|-------| | **Funded by:** | | | New Homes Bonus - release from EMR | 340 | | 2018/19 New Homes Bonus | 708 | | Unallocated Capital Receipts | 68 | | LAMS investment returned | 500 | | **Total:** | 1,616 |
New General Fund Capital Schemes
5.6 Council approved (14 December 2017) that £1.582m provisional capital schemes could be included in the General Fund Capital programme when enough capital receipts have been generated. As part of this capital budget setting process, those provisional schemes have been reviewed and reduced by £280k. The remaining £1.302m is now proposed to be included in the 2019/20 capital programme and funded from capital receipts. Table 3 below shows the schemes which have been adjusted:
| New Schemes to be funded from Capital Receipts | £'000 | |-----------------------------------------------|-------| | Provisionally approved 17.10.18 | 1,582 | | Schemes reviewed: | | | ICT Refresh reprofiled | -212 | | ICT Refresh reduced | -18 | | Equipment funded from Invest to Save Reserve | -30 | | Pay on exit works - car parks - adjusted | -20 | | **Revised total:** | 1,302 |
New Capital Bids
5.7 The annual outline capital bids have been received and reviewed by the Corporate Management Team. Two of those bids submitted were required urgently and have already been approved by Cabinet (4 December 2018) and are included within the 2018/19 capital programme. The four bids detailed below are included within this budget proposal:
- Bid 1 - Dilapidated Equipment Fire Risk Assessment – A capital budget of £41,000 is proposed to replace defective, end of life cycle switchgear and light fittings and provide emergency lighting and fire detection equipment. These works are to be funded from general fund capital receipts.
- **Bid 2 - Heritage Buildings at Risk** – A capital budget of £80,000 is proposed to assist in the restoration of listed buildings at risk to remove them from the Heritage at Risk register. These works are to be funded from general fund capital receipts.
- **Bid 3 - Empty Homes Loan** – A capital budget of £100,000 is proposed to allow owners of empty properties to borrow funds for renovation works which will enable them to be bought back into use. This scheme is to be funded from general fund capital receipts.
- **Bid 4 - Pilgrims Roots Project** – A further £239,000 is proposed to be added to this project to ensure the Pilgrims Gallery and Pilgrims Trail are delivered in the quality expected by the Heritage Lottery Fund, members, residents and visitors to the museum. This scheme is to be funded by £93k from general fund capital receipts and a further £146k from the Heritage Lottery Grant Fund.
**Further new proposals to be included in the General Fund Capital Budget:**
5.8 Ongoing Vehicle and plant replacements – A further £500k is proposed to be added to the capital programme for 2023/24 this is to be funded through borrowing.
5.9 It is anticipated that the Disabled Facilities Grant will continue to be received at £700k per annum. Therefore, a further £1.4m is proposed to be added to the capital programme to years 2022/23 and 2023/24, which is funded through the Better Care Fund.
5.10 Should all of the above proposals be approved the General Fund Capital budget will increase by **£3.692m** up to **£18.493m**. The proposed new schemes will also utilise all the available general fund capital resources of **£1.616m** and are summarised in Table 4 below: 5.11 Table 5 below shows:
- The current approved capital programme for 2018/19 of £6,488
- The proposed capital programme for 2019/20 of £6,020m and
- The indicative capital programme for years 2020/21 to 2023/24 totalling £5,985m
### Table 4
| PROPOSED NEW CAPITAL SCHEMES | Total Cost £'000 | |------------------------------|------------------| | Provisionally approved 17.10.18 | 1,302 | | New Bids submitted for 2019/20 | | | Equipment Fire Risk Assessments | 41 | | Heritage Buildings at Risk | 80 | | Empty Homes Loans | 100 | | Pilgrims Roots Project | 239 | | Other ongoing Capital Schemes | | | Disabled Facilities Grant | 1,400 | | Vehicle and Plant Replacements | 500 | | Equipment | 30 | | Proposed New Capital Schemes | 3,692 |
**Funded By:**
- Capital Receipts 1,616
- Government Grants (BCF) 1,400
- Other Grants (HLF) 146
- General Fund Reserves 30
- Borrowing 500
**Total Funding** 3,692
### Table 5
| General Fund Capital Programme | 2018/19 | 2019/20 | 2020/21 | 2021/22 | 2022/23 | 2023/24 | Total £'000 | |-------------------------------|---------|---------|---------|---------|---------|---------|-------------| | General Fund Capital Expenditure | 6,488 | 6,020 | 1,946 | 1,501 | 1,308 | 1,230 | 18,493 |
**Funded by:**
- General Fund Capital Receipts 1,278
- Government Grants 969
- Other Grants and Contributions 1,318
- S106 Grant/CIL 1,119
- General Fund Reserves 70
- Borrowing 1,734
**Total Funding:** 6,488
Provisional Approval Pending Future Capital Receipts 5.12 The amount of capital resources available for all of the bids approved by the Corporate Management Team are insufficient, but the schemes are required in order to maintain Council services at a high standard and reduce the future revenue increases in costs.
5.13 Therefore, it is proposed that the following list of schemes in table 6 below, are approved but they cannot commence until enough capital receipts are generated from the future sales of General Fund assets and the New Homes Bonus allocation for 2019/20 is confirmed. In terms of objectivity, no scheme shall commence until an aggregated amount of the required capital resources per financial year is available. Therefore, when £927k of capital resources is available all the schemes listed below for 2019/20 will be added onto the Capital Programme 2019/20 subject to Cabinet approval.
| Scheme Description | 2019/20 | 2020/21 | 2021/22 | 2022/23 | 2023/24 | Total | |--------------------|---------|---------|---------|---------|---------|-------| | ICT Refresh, re-profiled | - | - | 67 | 145 | - | 212 | | Mayflower Pilgrims | 60 | - | - | - | - | 60 | | Middletons | 400 | - | - | - | - | 400 | | Creative Village (industrial units) | 120 | - | - | - | - | 120 | | Canch Masterplan | 347 | - | - | - | - | 347 | | **Totals:** | **927** | - | **67** | **145** | - | **1,139** |
**Table 6**
Reserve list pending further Capital Receipts:
5.14 Any capital schemes that are subject to funding by external parties e.g. European Regional Development Fund (ERDF) are subject to a detailed bidding process against projects submitted by other organisations. If successful, these can provide additional funding for the capital programme and any bids for new schemes will be assessed accordingly.
5.15 A separate report from the Director of Regeneration and Neighbourhoods to the July 2018 Cabinet provided details of the latest position with regard to Section 106 agreements. It identified that the Council holds £0.777m of Section 106 capital contributions that, subject to the conditions attached, can be utilised to fund capital projects going forward.
**Prudential Borrowing**
5.16 In keeping to the Council’s Capital Investment Strategy, unsupported borrowing is minimised to prevent any destabilisation of the General Fund from the interest and Minimum Revenue Provision (MRP) that results from borrowing. Leasing is also tightly controlled within the revenue budgets for the same reason and is rarely used.
5.17 Some of the capital bids are traditional in that the approach to replacing assets e.g. vehicles and plant, is a well-established pattern and these are funded from borrowing. The reason for this is that they used to be funded via leasing, but given the low interest rates over the last few years, the costs of borrowing are a much cheaper option. 5.18 An indicative amount of £0.500m has been added to the capital programme during 2023/24 for vehicle and plant replacements.
6. Summary of Capital Programme 2018/19 to 2023/24
Table 7 below summarises the total value of the General Fund Capital Programme 2019/20 to 2023/24 by the already approved schemes, any new proposals and adjustments. Appendices A and B attached to this report provide further details of the proposed capital schemes.
| Summary of General Fund Capital Programme 2018/19 to 2023/24 | Total Cost £'000 | Detailed in Section: | |-------------------------------------------------------------|------------------|---------------------| | Schemes already approved as part of the 2018/19 Budget setting process | 14,801 | Section 4 Table 1 | | Proposed new schemes to be added to the Capital Programme | 3,692 | Section 5.10 Table 4 | | **Total General Fund Capital Programme 2018/19 to 2023/24** | **18,493** | **Section 5 Table 5** | | Provisional new schemes - pending future capital receipts 2019/20 | 927 | Section 5.13 Table 6 | | Provisional new schemes - pending future capital receipts 2020/21 to 2023/24 | 212 | | | **Total Provisional General Fund Capital Programme 2019/20 to 2023/24** | **1,139** | **Appendix B** |
7. Implications
a) For Service Users.
Bassetlaw’s capital investment in the district is an important factor for residents, but potential schemes and projects outweigh the resources available to the Council. Decisions on what schemes to fund are therefore important.
b) Strategic & Policy
The Capital Programme has been developed with regard to the Council Plan. In particular, it supports the delivery of the Council’s priorities through the Medium Term Financial Plan.
c) Financial - Ref: 19/22
These are included within the main body of the report. Additionally, the revenue consequences of all schemes have been assessed and included within the General Fund revenue base budget.
d) Legal – Ref: 210/01/2019
None arising directly from this report, although this will assist in meeting the Council’s corporate objectives. e) Human Resources
None arising directly from this report.
f) Community Safety, Equalities, Environmental
Some of the capital schemes have positive implications on community safety, equalities and environmental issues, and these have been considered at the project appraisal stage, prior to any recommendations on the capital programme.
g) G.D.P.R.
None arising directly from this report
h) This is Key Decision number 714
8. Options, Risks and Reasons for Recommendations
8.1 Members can decide what schemes to include or exclude. Any schemes which include external finance will have implications for those organisations.
9. Conclusions
9.1 It is imperative that capital schemes are seen to be delivered on time and to budget. Resources are scarce and therefore capital expenditure is approved for three specific reasons:
- there is a demonstrable need for the project;
- it meets the strategic objectives of the Council;
- the benefits are clearly measurable.
It is therefore important that expectations from Members and the public are realistic when approving timescales and determining the project outcomes is key to the successful delivery of projects.
9.2 This report fully allocates the balance of the General Fund capital receipts.
9.3 Members have carefully balanced their competing priorities in their approach to this investment plan and have sought to take stock of our assets. This year the continued investment in all Council services will give benefit to future year’s budgets.
9.4 Council resources in terms of both money and officer time are shrinking and it is important that appropriate time is allocated to project planning before the commencement of a project.
10. Recommendations 10.1 That Cabinet approves the Capital Programme for 2019/20 of £6.020m as shown at Appendix A, and recommends these to full Council on 31 January 2019.
10.2 That Cabinet approves the indicative Capital Programme for 2020/21 to 2023/24 of £5.985m also set out in Appendix A, and recommends these to full Council on 31 January 2019.
10.3 That Cabinet approves the provisional Capital Programme for 2019/20 of £0.927m as shown at Appendix B, which cannot commence until enough Capital Receipts are generated, and recommends these to full Council on 31 January 2019.
10.4 That Cabinet approves the indicative provisional Capital Programme for 2020/21 to 2023/24 of £0.212m as shown at Appendix B, which cannot commence until enough Capital Receipts are generated, and recommends these to full Council on 31 January 2019.
**Background Papers** Capital Bids & Resourcing Statements
**Location** Head of Finance & Property’s office
## GENERAL FUND CAPITAL PROGRAMME 2019/20 TO 2023/24
### APPENDIX A
#### EXPENDITURE SUMMARY
| Project Description | 2019/20 Proposed £'000 | 2020/21 Indicative £'000 | 2021/22 Indicative £'000 | 2022/23 Indicative £'000 | 2023/24 Indicative £'000 | TOTAL £'000 | |----------------------------------------------------------|-------------------------|---------------------------|---------------------------|---------------------------|---------------------------|-------------| | Disabled Facilities Grant | 700 | 700 | 700 | 700 | 700 | 3,500 | | Vehicles & Plant - Replacement | 684 | 607 | 454 | 548 | 500 | 2,793 | | Worksop Town Centre Interventions | 1,800 | 0 | 0 | 0 | 0 | 1,800 | | Retford Beck Flood Alleviation Scheme | 1,100 | 0 | 0 | 0 | 0 | 1,100 | | Flood Alleviation - Small Schemes | 50 | 50 | 50 | 0 | 0 | 150 | | Clarborough Flood Alleviation Scheme | 200 | 200 | 0 | 0 | 0 | 400 | | Play Areas Upgrade | 30 | 30 | 30 | 30 | 0 | 120 | | Planned Maintenance & Capital Upgrades | 100 | 100 | 100 | 0 | 0 | 300 | | Equipment Fire Risk Assessments | 11 | 35 | 10 | 10 | 10 | 76 | | Compliance with Energy Act | 0 | 25 | 25 | 0 | 0 | 50 | | ICT Refresh Project | 99 | 179 | 112 | 0 | 0 | 390 | | Memorial Library | 60 | 0 | 0 | 0 | 0 | 60 | | Heritage / Buildings at Risk | 20 | 20 | 20 | 20 | 20 | 100 | | Resurfacing and Re-lining Public Car Parks | 75 | | | | | 75 | | Langold Lake Resurfacing Works | 25 | | | | | 25 | | Pilgrims Roots Project | 239 | | | | | 239 | | Replacement windows Queens Buildings | 150 | | | | | 150 | | Community Sports | 100 | | | | | 100 | | Gateford Road car park | 100 | | | | | 100 | | Public toilet improvements | 100 | | | | | 100 | | Empty Homes Loan | 100 | | | | | 100 | | Land at Hannah Park Cemetery | 97 | | | | | 97 | | Heating System Upgrade - workshop | 70 | | | | | 70 | | Grinder for Sharpening mowing blades | 30 | | | | | 30 | | Works to Skip Compound at CF | 30 | | | | | 30 | | Park Safety Improvements | 30 | | | | | 30 | | Bench projects funding | 20 | | | | | 20 | | **TOTAL:** | **6,020** | **1,946** | **1,501** | **1,308** | **1,230** | **12,005** |
#### FUNDED BY:
| Source Description | 2019/20 Proposed £'000 | 2020/21 Indicative £'000 | 2021/22 Indicative £'000 | 2022/23 Indicative £'000 | 2023/24 Indicative £'000 | TOTAL £'000 | |----------------------------------------------------------|-------------------------|---------------------------|---------------------------|---------------------------|---------------------------|-------------| | Capital Receipts | 1,930 | 529 | 347 | 60 | 30 | 2,896 | | Government Grants | 1,660 | 810 | 700 | 700 | 700 | 4,570 | | Other Grants and Contributions | 1,046 | 0 | 0 | 0 | 0 | 1,046 | | Section 106/CIL | 670 | 0 | 0 | 0 | 0 | 670 | | Reserves | 30 | 0 | 0 | 0 | 0 | 30 | | Borrowing | 684 | 607 | 454 | 548 | 500 | 2,793 | | **TOTAL:** | **6,020** | **1,946** | **1,501** | **1,308** | **1,230** | **12,005** |
#### CAPITAL RECEIPTS
| Source Description | 2019/20 £'000 | 2020/21 £'000 | 2021/22 £'000 | 2022/23 £'000 | 2023/24 £'000 | |----------------------------------------------------------|---------------|---------------|---------------|---------------|---------------| | Capital Resources at start of year: | 1,289 | 975 | 446 | 99 | 39 | | Available New Homes Bonus | 708 | 0 | 0 | 0 | 0 | | Capital Receipt from LAMS Scheme | 500 | 0 | 0 | 0 | 0 | | Approved transfer from Reserve | 340 | 0 | 0 | 0 | 0 | | Available for Capital Bids | 68 | 0 | 0 | 0 | 0 | | Used for Funding | -1,930 | -529 | -347 | -60 | -30 | | **Capital Resources at end of year:** | 975 | 446 | 99 | 39 | 9 |
## GENERAL FUND CAPITAL PROGRAMME 2019/20 TO 2023/24
### Provisionally approved Pending Capital Receipts:
| | 2019/20 Proposed £'000 | 2020/21 Indicative £'000 | 2021/22 Indicative £'000 | 2022/23 Indicative £'000 | 2023/24 Indicative £'000 | TOTAL £'000 | |----------------------|------------------------|---------------------------|---------------------------|---------------------------|---------------------------|-------------| | ICT | 0 | 0 | 67 | 145 | 0 | 212 | | Mayflower Pilgrims | 60 | 0 | 0 | 0 | 0 | 60 | | Middletons Match Funding | 400 | 0 | 0 | 0 | 0 | 400 | | Industrial units at Creative Village | 120 | 0 | 0 | 0 | 0 | 120 | | Canch Masterplan | 347 | 0 | 0 | 0 | 0 | 347 | | **Totals:** | **927** | **0** | **67** | **145** | **0** | **1,139** |
### CAPITAL RECEIPTS
| | 2019/20 £'000 | 2020/21 £'000 | 2021/22 £'000 | 2022/23 £'000 | 2023/24 £'000 | TOTAL £'000 | |----------------------|--------------|--------------|--------------|--------------|--------------|-------------| | Pending Capital Receipts | 927 | 0 | 67 | 145 | 0 | 1,139 | | Used for Funding | -927 | 0 | -67 | -145 | 0 | -1,139 | | Capital Receipts at end of year: | 0 | 0 | 0 | 0 | 0 | 0 |
1. **Public Interest Test**
1.1 The author of this report, Dave Hill, has determined that the report is not confidential.
2. **Purpose of the Report**
2.1 To consider and approve the Housing Capital Programme for 2019/20 to 2023/24.
3. **Background and Discussion**
3.1 As part of the arrangements for the new HRA self-financing regime, the Council prepared a 30 year Business Plan which identified the levels of capital expenditure required to maintain council housing stock at the ‘Decent Homes’ standard prescribed by central government into future years.
3.2 The capital programme for 2019/20 to 2023/24 continues with the four major elements of:
- Decent Homes;
- Fuel Poverty;
- Crime & Disorder;
- Disability.
3.3 From 2017/18, the HRA Business Plan has been fully developed into a ‘live’ model that is updated on a continuous basis to reflect any changes that materialise. The commitment made in the original Business Plan regarding the first five years of the capital programme remains in place, with later years being added and revised according to latest information. This is important as 2013/14 heralded the end of the Decent Homes funding and this programme now looks at wider agendas and is therefore more balanced and diverse. Major Improvements
3.4 In considering the schemes and the funding available, the first task is to maintain the Decent Homes standard going forward. Appendix 1 shows that a total of £21.175m has been identified as a five-year commitment to maintain the housing stock at minimum decency levels.
Green Energy
3.5 One of the biggest risks to the financial stability of Bassetlaw’s tenants is their ability to pay energy bills with a level of household income that prevents them from being classed as ‘fuel poor’. The aim of this set of priorities in the capital programme is to minimise fuel poverty wherever possible, ensuring properties have good levels of insulation, A-rated boilers, solar PV, renewable energy and efficient well maintained heating schemes. The Council has set a target of 20% of stock to be on some form of renewable heating by 2020/21.
3.6 The Council has developed a sound tradition of pioneering air source and ground source heat pumps to properties that were previously dependent on expensive heating systems. Therefore, a number of schemes have been included in the 2019/20 – 2023/24 Capital Programme. The programme areas identified in Appendix 1 cumulate in an investment of £4.025m over the five years covered in this report, with £0.805m being recommended for 2019/20. Expenditure will be committed to external wall insulation to solid wall properties, boiler and heating replacements.
Decent Neighbourhoods
3.7 Other emerging priorities are anti-crime and community safety measures. The commitment to this is for £0.940m in 2019/20, with an outline total of £4.7m invested by the end of 2023/24.
3.8 This priority group of projects includes not just property protection, but also environmental protection to assist with community wide safety. Crime risk can be minimised in the home with ‘Secured by Design’ windows and doors, but it is often the community projects that reduce anti-social behaviour and crime. Community safety doesn’t however solely refer to crime but includes fire risk assessments, health protection from poor sanitation, waste management (2 or 3 bin systems for properties designed for only a single bin), Housing Health & Safety Rating System, safe car parking, putting footpaths into good repair and properties in a good state of structural repair.
3.9 Fire Risk Assessments have provided one of the most significant additional funding requirements over the last few years. This will have to remain one of the first priorities on the annual delivery programme.
Homes for Life
3.10 Commitments to meet Equality Act requirements for tenants living with a disability and further home adaptions are being put forward with some £0.540m in 2019/20, with a total of £2.7m by the end of 2023/24.
3.11 The main thrust of this area will be the requirement for the delivery of adaptions to council tenants (to mirror the Disabled Facilities Grant process for private sector residents). As part of this process, it is important Bassetlaw remains innovative and adopts initiatives designed to reduce accidents and prevent the decline in people’s health prematurely. This is where self-referral schemes are important. In addition, though this will always be a desire, the lifetime homes criteria (16 points relating to access in and around the home) should always be adopted wherever possible and schemes to improve some suitable properties would be beneficial. With new-build schemes, lifetime homes should always be criteria for consideration.
3.12 Any pressures in this area can be kept to a minimum through good asset management and by obtaining grants wherever possible and working with partner organisations such as United Living, energy companies and maximising tariff schemes to ensure any duplication is removed from processes. Ensuring procurement gives value contracts that deliver both the product, the service and specifications that ensure product delivery is maximised and repair obligations minimised. Relying on capital budgets without including the above will always leave Bassetlaw behind the times.
Other Schemes
3.13 The HRA capital programme includes details of other schemes as follows:
- **New Build Contribution** – a sum of £2.0m per year has been included within the programme for the period 2019/20 to 2023/24 to enable further options for new build to be considered.
- **Vehicle Fleet Replacement** – The Housing depot operate a varied fleet and some vehicles can expect a longer life than others can. A replacement programme has been included in the 30-year business plan based on a life of between six and seven years for each vehicle. The capital programme for the five years from 2019/20 includes £268k per annum for vehicle replacement.
- **Non Dwelling Assets (Community Centres, boiler houses, garages etc.)** - these have received very little capital investment over the last few years and the proposed programme allows for £0.100m per annum for the five years commencing 2019/20 for improvement work.
- **Contribution to Flood Prevention Schemes** – The Council is very proactive in developing new flood prevention schemes and an annual contribution from the HRA is made towards the overall costs of protecting the HRA properties. This is proposed at £50k per annum for the period 2019/20 to 2023/24.
- **Damp Proofing Works** – There is a need to inspect and provide damp proofing works to properties, and a sum of £0.100m per annum has been included in the five year programme.
- **Asbestos Encapsulation / Removal** - a proposed rolling programme of £0.100m per annum for the five years to identify areas at risk of deterioration and take the appropriate action.
- **Electrical Installation Condition Testing** – This is a health and safety issue and a sum of £0.250m per annum has been included in the five year programme to deliver this testing programme. • Planned Works – Many properties require additional works in excess of the decent homes standard and a budget of £0.200m per year to 2023/24 has been included for this purpose. A further £0.150 per year to 2023/24 has also been included for heating works at Conway Gardens.
• Other – Minor schemes such as the flats above shops, comprising replacement of external elements to improve weather resistance and lightning protection improvements to blocks of flats following fire risk assessments.
Funding
3.14 The Self Financing Regime for the Housing Revenue Account commenced in April 2012 and under it councils can self-finance capital investment. In addition to this, capital receipts from council house sales can also be used to finance capital expenditure and if there is enough flexibility, revenue contributions to capital can also be made to provide additional funding through the Major Repairs Reserve (MRR).
3.15 In summary, the Housing Capital Programme for 2019/20 totals £10.090m, which is to be funded by:
- £5.205m from the Major Repairs Reserve;
- £4.500m from Borrowing;
- £0.385m of capital receipts.
3.16 Members will note that the Major Repairs Reserve is funded from a combination of asset depreciation charges and other revenue contributions and this level of revenue contribution is significant to the coherence of the unfolding plan. It also emphasises the importance of the value for money savings within the Housing Revenue Account and the commitment required on rents to maintain the level of quality that tenants now expect and are demanding.
Capital Receipts and the Right to Buy Scheme
3.17 Under changes approved by Parliament in April 2012, local authorities were given the option of either transferring all Right to Buy receipts in excess of a government-set sales target back to central government, or to retain the receipt and reinvest in replacement homes.
3.18 Bassetlaw opted to retain the additional Right to Buy receipts and this means that the receipts:
a) Must be used for the provision of affordable rented homes; b) Will constitute no more than 30% of total investment in such homes (net of any contribution from another public body); c) If they have not been used after three years, the Council will pay the unused sums, plus interest, back to the Secretary of State.
3.19 As part of the introduction of the self-financing scheme, the government set Bassetlaw a Right-to-Buy sales target of circa 18 properties for 2019/20. This means that Bassetlaw will only retain 100% of the capital receipt from property sales in excess of this figure. In the interests of prudence, no retained right to buy receipts have been included within the updated business plan. 3.20 However, the 30 year Business Plan does include an assumption of £0.385m of Right to Buy receipts being generated in each financial year. This amount of receipts being generated is kept under review during the financial year.
**Affordability**
3.21 The updated HRA Business Plan provides the assumptions for the Council’s loan financing profile over the next thirty years. For information, the scheduled long-term debt repayments that are built into the Business Plan over the next 10 years amount to £25m and are itemised below:
- 2019/20 - £3.3m
- 2022/23 - £4.1m
- 2023/24 - £3.3m
- 2026/27 - £5.5m
- 2027/28 - £3.3m
- 2028/29 - £5.5m
3.22 The Council’s overall Borrowing limit was set at £105.436m as part of the 2012 Settlement. In October 2018, the Prime Minister announced a policy change of abolition of the HRA Debt cap. The Chancellor announced in the Budget that the applicable date was 29 October 2018.
3.23 The current position regarding the HRA debt is shown in the table below. The opening debt position of £89.05m reflects the repayment of £6.5m during 2018/19.
| | 2019/20 | 2020/21 | 2021/22 | 2022/23 | 2023/24 | |----------------------|---------|---------|---------|---------|---------| | Existing HRA Long Term Debt @ 1st April | -89.050 | -90.277 | -91.877 | -93.177 | -94.086 | | Internal Borrowing | 0.000 | -1.600 | -1.300 | 0.000 | 0.000 | | Additional Borrowing | -4.500 | 0.000 | 0.000 | -5.000 | -3.800 | | **Plus:** | | | | | | | Scheduled Debt Repayments in year | 3.273 | 0.000 | 0.000 | 4.091 | 3.273 | | **HRA Long Term Debt at year end** | -90.277 | -91.877 | -93.177 | -94.086 | -94.613 |
3.24 As the above figures show, with the cessation of the Decent Homes programme there is a direct impact on the decisions made on:
(i) the level of capital investment; (ii) the pace of that investment; (iii) the levels of rent that tenants will be asked to pay for the quality of homes they live in.
3.25 Considerations need to be made about the pace of investment and improvement. If an ambitious and proactive approach is taken in future years then overspends will occur in the revenue account which will take it below the approved minimum working balance of £1.3m.
3.27 The six maturing loans as outlined above will be repaid in the appropriate year payable. However, due to the prescribed 1% cut in rents in 2019/20 it has removed the previously expected flexibility within the HRA Business Plan from 2017/18. This is because there is now a need to re-borrow similar amounts to those repaid to keep the business plan a viable option over the next five years.
4. **Implications**
a) For service users.
Considered in tandem with the *Housing Revenue Account Budget 2019/20 & Future Years to 2021/22* report, the link between capital decisions on investment and the revenue account is self-evident, as is the relationship between income (rents) and expenditure (improvements and repairs). Members need to decide if they wish to pace the level of improvements or make immediate commitments to the programme submitted on the priority areas put forward.
b) Strategic & Policy.
There are a number of programme areas that are/will emerge as part of the post Decent Homes era and from within the Council Plan for Bassetlaw. These are outlined in the report.
c) Financial Ref: 19/186
Until the Chancellor’s Budget speech in July 2015, the business plan was based on a fair split between capital investment in old and new housing stock, and the repayment of long-term debt.
The Chancellor’s announcement regarding a 1% rent reduction each year for four years has effectively meant a 3% swing (as the business plan projected a 2% increase in rent each year). This has significantly impacted on the business plan in that £30.2m of rent has been lost as result of this decision over the next ten year period.
Ultimately, this decision has forced some difficult decisions to be made, resulting in the commitment to the capital programme being maintained, with the consequence of the repayment of debt being deferred to later years.
d) Legal Ref: 207/01/2019
The Council needs to ensure compliance with the Equality Act 2010 and the appropriate levels of decency for its properties.
e) Human Resources - None arising directly from this report.
f) Community Safety, Equalities, Environmental
The programme has been developed through tenant consultation. Ensuring the suitability of property for disabled users has been reflected in the scheme’s priorities.
g) G.D.P.R – None arising directly from this report
h) This is key decision number 724 5. **Options, Risks and Reasons for Recommendations**
5.1 Members can decide what schemes to include or exclude, and the timing of those commitments. The summary provided under the section ‘Affordability’ sets out the full situation. In coming to a view on what priorities Members want to establish, consideration must be given to the impact that long-term borrowing has on the affordability within the Housing Revenue Account.
6. **Conclusions**
6.1 The year 2013/14 saw the end of government funding for the Decent Homes programme, but for Bassetlaw, the legacy and further commitment to the programme will be ongoing.
6.2 The Council will always need some room for manoeuvre and for this reason only full approval for the 2019/20 proposed programme is being sought at this stage. Following years’ capital programmes are therefore only being approved on an indicative basis and will be confirmed in succeeding financial years.
6.3 The government-prescribed reduction in rent has had a significant detrimental impact on the sustainability of the HRA Business Plan and caution should be exercised when considering any more proposals for new build in the medium term up to 2020.
7. **Recommendations**
7.1 That Members approve the 2019/20 proposed programme set out in Appendix 1 of the report.
7.2 That Members approve the indicative programmes for 2020/21 to 2023/24 in Appendix 1 of the report.
7.3 That Cabinet recommends the report to the Extraordinary Council meeting for approval on 31 January 2019.
| Background Papers | Location | |------------------------------------|-------------------------------| | HRA Housing Capital Schemes | Head of Finance & Property’s | | HRA Self Financing data | office |
## Appendix 1
### HOUSING REVENUE ACCOUNT CAPITAL PROGRAMME 2019/20 to 2023/24
| | 2019/20 | 2020/21 | 2021/22 | 2022/23 | 2023/24 | TOTAL | |----------------------|---------|---------|---------|---------|---------|-------| | | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | | **Proposed** | | | | | | | | **Indicative** | | | | | | | | **TOTAL** | | | | | | |
### MAJOR IMPROVEMENTS
- **Maintaining the Decent Homes standard**: £21,175
- **External Wall Insulation to Solid Wall Properties**: £1,550
- **Boiler and Heating Replacements**: £2,475
### GREEN ENERGY
- **External Wall Insulation to Solid Wall Properties**: £1,550
- **Boiler and Heating Replacements**: £2,475
### DECENT NEIGHBOURHOODS
- **Fire Protection to Blocks of Flats with Communal Areas, including compartmentation work and sheltered accommodation**: £2,000
- **Structural Repairs**: £550
- **Waste Storage Facilities - Communal Areas and Dwellings**: £250
- **Smoke and Heat Detection**: £500
- **Repairs to Un-adopted Roads and Paths**: £400
### HOMES FOR LIFE
- **Adaptations - from OT Referrals**: £2,500
- **Lifetime Homes Works - Disability Access**: £200
### OTHER SCHEMES
- **Abbey Grove**: £600
- **New Build Schemes - Airey Houses/Beverly Rd/Amanda Rd**: £10,000
- **Vehicle Fleet Replacement**: £1,340
- **Non Dwelling Assets (Community Centres, Boiler Houses, Garages etc)**: £1,340
- **Contribution to Flood Prevention Schemes**: £250
- **Damp Proofing Works**: £500
- **Asbestos Encapsulation / Removal**: £500
- **Electrical Installation Condition Testing and Rewires**: £1,250
- **Flats above shops**: £300
- **Lightning Protection**: £200
- **Planned Works**: £1,000
- **Legionella surveys and remedial works**: £250
- **Conway Gardens Individual Heatings to Flats**: £750
- **Electrical compliance to 10 blocks of flats**: £135
- **Exchange Street - new lift**: £0
- **Demolition of Styrrup Road / Common Lane**: £0
- **Furnival Street Demolition & Assoc. Works**: £0
- **Ashford Court Demolition & Carpark**: £0
- **Conway or Larwood replacement Lift**: £275
### TOTAL EXPENDITURE
- **2019/20**: £10,090
- **2020/21**: £10,090
- **2021/22**: £10,090
- **2022/23**: £10,090
- **2023/24**: £10,090
- **TOTAL**: £50,450
### Funded By:
| | 2019/20 | 2020/21 | 2021/22 | 2022/23 | 2023/24 | TOTAL | |----------------------|---------|---------|---------|---------|---------|-------| | | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | | **Proposed** | | | | | | | | **Indicative** | | | | | | | | **TOTAL** | | | | | | |
- **Major Repairs Reserve**: £32,325
- **External Funding**: £0
- **New Build Reserve**: £0
- **Unsupported / Internal Borrowing**: £16,200
- **Capital Receipts**: £1,925
### TOTAL FUNDING:
- **2019/20**: £10,090
- **2020/21**: £10,090
- **2021/22**: £10,090
- **2022/23**: £10,090
- **2023/24**: £10,090
- **TOTAL**: £50,450
1. **Public Interest Test**
1.1 The author of this report, David Hill, has determined that the report is not confidential.
2. **Purpose of the Report**
2.1 To consider and approve the Housing Revenue Account budget for 2019/20 and provide indicative figures for 2020/21 and 2021/22.
2.2 To make recommendations to Extraordinary Council on the 31 January 2019 to set the budget and rent levels for 2018/19.
3. **Background and Discussion**
3.1 Unlike the General Fund that comprises a range of different services, the Housing Revenue Account is a single service account which is funded by tenants’ rent income for the social housing and the landlord functions Bassetlaw provides via the Arm’s Length Management Organisation, A1 Housing. Therefore, all decisions on income and expenditure will have a direct impact on tenants’ service levels and the level of investment in their homes.
3.2 This has been re-enforced by the new ‘Self Financing Regime for Housing’ which became effective in April 2012. This means that expenditure now has to be entirely supported from rental and other income. The main tool for the future financial management of the HRA is the 30-year Business Plan.
3.3 The introduction of HRA self-financing did not end the requirement to maintain a statutory ring-fenced HRA, and the Council is still required to maintain a separate account for the income received and expenditure incurred on council housing.
**The 2019/20 HRA Revenue Budget**
3.4 The Housing Revenue Account is shown at Appendix 1. Due to the changes made under self-financing, any favourable variance from the expected out-turn in year is now transferred to the New Build Reserve. This decision can, of course, be changed if the 2018/19 outturn is significantly different to the planned budgets. 3.5 Under the old housing subsidy system, the government gave a Major Repairs Allowance (MRA) which was used to fund capital expenditure. Within the government’s self-financing settlement figures released in March 2012, this government guidance was followed for the required 5 years which finished in 2016/17. Depreciation represents a cash charge to the HRA which is required to be transferred to the Major Repairs Reserve (MRR) to provide for future capital expenditure and/or the repayment of debt. The level of depreciation chargeable to fund the capital programme is not sufficient to fund the capital programme and the repayment of debt, therefore a voluntary contribution of £1.5m is required during 2019/20.
3.6 The HRA outturn for 2018/19 is expected to deliver a £0.154m surplus in year, which is slightly higher than the original budget of £0.095m.
3.7 The estimated balances on the HRA and MRR are as follows:
| | HRA | MRR | |------------------------|------|------| | Balance at 1 April 2018| 1,669| 817 | | Surplus/(deficit) | 154 | | | MRA (made up of Depreciation & additional payment) | 6,376 | | | Voluntary revenue contribution for repayment of debt/capital expenditure | 2,500 | | | Housing Capital Expenditure | (8,396) | | | Repayment of Debt | | | | **Balance at 31 March 2019** | **1,823** | **1,298** | | Surplus/(deficit) | (135) | | | MRA (made up of Depreciation) | 6,375 | | | Voluntary revenue contribution for repayment of debt/capital expenditure | 1,500 | | | Housing Capital Expenditure | (5,205) | | | Repayment of Debt | | | | **Balance at 31 March 2020** | **1,688** | **695** |
**Balance Analysed Over:**
| | HRA | MRR | |------------------------|------|------| | Housing Revenue Expenditure | 1,688 | | | Housing Capital Expenditure | | 695 | | Repayment of Debt | | | | **Balance at 31 March 2019** | **1,688** | **695** |
**Rents**
3.8 As part of the Budget speech on 8th July 2015, the Chancellor announced that social housing rents will have to be cut by 1% each year for the next four years from April 2016. The last year will be 2019/20 and the indication is that the increase will then revert to CPI plus 1%. The rent reduction was aimed at ending ‘the ratchet of ever higher housing benefit chasing up ever higher rents in the social housing sector’. 3.9 The proposal is, therefore, to recommend a rent reduction for 2019/20 of 1.0% or an average of £0.63 per week. This is broken down by property types as follows:
| CHANGES BY PROPERTY TYPE | Bedsit | 1 Bed | 2 Bed | 3 Bed | 4+ Bed | 5+Bed | Overall | |--------------------------|--------|-------|-------|-------|--------|-------|---------| | £ | £ | £ | £ | £ | £ | £ | £ | | 2018/19 | 53.94 | 64.85 | 73.75 | 78.23 | 85.61 | 102.29| 72.86 | | 2019/20 | 53.40 | 64.20 | 73.01 | 77.45 | 84.75 | 101.27| 72.13 | | £ | (0.54) | (0.65)| (0.74)| (0.78)| (0.86) | (1.02)| (0.73) | | % | (1.00%)| (1.00%)| (1.01%)| (0.99%)| (1.00%)| (1.00%)| (0.96%) |
(Based on a 52 week rent year)
Note: The above table is based on average rental income from each type of property; the following items will affect the calculation of the percentage decrease in the above table:
- During the year the housing stock may be revalued which could affect the weekly rental charge.
- Changes in the housing stock through redevelopment or purchase of additional properties.
- All right to buys have the potential to affect the % decrease in the dwelling rental weekly charge.
3.10 Members should note that 2019/20 is a 53 week rent year (the first two days of the first week of the 2020/21 financial year sit in the 2019/20 rental year). In accordance with the Welfare Reform and Work Act 2016, rents for 2019/20 (the final year of the 4 year rent reduction covered in this legislation) must be set at no more than 99% of the previous year’s rent (2018/19). The 53rd week in 2019/20 will mean that tenants will pay 100.9% of the 2018/19 rent if no action is taken. Therefore, to address this in 2019/20 the Housing Revenue Account has been adjusted to account for rental income on a daily basis (366 days). This adjustment is needed only for one year, as rents will increase from 2020/21 onwards. This means that the rental income that relates to the 2020/21 financial year (3 days 1st, 2nd and 3rd April 2020) will sit in the 2020/21 accounts and tenants will therefore pay 99% of the rents from 2018/19. This is purely an accounting practice and will not affect how much tenants pay or when the pay.
3.11 This approach is one that is suggested by the LGA. MHCLG are aware of the position and that it affects all social landlords. They have indicated to the LGA that it is for landlords to satisfy themselves of the application of the Welfare Reform and Work Act 2016, but have also established a Working Party to consider this.
3.12 The Chancellor has announced that from 2020/21 rent may be increased by up to CPI + 1%. At current rates this equates to around a 3.2% increase shown in the table below:
| Average increase 2020/21 | Average increase 2021/22 | |--------------------------|--------------------------| | Per Week £ | % | Per Week £ | % | | 2.31 | 3.2% | 2.37 | 3.2% |
(Based on a 52 week rent year) 3.13 Whilst there may be some concerns nationally about the level of rents, approximately 57% of tenants get assistance through the Housing Benefit scheme, and 67% of those on HB (38% of all tenants) receive a full rebate and pay nothing. Housing Benefit is met by a charge to the General Fund, and in turn, this is met by a grant from the MHCLG currently covering 99.4% of the actual costs.
**Repairs & Maintenance**
3.14 The amount of money spent on responsive repairs is estimated at £6.9m for 2019/20, compared to £10m for planned maintenance in the HRA’s capital budget. This balance is deemed to be sound compared to the standard split of 40% responsive and 60% for planned repair expenditure.
**Depreciation**
3.15 Under the previous HRA regime depreciation (the annual charges made to reflect historic assets and improvements) was an in/out adjustment which made no difference to the overall level of HRA resources. Under the Self Financing regime these calculations are more important as all depreciation adjustments are in effect ‘real’ cash set aside for investment, and then used up once the asset or improvement they originally financed needs to be replaced. The 2018/19 budget for depreciation is £6.3m, and this is transferred into the Major Repairs Reserve to fund future capital expenditure.
**Value For Money and the Housing Revenue Account**
3.16 All elements of the HRA budget and business plan are subject to review in relation to value for money. In addition, the impact of any General fund Budget Review savings and service reviews will achieve reductions in costs for the Housing Revenue Account, thus releasing additional resources for the housing stock.
3.17 There are no specific savings targets for Housing moving forward in the Business Plan. Budgets previously controlled by A1 Housing through the Management Fee have been brought back in house and are summarised in Appendix A.
3.18 The following budget assumptions have been used to produce the draft Housing Revenue Account:
- Pay Award – Actual agreed increases have been included averaging 2.05% for 2018/19. From 2020/21 2% has been included for each year.
- Contracts – Where contracts have specific provision for inflationary increases these have been included at CPI (2.2%) or RPI (3.3%)
- BDC SLA’s – This is primarily based on recharges of staff time, therefore increases have been linked to the assumed pay increase each year.
- Rental Income has been increased by CPI + 1% from 2020/21 after the 4 year 1% reduction has finished.
**Provision for Bad debts**
3.19 Changes to welfare reform, including the ‘bedroom tax’ for under occupancy, the introduction of the Local Council Tax Reduction Scheme and the roll-out of Universal Credit all have the potential to increase the level of debts outstanding for council house rents. It is therefore prudent that the Council takes measures to mitigate the financial impacts of these changes. These include an annual bad debt provision of £150,000, and the welfare reform initiatives as identified above.
**Treasury Management**
3.20 As part of the self-financing arrangements, Bassetlaw inherited £26.9m of the national housing debt in March 2012, which increased its overall HRA debt level to £96.5m. This debt has been reduced over the last 5 years by £6m as at the 31st March 2018 the debt stood at £89.05m Overall this has an average debt interest rate of 3.88% and these figures are reflected in the budget profiles. This level of debt and average interest rate will fluctuate over time as existing loans mature and decisions are made as to whether to replace or pay off debt in the longer term.
3.21 As part of this transfer of debt, the government set Bassetlaw an overall HRA borrowing limit of £105.4m. Although this limit has been removed the Council is taking a very prudent approach to this as for every additional £1m in borrowing, the cost to the HRA budget will be approximately £40,000 per annum. If Members wish to utilise this borrowing ‘gap’ for further investment in our housing stock, or to self-build, the affordability of the revenue budget will always be the deciding factor.
3.22 The updated HRA Business Plan provides the assumptions for the Council’s loan financing profile over the next thirty years. For information, the scheduled long term debt repayments and associated reductions in interest costs that are built into the Business Plan over the next 10 years are:
- 2019/20 - £3.3m
- 2022/23 - £4.1m
- 2023/24 - £3.3m
- 2026/27 - £5.5m
- 2027/28 - £3.3m
- 2028/29 - £5.5m
3.23 Due to the introduction of 1% rent reductions each year for four years, re-borrowing will be necessary to retain the Council’s current levels of capital investment, and for this reason further borrowing has been built into the HRA Business Plan as follows:
- 2019/20 - £4.5m
- 2022/23 - £5.0m
- 2023/24 - £4.0m
3.24 The *Treasury Management Strategy 2019/20 to 2021/22* will be reported to Cabinet in February 2019 and will detail the borrowing requirements of the Housing Revenue Account. To ensure the stability of the HRA, its debt portfolio is long-term fixed rate borrowings. Therefore, for the purposes of Treasury Management, any additional borrowing requirement will be facilitated through similar fixed term loans.
**Reserves**
3.25 Due to the uncertainty around the new self-financing arrangements, the level of recommended minimum balances for the Housing Revenue Account was increased to £1.3m in April 2013. There are a number of benchmarks that are used for Housing authorities to determine the correct level as follows: | £000 | £200 per property (Housing Finance Act 1989 recommended based on 6,739 properties) | 1,348 | |------|---------------------------------------------------------------------------------|-------| | | 5% of dwelling rental income | 1,282 | | | 5% of gross expenditure (excl. transfers to MRR) | 1,289 | | | Average of the 3 options | 1,306 |
3.26 As the results of the three options are wide-ranging, it would be prudent to keep the minimum working balance under review each year. However, for 2019/20, it is recommended that the Council retains the minimum working balance at £1.3m.
3.27 This prudent approach reflects the level of uncertainties arising from welfare reform and the potential for tenants to accrue significant debts under these changes. In addition, the major work programmes planned under the Housing capital programme will require some properties to be held void, which reduces rent income levels. Reserves should not be used to mitigate rent levels as this would only be effective in the short term.
4. **Implications**
a) For service users.
Bassetlaw provides 6,739 homes for its residents, and this is makes up 14% of the number of homes in the district. Significant resources have been spent on improving the condition of the housing stock.
b) Strategic & Policy.
Decisions about the long term financial health of Bassetlaw’s council housing are now local ones, and Members now have a lot more influence over more significant matters of choice than previously. Long term decisions about quality and rent income are more pronounced, as is the long term financial stability of Bassetlaw’s HRA. With the end of the Decent Homes programme, Members need to consider what improvements they wish to make to the Council’s housing service, but this needs to be affordable both in the short and long term.
If Members wish to be positive about the improvements that can be made then they need to generate the income to pay for them, and this will influence the Council’s rent policies. As with anything else, improvements need to be funded accordingly.
c) Finance – 19/429
These are set out in the report. The recommended rent decrease is based on the government’s set parameters of a 1% rent reduction, and this has removed a significant amount from the HRA Business Plan. This has necessitated the modelling of £25m of further long term borrowing going forward to keep the Business Plan sustainable. This means that any further investment over and above that planned needs to be considered very carefully for its impact on the viability of the Housing Revenue Account. d) Legal – 298/01/2019
These are set out in the report.
e) Human Resources.
There are none arising from the report.
f) Community Safety, Equalities, Environmental.
The Council must ensure that decisions are made in such a way as to minimise unfairness and ensure that there is not a disproportionate effect on any protected group as defined in Equalities legislation. Recommendations to increase/decrease rent levels do not directly discriminate any particularly group as they apply across all tenants. Bassetlaw District Council provides financial and welfare advice and work with voluntary sector partners to ensure tenants can receive advice and support.
g) G.D.P.R. – None arising directly from this report
h) This is Key Decision number 725.
5. **Options, Risks and Reasons for Recommendations**
5.1 The Council needs to set a balanced budget for its HRA services with income equalling expenditure, and ensure that the Housing Revenue Account remains solvent, with the adequate reserves of a “going concern”.
5.2 This budget sets out the approach to maintain levels of quality and investment, and comply with the borrowing limit. The rent reduction of 1.0% could be lowered even further, but this will impact on the levels of investment in this and successive financial years.
5.3 The Budget assumptions are based on the HRA Business Plan. The associated risks include any variances in estimates for inflation, interest rates, volume of voids, and the number of Right to Buy sales.
5.4 The viability of the Business Plan is based on the management of debt levels coupled with investment in the Council’s existing and new stock. In reality the Business Plan needs to be flexible enough to cope with changes to this strategy over time.
6. **Conclusions**
6.1 The Council has a self-sufficient HRA, in which income from tenants is used to pay for the delivery of services to tenants and investment in the housing stock. The transition to self-financing represents a key shift in risks, with the Council taking full responsibility for managing and maintaining its own housing stock in return for access to all of its revenue income.
6.2 For these reasons the budget has been framed to minimise any risks identified. Members have a clear set of recommendations to support a soundly financed housing service as the 2019/20 budget will set the foundation for the next 30 years of council house funding in Bassetlaw.
7. **Recommendations**
7.1 That Members approve the Housing Revenue Account budget set out in Appendix 1 of the report for 2019/20.
7.2 That Members approve the indicative Housing Revenue Account budgets set out in Appendix 1 of the report for 2020/21 and 2021/22.
7.3 That Members approve an average rent reduction of 1.0% for 2019/20 in accordance with government policy.
7.4 That Members, in accordance with best practice note the flexibility to increase rents from 2020/21 onwards.
7.5 That Members approve the minimum level of HRA reserves to remain at £1.3m in recognition of the overall funding value of the HRA.
7.6 That Cabinet recommends this report to the Extraordinary Council meeting for approval on 31st January 2019.
**Background Papers:**
- Self-Financing Data
- HRA Budget Papers
**Location:**
Head of Finance & Property’s office
### Housing Revenue Account - Budget Forecast 2019-2022
#### APPENDIX 1
| BUDGET 2019/20 | Employees £ | Premises £ | Transport £ | Supplies and Services £ | Third Party Payments £ | Internal Services Recharged £ | Capital Charges £ | GROSS EXPEND £ | INCOME £ | NET EXPEND 2019/20 £ | ESTIMATE 2020/21 £ | ESTIMATE 2021/22 £ | ESTIMATE 2022/23 £ | ESTIMATE 2023/24 £ | |----------------|-------------|------------|-------------|-------------------------|------------------------|-----------------------------|-----------------|----------------|---------|----------------------|----------------|----------------|----------------|----------------| | **Management Fee** | | | | | | | | | | | | | | | | Rent Rates & Taxes | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Supervision and Management | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | Repairs & Maintenance | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | **Total Management Fee** | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
#### Council Managed HRA Budgets
| | | | | | | | | | | | | | | | | **Expenditure** | | | | | | | | | | | | | | | | Repairs & Maintenance | 2,084,000 | 1,090,000 | 143,500 | 1,034,800 | 2,557,500 | 6,310,400 | 6,910,400 | 6,355,500 | 6,396,000 | 7,036,200 | 7,080,000 | 0 | 0 | 0 | | Supervision and Management | 1,962,400 | 30,000 | 72,000 | 579,900 | 94,400 | 3,547,100 | 6,281,800 | 6,281,800 | 6,392,700 | 6,504,400 | 6,613,500 | 6,724,700 | 0 | 0 | | Special Services | 699,700 | 436,000 | 39,400 | 276,400 | 129,000 | 1,589,100 | 1,589,100 | 1,694,000 | 1,618,000 | 1,832,200 | 1,946,100 | 0 | 0 | 0 | | Rent Rates & Taxes | 255,500 | 255,500 | 255,500 | 255,500 | 255,500 | 255,500 | 255,500 | 255,500 | 255,500 | 255,500 | 255,500 | 0 | 0 | 0 | | Rates Expenditure | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | 0 | 0 | 0 | | **Total Income** | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | **Surplus (-) or Deficit for the Year on Service** | 4,732,100 | 1,812,700 | 274,300 | 2,724,500 | 2,786,800 | 3,681,100 | 22,382,300 | 22,382,300 | 22,382,300 | 22,382,300 | 22,382,300 | 22,382,300 | 0 | 0 | | **Net Income/Costs for Service** | 4,732,100 | 1,812,700 | 274,300 | 2,724,500 | 2,786,800 | 3,681,100 | 22,382,300 | 22,382,300 | 22,382,300 | 22,382,300 | 22,382,300 | 22,382,300 | 0 | 0 |
#### Movement on HRA Balance
| | | | | | | | | | | | | | | | | **Charges for Depreciation and Impairment on non-current assets** | -5,946,700 | -5,946,700 | -5,946,700 | -5,946,700 | -5,946,700 | -5,946,700 | -5,946,700 | -5,946,700 | -5,946,700 | -5,946,700 | -5,946,700 | -5,946,700 | 0 | 0 | | **Revenue Expenditure Funded from Capital Under Statute** | -50,000 | -50,000 | -50,000 | -50,000 | -50,000 | -50,000 | -50,000 | -50,000 | -50,000 | -50,000 | -50,000 | -50,000 | 0 | 0 | | **Capital Expenditure Charged against the HRA** | 2,676,000 | -2,743,000 | -45,000 | -45,000 | -45,000 | -45,000 | -45,000 | -45,000 | -45,000 | -45,000 | -45,000 | -45,000 | 0 | 0 | | **Employers Contribution Payable to NCC Pension Fund and Retirement Benefits Payable Direct to Pensioners** | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | **Transfer to Major Repairs Reserve** | 7,876,100 | 7,876,100 | 7,876,100 | 7,876,100 | 7,876,100 | 7,876,100 | 7,876,100 | 7,876,100 | 7,876,100 | 7,876,100 | 7,876,100 | 7,876,100 | 0 | 0 | | **Net Additional Amount Required by Statute** | 1,385,000 | 1,385,000 | 1,385,000 | 1,385,000 | 1,385,000 | 1,385,000 | 1,385,000 | 1,385,000 | 1,385,000 | 1,385,000 | 1,385,000 | 1,385,000 | 0 | 0 | | **Net (Increase) or Decrease in HRA Balance in Year** | 135,370 | -708,570 | -65,200 | -232,600 | -247,800 | -247,800 | -247,800 | -247,800 | -247,800 | -247,800 | -247,800 | -247,800 | 0 | 0 |
#### Balance carried forward @ 1 April 2019
| | | | | | | | | | | | | | | | | **Balance carried forward** | 1,823,709 | 1,823,709 | 1,823,709 | 1,823,709 | 1,823,709 | 1,823,709 | 1,823,709 | 1,823,709 | 1,823,709 | 1,823,709 | 1,823,709 | 1,823,709 | 0 | 0 |
1. **Public Interest Test**
1.1 The author of this report, Dave Hill, has determined that the report is not confidential.
2. **Purpose of the Report**
2.1 To make projections about the longer term financial position of the Council.
3. **Background and Discussion**
3.1 The Medium Term Financial Plan (MTFP) sets the financial strategic direction for the Council, and is regularly updated as it evolves and develops throughout the year, to form the framework for the Council’s financial planning. To ensure Members have a sound basis for planning and decision making, the MTFP will be updated at three key points in the year: These are:
- June – with the initial viewpoint of the upcoming financial year;
- December – an update to include additional information received at national level and corporate issues identified through service planning;
- February – with the final budget for the new financial year;
3.2 The purpose of the MTFP is to set out the key financial management principles, budget assumptions and service issues. It is then used as the framework for the detailed budget setting process to ensure that resources are effectively managed and are able to deliver the aspirations of the Council as set out in the Council Plan, over the medium term.
**Principles Underpinning the Budget Strategy**
3.3 The Council has a number of agreed principles as a basis for financial management and budget planning as follows:
- Emerging pressures are managed within existing overall budgets;
- Spending is aligned to key priorities as set out in the Council Plan; • Income is only included in the budget where supported by robust proposals and is deliverable; • Commercial income will be maximised where possible to ensure that fee charging services break-even over time and are provided with a nil cost subsidy from the taxpayer, or return a surplus where appropriate; • Where possible, future liabilities are anticipated; • Budgets are sustainable; • Savings proposals are supported by project plans and the impact on service delivery is clear; • Capital and revenue planning must be integrated to ensure implications are fully anticipated; • The Council’s reserves and balances are not to be used as a primary method to balance the ongoing pressures in the budget. Earmarked reserves are used for specific one-off purposes to support the delivery of corporate objectives and to mitigate risks.
3.4 The national Government deficit reduction strategy has resulted in significantly less funding being available to local government since June 2010. This means the continued need to reduce costs and increase income will remain a key part of the 2019/20 budget and this MTFP.
3.5 In light of the anticipated medium term gap, the Council has developed a forward strategy to inform future financial planning, by providing a framework for reducing planned expenditure over the medium term to ensure the Council is financially sustainable, while still delivering the Council’s key priorities as set out in the Council Plan.
3.6 To provide some certainty for the 4 years to 2019/20 the Council accepted the government’s offer of a multi-year settlement. A condition of the offer was the submission of an Efficiency Plan showing how we will deliver savings and efficiencies. This document was submitted in October 2016.
Budget Assumptions
3.7 Over the last year inflation has fallen. The Consumer Prices Index (CPI) annual inflation stood at 2.2% in October 2018 (compared to 2.8% in October 2017). The Retail Prices Index (RPI) annual inflation was 3.3% in October 2018 (compared to 4.0% in October 2017). These have been factored into the projections on Appendix 1 of the report, with future inflationary pressures set out for future years.
3.8 The following budget assumptions have been built into the forecast:
• Pay award – A pay award averaging 2.05% for 2019/20 and 2% thereafter; • Contracts have been linked to the CPI/RPI as per individual agreements; • Fees and charges have, in the main, been linked to the CPI annual average of 2.2% rounded up to 3%; • Other expenditure has not had any inflationary factor applied;
4. Resources Available
4.1 On 29th October 2018, the Chancellor announced the Autumn Statement. This identifies the government intentions for public spending for 2019/20 ahead of the Spending Review in 2019. The MTFP report to Cabinet in September outlined the uncertainty facing local government from 2020/21 onwards. This uncertainty remains and very little additional information has been released since September.
**Local Government Financial Settlement 2019/20**
4.2 Based on the information provided in the provisional Local Government Finance Settlement 2019/20 announced on December 13th 2018 and national spending announcements, the following estimated funding will be available over the medium term:
| | 2019/20 £m | 2020/21 £m | 2021/22 £m | 2022/23 £m | 2023/24 £m | |----------------------|------------|------------|------------|------------|------------| | Revenue Support Grant| 0.23 | 0 | 0 | 0 | 0 | | Retained Business Rates (including S31 Grant) | 16.59 | 15.55 | 15.89 | 16.24 | 16.60 | | Government Tariff | (12.60) | (11.34) | (11.68) | (12.03) | (12.39) | | Total Government Funding | 4.22 | 4.21 | 4.21 | 4.21 | 4.21 | | Reduction in Government Funding | 0.42 | 0 | 0 | 0 | 0 | | Percentage Reduction (%) | 9.1% | 0% | 0% | 0% | 0% |
4.3 2019/20 is the last year of the 4 year Local Government Finance Settlement where we have some certainty on the funding. The 2020/21 funding figures will not be available until the completion of the Fair Funding Review and the picture regarding the 75% Business Rates Retention becomes clearer. Therefore, the figures from 2020/21 onwards are the best estimates given the information available and assume 75% Business Rates retention with a 50/50 tier split.
**Revenue Support Grant**
4.4 The Council is estimated to receive £0.23m in RSG in 2019/20, which is a reduction of £0.51m from 2018/19 (70%). This grant has been retained to allow the Government to continue to reduce funding to local government in line with the national funding totals.
4.5 The formula underpinning the Revenue Support Grant is expected to remain constant until the Business Rates Baseline is reset i.e. it is adjusted for growth/loss of business income. This means changes in factors such as population growth will not be taken into account in the local resources received. The RSG will reduce to zero in 2020/21.
**Retained Business Rates**
4.6 The changes under the ‘Localisation of Business Rates’ now means that local authorities are incentivised to promote economic growth in their area. From 1st April 2013, local authorities can retain a share of the net income that they receive in Business Rates as funding to meet the costs of service provision.
4.7 In total, Bassetlaw retains 40% of Business Rates collected during the year, after deductions for mandatory and discretionary reliefs, the cost of income collections, including losses, and for the cost of changes to rateable values as a result of appeals. The remaining amounts are paid on the basis of: 50% to central government, 9% to Nottinghamshire County Council, and 1% to Nottinghamshire Fire & Rescue Authority.
4.8 Bassetlaw’s Retained Business Rates income (i.e. the 40%) is then subject to a tariff, annually increased by the Retail Price Index (RPI), which is paid to central Government. This equates to the amount of Business Rates collected which is in excess of what we need. This tariff payment funds other local authorities where their Business Rates are considered to be disproportionately low. The level of tariff is unique to each local authority.
4.9 From 1st April 2013, all of the seven Nottinghamshire District Councils joined forces with Nottinghamshire County Council to form a Business Rates Pool. This works in exactly the same manner as for an individual authority, but has the added financial advantage of a greater level of resources being retained within the County for reinvestment or distribution to partner authorities. This is because 50% of the growth experienced by each of the District Councils would, singularly, have been transferred to Central Government via the levy mechanism if the Pool was not in place. Instead it is retained within the Pool membership and distributed accordingly.
4.10 The City of Nottingham and Nottinghamshire Economic Prosperity Committee on 24th July 2015 agreed that 50% of the Pool surplus generated in 2014/15 and future years, net of retention for the volatility fund, would be re-distributed back to Pool members. For Bassetlaw this has generated an additional £306,000 in 2017/18 that can be used towards setting a balance budget in future years. The MTFP will not include any such sums for future years until they have been formally agreed.
4.11 An additional complexity for local authorities when forecasting their retained Business Rate income is the Government’s announcement in March 2017 on a range of Business Rate measures to support businesses affected by the national revaluation exercise. These included:
- £1,000 relief for pubs;
- Supporting Small Business relief;
- Discretionary Rate Relief.
4.12 These measures were extended into 2018/19 and are expected to be applied in 2019/20. The Government confirmed that local authorities will be reimbursed through a grant (known as a Section 31 grant) for the lost Business Rate income, which forms part of their Retained Business Rate funding.
4.13 Including the Section 31 grant funded business rate measures, Bassetlaw will collect £43.0m in 2018/19 (after deductions for reliefs, bad debt provision, and set aside for potential loss on appeals), inclusive of annual business rate income growth.
4.14 There are a number of risks that could affect the level of Business Rate income collected, and as such, reduce the anticipated amount of Retained Business Rates. The most significant risks are as follows:
- Unpredictable increases in exemptions and reliefs due to different property usage;
- Successful business rate appeals dating back to earlier years;
- Slower than anticipated local economic growth;
- RPI increases on the tariff being higher than local economic growth;
- Uncollectable debts as a result of worsening economic conditions. 4.15 Bassetlaw is currently performing well by increasing the rateable value within the district. This is because of the growth that is being encouraged by the Council within the business sector, and the proactive work being undertaken by the additional property inspector in inspecting our business properties. Some additional growth above the government baseline is expected over the next 4 years although it is very difficult to forecast without knowing the potential effect of appeals.
4.16 The collection of Business Rates is being closely monitored throughout the year to inform future funding projections and on the basis of the current position it is expected that income will increase.
**New Homes Bonus**
4.17 The Government has established the New Homes Bonus, which is allocated to Councils on the basis of new homes built within the district, and on bringing empty homes back into use. It promoted the New Homes Bonus as a way to ensure that the economic benefits of growth are returned to the local authorities and communities where growth takes place – and so help engender a more positive attitude towards growth. In reality, this was just funded by a top-slice of the Revenue Support Grant and is not new money.
4.18 In December 2016 the government announced fundamental changes to New Homes Bonus funding, reducing the 6 year’s payment period to 4 years and introducing a threshold below which there is no payment. There have been no further changes in 2019/20. The estimated payments over the next 5 years are show below:
| Year | 2018/19 £’000 | 2019/20 £’000 | 2020/21 £’000 | 2021/22 £’000 | 2022/23 £’000 | 2023/24 £’000 | |--------|---------------|---------------|---------------|---------------|---------------|---------------| | 2015/16| 344 | | | | | | | 2016/17| 400 | 400 | | | | | | 2017/18| 189 | 189 | 189 | | | | | 2018/19| 115 | 115 | 115 | 115 | | | | 2019/20| 318 | 318 | 318 | 318 | 318 | | | 2020/21| | 250\* | 250\* | 250\* | 250\* | | | 2021/22| | 200\* | 200\* | 200\* | 200\* | | | 2022/23| | | 200\* | 200\* | 200\* | | | TOTAL | 1,048 | 1,022\*\* | 872 | 883 | 968 | 650 |
\*Note: Estimates only
\*\*Note: There is a one off adjustment in 2019/20 of £160k due to an error in a previous return. Actual grant received will be £862k.
4.19 Bassetlaw has utilised the New Homes Bonus between 2011/12 and 2018/19 as replacement core funding whilst delivering a measured savings programme each year. The future of the New Homes Bonus remains under review but nothing has yet been announced as to whether it will continue in its current form, phased out or scrapped in its entirety.
4.20 The budget from 2016/17 onwards was based on the utilisation of £0.75m of New Homes Bonus for mainstream funding, with the remaining grant income being earmarked for specific one-off purposes. 4.21 This was reduced to £0.25m in 2018/19 which will be the last year where New Homes Bonus is used for Revenue purposes. The money released by not including New Homes Bonus in the revenue budget will be earmarked for either specific one-off revenue projects, or utilised to fund the capital programme.
**Council Tax**
4.22 Under the current arrangements, if a Council increases its Council Tax above a certain level, there is a legislative requirement to hold a referendum. The referendum limit for 2018/19 was set at 3% or £5.
4.23 As part of its financial strategy, Bassetlaw set an increase of £5 in respect of 2018/19. For the purposes of this MTFP, as a basis for exemplifying the financial position only, it has been assumed that annual increases of £5 will apply each year from 2019/20 onwards. Failure to increase council tax for the duration of this MTFP will contribute to the overall decline of the Council’s financial capacity and Members’ ability to fulfil their service responsibilities.
4.24 Council Tax Benefit was a benefit for people on low income to help them to pay Council Tax, and it was paid to individuals by local authorities. The Government gave local authorities a grant to match the payments made to individuals. In April 2013 the Government reduced the funding available to Local Authorities and changed the mechanism for operating Council Tax Benefit, to a local decision known as a “Local Council Tax Reduction Scheme”.
4.25 The change from Council Tax Benefit to the Local Council Tax Reduction Scheme means rather than receiving a benefit to offset the cost of Council Tax, eligible residents now receive a discount at source direct from the bill, which reduces the Tax Base for all precepting authorities. The current value of council tax reduction discounts is estimated at £7.65m (Bassetlaw’s share is £0.81m). When converted to Band D equivalent properties this is a reduction of 3,927 properties to the 2018/19 Council Tax Base. The number of discounts will vary as claimant numbers change, but demand is continuing to be lower than was estimated when the 2018/19 tax base was set. This will continue to be closely monitored each year.
4.26 The calculation of the Council Tax Base for a given year, includes an assumption of the percentage of sums due which are actually collected. The changes to the Local Council Tax Reduction Scheme (LCTRS) and the impact of welfare reform means that it is prudent to keep the anticipated overall collection rate at 98.0% for 2019/20. The collection rate will continue to be closely monitored throughout the year.
4.27 The forecast growth in the Tax Base is based on housing growth assumptions and adjusted for a risk to potential service delivery. The current Tax Base growth is estimated at 563 Band D equivalent properties for 2019/20 and 1.25% growth for the following 4 years until 2023/24. This is offset by an assumed constant level of LCTR claimants at 3,927 Band D equivalent properties. The estimated Tax Base and the changes for LCTRS are currently estimated as follows: The estimated future growth is regularly reviewed to ensure it remains reasonable, and a prudent estimate is always used to ensure the Collection Fund remains balanced or in a surplus.
Bassetlaw’s anticipated income arising from a £5 council tax increase coupled with the increase in the Council Tax Base, is shown below:
| | 2019/20 | 2020/21 | 2021/22 | 2022/23 | 2023/24 | |----------------------|---------|---------|---------|---------|---------| | Forecast Taxbase | 34,795 | 35,230 | 35,670 | 36,116 | 35,568 | | Forecast Band D based on a £5 Council Tax Increase | £173.48 | £178.48 | £183.48 | £188.48 | £193.48 | | Council Tax Income – BDC only | £6.036m | £6.289m | £6.545m | £6.807m | £7.075m | | Percentage Increase (%) | 4.7% | 4.2% | 4.1% | 4.0% | 3.9% |
Collection Fund Surplus/Deficit
The Council is statutory obliged to prepare an estimate of its Collection Fund transactions for council tax on 15th January each year. This estimate enables Bassetlaw and the three major precepting authorities to take account of any surpluses or deficits on the Fund when they set their own authority budgets. It is therefore requested that this calculation on the 15th January 2019 and the declaration of the surplus or deficit be delegated to the Head of Finance and Property.
Specific Grants
The Council continues to receive a number of specific grants, although these have and will continue to reduce. These grants are in some cases “ring fenced” to individual activities, so spending is dictated along with the funding. Some specific grants are not ring-fenced which means that the Council can choose how funding is spent in accordance with local priorities (even where a grant was previously linked to a specific service or priority).
In 2018/19 the Council will receive £24.8m as earmarked revenue specific grant funding, although the bulk of this funding relates to the subsidy for housing benefit payments. The latest estimates going forward are as follows: | | 2018/19 £m | 2019/20 £m | 2020/21 £m | 2021/22 £m | 2022/23 £m | |--------------------------------|------------|------------|------------|------------|------------| | Rent Rebates (Council dwellings) | 12.464 | 10.095 | 8.176 | 6.622 | 5.364 | | Rent Allowances (Private Sector Dwellings) | 11.792 | 9.308 | 7.347 | 5.800 | 4.578 | | Housing Benefit Administration | 0.330 | 0.280 | 0.238 | 0.280 | 0.280 | | Business Rates Cost of Collection | 0.168 | 0.168 | 0.168 | 0.168 | 0.168 | | **TOTAL:** | **24.754** | **19.851** | **15.929** | **12.791** | **10.280** |
4.33 Universal Credit was extended for working-age claimants in Bassetlaw from December 2017. This change means an element of the housing benefit subsidy that Bassetlaw currently receives has been transferred to the DWP, leaving the Council with a smaller gross expenditure amount. This “reduction” in both new Housing Benefit claims and therefore subsidy has been included in the above figures from 2018/19 onwards when couples and family claims will transfer to Universal Credit. Although the government has announced there will be a full roll-out there is no timetable. Subsidy has, therefore, been reduced in-line with current actual migration levels. The DWP have not issued any plans to transfer pensioner claims away from local authorities for the foreseeable future, so Housing Benefit subsidy will still have to be paid to Bassetlaw for this. Other changes associated with this will be the inevitable reduction in Housing Benefit Administration Grant.
**Reserves and Balances**
4.34 When setting its Budget, the Council must have regard to the level of reserves needed to mitigate against both known and unknown risks and issues. A risk assessment of the General Fund Balances informs the Council’s Section 151 Officer’s view of the adequacy of reserves to provide assurance to the budget.
4.35 The minimum prudent level of reserves remains at £1.0m for 2018/19. Best practice guidance from CIPFA states that the General Fund balance may be between 5% and 100% of net expenditure. The Council’s £1.0m minimum working balance represents 6.1% of net expenditure.
4.36 In addition to the General Fund Balance, the Council retains a number of earmarked reserves on the balance sheet. Some are required to be held for statutory reasons, some are needed to comply with proper accounting practice, and others have been set up voluntarily to earmark resources for future spending plans or potential liabilities.
4.37 The Council has continued to develop its prudent financial management arrangements, through the development of earmarked reserves to mitigate against potential future risks. As issues arise, the potential requirement for an earmarked reserve is considered. New earmarked reserves are formally considered as part of the detailed budget process, to ensure that any new risks identified are adequately mitigated, and throughout the annual budget monitoring process as risks arise or become clearer.
4.38 The detailed budget process includes an assessment of risk, the adequacy of General Fund Reserves and a review of earmarked reserves, to both create and change earmarked reserve levels, and to also release reserves which are no longer required. | General Fund: | 1<sup>st</sup> April 2018 £’000 | Description and Intended Drawdown: | |--------------|-------------------------------|----------------------------------| | **Balances:** | | | | General Fund Balance | 2,504 | General balances to be utilised for unexpected events and other contingencies. No end date. | | **Usable Reserves:** | | | | Job Evaluation | 652 | Set aside to cover the one-off costs of Job Evaluation, and to meet downsizing and redundancy costs. To be utilised in 2019/20. | | Internal Insurance | 283 | Set aside from revenue as a self-insurance fund to reduce the annual costs of insurance premiums. No end date. | | Developers’ Contributions Unapplied | 72 | To be used for specific revenue purposes as part of Section 106 agreements. To be written down as part of the individual agreements. | | Revenue Grants & Contributions Unapplied | 432 | Grants unspent at the year end. | | General Fund Earmarked Reserve | 1,119 | Various earmarked reserves to support service requirements. A number are expected to be drawn down in 2018/19, whilst remainder expected to be drawdown over life of the MTFP. | | Business Rates Volatility | 599 | Set aside from revenue each year as an assurance against in year reductions in business rates. | | Retained Business Rates | 380 | The Business Rates Retention scheme was introduced in April 2013. The scheme allows Councils to retain their share of Business Rates income. However, the accounting arrangements for the scheme are complex and different income streams have to be accounted for under different legislative arrangements. This can lead to deficits or surpluses within General Fund. This reserve has been set up to help smooth these variances. | | Business rates Pooling | 872 | Bassetlaw is a member of the Nottinghamshire Pool for Retained Business Rates. This reserve represents the Councils share of redistributed growth generated from not paying over the individual Council levies to Central Government as a result of the pooling arrangements. | | New Homes Bonus | 590 | Reserve created to hold New Homes Bonus Grant received in year and allocated to revenue. | | Invest to Save Reserve | 1,000 | Money set aside to assist with the creating efficiencies and increase income generation potential. | | Local Plan | 167 | To be used to fund the costs of producing the next Local Plan. | Management Team Reserves 145 Various EM reserves to support Service requirements, as agreed by Management Team.
Other 302 Donations for Museum and Shopmobility £33k; Environmental Improvements £9k; LAMS £58k; ICT Developments £84k; Building asset Improvements £48k; Fair Value Movement £70k
TOTAL £6,613
4.39 One of the key underpinning financial principles of the MTFP is to not use the Council’s reserves (and other one-off resources) as a method to balance the ongoing pressures of the budget. However, over the years, Bassetlaw has made use of its reserves to deal with one-off unbudgeted matters: to improve services, or to offset declining income levels and support service delivery.
4.40 If the stage is ever reached where the Council has to generate more in-year cuts to deal with the costs of downsizing it will add further pressure to an already challenging situation, which is why this document, and more importantly the proactive work to be at least one year in advance of the problem, that goes into every budget, is so important.
4.41 Any situation which erodes this will be a serious matter for the Council’s External Auditors who expect Members to continue to run the Council as a viable going concern. This is particularly so now that Members have to, in effect, balance and manage two budgets – the mainstream revenue budget, and also since April 2013, the local council tax benefit scheme and the impact this has in the Collection Fund. As council tax benefits are no longer fully funded it adds to the complexity of Bassetlaw’s operations as a council tax collection authority.
5. Proposed Strategy to Bridge the Funding Gap
5.1 Appendix 1 shows that the Council has a forecast budget shortfall for the next five years of £1.3m, which is summarised below.
| Financial Year | Gross budget shortfall £m | Savings Identified £m | Net Budget Shortfall £m | |----------------|---------------------------|-----------------------|-------------------------| | 2019/20 | 1,170 | (1,080) | 90 | | 2020/21 | 1,900 | (649) | 1,251 | | 2021/22 | 730 | (648) | 82 | | 2022/23 | 530 | (615) | (85) | | 2023/24 | 310 | (330) | (20) | | TOTAL | 4,640 | (3,332) | 1,318 | 5.2 Over the last 10 years Bassetlaw has delivered savings of just over £8m and any new savings are becoming increasingly difficult to identify and deliver. It is essential that the Council continues to identify areas where costs can be reduced or income increased to close the budget gap.
5.3 A number of areas have been identified that will help to address the budgeted shortfall over the next 4 years and these are focussed around additional income and reducing expenditure as follows:
- **Additional Income:**
- Potential Council Tax increases and growth in the taxbase
- New Income streams
- **Reducing Expenditure:**
- Treasury management savings
- Improved procurement
- Vacancy management
- Zero base budget review
- Service Reviews
These will be examined in more detail in the following paragraphs.
**Sources of Income**
5.4 During 2017/18 the Council has set up two new trading companies – the S80 partnership – a general trading company and Bersahill Developments Ltd, a company formed in partnership with a local building firm. It is expected that from 2019/20 these companies will provide the Council with an important income stream.
5.5 Further trading opportunities will be evaluated as they come forward. Bassetlaw DC is working with another Council with an established trading unit. This will help with assessing suitable trading opportunities, developing comprehensive business plans and monitoring trading activity.
**Other Reductions in Expenditure**
5.6 Treasury Management – Working with the Council’s Treasury advisors we will ensure that our Treasury Management Strategy allows for more innovative investment to improve our returns from investments. Re-scheduling long-term debt and adjusting MRP calculations remain under constant review.
5.7 Improved Procurement – During 2018/19 Nottinghamshire City Council agreed to provide the procurement service for Bassetlaw. The Cabinet report identified significant potential savings through more effective procurement. This will be closely monitored over the next year.
5.8 Zero Base Budgeting – This was introduced as a new concept to Bassetlaw in setting the 2015/16 budget. Service Managers were fully engaged with the process, and the exercise has been a useful tool in challenging, and consequently reducing levels of expenditure. It is proposed to continue this for the foreseeable future.
5.9 A1 Housing – From 1st October 2018, A1 Housing Ltd ceased trading and the company will be wound up in due course. The A1 staff were transferred to BDC and significant savings have been identified through, for example, removing the duplication of expenditure. Work is underway to identify further opportunities for savings and improved service delivery.
5.10 CCTV and Security – The CCTV control room relocated to Queen’s Buildings in 2013 and new state of the art digital equipment was purchased to kit-out the room. This gives a number of opportunities for selling the Council’s services to Parish/Town Councils and other organisations through the newly created S80 partnership company
Service Improvements
5.11 Growth - There are no assumptions about any revenue growth bids in the figures on Appendix 1. If there are any improvements that emerge and are linked to the Council Plan, the assumption is that they will be cost neutral or met from compensating savings from existing services, as Bassetlaw’s resource envelope will not be increasing. Therefore, Members will have to carefully consider the financial implications of any new service proposals.
5.12 Business Rate Debt – Property Inspector - The implementation of the National Non-Domestic Rate system in 1990, effectively removed any financial incentive for improving the business rate tax base from local authorities. Council’s are legally responsible for bringing matters to the attention of the Valuation Office. IRRV research, which showed that there are instances where:
- Some hereditaments are not included in the rating list;
- properties are under-assessed due to floor value or size of hereditament;
- newly-built and other properties are ready for completion, but with no completion notice being served.
5.13 The Property Inspector is in the process of physically inspecting over 3,500 businesses which is generating income for the Council. Through this work the rateable value of properties has been increased by over £4m. This provides a cash benefit to the authority.
6. Capital Investment Strategy
6.1 The Council has minimal resources available to fund future capital programmes and is very much reliant on the sale of surplus assets. However, the majority of surplus and undeveloped plots of land are under the ownership of the HRA, so resources for General Fund are restricted.
6.2 The Capital Investment Strategy has 2 aims: firstly, to ensure that schemes started in previous years are swiftly completed; and secondly, new schemes added to the capital programme will be appropriately managed to ensure that these are also successfully delivered within the designated financial year. Any new capital investment funded from borrowing will be carefully considered as part of a business case to ensure that borrowing costs are fully covered by new income stream or savings
7. Implications
a) For service users – the Council will face significant and ongoing financial pressure for the foreseeable future, and most certainly during the three years of this plan until the next General Election scheduled for 2020. b) Strategic & Policy
The scale of the withdrawal of Government funding is forcing all councils to do things differently and more innovatively to ensure they succeed in delivering services with less funding. The Financial Strategy Group will be considering different strategies to steer the authority towards achieving self-sufficiency over the coming years.
c) Finance: 19/611
These are set out in the report, and in more detail at Appendix 1.
d) Legal: 212/01/2019
The Council needs to ensure delivery of the Council’s strategic aims and objectives and adherence to the Council’s annual spending plans.
e) Human Resources – These are set out in the report.
f) Community Safety, Equalities, Environmental
This report sets out the overall context against which future decisions will have to be made. The equality and diversity issues will be subject to more detailed assessment by service managers as part of the development and implementation of their budget proposals.
g) G.D.P.R. – None arising directly from this report
h) This is Key Decision No. 726
8. Options, Risks and Reasons for Recommendations
8.1 Bassetlaw needs to review its Financial Strategy and Medium Term Financial Plan annually to ensure its projected expenditure is balanced with the income it receives, and where it doesn’t, or is projected not to, corrective action is identified. | Risk | Impact | Comments | |--------|--------|------------------------------------------------------------------------------------------------------------------------------------------| | Time | Medium | Bassetlaw has always aimed to be one year ahead of the budget reductions it needs to make, so that any changes required are as trouble free as possible. | | | | Savings have been identified to balance the 2019/20 budget through the work of the Financial Strategy Group and the other measures outlined in this report in the run up to the budget setting at Full Council on the 7th March 2019. | | | | Work is underway to find the shortfall projected for future years. This needs to be worked on in the next 12 months to ensure we are in a satisfactory position at the beginning of 2020/21 when there will be significant changes in local government funding. | | Viability | Medium | Bassetlaw is relatively well placed to deal with the next financial years and plans are in place to address the next 5 years although the uncertainty after 2020/21 is a significant worry. | | | | The continuation of the New Homes Bonus and the benefits of the Nottinghamshire NNDR Pool have provided significantly more income than expected and underline the importance of income generation as well as further expenditure cuts. | | Finance | Medium | It is important to consider all measures possible to help reduce the budget gap. Council tax increases play an important part offsetting the continual reductions in available budgets. The budget recommended for 2019/20 will include a range of measures to balance the budget: | | | | - potential council tax increases; | | | | - income maximisation measures; | | | | - service savings; | | | | The foundations for balancing future budgets are also being identified. | | Profile | High | Bassetlaw has cut £10m from its budget since 2007/08 and, faces further reductions of £1.3m over the life of this MTFP. | Adaptability | High | Working with partners will be essential to successfully respond to the challenges that face the Council. Local government is changing rapidly and a successful Council will be able to adapt and work with partners in both the private and public sectors.
9. **Conclusions**
9.1 The review of the MTFP has once again been undertaken against the backdrop of significant reductions and changes to funding, and the additional cost of service pressures, and a lot of uncertainty regarding future funding bringing with them the need to plan ahead for the future with far fewer resources.
9.2 The overall financial management strategy is concerned with all the things the Council needs to do to make Bassetlaw financially stable so that the Council can continue to deliver its overall strategy and thrive as a ‘Viable Co-operative Council’.
9.3 The 2019/20 budget will be balanced when presented to members in the new year allowing the Council to put in place plans to achieve a balanced budget over the following years. By planning for the medium to longer term, consideration can be given to further projects and commercial initiatives to encourage new income generation and development opportunities.
9.4 Membership of the Nottinghamshire business rates Pool has proved financially beneficial since its inception, and it remains important that the Council continues to retain a high proportion of the business rate income it generates.
9.5 Although the financial context is ever more challenging, the Council has a track record of identifying and delivering significant savings and for annual expenditure to be at, or slightly under, the agreed budget, all within a framework of effective financial planning. This approach will need to continue to ensure that a sustainable position can be maintained.
10. **Recommendations**
10.1 Cabinet is recommended to note the projections for the next five financial years as set out in Appendix 1.
10.2 Cabinet approve the Medium Term Financial Plan for 2019/20 – 2023/24 as set out in Appendix 1 of the report, as the framework for the next five years’ budgets.
10.3 Cabinet increase council tax as part of their 2019/20 budget preparations.
10.4 Cabinet delegate the calculation and declaration of the Council Tax deficit or surplus for the 2019/20 budget on the 15th January 2019 to the Head of Finance & Property. | **Background Papers** | **Location** | |------------------------------------------|-----------------------------------| | Previous Year's Budget Reports | Head of Finance & Property | | Local Authority Financial Settlement Data | Head of Finance & Property |
### GENERAL FUND BUDGET 2019/20 TO 2023/24
#### APPENDIX 1
| Approved Budget | Budget 2019/20 | Budget 2020/21 | Budget 2021/22 | Budget 2022/23 | Budget 2023/24 | |-----------------|----------------|----------------|----------------|----------------|----------------| | **£** | **£** | **£** | **£** | **£** | **£** | | **SERVICE BUDGETS** | | | | | | | 501,300 | 426,600 | 407,400 | 413,700 | 420,000 | 426,700 | | 2,490,700 | 2,520,700 | 2,427,100 | 2,455,200 | 2,482,800 | 2,579,400 | | 2,888,200 | 3,017,400 | 2,932,100 | 2,820,700 | 2,813,700 | 2,858,200 | | 151,500 | 169,700 | 178,900 | 190,700 | 182,400 | 184,200 | | 6,492,500 | 6,393,300 | 6,489,400 | 6,586,900 | 6,683,400 | 6,782,000 | | 2,611,900 | 2,760,600 | 1,915,100 | 1,944,800 | 1,980,900 | 2,033,000 | | 310,200 | 412,100 | 323,600 | 321,800 | 330,800 | 340,000 | | **Total Net Cost of Services** | **15,699,300** | **14,673,500** | **14,723,800** | **14,894,000** | **15,203,500** | | **OTHER BUDGETS** | | | | | | | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | | 0 | 0 | 0 | 0 | 0 | 0 | | (175,000) | (350,000) | (175,000) | 0 | 0 | 0 | | **Total Other Budgets** | **(100,000)** | **75,000** | **250,000** | **250,000** | **250,000** | | 653,200 | 670,000 | 691,300 | 721,300 | 703,500 | 713,000 | | (79,000) | (85,000) | (80,000) | (80,000) | (80,000) | (80,000) | | 7,700 | 7,700 | 7,700 | 7,700 | 7,700 | 7,700 | | (3,000) | (1,000) | (1,000) | (1,000) | (1,000) | (1,000) | | 1,500 | 1,500 | 1,500 | 1,500 | 1,500 | 1,500 | | **Net interest and borrowing costs** | **593,200** | **619,500** | **649,300** | **631,700** | **641,200** | | 486,600 | 496,300 | 506,200 | 516,300 | 526,700 | 537,200 | | 1,950,000 | 1,866,000 | 1,902,000 | 1,941,500 | 1,941,500 | 1,941,500 | | 1,076,000 | 1,130,000 | 1,185,000 | 1,185,000 | 1,185,000 | 1,185,000 | | **Total Council Net Budget** | **16,031,900** | **14,875,700** | **15,193,700** | **15,591,100** | **15,641,000** | | **FUNDING BY** | | | | | | | (734,000) | (223,900) | 0 | 0 | 0 | 0 | | 12,420,400 | 12,596,500 | 11,335,900 | 11,335,900 | 11,335,900 | 11,335,900 | | (16,322,200) | (16,587,700) | (15,550,900) | (15,550,900) | (15,550,900) | (15,550,900) | | **Sub-total: Start-up Funding Assessment** | **(4,215,100)** | **(4,215,000)** | **(4,215,000)** | **(4,215,000)** | **(4,215,000)** | | (4,635,800) | (4,700,400) | 0 | 0 | 0 | 0 | | (1,549,370) | (1,493,800) | (1,393,800) | (1,293,800) | (1,293,800) | (1,293,800) | | (582,000) | (621,000) | (621,000) | (621,000) | (621,000) | (621,000) | | (50,000) | (100,000) | (100,000) | (100,000) | (100,000) | (100,000) | | (1,208,600) | (862,600) | (872,000) | (883,000) | (968,000) | (650,000) | | (134,800) | (130,000) | (130,000) | (130,000) | (130,000) | (130,000) | | (95,500) | (124,800) | (71,100) | (71,100) | (71,100) | (71,100) | | (677,000) | (846,000) | 0 | 0 | 0 | 0 | | (5,767,400) | (6,036,200) | (6,287,800) | (6,544,800) | (6,807,200) | (7,075,100) | | (1,076,400) | (1,130,000) | (1,185,000) | (1,185,000) | (1,185,000) | (1,185,000) | | **Total Funding** | **(11,816,800)** | **(10,860,700)** | **(10,976,700)** | **(11,376,100)** | **(11,426,000)** | | **GENERAL FUND BALANCES:** | | | | | | | **Balance @ 1 April** | **1,939,000** | **1,939,000** | **1,939,000** | **1,939,000** | **1,939,000** | | **Movement in year** | 0 | 0 | 0 | 0 | 0 | | **Balance @ 31 March** | **1,939,000** | **1,939,000** | **1,939,000** | **1,939,000** | **1,939,000** |
(5,024,530) REPORT OF THE DIRECTOR OF CORPORATE RESOURCES
CALCULATION OF COUNCIL TAX BASE 2019/20
Cabinet Member: Finance Contact: D Hill Ext. 3174
1. Public Interest test 1.1 The author of the report, David Hill, has determined that the report is not confidential.
2. Purpose of the Report 2.1 To set out and approve the calculation of the Council’s 2019/20 tax base as required by The Local Government Finance Act 1992 in accordance with The Local Authorities (Calculation of Council Tax Base) (England) Regulations 2012.
3. Background and Discussion 3.1 The Local Authorities (Calculation of Council Tax Base) Regulations 2012 (the council tax base regulations), specify the formulae for calculating the council tax base, which must be set each year between 1st December and 31st January.
3.2 The ‘billing authority’ must calculate the tax base based on information contained in its Council Tax valuation list on the 30th November in the year immediately preceding.
3.3 The tax base calculations for Bassetlaw are also used by Nottinghamshire County Council as well as the Nottinghamshire Police and Crime Commissioner and Combined Fire Authority to determine their respective levies for 2019/20. Additionally, the figures are used by the 56 local parish and town councils throughout Bassetlaw.
3.4 The council tax base is a measure of the number of dwellings on which council tax is chargeable in an area or part of an area. It is used for the purposes of calculating an authority's band D council tax. The tax base calculation has changed to take into account the introduction of the local council tax support scheme which commenced in 2013/14.
3.5 Under the new local council tax reduction scheme, the council tax base is affected by whether persons living in a dwelling within an authority area are in receipt of a council tax reduction awarded under the scheme, as the billing authority foregoes council tax income from those dwellings. These local council tax reductions are reflected in the calculation of the council tax base, in order to calculate the correct amount of band D council tax for the billing and precepting authorities in the area.
3.6 For Council Tax purposes, properties are placed in different property ‘bands’ based broadly on the value of the property, using April 1991 as the baseline valuation date. The band is used to determine the Council Tax levied for that property.
3.7 The Council’s basic tax figure is calculated in respect of band D. Other bands are then calculated as a fraction of the tax at band D.
The fractions applicable to the various Council Tax bands are as follows:
| Band | A | B | C | D | E | F | G | H | |------|-------|-------|-------|-------|-------|-------|-------|-------| | Fraction | 6/9ths | 7/9ths | 8/9ths | 9/9ths | 11/9ths | 13/9ths | 15/9ths | 18/9ths |
3.8 The tax base calculation is determined by identifying the number of properties liable to be levied and the banding in which the properties are placed and then applying relevant exemptions, discounts, including the local council tax reduction scheme, surcharges and banding reductions. The information is compiled for each parish and the authority’s tax base is built up from these bands. The resultant figures are then adjusted to the number of band D equivalents by applying the proportions shown above.
3.9 As can be seen in Appendix 1, the total number of dwellings in Bassetlaw is 52,518 (line 1). Once adjusted for discounts, exemptions, premiums and band reductions this figure reduces to 47,727.50 (line 14). The total is then converted into the number of band D equivalents, 39,268.67 (line 16). The figure is finally adjusted for the local Council Tax reduction scheme (line 18) to produce the tax base figure of 35,341.23 properties (line 19).
3.10 The final band D equivalent figure is then further adjusted to allow for a provision of growth of housing stock, additional requirements relating to Council Tax reduction scheme changes, anticipated losses on collection, and any other relevant unforeseen adjustments. A final tax base figure is then obtained, shown on Appendix 1 as 34,794.99 band D properties.
3.11 Regulations under the Localism Act enacted as an amendment to LGFA 1992 state that a Council should calculate a tax base. The tax base recommended on the attached appendices is 34,794.99 properties, net of reduction, discounts and growth. This tax base shows an increase in band D equivalents of 563 properties compared to the tax base set for 2018/19. This in turn will result in additional income for all preceptors.
3.12 In a report of the Director of Resources to Cabinet on 4th December 2012, it was agreed that ‘the amount of Council Tax payable in respect of long term empty dwellings after the 2 year period, be increased by 50% where regulations permit’. Under the Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018, Councils have been given the power, by amending the Local Government Finance Act 1992, to increase the long term empty premium to 100% for 2019/20 where the property has been empty for more than 2 years.
3.13 The calculation of this tax base has assumed implementation of the powers contained in section 12 of the Local Government Finance Act 1992 (which is amended at section 11b by the 2018 Act) 4. **Implications**
a) **For Service Users**
The tax base forms the basis of the Council Tax levels for 2019/20 for Bassetlaw's Council Tax payers. The amount required to be met from Council Tax for 2019/20 (to be approved by Council on 7th March 2019) will be divided by the tax base set to determine the Bassetlaw District Council charge.
b) **Strategic & Policy**
The income received from Council Tax is key to financing the provision of Council services.
c) **Financial – Financial Ref. 19/16**
The tax base forms the basis of the Council’s Council Tax setting resolution for 2019/20, which is due to be considered by full Council on 7th March 2019.
The adjusted Bassetlaw tax base must be notified to Nottinghamshire County Council and to respective Police and Fire Authorities before 31st January 2019.
The Parish tax base figures are notified individually to the Parish Councils in order that they may determine their level of precept on Bassetlaw District Council.
The tax base calculation performed as at 30th November 2018 is subject to a collection rate factor which has been set at 98%.
d) **Legal – Legal Ref. 204/01/2019**
The relevant regulations place a legal requirement on a billing authority to set a tax base.
e) **Human Resources**
None from this report.
f) **Community Safety, Equalities, Environmental**
None from this report.
g) **Whether this is a key decision, and if so the reference number.**
This is key decision number 727.
5. **Options, Risks and Reasons for Recommendations**
5.1 The Council has a statutory obligation to set a tax base and to notify precepting authorities. To not set a tax base would mean a breach of the statutory requirement and there would be no basis on which to set a Council Tax for 2019/20. 5.2 Setting the Council tax base is the first step in determining the Council Tax for 2019/20. The tax base must be determined and notified to other relevant bodies by 31st January each year.
6. **Recommendations**
6.1 Cabinet agrees that the Council tax base for the year 2019/20 shall be 34,794.99 band D properties, subject to the Council Tax Reduction Scheme being agreed as proposed.
6.2 That Cabinet recommends to Council the calculations set out in Appendix 1 to agree the Council tax base calculation for the district for 2019/20 and instructs officers to notify this figure to the major precepting authorities.
6.3 That Cabinet recommends to Council the calculations set out in Appendix 2 figures which are tax bases for parts of the area and instructs officers to notify the 2019/20 tax base to Town and Parish Councils, Parish Meetings and Charter Trustees as soon as is practicable.
6.4 That Cabinet recommends to Council that the additional premium charge levied to properties that have been empty for a period in excess of 2 years, be increased from 50% and set at 100% for the year 2019/20.
## Bassetlaw District Council - Council Tax Base 2019/20
### Appendix 1
| Dwellings shown on the Valuation List for the authority on 30th November 2018 | Band A entitled to disabled relief reduction | Band A | Band B | Band C | Band D | Band E | Band F | Band G | Band H | TOTAL | |---|---|---|---|---|---|---|---|---|---|---| | 1 | Total number of dwellings on the Valuation List | 26,920 | 7,793 | 6,349 | 6,112 | 3,106 | 1,492 | 689 | 57 | 52,518 | | 2 | Number of dwellings on valuation list exempt on 30th November 2018 (class B to W exemptions) | 411 | 75 | 75 | 40 | 19 | 11 | 7 | 2 | 640 | | 3 | Number of demolished dwellings on 30th November 2018 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | | 4 | Number of chargeable dwellings on 30th November 2018 (lines 1-2-3) | 26,509 | 7,718 | 6,274 | 6,072 | 3,087 | 1,481 | 682 | 55 | 51,878 | | 5 | Number of chargeable dwellings in line 4 subject to disabled reduction on 30th November 2018 | 149 | 56 | 64 | 53 | 30 | 19 | 15 | 12 | 398 | | 6 | Number of chargeable dwellings effectively subject to disabled relief on the Band by virtue of disabled relief (lines 4-5+6) | 149 | 56 | 64 | 53 | 30 | 19 | 15 | 12 | 398 | | 7 | Number of chargeable dwellings adjusted in accordance with Band C (lines 4-5+6) | 149 | 26,416 | 7,726 | 6,263 | 6,049 | 3,076 | 1,477 | 679 | 43 | 51,878 | | 8 | Number of dwellings in line 7 entitled to a 25% discount by virtue of occupancy on 30th November 2018 | 52 | 10,977 | 2,487 | 1,770 | 1,279 | 524 | 226 | 78 | 6 | 17,399 | | 9 | Number of dwellings in line 7 entitled to a 50% discount by virtue of occupancy on 30th November 2018 | 1 | 27 | 14 | 6 | 14 | 9 | 13 | 24 | 2 | 110 | | 10 | Number of dwellings in line 7 entitled to a 25% discount by virtue of being empty less than 6 months on 30th November 2018 | 433 | 81 | 46 | 37 | 17 | 9 | 7 | 1 | 631 | | 11 | Number of dwellings in line 7 entitled to a 25% discount by virtue of being empty and uninhabitable on 30th November 2018 | 20 | 1 | 7 | 11 | 0 | 1 | 0 | 0 | 40 | | 12 | Number of dwellings in line 7 subject to a 50% surcharge by virtue of being empty more than 2 years on 30th November 2018 | 96 | 14,959 | 5,143 | 4,434 | 4,708 | 2,526 | 1,228 | 570 | 34 | 33,698 | | 13 | Number of dwellings in line 7 subject to a 50% surcharge by virtue of being empty more than 2 years on 30th November 2018 | 120 | 36 | 16 | 20 | 9 | 4 | 5 | 1 | 211 | | 14 | Total equivalent number of dwellings after discounts, exemptions and disabled relief (to 2 decimal places) | 135.50 | 23,785.00 | 7,148.75 | 5,836.25 | 5,750.25 | 2,964.25 | 1,419.50 | 655.75 | 42.25 | 47,727.50 |
| 15 | Ratio to Band D | 5/9 | 2/3 | 7/9 | 8/9 | 1 | 1 | 2/9 | 1 | 4/9 | 1 | 2/3 | 2 | | | Number of Band D equivalents (to 2 decimal places) (line 14 x line 15) | | | | | | | | | |---|---|---|---|---|---|---|---|---|---| | 16 | 75.28 | 15,858.67 | 5,560.14 | 5,187.78 | 5,750.25 | 3,610.75 | 2,050.39 | 1,092.92 | 84.50 | 39,268.67 | | 17 | Tax base for Revenue Support Grant purposes | | | | | | | | | 39,268.67 | | 18 | Reduction in tax base due to Council Tax Reduction Scheme | | | | | | | | | 3,927.44 | | 19 | Tax base before adjustment for growth | | | | | | | | | 35,341.23 |
- Estimate of dwellings due for completion by 31.03.19 not yet on Valuation List: 144.22
- Estimate of new building coming on stream in 2019/20: 119.67
- Growth in Council Tax Reduction Scheme due to additional take up: 100.00
Total: 35505.12 Collection Adjustment (98%): 710.13 Taxbase for Bassetlaw for 2019/20 (2018/19 in brackets): 34,794.99 (34231.95) | Parish/Town | Area Council Tax Base | |------------------------------------------------|-----------------------| | Askham | 82.80 | | Babworth | 223.47 | | Barnby Moor | 118.44 | | Beckingham-cum-Saundby | 478.44 | | Blyth | 490.50 | | Bole | 54.54 | | Bothamsall | 91.53 | | Carburton | 25.47 | | Carlton-in-Lindrick | 1625.22 | | Clarborough & Welham | 393.21 | | Clayworth | 143.55 | | Clumber & Harwick | 31.68 | | Dunham-on-Trent with Ragnall, Fledborough & Darlton | 222.48 | | East Drayton | 117.09 | | East Markham | 495.90 | | East Retford Charter Trustees | 6997.05 | | Elkesley | 242.46 | | Everton | 372.15 | | Gamston with West Drayton & Eaton | 247.05 | | Gringley-on-the-Hill | 347.31 | | Harworth & Bircotes | 2084.04 | | Haughton | 20.79 | | Hayton | 158.94 | | Headon-cum-Upton with Grove & Stokeham | 161.37 | | Hodsock | 597.42 | | Holbeck & Welbeck | 138.87 | | Laneham | 151.20 | | Lound | 200.61 | | Markham Clinton | 93.87 | | Mattersey | 246.06 | | Misson | 270.72 | | Misterton | 723.06 | | Nether Langwith | 139.50 | | Normanton-on-Trent with Marnham | 202.95 | | North & South Wheatley | 272.43 | | North Leverton with Habblesthorpe | 340.74 | | Norton Cuckney | 141.21 | | Rampton | 285.12 | | Ranskill | 512.19 | | Rhodesia | 236.61 | | Scaftworth | 18.99 | | Scrooby | 131.49 | | Shireoaks | 458.64 | | South Leverton | 197.91 | | Sturton-le-Steeple | 196.38 | | Styrrup with Oldcotes | 252.99 | | Sutton | 259.83 | | Torworth | 84.60 | | Treswell with Cottam | 123.75 | | Tuxford | 802.71 | | Walkeringham | 355.50 | | Wallingwells | 15.12 | | West Burton | 8.10 | | West Stockwith | 116.55 | | Wiseton | 44.10 | | Worksop Charter Trustees | 11950.29 | | TOTAL | 34794.99 | REPORT OF THE DIRECTOR OF CORPORATE RESOURCES
PROPERTY ASSET MANAGEMENT PLAN 2019/20 UPDATE
Cabinet Member: Finance Contact: Dave Hill Ext: 3174
1. Public Interest Test 1.1 The author of this report, David Hill, has determined that the report is not confidential.
2. Purpose of the Report 2.1 For Members to approve the 2019/20 update to the Property Asset Management Plan 2015/16 to 2019/20 approved by Cabinet in February 2015.
3. Background and Discussion 3.1 In order to ensure that the Council is managing its assets more effectively, an up to date Asset Management Plan is essential.
3.2 This Asset Management Plan sets out how the Council’s Property Portfolio will contribute to the Council’s main aims/key priorities identified in the Council Plan.
3.3 The appendix provides an update to the Property Asset Management Plan 2015/16 to 2019/20 with regard to:
- Co-location of services;
- Maintaining assets (including condition surveys);
- Investment portfolio review;
- Property disposals.
3.4 This is the last year of the current Property Asset Management Plan. A complete and comprehensive review of the Plan will need to take place in 2019/20 in order to produce a meaningful Plan for the next 5 years. 4. **Implications**
a) **For Service Users**
By adopting the Property Asset Management Plan the service delivery to customers of the authority will be enhanced.
b) **Strategic and Policy**
The Asset Management Plan is a five-year plan which is reviewed annually.
c) **Financial – Ref: 19/4**
There are no immediate financial implications arising from this report. However, over the next financial year, assets may be acquired and disposed of, whereby further reports will be presented to Cabinet for approval with the full financial implications outlined.
d) **Legal – Ref: 209/01/2019**
The legal implications are as contained within the report.
e) **Human Resources**
None contained in this report.
f) **Community Safety, Equalities, Environmental**
Any implications are outlined in the Asset Management Plan. The Council’s non-operational assets are occupied by a variety of organisations on a contractual basis. The Council seeks to eliminate access discrimination in accordance with the Equality Act 2010.
g) **This is key decision number 728.**
5. **Options, Risks and Reasons for Recommendations**
5.1 The Property Asset Management Plan is a key document that sets out how assets are effectively managed to support the efficient delivery of its priorities.
6. **Recommendations**
6.1 That the Cabinet recommends approval of the Property Asset Management Plan 2019/20 update to the Extraordinary Council on 31st January 2019.
**Background Papers**
| Property Asset Management Plan 2015/16 to 2019/20 | Location | |--------------------------------------------------|----------| | QB Estates Unit - Floor 2 | | BASSETLAW DISTRICT COUNCIL
PROPERTY ASSET MANAGEMENT PLAN
2019/20 UPDATE 1 FORWARD
The purpose of the plan is to ensure that the Council’s property holdings are aligned to meet strategic priorities and service needs to ensure that the right property is available in the right place, and at the right time.
The goal is to get the most from our assets as they support the provision of Council services and the delivery of our priorities. The Council will be judged on the quality of the services it delivers not the quality of its buildings, but those land and property assets do support the ongoing provision of the services provided to businesses and residents in the District. Property remains the second highest cost incurred by most public authorities after expenditure on staff, and its effective and efficient management is key to being able to deliver value for money and quality services.
The Property Asset Management Plan for 2015/16 to 2019/20 details an effective strategy and robust operational plan for the management of Bassetlaw District Council’s significant land and building assets over a 5 year period.
Bassetlaw District Council operates a substantial property portfolio comprising of approximately 1,100 Operational Properties with a total combined asset value of just over £47.0 million.
2 Bassetlaw District Council Plan 2017-20
The Council identified the following priorities in the Council Plan 2014 - 2017:
- Driving Efficiency and Resilience
- Supporting Business and Growth
- Enhancing Home and Place
The Council’s land and property assets provide a key to the delivery of its services to residents of the District and delivery of these Corporate Priorities. The Asset Management Plan provides a summary of how the Council uses its land and property assets to contribute towards ambitions, whilst at the same time:-
- Supports improvements to service delivery;
- Continues to provide a significant income through property rents and capital receipts;
- Identifies and drives out efficiencies, such as co-location of services.
The Asset Management Plan is also prepared alongside the Capital Investment Strategy in order to ensure that our plans are financially sustainable. The focus of the Strategy is towards optimising the use of the Council’s land and buildings in terms of service benefit, affordability and best value for money.
The intention is to create an improved and well planned property portfolio, that is fit for purpose and able to meet changing requirements whilst at the same time is also one that costs less to run, and able to release funds to invest in improved delivery of front line services for the benefit of the community.
Specifically, the objectives are:
- To have sufficient, fit for purpose, well maintained and managed property in the right locations to meet the need of services, including community facilities in district and local centres.
- To identify opportunities for “Total Place Initiatives” in order to reduce the number of administrative office buildings in the outlying district and to identify co-location opportunities to share with public sector partners where this benefits the parties in supporting improved service delivery or efficiency.
- To make investment in property that is prioritised corporately according to strategic need and to enhance the Council’s commitment to the environment.
- To continue to support and promote regeneration and economic development and employment opportunities within the district.
- To support transformation of service delivery and community infrastructure using strategic property solutions.
- To have an estate that is fit for purpose for the delivery of all Council Services.
- To only retain investment property that generates strong income streams to help fund asset maintenance and support service delivery.
- To identify development opportunities that will encourage business into the district and with this create employment opportunities.
- To use Council land holdings to support affordable housing. 2.1 Asset Management
Linkages with the Council Plan
Supporting Business and Growth
- Reduce running Costs
- Maximise the use of the Council's assets
- Enhancing Home and Place
- Driving Efficiency and Resilience
- Maximise our property portfolio to increase our business base
- Ensuring that residents have access to shared services across the District
- Increase the supply of affordable homes in the District by the identification of sites in BDC ownership
- Working in partnership with the DWP by making available suitable premises
- Ensure new developments provide and contribute towards the infrastructure of the local area and to the benefit of local communities 3 CO-LOCATION OF SERVICES
Continuing on from the earlier lettings of surplus office space within the former County Council Wing to the Two Shires Credit Union and the Worksop CAB, the DWP occupied a substantial part of the ground floor of Queens Buildings from May 2015. This letting not only improved services to users but also reinforced Queens Buildings’ as a “hub” for the provision of jointly located local services. During the summer of 2018, Notts Police moved into the second and third floors of the former County Council wing. The above lettings have provided the Council with a new source of income in terms of rent and savings on building running costs recovered amounting to around £146k per annum.
Nottinghamshire Police occupied of two floors at 17b The Square at Retford from January 2016. Their relocation into the Council’s building not only ensured presence of a local police station in the town centre but utilised unused office space in the building and by doing so this has reduced the Council’s running costs of the building. The letting to the police at 17b The Square produced a further income of £22k per annum from office space that would have been otherwise vacant.
Substantial rebuilding works have been completed at Queens Buildings which has created open plan offices on all the floors of the building. Not only has this made better use of the available space and improved the overall working environment, this enabled the vacant office space within the Old Town Hall to be available for refurbishment.
Currently all the space in Queens Buildings and the former County Wing is either occupied or earmarked for occupation in the near future.
4 MAINTAINING ASSETS
An essential part of Asset Management is for an effective Planned Maintenance Policy and a thorough understanding of the condition of the property portfolio in order that strategic decisions can be made with full information.
Physical condition surveys were undertaken on 66 properties and sites around 5 years ago. That survey divided the buildings or sites up into a number of elements which is then allocated a condition category from A to D. Each element also has a “repair budget required” allocated to it as well as an identified life expectancy until that element requires repair or replacement.
Where only a repair is identified for an element the budgeted sum reflects an upgrade to condition B (which is defined as “satisfactory - performing as intended but exhibiting minor deterioration”). There may be circumstances where a different standard is appropriate for example a short life building used for a temporary purpose. In all cases however the asset must comply with statutory requirements such as health and safety, disabled access, food hygiene.
A new condition survey of all properties (excluding housing assets managed by A1 Housing) has been completed and the extent of the backlog maintenance costs identified from this work are currently being considered. From this work a new five-year planned maintenance programme is identified for each property taking into account repairs and maintenance, fire risk recommendations, access improvements and essential health and safety work. The surveys will be carried out for properties where the Council has a direct repairing obligation.
The aim of the programme is to ensure that the Council's assets remain fit for purpose and to shift the focus of maintenance closer to the RICS best practice ratio of 60% (planned) – 40% (responsive) where sufficient funds exist. Overall, this approach should reduce the cost of maintenance over the life of the programme.
The five-year planned maintenance programme is monitored annually to assess the true maintenance backlog for Council properties. The identified backlog for each property will be the difference in work carried out in year against the identified programme.
When possible, the opportunity to dispose of vacant and underused properties will continue to be considered with a view to further reduce backlog maintenance and generate capital receipts. One property identified was the Regal at Carlton Road, Worksop. Terms for the sale of the Regal Cinema have also been agreed thereby reducing the backlog maintenance figure by a further £900k.
5. INVESTMENT PORTFOLIO REVIEW
The existing work plan was amended following consideration of the recently completed Employment Land Review. One of the outcomes this review identified is that several of the existing industrial estates are to be earmarked for disposal or redevelopment. The first industrial estate to be disposed of was Old Brewery Yard which generated a capital receipt of £372,000 but also had a back-log maintenance liability of £375,000.
One of the older industrial buildings at the Leverton Road Industrial Estate Retford is currently under review with the intention of preparing a business case for its demolition and replacement with new units.
Following a cabinet report recommending that unused land within the Harrison Drive Industrial Estate at Langold be developed to create a further four industrial units available for letting. Funding was identified to build 4 new units and building works have just started on site and the new units will be available to let from June 2019.
5.1 Key Strengths
- Varied Portfolio with historically relatively very low void rates, remaining at around 2%.
5.2 Areas for Improvement
- Due to staff changes there are a wide variety of lease and tenancy agreements that have been adopted and a standard approach is required.
- The stock has remained static over the last five years and there is significant potential through ring fencing to adopt a disposal/re-investment strategy to increase income and provide new assets.
- As referred to above, there is an ongoing piece of work to establish the viability of developing up to 4 new additional industrial units on vacant BDC owned land within the Harrison Drive Industrial Estate at Langold • Ongoing Programmed Property Maintenance (PPM) is required in order to ensure that investment assets are fit for purpose.
• The new Property Management software needs to be fully populated with data, potentially using the i Dox system used elsewhere in the Council
• More effective management of tenant rent arrears through early contact and use of bailiff action where necessary.
5.3 Threats
• Market volatility/demand for properties held in portfolio.
• Property condition and changes in legislation that will impact on the ability to let poorer quality properties. The RICS website reports the following:
“As from the 1st April 2018 there will be a requirement for any properties rented out in the private rented sector to normally have a minimum energy performance rating of E on an Energy EPC. The regulations will come into force for new lets and renewals of tenancies with effect from 1st April 2018 and for all existing tenancies on 1st April 2020. It will be unlawful to rent a property which breaches the requirement for a minimum E rating, unless there is an applicable exemption. A civil penalty of up to £4,000 will be imposed for breaches. There are separate regulations effective from 1st April 2016 under which a tenant can apply for consent to carry out energy efficiency improvements in privately rented properties.”
• Tenant default (failure to pay rent and comply with repair covenants).
• Property voids.
5.4 Key Objectives
• Property management to maximise investment return in line with market conditions.
• Debt management through liaison with tenants and if necessary, bailiff action to recover arrears
• Minimise letting voids through pro-active property management
• Performance is challenged continuously and poorly performing properties are identified through benchmarking/performance measures. Assessments are to be made in respect of further investment or disposal
• Undertake maintenance on a planned basis to maintain asset life, repairs to take into account whole life costing
• To seek to acquire new properties where possible which can generate a financial return for the Council greater than that obtained for alternative non-property investments held by the Council in order to enhance the income streams outlined above.
- The disposal of underperforming assets as identified in the employment land review in order to reduce the Council’s costs in terms of management and day to day maintenance and to provide a source of income to reinvest in replacement income producing assets.
6 PROPERTY DISPOSALS
6.1 Key Objectives
- To generate capital receipts that can be reinvested in services or other assets that meet the needs of the organisation.
- To focus on the sale of non-income generating assets to minimise income loss as far as possible in the early stages of the programme and then through a robust property review exercise.
- As the supply of surplus property and development land comes to an end, future disposals will be prioritised based on investment performance as identified in the performance management framework.
- Investment and disposal decisions are based on thorough option appraisal and whole life costs.
- Achieve efficiency savings through disposal of surplus operational property.
- Strategic Service Priorities.
- Regeneration.
- Identification of joint service delivery and partnership working.
- Co-location.
- Property rationalisation.
- Community transfer of assets.
- Sustainability.
6.2 Disposal Work plan
A work plan has been developed which details priority actions under this Strategy. The disposal of surplus property assets provides funding that will help deliver priorities. Increasingly the identification, marketing and subsequent disposal of surplus, under-utilised or under-performing property has become a priority for the Council. However the timing of these disposals must have regard to the prevailing market conditions in order to ensure that the maximum benefit to the Council is achieved. The workplan for 2019/20 includes the following:
- Sale of electricity sub-station sites across the district;
- Land at Broad Gores, Clarborough; Terms now agreed for a sale and with legal
- Land at Turner Road, Worksop; - Terms now agreed and with legal
- Land off Kingston Road, Worksop (in conjunction with the County Council);
- Land at Newgate Street/Bridge Street, Worksop. this sale will complete Spring 2019
- Land and Buildings at Rectory Road, Retford - Terms now agreed for a sale
- The potential disposal of The Regal, Carlton Road, Worksop - Terms now agreed for a sale and with legal
- Proposed sale of 88/90 Albert Road, Retford.
During financial year 18/19 the Estate Division undertook number of garage site sales generating a capital receipts of £295k from the sale of 5 sites, all of these sites were underused and producing minimal levels of income
The disposals work plan outlines the processes to be followed in terms of initial consultations to confirm that surplus premises are not required elsewhere within the authority, through to marketing and final disposal of the property interest. The Capital Programme remains dependent upon the generation of capital receipts from the sale of assets.
There will be opportunities to dispose of land and buildings to Bersahill Ltd; the Council joint venture with Robert Woodhead Ltd. Agreed sales to the JVC will be a full market value and with the intention of creating quality housing developments.
It is important to understand that this is a finite resource and the capital receipts generated from future disposals which are not linked to future initiatives and can be used as an unfettered receipt is relatively low in both number and value.
The impact of the current economic climate and the remaining significant uncertainty regarding the timescale for economic recovery renders the development of a disposals work plan for a 5-year period that can be relied upon as somewhat problematic. It is not possible to predict when the market will recover, or what values will be achieved post recovery. Nevertheless, opportunities to dispose of surplus assets should still be pursued, in particular where these represent an ongoing liability to the Council regardless of the current market conditions. Whilst there are signs of property markets improving locally the position overall remains sluggish and significant improvement in the near future is unlikely.
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b6134a43413eb3ed9e9d637e264ef874d78ceae0 | Guidelines for market investigations: Their role, procedures, assessment and remedies
April 2013
CC3 (Revised) Guidelines for market investigations: Their role, procedures, assessment and remedies
Contents
Introduction ......................................................................................................................... 5 Enterprise and regulatory reform ....................................................................................... 6 A brief note on terminology ............................................................................................... 6 Part 1: The promotion of competition in the UK ............................................................... 7 Threats to competition ....................................................................................................... 7 Responding to the threats to competition .......................................................................... 8 The market investigation regime ....................................................................................... 8 The making of references to the CC .................................................................................. 9 Public interest issues ........................................................................................................ 10 Terms of reference and the statutory questions ............................................................... 10 An AEC ............................................................................................................................ 11 Features ............................................................................................................................ 11 Remedial action ................................................................................................................ 12 Part 2: The conduct of a market investigation ................................................................ 12
1. The gathering and analysis of evidence ...................................................................... 12 Range of analysis ........................................................................................................... 12 Qualitative and quantitative analysis ........................................................................... 13
2. Processes and procedures ............................................................................................ 13 A. Statutory obligations and rules for Inquiry Groups .................................................. 14 B. Appointment of Inquiry Groups and staff ................................................................. 15 C. Overarching procedural issues ............................................................................... 16 D. The main stages of an investigation ....................................................................... 18 Part 3: The AEC test .......................................................................................................... 24 Part 3: Section 1—Market characteristics and outcomes .............................................. 24 Market characteristics ...................................................................................................... 24 Market share data ............................................................................................................. 25 Other background market characteristics ....................................................................... 25 Market outcomes ............................................................................................................. 26 A. Prices and profitability ............................................................................................. 26 B. Quality, innovation and other non-price indicators .................................................. 30 Part 3: Section 2—Market definition ................................................................................ 30 The role and determinants of market definition ............................................................... 31 Assessing substitutability ................................................................................................. 32 Dimensions of the market ............................................................................................... 32 Product market ............................................................................................................. 33 Geographic market ....................................................................................................... 33 Other issues ....................................................................................................................... 34 Customer groups ......................................................................................................... 34 Temporal dimensions ................................................................................................. 34 Grouping markets together ......................................................................................... 35 Effects outside the relevant market ................................................................. 35
Part 3: Section 3—The competitive assessment .................................................. 35 Identifying features that harm competition ......................................................... 35 Structural features ............................................................................................... 36 Conduct features ................................................................................................. 36 A combination of features .................................................................................. 37 Theories of harm .................................................................................................. 37 Formulating and reviewing theories of harm ....................................................... 37 Potential sources of competitive harm ................................................................. 38
1. Unilateral market power .................................................................................. 40 Indicators of unilateral market power ............................................................... 41 Assessing sources of unilateral market power .................................................. 41 (a) High concentration ...................................................................................... 42 (b) Capacity constraints ................................................................................... 43 (c) Lack of substitutability of products .............................................................. 43 (d) Weak supply-side constraints .................................................................... 44
2. Barriers to entry and expansion ....................................................................... 45 Types of entry barriers .................................................................................... 46 Assessing the impact of entry barriers ............................................................. 49
3. Coordinated conduct by firms ......................................................................... 51 Forms of coordination ...................................................................................... 51 Impact of coordinated conduct ....................................................................... 51 Assessing potential concerns about coordination ............................................. 52
4. Vertical relationships ....................................................................................... 56 Impacts of vertical relationships ..................................................................... 57 Assessment of vertical relationships ............................................................... 58
5. Weak customer response ................................................................................ 62 Impacts and assessment of weak customer response ....................................... 63
Part 3: Section 4—Concluding the AEC test ....................................................... 68
Part 4: Remedial action ....................................................................................... 69 Framework for consideration of remedies .......................................................... 69 The remedy questions ..................................................................................... 69 A comprehensive solution to the AEC and/or detrimental effects .................... 70 Effectiveness .................................................................................................... 71 Reasonableness and proportionality ................................................................. 73 Assessing the impact of remedies .................................................................. 74 Possible remedy outcomes ............................................................................. 75 Relevant customer benefits ............................................................................ 76 Possible relevant customer benefits ............................................................... 76 Relevant customer benefits and remedies ....................................................... 78 Choice of remedy ............................................................................................ 78 Remedies universe .......................................................................................... 78 Selection of remedies ...................................................................................... 81
Annex A: Market characteristics and outcomes .................................................. 87 Annex B: Remedial action ................................................................................... 91 Introduction
1. Market investigations were introduced by the Enterprise Act 2002 (the Act). In June 2003, the Competition Commission (CC) published CC3, Market Investigation References: Competition Commission Guidelines as one of the series of documents which it is required to publish under section 171(3) of the Act. Since the inception of the regime the CC has learnt much from its practical experience of conducting cases, and has progressively refined its policies, practices and procedures. These Guidelines distil the lessons the CC has absorbed since the introduction of the new regime and replace the 2003 version.
2. The Guidelines are in four parts, plus two annexes:
- **Part 1** outlines the nature of competition and sets market investigations within the context of the overall regime for the promotion of competition within the UK. It describes how references are made to the CC and the statutory questions the terms of reference put to the CC.
- **Part 2** provides guidance on the way the CC gathers evidence and the range and depth of its analysis, and outlines the processes and procedures the CC typically follows in conducting a market investigation and, if necessary, implementing remedies.
- **Part 3** addresses the three issues the CC looks at in applying the AEC test:
- the characteristics of the market and the outcomes of competition within it;
- the definition of the market; and
- the state of competition in the market; specifically, whether there are any features harming competition.
- **Part 4** discusses the remedial action the CC may prescribe, if it has found there to be an AEC; this may include divestiture, behavioural remedies or recommendations for action by Government or other agencies.
- **Annexes:**
- A: Market characteristics and outcomes:
1. Measuring market shares and concentration.
2. Measuring profitability.
- B: Remedial action.
3. The types of markets referred to the CC vary widely, making it impossible to cover in these Guidelines all issues and aspects that might be encountered during investigations. The CC’s assessment of markets has inevitably to be case-specific. The Guidelines cannot therefore be applied in a rigid and mechanistic way. While the CC will always have regard to these Guidelines in conducting market investigations, it will apply them flexibly and may sometimes depart from them, explaining its reasons for doing so, if it considers that the particular circumstances of the case (including the information available and the time constraints applicable) justify doing so. Past case references are included in the Guidelines for illustrative purposes only and do not constrain the CC’s approach.
4. The Guidelines reflect the views of the CC and the competition regime in place at the time of publication. However, markets, economic theory, the legal background and best practice may develop and these Guidelines may be revised from time to time to reflect such developments.
Enterprise and regulatory reform
5. The enactment of reforms along the lines proposed in the Enterprise and Regulatory Reform Bill, introduced into Parliament on 23 May 2012, will have a significant impact on the structure of the competition regime, especially by transferring functions of the CC and the Office of Fair Trading (OFT) to a new body, the Competition and Markets Authority (CMA).
6. The prospective legislation, as introduced in parliament, would bring some changes to the market investigation regime. The CMA could be asked to investigate issues that affect different markets (‘cross-market practices’) and the Secretary of State would be able to ask it to consider defined public interest considerations during market investigations by the CMA. Some changes are also contemplated to the CC’s remedy powers. The time limits for investigations would be tightened, with a proposed time limit of 18 months for investigations (with the possibility of a six-month extension) and statutory time limits for remedies implementation (see paragraph 89). In due course, these Guidelines will be updated to reflect these legislative changes.
A brief note on terminology
7. All references to statute, unless otherwise stated, relate to the Enterprise Act 2002—referred to throughout as ‘the Act’—and all references to ‘section(s)’, unless otherwise specified, relate to the Act. The term ‘referring body’ refers to the body making the reference (see paragraph 22).
8. Several terms used in the context of market investigations are ‘terms of art’, having specific and limited, rather than literal, meanings: notably, ‘theory of harm’ (see paragraph 163), ‘relevant market’ (see paragraph 26), ‘efficiencies’ (see paragraph 174) and ‘a well-functioning market’ (see paragraphs 30 and 320).
9. Throughout this publication also:
- unless otherwise specified, the term ‘price’ is used as shorthand for all aspects of a supplier’s competitive offer; a change in price should be read as incorporating any comparable change in any element of the competitive offer;
- the term ‘customers’ includes ‘consumers’;¹
- the term ‘products’ is used to apply to goods and/or services;
- ‘market participants’ are sellers, buyers and intermediaries, such as distributors, agents and platforms in multi-sided markets;
¹ See section 183(1). • the term ‘market power’ is used to denote the ability of a firm to influence aspects of competition (see paragraphs 178 to 204: unilateral market power); there are gradations of market power, with many firms having limited or transitory market power but only some having ‘significant market power’ which endures over time and gives them the ability to maintain prices above the competitive level, or restrict output or quality below competitive levels, without the consequent loss of sales becoming unprofitable; and
• the phrase ‘to harm’ competition is often used in the Guidelines as shorthand for the statutory language of ‘prevents, restricts or distorts’ competition.
Part 1: The promotion of competition in the UK
10. Competition is a process of rivalry as firms seek to win customers’ business. It creates incentives for firms to meet the existing and future needs of customers as effectively and efficiently as possible—by cutting prices, increasing output, improving quality or variety, or introducing new and better products, often through innovation; supplying the products customers want rewards firms with a greater share of sales. Beneficial effects may also come from expansion by efficient firms and the entry into the market of new firms with innovative products, processes and business models, and the exit of less successful ones.
11. In some instances firms compete for a market, rather than in a market, for example, by competing to be the first to claim a patent in a key area, the first to achieve scale in a new market, or to win a public procurement contract or franchise to supply a public service.
12. Vigorous competition between firms also fosters economic growth, as firms respond to competitive pressure by striving for efficiency and directing their resources to customers’ priorities. Customers have an important part to play in stimulating rivalry between suppliers by making informed decisions which reward those firms that best satisfy their needs or preferences. Markets work best when both the supply side (the firms) and the demand side (the customers) interact effectively.
Threats to competition
13. There are many different ways—and combinations of ways—competition may be impeded in a market. Some instances are given in the following two paragraphs.
14. One or more firms may exhibit significant market power(^2) when the market is highly concentrated, potentially adversely affecting not only price, cost and profits levels but also competition in the more dynamic sense of innovation and product development. There may be barriers to entry and expansion of various kinds, giving incumbent firms an advantage over potential market entrants as a result of, for example, scale economies, technological expertise, a strong customer network or regulatory requirements.
15. Other ways in which competition can be threatened include: rival firms may adopt, in some cases only tacitly, a coordinated approach to the market; vertical relationships among firms may enable them to foreclose markets or customers to rival firms, or otherwise to exert a dampening effect on competition; and customers may lack
(^2) See paragraph 9. information about what product to choose, may not be able to judge between different products on offer or may be locked into one supplier and unable to switch to another.
Responding to the threats to competition
16. Regulators, competition authorities and governments have an important role to play in making sure competition is as effective as possible. They do so in various ways. Sometimes the Government may intervene directly in specific markets with this aim (for example, in the programme of liberalizing public utilities in the 1980s and 1990s). The merger control regime limits the ability of firms to avoid competing with their rivals by gaining control of them. Economic regulation of certain sectors involves measures to assist customers to make informed choices and to encourage new entry and investment, promoting the emergence of competition in markets where it has been historically weak. Regulators can also intervene directly to prevent or mitigate the harmful effects of a lack of competition in the short term.
17. Legal prohibitions play a particularly important role in limiting the extent to which firms are able to restrict competition between them or win customers in non-competitive ways. Specifically, the prohibitions under the Treaty on the Functioning of the European Union (TFEU)(^3) and the Competition Act 1998 (CA98)(^4) are designed to prevent and penalize collusive conduct among rival firms or abusive practices by a dominant firm.(^5) Enforcement of these prohibitions falls, not to the CC, but to the European Commission and the OFT together with certain (‘concurrent’) sectoral regulators,(^6) respectively.
The market investigation regime
18. The CC’s market investigation regime sits within the broad spectrum of competition law, operating alongside other regulatory mechanisms, including prohibitions (see paragraph 17), by allowing the competition authorities the opportunity to assess whether competition in a market is working effectively, where it is desirable to focus on the functioning of the market as a whole rather than on a single aspect of it or the conduct of particular firms within it. A market investigation may examine any competition problem and identify the feature causing the problem. It aims only to see
______________________________________________________________________
(^3) Articles 101(1) and 102.
(^4) See The Chapter I Prohibition (OFT401) and Chapter II Prohibition (OFT402).
(^5) The relationship between Articles 101 and 102 TFEU and national competition law is provided for in Article 3 of Council Regulation 1/2003/EC. Under Article 1 of that regulation, where national competition authorities apply national competition law to agreements, decisions by associations of undertakings or concerted practices within the meaning of Article 101(1) which may affect trade between member states or to any abuse prohibited by Article 102 they shall also apply Article 101 or 102 respectively. Under Article 2 the application of national competition law may not lead to the prohibition of agreements, decisions by associations of undertakings or concerted practices which may affect trade between member states but which are not prohibited under Article 101(1) or which fulfil the conditions of Article 101(3) or are covered by an EC block exemption, although they may prohibit or sanction unilateral conduct engaged in by undertakings which is not prohibited by Article 102. Article 3 of the regulation provides that, without prejudice to the general principles and other provisions of Community law, Articles 1 and 2 do not preclude the application of provisions of national law that predominantly pursue an objective different from that pursued by Articles 101 and 102. In the context of a market investigation these provisions do not affect the exercise by the CC of its powers of investigation, but may be relevant at the remedies stage (ie the CC would have to consider whether it was limited or prevented from taking remedial action). If during the course of its investigation the CC uncovered a potential breach of Article 101(1), it would consider whether that matter should be referred to the authorities responsible for enforcing Article 101 but would also expect to continue with its investigation and then take the application of Regulation 1 into account when determining whether to take remedial action and if so, what action to take. If the CC found evidence suggesting a breach of Article 102 it would normally continue its investigation and, when appropriate, implement remedies under the Act. The OFT would then be able to take such action into account when carrying out any Article 102 investigation it considered appropriate.
(^6) The following bodies have concurrent powers with the OFT in designated areas to apply and enforce CA98 and Articles 101 and 102 of the TFEU: Office of Communications (Ofcom) (communications); Water Services Regulation Authority (Ofwat) (water and sewerage in England and Wales); Office of Rail Regulation (ORR) (railways); Gas and Electricity Markets Authority (Ofgem) (gas and electricity); Northern Ireland Authority for Utility Regulation (NIAUR) (gas and electricity in Northern Ireland); Civil Aviation Authority (CAA) (air traffic services); and Monitor (healthcare services in England). if competition within the particular market under review is working well or can be improved and is not seeking to establish general rules and obligations for firms.
19. Its overarching framework allows the investigation to tackle adverse effects on competition (AECs) from any source. As well as being able to look into the conduct of firms, the CC can probe for other causes of possible AECs, such as structural aspects of the market (including barriers to entry and expansion) or the conduct of customers. However, the focus of an investigation is always on competition. There may be other problems in the market—for example, ‘externalities’, such as air or water pollution, the cost or benefit of which is not transmitted through prices—which fall outside the ambit of a market investigation.
20. Having established a competition problem, and identified its causes, the CC is able to impose a wide range of legally enforceable remedies that typically focus on making the market more competitive in the future and make recommendations for remedial action by other public bodies.
21. The identification of anticompetitive features in a market investigation or the imposition of remedies does not mean that market participants have infringed the law. The process is investigative and inquisitorial, not accusatorial. To be required to give evidence in a market investigation or be subject to remedial action following an investigation does not imply that market participants are suspected of wrongdoing.
The making of references to the CC
22. The CC does not select markets for investigation. The referring bodies—the OFT, a sector regulator or, exceptionally, a Minister—make market investigation references to the CC when they have reasonable grounds for suspecting that a feature or combination of features of a market in the UK is preventing, restricting or distorting competition. However, once a reference is received, the CC proceeds wholly independently of the referring body; a CC market investigation casts a ‘fresh pair of eyes’ able to look more deeply at new evidence and analysis of the market. Regardless of the views of the referring body, it may conclude that there are no adverse effects in the market.
23. Before a case reaches the CC the referring body will have looked into the market in question, either on its own initiative or in response to a complaint, which may include a ‘super-complaint’ from certain designated consumer bodies. The Act allows the OFT to study markets that appear not to be working well for customers. There is no statutory definition of a ‘market study’ but it was envisaged from the inception of the Act that the OFT ‘should scrutinize markets to assess whether strong competition pressures are
______________________________________________________________________
7 See paragraph 9. 8 The powers of the concurrent regulators (see footnote 6) apply also to the making of market investigation references under section 131 of the Act. 9 Section 132. Ministers have the ability to make market references as a reserve power; in addition to applying the same criteria set out in the Act for the making of a reference by the OFT or other referring body, a minister must either be ‘not satisfied’ with an OFT decision not to make a reference or, having brought information to the attention of the OFT, will decide whether to make a reference in the period that the minister considers is reasonable. As at the date of publication of these Guidelines, this power had never been used. 10 As at the time of publication of these Guidelines, the OFT had been responsible for 13 of the 15 references made since the Act came into force. 11 Section 11 of the Act allows a consumer body (acting collectively on behalf of consumers), that has been designated by Ministers, to make a ‘super-complaint’ to the OFT about features of a market that appear to be significantly harming the interests of consumers. See: www.oft.gov.uk/advice_and_resources/resource_base/super-complaints/ and www.oft.gov.uk/advice_and_resources/resource_base/market-studies/. 12 Section 5. at work … in some cases … it will need to refer the market to the Competition Commission for further study. The other sectoral regulators having powers concurrently with the OFT (see paragraph 22) can also study markets coming within their purview. Where a market study suggests that a market is not working well, the referring body has several options open to it. It may recommend legislation, or actions by customers; it may proceed to investigate any suspected breaches of consumer protection legislation or the competition law prohibitions; and/or, where it has reasonable grounds for suspecting there are features which prevent, restrict or harm competition, make a market investigation reference. (But the referring body may also accept undertakings in lieu of making a reference if appropriate undertakings are offered.) Where a market study leads to a reference to the CC, it thus serves as the first phase in a two-phase investigation process.
24. When faced with a choice on how to deal with a perceived competition problem, the approach the OFT or sectoral regulator takes will depend on many factors, some of which may suggest that a market investigation reference is the appropriate course:13
- A market investigation might be preferred when, for example, the facts and issues underlying a perceived competition problem are complex and other forms of intervention by the Government or regulatory body might have to be too tightly focused to benefit the overall operation of the market.
- The range of remedies available under the market investigation regime can also make a market investigation a more appropriate instrument than relying on the system of prohibitions (see paragraph 17). Prohibitions on using market power to exploit customers or exclude rivals, or on coordinating with the few rivals that remain, may not be sufficient to address issues in a market whose characteristics and structure limit the ability or incentive of firms to compete effectively. There are markets, for example, in which the root cause of a problem lies within the regulatory framework; or it may lie within the way the market operates, with weak competition resulting, for example, from network effects,14 customer inertia or imperfect information flows between market participants.
Public interest issues
25. Although market investigation references are generally only concerned with competition issues, in the first four months after a reference has been made, the Act allows ministers to ask the CC to consider the implications of its competition analysis for any public interest consideration Parliament may identify in the case. Correspondingly, in those four months, the CC is under a duty to bring to the attention of the Secretary of State any case that it believes raises a public interest consideration specified in the Act.15 (But it has not done so in any case before the issue of these Guidelines.) Substantial changes to the framework for the consideration of public interest issues are included in the Enterprise and Regulatory Bill currently (March 2013) before Parliament (see paragraph 6).
Terms of reference and the statutory questions
26. In its terms of reference (ToR) for the CC investigation, the referring body describes the goods or services in the UK that the CC is to investigate. The ToR will indicate
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13 For further details see OFT511, www.oft.gov.uk/shared_oft/business_leaflets/enterprise_act/of511.pdf. 14 See paragraph 179. 15 Section 152(2). the sources (the feature or features, see paragraph 28) the referring body suspects are giving rise to an AEC (see paragraphs 19 and 29). When making the reference, the referring body may also require the CC to confine its investigation to either the supply or the acquisition of the goods or services described in the ToR, in particular by reference to the place where the goods and services are supplied or acquired or the persons by or to whom they are supplied or acquired or by or from whom they are acquired. The ‘relevant market’ is defined in the Act to mean the market for the goods or services described in the ToR given to the CC for investigation. The market definition(s) used by the CC (see paragraphs 130 to 153) need not always correspond with the ‘relevant market(s)’ as used in the Act. It will also be for the CC to reach its own conclusions on whether or not there is any AEC.
27. The Act enables the ToR to be varied, either at the instigation of the referring body, after consultation with the CC, or at the request of the CC. In principle this could be to widen or narrow the scope of the investigation while it is in progress, although it would be likely to raise procedural and timing issues. A variation would not affect the statutory timetable.
An AEC
28. The CC is required to decide ‘whether any feature, or combination of features, of each relevant market prevents, restricts or distorts competition in connection with the supply or acquisition of goods or services in the United Kingdom or a part of the United Kingdom’. The CC interprets the phrase ‘prevents, restricts or distorts’ in the Act broadly to cover any adverse effect on competition, whether actual or potential. It will therefore consider features that affect potential competition in a market (for example, by preventing entry and expansion) as well as those that affect the existing market situation.
29. If that proves to be the case, under the Act this constitutes an AEC (see paragraphs 19 and 26). The CC uses the term ‘a well-functioning market’ in the sense, generally, of a market without the features causing the AEC, rather than to denote an idealized, perfectly competitive market. The criteria the CC applies in coming to a view on the existence of an AEC are discussed in paragraphs 319 and 320, below.
Features
31. The Act states that the following may be taken to be a ‘feature’ of a market:
(a) the structure of the market concerned or any aspect of that structure;
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16 Section 133. 17 Section 134(3). An alternative description could be ‘reference market’. 18 In these Guidelines, ‘relevant market’ is used in two contexts: first, when referring to the statutory test, it has the meaning as defined in section 134(3) (see footnote 17); secondly, when referring to market definition, the relevant market is the market defined by the CC (an alternative description of which could be ‘economic market’). 19 The ToR in March 2004 for the investigation of (a) store card credit and related services to retailers, and (b) consumer credit through store cards were, for example, varied in March the following year to include insurance services, related to store cards, for retailers, and insurance for consumer credit associated with store cards (see Store cards market investigation, 7 March 2006). 20 Section 134(1). 21 Section 134(2). 22 Section 131(2). (b) any conduct (whether or not in the market concerned) of one or more than one person who supplies or acquires goods or services in the market concerned; or
(c) any conduct relating to the market concerned of customers of any person who supplies or acquires goods or services.
32. How the CC identifies features that prevent, restrict or distort competition is described in paragraphs 155 to 162.
**Remedial action**
33. Where the CC decides that there is an AEC, it is required to decide additional questions relating to remedial action, which are set out in paragraph 325.
**Part 2: The conduct of a market investigation**
34. This part of the Guidelines begins by outlining the ways the CC gathers evidence and the range and depth of the analysis it conducts (paragraphs 35 to 41). A second section outlines the processes and procedures typically followed in the conduct of market investigations and in the implementation of remedies (paragraphs 42 to 93); the latter section discusses: (A) statutory obligations and rules for Inquiry Groups; (B) the appointment of Inquiry Groups and staff; (C) overarching procedural issues; and (D) the main stages of an investigation.
35. **The gathering and analysis of evidence**
36. In collecting and analysing evidence on the way the market under investigation operates, the CC will particularly try to assemble evidence on the impact possible features have on the market's operation.
**Range of analysis**
36. The CC only carries out analysis that it considers necessary so as to reach a decision on the statutory questions. As the CC scrutinizes evidence, it will prioritize the uses of its resources to undertake as wide and as deep analyses as appropriate.23
37. The CC’s analysis covers all relevant aspects of competition. It often assesses the ability or incentives firms have to offer better prices or terms to customers and to strive for efficiency, better ways of operating and improved products.
38. Whatever forms competition takes, the CC considers its effects and expected development over time. Although there may be circumstances in which analysis can be conducted only on the basis of the current state of the market, the CC always considers how a market may evolve. The prospect of gaining a lasting advantage over rivals can be a spur to competition, and the CC may in some circumstances
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23 The need for the CC to focus on the bigger issues in reaching a decision on the statutory questions has been underlined in Competition Appeal Tribunal (CAT) judgments: in *Barclays Bank plc v Competition Commission* (2009), CAT 27 (paragraph 21); citing *Tesco v Competition Commission* (2009), CAT 6 (paragraph 139), the CAT wrote: ‘the depth and sophistication called for in relation to any particular relevant aspect of the inquiry needs to be tailored to the importance or gravity of the issue within the general context of the Commission’s task.’ This proposition was labelled ‘double proportionality’ in the CAT judgments. consider assessing the effectiveness of competition for the market as well as, or rather than, within the market (see paragraph 11).
**Qualitative and quantitative analysis**
39. The CC applies a range of analytical techniques, both qualitative and quantitative, so as to understand the nature of competition in the market under investigation as well as the impact of any features. The CC will seek data and information about a range of factors, including the pricing and quality of goods and services supplied in the market under investigation. It often commissions surveys, normally on customer behaviour and attitudes, at an early stage of an investigation (see paragraph 67). It will use various other means of collecting evidence, including questionnaires to parties, requests for internal company documents (including management information), and discussions with customers, investors and other market participants. (See paragraphs 63 to 69 on the procedures for information-gathering).
40. Parties may also choose to provide the CC with any information they consider relevant to the investigation. When making submissions involving technical economic analysis, parties should adhere to the principles set out in the CC’s publication *Suggested best practice for submissions of technical economic analysis from parties to the Competition Commission*. A joint CC/OFT good practice guide for parties wishing to submit evidence based on consumer surveys in merger inquiries is also relevant to market investigations.
41. The extent to which the CC will seek to quantify particular effects (eg on the adverse effects on competition or the effects of remedies)—and the degree of precision with which this is attempted—is likely to vary from case to case. Relevant considerations in determining the extent and nature of quantification that the CC will carry out in a particular case may include:
(a) The scale of any particular effect: if it is clear from an initial assessment that a particular effect is unlikely to be material, it may not be necessary to quantify its magnitude with great precision to reach a view about the scale of any harm to competition. Similarly, when it considers that the harm is material, the CC may decide that quantification would not add value to its assessment.
(b) The practicality of conducting quantitative analysis: whether reliable data is available and the extent to which it is possible to quantify a particular effect with any degree of accuracy. (In general, it is likely to be more straightforward to estimate the effects on prices in the shorter term than to quantify the longer-term effects on dynamic and non-price competition.)
(c) The resource implications: the costs in terms of time and resources to acquire and process the data, to apply a suitable methodology and to test the robustness of the results would not be justified if the outcome would not significantly help the CC to reach a decision on the statutory questions.
2. Processes and procedures
3. The procedures the CC follows in market investigations have been developed to fulfil and balance different demands. It is imperative that investigations are concluded
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24 Suggested best practice for submissions of technical economic analysis from parties to the CC, www.competition-commission.org.uk/rep_pub/corporate_documents/corporate_policies/best_practice.pdf. 25 www.competition-commission.org.uk/assets/competitioncommission/docs/2011/consultations/good_practice_guide.pdf. within the statutory time limit, and the time and resources of both the CC and the parties must consequently be used efficiently. At the same time, the CC recognizes that market investigations can result in significant interventions in markets and that its investigations must not only be thorough and disciplined but also fair. The requirement for fairness includes giving the parties opportunities to understand the CC’s analysis affecting them; the CC accordingly aims to be open and transparent in its work.26
43. The following sections:
A. outline the statutory obligations and rules with which Inquiry Groups must comply (paragraphs 44 and 45);
B. explain how Inquiry Groups and staff teams are appointed (paragraphs 46 to 49);
C. discuss some of the overarching procedural issues in conducting a market investigation (paragraphs 50 to 61); and
D. provide a guide to the main stages in a typical investigation (paragraphs 62 to 93).
A. Statutory obligations and rules for Inquiry Groups
44. The CC has a statutory duty to consult on its proposed decisions on the AEC test and the remedy questions when it considers a decision likely to have a substantial impact on any parties’ interests.27 The Chairman of the CC is also required to issue Rules of Procedure for market reference Inquiry Groups. The current Rules of Procedure28 are published on the CC website and may be revised from time to time. The Rules include requiring Inquiry Groups to:
(a) draw up and notify the parties of the administrative timetable for each investigation (and to prepare a revised timetable if required);
(b) decide the forms of hearings (public or private, joint or individual) and who should attend them;
(c) notify the main parties of their provisional findings on the statutory questions (on the AEC issue) and allow them at least 21 days to comment on the provisional findings; and
(d) notify main parties of actions which may be taken to remedy the AEC and give the parties the chance to make representations about the Inquiry Group’s proposed actions.
26 As explained in CC7 (Revised), Chairman’s Guidance on Disclosure of Information in Merger Inquiries, Market Investigations and Reviews of Undertakings and Orders accepted or made under the Enterprise Act 2002 and Fair Trading Act 1973 (April 2013), an important aim of transparency is to ensure that ‘by having a better understanding of the CC’s analysis affecting them, the main parties in inquiries are treated fairly’ (paragraph 2.2(a)).
27 Section 169 of the Act.
28 CC1, Competition Commission Rules of Procedure, 2006: www.competition-commission.org.uk/assets/competitioncommission/docs/pdf/non-inquiry/rep_pub/rules_and_guide/pdf/cc1.pdf. 45. Subject to complying with the Rules of Procedure, and having regard to any guidance issued by the CC Chairman, Inquiry Groups are free to decide how they conduct a market investigation.29
B. Appointment of Inquiry Groups and staff
46. Market investigations are performed by Inquiry Groups of independent CC members30 (commonly between four and six), normally chaired by the Chairman of the CC or by one of the Deputy Chairmen.31 An Inquiry Group conducting an investigation provides its strategic direction, weighs the evidence and considers the arguments from parties, both received in writing and given orally, and directs and assesses the analysis produced by the staff team. It makes the final decisions on whether or not there are features of a market that give rise to an AEC and if so on the remedies to be applied.
Appointment of Inquiry Groups
47. As soon as practical after receiving the reference, the CC Chairman identifies and appoints an Inquiry Group. The composition of the Inquiry Group and biographical details of its members are sent to parties and published on the CC inquiry webpage. The appointment of the Inquiry Group is made for the duration of the investigation, up to the point at which the reference is ‘finally determined.’32
48. Before deciding to appoint a member to a particular Inquiry Group, the CC will consider whether there might be a risk that a member’s outside interests could affect, or could be perceived as affecting, the impartiality of the CC.33 In some cases the CC may inform parties of specific interests and give them the opportunity to comment before deciding whether to make a proposed appointment. Relevant outside interests of appointed members are disclosed on the CC website. In addition, the CC may take action to deal with any relevant and significant changes in members’ interests that may arise during the course of the investigation.34
Staff team
49. Each Inquiry Group is supported by a staff team. The team is led by an Inquiry Director and includes both inquiry management and specialist staff. The inquiry management team is responsible for the day-to-day running of the investigation; the key point of contact at the CC for the parties is likely to be the Inquiry Manager. The specialist staff provide advice to the Inquiry Group in their areas of expertise
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29 CA98, Schedule 7, paragraph 19 (see paragraph 17 above). 30 A pool of members—currently (March 2013) around 40—is appointed by the Department for Business, Innovation and Skills (BIS) for eight years, following open competition. Members are selected for their experience, ability and diversity of skills in competition economics, law, finance and industry. All except the CC Chairman and Deputy Chairmen work part-time for the CC. 31 Occasionally, a member who is neither the Chairman nor one of the Deputy Chairmen will be asked to chair an Inquiry Group conducting a market investigation. 32 Generally a reference is finally determined, as defined in section 183(3)-(6) of the Act, when the final report is published or, if remedial action is to be taken by the CC, when the remedies are implemented (ie either by the making of an Order or acceptance of Final Undertakings). Paragraph 17 of Schedule 7 to CA98 provides that the CC Chairman may appoint replacements to the Inquiry Group if necessary. Members may be reappointed to deal with matters arising from the reference following final determination, for example to consider any ongoing remedy implementation or post-litigation issues (see paragraph 91). 33 See guidance on outside interests on the CC website: www.competition-commission.org.uk/our_peop/members/conflicts_interest/110407_Conflicts_guidance_for_publication.pdf. The guidance categorizes the most common interests that could put the CC’s impartiality at risk as: financial interests, organizational relationships, personal relationships and prejudgement. 34 If at any time during an investigation it appears to the Chairman that, because of a particular interest of a member, it is inappropriate for him or her to remain in the Inquiry Group, the Chairman may appoint a replacement. CA98, Schedule 7, paragraph 17(1)(c). (including economics, law, business and finance). They conduct the analysis on the substantive issues that arise during the investigation and develop remedies where needed. The staff team may sometimes be supplemented by academic specialists or other advisers.
C. Overarching procedural issues
50. The following paragraphs provide an overview of the procedures for a market investigation. In practice some detailed aspects of the procedures used in a particular case may vary from those set out below. This is inevitable because no two market investigations are alike in all respects. The sectors under investigation can range in size from small, highly specialized industries to large-scale multi-faceted markets. Some references can encompass both upstream and downstream markets. Moreover, the numbers of parties with an interest in the investigation may vary from a few to several hundred.
Managing investigations with a large number of parties
51. All providers of the goods or services in a market under investigation are potentially main parties to an investigation. However, the degree of each party’s engagement with the CC may vary, particularly where there are substantial numbers of main parties. The CC may need more information and evidence from some than from others. Some firms may choose to engage more with the CC than others. Differences in communication by the CC with different main parties may consequently reflect the different levels of party engagement.
52. In addition, there will be parties which are not providers of the goods or services in the market but which may be materially affected by the investigation (including super-complainants, customers and consumer groups, upstream suppliers, and trade and professional bodies). Levels of engagement with these parties will also vary. For example, the CC may seek information from some of them, while others may volunteer information and views to the CC.
53. The CC makes extensive use in market investigations of its website to communicate or to make disclosures, enabling any number of parties to follow the progress of an investigation (as far as possible the CC alerts parties when relevant material is posted). While the detail of its processes might vary, the CC will ensure that its procedures are fair and give parties the opportunity to participate appropriately in an investigation.
Timescales
54. The Act requires the CC to publish its report on a market investigation within two years of the reference. However, while its largest and most complex investigations will take two years, the CC aims to complete a ‘standard’ investigation within 18 months.
55. The timescales for the different stages of a market investigation cannot be exactly prescribed. The following timetable illustrates the progressive stages of procedures for an 18-month investigation. But in practice, some of the stages may overlap and
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35 An upstream firm provides raw materials or manufactures inputs for processing and/or distribution by a downstream firm. 36 See paragraph 23. 37 The timings envisaged for investigations by the CMA (see paragraphs 5 and 6) will be shortened to 18 months (with a possible six-month extension in special circumstances). on occasions developments in the investigation, for example a revision of the provisional findings and a consequent need for additional consultations, will require adjustments to the timings and procedures.
| Stage of process | 18-month process | |-------------------------------------------------------|-------------------------------------------------------| | Reference | Pre-reference sharing of appropriate information with the CC by the referring body | | ‘First day letter’/initial information requests | Months 1–2 | | Publication of initial issues statement (setting out theories of harm) | Months 1–2 | | Initial submissions from main and third parties | | | Site visits | Month 3 | | Publication of relevant working papers | Months 5–9 | | Publication of annotated issues statement | | | Hearings with parties | | | Final deadline for all parties’ responses before provisional findings | | | **Publication of provisional findings** | Months 11–12 | | **Publication of remedies notice (if relevant)** | | | Consideration of responses to provisional findings and consultation on remedies (if needed). | Months 13–15 | | Response hearings with parties | | | Publication of provisional decision on remedies (if needed) | Month 16 | | Final deadline for all parties’ responses before final report | | | **Publication of final report** | Month 18 |
56. The CC draws up and publishes an administrative timetable at an early stage in the investigation. A draft is first sent to main parties for comment. The administrative timetable is updated as necessary during the investigation.
**Information provision and disclosure**
57. While the time taken to conclude a market investigation depends on several factors, including the complexity of the investigation and the number of parties involved, a key factor is timely provision of information. The CC aims to be fair and reasonable in its requests for information and the deadlines it sets for parties to respond to such requests. It expects parties to meet the timescales set. The CC is empowered to require information and the attendance of witnesses. It will use its mandatory powers if necessary to ensure that its information requests are answered completely and in a timely fashion. The provision of false or misleading information to the CC is
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38 Rule 6.4 provides that the administrative timetable should be produced having regard to the views of the main parties (CC1). 39 Section 109 of the Act, which applies to market investigations by virtue of section 176 of the Act. For further details see CC5, Statement of Policy on Penalties, June 2003. a criminal offence, regardless of whether that information has been provided voluntarily or in response to a statutory notice.40
58. In pursuing its aim to conduct investigations in a fair and transparent manner, the CC discloses its key documents, mainly by publishing them (in particular an issues statement, an annotated issues statement, provisional findings, Notice of possible remedies—if needed, provisional decision on remedies—if needed, and final report). Typically, it also publishes a large amount of other documentation, for example non-confidential versions of key submissions from parties, including their submissions on the issues statement and responses to other publications, key submissions of third parties, hearing summaries, survey reports and some working papers.
59. The Act provides for the protection of confidential information relating to individuals and businesses.41 But the CC may disclose information under certain circumstances and having taken into account the considerations specified in the Act.42
60. Where issues arise as to the confidentiality of some information in the CC’s possession that underlies a decision or a piece of analysis, but the CC nevertheless considers that disclosure of some sort is necessary to allow a party to comment on it, the CC may decide on some form of limited disclosure.43
61. For further details on the statutory provisions relating to the information obtained during the course of an investigation and to its disclosure, see the Chairman’s guidance to Groups and Chairman’s guidance on disclosure.44
D. The main stages of an investigation
62. The following paragraphs describe the main stages of a market investigation and outline the key interactions which the CC has with parties and their advisers in the course of a typical investigation.45 This procedural guidance is not intended to be binding and may be adapted to take account of the particular circumstances of an investigation, in which case parties will be notified of the reasons for departures from usual procedures.
Information-gathering
63. The CC begins preparatory work on an investigation on a contingency basis shortly before the formal reference arrives. It identifies any relevant information that is publicly available and makes use of any market or company information that can be shared by the referring body46 so as to avoid duplication of effort by the parties or the authorities between the first phase (typically a market study by the OFT or other
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40 Section 180 of the Act deals with the provision of false or misleading information and the commission of offences by bodies corporate. Section 125 states that offences of bodies corporate may be an offence of the secretary, director or other officer of the body corporate. 41 Part 9 of the Act, in particular section 245, provides that a person commits an offence if he or she discloses or uses specified information unless in the circumstances permitted by the Act or the information is already in the public domain in the circumstances described by section 237(3). 42 Section 244. 43 For example, to enable disclosure of some data used in its analysis, the CC might set up a data room in which the parties’ economic advisers can review it. Rules relating to access, use and non-disclosure are applied and participants are required to sign undertakings that they will comply with the restrictions. 44 CC7 (Revised) and CC6, Chairman’s Guidance to Groups, March 2006, paragraphs 19–26. 45 On possible variations in the timing and content of procedures see paragraph 55. 46 Section 170 of the Act stipulates that the referring body provide the CC with: (a) such information in its possession as the CC might reasonably require; (b) any other assistance which the CC may reasonably require to carry out its investigation and which the body has the power to give, and; (c) information in its possession which, although not requested by the CC, is appropriate for the referring body to give the CC to assist it in carrying out its functions. referring body\\textsuperscript{47}) and the second-phase market investigation. (But, as noted in paragraph 22, the CC’s decisions are reached wholly independently of the referring body.)
64. Once the reference has been received, the CC formally launches its investigation with a ‘first day letter’ from the CC Chairman to key main parties. The letter includes information on the terms of the reference, the statutory deadline for the CC’s report, relevant guidance material, the key CC staff working on the investigation, and the next steps to be taken. (Subsequently the CC, having consulted the key main parties, prepares the administrative timetable, see paragraph 56). The first day letter also takes forward the information-gathering process by requesting specified initial factual and financial information.
65. At an early stage, informal meetings are held between the staff team and selected main parties (and, where relevant, with other parties such as the super-complainant).\\textsuperscript{48} Such meetings usually cover the procedures to be adopted for the conduct of the investigation, and often seek information and views on the market. In addition, the CC holds ‘data meetings’ with appropriate main parties to discuss the organization and availability of technical data. (There may be subsequent staff meetings as the investigation progresses—see, for example, paragraph 73.)
66. A detailed market and financial questionnaire is next sent to the main parties; and, in many cases, other information is collected from a wider range of parties. The information-gathering will be informed by the developing ‘theories of harm’ (see paragraph 163). When practicable, parties are consulted on questionnaires to facilitate efficient collection of useful and consistent information, whilst as far as possible minimizing the burden to business.
67. The CC may decide to conduct one or more surveys as part of the information-gathering process (see also paragraph 39).\\textsuperscript{49} If the decision is taken to conduct a survey, relevant parties are consulted on the draft survey design and content. In some cases, so as to construct the sample for questioning, parties may be required to provide contact details for some or all of their customers or suppliers.
68. In many cases, the CC organizes early site visits to several parties. These are designed to be helpful to both the CC and the parties involved. A site visit offers a chance for the Inquiry Group members and staff to gain a greater understanding of the party’s business by visiting key facilities and meeting key operational staff. A party receiving a site visit is encouraged to organize a short presentation, and take some questions, on its business so as to explain its nature and the market context in which it is operating.
\\textit{Issues statement}
69. An issues statement is released by the CC at an early stage in the investigation process. This generally discusses the theories of harm framing the analysis the CC intends to pursue (see paragraph 163). Parties are invited to provide submissions commenting on the issues set out in the statement.
\\textsuperscript{47} See paragraph 23. \\textsuperscript{48} See paragraphs 23 & 52. \\textsuperscript{49} The survey results will usually be disclosed through publication (accompanied by an explanation of the methodology) but there may be instances when it is inappropriate to publish the whole report. The Inquiry Group will consider whether other information relating to the survey should be disclosed, for example cross-tabulations of the survey results. Assessment
70. Using the information gathered and the theories of harm postulated the competition assessment gets under way. The issues addressed will be diverse, covering the many aspects raised by the investigation: for example, background on the market, the operation of the market or the performance of parties, market definition and assessments of the relevant competition issues set out in the issues statement.
71. The staff and the Inquiry Group work together on these issues, and many internal working papers are typically prepared on the various aspects of the investigation. Generally, internal communications are not disclosable.
72. The Inquiry Group’s developed analysis is included in the provisional findings (see paragraph 81). However, the Inquiry Group will disclose its developing approach and analysis before publication of provisional findings:
(a) Ahead of the main party hearings (see paragraph 77), it will disclose (normally by publishing) an annotated issues statement. This gives an overview of the Inquiry Group’s current thinking with reference to the theories of harm and its analysis to date. (In this way, the theories of harm the CC may then be considering (paragraph 168) will be communicated to the parties.)
(b) An additional means of conveying the Inquiry Group’s developing approach and analysis is to disclose some of the working papers, or parts of working papers (see paragraph 71), often through publication.50
73. On occasions, specific pieces of technical analysis merit discussion between a party and the CC on the methodology used and, possibly, the results found. The CC arranges meetings with one or more parties for this purpose. These are generally attended by CC staff (together, on occasion, with members of the Inquiry Group), the party and its technical advisers.
74. The administrative timetable will include a deadline for the receipt of all parties’ responses and submissions for consideration by the Inquiry Group in forming its provisional findings.
Put-back
75. The CC may also send (‘put back’) text to parties for the purpose of enabling them to:
(a) verify the factual correctness of certain content (usually information supplied by them); and
(b) identify any confidential material, prior to publication; parties are asked to provide reasons for any requests for excisions of the material from published documents.
76. The put-back process is separate from disclosure of the CC’s developing thinking (see paragraphs 72 and 73).
50 See CC7 (Revised), paragraphs 7.1–7.3. Disclosed working papers provide a snapshot of the issues, analysis and views that are relevant at the time of disclosure and may change. Hearings
77. The Inquiry Group holds a round of formal private hearings with parties (or a selection of them) ahead of the publication of its provisional findings. The primary purpose of these hearings is to enable the CC to test the evidence and explore key issues with the parties. They also provide an opportunity for the parties to explain their views in person directly to the decision-makers as their thinking is developing. The CC aims to ensure that hearings are held with as wide a range of parties as possible. However, decisions on which main and third parties to invite to hearings, and the sequencing of any hearings, rest with the CC.
78. Parties are given an opportunity to make brief opening and/or closing statements, and should expect to respond to the CC’s questions. A transcript of the hearing will be taken and will be sent to the relevant party for checking (the transcript will not be published). Additionally, staff-led hearings (sometimes via teleconferencing) are conducted with some parties not attending hearings with the Inquiry Group, including some main parties when there are large numbers of them. Some members of the Inquiry Group may also participate. Transcripts or written notes are taken and sent to the relevant party for checking.
79. A summary of the key points raised at a hearing is normally prepared by the CC, and the party is given the opportunity to comment on both content and confidentiality before the summary is published. The party is also invited to follow up in correspondence any issue raised during the hearing.
Provisional findings and the Notice of possible remedies
80. CC staff will start to gather information on possible remedies and identify relevant remedy options after the basis of a possible AEC has been identified. However, the investigation of possible remedies will remain hypothetical until a decision regarding a provisional AEC finding has been made, at which point the Inquiry Group will consider possible remedy options.
81. When the Inquiry Group has provisionally formed a view on whether or not there are features of the market(s) that give rise to an AEC, its provisional findings will be published and a public consultation on them will be held. The Rules (paragraphs 44 to 45) state that the time allowed for the consultation will be no less than 21 days and the CC applies some flexibility in setting reasonable deadlines case by case in light of the relevant circumstances.
82. If an AEC has provisionally been found, the CC will publish, in addition to its provisional findings, a Notice of possible remedies (the Notice). The Notice will contain details of remedies the CC has identified as possibly addressing the AEC effectively, and will provide a starting point for a discussion of remedies with the relevant parties to the investigation, including main parties, customers, competitors, any sectoral regulator and the OFT. The Notice may also outline details of remedies the CC considers unlikely to be effective and the reasons why it has reached this provisional view, as well as inviting parties to put forward any other remedy options that they wish the CC to consider. Normally, the CC will publish the Notice on the same date as its provisional findings and will set a deadline of no less than 21 days for responses, which may coincide with the deadline for responses to the provisional findings. Response hearings and the provisional decision on remedies
83. Where the CC provisionally finds that there is an AEC, response hearings will take place with main parties and potentially with key third parties. At a response hearing, parties will be given the opportunity to comment orally on the provisional findings and the CC may seek clarification of particular points made in written submissions or at the hearing. However, much of the discussion will focus on possible remedies and/or relevant customer benefits (RCBs) (see paragraphs 355 to 357). Transcripts, or alternatively Notes, of response hearings will be taken and, in most cases, summaries prepared and both will be processed in a similar way to those relating to hearings held earlier in the investigation (see paragraphs 77 to 79).
84. Having considered the responses from parties, the CC will notify its provisional decision on remedies, normally through publication on its website, for comment before reaching its final decision. The CC will normally allow a period of at least 21 days for parties to respond to its provisional decision on remedies.
85. Separately, a deadline will have been set in the administrative timetable for the receipt of all parties’ responses and submissions for consideration by the Inquiry Group ahead of reaching its final decision.
Final report
86. The CC will publish its final decision on the competition question and (if necessary) remedies together with supporting reasons and information in a final report. The report will, if it confirms the finding of an AEC, contain sufficient detail on the nature and scope of remedies to provide a firm basis for subsequent implementation of remedies by the CC.
87. Parties may, during the two months following the release of the CC’s findings, lodge an appeal with the CAT against the decisions. If a judgment of the CAT upholds an aspect of an appeal, this could lead to the investigation or a part of it being remitted to the CC for reconsideration. (Appeals against CAT judgments can, if allowed, go forward to the Court of Appeal or, in Scotland, the Court of Session and, ultimately, to the Supreme Court.)
Implementation of remedies
88. Following publication of the final report, if the CC has determined to take action itself, the CC has the choice of implementing remedies by accepting undertakings from the relevant parties and/or by making an order (see paragraphs 92 and 93 for a discussion of the considerations relevant to this choice).
89. The CC will publish an administrative timetable for the implementation of those remedies where it has decided to take action itself. For straightforward remedies, the CC expects to make an order or accept undertakings within around six months of publication of its final report. The implementation of more complex remedies may take longer, though the CC expects to make an order or accept undertakings within ten
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51 Section 136. 52 Following appeals against CC decisions, the CAT ordered the CC to reconsider parts of the remedies packages in the final reports on Groceries (April 2008) and Payment Protection Insurance (PPI) (January 2009). These aspects were, respectively, the competition test applied to grocery retail planning applications and the inclusion of a prohibition of the issuing of PPI at the point of sale. months from publication of its final report, other than in exceptional circumstances. The CC consults all parties affected by the remedies in determining the required undertakings or order. This includes a period of formal public consultation.
90. The action the CC takes in implementing remedies must be consistent with the decisions in the final report unless there has been a material change of circumstances since the preparation of the report or the CC has a special reason for acting differently.
91. An Inquiry Group will normally be disbanded following its acceptance of Final Undertakings or the imposition of an order to implement remedies. Responsibility for overseeing any further implementation activity that falls to the CC, such as the implementation of any divestiture remedy, falls to either the CC’s Remedies Standing Group or to a specifically-appointed Group. A Group specifically appointed to oversee further implementation activity may include some or all members of the original Inquiry Group (see footnote 32). The identity of the Group charged with this activity is determined in light of factors such as the availability and expertise of members, the type of remedy to be implemented and the extent to which implementation is expected to be resource- and/or time-intensive. If all remedies are being implemented by means of recommendations to other bodies, the Inquiry Group originally appointed is normally disbanded following publication of the final report. The OFT is normally responsible for monitoring and enforcement of behavioural remedies following acceptance of undertakings or the imposition of an order by the CC. Compliance with undertakings or an order is enforceable in the courts.
Undertakings and Orders
92. The CC’s decision whether to implement remedies by means of accepting undertakings or making an order is determined case by case, primarily by practical issues including the number of parties concerned, and their willingness to negotiate and agree undertakings. Another consideration is the scope of the CC’s order-making powers and whether the remedy it is considering falls within those powers.
93. The content of any orders made by the CC is limited by the Act. In contrast, the subject matter of an undertaking is not similarly limited. This, and the process involved in agreeing undertakings, can help the CC and the parties, in terms of flexibility and suitability, in implementing remedies. However, because market investigations are likely to be market-wide rather than focused on the conduct of one firm, it may be more practical to implement remedies by order rather than through undertakings, so as to avoid the likely delay and complexity of negotiating
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53 The period envisaged for the implementation of remedies by the CMA (see paragraph 5) is limited to six months, with the possibility of a four-month extension. 54 As specified in Schedule 10 to the Act. 55 Section 138. For example, following the Court of Appeal’s judgment on 13 October 2010 to reinstate the CC’s findings on the BAA airports investigation (March 2009), the CC invited representations from all interested parties as to whether there had been any developments since the publication of the CC’s report which constituted a material change of circumstances or a special reason within the scope of section 138(3) of the Act, to the extent that it should amend the remedy package set out in the report, for example the timing of proposed airport divestitures. In its decision of July 2011, the CC found that while the change in government policy on building new runway capacity in south-east England represented a significant change of circumstances, it did not remove the scope for, and the need for, competition between airports in south-east England as claimed by BAA. Consequently, the CC did not change its decision on the appropriate remedy. 56 Section 162. 57 If a person fails to comply with any undertakings that it has given or any order imposed on it by the CC, compliance may be enforced by means of civil proceedings brought by the OFT or the CC (section 167). In addition to enforcement by the OFT or the CC, any person affected by the contravention of undertakings or an order who has sustained resulting loss or damage may also bring an action against the relevant party. 58 Schedule 8 sets out the types of provisions that could be included in an order and Part 1 of Schedule 9 enables the CC to modify, by order, licence conditions in various regulated markets. 59 Section 164(1). undertakings with several parties. In regulated sectors, if the CC decides to modify licence conditions to give effect to, or take account of, any provision of a proposed remedy, it will make an order.
Part 3: The AEC test
94. In assessing whether or not an AEC has arisen the CC looks at three basic issues:
(a) the main characteristics of the market and the outcomes of the competitive process;
(b) the composition of the relevant market within which competition may be harmed (market definition); and
(c) the features, if any, which are harming competition in the relevant market (the competitive assessment—which the CC frames using ‘theories of harm’), considering also possible countervailing factors, such as efficiencies, which may remove or mitigate the competitive harm of the features.
95. Analyses of these issues are not conducted as distinct chronological stages of the investigation but as overlapping and continuous pieces of work, which often feed into each other. For example, the CC may take an initial view about the scope of the relevant market but the competitive assessment may suggest that this initial view of the market was either too broad or too narrow. Evaluation of outcomes continues throughout the investigation.
96. Part 3, Sections 1 to 3, below, deal with each of these issues in turn, and are followed by a short section on the conclusion of the AEC test.
Part 3: Section 1—Market characteristics and outcomes
97. To develop robust findings on whether or not features in a market are harming competition, the CC needs to understand how a market operates and reach a view about its performance. A part of its investigation is therefore the collection and analysis of information about the main characteristics of the market referred and the outcomes of the competitive process within that market. The CC’s evaluation of characteristics and outcomes goes on throughout an investigation and continuously informs its assessment of what might be causing any adverse effects in the market.
Market characteristics
98. Reviewing evidence and observations on the main characteristics of the markets that it investigates helps the CC to frame the analysis of market definition and competitive effects, as well as to assess the practicability of remedy options, should an AEC be found.
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60 For example, in Home Credit and PPI, the remedies applied to a large number of parties and this was a reason for implementing these measures by means of an order. By contrast, in Classified Directories, the remedies applied to only one party and undertakings were preferred. In other cases (eg Groceries, Rolling Stock Leasing market (ROSCOs)), some measures were implemented by means of an order, while others were implemented through undertakings.
61 The CC has the power to make such changes by Order through the amendments made to sector specific legislation by Part 1 of Schedule 9 to the Act.
62 The term ‘relevant market’ is used throughout these Guidelines in two contexts, see paragraph 26. 99. Any assessment of the working of competition usually begins with an overview of market structure and the possible implications of this structure for the conduct of the firms within the market. The CC studies the profiles and performances of the suppliers (or, where relevant, acquirers) of the goods or services referred for investigation.
**Market share data**
100. The CC calculates the market shares of the suppliers of the reference products (and sometimes other measures of market concentration), if possible over several years, using the methodologies set out in Annex A (The measurement of: market shares and concentration; profitability).
101. The calculation of market concentration measures can provide background data for the assessment of the levels of firms’ market power (see paragraphs 9, 14 and 186 to 195) and may be relevant for the assessment of other sources of potential competitive harm, for example coordinated conduct. In many cases, the weight the CC places in its competitive assessment on market concentration measures will be influenced by its ability to define with confidence the boundaries of that market (see paragraph 137). However, there are some measures of market concentration, such as the Logit Competition Index (LOCI), which can be used, if relevant information is available, without relying on establishing market boundaries (see Annex A, paragraph 8).
**Other background market characteristics**
102. The other market characteristics most relevant to the CC’s investigation will vary from case to case. However, the CC normally looks at the following:
(a) The nature and characteristics of the products or services included in the terms of reference and of any potential substitutes for these products.
(b) The nature of the customer base—for example, whether customers are businesses or final consumers, the extent of customer segmentation in a market, the demographic profile of the customer base or, where relevant, the extent to which they are informed about the products in the market subject to investigation.
(c) The legal and regulatory framework that applies to the reference market. Laws and regulations can determine the nature of competition within a market and may also be relevant to the CC’s consideration of remedies.
(d) Industry practices, for example the way in which products are sold and how prices are set and communicated to customers.
(e) The history of the market, including recent competitive developments such as any recent examples of entry, expansion or exit and any significant changes that are anticipated in the market in the foreseeable future.
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63 Examples of investigations in which the CC found that high concentration was a feature of the market that prevented, limited or distorted competition are given in paragraph 157. Market outcomes
103. Outcomes of the competitive process in their different forms in a market—eg prices and profitability, levels of innovation, product range and quality—can also provide evidence about its functioning. Evaluating these outcomes helps the CC determine whether there is an AEC and, if so, the extent to which customers may be harmed by it, ie the degree and nature of ‘customer detriment’. This can be an important factor in any later consideration of possible remedies.
104. Prices and costs are among the more observable and measurable outcomes and an analysis of these may be useful in quantifying the extent and nature of competition and can be helpful in measuring customer detriment. However, the other, less-quantifiable factors, such as quality and innovation, are no less important to customers.
105. Although the outcomes of the competitive process may differ in character, there may be linkages between them, and the CC does not therefore consider each in isolation. The extent to which prices respond to changes in costs and the question of whether those costs are at an efficient level, for example, may have implications for a firm’s profitability, and the level of investment may have implications for efficiency and product or service quality.
106. The following paragraphs in this section deal in turn with:
A. Prices and profitability.
B. Quality, innovation and other non-price indicators.
A. Prices and profitability
107. The types of analysis the CC may undertake on prices and profitability depend on the nature of the markets and the theories of harm the CC has postulated (see paragraphs 163 to 169). Four possible types of analysis are considered below: pricing patterns; price cost margins; price comparisons; and profitability.
Price patterns
108. In markets subject to effective competition prices are likely to respond to changing supply and demand conditions and firms will seek to win business by improving their prices and other aspects of their offer. The pattern of prices over time can therefore indicate the nature of competition (see, for example, paragraph 246). However, the CC recognizes that there may be several factors affecting prices and will take this into account when considering inferences from this type of analysis. Taken in conjunction with other evidence and in the absence of other explanatory factors, such as cost increases:
(a) static or continually rising prices may indicate a lack of competition; and
(b) parallel pricing—ie the practice by a seller of varying prices in a similar way and at about the same time as competitors—may be a symptom of coordinated effects (see paragraphs 249 and 189).
109. The pricing strategies adopted by firms in the market can also be indicative of competitive conditions. For example: (a) introductory discounts followed by price increases might indicate high switching costs or customer inertia (see section on weak customer response, paragraphs 295 to 318); and
(b) a wide range of prices for similar goods or services might indicate the presence of search costs (see section on weak customer response, paragraphs 295 to 318).
110. Another type of analysis in this category, price concentration studies, looks at the extent to which prices may vary with market concentration. This is relevant to the assessment of unilateral market power (paragraphs 186 to 195). For example, if there were several local geographic markets, higher prices being charged in more concentrated areas may indicate limitations in the competitive process in those areas.64 This type of analysis may also examine the relationship between prices, margins and concentration over time.
**Price-cost margins**
111. The analysis of prices will in many cases be complemented by an analysis of costs, because these may explain price changes over time or differentials between areas. Therefore when analysing patterns of prices over time or geography, the CC may consider price-cost margins. Typically a price-cost margin is calculated by subtracting some measure of marginal cost from revenue and expressing the difference as a percentage of revenue.65
112. Price-cost margins can also provide useful information about the effectiveness of competition in the short run (ie for a current range of products), including about the willingness and ability of customers to switch between alternatives. Vigorous competition may be expected to lead firms to price towards marginal cost. The CC may therefore consider the pattern of price-cost margins across geographic markets or customer segments or over time. A pattern of sustained high price-cost margins may, for example, indicate an unwillingness or inability to switch because of, for example, switching costs, search costs, limited customer information or significant product differentiation (see section on ‘weak customer response’, paragraphs 295 to 318). But the CC interprets price-cost margins with caution: margins may be a misleading indicator in some industries66 and in many circumstances a gap between price and marginal cost can be consistent with robust competition.67 A fuller analysis of profitability may be required to establish whether prices are on average above the competitive level, as described below.
**Price comparisons**
113. Comparisons of prices with those of other markets, such as markets for similar products in other countries or in markets for comparable products in the UK, are sometimes made in CC market investigations. Such comparisons can be relevant where market conditions are similar. In the Home Credit investigation (November
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64 The suitability of this technique will vary on a case by case basis. For examples of where the CC has applied the technique see *The supply of groceries in the UK market investigation*, 30 April 2008 (paragraphs 4.106–4.113) and *Local bus services market investigation*, 20 December 2011 (paragraph 7.37). In the latter investigation, an analogous performance concentration study was also undertaken (paragraphs 7.35 & 7.36 and Appendix 7.1).
65 Typically, this analysis is feasible only if it is possible accurately to measure price and some version of marginal cost, usually average incremental cost.
66 Those in which marginal cost is below average cost and capacity constraints are not binding.
67 For example, where there are no entry barriers, fixed costs are present and products are differentiated. Customers might be unwilling to switch between highly differentiated products, but nonetheless competition on the basis of development efforts to introduce new products could be robust. 2006), for example, the CC found that prices in that market were high in comparison with the prices of other credit products and were higher than prices in the Republic of Ireland, where similar products were offered to customers.
**Profitability**
114. One approach to the question of whether prices are above competitive levels is to consider the profitability of the business activity being investigated. In many cases, the CC’s focus will be on the largest incumbent firms in the market or market sector. However, the CC may also consider the profitability of less well established firms with smaller market shares, eg for comparative purposes. Where the business activity being investigated is only one part of the firms’ activities, it will be necessary to take this into account.
115. In its analysis the CC is concerned with economic profits and these can differ in important respects from accounting profits. The CC will generally derive the profitability of the relevant business activity by identifying the relevant revenues and costs for that business activity, including an appropriate value for capital employed and an allowance for the cost of capital. More information about the CC’s approach to the calculation of profitability is in Annex A (The measurement of profitability).
116. Firms in a competitive market would generally earn no more than a ‘normal’ rate of profit—the minimum level of profits required to keep the factors of production in their current use in the long run, ie the rate of return on capital employed for a particular business activity would be equal to the opportunity cost of capital for that activity. The profitability of firms representing a substantial part of the market can therefore be a useful indicator of competitive conditions in a market (see paragraphs 118 and 119).
117. In practice, a competitive market would be expected to generate significant variations in profit levels between firms and over time as supply and demand conditions change, but with an overall tendency towards levels commensurate with the cost of capital of the firms involved. At particular points in time the profitability of some firms may exceed what might be termed the ‘normal’ level. There could be several reasons, including cyclical factors, transitory price or other marketing initiatives, and some firms earning higher profits as a result of past innovation, or superior efficiency.
118. However, a situation where profitability of firms representing a substantial part of the market has exceeded the cost of capital over a sustained period could be an indication of limitations in the competitive process.
119. The ability to earn profits persistently above the competitive level could indicate the presence of entry barriers (see paragraph 231). A situation where a firm with a large market share has earned profits that have been persistently above the competitive level may indicate significant market power (see paragraph 180). A situation where levels of profitability have remained persistently high and stable over time across several incumbent firms may indicate coordinated conduct (see paragraph 247).
120. The extent to which the results of profitability analysis indicate limitations in the competitive process may depend on both the size of the gap between the level of profitability and the cost of capital and the length of the period over which the gap persists.
121. The appropriate time period over which to examine the persistence of the gap between profitability and the cost of capital may therefore vary according to the specific market. The pattern of investment and the nature of sources of competitive advantage (advertising, research and development (R&D), more efficient production) may affect the CC’s view of the relevant timescales over which it would expect to see competition playing out in the market. Where large and risky investments have been made, the CC would expect to see a normal level of profitability restored over a relatively long timescale.
122. In cases where a persistent gap is not unequivocally substantial, it is particularly important for the CC to consider the analysis in conjunction with other information about the operation and nature of the market concerned.
123. Moreover, as with other forms of analysis, the CC’s interpretation of profitability analysis may be affected by the quality of the data available (see section on the gathering and analysis of evidence, paragraphs 35 to 41).
124. The trend in profits will be an important consideration and the CC will seek to understand the reasons for the observed trend. Where the size of the gap between the level of profitability and the cost of capital has grown over a period the competitive situation may have worsened. Where that gap has narrowed competitive conditions may have improved. Where that gap has fluctuated the CC may consider whether, on average for firms representing a substantial part of the market, profits have exceeded the cost of capital.
125. A CC finding of low profitability would not necessarily signify that competition is working well. Low profitability may be concealing ineffective competition. Reasons for this may include:
(a) A period of low profitability may occur during the course of a downturn in trading conditions, regardless of the state of competition in the affected market.
(b) Weak competition as a result of customers not responding effectively to competing offers may sometimes result in an inefficient market structure in which operators have higher costs and set higher prices than would be the case in a competitive market68 (see section on weak customer response, paragraphs 295 to 318).
(c) Incumbent firms, despite being protected from new entry, are not earning high profits because they are inefficient and operate with higher costs than would be sustainable with stronger competition in the market (see section on barriers to entry, paragraphs 205 to 236).
In some cases, the CC may be able to compare actual costs with efficient costs when looking at the level of profitability achieved by firms but this may not always be practical.
Indicators—not features
126. In summary, the CC will consider prices and profitability in the context of its overall assessment of the market. While useful, findings that price-cost margins are wide or profitability is high in a market do not on their own provide conclusive evidence that the market could be more competitive. Such findings are not in themselves causes of competitive harm—they are not features of the market for the purpose of the AEC test.
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68 Hotels near airports, for example, may exhibit a form of monopolistic competition characterized by low entry barriers, in which customers do not compare offers effectively, and hence there are more operators, with excess capacity, charging higher prices than would otherwise be the case. Individual operators may be observed to have normal profitability in this example. B. Quality, innovation and other non-price indicators
127. As indicated above, prices and costs are not the sole indicators of the level of competition in a market. Poor quality, lack of innovation, or limited product ranges are prominent among other indicators of weak competition in a market. Evidence about this kind of indicator tends to be qualitative, coming particularly from surveys, questionnaires or discussions with customers, investors, or other market observers. In several past market investigations, such analysis has spotlighted various negative non-price factors as important indicators of weak competition.
128. In the investigation into Northern Irish personal banking, the CC chose a range of indicators on which information was readily obtainable and readily comparable and, analysing responses to questionnaires, made a comparison between banks within Northern Ireland and some of the large banks based in Great Britain. This evidence indicated several non-price indicators of a lack of competition between Northern Irish banks in relation to branch opening hours, functionality of Internet banking and product innovation. In its investigation into PPI, the CC considered evidence it had obtained so as ‘to identify: any new PPI policies which had been introduced, whether there had been any innovations within existing policies, the rationale for product change or innovation, and whether, and if so how, distributors advertised and marketed their policies’. The CC concluded that there was less choice (and possibly less innovation), as well as higher prices, ‘than would be expected in a well-functioning market’.
129. In its investigation into BAA airports, the CC compared Aberdeen Airport with other regional airports and found slower development of routes; lack of ambition in development; underinvestment and poor facilities. In relation to the South-East of England airports the CC found a lack of responsiveness to the interests of airlines and passengers that would not be expected in a well-functioning market; weaknesses in the approach to planning and consulting on capital expenditure; and deficiencies in the level and quality of service.
Part 3: Section 2—Market definition
130. A market is a collection of goods and services provided in particular geographic areas (or in some cases to particular groups of customers or at particular times), connected by a process of competition. The process is one in which firms seek to win customers’ business over time by improving their portfolios of products and the terms on which these are offered, so as to increase demand for the products (see paragraph 10). The willingness of customers to switch to other products is a driving force of competition. In forming its views on market definition, the CC will therefore consider the degree of demand substitutability. In some markets, supply-side constraints will also be important (see paragraph 134).
131. In considering the substitutability of goods or services or areas of supply set out in the ToR, the CC may (as stated above, paragraph 26) conclude that the market definition goes wider or narrower than those goods and services.
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69 Northern Irish personal banking, 15 May 2007, paragraphs 4.193–4.206. 70 PPI market investigation, 29 January 2009, paragraphs 4.12 & 9.4. For the concept of a ‘well-functioning’ market, see paragraph 30 and paragraphs 319 & 320. 71 See paragraph 30. 72 BAA airports market investigation, 19 March 2009. The role and determinants of market definition
132. In defining the relevant market (see paragraph 26), the CC identifies the participating firms and customers and the traded products in the market(s) that are the subject of the reference. This enables the CC to focus on the sources of any market power and provides a framework for its assessment of the effects on competition of features of a market (see paragraph 31).
133. Market definition is thus a useful tool, but not an end in itself, and identifying the relevant market involves an element of judgement. The boundaries of the market do not determine the outcome of the CC’s competitive assessment of a market in any mechanistic way. The competitive assessment will take into account any relevant constraints from outside the market, segmentation within it, or other ways in which some constraints are more important than others.
134. While the composition of a relevant market is usually determined by the degree of demand substitutability (see paragraph 130), the CC will where relevant include supply-side factors in defining the market. There might, for example, be a possibility that firms supplying non-substitute products have the capabilities and assets to redirect production to goods and services that would be substitutes for those in the market. (For further detail on substitutability, see paragraphs 198 to 204.) Alternatively, the same firms might compete to supply the non-substitute products under similar conditions of competition; in that case aggregating the supply of these products and analysing it as one market does not affect the competitive assessment (for example, in markets characterized by bidding and tendering processes).
135. The nature of competition in a particular market (and the theories of harm under consideration) may require that the CC identify more than one market for the same product so as to understand different aspects of competition. For example, in some industries certain aspects of competition are determined at a national level, while others occur at a local level. Looking at how competition operates at both levels, and at how the levels interact, could produce important insights.
136. Substitutability in the short run may, moreover, be different in the longer term. In the short run firms compete on the basis of the products in their existing portfolios and the current geographical footprint of their distribution systems. In assessing short-run competition the CC will therefore usually define markets on the basis of substitutability between existing products and areas. However, in the longer term... firms may compete by improving their product portfolios, or extending the geographical scope of their operations. The CC’s assessment of this sort of competition may be concerned with identifying groups of firms that have the capability to introduce new or improved substitute products, or open new outlets in a more broadly defined product category or areas.
Assessing substitutability
137. In defining a market it is important to ensure that the pool of products identified as effective substitutes for the relevant product(s) is not unrealistically small. If the market is drawn too narrowly there is a risk that a party is incorrectly viewed as holding significant market power, whereas in reality that position is undermined by constraints from alternative suppliers that should be included in the market. (Conversely, defining a market too widely carries the risk that market participants, in seeming to be in weaker positions, are inferred to have less market power than they actually enjoy.)
138. The hypothetical monopolist test (HMT) is a tool which can be used to identify effective substitutes and to check that the market is not defined too narrowly. The principle behind it rests on defining a market as a product, or collection of products, a sole supplier of which could hypothetically impose a small but significant non-transitory increase in price (sometimes referred to as the SSNIP test). The test can help to identify the constraints that would prevent a hypothetical monopolist from exercising market power. In practice it may often be used, not quantitatively, but as a conceptual framework.
139. There are some practical difficulties in using the HMT in market investigations. If significant market power is already being exercised, using prevailing prices can lead to defining markets too broadly and possibly to an incorrect inference that significant market power does not exist. In theory, the HMT could be implemented in the presence of significant market power using notional competitive prices, but in many cases it is difficult to assess what those prices would be. There is also a risk that using a notional benchmark in effect assumes the existence of significant market power as part of the framework within which the competitive assessment is being undertaken.
140. The CC will consider the pros and cons of using the HMT depending on the particular facts and circumstances of the case, including whether the practical difficulties mentioned above can be avoided and how informative its use would be.
141. In practice, the HMT is more likely to be used to check that the market has not been defined too narrowly in cases where the CC’s findings include a finding that high concentration is a feature harming competition (see paragraph 195).
Dimensions of the market
142. The different dimensions of the market are discussed in the following sections. These are (as indicated in paragraph 130): the product dimension, the geographic
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79 Unilateral market power is discussed in paragraphs 178–184. 80 In these Guidelines, references to the ‘use’ of the HMT applies to its use both quantitatively and as a conceptual framework. 81 This problem is known as the ‘Cellophane Fallacy’ because it arose in a US Supreme Court case involving cellophane, in which the issue was whether the relevant market was cellophane or all flexible packaging materials. 82 Competitive price levels that are clearly below current levels will usually be an indicator of an AEC. Alternatively, the competitive assessment may provide some insight into an appropriate competitive benchmark to feed into the HMT. dimension, and markets defined with reference to customer group or temporal factors.
**Product market**
143. The CC may consider the following types of information, where available, when assessing whether products are substitutes:
(a) Product characteristics, such as physical properties and intended use that can indicate similarities (from the purchaser’s perspective) between different products.
(b) Relative price levels and the extent to which prices of products within the possible relevant market are correlated with each other, as compared with the prices of products outside that market.
(c) Prices and sales volumes over time or across areas that permit analysis of the way that customers respond to changes in prices or to firms entering or leaving the market.
(d) Responses from customers, competitors and interested and informed third parties to questions—sometimes posed in surveys—about customer behaviour.
(e) Firms’ view of the products, drawing on internal documents such as marketing studies, consumer surveys prepared in the normal course of business, market analyses prepared for investors, and internal business analyses (e.g., board papers, business plans and strategy documents).
144. The existence of a market for secondary products has sometimes to be considered in fixing the dimensions of a market. Secondary (or aftermarket) products are those that are purchased only as a result of the customer having purchased a primary product. An example is the market for printer cartridges, a secondary market linked to the primary market for printers. The CC may sometimes consider primary and secondary products to be in separate markets. However, it may consider the products to be in the same market where customers take into account the cost of the secondary product when purchasing the primary product (see also paragraphs 291 to 293). Whichever of the two definitions is chosen will not determine the outcome of the CC’s competitive assessment, since the competitive constraint from other suppliers will be taken into account in either case.83
**Geographic market**
145. Geographic markets may be based on the location of either suppliers or customers. In the case of the former, the geographic market is an area covering a set of firms or outlets which compete closely because enough customers consider them to be substitutes (as in the case of retail markets and some industrial markets). In the latter case, a geographic market is an aggregation of customers paying individually negotiated prices but enjoying sufficiently similar purchasing options (i.e., in effect many customers in industrial markets).
146. The geographic market: may be local, regional, national or wider. Imports may be taken into account as well as UK products. Depending on the circumstances of the
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83 Other types of markets are described in paragraphs 179 & 193. case and the theory of harm posited, the CC may examine geographic markets at more than one level in the same investigation, eg at both national and local levels.
147. The key to defining both supplier-based and customer-based geographic markets, as to defining the product market, is the degree of substitutability, ie the extent to which suppliers can switch their areas of supply and the extent to which customers in one area may be served in another area.
148. In the case of supplier-based markets the geographic scope may be described as a set of competing outlets. In identifying these sets the CC may consider the following information on:
(a) the catchment areas from which the bulk of an outlet’s customers is drawn;
(b) differences in pricing, sales, advertising and marketing strategies by area;
(c) which outlets customers consider to be substitutes for each other; and
(d) natural experiments which show the effect on one outlet’s sales arising from entry, exit or expansion by other outlets nearby.
149. The CC may consider the following when identifying the boundaries of customer-based markets:
(a) product characteristics such as perishability;
(b) differences in pricing, sales, advertising and marketing strategies by area;
(c) information enabling the estimation of switching costs (which can include additional delivery costs) that customers might incur in changing to products currently supplied in other geographic areas, relative to the value of the products and the length of time taken to make the switch; and
(d) the flows of goods between regions or into the UK and any barriers to entry, whether legislative, natural or strategically created.
Other issues
Customer groups
150. Many markets serve a diverse customer base, for example suppliers may have both business and personal customers. One set of customers may be more affected than others by any particular feature. Where such diversity exists, and where suppliers can charge different prices to different groups (ie price discriminate), the CC will recognize these differences. In terms of market definition, depending on the market and the evidence presented, the CC may choose either to treat these different groups as separate markets, or as segments within one market, noting the scope for price discrimination between different groups within the market (see also the discussion of the hypothetical monopolist test at paragraph 139).
Temporal dimensions
151. When customers are not able to substitute products between periods, there may be a temporal dimension to the market, for example seasonality, peak and off-peak services. A typical example concerns commuters and leisure travellers on trains. Commuters constrained by their hours of work have little choice but to travel at ‘peak’ times, during which the train companies charge more than at other times. On the other hand, leisure travellers may be less concerned about the time of travel and more willing to travel at off-peak times and are charged less. In such instances, depending on the circumstances of the case, the CC may decide to define two or more markets, or it may decide to define only one market and note the scope for price discrimination within the market, for instance identifying a market for rail travel with different prices charged to peak and off-peak travellers.
**Grouping markets together**
152. In some cases, the CC may treat a group of product, geographic or other types of markets together for the purposes of assessing competitive effects. This can be the case where a feature manifests itself in a similar way across several different markets (for example, the need for an operating licence may be an aspect of many local markets) and the CC is able to reach a view about the effects of the feature on competition across the group of markets as a whole. In the investigation into home credit, for example, the CC was satisfied that the conditions of competition were sufficiently similar to justify a conclusion that applied throughout the reference area, without looking at every geographic area in detail.
**Effects outside the relevant market**
153. The CC may also consider effects in neighbouring markets, including those which are upstream or downstream of the relevant market (see paragraph 26). For example, one firm’s advantage as a buyer in an input market may protect it from competitive pressures when supplying a downstream market for manufactured goods relying on that input. If the input market has been referred to it, the CC may consider effects in the downstream output market.
**Part 3: Section 3—The competitive assessment**
154. In deciding whether or not there is an AEC, the CC’s core task—given the statutory questions (paragraphs 28 and 29)—is to assess the effects of possible features on competition. In conducting this assessment, the CC will seek to establish whether or not any of the possible features, or any combination of them, can be expected to harm competition when measured against a theoretical benchmark (see paragraphs 30, 319 and 320). The emphasis on assessing the competitive effects of features means that any AEC finding will be grounded in a clear understanding of why competition in a market may be harmed.
**Identifying features that harm competition**
155. As noted in paragraph 31, a market feature may be intrinsic to the structure of the market or may arise from the conduct of any market participant (whether supplier, acquirer or customer and whether or not in the reference goods or services market). The Act does not require the CC to state whether particular features of a market are to be considered structural features or an aspect of conduct. Provided the relevant feature falls within at least one of these categories, the categorization is of little practical importance. Since the concept of a feature is broad, the CC has the
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84 Home credit market investigation, 28 April 2006. flexibility to investigate a wide range of possible market features, each of which may have effects on the different aspects of competition (see paragraphs 13 to 15). Moreover, how far any feature identified by the CC is along a causal chain resulting in harm to competition may vary (ie some may be directly causing harm and others may be doing so indirectly).
156. It has been emphasized (see paragraph 22) that the CC, on receiving a market investigation, makes no presumption that there are market features that harm competition. A CC investigation may find that there are no such features giving rise to an AEC in the relevant market (as was the case in the investigation into Movies on Pay TV85).
**Structural features**
157. Structural features may include high levels of market concentration, high entry barriers, common ownership of competing facilities and buyer power.86 For example, market concentration was identified as a feature harming competition, in the market investigations into classified advertising services87 and the supply of groceries by retailers;88 high barriers to entry in the cases of the supply of groceries and domestic bulk liquefied petroleum gas (LPG)89 and the ROSCOs90 investigation; common ownership in the case of BAA airports;91 and buyer power in the case of the supply of groceries investigation.
158. Specific structural features identified in past investigations to be harming competition include aspects of the planning system, government policy and the regulatory system (in the BAA airports investigation and, with regard to the planning regime, in the grocery retailing market); the criteria applied for the award of franchises (in the ROSCOs market investigation); information asymmetries between incumbents and entrants (in the home credit market investigation); and buyer power in the case of the supply of groceries investigation.
**Conduct features**
159. ‘Conduct’ of a market participant includes any failure to act, whether intentional or not, and any other unintentional conduct.94
160. Conduct features by sellers identified in past investigations as harming competition include: a failure of Northern Irish banks sufficiently to explain their charging structures and practices for personal current accounts;95 and the failure of distributors and intermediaries in the market for PPI to try to win customers by setting competitive price or quality levels for their policies.96 ‘Exclusionary behaviour’—for example, by bus companies deliberately obstructing the services of competitors97—also falls within the category of a conduct feature. The conduct of firms which supply
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85 Movies on pay TV market investigation, 2 August 2012. 86 Buyer power is the ability of a firm to secure from its supplier(s) prices or other terms in its favour. 87 Classified Directory Advertising Services market investigation, 21 December 2006. 88 The supply of groceries in the UK market investigation, 30 April 2008. 89 Market investigation into supply of bulk liquefied petroleum gas for domestic use, 29 June 2006. 90 ROSCOs market investigation, 7 April 2009. 91 BAA airports market investigation, 19 March 2009. 92 Home credit market investigation, 28 April 2006. 93 PPI market investigation, 29 January 2009. 94 Section 131(2). 95 Northern Irish personal banking, 15 May 2007. 96 PPI market investigation, 29 January 2009. 97 Local bus services market investigation, 7 January 2010, paragraphs 8.263–8.277. the market when acting in other markets can be a feature of the market. For example, if the market investigation concerned competition to supply a particular manufactured good, the conduct of vertically integrated suppliers in the market for the input might be a conduct feature.
161. The behaviour of customers can also sometimes be a feature limiting competition between firms. (As noted in paragraph 19, market investigations allow the competition authorities to look at customer behaviour and customer vulnerability in relation to their implications for competition, instead of just looking at them as consumer protection issues; see also paragraphs 295 to 318). The insensitivity of customers to measures of price other than the level of weekly repayment was found to be a feature detrimental to competition in the home credit market. Similarly, the low sensitivities of customers to store card APRs and late payment charges were identified as features harming competition between store card credit services. A customer behaviour feature—failure to investigate alternative accounts or banks—was also found in the market for personal current accounts in Northern Ireland.
A combination of features
162. In some circumstances, several features may in combination harm competition. In the PPI investigation, for example, competition was found to be adversely affected by several interconnected features, including barriers to searching and switching, which hindered customers’ ability to compare PPI policies or to switch to alternatives, as well as the point-of-sale advantage credit providers enjoyed. Barriers to searching included product complexity, the perception that taking PPI would increase a customer’s chances of being given credit, the bundling of PPI with credit and the limited scale of stand-alone provision. Barriers to switching included contract terms which made switching expensive or which risked leaving customers uninsured.
Theories of harm
163. To provide focus and structure to its assessment of the way competition is working in a market the CC sets out one or more ‘theories of harm’. A theory of harm is a hypothesis of how harmful competitive effects might arise in a market and adversely affect customers. The use of the term does not imply any prejudgement of an AEC in a given market.
164. Focusing the competitive assessment on the testing of theories of harm helps the CC to understand the market and to evaluate evidence so as to be able to decide the statutory question of whether or not there is a prevention, restriction or distortion of competition and, if so, identify what features are causing it. The use of theories of harm also helps the parties by identifying the issues that will be addressed and indicating the information that will be gathered.
Formulating and reviewing theories of harm
165. The starting point for formulating theories of harm in market investigations is the work already done by the referring body, particularly the terms of reference (paragraph 26) and decision documents. These will not only include observations on the structure of the market but will also have described the products the referring body considers are affected and the features it has grounds for suspecting may be the cause of harm to competition. At this stage, the CC supplements the analysis carried out by the referring body with its own initial consideration and may formulate theories of harm involving other possible aspects of the market on the basis of its own analysis (see paragraphs 98 to 105 on market characteristics and outcomes).
166. The initial theories are set out in the issues statement published at an early stage in an investigation (see paragraph 68). In the market investigation into local bus services, for example, the CC noted in the issues statement (4 February 2010): ‘It appears from the OFT investigation that in many (local bus) markets there is limited head-to-head competition. The OFT’s report also suggests that concentration is high.’ It went on to list hypotheses as to why this might be so, including theories derived from barriers to entry, supplier behaviour and aspects of the tendering and bidding systems.
167. Although the CC aims to focus on those aspects of the market that appear most likely to influence competition directly, these are not always clear at the outset of an investigation. At this early stage, one or more theories may often therefore be set out in broad, generic terms.
168. As the CC investigates the interlinked issues of market characteristics and outcomes, market definition and the operation of competition within that market, it reviews its theories. The theories often become increasingly specific to the investigation. Some may be dropped and others put forward (see paragraph 72 for information on how substantial changes in theories of harm are communicated to the parties).
169. Several different hypotheses may be put forward for investigation. They need not be mutually exclusive. One or more theories may be linked to different outcomes, may in combination produce a single outcome, or may relate to different markets. On the other hand, several competing theories may sometimes be advanced linking features with observed market outcomes, and in that case the CC has to consider which theory, if any, best explains the outcome.
Potential sources of competitive harm
170. Individual theories of harm are numerous and specific to different market investigations. However, most draw on a limited number of common potential sources of competitive harm. These reflect the nature of competition as set out in Part 1 (paragraphs 10 to 15), which explained that the constraints helping to ensure that competition is effective mainly come: first, from other firms already in the market; secondly, from firms that could readily enter it; and, thirdly, from their customers; conversely, competitive harm can flow from five main sources:
(a) unilateral market power (including market concentration);
(b) barriers to entry and expansion;
(c) coordinated conduct;
(d) vertical relationships; and
103 But, as noted in paragraph 22, the CC proceeds wholly independently of the referring body. (e) weak customer response.
171. The list is not exhaustive. While the majority of theories of harm flow from these five sources, other theories may be identified that do not do so.
172. Moreover, the five sources are not mutually exclusive. Individual features identified in a market investigation have been associated with more than one of them. Some may have mutually reinforcing effects. Barriers to entry and expansion, in particular, have been found to be features, sometimes in combination with other features, in many investigations.
**Countervailing factors**
173. In assessing the potential sources of harm, the CC considers aspects of the competitive situation that may, on the other hand, benefit competition and operate to the benefit of customers.
174. In some circumstances, for example, the positive effects of efficiencies on competition associated with a particular market feature may outweigh the harmful effects of that feature, which would otherwise cause an AEC. Efficiencies can enhance rivalry when they induce one or more firms to follow a course of action of benefit to customers (e.g., lowering prices or increasing innovation) in response to actual or expected actions by rivals. Examples of such rivalry-enhancing efficiencies are given within each of the following sections on the potential sources of competitive harm. Should the CC decide that, despite the existence of some efficiencies that benefit customers, there is still an AEC in the market, these efficiencies may be taken into account as RCBs when the CC considers possible remedies (see paragraphs 355 to 366).
175. The prospect of entry or expansion (see paragraphs 205 to 236)—and therefore of stronger competition in the longer term—may also sometimes offset competitive harm that may otherwise arise, if there are no significant barriers to entry or expansion and the CC judges that:
(a) actual entry or expansion is likely, of sufficient scale and swift enough to constrain incumbent firms in the near future; or
(b) the threat of potential entry or expansion is sufficient to exercise a constraint even though no actual entry of sufficient scale has been observed in the recent past (small-scale past entry does not demonstrate the absence of entry barriers see paragraph 234); such a constraint could arise when entry would be swift and low-cost so as to exploit any commercial opportunity in the market.
176. Countervailing buyer power may also be taken into account in the CC’s competitive assessment. In some markets prices are in effect determined by the relative bargaining power of sellers and buyers. The exercise of buyer power can sometimes be a feature harming competition (see paragraph 157 and footnote 86). However, in other circumstances ‘countervailing buyer power’ can have the positive effect of preventing the exercise of a supplier’s market power in the bargaining process. The presence of large buyers relative to the size of the suppliers does not necessarily guarantee that the buyers can exert countervailing buyer power. The relative importance to each buyer and supplier of its business with the other party is a key
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104 In retailing, for example, a supplier may be more dependent on its sales to a large retailer than is the retailer on its purchases from that supplier. (This may be the case even if the supplier has a larger share of its market than the retailer has of the retail market.) factor, and the strength of the buyers' ‘outside options', ie their alternative strategies in relation to the relevant product, is often the crucial determinant of countervailing buyer power. Whether or not suppliers have the ability to offer different prices that discriminate between customers and customer groups, and thereby reduce any potential impact of buyer power, can sometimes be an important issue in the CC’s assessment. The CC will also assess the extent to which the benefits of any countervailing buyer power are passed on to customers in lower prices.
The five potential sources of competitive harm
177. The following subsections deal with each of the five sources of potential competitive harm identified above (see paragraph 170) by considering first the nature of the mechanism involved, and secondly its potential impact on the market, including any positive effects, and the CC’s approach to testing this impact.
178. Unilateral market power
179. As explained in Part 1 of these Guidelines (see paragraph 14), competition within a market may be weak when one or more market participants enjoys significant market power, and is therefore able to influence market outcomes and other important aspects of competition. The features that give rise to significant market power may cause an AEC to arise. When exerted by a single firm, or by several firms acting independently in a market, such power is termed ‘unilateral market power’, distinguishing it from the market power that arises as a result of coordinated conduct.
180. A single firm’s level of market power will be related to the elasticity of demand for its product and its rivals’ elasticity of supply for that product. The market power of a firm will be strong if the level of demand for its product is insensitive to an increase in price of that product and if its rivals are unlikely to step up their supplies in response to a price rise. Significant market power may also be conferred on one or more firms operating in markets with particular characteristics. Such cases include:
(a) monopolies, where a single firm or group supplies all or nearly all of a market for a product or service;
(b) oligopolies, where a concentrated market or industry is dominated by a small number of sellers (see paragraph 189);
(c) network or two-sided markets providing services over a network or through a platform; and
(d) secondary or after-markets (where the products are purchased only as a result of the customer having purchased another (primary) product; see paragraph 144 and paragraphs 291 to 293).
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105 See paragraph 9. 106 See paragraphs 9 & 14. 107 Customers value the network or platform more highly when it is used by a greater number of other customers; for example, in newspaper (and other media) markets both readers (or viewers, or listeners) and advertisers are served and the value of the product (eg an advertisement) to one group of customers (advertisers) is affected by the number of customers served in the other group (the number of readers of a newspaper, listeners to a radio station or viewers of a television channel). Indicators of unilateral market power
180. The CC may sometimes observe indicators of unilateral market power, such as high profits (see paragraphs 114 to 126), high price-cost margins (see paragraph 112), low single-firm demand elasticities (see paragraph 179) or other evidence of adverse effects in the form of high prices, low quality and limited choice (see paragraphs 127 to 129).
181. The way a firm behaves—for example, in relation to its customers or competitors—may also give an indication of the market power it may enjoy. However, actions apparently indicating the exercise of unilateral market power may be benign or even beneficial practices. For example, a supplier pitching prices below cost may be predatory action, but may alternatively be part of an introductory offer which will expand future demand for the product and therefore increase competition in the longer term.
Innovation and new product development
182. One important outcome of unilateral market power can be to stifle incentives on firms to innovate or invest in product development and thereby prevent the gains in productive efficiency and customer benefits that innovation or new products bring over time. When firms face competition—whether from other incumbents or from the threat of entry—the possibility of generating high profits encourages them to discover new products and processes. In contrast, firms that do not face competitive pressures may choose not to invest significantly in R&D (see paragraph 121).
183. However, the relationship between market power and innovation is not always clear cut. Large incumbent firms may benefit from significant economies of scale in the innovative process. On the other hand, an incumbent firm with unilateral market power may have a lower incentive to innovate than a smaller competitor or new entrant because it has less to gain. In some markets innovators may expect to benefit only to a small extent but, even in such markets innovation incentives may be strong if rivalry is intense.
184. In assessing market power in high-technology industries, the CC will pay particular attention to the number of products and/or technologies that are being developed. Another useful indicator in high-technology industries is R&D spending relative to sales. High R&D spending to sales ratios provide a clear indication that competition takes place through innovation. Where R&D investment is high, market power may be vulnerable to future innovations by rivals or new entrants. Substantial shifts in market share over time are also positive signs of a high level of rivalry in innovative or high-technology industries.
Assessing sources of unilateral market power
185. Generally, the most common reasons for one or more firms to possess unilateral market power are:
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108 Large-scale firms that undertake large amounts of R&D may be able to employ more specialized resources; they will face smaller average total costs because they can average the fixed costs of their innovative effort over a greater level of output; and they may be able to support a larger portfolio of R&D efforts, increasing the likelihood that this will develop an improved product or process likely to be applicable to at least one of its businesses.
109 A strong incumbent company might be deterred from investing because it could not be confident that it would increase its sales or its already large share of the market. In contrast, a new entrant or small incumbent supplier might have a strong incentive to invest because, having only a small or no presence in the market, its investment would have greater potential to gain business there. (a) high concentration (see paragraphs 186 to 195); (b) capacity constraints (see paragraphs 196 and 197); (c) lack of substitutability (see paragraphs 198 and 199); and (d) absence of supply-side constraints (see paragraphs 200 to 204).
(a) High concentration
186. An examination of market structure, including the initial calculation of market shares and sometimes other concentration measures (as discussed above, paragraph 101 and in Annex A), often provides a starting point for the assessment of firms’ market power.
187. In general, a highly concentrated market—as indicated by, for example, persistently high market shares held by one or more firms—might be an indicator that one or more firms hold unilateral market power. If a firm has a high market share it might have less incentive to compete vigorously with its rivals (particularly if there are barriers to entry). For example, if a price reduction aimed at new customers would also apply to existing customers, a firm with a large market share may be more reluctant to implement a price reduction than might one with a small share. The firm with a large market share may feel little pressure to reduce price even if a smaller rival does so.
188. A large market share could also confer advantages in bargaining with suppliers upstream, or buyers downstream (see paragraph 50), and a firm may be able to control prices in its favour or impose conditions in the negotiation process that restrict competition in one or more markets.
189. As explained in paragraph 179, market concentration and the exercise of market power are not necessarily linked to the position of a single firm. A market with a small number of suppliers which are protected by barriers to entry (an oligopoly), for example, may be characterized by significant market power. One mechanism by which this market power can manifest itself is through coordinated conduct (see paragraphs 237 to 294). However, unilateral market power can be enjoyed by a number of firms even where they act independently, albeit aware of each other’s presence—so-called ‘non-coordinated oligopolies’. In such situations, each firm knows that it can affect market prices and hence its rivals’ profits. This awareness conditions the way in which competition occurs, although the precise way it does so will depend on the specific characteristics of the market in question.
190. A large market share does not always indicate that competition within the market is weak. It may simply indicate that the firm(s) possessing it is capable and relatively efficient, having low costs, an attractive product, or both. Moreover, a firm with a large market share could be vulnerable to entry and expansion which might constrain its market power (see paragraphs 175), or face countervailing buyer power (see paragraph 176).
191. Conversely, since a firm’s level of market power will be related to the elasticity of demand for its product, and to its rivals’ elasticity of supply for that product (see
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110 It may on occasions be difficult to assess whether a particular market outcome has been driven by coordinated conduct or is the result of a non-coordinated oligopoly. paragraph 179), even a firm with a low share of sales of a product may have significant market power if both measures of elasticity are low.
192. Observed changes in market share over time (see paragraph 101) may help interpret the implication of high concentration in a market. For example, when market shares have been stable over time, especially in the face of historical changes in prices or costs, high concentration may indicate that competition within the market is weak. However, a highly concentrated market may be competitive if market shares fluctuate over short periods in response to changes in competitive offers; such volatility may indicate the existence of effective competitive constraints, such as successful entry and innovative developments.
193. In markets characterized by bidding and tendering processes (see paragraph 134 and footnote 76), market shares may fluctuate only when tenders occur and a firm may have a high market share at any given point, as a result of winning several recent tenders, without necessarily possessing significant market power.
194. In some cases, recent or ongoing changes in market conditions may indicate that the current market share of a particular firm either understates or overstates the firm’s expected competitive significance in the near future. Predictable effects of such changes—for example, the spreading of new technologies, the longevity of patents and the prospective development of new products—may be taken into account when calculating and interpreting market share data.
195. In some circumstances, the CC will find that high concentration is a feature causing harm to competition. It has been so identified in several market investigations (see paragraph 157). As explained in paragraphs 101 and 137, the CC will consider how confident it is that it has defined the market neither too widely nor too narrowly before identifying market concentration as a feature harming competition. The CC would generally expect to find this in conjunction with other features, such as barriers to entry.
(b) Capacity constraints
196. In markets involving relatively undifferentiated products, one or more market participants may find it profitable unilaterally to reduce output and increase the market price (eg by leaving capacity idle or diverting production to another market). Such a strategy is more likely to be profitable when any rival is limited by capacity constraints or a relatively low elasticity of demand in the market (see paragraph 179). In some markets, therefore, share of capacity may be more important than share of supply.
197. In assessing the power of a firm to suppress output unilaterally in this way the CC focuses on the degree of spare capacity other firms in the market may possess, the ease with which these firms could expand existing capacity, and their commercial incentive to counteract any overall output shortfall.
(c) Lack of substitutability of products
198. A firm may also enjoy unilateral market power because it controls a group of close substitute products, for which its customers have limited alternatives. In differentiated product markets, while some products can be close substitutes and compete strongly with each other, others are more distant substitutes and compete less strongly. Branding, quality, product characteristics or geographical location will have effects on the extent to which a product competes with another; one high-end product, for example, may compete more directly with another high-end product than with a low-end product.
199. Assessing the extent of direct competition between close and distant substitute products may involve calculations of diversion ratios and of cross-price elasticities of demand. The higher the cross-price elasticity of demand between two products the closer substitutes they are in the eyes of customers.
(d) Weak supply-side constraints
200. Unilateral market power can only be sustained if potential market participants will not respond to a price rise by expanding their production facilities to produce the goods and services concerned, ie ‘supply-side substitutes’ do not come into the market.
201. Two products are considered to be supply-side substitutes if the supplier of one of the products already owns the key assets needed to produce and market the other, without incurring additional sunk (ie non-recoverable) costs. An incumbent firm may be able to do so, and sometimes new entrant firms may exert a competitive constraint if they can easily and rapidly begin selling in the market without incurring significant sunk costs. This may be the case when, for example, a firm has idle capacity or when it produces the relevant product but sells it in a neighbouring geographic market—or to customers in another market. Similarly some firms, even producing relatively distant substitutes, may have access to the know-how, and may have assets (physical and human) that can be easily and rapidly adjusted to produce and distribute close substitute goods.
202. So as to assess the extent to which suppliers of potential supply-side substitutes enhance competition in the market (or whether the absence of supply-side constraints restricts competition), the CC considers whether:
- there are economic incentives to engage in production of the relevant goods/services;
- the suppliers are able to divert production to the relevant goods or services, or conversely are contractually tied to continue production of existing products; and
- the suppliers possess unused plant capacity that can be brought into production at a reasonable cost.
203. The CC will also consider whether the existence of supply-side substitutes influences the market behaviour of incumbent firms which otherwise would enjoy significant market power (seeking evidence, for example from internal documents, past episodes of successful rapid entry and exit, and from customers about the credibility of rapid entrants).
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111 A diversion ratio between Product A and Product B represents the proportion of sales that would divert to Product B (as opposed to Products C, D, E etc) as customers’ second choice in the event of a price increase for Product A. The cross-price elasticity of demand of Product A to Product B is a measure of the percentage change in the quantity of Product A sold when the price of Product B rises by 1 per cent.
112 As noted in paragraph 179.
113 See also paragraph 211.
114 The extent of intra-market rivalry may depend on whether firms’ cost structures are similar, and how low-cost firms utilize this advantage.
115 Situations in which firms compete with products that are currently available may be distinguished from situations where firms compete by producing to order or on the basis of blueprints or where firms define their businesses in terms of the skills of their employees. In the latter situations the extent to which substitution exists is likely to be particularly important. 204. In assessing the prospects of expansion, repositioning, and mobility, the CC will consider in particular, the timing of the likely supply response, possible legal restrictions, access to distribution channels, and commercial risks and incentives on account of such factors as customer loyalty, brand reputation or managerial expertise.
2. Barriers to entry and expansion
3. Entry or expansion by firms will often stimulate competition and, as noted in paragraph 175, the prospect of entry and expansion within a short time can sometimes countervail against a prospective AEC decision. The possibilities of entry by outside firms or the expansion of incumbent firms have featured in most findings on whether or not there is an AEC in a market.
4. Firms can enter a market or expand within it in several ways. Firms coming into a market may build new capacity or take over existing capacity to use it in new or more productive ways. Incumbent firms may expand by building new plants or capacity, developing new products or expanding into neighbouring markets. Incumbent firms may invest in upstream or downstream companies to supply materials and process their output, respectively (see paragraph 50). Entry or expansion, or just the threat of it, can:
- upset established patterns of market conduct, particularly by making it difficult for an incumbent firm to continue wielding significant market power;
- promote efficient firms at the expense of inefficient ones;
- introduce new technology and fresh approaches to product design, marketing and delivery; the impact of entry and expansion on innovation within an industry has been observed above (see paragraph 182); and
- lead to more competitive prices as well as greater choice and quality to the benefit of customers.
207. A major source of competitive discipline is therefore generally eliminated or reduced if there is any barrier to market entry and expansion, whether an absolute barrier or some other form of restriction such as aspects of the market that deter entry. Barriers to entry and expansion give at least some incumbent firms an advantage over efficient potential firms or rival incumbent firms, either by reducing the expected profits, or increasing the expected costs, of entry or expansion. They may therefore constitute a feature, often in combination with other features, that harm competition.
208. The main focus of the CC’s assessment of the conditions for entry and expansion in a market is generally on the ability and incentive of new or relatively small incumbent firms to enter into or expand in a market. However, the prospects for larger incumbent firms, which can also in some cases be an important driver of competition, will also be evaluated.
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116 Absolute barriers to entry may include, for example, the constraints on entering a network market (paragraph 216). 117 Factors that delay entry may include licensing, certification, or product registration requirements that involve little or no costs but take significant amounts of time to satisfy. Other examples include the time required to obtain contracts (ie where the market’s products are sold via long-term contracts) or to gain a market share large enough to influence the behaviour of incumbents significantly. Sometimes these market aspects can apply for such a long period as to be tantamount to an absolute barrier. 209. A barrier to entry, as well as denoting different levels of restrictions (paragraph 207), takes various forms. The following sections of these Guidelines, first, outline the different types of barriers to entry and, secondly, describe the CC’s approach to assessing the impact of these barriers. The barriers surveyed are mostly entry barriers but some are barriers to expansion; the same analytical principles apply in assessing both sorts of barrier.
**Types of entry barriers**
210. There are three broad categories of barriers to entry: natural or intrinsic barriers; strategic and other ‘first mover’ advantages (including the endogenous costs of investing in market entry(^{118})); and regulatory barriers. Other factors will also help determine an entrant’s decision to move into a market, for example, the possession of the necessary production facilities, and the economic prospects for the market. Barriers to exit—the cost of exit from the market if the business venture fails—have also to be considered. Barriers to entry or exit can interact with and magnify each other’s effects.(^{119})
**Natural or intrinsic barriers to entry**
211. Firms entering a market unavoidably incur costs. These costs can sometimes in effect be ‘natural’ or ‘intrinsic’ barriers to entry, and may include the cost of putting the production process in place, gaining access to essential facilities or inputs and the acquisition of any necessary intellectual property rights (IPRs). Important considerations in evaluating the effects of such costs on the ability of firms to enter the market are the nature of the costs and the extent to which the costs are ‘sunk’, ie investments that cannot be recovered upon exit and hence would serve to commit a firm or firms to staying in the market. Sunk costs may include, for example, some specific asset investments, advertising, R&D and, in some markets, the costs of acquiring a reputation (eg for producing quality products).(^{120}) (Non-sunk costs, in contrast, are recoverable if production ceases, and do not therefore pose the same risk.)
212. Economies of scale, in combination with sunk investment costs, can constitute a barrier in cases where these relate to the cost of getting into or expanding in the market.
213. In industries where economies of scale are significant, entry on a small scale may not be profitable unless the firm is aiming at a ‘niche’ in the market or can develop a new production strategy which offsets the disadvantages of small-scale production. Entry on a large scale will often entail a high risk (that sunk investment costs may not be recovered) because it will generally be successful only if the firm can expand the total market significantly, or substantially replace one or more existing firms.(^{121})
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(^{118}) Endogenous costs are those located within a firm’s organization—human capital, innovation, knowledge and so forth.
(^{119}) Economists distinguish between ‘stand-alone’ and ‘ancillary’ barriers. The former is a cost that constitutes a barrier to entry by itself. An ‘ancillary’ barrier to entry is a cost that does not constitute a barrier by itself but reinforces other barriers that may be present. A group of small stand-alone barriers may constitute a significant barrier but a group of small ancillary barriers cannot do so.
(^{120}) Three important aspects of sunk costs may influence entry and exit decisions. First, sunk costs increase the risk of entering an industry because they cannot be recouped on exiting. Secondly, sunk costs create a cost asymmetry between entrants and incumbents. Once costs are sunk they are no longer a portion of the opportunity costs of production, and hence an incumbent will require a lower return on costs so as to stay in an industry than will be required to enter. Thirdly, sunk costs can serve as a commitment by incumbent firms not to exit the industry.
(^{121}) Economies of scale may constitute a particular barrier to entry if the size of the market is small relative to the minimum efficient scale. 214. Entrant firms may also face disadvantages relative to incumbents where production costs decrease as the cumulative quantity produced increases (i.e., through ‘learning by doing’). Similar considerations apply to economies of scope, which arise where producing two (or more) products is less costly for a single firm than for two (or more) firms each to produce the products separately. Where economies of scope are significant, an entrant, if it is to be successful, might have to produce a range of products from the outset, adding to the costs of entry.
215. Other disadvantages to entrants, imposed by natural or intrinsic barriers to entry, may arise simply because incumbents are already in the market. Switching costs for customers may be such an intrinsic barrier, as well as other demand-side factors (see also strategic and ‘first-mover’ advantages, paragraphs 217 to 222).
216. Network effects—where other customers committing to a particular product or service makes it more attractive to new customers (see paragraph 179)—may constitute a barrier to entry. This is because incumbents with an existing customer base have an automatic advantage over entrants. However, when demand is growing fast, or innovation is rapid, the barrier might not be as high as when demand or technological change is more static.
Strategic advantages of incumbents
217. Some forms of investments by incumbents, although they may often be pro-competitive and/or benefit customers, may sometimes have the effect of deterring market entry by increasing the sunk costs of entry. Such barriers are termed strategic and can have the effects of:
(a) lowering the incumbents’ costs relative to those of potential entrants (for example, by increasing capacity);
(b) altering the cost structure of rivals (for example, by vertical arrangements); and
(c) altering demand conditions in their favour (for example, by brand and product proliferation).
218. Such strategic entry barriers may increase the risks faced by new entrants. For example, vertical arrangements may in some cases make it difficult for an entrant to gain sufficient distribution outlets, because existing sellers are largely tied up with existing suppliers, or to gain access to vital components (see also paragraph 269).
219. The risks will be proportionately higher if the sunk costs of entry are high and the difference between the incumbent’s profitability and the rival’s post-entry profitability is substantial. In general, the greater the financial investment needed by a potential entrant the greater becomes the risk associated with entry.
220. The existence of significant switching costs for customers may act as a barrier to entry. These may be intrinsic to the market (see paragraph 215), but firms may also act strategically to increase them, for example by offering fidelity discounts or agreeing long-term contracts with customers, accompanied by penalties for early termination. Moreover, incumbent firms producing complementary goods may tie or
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122 On telephone networks, for example, customers pay less to call other people on the network than they pay to contact those on other networks. If most existing customers (and therefore likely recipients of calls from new customers) are on the same network, it is harder for a rival to attract new customers. bundle them together, potentially raising the costs for an entrant producing only one of the complementary goods (see paragraphs 286 to 290).
221. The incumbent firms may also be able to deter entry by signalling that they would respond aggressively to entry, including by over-investing in spare capacity, or seek to target entrants specifically to discourage them from entering the market.
‘First mover’ advantages
222. Other entry barriers may result simply from the established position of the incumbent firms in the market. Such so-called ‘first-mover’ advantages may make it difficult for other firms to enter a particular industry because experience or an established reputation is necessary to compete effectively. Relevant factors in this context include customer loyalty to a particular brand, the closeness of the relationships between suppliers and customers, and the role of promotion or advertising in the particular industry.
Regulatory barriers to entry
223. The ability of firms to enter a market can be affected by the market’s regulatory framework, broadly defined as including any applicable legislation (for example, intellectual property law and planning law), voluntary or compulsory standards and codes of practice, and other applicable sectoral regulations.
224. Regulations may be beneficial for a variety of reasons ranging from ensuring the stability of the financial system to protecting the environment, but they may inhibit the extent to which competition can flourish in certain circumstances. Some types of regulations may concern the production process and the characteristics of the finished product, for instance health and safety standards. Others may limit the number of competitors in the market directly, for example by requiring that only firms with a licence or permit may operate within it.123
225. With regard to their effect on competition, a distinction can be drawn between regulations that impose costs proportionately on all firms and those that hit new entrants harder than incumbent firms. Subsidies, tax reliefs and preferential purchasing may raise barriers to entry in a market if potential entrants are not equally eligible for them. Barriers that raise fixed costs can more easily be absorbed by an incumbent firm than by an entrant (because of the former’s larger sales in the market); however, barriers that raise variable costs would fall more evenly on both firms. Planning policies and regulations can also constitute a barrier to potential entrants into a market to the advantage of incumbent firms. IPRs such as patents, trademarks and copyrights give the owners of such rights exclusive use of them and the ability to control their use by others, though the period of such exclusivity or control varies according to the nature of the property right. IPRs can act as barriers to entry when access to the rights owned by an incumbent may be vital for entry.124
226. Quality, environmental, and health and safety standards that apply to all the firms in a market may on occasions adversely affect entry despite making no formal distinction between incumbents and new entrants. For example, they might favour the technology the incumbent owns and therefore raise the costs of a new entrant. Some
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123 Although sometimes in a competitive market licences and permits can be traded and a potential entrant is able to enter the market by buying a licence, depending on how frequently such opportunities arise. 124 In some such cases it might be appropriate to assess the impact of IPRs on competition for the market rather than within it. regulations may give advantage to incumbents by not requiring them to comply with the same standards as new entrants.\\textsuperscript{125}
**Assessing the impact of entry barriers**
227. To test a theory of harm based on the effects on competition of any barriers to entry, the CC has to assess the impact that the entry barriers identified have had, are having or may have in the future.
**Current competitive climate**
228. The CC considers how the competitive climate within a market affects the decisions of individual firms to enter or invest in that market, taking into account the advantages of established sellers. This entails examining the factors influencing entry decisions, while recognizing that these will be accorded different weights by different firms.
229. The post-entry profitability that a firm can expect—and therefore the degree of attractiveness to that firm of entering a market—is affected, not only by the extent to which entry costs are sunk (see paragraph 211) but also by its assessment of the likely intensity of competition post-entry. The expectation of a tough competitive regime post-entry leads entrants to anticipate lower prices, reducing the profitability of entry and making it less attractive. If, on the other hand, growth in demand is likely to be large and rapid, barriers to entry are less likely to have a lasting effect. Similarly, in markets characterized by innovation, product cycles are likely to be shorter and barriers less likely to have a lasting effect. Entry decisions are often influenced by a range of other factors, including payback periods, the effect on other business segments (eg possible cannibalization, ie creation of competition to a firm’s existing business), and the risk of the project. The risk will in turn be affected by various factors influencing the certainty or otherwise of forecast future cash flows: for example, the management team’s level of experience, the predictability of demand, and likely competitor reactions.
230. In assessing the factors influencing entry decisions, the CC therefore may consider:
- the costs involved in entry and in operating at the minimum efficient scale necessary to achieve a reasonably competitive level of costs;
- the likelihood of entry within a timescale that would bear on the incentives and decisions of the existing firms in the market;
- the cost of exiting the market; and
- the likely response to entry by incumbent firms.
**Past and prospective entry**
231. Evidence of persistent profits above the competitive level within the industry or among large incumbents could suggest there may be entry barriers in the market. But such evidence is neither necessary nor sufficient. Conversely, data showing that incumbents consistently fail to earn high profits may be consistent with low entry
\\textsuperscript{125} For example, existing high pollution factories often have ‘grandfather’ rights to pollute, which are not enjoyed by entrants, because the factory existed before the relevant regulation came into force. barriers, but it does not prove that barriers are low and that competition is working dynamically (see paragraph 125).
232. The CC will examine the history of entry and evidence of planned entry. This assessment will include the extent to which past entrants and smaller firms have successfully gained market share (see paragraphs 100 and 101) and, more generally, the cost of gaining a significant share of the market.
233. In considering historical evidence, the CC may consider: survival rates, ie how long any entrants traded in the market; the effects that entry or expansion had on competition in the market, in particular whether past entry or expansion modified the pattern of behaviour and competition; and if so, whether this would be relevant for the present analysis. The CC may also consider the price effects, if any, from past episodes of entry, the viability of the entrant and its experience in trying to gain market share.
234. Although evidence of past entry (or the lack of it) can be helpful in assessing the significance of entry barriers in a market, previous episodes of entry do not necessarily prove that it was easy, that it was competitively significant, that it is likely to take place again, or that the possibility of entry is imposing a competitive constraint (see also paragraph 175). Moreover, current potential entrants may not face the same market conditions that previous entrants faced. Similarly, although an absence of actual or meaningful entry in the past may indicate the presence of entry barriers, it does not necessarily prove that significant entry is unlikely in the future.
The positive effects of a barrier
235. In some circumstances barriers to entry may have a positive impact:
- Entry barriers may sometimes increase incentives to innovate. While new entrants can often lead to innovative competition, the effect of entry barriers, or the prospect of creating them, may also increase the incentives for incumbents to create new products and services. IPRs, for example, provide an incentive to innovate because they prevent rivals ‘free-riding’ on other firms’ innovations. Given these conflicting factors, the CC will assess the incentives of incumbents relative to those of potential entrants to engage in innovative activities in the presence of entry barriers. The CC will also sometimes assess whether or not potential technological change and innovation could affect the nature and effectiveness of current barriers to entry.
- Some regulations which restrict entry may achieve important social goals outside the scope of competition policy (see paragraphs 224 and 226). Safety regulations, for example, may make it more difficult to switch suppliers of domestic liquified gas in the UK, but the CC recognized in its investigation of the LPG market that regulation in that industry was necessary.127
236. Such positive impacts could be taken into account at different stages of an investigation. First, they may be considered as part of the competitive assessment, for example, a restriction on short-run competition might be tolerated so as to preserve incentives to compete in longer-term ways. Secondly, they may be considered during the remedies process as RCBs (see paragraphs 355 to 366).
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126 See paragraph 261 and footnote 142. 127 Market investigation into supply of bulk liquefied petroleum gas for domestic use, 29 June 2006. 3. **Coordinated conduct by firms**
237. The successful adoption by rival firms of a coordinated course of action is a third way in which competition in a market may be harmed to the detriment of customers.
**Forms of coordination**
238. Coordination typically involves repeated interaction, aimed at increasing or protecting profits, between firms in the market. But coordination can take different forms across a wide spectrum of behaviour.
239. At one end of the spectrum, direct and unambiguous communication among competitors can lead to explicit agreements to fix prices, share markets or allocate customers. At the other end of the spectrum, when a market is sufficiently stable and rival firms interact repeatedly they may be able to anticipate each other’s future actions, enabling them tacitly to establish a coordinated course of action without communicating directly or sharing information. Coordination does not have to be ‘perfect’ at all times to affect a market. For example, it may be intermittent; ie periods of coordination may be interspersed with periods of greater competition when not all competitors see it in their interest to cooperate.
240. The sole focus of any market investigation is upon the effects on competition of possible features of the market (whether through coordinated conduct or otherwise) and it is not the CC’s role to ascertain whether one or more parties have been acting unlawfully. While enforcement action on some cases of coordinated behaviour may fall within Article 101 of the TFEU or Chapter 1 of CA98, the CC may investigate all forms of coordination. Any form of coordination has the potential to reduce strategic uncertainty among competitors to the detriment of their customers and, depending on the degree, may thereby result in an AEC.
**Impact of coordinated conduct**
241. Coordination may have an impact on any dimension of competition, including price and output levels, the scope of firms’ geographic operations, investment or innovation.
242. Not all cooperation will be harmful. It may sometimes also bring about pro-competitive effects, which benefit customers. For example:
- In some financial markets, credit providers and insurers routinely share certain data (eg about customers’ repayment or claim history) that facilitates the efficient operation of those markets. The CC found that the absence of such data sharing was a feature harming competition in the market for home credit and required lenders above a certain size to provide credit reference agencies with full data on the payment records of customers.
- In its investigation into local bus markets, the CC found that effective multi-operator ticketing schemes could reduce barriers to entry and expansion associated with network effects and made various recommendations to facilitate the development of such schemes.
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128 See footnotes 3, 4 and 5. 129 Home credit market investigation, 28 April 2006, paragraphs 26, 9.36–9.40, and Appendix 2.1. 130 Local bus services market investigation, 20 December 2011, paragraph 15.11 and Appendix 9.2. 243. However, in many cases coordination between rivals has harmful effects on both competition and customers. Prices may be higher than they would have been if firms had taken unilateral decisions. In other cases, coordination may involve limiting production or innovation. Firms may divide up the market between them, for example by geographic area or customer characteristics, or by allocating contracts between themselves. Joint action may be taken to foreclose access to markets, inputs or customers. In these ways, coordination between rivals can worsen the terms on which products are offered to customers, reduce customer choice and hold back efficiency and innovation.
Assessing potential concerns about coordination
244. In assessing whether coordination gives rise to an AEC, the CC will examine the evidence of the behaviour of firms in the market, structural characteristics of the market and market outcomes. In doing so, the CC considers whether market conditions are conducive to coordination, seeks to understand the way in which the firms in the market operate and comes to a view on whether the observed outcomes are best explained by coordinated or non-coordinated behaviour.131
Observed market outcomes
245. The CC will consider whether observed market outcomes may suggest coordinated behaviour. A range of market outcomes may be relevant to this assessment. Some examples are given below (paragraphs 246 to 248).
246. Certain forms of pricing behaviour can be possible outcomes of coordination. For example, information on demand elasticities (see paragraph 179) and variable profit margins (sales revenue minus costs of sales) may suggest that prices are higher than would be expected if firms were acting unilaterally since each firm would stand to profit by undercutting the current market price.
247. It has also been noted (see paragraph 119) that a situation where levels of profitability have remained high and stable over time across several incumbent firms could indicate coordinated behaviour.
248. The absence of a provider serving an area where there are potential customers that it would be economic to supply may also be an indication of coordination by firms over the scope of geographic operations.
249. The CC will generally look at a range of market outcomes in combination. A single outcome looked at in isolation may often be consistent with both coordinated and non-coordinated behaviour. For example, whilst coordination may result in price parallelism (see paragraph 108(b)), intense price competition often also does so. Non-coordinated behaviour may be the more likely explanation if parallel pricing is explained by common movements in costs, and the CC will therefore consider information about changes in variable costs alongside price movements.
Market conditions and characteristics
250. Three conditions are necessary for coordination to be sustainable in a market:
131 ‘Non-coordinated behaviour’ in this context refers to the interaction of firms acting unilaterally. (a) Firms need to be able to reach an understanding and monitor the terms of coordination. Where there is no explicit agreement, firms need to have sufficient awareness of each other and be able to anticipate each other’s reactions so as to identify a mutually beneficial outcome.
(b) Coordination needs to be internally sustainable among the coordinating group—ie firms have to find it in their individual interests to adhere to the coordinated outcome; the firms must lack an incentive, or have a positive disincentive, to compete because they appreciate how each other will react. However, coordination does not need to be perfect or continuous to fulfil this criterion (see paragraph 239).
(c) Coordination also needs to be externally sustainable, in that coordination is unlikely to be undermined by competition from outside the coordinating group or from the reactions of customers.
251. An important part of the CC’s investigation is therefore to establish whether or not the specific characteristics of the market—structural characteristics and the way firms behave—create the conditions in which coordination can arise and be sustained. These characteristics are described below. Which of them the CC will consider as potentially facilitating coordination will depend on the facts of the individual case.
(A) Structural characteristics of the market
252. Structural characteristics that may help firms reach an understanding and monitor terms of coordination, include:
(a) A non-complex and stable economic environment can help firms to reach an understanding on the terms of coordination. For example: where markets are concentrated, firms are more likely to be aware of the behaviour of individual competitors; it is often easier to coordinate on a price when demand and supply conditions are relatively stable than when they are continually changing.
(b) Simple and relatively undifferentiated products are more easily subject to the coordinated setting of prices than situations in which each firm’s offering is different from the offerings of its rivals.
(c) Customers with easily identifiable characteristics help firms coordinate by way of market segmentation (based on geography or customer type or simply on customers who typically buy from one supplier).
(d) Firms that are relatively symmetric, for example in terms of cost structures, market shares or spare capacity levels, may more easily respond to incentives to reach an understanding with each other.
132 For an example of the CC’s approach see, for example, the Local bus services market investigation, 20 December 2011 (paragraphs 8.239–8.243 and 8.261). The CC had identified as a conduct feature of some bus markets that ‘operators avoid competing with other operators in “Core Territories” (certain parts of an operator’s network which it regards as its “own” territory) leading to geographic market segregation’ (final report, paragraph 5). The CC found evidence of contacts between operators and actions which had the effect of segregating areas of operation. These behaviours reduced or eliminated head-to-head competition and diminished the constraint from potential competition. Finding conditions facilitating coordination caused the CC to be concerned that geographic market segregation might be a more widespread feature than was identified.
133 Coordination can become more complex—and may be more difficult to sustain—if important characteristics of the product are changed over time or if new products are introduced. However, coordination through, for example, simple pricing rules may overcome problems stemming from complex economic environments. One example of such a rule is the setting of only a small number of pricing points. The more complex the market environment the more transparency or communication is needed to reach an understanding of coordination arrangements.
134 Coordination is also possible where markets display elements of asymmetry: for example, one participant (say, the largest) may act as a market leader. (e) Firms with cross-shareholdings, participating in joint ventures with each other or in reciprocal supplier/buyer relationships may also find it easier to reach an understanding.
253. Other structural characteristics that may help firms reach an understanding and monitor terms include the need for firms to make a long-term market commitment, and the existence of institutions (eg trade associations) or regulations that may facilitate the sharing of information.
254. The following market characteristics can help increase the internal sustainability of coordination:
(a) A concentrated market is the foremost factor in helping to sustain coordination internally. It allows deviations to be spotted quickly. (In a less concentrated market with many companies coordinating, deviation may be more likely because a larger market share can be gained through undercutting.)
(b) Market transparency also allows coordinating firms to monitor whether one or more of them are deviating from a coordinated outcome. The way transactions are conducted will often determine the degree of transparency in a market; price transparency will, for example, be higher on a public exchange, than when transactions are negotiated confidentially and bilaterally. Nonetheless, even where price transparency is limited, other aspects of transparency (eg of sales or production volumes or customer relationships) may help increase internal sustainability.
(c) Transparency in the market also affects the speed, and hence effectiveness, of any deterrent mechanism used against a deviating firm or strengthens firms' ability to anticipate each other's conduct.
(d) Factors that make it easier to respond quickly to deviation from a coordinated outcome may make coordination easier to sustain. For example, firms could use excess capacity as a credible threat against deviation. Likewise a response to a perceived deviation from a coordinated outcome need not necessarily take place in the same market as the deviation; if coordinating firms have commercial interactions in several markets, these may offer various ways of responding to deviations, such as cancellation of joint ventures or selling shares in jointly-owned companies.
255. The external sustainability of coordination may be affected by the following characteristics:
(a) Barriers to entry or expansion facilitate coordination. If barriers to entry or expansion are low, the threat of entry or expansion by non-coordinating competitors will tend to undermine coordination.
(b) The number and size of the non-coordinating (or fringe\\textsuperscript{135}) rivals, their cost and profit margins and, critically, their scope to expand output in relation to their current levels and to the output of the coordinating firms will determine the extent to which non-coordinating firms act as a competitive constraint.
(c) If a firm has the capacity to take significant share from any group of firms that tried to coordinate without its participation but also has substantially different
\\textsuperscript{135} The term 'competitive fringe' is often used by economists to describe a group of relatively small firms in a market containing larger firms. incentives from those of the coordinating group, it can undermine a coordination strategy. (Such a firm is sometimes referred to as ‘a maverick’.)
(d) Countervailing buyer power of customers (see paragraph 176) can similarly undermine the stability of coordination. For example, a large buyer may do so by concentrating its purchases on one supplier or by offering long-term contracts and tempting one of the coordinating firms to break ranks to gain substantial new business.
(B) Practices of firms operating in the market
256. In addition to investigating structural characteristics of the market that may be conducive to coordination and considering evidence of outcomes that might be indicative of coordinated conduct, the CC will look at whether would-be competitors have taken any actions to reach, sustain or enhance coordination. Such actions may involve exchanges of information or specific types of arrangements.
- Availability of information
257. The ease with which firms can obtain information about their competitors tends to facilitate coordination. Readily available information or exchanges of information increase transparency between firms and help firms interpret the choices their competitors have made. Information availability can facilitate coordination by:
(a) generating mutually consistent expectations among rival firms regarding their conduct and beliefs, making it easier for firms to reach an understanding on the terms of coordination (paragraph 250(a));
(b) giving an indication of rivals’ past and present conduct and enabling rival firms to monitor deviations and, potentially, to retaliate, thereby increasing internal sustainability of coordination (paragraph 250(b)); and
(c) increasing transparency making it easier for coordinating companies to monitor where and when other companies are trying to enter the market, allowing the coordinating companies to target the new entrant. This can increase the external sustainability of coordination (paragraph 250(c)).
258. The means by which companies may obtain or exchange information, other than by the many forms of direct communication, include most-favoured customer clauses (MFCs, see paragraphs 261 and 272), voluntary publication of information, price announcements, or information shared—even anonymously—through trade associations. Cross-directorships, joint ventures, supplier/buyer relationships and similar arrangements may also make monitoring and retaliation easier.
259. Less obvious means and practices may also increase the transparency or predictability of the environment in which firms operate. These may include the adoption of rules of conduct, ethics codes, product standardization, regulatory disclosures, joint marketing or buying agreements, price computation manuals and R&D joint ventures. Such practices may sometimes be justifiable on efficiency or customer-benefit grounds, but they could also create market conditions favourable for coordination.
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136 For example, a firm might value having a reputation for offering the lowest price in the market, and might consider itself likely to sacrifice profits in the long term if it were to lose that reputation by coordination.
137 Equivalent, in economic parlance, to ‘facilitating practices’. 260. These Guidelines cannot be prescriptive about the type of information that may be associated with coordinated conduct. The likely effects of the availability of particular items of information on competition are analysed by the CC on a case-by-case basis. The assessment compares the likely effect of the information flow with the competitive situation that would prevail in its absence.
- **Specific arrangements made by firms**
261. The specific types of arrangements firms make, which, although sometimes benign from a competition viewpoint, can sometimes facilitate coordination, include:
- **Best price policies** (or low-price guarantee);(^{138}) they can increase transparency, facilitating consensus and the detection and punishment of cheating.
- **Most favoured customer (MFC) clauses**;(^{139}) although generally benign, these provisions can in some circumstances deter competitive price cutting, reduce the incentive to deviate from established terms of coordination, and deter a firm from offering discounts to its smaller customers.
- **Minimum advertised price agreements**(^{140}) can be conducive to coordination at both retail and manufacturing levels since they can control the pricing strategies of several competing retailers and are visible to competing manufacturers.
- **Resale price maintenance (RPM)**(^{141}) can be used to facilitate coordination between suppliers and retailers, making it easier to detect whether a supplier deviates from a coordinated price; strong or well-organized distributors may be able to use RPM to influence one or more suppliers to fix their resale price above the competitive price. Instances of RPM may sometimes fall to CA98 and TFEU investigation (see paragraph ). However, depending on the circumstances, manufacturers can use RPM to promote effective competition by preventing ‘free-riding’(^{142}) at the distribution level.
4. **Vertical relationships**
5. Market outcomes may sometimes be the result of vertical integration or other vertical arrangements within the market (collectively known as ‘vertical relationships’).
- ‘Vertical integration’ means that activities at upstream and downstream levels of the supply chain have been brought under common ownership and control (see paragraph 50).
- ‘Vertical arrangements’ fall short of vertical integration and may involve agreed pricing schemes or other contractual provisions between companies at different levels of the supply chain.
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(^{138}) Best price policy is a commitment made by a firm (frequently a retailer) either to match or beat the lower price charged by other firms—a price-matching guarantee (PMG) and price-beating guarantee (PBG)—or by the same firm to other current or future customers—MFC clause. Such policies may be adopted unilaterally or through agreement or they may simply become accepted practice.
(^{139}) An MFC clause is a provision in a sales contract, under which the seller agrees to give the buyer the benefit of any more favourable contract terms it may later negotiate with some other purchaser.
(^{140}) Under minimum advertised price agreements, the manufacturers set the price of a product and the distributor enforces it; retailers may spend cooperative advertising allowances they receive from the product manufacturers.
(^{141}) RPM is the practice whereby a manufacturer and its distributors agree that the latter will sell the former’s product at certain prices.
(^{142}) ‘Free-riding’ is where other parties benefit from the provision of a good or service without paying for its provision. 263. Vertical relationships will often have been established when upstream and downstream firms in a trading relationship (see paragraph 50) consider that it is more efficient and economical for transactions to be organized within firms.(^{143}) Arm’s length supply contracts between such firms may be imprecise, incomplete and/or difficult to enforce and in practice may give one of the contracting firms leverage over the other. To avoid this risk one or other of the firms may decide to bring the transaction ‘in house’, either through internal growth or external acquisition.
264. Alternatively, firms may make vertical arrangements with each other, either via legally enforceable contracts or commitments by each firm not to behave opportunistically against the interests of the other. By restricting each other’s actions, vertical arrangements may give both parties a mutual incentive to invest in their relationship. A wide variety of vertical arrangements are employed by firms. Among the most prominent are exclusive purchasing, tying and bundling, franchising, selective distribution systems and pricing arrangements. Some examples of vertical arrangements, and the CC’s approach to assessing their effects, are discussed in paragraphs 271 to 294.
**Impacts of vertical relationships**
265. Vertical relationships often have beneficial effects. They can improve the coordination of activities at different stages of the supply chain and deliver savings in transaction and inventory costs.(^{144}) With vertical integration, the benefits are achieved by bringing ‘in-house’ activities which would otherwise be carried out in separately-owned businesses.(^{145}) The benefits of other vertical arrangements flow from a closer alignment of the incentives of firms within a supply chain (eg the supplier and its distributor), towards the achievement of complementary objectives. Vertical relationships may also help to resolve the ‘free-rider’ problem(^{146}) in markets where suppliers require their distributors to incur certain costs if advice and other pre-sale services are to be provided in a sustained way.
266. Since vertical relationships involve complementary products, services or activities, each firm would like the other to lower the price of its product. Such a relationship can therefore have the effect of lowering prices that would be charged to customers if the firms acted independently and in this way can sometimes benefit customers.
267. However, despite their potential to enhance efficiency and consumer welfare, vertical relationships can also sometimes lead to an AEC in a market, particularly by allowing the firms to:
(a) foreclose rivals’ access to inputs and customers; and/or
(b) otherwise have a dampening effect on competition.
(^{143}) In economists’ parlance, the relationships often result from attempts to resolve a market failure.
(^{144}) For example, by helping guarantee stability of supplies, improve coordination on product design, production process and the way in which the products are sold.
(^{145}) In the absence of vertical coordination, if both producers and distributors add mark-ups over their costs, the resulting ‘double’ mark-up—or ‘double marginalization’—may lead to inefficiently high prices. This is because each partner, when setting its price (the wholesale price for the producer and the retail price for the distributor) takes no account of the effect of this price on the other’s profit. By aligning incentives, vertical relationships may lead to a coordinated reduction of the mark-ups at different levels in the supply chain, both increasing firms’ profits and benefiting consumers.
(^{146}) See paragraph 261 and footnote 142. (a) Foreclosure
268. For a vertically related firm, foreclosure may be achieved by practices that restrict access to essential inputs or raise rivals’ costs, or limit rivals’ ability to acquire sufficient customers to benefit from economies of scale, learning effects(^{147}) and/or network effects.
269. Foreclosure can be total (where rivals are forced to exit from the market or are prevented from entering) or partial (where rivals or potential entrants—are materially disadvantaged and consequently compete less effectively).
270. Foreclosure of access to key inputs (‘input foreclosure’) may lead to a reduced competitive constraint on a vertically related firm. When deciding whether to supply its competitors downstream with key inputs, a vertically integrated firm may take into account how these sales would affect the profits of its own downstream division. If it has significant market power in the upstream market, the firm may have an incentive to refuse access to the input or to raise its price, and consequently increase the costs of competing downstream firms. By being subjected to higher input prices—of which an extreme form is a ‘margin squeeze’(^{148})—downstream competitors may be unable to compete effectively. As a result of such foreclosure effects a vertically integrated firm may be able to maintain high prices and/or increase the prices charged to customers relative to the prices obtained in the absence of vertical integration.
(b) Dampened competition
271. Since the rationale for vertical relationships is often unconnected to competition issues (see paragraph 263), a widespread network of overlapping vertical relationships may develop within an industry. While such arrangements may address market failures, they can have far-reaching effects on the operational structure of the upstream and downstream markets, reducing the incentives on firms to compete vigorously against each other and possibly leading to an increased likelihood of coordinated conduct by firms at the same level of the supply chain and to a greater incidence of entry barriers.
272. Pricing relationships especially, notably MFC and RPM arrangements (see section on coordinated conduct, paragraph 261) may sometimes harm competition in some industries because a commitment to apparently less vigorous conduct may lead rivals to see that their best interest lies in allowing prices to rise. Such practices have greatest impact when the arrangements have been adopted by most or all of the firms in an industry.
Assessment of vertical relationships
273. In reaching a judgement on whether a particular vertical relationship has an adverse effect on competition, the CC will evaluate its overall impact on competition, taking into account rivalry-enhancing, as well as adverse, effects. This will normally require
(^{147}) ‘Learning effects’ relate to firms becoming more efficient as they gain experience of providing a good or service (average cost falls over time spent in the market); see paragraph 214.
(^{148}) A margin squeeze occurs when downstream competitors are charged such a high price for the upstream input of the upstream firm that they cannot compete downstream since their operating costs plus the wholesale prices exceed retail prices. an assessment of the impact of the vertical relationship on rivalry at different stages of the supply chain.\\textsuperscript{149}
274. For vertical relationships to result in foreclosure of rivals, the firms involved must have significant market power in one or more markets along the supply chain. They will also need to have both the ability and an incentive to seek to foreclose rivals (this will not necessarily be the case, even if the firms enjoy significant market power.\\textsuperscript{150})
275. In conducting its assessment of the overall impact of vertical relationships on competition, the CC will look at a variety of evidence. Economic modelling may be used to test whether or not different vertical relationships have a harmful effect on the evolution of competition in a market. The CC will also assess the conduct and strategic interactions of relevant market participants. This may involve comparing relevant industry characteristics and firm behaviour over time or across geographical locations, making comparisons with other similar sectors or examining and drawing inferences from any observed natural experiment, where available.
276. Analysis of profitability and financial data can help provide an insight into whether foreclosure would be a profitable strategy.
277. The profitability of input foreclosure will depend on:
(a) the integrated firm’s ability to refuse to supply or to increase the price of an essential input, or limit access to an asset, facility or platform;
(b) the competitiveness of upstream and downstream markets (lower competition leads to higher profitability);
(c) the size of any cost asymmetry\\textsuperscript{151} it can create on the downstream market (higher cost asymmetries lead to higher profitability); and
(d) counter-measures by rivals such as vertical integration, or other factors (such as switching costs) which could reduce the profitability of foreclosure.
278. The following paragraphs survey some of the more prominent among the wide range of vertical arrangements and discuss how the CC approaches an assessment of their effects on competition. Some arrangements, such as exclusive purchasing arrangements, tying and bundling and RPM can sometimes come within the jurisdiction of the TFEU and CA98 (see paragraph 17).
\\textit{Exclusive purchasing obligations}
279. Exclusive purchasing obligations may effectively require the customer to purchase all or a significant part of its requirements from a particular upstream supplier.\\textsuperscript{152} If the customers make up a large part of the market, this has the effect of foreclosing the
\\textsuperscript{149} Vertical arrangements normally relate to competition between brands (inter-brand competition) but some arrangements can affect competition between the same brands sold in different outlets (intra-brand competition). While the latter could potentially lead to an AEC, the CC is more likely to identify an AEC if vertical relationships result in a reduction in inter-brand competition.
\\textsuperscript{150} For instance, an upstream monopolist may have limited incentive to leverage its upstream power to monopolize the downstream market since monopoly profits can be taken only once along a vertically linked chain; moreover, suppliers often have an incentive to expand their distribution networks and to expand sales.
\\textsuperscript{151} ie the difference between the costs of an affiliated downstream firm and those of its downstream rivals. If the costs of an affiliated downstream firm are lower than those of its downstream rivals it makes commercial sense for the upstream firm to supply its downstream affiliate since it increases the profitability of the overall relationship. If, on the other hand, the costs of downstream rival firms are significantly lower than those of the affiliate, this will reduce the profitability of the relationship.
\\textsuperscript{152} Obligations, such as stocking requirements that appear to fall short of requiring exclusive purchasing, may in practice lead to exclusivity. upstream supplier’s competitors from the market. Similar foreclosure effects may derive from conditional rebates and other inducements that levy switching costs on any buyer seeking to switch from an incumbent. Exclusive purchasing may thus be used in some situations as a substitute for vertical integration and have similar effects as a refusal to deal.
280. Foreclosure may lead to an AEC where, without the exclusive purchasing obligations, an important competitive constraint could be exercised by competitors that either were not present in the market at the time the obligations were concluded, or that were not in a position to compete for the full supply of the customers.
281. In general, the longer the duration of the obligation, the stronger the likely foreclosure effect, in particular if new entrants are affected. Foreclosure of this type will be more likely if the exclusive purchasing obligation has been tied selectively to buyers of particular relevance to new entrants. In such cases an anticompetitive foreclosure effect may result even though the market share involved is modest.
282. The existence of exclusive purchasing arrangements in a market does not necessarily suggest that competition is harmed. For example, when an upstream supplier faces significant inter-brand competition, it may need to compensate buyers, in whole or in part, for the loss in choice resulting from the possible foreclosure. Such compensation could, for instance, take the form of lower prices or other benefits.
283. Moreover, competitors may have counter-strategies at their disposal allowing them to protect themselves against exclusive purchasing strategies and to prevent any harm to competition. Such counter-strategies could, for instance, include: (a) concentrating their sales on certain customers; (b) building up stronger ‘ex-ante’ competition for the customers, as foreclosure is less likely if customers, before entering into exclusive purchasing obligations, have had access to several alternative competitive offers; and (c) ensuring new entry in the downstream market, either by sponsoring entry or by integrating vertically.
Exclusive supply obligations
284. Exclusive supply obligations—by which a supplier is obliged to sell exclusively or to a large extent to an incumbent downstream firm—may also be used to try to foreclose the downstream market to new entry if an incumbent downstream firm has sufficient market power to induce all input suppliers to make such arrangements. Exclusive supply obligations may be found to lead to an AEC if they have tied most of the efficient input suppliers and rival buyers have been unable to find alternative sources of input supply. The foreclosure effects would be likely to be stronger if there were significant scale economies or network effects in the downstream market (see paragraph 179) or if there were significant entry barriers for input suppliers.
285. Exclusive supply incentives may have similar effects to exclusive supply obligations. Under such arrangements, for example, an incumbent firm with significant buyer power offers to pay a higher price if the supplier sells it a higher percentage of its output, or the supplier may be required to pay a lump sum so as to get its goods on to the shelves of the incumbent buyer.
153 See paragraph 273 and footnote 149. Tying and bundling
286. Tying and bundling are common commercial practices, frequently having no anticompetitive consequences but with the potential sometimes to foreclose markets and harm customers.
287. Tying occurs when the supplier makes the sale of one product (the tying product) conditional upon the purchase of another distinct product (the tied product) from the supplier or a firm designated by that supplier. Bundling relates to situations where a package of two or more goods is offered in fixed proportions. Tying and bundling may also be achieved in indirect ways, eg by offering discounts or rebates to customers using both products or limiting guarantees to customers using only one of the products.
288. Tying and bundling can benefit customers by enabling firms to provide better products or offerings in cost-effective ways. They can lead to significant savings in production, distribution and transaction costs.
289. However, a firm with significant market power in the tying market can harm customers through tying by foreclosing the tied market and, indirectly, the tying market. In the case of the tied market, competition may be harmed if the tying has led to less competition for customers buying the tied good but not the tying good; if there are not enough of these customers to sustain competitors of the tying firm in the tied market, these customers may face higher prices. In the tying market such foreclosure may constrain market entry by rivals, which would have been likely in the absence of the tie. Similar effects may arise from pure and mixed bundling. (Paragraph 220 discusses tying and bundling as a potential barrier to entry and expansion.)
290. The factors the CC considers in assessing the extent of the foreclosure effect of tying and bundling in a market, include: the nature of the restriction applied, eg whether tying or bundling, and its effects on the choices of customers and the commercial strategies of firms; the tied percentage of total sales on the tied market; the overall strength of the tying firm on both the tying and the tied markets; the identity of the tied customers; the level of sales of the tied product to customers not buying the tying product and, in the case of bundling, the extent to which a firm is bundling goods, and whether the items within the bundle may also be purchased separately. In considering whether foreclosure of the tying market had deterred market entry, the CC may examine previous attempts to enter it.
Aftermarket arrangements
291. In those aftermarkets where secondary products can be used with one brand of primary product but not easily with another brand (although the primary products may be substitutable), the supplier of the primary product may reserve the secondary product for itself by excluding competitors, for example through tying or a refusal to deal (eg to supply necessary information, licences, IPRs or spare parts). In other cases, the supplier of the primary product may have a point-of-sale advantage in
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154 With 'pure bundling' only the bundle, and not the components, is made available. 'Mixed bundling' allows both the sale of the bundle and at least some of the separate components. 'Technical bundling' is where the tied product is physically integrated in the tying product. relation to the secondary product that restricts the ability of other potential suppliers of the secondary product to serve its customers.\\textsuperscript{155}
292. In assessing the effects of aftermarket arrangements, the CC will typically first consider the nature of the relationship between the primary and secondary markets. This may constrain the extent of, or in some cases remove, any market power enjoyed in the secondary market by the supplier of the primary product. In particular, if the primary market is competitive and if customers anticipate the likely cost of secondary products when making decisions about which primary product to buy, competition in the primary market may constrain suppliers’ ability to raise prices of the secondary product. Competition in the primary market may in this way ensure that the overall price of the ‘bundle’ of goods and services comprising the primary product and the secondary product(s) is set at a competitive level.
293. The extent to which competition in the primary market may constrain market power in the secondary market is determined by:
(a) The amount of information available to customers, together with the use customers make of this information when buying a primary product. These are important factors in assessing the extent to which customers calculate the overall cost of the bundle over the expected life cycle of the primary product. For this competitive constraint from the primary market to function effectively, a sufficient number of customers must engage in life-cycle cost calculations, and the supplier(s) concerned must not be able to discriminate between customers that make such calculations and those that do not.
(b) Whether the suppliers, even if customers have not based their choice on accurate life-cycle calculations, make their own assessment of the profitability of a customer relationship over the life cycle of a product and compete vigorously in the primary market so as to enjoy profits on subsequent aftermarket sales.\\textsuperscript{156} The CC may consider the extent to which customers benefit from lower prices of the primary product as part of its assessment of RCBs (see paragraphs 355 to 366).\\textsuperscript{157}
\\textit{Wider competition-dampening effects}
294. As explained (see paragraphs 271 and 272) in some circumstances vertical relationships can have far-reaching effects on the operational structure of a market. These potential effects, for example the possibilities of coordination or entry barriers arising from competition-dampening relationships are assessed in the ways described in the relevant sections on coordinated conduct and entry barriers.
295. \\textbf{Weak customer response}
296. Competition (as emphasized in Part 1, paragraph 15) may be threatened if customers respond weakly to competitive offers. A weakness of customer response may be variously caused by customers’ behaviour, actions by suppliers or a structural feature of the market (for example, affecting the availability of information). A market investigation is well placed among competition policy instruments to
\\textsuperscript{155} For example, in its investigation into PPI, the CC found that suppliers of credit (the primary product) enjoyed a point-of-sale advantage in relation to the supply of PPI (the secondary product) to their own credit customers and that, in combination with other features, this feature of PPI markets harmed competition.
\\textsuperscript{156} This pattern of low pricing for primary products and high pricing for secondary products is sometimes referred to as a ‘waterbed effect’.
\\textsuperscript{157} This was the approach adopted in the \\textit{PPI} market investigation (29 January 2009). analyse and remedy undesirable patterns of customer responses which result in a lack of competition.\\textsuperscript{158}
**Impacts and assessment of weak customer response**
296. To drive effective competition customers need to be both willing and able to: access information about the various offers available in the market; assess these offers to identify the good or service that provides the best value for them; and act on this assessment by switching to purchasing the good or service from their preferred supplier.
297. Theories of harm that competition is adversely affected by weak customer response are therefore generally examined in relation to these three issues so as to establish what may be restricting customers from exercising effective choice. The following sections of the Guidelines examine barriers to:
(a) accessing information;
(b) identifying best value offers; and
(c) switching suppliers.
(a) Barriers to accessing information
298. When customers face significant impediments or costs in their search for—and comparison of—alternatives, sellers may be able to set prices with only limited regard to competition.
299. Firms can enjoy some market power (see paragraph 9) if customers cannot easily or effectively compare their products with others on offer, because of the difficulty or cost (including the opportunity cost of customers’ time) of finding better deals.\\textsuperscript{159}
300. Where it is difficult to obtain information, or where the cost of obtaining information is high, customers may not search the market but simply choose a firm randomly; firms may respond by charging a high price to these customers. Search costs are likely to be substantial in cases where the information that could possibly affect purchasing decisions is relatively complex, or difficult to obtain or process.
301. Firms may be able to charge high prices even where some customers search for information but a significant number of less well-informed customers remain; a seller’s profit foregone by losing informed customers who buy elsewhere may be more than offset by the higher profits accruing from less well-informed customers who do not shop around.\\textsuperscript{160} An increase in the proportion of informed customers will generally increase the level of effective competition in a market.
302. Prices in the market tend to increase with the cost of acquiring information (although there is no general formulation for the relationship between prices and customers’ search costs). This is because the higher the search costs, the lower the net gain for
\\textsuperscript{158} While strengthened competition plays an important role in solving some customer-related problems, others can only be tackled by means of consumer protection policies.
\\textsuperscript{159} If, for example, one store raises its price for a commonly-available good above the level of other stores, and all customers know this and switch to rivals, that store would lose all its business. In contrast, if some or all customers do not know that other stores charge lower prices and hence do not switch, the store may be able to raise its price without losing all its sales, ie the store has some degree of market power.
\\textsuperscript{160} For example, markets serving both tourists (with high search costs) and local residents (with low search costs). customers from searching for a lower price and the higher the degree of market power that firms can exploit.
303. Firms may sometimes engage in practices that increase search costs so as to obtain market power (or fail to engage in practices that would reduce search costs). They may do so, for example, by:
(a) charging different prices for the same good at various locations or under different brand names, making it difficult to find the low-priced brand;
(b) not clearly displaying prices or referring to some prices (eg special offers) which are not necessarily available to all customers; and
(c) failing to make available all the product information needed by customers to make an informed choice, in particular of one-off purchases.(^{161})
304. Other reasons buyers—in particular end-consumers—may have difficulty acquiring knowledge of substitutes or of the quality and prices of goods on offer might include:
(a) information may vary in availability or may become dated;
(b) customers’ knowledge about their requirements may be imprecise;
(c) customers may have limited capabilities to search for products and compare alternatives, for example they can remember and readily recall only a limited amount of information; and
(d) customers may be sensitive or embarrassed about the product for which they are searching.
305. Advertising and other freely available information on products (eg online price comparison sites or organizations conducting product reviews) might be expected to reduce search costs. However, their influence may be limited in this respect, for example because:
(a) Advertising, while a ‘free’ resource reducing buyers’ search costs to some degree, may not tell customers everything that they want or need to know about a product.
(b) Third party providers of information may have a legitimate commercial interest in protecting the IPRs (see paragraph 211) to the information they collect and distribute—for example, to prevent its use to publicize only the ‘bottom’ line (eg which brand is most or least reliable overall), or to benefit those who have not produced or paid for information.(^{162})
(c) The large fixed costs typically associated with the creation of information, and the small marginal costs of distributing it, may prevent fully efficient pricing and may give sellers an incentive to limit the information they provide.
(^{161}) For example, in the case with many financial products, extended warranties on electrical products, certain professional services and some consumer durables.
(^{162}) The ‘positive externalities’ associated with the provision of information in consumer markets affect both buyers and sellers: buyers because, for example, search by some individuals tends to improve the market for all customers; and sellers because, for example, advertised information that applies to more than a single brand may help sellers of competing brands or other competing products. (b) Barriers to identifying best value offers
306. Even if customers are able to access several offers, their assessment of those offers may be handicapped by two main factors:
(a) the susceptibility of some customers to behavioural biases and the potential for exploitation of these biases by providers (see paragraphs 307 to 310); and
(b) the potential for asymmetries of information to exist between suppliers and their customers (see paragraphs 311 to 315).
Behavioural bias
307. There are many explanations of the biases customers apply when making purchasing decisions. The main biases identified in the literature on the subject(^{163}) are:
(a) Processing power biases including: choice overload (faced with too many choices, customers have difficulties making a purchasing decision); representational biases (customers use visible value as a reliable indicator of hidden value); and rules of thumb (for example, customers imitate what other customers do rather than make their own decisions).
(b) Framing biases including: relative utility (a customer’s choice is affected by reference points such as past actions); default biases (customers adopt the default option); and placement biases (customers’ choices depend on where goods are placed on a list—for example, they may tend to choose the first).
(c) Time inconsistency biases including: projection bias (customers expect that they will feel the same tomorrow as they do today); overoptimism (customers overestimate how much they will use a good, or underestimate how much it will cost them); and hyperbolic discount biases (customers value a reward today disproportionately more than one tomorrow).
(d) Loss aversion biases including endowment biases (customers value something more once they have owned it than before they own it).
308. In practice it can be difficult to predict how a customer will react in a particular situation. Empirical evidence is normally required to identify behavioural biases and any possible impact on competition in particular markets. The persistence of a bias is also hard to predict. Customers can learn from their biases and become more sophisticated, for example in markets where they make frequent purchases (or can benefit from the learning of others via word of mouth).(^{164}) Advisers, intermediaries, consumer organizations and the media can also act as catalysts in improving customer decision-making, where there are customer biases.(^{165})
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(^{163}) There is a wide economic literature on the influence of bias—cognitive, emotional or reflexive—on economic decision-making. See, for example, Steffen Huck, Jidong Zhou and London Economics (Charlotte Duke), Consumer Behavioural Bias in Competition: a Survey (OFT1324), OFT, 2011.
(^{164}) When purchases are infrequent or large value (for example, when entering into a sale and rent back arrangement), learning may not provide the constraint required. There will also be circumstances where biases are hardwired (for example, limits to computation capabilities cannot be overcome) or where customers cannot learn from others.
(^{165}) The reach and effectiveness of intermediaries have been greatly extended with the advent of the Internet and price-comparison websites and the consequent ability to compare prices and terms across different sellers. However, there may be cases when incentives of the intermediaries are not always aligned with customers. For example, when firms pay intermediaries for their advice to customers their impartiality may be questioned. 309. As well as influencing their purchasing decisions, the behavioural biases of customers can have a bearing on suppliers’ behaviour. Where such biases exist, firms can act to exploit them at every stage in the decision-making process. They can potentially increase their profits by playing to these biases in certain ways, for example, unilaterally or jointly restricting the information provided to customers or by failing to highlight the add-on costs of a service.
310. In some markets there will be a proportion of ‘active’ customers who recognize their biases and correct for them and a proportion of more ‘passive’ customers who do not do so. Competition in these markets will work most effectively where there is a high proportion of ‘active’ customers and it is difficult for suppliers to discriminate between ‘active’ and ‘passive’ customers.
Information asymmetries
311. Information asymmetries between suppliers and customers might have adverse effects on competition, particularly in markets for goods or services where customers are not able to gauge the quality of a service when acquiring it.
312. Buyers may not know, for example, how quality varies across brands. Markets where customers may be unsure about quality include those for professional services, used goods and complex mechanical or electronic products. When, as a result of information asymmetries, customers are unable to form an accurate assessment of product quality (eg if they consistently underestimate the probability of product failure), a market may operate inefficiently. Imperfect information about quality can be a particularly severe problem for infrequently purchased goods or goods the quality of which cannot be verified even after purchase—so-called ‘credence’ goods.
- Potential adverse effects on competition
313. In extreme cases, asymmetric information about quality may lead to only the lowest quality product being offered, effectively meaning that a true market may not exist. This could arise where sellers of low-quality products are able to make their products appear indistinguishable from higher-quality products, and consequently sellers of the higher-quality products are unable to convince customers of their products’ worth. In this situation, customers are only willing to pay the price of the average quality product, which is not enough to cover the cost of the higher quality products, leading to these products not being supplied. Even if information asymmetries do not lead to all higher-quality products being forced out of the market, quality levels are lower than they would be in the absence of any asymmetry.
314. A related issue (the so called ‘principal-agent’ problem) arises where a provider (the agent) acts on behalf of another party (the principal), thereby providing a service to it. If the agent has better information than the principal about how well it is providing the service, the principal may be prevented from exercising effective choice. Moreover, where the two parties’ interests are not aligned, the agent may act against the interests of the principal if information asymmetries allow it to do so undetected by the principal.166
315. These effects of asymmetric information are generally commensurate with the degree of asymmetry: the greater the asymmetry of information, the greater the
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166 Similarly, where a service (eg liability insurance) is provided to one party, while another party is liable to pay for it, a service provider may not have an incentive to compete as fiercely on price, or quality, as where the party receiving the service also pays for it. effect. However, the potential effects of asymmetric information may be mitigated in various ways:
(a) The Government, consumer groups, industry groups or others may provide information in the form of standards (defining a metric, or scale, for evaluating a particular product) and certification (that a particular product has been found to meet a standard)—for example, relating to the licensing of new drugs, car safety regulations and rules for financial fund managers.
(b) Liability laws may serve the same function as explicit warranties, forcing the manufacturer to make good any defective products.
(c) Professional and other bodies can regulate entry into, and ongoing participation in, the profession and require that practitioners obtain certain qualifications, thus guaranteeing quality of service to some degree (see also discussion of entry barriers, paragraphs 223 and 224).
(d) A disinterested expert may be able to provide customers with reliable information, for example, a mechanic in the case of a used car.
(e) Warranties or guarantees may eliminate problems due to limited information or act as a signal of the item’s quality at the time of purchase, for example ‘satisfaction guarantees’ might be offered by holiday providers.
(c) Barriers to switching suppliers
316. Switching from one supplier or provider to another, so as to respond to attractive offers, may be made difficult for customers by the costs of doing so.
317. In investigating switching costs, the CC recognizes that they can sometimes have both detrimental and beneficial effects on different groups of customers.
(a) On the one hand, switching costs allow firms potentially to charge high prices to ‘captive’ customers. Even if the firm is unable to discriminate between ‘captive’ and new customers, switching costs may enable it to charge higher prices in what would in other respects be a competitive market.
(b) On the other hand, the presence of switching costs may benefit some customers by intensifying the competition for new customers, particularly if there is scope to charge different prices to new as opposed to existing customers. In other situations, some limited constraint on switching (eg for a fixed period after signing a contract) may enable providers to recoup upfront costs of supplying a customer and may in that way facilitate customer-specific investments (eg in the equipment needed to receive a particular product).
318. Among the causes of high switching costs the CC may consider are:
(a) Lack of information on the part of the customer about alternative products; in some markets the customer may be unaware of the existence of competing products, possibly because of a lack of access to information or high search costs (see paragraph 300 above). The latter in particular magnify switching costs.
(b) Inconvenience and administrative obstacles: the CC’s report on banking services to small and medium-sized enterprises identified the ‘hassle in moving direct debits, standing orders etc and a fear that crucial payments could be missed whilst a switch was in progress’ as a factor discouraging switching between banks.
(c) The presence of network effects (see paragraph 179 and footnote 107), which gives rise to collective switching costs, locking customers into existing standards and the firms that control them.
(d) If customers have made a large investment in a piece of equipment or in product-specific skills they may be deterred from switching if it involves a further substantial investment; the CC found that such high switching costs were features harming competition in the markets for domestic LPG.
(e) Contractual terms (eg low early settlement rebates) or marketing devices, such as loyalty cards, and negative advertising can have the effect of increasing switching costs or influencing switching decisions.
Part 3: Section 4—Concluding the AEC test
319. Having considered evidence of all kinds, the CC comes to a rounded judgement on what may be causing any adverse effects on competition. This judgement entails the CC reaching a finding on whether there is a feature, or combination of features, of a relevant market that prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the UK or part of the UK. If so, it will find that there is an AEC. In forming its judgement the CC will apply a ‘balance of probabilities’ threshold to its analysis, ie it addresses the question: is it more likely than not that features or a combination of features lead to an AEC?
320. In identifying some features or combination of features of the market that may give rise to an AEC, the CC has to find a benchmark against which to determine how the market may be judged to be performing. In the absence of a statutory benchmark, the CC defines such a benchmark as ‘a well-functioning market’ (see paragraph 30)—ie one that displays the beneficial aspects of competition as set out in paragraphs 10 to 12 but not an idealized perfectly competitive market. The benchmark will generally be the market envisioned without the features. But there may some-
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167 In purchasing durable goods, for example, the customer needs information on the availability and costs of spare parts, other aftermarket services and maintenance. A competition problem can arise where customers are unable to factor into their purchase decisions all the aftermarkets costs of the product or where the aftermarket is not competitive.
168 The supply of banking services by clearing banks to small and medium-sized enterprises, CC, 2002 under the Fair Trading Act 1973.
169 However, such a cost may not reduce competition if customers are able to make a fully informed choice about the lifetime costs of all the alternatives at the time of the initial investment.
170 Market investigation into supply of bulk liquefied petroleum gas for domestic use, 29 June 2006 (see, for example, paragraphs 4.47–4.52.)
171 For example. PPI market investigation, paragraph 53: ‘The final barrier to switching we identified was the rebate policy on single-premium policies. Rebates are not given on a pro-rata basis ... if a consumer cancels a PPI policy, the rebate given is not enough to take out an identical policy ...’
172 See, for example, the CC report on the PPI market investigation. Referring to this in its judgment in Barclays Bank v CC (October 2009) the CAT wrote (paragraph 104): ‘On a fair reading, the Commission concluded that a well-functioning market for PPI (ie a market without the AEC) was consistent with the continuation of some incumbency or POSA being enjoyed by distributors and intermediaries. There is, in our view, a clear distinction between a properly functioning market unaffected by an AEC and an ideal market, in which every potential supplier of the relevant product competes on a precisely level playing field.’ times be reasons to depart from that general concept, for example, if features are intrinsic to the market but nevertheless have anticompetitive effects (as in the case of a natural monopoly) or if the nature of competition in the market is defined by arrangements put in place by Government, eg as in rolling stock leasing.
321. If the CC decides that there are features in the market leading to an AEC, it moves on to consider appropriate remedies.
Part 4: Remedial action
322. When identifying and implementing a remedy to an AEC the CC may have to intervene directly in the structure of established markets and/or address the conduct of firms and their customers. Consideration of whether remedies are necessary and identification of the right remedy are highly dependent on the facts and context of the investigation and require the exercise of judgement by the Inquiry Group conducting the reference. The starting point for the CC’s remedies assessment is its finding of features that give rise to an AEC and the related findings of fact. More broadly, the CC will have developed, through the course of its investigation, a detailed understanding of the market and an appreciation of the way in which it is capable of working.
323. In choosing a remedy the CC will normally have to consider the interaction of a range of legal, factual and economic considerations.
324. This part of the Guidelines first sets out the framework for consideration of remedies (paragraphs 325 to 369). It then provides an overview of the different types of remedy and their characteristics (paragraphs 371 to 380) before setting out some of the main considerations that go into the selection of remedies from the options available (paragraphs 381 to 393. A more detailed discussion of particular types of remedy is included in Annex B.
Framework for consideration of remedies
The remedy questions
325. Where the CC decides that there is an AEC, it is required to decide the following additional questions:
(a) whether action should be taken by [the CC] … for the purpose of remedying, mitigating or preventing the adverse effect on competition concerned or any detrimental effect on customers so far as it has resulted from, or may be expected to result from, the adverse effect on competition;
(b) whether it should recommend the taking of action by others for the purpose of remedying, mitigating or preventing the adverse effect on competition concerned or any detrimental effect on customers so far as it has resulted from, or may be expected to result from, the adverse effect on competition; and
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173 ROSCOs market investigation, 7 April 2009. 174 See paragraph 46 for information on Inquiry Groups. 175 Section 134(4). (c) in either case, if action should be taken, what action should be taken and what is to be remedied, mitigated or prevented.
326. A detrimental effect on customers is defined as one taking the form of: 176
(a) higher prices, lower quality or less choice of goods or services in any market in the UK (whether or not the market to which the feature or features concerned relate); or
(b) less innovation in relation to such goods or services.
327. Whether action should be taken therefore involves consideration of both the action the CC can take and the action the CC can recommend others to take. The CC may act itself through exercising its order-making powers or through accepting undertakings from parties (see paragraphs 92 and 93). Alternatively or in addition, the CC may recommend that remedial action should be taken by others, such as government, regulators and public authorities. Such recommendations do not bind the person to whom they are addressed, although the UK Government has committed to respond to any recommendation made to it within 90 days of publication of the CC’s final report. 177 When deciding on certain remedial actions in regulated sectors the CC has to have regard to the relevant statutory functions of the sectoral regulator concerned. 178 In all cases, the CC will state the action that should be taken and what it is designed to address.
328. In practice, the CC may decide to take several actions itself and/or make several recommendations. This combination of actions and/or recommendations is sometimes referred to as a ‘package’ of measures. Unless otherwise specified, reference to a remedy or a remedy option in this section encompasses the package of measures the CC is taking and/or recommending.
329. The Act requires the CC, in considering these questions, ‘in particular to have regard to the need to achieve as comprehensive a solution as is reasonable and practicable to the adverse effect on competition and any detrimental effects on customers so far as resulting from the adverse effect on competition’. 179 To fulfil this requirement, the CC will consider how comprehensively possible remedy options address the AEC and/or its detrimental effects and whether they are effective and proportionate. The CC may also have regard, in accordance with the Act, to any RCBs of the market feature(s) giving rise to the AEC 180 (see paragraph 83). Paragraphs 330 to 333 provide greater detail about these factors and their interaction, the ways in which the CC seeks to assess the impact of remedies and the possible outcomes that may arise from balancing these factors.
A comprehensive solution to the AEC and/or detrimental effects
330. Remedies can remedy, mitigate or prevent the AEC or its detrimental effects on customers. The clear preference of the CC is to deal comprehensively with the cause or causes of AECs wherever possible, and by this means significantly increase competitive pressures in a market within a reasonable period of time.
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176 Section 134(5). The reference to customers includes future customers. 177 The Enterprise White Paper, A World Class Competition Regime, Department of Trade and Industry, July 2001 Cm 5233, p12. 178 Section 168. 179 Section 134(6). 180 Section 134(7). 331. AECs are likely to result in costs to the UK economy in general and to customers in particular. Remedies that are effective in generating competition are likely to deliver substantial benefits, by driving down prices and costs and increasing innovation and productivity, thereby facilitating economic growth and increasing the choice available to customers.
332. In deciding what action to take, the CC will typically consider whether tackling some or all of the features it has identified (see paragraphs 154 to 162) will remedy, mitigate or prevent the AEC. In some situations, for example where an AEC arises from a combination of features, it may be necessary to devise a package of remedies to address the AEC, generally by addressing its causes. However, the remedy that is ultimately selected need not directly address every feature identified, if for example, tackling a subset of features directly would be sufficient to generate effective competition and thereby remedy the AEC.
333. While generally preferring to address the causes of the AEC, the CC will consider introducing measures which mitigate the harm to customers created by competition problems, for example if other measures are not available, or as an interim solution while other measures take effect. Such measures to control outcomes may be able to reduce the harm to customers associated with high prices, for example, but are unlikely to generate the dynamic benefits, such as innovation, that are normally associated with competitive markets. These measures are therefore likely to represent a less comprehensive remedy to the AEC and any detrimental effects.
**Effectiveness**
334. The CC will assess the extent to which different remedy options are likely to be effective in achieving their aims, including their practicability.
335. The effect of any remedy is always uncertain to some degree. In evaluating the effectiveness of potential remedies, the CC will consider the risks associated with different remedy options and will tend to favour remedies that have a higher likelihood of achieving their intended effect. Assessing the effectiveness and practicability of a remedy may involve consideration of several dimensions discussed further below.
336. First, a remedy should be capable of effective implementation, monitoring and enforcement. To facilitate this, the operation and implications of the remedy need to be clear to the persons to whom it is directed and also to other interested persons. Other interested persons may include customers, other businesses that may be affected by the remedy, sectoral regulators, and the OFT (and/or any other body) which has responsibility for monitoring compliance. The effectiveness of any remedy may be reduced if elaborate monitoring and compliance programmes are required. Remedies regulating behaviour generally have the disadvantage of requiring ongoing monitoring of compliance and may also constrain beneficial aspects of competitive rivalry.
337. Secondly, the timescale over which a remedy is likely to have effect will be considered. The CC will generally look for remedies that prevent an AEC by extinguishing its causes, or that can otherwise be sustained for as long as the AEC is expected to endure. The CC will also tend to favour remedies that can be expected to show
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181 Section 138(6). However, the CC is prevented from taking action to address future detrimental effects on customers if no detrimental effects on customers currently exist and the CC is not remediying the AEC (that is, the source of the problem).
182 The CC will also consider the costs of compliance as part of its assessment of the impact of remedies and their proportionality (see paragraph 352). results within a relatively short time. Some remedy options may have an almost immediate impact, while the effects of others will be delayed. In such instances the CC may select a remedy package combining both types of measure taking into account both when each measure would take effect and how long it would endure.
338. Where an AEC is expected to be short-lived (for example, because a specific future event is expected to bring it to an end) and the timescale for implementation of a remedy option would extend significantly into this period, the CC will consider whether an alternative measure would more be appropriate.
339. The CC may also consider whether to specify a limited duration—for example, by means of a long-stop date in a ‘sunset clause’—for individual measures, where these are designed to have a transitional effect. This might occur if the CC expects an AEC to be time-limited, or if a particular element of a remedy package is intended to be a temporary arrangement to deliver improvements in the short term, while other longer-term measures take effect. However, the period used for any long-stop or review date will depend on the circumstances of the case. The duration of an AEC, in the absence of an intervention by the CC, cannot normally be predicted during the course of an investigation and there will normally be some uncertainty about the precise timescale over which remedies will take effect. For these reasons, the CC will generally rely on parties applying for variation or cancellation of remedies on the basis of a change of circumstances. In some cases, the CC may also recommend that the OFT reviews (or considers reviewing) the continued need for particular measures at some future date and/or specify the types of future circumstances which might be expected to trigger such a review (eg significant new entry). Alternatively, the OFT might identify a change of circumstances following a review conducted on its own initiative.
340. Thirdly, remedies may need to take account of existing laws or regulations either currently applicable or expected to come into force in the near future. Such other legislation may include both UK and EU legislation and directives and could cover any aspect, for example competition law, health and safety, or data protection). Where there is a tension between existing laws or regulations and the actions that the CC considers necessary to achieve an effective remedy, the CC may make recommendations to the body responsible for the laws or regulations in question. Remedies will also need to take into account the extent to which the prohibitions on anticompetitive agreements and abuses of market power are applicable to the market concerned and impact, if any, these have on the need and ability to impose remedies (see paragraph 17).
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183 For example, in the report on Veterinary Medicines (April 2003) under the Fair Trading Act 1973, the package of remedies included an obligation on veterinary surgeons not to charge for writing prescriptions for a period of three years.
184 For example, in 2012, the CC decided to remove the Domestic Electrical Goods Order (the DEGs Order) (and certain associated undertakings). The DEGs Order, which was introduced in 1998, prevented suppliers of goods such as televisions and washing machines from recommending resale prices or making agreements that restricted the resale prices of wholesalers and retailers, and from restricting or withholding supply from particular retailers. In deciding to lift the DEGs Order, the CC found that a number of changes since the Order was introduced had significantly increased competition in the market and removed the need for the safeguards provided by the Order. The CC also considered that the enactment of CA98 provided an effective mechanism to address attempts to fix prices or restrict supply unfairly. A memorandum of understanding setting out how the OFT and CC approach their respective roles on reviews of undertakings and orders may be found at www.competition-commission.org.uk/assets/competitioncommission/docs/pdf/non-inquiry/our_role/ms_and_fm/pdf/mou_between_oft_and_cc.pdf.
185 For example, in the 2002 report on The supply of banking services by clearing banks to small and medium-sized enterprises under the Fair Trading Act 1973, the CC recommended that, three years after implementation of the remedies, the OFT should review whether further measures were needed or, on the other hand, in the light of market developments, whether any or all of the measures in the CC’s package of remedies could be modified or discontinued. Following a review by the OFT, the CC decided in 2007 to release the UK’s four largest clearing banks from most of the Transitional Undertakings given by them in 2002. 341. Fourthly, where more than one measure is being introduced as part of a remedy package, the CC will consider the way in which the measures are expected to interact with each other. As a general rule, measures which have a shared aim of introducing, or strengthening competition within a market will tend to be mutually reinforcing. For example, where market-opening measures are being introduced that increase customer choice by facilitating entry or removing barriers to switching, these may be accompanied by information remedies that help customers choose the best product available to them.(^{186})
**Reasonableness and proportionality**
342. In considering the reasonableness of different remedy options the CC will have regard to their proportionality.
343. The CC’s assessment of proportionality will depend on the particular facts and circumstances of the case. It often depends on what other remedy options are also being considered and on judgements about the respective merits of each option, including whether or not a remedy option is likely to be effective in practice.
344. In making an assessment of proportionality, the CC is guided by the following principles. A proportionate remedy is one that:
(a) is effective in achieving its legitimate aim;
(b) is no more onerous than needed to achieve its aim;
(c) is the least onerous if there is a choice between several effective measures; and
(d) does not produce disadvantages which are disproportionate to the aim.(^{187})
345. Applying these principles to the circumstances of particular cases usually involves consideration of remedy options both relative to other effective measures as well as relative to taking no action.
346. The CC will apply these principles to the evaluation of individual measures within a package of remedies as well as to the package taken as a whole (see paragraph 332).
347. Where the CC is considering whether to modify licence conditions in a regulated sector would be proportionate it will have regard to the relevant statutory functions of the regulator concerned.(^{188})
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(^{186}) For example, the packages of remedies in the market investigations into *Home Credit* (November 2006), *LPG* (June 2006) and *PPI* (January 2009) each included a combination of market-opening measures and information remedies.
(^{187}) These principles have been referred to by the CAT in various judgments including *Tesco v CC* (4 March 2009), the PPI appeal (*Barclays and others v CC*, 16 October 2009) and *BAA v CC* (21 December 2009 and 1 February 2012). See *Tesco* judgment, paragraph 137:
A useful summary of the proportionality principles is contained in the following passage from the judgment of the ECJ in Case C-331/88 R v Ministry of Agriculture, Fisheries and Food and Secretary of State for Health, ex parte Fedesa [1990] ECR I-4023, paragraph [13], to which we were referred by the Commission: ‘By virtue of that principle, the lawfulness of the prohibition of an economic activity is subject to the condition that the prohibitory measures are appropriate and necessary in order to achieve the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued’.
(^{188}) Section 168. Assessing the impact of remedies
348. In reaching a judgement about whether to proceed with a particular remedy, the CC will consider its potential effects—both positive and negative—on those persons most likely to be affected by it. The CC will pay particular regard to the impact of remedies on customers. The CC will also have regard to the impact of remedies on those businesses subject to them and on other affected parties, such as other businesses (eg potential entrants, or firms active in upstream or downstream markets), government and regulatory bodies, the OFT and other monitoring agencies.
349. The CC will explain what effects it expects to result from a remedy option and will form a view of their significance. As in its assessment of competition in a market (see paragraphs 35 to 41), the CC may take into account a variety of evidence and use a variety of techniques—both qualitative and, where appropriate, quantitative—to analyse effects of remedy options. Similarly to its prioritization of resources in conducting the AEC test (see paragraph 36), the level of detail in which the CC investigates particular effects of a remedy will be influenced by their importance to the CC’s overall assessment. For example, if it is clear that the costs of a particular remedy are likely to be very small—both in absolute terms and relative to its likely benefits—the CC may not seek to establish these costs with greater precision.
350. The extent to which the CC will seek to quantify particular effects of remedies, and the degree of precision with which such quantification is attempted, are likely to vary from case to case. The CC will not carry out quantitative analysis that it considers unnecessary or otherwise not justified by the need to identify a remedy that meets the statutory tests. The general principles the CC follows in its use of evidence are set out in paragraphs 35 to 41.
351. The CC will assess the potential beneficial effects of its interventions. In considering how markets may develop with remedies in place, the CC will consider both benefits that are relatively easy to quantify (such as lower prices) and benefits that are more difficult to quantify (for example, the dynamic benefits of increased rivalry on productivity and innovation). Both are important. The more an AEC reflects longer-term and structural problems within a market, the greater the significance the CC is likely to accord to the long-term development of competition in the market and to the less quantifiable consequences of an improvement in the competitive pressures in the market. Conversely, if addressing the AEC requires a remedy focused on achieving relatively predictable changes to outcomes in the shorter term, quantification of these changes is more likely to be a material aspect of the CC’s assessment of the beneficial effects of the remedy.
352. Similarly, the CC will consider the potential negative effects of a remedy including the costs to business. Such negative effects may arise in various forms, for example:
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189 See paragraph 50. 190 For further discussion of this principle, see the judgment of the CAT in Tesco v Competition Commission (2009), CAT 6, (paragraph 139): ‘it may well be sensible for the Commission to apply a ‘double proportionality’ approach: for example, the more important a particular factor seems to be in the overall proportionality assessment, or the more intrusive, uncertain in its effect, or wide-reaching a proposed remedy is likely to prove, the more detailed or deeper the investigation of the factor in question may need to be’; see also the CAT judgment in Barclays Bank plc v Competition Commission (2009), CAT 27 (paragraph 21), and footnote 23, above. 191 For example, in the BAA airports market investigation (March 2009), the CC concluded that the main benefits from the divestitures of Gatwick and Stansted airports would result from the dynamic aspects of competition, for example in relation to the delivery and allocation of airport capacity. While it was not possible to quantify the benefits of divesting these airports, given among other factors the interaction with the regulatory regime, the CC was confident that the expected benefits would outweigh the costs of divestiture. (a) A remedy may result in unintended distortions to market outcomes. This is more likely to be the case where behavioural remedies are used which intervene directly in market outcomes, especially over a long period. Such distortions may reduce economic efficiency (including dynamic incentives to invest and innovate) and adversely affect the economic interests of customers over the longer term.
(b) A remedy may result in implementation costs (for example, modifying a distribution system), ongoing compliance costs (for example, providing the OFT with periodic information on prices or reporting to the OFT on other aspects of compliance), and monitoring costs (for example, the costs of the OFT or other agencies in monitoring compliance). The CC will normally collect information from parties about the potential cost of implementing and complying with its remedies. In evaluating such information, the CC will bear in mind that it has less information than the parties have about how such potential costs have been estimated and that there might be incentives for parties to overstate the cost of those remedies that they do not support. The CC is likely to place most weight on estimates of implementation and compliance costs where parties have provided a clear explanation of how the estimate was reached, together with supporting evidence as to the assumptions used to derive those estimates.
(c) If remedies extinguish RCBs, the amount of RCBs foregone may be considered to be a relevant cost of the remedy (see discussion of RCBs, paragraphs 355 to 366).
353. To avoid imposing unnecessary burdens on business, the CC will seek (as stated in paragraph 344) to ensure that its remedies are no more onerous than is necessary to remedy the AEC it has identified. In selecting and designing remedies, the CC will also have regard to the potential for more competitive markets to create profitable opportunities for new and innovative competitors as well as the cost of remedial measures on established businesses. However, where businesses have been found to be earning profits persistently in excess of their cost of capital as a direct result of a feature of the market (see paragraphs 114 to 126), and are likely to continue to do so in the absence of intervention, the CC will not usually give any significant weight to the anticipated reduction of such profits as a negative effect of a remedy.
Possible remedy outcomes
354. In reaching a decision on what remedial action to take, the CC will seek a comprehensive solution to the AEC and resulting customer detriment. In so doing, it will have regard to the need for the solution to be both reasonable and practicable. A consequence of balancing these considerations is that there may be circumstances where the CC judges, for example on the basis of considerations of proportionality, that it should not pursue an effective remedy option that is potentially available to it. There may also be rare cases where, having found an AEC, the CC chooses not to take any remedial action, for example:
(a) Where there are no practicable remedy options available to the CC, including any possible recommendations to others.
(b) Where the cost of each practicable remedy option is disproportionate compared with the extent that the remedy option resolves the AEC. This might be the case, for example, if the market in which the AEC was found was small in relation to the costs of each practicable remedy option and/or if it was only practicable to mitigate some of the negative consequences of an AEC and the costs of doing so were prohibitively high. (c) Where RCBs accruing from the market features are both large in relation to the AEC and would be lost as a consequence of any practicable remedy (see paragraphs 355 to 359).
**Relevant customer benefits**
355. The CC, in deciding the question of remedies, may in particular ‘have regard to the effect of any action on any relevant customer benefits of the feature or features of the market concerned’.
356. RCBs are limited to benefits to relevant customers in the form of:
(a) lower prices, higher quality or greater choice of goods or services in any market in the UK (whether or not the market to which the feature or features concerned relate); or
(b) greater innovation in relation to such goods or services.
357. The Act provides that a benefit is only an RCB if the CC believes that:
(a) the benefit has accrued as a result (whether wholly or partly) of the feature or features concerned or may be expected to accrue within a reasonable period of time as a result (whether wholly or partly) of that feature or those features; and
(b) the benefit was, or is, unlikely to accrue without the feature or features concerned.
358. In considering potential RCBs, the CC will therefore need to ascertain that the market feature(s) with which it has been concerned results, or is likely to result, in lower prices, higher quality, wider choice or greater innovation, and that such benefits are unlikely to arise in the absence of the market feature(s) concerned. RCBs may include benefits to customers in the market in which the CC has found an AEC and to customers in other markets within the UK, provided these benefits meet the criteria set out in paragraphs 356 and 357.
359. In general, the CC would expect parties to put forward for the CC’s consideration any RCBs they think relevant. Parties doing so will be expected to provide convincing evidence regarding the nature and scale of any RCB that they claim to result from the market feature(s) concerned and to demonstrate that these fall within the Act’s definition of such benefits.
**Possible relevant customer benefits**
360. Whether a particular claimed benefit to customers is found to be an RCB will depend on the facts of the case and the characteristics of a particular market.
361. It would normally be expected that market features that have been found to adversely affect competition—after consideration of any potential rivalry-enhancing efficiencies
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192 Section 134(7). 193 As noted in paragraph 173, in reaching a judgement about a particular theory of harm, the CC will evaluate its overall impact on rivalry, taking into account rivalry-enhancing as well as adverse effects. 194 Section 134(8)(a). 195 Section 134(8)(b). 196 For example, in the PPI market investigation (January 2009), the CC found that credit prices, and credit cut-off scores, were lower than they otherwise would be because of PPI income generated at the credit point of sale and that this was an RCB. (see paragraph 174)—would also have detrimental effects on customers. For example, one usual consequence of a failure of competition is that prices will be higher than they would otherwise be. Nevertheless, it is possible that features that adversely affect competition could result in beneficial effects on customers, either in the market in which competition is adversely affected, or in other related markets. The potential loss of such beneficial effects on customers may therefore be taken into account by the CC in its consideration of remedies. In the following paragraphs, examples of possible RCBs are given. In all instances the CC will need to consider whether the criteria set out in paragraphs 356 and 357 are met.
362. Aspects of market structure that could adversely affect competition, such as a high level of concentration, might enable economies of scale and/or scope to be obtained that would not be available if there were a larger number of firms in the market. Whether scale or scope economies would constitute an RCB in a particular case would depend partly on the extent to which, in practice, any cost economies were being passed on to customers as lower prices, improved quality, greater innovation or more choice.
363. Similarly, on the demand side, network effects and the operation of multi-sided markets or platforms (see paragraph 179) may lead to barriers to entry and sustained market concentration, but may also bring benefits to customers of being able to participate in a larger and/or better integrated network or platform. In determining whether a particular form of network effects constitutes an RCB, the CC will consider whether customers benefit in practice from such effects and whether such benefits are unlikely to arise in the absence of the AEC resulting from the network effects.
364. Generally, customers are unlikely to enjoy any benefits as a direct result of entry barriers. However, some entry barriers may indirectly secure other kinds of benefit (see paragraph 235). For example, regulations that limit entry to persons of proven competence or with adequate capital resources may lead to an improvement in product or service quality. Likewise regulations that protect IPRs (see paragraph 211), while potentially restricting access to markets, may lead to improvements in innovation by enabling innovative companies to benefit from the new ideas that they generate. The CC will generally have regard to the wider purpose of such regulations in considering their effects on customers. In the absence of clear, countervailing customer benefits from barriers to entry, the CC would normally expect customers to benefit from any reduction of entry barriers as this would be expected to facilitate dynamic competition and better market outcomes (see paragraphs 205 and 206).
365. As set out in paragraphs 265 and 266, vertical relationships can often have beneficial effects, for example through better coordination of activities at different stages in the supply chain, resolving ‘free-rider’ problems between producers and distributors and creating incentives to reduce the price of complementary products. Where an AEC has nonetheless arisen from vertical relationships within a market (see paragraph 267), the CC will consider whether these relationships have resulted in RCBs.
366. The CC will similarly consider, when AECs have arisen from the many forms of business conduct that can also have either positive or negative effects, depending on the context, whether these conducts have resulted in RCBs. Tie-in sales or product bundling (see paragraphs 286 to 290), for example, may sometimes be convenient to customers, reduce transaction costs or provide quality assurance.
197 For example, in the Stagecoach/Preston Bus merger inquiry the CC took into account an RCB associated with integrated ticketing brought about by the merger.
198 For example, it may be possible for network benefits to be preserved through requiring interoperability between competing networks. Relevant customer benefits and remedies
367. If the CC is satisfied that there are RCBs deriving from a market feature that has resulted in an AEC, the CC will consider whether to modify the remedy that it might otherwise have imposed or recommended. The CC will consider several factors including the size and nature of the expected RCB, what proportion of the benefit will be preserved through the modification, and how long the RCB may be sustained. The CC will also consider the different impacts of the features on different customers or groups of customers.
368. It is possible that the RCBs are of such significance compared with the effects of the market feature(s) on competition that the CC will decide that no remedy is called for (see paragraph 354). This might occur if no remedies can be identified that are able to preserve the RCBs whilst also remedying or mitigating the AEC and/or the resulting customer detriment. This situation has not arisen on a market investigation to date.
369. Alternatively, the CC, as a result of identifying RCBs, may choose a different remedy, for example a behavioural remedy rather than a structural remedy (see paragraph 371 for an explanation of this distinction). In this case, the CC will have to weigh the disadvantage of a less comprehensive solution to the competition problem against the preservation of the RCBs that result from the feature concerned.199
Choice of remedy
370. Paragraphs 371 to 380 provide an overview of the various types of remedy and their characteristics. Paragraphs 381 to 393 consider the selection from these types of remedy by applying the decision framework outlined in paragraph 384.
Remedies universe
371. A diagrammatic representation of the universe of possible remedies is shown in Figure 1. Remedies are conventionally classified as either structural or behavioural. Structural remedies are generally one-off measures that seek, in market investigations, to increase competition by altering the competitive structure of the market. Behavioural remedies are generally ongoing measures that are designed to regulate or constrain the behaviour of parties in a market and/or empower customers to make effective choices. Some remedies, such as those relating to access to IPRs, may have characteristics of structural or behavioural remedies depending on their particular formulation. Likewise, recommendations to others may be either structural or behavioural in nature, depending on their content. Further discussion of the different categories of remedy may be found in Annex B.
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199 For example, in the Macquarie UK Broadcast Ventures/National Grid Wireless Group merger inquiry (March 2008), the CC required the merged company to agree a package of measures with the CC, including price reductions for customers on new and existing contracts and the appointment of an adjudicator to resolve disputes. The CC decided that these measures would be effective in addressing the adverse effects of the acquisition, whilst preserving the RCBs that could arise from the acquisition, including reducing the risks associated with the digital switchover process and passing back cost savings to customers. FIGURE 1
Overview of the universe of possible remedies
Source: CC.
Divestiture
372. The aim of divestiture in market investigations will generally be to address competition problems resulting from structural features of a market. This may be done by either creating a new source of competition through disposal of a business or assets to a new market participant, or by strengthening an existing source of competition through disposal of a business or assets to an existing market participant that is independent of the divesting party (or parties).
373. A successful divestiture will address at source the lack of rivalry resulting from structural features of a market. Divestiture remedies will generally not require detailed ongoing monitoring beyond the completion of the disposal of the business or assets in question, although, in some cases, an effective divestiture may require supplementary behavioural measures for an interim period (eg to secure supplies of an essential input or service from the divesting party to the divested business). The requirements for design and implementation of divestiture remedies are considered in detail in Annex B, paragraphs 3 to 30.
Intellectual property remedies
374. A remedy that provides access to intellectual property (IP) by licensing or assignment of those rights may be viewed as a specialized form of divestiture remedy. The aim of such a remedy is that the party or parties acquiring the IPRs should thereby be able to compete effectively with other companies in the market. Where the terms of an IP remedy result in a material ongoing link between the original owner of the IP and the parties gaining the IP (eg providing access to new releases or upgrades of
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200 For example, in the BAA airports market investigation (March 2009), the CC required the divestiture of Gatwick and Stansted airports and a Scottish airport as part of its package of remedies.
201 At the time of publication of these Guidelines, the CC had not used an IP remedy in any market investigation. The package of remedies applied in the Nufarm/AH Marks merger inquiry (February 2009) had some characteristics of an IP remedy. technology) an IP remedy may take on some of the characteristics of a behavioural commitment, which may require ongoing monitoring and enforcement. As with other types of remedies, the CC will assess the extent to which specific interventions in relation to IPRs may risk creating distortions, for example by reducing incentives to innovate (see paragraphs 225 and 235). Considerations regarding the design and implementation of IP remedies are outlined in Annex B, paragraphs 31 to 36.
**Enabling measures**
375. Certain forms of behavioural remedy operate principally to enable competition by removing obstacles to competition or stimulating actual or potential competition.
376. Within the category of enabling measures, there are further distinctions between:
(a) market-opening measures, which are intended to open up a market to new sources of competition by removing or reducing barriers to entry, expansion or switching. Such measures may, for instance, limit parties’ ability to require their customers to enter into long-term or exclusive contracts or to otherwise create switching costs for customers (see Annex B, paragraphs 46 to 60).
(b) informational remedies, which are aimed at giving customers information to help them make choices and thereby increase competitive pressure on firms in the market (see Annex B, paragraphs 61 to 71). Where an AEC results from coordinated effects (see paragraphs 241 to 243) the CC may consider remedies that prevent the sharing of information between firms, if sharing such information has been found to facilitate coordination; and
(c) remedies that restrict the adverse effects of vertical relationships (see paragraphs 267 to 272). Such measures may include restriction of access to confidential information (‘firewall provisions’), or obligations to provide access to facilities on fair, reasonable and non-discriminatory (FRND) terms (see Annex B, paragraphs 72 to 85).
377. Enabling measures are generally likely to require ongoing intervention and monitoring. In some instances this may involve complex issues, for instance the pricing of access to facilities that are subject to rapid technological change. Further considerations regarding the design and implementation of enabling measures are outlined in Annex B, paragraphs 46 to 85.
**Controlling outcomes**
378. Certain forms of behavioural remedy seek to prevent the exercise of significant market power and thereby control the detrimental effects arising from an AEC. For example, price caps, supply commitments and service level undertakings all control the way a business can operate to limit any possible detrimental effects on a
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202 For example, the remedies introduced following the LPG market investigation (June 2006) included measures designed to facilitate the transfer of tank ownership when a customer wishes to switch supplier and other measures to make the switching process easier.
203 For example, the remedies introduced following the Home Credit market investigation (November 2006) included an obligation to publish price and other information on a comparative website www.lenderscompared.org.uk.
204 In the Local bus services market investigation, the CC decided to introduce by means of an Order a requirement for bus operators to provide access on FRND terms to privately-owned and operated bus stations. This type of remedy is also sometimes used in merger cases. For example, the Centrica/Dynegy Storage merger inquiry (2003) was a case in which firewall provisions and an access remedy were introduced to restrict the adverse effects of vertical relationships following a merger. customer. Such measures are often used in regulated sectors, where it may not be feasible to introduce effective competition. However, this type of behavioural remedy can be complex to implement and monitor, given informational asymmetries between the parties and the authorities and the associated risk of circumvention. There is also a risk that such controls create market distortions, particularly if they are kept in place over a long period. Ensuring that measures to control outcomes remain fit for purpose in the light of market developments may involve costs for monitoring and enforcement agencies as well as for the parties subject to them. Further considerations regarding this type of remedy are outlined in Annex B, paragraphs 86 to 93.
Recommendations
379. The CC can decide to make recommendations to other bodies, rather than taking action itself. Such recommendations can be thought of as falling into one of two categories:
(a) In some cases, the legal framework, regulations or conduct applicable to a market may be a structural feature giving rise to an AEC; for example, planning or certification requirements may inhibit entry or restrict market outcomes (see paragraphs 223 to 226). In such cases the CC may recommend modifications of these requirements to the Government or other controlling body to help address the AEC or control its detrimental effects. For example, the CC may recommend the removal or reform of regulatory requirements that have been found to constitute a barrier to entry.
(b) The CC may also make recommendations in situations where it is more practicable, or otherwise preferable, to implement a remedy by means of a recommendation.
380. It will, of course, be for the Government or other person to whom a recommendation is addressed to decide whether to act on the recommendation and the CC will consult with the relevant body prior to making the recommendation. Further considerations regarding this type of remedy are outlined in Annex B, paragraphs 94 to 102.
Selection of remedies
381. As set out in paragraphs 88 to 93, the identification of the Group’s preferred remedy is an iterative process in which a potentially wide range of remedy options are progressively narrowed down until a solution has been found that enables the CC to meet its statutory duties. This process involves public consultation on those remedy options that appear to the Inquiry Group to have the best chance of being both effective and proportionate. Some of the key considerations that affect the selection of remedies are set out in the remainder of these Guidelines.
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205 In the Classified Directories market investigation, the CC found that prices of Yell, the largest provider, had been largely constrained by an existing price cap rather than competition. Were it not for the price cap, customers of Yell would be paying more for advertisements in Yellow Pages than they would if the market was functioning well. However, the CC expected that growing competition would increasingly constrain Yell’s prices and that Yell would feel more pressure due to the Internet. The CC’s remedies included a revised price control to prevent Yell from exploiting its market power and other measures designed to preserve developing competition from actions that could be targeted at competitors.
206 For example, in the Local bus services market investigation the CC decided to make a series of recommendations (eg in relation to multi-operator ticketing schemes) which would enable the implementation of these measures to take account of specific local conditions. 382. As set out in paragraph 330, in deciding what remedial action should be taken, the CC will first look for a remedy that would effectively address the causes of the AEC directly and thereby deal with any detrimental effects on customers of the AEC.
383. The type of action that will be effective in increasing competition will depend on the nature of the AEC concerned. The range of potential competition problems that may be identified as giving rise to an AEC is wide, as is the range of potential remedies. The relative merits of different remedy options will be determined by the facts of the case and, in particular, the nature of the underlying competition problem that gives rise to the need for remedial action.
384. Table 1 illustrates some possible approaches to remedying some of the different types of competition problem that may give rise to an AEC.
### TABLE 1 Illustration of possible remedy approaches to different types of competition problem
| Example of problem arising | Possible remedy approaches | |---------------------------|---------------------------| | Restrictions on competitive entry or expansion reduce dynamic competition and slow technological progress and introduction of new products. | • Market-opening measures to reduce barriers to entry and promote dynamic competition.\
• Recommendations to Government or regulatory bodies to address any barriers to entry which are caused or created by government laws or regulatory actions (eg planning rules). | | Concentrated market structure means that the market is dominated by one player, or a small number of players, whose position is protected by high barriers to entry and/or expansion. | • Structural measures (eg divestiture, IP licensing) to create directly a less concentrated market structure.\
• Market-opening measures (eg reduction of entry barriers) to increase the competitive constraint from entry, addressing market structure indirectly and thereby increase competitive threat to incumbents.\
• Recommendations to Government or regulatory bodies to address regulatory barriers to entry or expansion.\
• Measures to control outcomes (eg price caps) possibly on an interim basis to mitigate the harm to customers until market-opening measures become effective. Measures to control outcomes might also be used if market concentration is very difficult or very costly to alter in practice (eg in a natural monopoly) and/or if concentration gives rise to very substantial RCBs (eg network effects) that would be lost in a more fragmented market structure and market-opening measures are unlikely to be successful. | | Coordination between rivals means that competition is restricted and customers are made worse off. | • Structural measures (eg divestiture, IP licensing) to make it harder to achieve, monitor and sustain a coordinated outcome, by increasing the number of significant market participants.\
• Market-opening measures (eg reduction of entry barriers) to increase the competitive constraint from entry and thereby increasing competitive threat to incumbents.\
• Restrictions on supplier conduct or other market features that have the effect of facilitating coordination—for example, remedies might be aimed at limiting the availability of information held by suppliers about their rivals.\
• Recommendations to Government or regulatory bodies to ensure that government laws or regulatory actions do not facilitate coordination or cause unnecessary barriers to entry or expansion. | | Vertical effects. Competition problems can arise where a single firm operates at a number of levels of the supply chain or where there are other vertical arrangements between firms active at different levels of a supply chain. | • Structural measures—for example, to separate ‘natural monopoly’ activities from potentially competitive activities, or to reduce market power at one or other stage of the supply chain.\
• Remedies to restrict the effects of vertical relationships to ensure access to key services, products or facilities; prevent discrimination; or prohibit vertical arrangements that restrict competition.\
• Measures to control outcomes—for example, to mitigate the detrimental effects in ‘natural monopoly’ activities and/or if vertical relationships give rise to substantial RCBs (eg network effects) that would be lost with other measures. | | Information shortfalls and behavioural biases. Competition can be weak, when customers find it hard to identify good value products in a market or switch between providers, or are subject to behavioural biases. | • Market-opening measures to address the source of switching costs and/or encourage entry and expansion by firms with incentives to reduce search costs (eg by advertising).\
• Informational remedies to make it easier for customers to find out about products in the market and to facilitate comparisons; to address ‘customer’ barriers to switching (eg inertia, or lack of familiarity with the switching process) and/or to encourage whole-life costing (eg upfront disclosure of ‘hidden’ charges). Such measures might involve an element of product regulation to simplify the choices facing customers and/or to protect customer interests, where customer search for information on a particular aspect is unlikely to occur. |
Source: CC. 385. As Table 1 shows, structural remedies such as divestiture are a potential solution where horizontal market concentration, coordinated effects or vertical integration are among the principal market features that give rise to an AEC (see Annex B, paragraphs 3 to 30). Likewise, IP licensing may be used to remedy AECs that result from highly concentrated markets, if, by virtue of an IP remedy, new or expanding suppliers would be able to provide an effective competitive constraint on powerful incumbents (see Annex B, paragraphs 31 to 36).
386. Enabling measures may also remedy structural problems. Market-opening measures, for example, may remove or reduce barriers to entry (see Annex B, paragraphs 47 to 60) or measures may be introduced to restrict the adverse effects of vertical relationships (see Annex B, paragraphs 72 to 85).
387. In choosing between structural remedies and enabling measures that impact on market structure indirectly, the CC will consider whether the market response to either type of remedy will be timely and of sufficient scale to represent a comprehensive solution to the AEC. In remediating competition problems arising from high concentration structural remedies have some important advantages over other measures. Once implemented, structural remedies may be expected to increase competitive constraints on the behaviour of firms in the market within a short timescale and without requiring ongoing detailed monitoring by the OFT and/or any other body such as the relevant sector regulator. The underlying cause of high concentration may also be relevant. For example, if certain features of a market (e.g., network advantages or other barriers to entry and expansion) result in a tendency towards high levels of concentration, enabling measures that address the underlying causes of high concentration (e.g., by lowering barriers to entry or expansion) might be preferred. The costs of different remedy approaches, including the extent to which any RCBs are retained (see paragraphs 355 to 366) may also be relevant to this choice.
388. In other circumstances, structural remedies may not address the features giving rise to the AEC and behavioural remedies are likely to be preferred. An important difference between remedies in merger and market investigations is that structural remedies, even if they are feasible in a market investigation, may not be an appropriate solution to a particular AEC because of the wide range of features, including non-structural features, that can give rise to an AEC. For example, enabling measures are more likely to be chosen where:
(a) the conduct of firms has given rise to an AEC—for example, by raising barriers to entry or facilitating coordination. In such situations the CC may consider restrictions on firms’ behaviour that constrain firms’ future ability to engage in such conduct (see Annex B, paragraphs 49 to 53);
(b) switching costs or barriers to entry or expansion are among the features that give rise to an AEC. Here, the CC may consider market-opening measures that address the main barriers to switching, entry or expansion that it has identified (see Annex B, paragraphs 54 to 60); or
(c) search costs and other information shortfalls are among the features giving rise to an AEC. In such situations, informational remedies that make it easier for customers to search and switch may be an appropriate response (see Annex B, paragraphs 61 to 71).
389. Remedial action may also be required to address customer detriment directly, for example where effective remedies aimed at introducing competition by addressing the AEC are unavailable or will not bear fruit in the short term (see Annex B, para- graphs 86 to 93). Price controls are the most obvious example. However, such measures to control outcomes are not likely, by their nature, to provide a solution to the underlying problem and may also give rise to distortion risks, if retained over a long period. For these reasons (as stated in paragraph 330), remedial action to control outcomes will not generally be preferred as a long-term solution.
390. As stated in paragraph 379, recommendations may be considered where an aspect of regulation or government behaviour is itself giving rise to an AEC or where it would be more practicable (or otherwise preferable) for the CC to implement a remedy by means of a recommendation rather than taking action itself. This may include situations in which other bodies have powers that are unavailable to the CC or where a recommendation enables a remedy to be better integrated with existing interventions in a sector. It may also include cases where a remedy to increase competition in a market has the potential to come into conflict with other important public policy objectives and it is more appropriate for Government, rather than the CC, to balance these conflicting objectives.
391. In deciding whether to make a recommendation rather than take action itself, the CC will form a view as to the likelihood that the recommendation will be acted upon and, if so, over what time period. In reaching this view, the CC will have regard both to the stated policy of the body to which the recommendation is to be directed and to the possibility that that stated policy may change, either in light of the CC’s recommendation or subsequent events (see Annex B, paragraphs 94 to 102). The likelihood of a recommendation being implemented is therefore relevant to the timeliness and effectiveness of such a recommendation. However, the CC may sometimes make recommendations that may not be implemented immediately, where it judges that these are nonetheless likely to be more effective than other possible remedies.
392. In looking for remedies that would be likely to increase competition in the relevant market(s), the CC will give attention to the time period within which the remedy can be expected to show results. If a remedy is not likely to have rapid results, the CC may choose an alternative remedy or implement additional remedies such as measures to address the detrimental effects on customers during the interim period. Otherwise, not only might there be uncertainty as to whether the beneficial effects of the remedy would materialize, but, in the meantime, customers would continue to suffer from the consequences of the AEC.
393. The CC’s experience to date suggests that remedies in market investigations may take the form of a ‘package’ of measures, rather than the implementation of a single measure (see paragraph 332). This may be because there are several features giving rise to an AEC, and consequently an individual measure may be incapable of addressing the AEC in its entirety. For example, to deal with problems associated with a lack of customer switching it may be necessary both to remove contractual barriers to switching and also to put in place informational remedies that raise customer awareness of the potential benefits of switching. Where more than one measure is being introduced, the CC will consider the way in which the measures are expected to interact with each other. As a general rule (as stated in paragraph 341),
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207 For example, in the Local bus services market investigation the CC made several recommendations to the OFT about the operation of existing competition law mechanisms that are the responsibility of the OFT rather than the CC.
208 For example, in the PPI market investigation, the CC made a recommendation to the Consumer Financial Education Body—now known as the Money Advice Service—to publish information on its existing price comparisons website, rather than requiring the creation of a new price comparison site.
209 For example, in the ROSCOs market investigation, the CC made recommendations in relation to the operation of the rail franchising system to increase competition in the supply of rolling stock. In making these recommendations, the CC was mindful of the Government’s wider public policy objectives in relation to rail franchising. measures which share the aim of introducing competition into a market will tend to be mutually reinforcing. Annex A: Market characteristics and outcomes
1. Measuring market shares and concentration
**Market shares**
1. Subject to the availability of data, the CC normally calculates market shares for all firms currently producing products in the relevant market or in any market the CC considers relevant to its investigation. It does so on the basis of the available indicators of firms’ future competitive significance in the market. These may depend upon the nature of competition in the market as well as on the availability of data. In many cases, the CC will calculate market shares on the basis of several indicative measures (see paragraph 2) so as to understand fully how a market is operating. The CC may use information from a variety of sources including established sellers, potential entrants, customers, buyers, suppliers, trade associations and market research reports.
2. Market shares can be measured in terms of revenues, volumes, production capacities or inputs:
- **Revenues.** In most contexts, the CC uses actual or projected revenues in the market as the bases for measurement. They are the best ‘real world’ measure and are particularly pertinent when products differ in quality. But in some cases, unit sales (eg when a new, less expensive product has entered the market) or revenues earned just from recently acquired customers (when long-term contracts or high switching costs are involved) may be better measures of competitive significance than total revenues.
- **Capacities.** In markets for homogeneous products, the level of readily available capacity or reserves to serve the market can be an appropriate measure if that capacity is efficient enough to make expansion profitable in response to a price rise or to reduced output by competitors. If this measure is used, market participants that are not current producers may sometimes be assigned positive market shares to reflect their impact on competition.
3. Typically, annual data is used, but where individual transactions are large and infrequent, annual data may be unrepresentative, and in these cases the CC may measure market shares over a longer period of time.
**Concentration measures**
04. The degree of concentration in a market may be measured in different ways, depending on the nature of competition and availability of data. A numerical count of the firms in a market is the basic measure. It does not take into account differences in market shares and the size distribution of firms, but can be useful when there is a gap in market share between significant competitors and smaller rivals or when it is difficult to measure revenues in the market. The CC attaches particular weight to a numerical count of firms when considering coordinated conduct.
05. Two other commonly used measures are the concentration ratio and the Herfindahl-Hirschman Index (HHI).
06. The concentration ratio measures the combined market share of the largest firms in a market. For example, the ‘five firm’ concentration ratio is simply the sum of the mar- ket shares of the five largest firms in the market. It does not provide any information on the relative size of the firms nor on the number, or size, of the smaller firms.
07. The HHI potentially reflects both the number of firms in the industry and their relative size. It is defined as the sum of the squares of all the market shares in the market, and thus gives proportionately greater weight to the larger market shares. The CC is likely to regard any market with an HHI in excess of 2,000 as highly concentrated, and any market with an HHI in excess of 1,000 as concentrated. However, the CC will have regard to these threshold levels—if considered relevant—only as one factor in its wider assessment of competition.
08. The calculations of market shares, numbers of firms, concentration ratios and the HHI generally depend on being able to identify the boundaries of the market concerned. However, one technique, which is closely related to other traditional concentration measures, but does not rely on pre-defined boundaries, is the Logit Competition Index, sometimes referred to as LOCI. LOCI can be computed as (one minus) a firm’s weighted average market share across the submarkets within which it operates. The weights are calculated according to the importance to the firm of each submarket, and the definition of a submarket depends on the particular application. In practical terms, LOCI requires that a much greater amount of information be available than is required for computing the traditional concentration measures described in paragraphs 4 to 7 above.
09. Measuring profitability
10. In measuring profitability the CC’s approach will often be to start with accounting profit produced in line with UK Generally Accepted Accounting Principles (GAAP) and then to make adjustments to arrive at an economically meaningful measure of profitability, usually in terms of rates of return on capital. The CC will often inform its judgement on what is an ‘economically meaningful measure of profitability’ by examining the management accounting records of the firms in question. The manner by which industry participants, including firms, analysts, and investors, assess profitability for the purposes of monitoring and reporting performance may well inform our view as to what is an appropriate measure for the industry in question. For example, in the financial sector the CC has previously considered return on equity over a five-year period as its primary measure of profitability. In other industries the CC has considered return on capital employed over a similar period.
11. The appropriateness of a given measure will also depend on the nature of the industry and the pattern of investment. Where investment is characterized by large one-off expenditure, or the industry has experienced a period of growth, it may be desirable to consider profitability over a relatively long period of time or on a project appraisal basis. For example, it may be appropriate to use a cash-flow-based model to compute a measure of the internal rate of return (IRR) where reliable data is available on this basis.
12. An important factor to consider when selecting an appropriate model will be data availability. Where possible, the CC will base its calculations on financial data that can be reconciled to audited financial statements, albeit with appropriate adjust-
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1 Where the capital base is valued appropriately. See, for example, the reports on Store Cards (March 2006), Home Credit (November 2006) and PPI (January 2009). 2 See, for example, PPI. 3 See BAA Airports. 4 In Movies on Pay TV the CC used a cash-flow-based truncated IRR in conjunction with a return on capital employed (ROCE) approach. ments. For example, where the market of interest is a division or segment of a company it may not be possible to obtain reliable cash flow data at this level and the CC may therefore adopt a return on capital approach for this reason.
12. Whatever measure of profitability is used, the calculation of profitability for the purposes of competition analysis is often not straightforward because of the need to obtain an appropriate value for capital employed, as described below. In industries with a relatively low level of tangible assets, such as service and knowledge-based industries, the book value of capital employed may bear little relationship to the economic value because of the presence of significant intangibles. In some cases, the replacement cost of assets may be different from historical costs due to the length of time elapsed and changes in asset prices and efficient technologies over time.
13. Obtaining a value for capital employed can present difficulties irrespective of the choice of model. For example, the use of a truncated IRR requires the assets to be valued appropriately at the beginning and end of the period selected. Similarly, a return on capital approach, whether return on equity or return on capital employed (ROCE), requires an economically meaningful value for the capital base which may not accord with the value ascribed in the financial records.
14. Hence, it may be necessary to make adjustments to accounting data produced in line with UK GAAP. In particular, the following adjustments may be considered:
- Under current accounting standards, most assets are held at historical cost and this may differ substantially from the ‘replacement cost’ or ‘Modern Equivalent Asset value’, which the CC considers to be the economically meaningful measure for its purposes in most cases. In these circumstances, and where this would be likely to have a material effect on its calculations, the CC will consider whether replacement cost values can be derived reliably.
- Secondly, the CC may consider the inclusion of certain intangible assets where the following criteria are met:
- it must comprise a cost that has been incurred primarily to obtain earnings in the future;
- this cost must be additional to costs necessarily incurred at the time in running the business; and
- it must be identifiable as creating such an asset separate from any arising from the general running of the business.
In establishing a value for intangible assets meeting the above criteria, the CC will have regard to similar principles as for other types of assets.
- Other adjustments may be considered on a case-specific basis.
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5 These terms are used interchangeably to mean the current cost of acquiring assets which yield equivalent services to those currently used by the firm, based on the most efficient technology and optimal configuration.
6 These criteria were originally set down in the CC report, The supply of banking services by clearing banks to small and medium-sized enterprises (March 2002). 15. In situations where capital employed cannot be reliably valued the CC may consider alternative measures, such as the return on sales or other relevant financial ratios. For instance, comparisons with businesses operating in different but similar markets may on occasions be helpful.
16. In assessing levels of profitability the CC will have regard to its view of firms’ cost of capital. The CC will generally look to the capital asset pricing model (CAPM) when considering the cost of capital, since this is a widely understood technique with strong theoretical foundations. However, the CC will have regard to alternative models where appropriate. Annex B: Remedial action
Types of remedy
1. This annex summarizes some of the key considerations relevant to the evaluation, design and implementation of different classes of remedies. It is structured as follows:
(a) Section 1 discusses divestiture and IP remedies.
(b) Section 2 discusses behavioural remedies.
(c) Section 3 discusses recommendations.
Section 1: Divestiture and intellectual property remedies
2. This section deals with issues relating to divestiture and IP remedies. These types of remedy are sometimes referred to as ‘structural remedies’, though as set out in paragraph 31, IP remedies can have both structural and behavioural aspects. Divestiture remedies are discussed in paragraphs 3 to 30 and IP remedies in paragraphs 31 to 36.
Divestiture remedies
Introduction
3. In essence, a divestiture seeks to remedy an AEC by either creating a new source of competition through disposal of a business or set of assets to a new market participant or strengthening an existing source of competition through disposal to an existing market participant independent of the divesting party (or parties).
4. The CC has required divestiture in one market investigation to report to date (BAA Airports). This guidance reflects the CC’s experience in that case and also, where relevant, the experience of designing and implementing divestiture remedies in merger inquiries, where divestiture is the most frequently used remedy option.¹
5. The design of a divestiture remedy will seek to address the underlying cause of an AEC and will take account of any risks of not addressing the AEC and any RCBs that may be affected by the form of divestiture.
Divestiture risks
6. Divestitures may be subject to a variety of risks that may limit their effectiveness in addressing an AEC. It is helpful to distinguish between three broad categories of risks that may impair the effectiveness of divestiture remedies as follows:
(a) Composition risks—these are risks that the scope of the divestiture package may be too constrained or not appropriately configured to attract suitable purchasers or may not allow a purchaser to operate as an effective competitor in the market.
¹ As a consequence, many of the examples cited in this section relate to divestitures in merger inquiries, where these examples illustrate a point that is also relevant to market investigations. (b) **Purchaser risks**—these are risks that a suitable purchaser is not available or that the divesting party (or parties) will dispose to a weak or otherwise inappropriate purchaser.
(c) **Asset risks**—these are risks that the competitive capability of a divestiture package will deteriorate before completion of divestiture, for example through loss of customers or key members of staff.
7. The incentives of divesting parties may serve to increase the risks of divestiture. Although divesting parties will normally have an incentive to maximize the disposal proceeds of a divestiture they will also have incentives to limit the future competitive impact of a divestiture on themselves. Parties may therefore have, on balance, an incentive to make divestitures to weaker competitors of less competitive assets or businesses and may also allow the competitiveness of divestiture packages to decline during the divestiture process.²
8. Divestiture risks can be overcome, at least in part, through the design of the divestiture and by adopting protective measures such as appointment of monitoring and divestiture trustees and alternative divestiture packages as shown later in this section. To be effective in increasing rivalry—and managing divestiture risks—a divestiture remedy should involve the sale of an appropriate divestiture package to a suitable purchaser through an effective divestiture process. These critical elements of the design of a divestiture remedy are discussed in detail in the following sections.
**Scope of divestiture packages**
**Package definition**
09. In defining the scope of a divestiture package that will satisfactorily address an AEC, the CC will normally seek to identify a divestiture package that comprises a viable, stand-alone business that can compete successfully on an ongoing basis and is of sufficient scale and scope to enable its acquirer to become an effective competitor. This may comprise a division or the whole of an operating company functioning in the market affected by the AEC. Depending on the nature of the AEC, it may be necessary to identify more than one divestiture package to achieve a comprehensive solution—for example, if several distinct businesses under common ownership need to be divested to remedy the AEC.³
10. In order to achieve a proportionate solution, the CC will seek to identify the smallest such package (or packages) that is likely to be a viable competitor and satisfactorily addresses the AEC. Following discussion with parties, the CC may modify the scope of the proposed divestiture package (or packages) provided that the parties can demonstrate, to the CC’s satisfaction, that the modified package (or packages) addresses the AEC and the modification does not create significant additional new costs or composition, purchaser or asset risks after taking account of protective measures.
11. The scope of a divestiture package will be outlined, with reasons, in the CC’s report. The package will generally be specified in greater detail in the undertakings accepted or orders made by the CC when implementing the remedy. The divesting parties may
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² See, for example, the SCR Sibelco/Fife Silica Sands inquiry (2001) as discussed in the CC’s report Understanding past merger remedies; report on case study research (2010). See also the Federal Trade Commission’s A Study of the Commission’s Divestiture Process (1999) and DG COMP’s Merger Remedies Study (2005) (for example, paragraph 44 of Summary and Conclusions).
³ As was the case in the BAA Airports market investigation. also add further assets to the specified package at their request with the approval of the CC, or may be required to do so by the CC, to secure divestment to a suitable purchaser. The divesting parties will generally be prohibited from subsequently purchasing assets or shareholdings sold as part of a divestiture package or acquiring material influence over them. The CC will normally limit this prohibition to a sunset clause period of ten years.
Divestiture of an existing business or package of assets
12. The CC will generally prefer divestiture of an existing business that can compete effectively on a stand-alone basis independently of the divesting party (or parties), to divestiture of part of a business or a collection of assets. This is because divestiture of a complete business is less likely to be subject to purchaser and composition risk and can generally be achieved more quickly.
13. Where a proposed divestiture comprises part of a business or specified assets, such as IPRs, the capabilities and resources of prospective buyers are likely to be more critical to a successful outcome than for a stand-alone business. A package of assets proposed for divestiture may, for example, lack an established infrastructure and its viability may therefore be more dependent on an appropriate match with the capabilities of the purchaser. A package of assets may also be far more difficult to define or ‘carve out’ from an underlying business and the CC may have less assurance that the purchaser will be supplied with all it requires to operate competitively. In such circumstances, the CC is likely to require additional protective measures such as identification of an alternative divestiture package (see paragraphs 15 and 16) to mitigate increased purchaser and composition risk. Where a package of assets is proposed for divestiture, the CC will require the divesting parties to specify the composition and operation of the package in detail.
14. In particular circumstances, parties may propose a ‘virtual divestiture’ consisting of divestiture of production capacity for a specified period rather than conventional disposal of a business or package of assets. Such a proposal may have higher risks and costs than a conventional divestiture, and require continuing monitoring and compliance activity. The CC would need to satisfy itself that there was good reason to justify such a proposal in preference to a conventional divestiture and that the risks of the proposal could be appropriately contained.
Alternative divestiture packages
15. In some circumstances, it may be appropriate to define a more extensive and/or more marketable divestiture package (‘alternative divestiture package’) which the CC would require the parties to sell if the initially proposed divestiture package were not sold within a specified period. Alternative divestiture packages may be appropriate if there is doubt as to the marketability of the initially proposed divestiture package or where a business is subject to major asset risks and speed of divestiture is likely to be a critical requirement. In such circumstances, prior identification of a
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4 DG COMP’s Merger Remedies Study (2005) found that carve-out problems were a common cause of serious design and implementation issues in a significant proportion of divestiture remedies within its purview—see section 6 of Summary and Conclusions (pp152–155, public version).
5 So-called ‘virtual power plant’ remedies are examples of this type of remedy. See, for example, the Nuon/Reliant Energy case in the Netherlands, outlined in Appendix J of the ICN’s Merger Remedies Review Project.
6 Such packages are sometimes referred to as ‘Crown Jewel’ packages; however, in view of the wide variety of usage of this term, the CC uses the more closely defined terminology of ‘alternative divestiture packages’.
7 Other measures are also available to the CC to manage the risk that a divestiture is not implemented to the timescales set out by the CC in its final report. These include the ability to appoint a monitoring or divestiture trustees (see paragraphs 26 & 29). The specification of an alternative divestiture package may be used in conjunction with such measures. more extensive, more marketable package may be the most effective means of facilitating rapid disposal if the initial package cannot be sold to a suitable purchaser within a specified period. In specifying an alternative divestiture package the CC would wish to satisfy itself that divestiture of such a package would be effective and (in the event that the proposed divestiture package had not been disposed to a suitable purchaser) proportionate.
16. The alternative divestiture package will include all the core assets necessary to remedy the AEC. The CC will wish to satisfy itself that the purchaser of such a package is committed to operate the core assets so as to compete effectively in the market(s) affected by the AEC and not primarily attracted by the additional assets. The CC will identify the alternative package in its report but the precise nature, and in some cases the existence, of an alternative package may be excised from the published version of the report to prevent the existence of the alternative package undermining divestiture of the initial package.
Suitable purchasers
Criteria
17. The identity and capability of a purchaser will be of major importance in ensuring the success of a divestiture remedy. The divesting party (or parties) will therefore need to obtain the CC’s approval of the prospective purchaser(s). The CC will wish to satisfy itself that a prospective purchaser is independent of the divesting parties, has the necessary capability to compete, is committed to competing in the relevant market(s) and that divestiture to the purchaser will not create further competition concerns. The relative importance that the CC attributes to each of these criteria will depend on the circumstances of the inquiry. These criteria are considered in more detail below:
(a) Independence. The purchaser should have no significant connection to the divesting parties that may compromise the purchaser’s incentives to compete with them or, where relevant, with other major suppliers in the relevant market(s). Significant connections may include, for example, an equity interest, shared directors, reciprocal trading relationships or continuing financial assistance. The CC will seek to understand the significance of such connections in the context of the overall relationship between the parties concerned, in order to form a view of their cumulative effect on incentives to compete.
(b) Capability. The purchaser must have access to appropriate financial resources, expertise and assets to enable the divested business to be an effective competitor in the market. This access should be sufficient to enable the divestiture package to continue to develop as an effective competitor. For example, a highly leveraged acquisition of the divestiture package that left little scope for competitive levels of capital expenditure or product development is unlikely to satisfy this criterion. Where the purchaser takes the form of a consortium, the CC will wish to satisfy itself that the structure and governance arrangements of the consortium will permit appropriate access to expertise and finance.
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8 The EWS Railway Holdings/Marcroft Engineering (2006), Stericycle International LLC/Sterile Technologies Group Limited (2006) and Capita/IBS (2009) merger inquiries provide examples of the use of alternative divestiture packages. 9 The CC reviewed consortium arrangements in the divestiture of Gatwick Airport (BAA Airports). (c) **Commitment to relevant market.** The CC will wish to satisfy itself that the purchaser has an appropriate business plan and objectives for competing in the relevant market(s).(^{10})
(d) **Absence of competitive or regulatory concerns.** Divestiture to the purchaser should not create a realistic prospect of further competition or regulatory concerns. Moreover, the CC’s approval of a purchaser may be subject to clearance by the OFT or other regulatory authority.
18. Except in circumstances, as specified below, where a divestiture trustee is in place, the divesting parties are responsible for securing a prospective buyer which is able to demonstrate that it satisfies the CC’s criteria for a suitable purchaser. However, the CC will keep the progress of the divestiture under close scrutiny.
19. Where divesting parties receive interest from more than one prospective buyer, the CC will generally wish to evaluate whether purchasers fulfil the criteria before any purchaser is granted exclusivity to undertake detailed due diligence. This is to avoid situations where a prospective purchaser undertakes lengthy due diligence on an exclusive basis but is then found not to satisfy the CC’s criteria.
20. In certain cases, for example where the effectiveness of a divestiture remedy is particularly dependent on the long-term development of the divested entity, the CC may require a purchaser to provide it with undertakings that it will not sell on the divested entity within a limited period other than with the CC’s approval that the new purchaser satisfies the same purchaser criteria as applied in the initial divestiture. Whether such a restriction is necessary and the time period over which any such restriction will apply will be determined by the facts of the case.(^{11})
**Continuing links and purchaser protection**
21. A purchaser should not have continuing links with the divesting party (or parties) after divestiture that may compromise the purchaser’s incentives to compete with these parties, for example financial, ownership or management links. However, purchasers may require access to key inputs or services at appropriate terms from the divesting party (or parties), on an interim basis, in order to enable the divestiture to operate effectively. Such transitional service arrangements may be permitted by the CC for a limited period. The timescale over which transitional service arrangements will be permitted is likely to vary from case to case, depending on the time that it may reasonably be expected to take potential purchasers to develop their own independent access to the inputs or services in question.
22. The CC may also permit or require non-solicitation clauses or other measures to protect the purchaser from the divesting party (or parties) for a limited period to enable the purchaser to become established as an effective competitor in the relevant market(s). In order to ensure a timely remedy, the CC will seek to ensure that any period of purchaser protection is no longer than necessary and can be justified by reference to the steps necessary for the purchaser to become established as an effective competitor. In any event, given the desirability of achieving a timely remedy, the CC would not normally expect to permit or require such measures for more than two years.
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(^{10}) This approach was upheld by the CAT in the *Somerfield v Competition Commission* case [2006] where the CC excluded limited assortment discount retailers from acquiring Somerfield stores on the basis that these were insufficiently close competitors to conventional supermarkets, paragraph 183.
(^{11}) This restriction was required in the BAA divestitures, for which a period of five years was specified. This is the only instance to date in which the CC has specified a restricted period of this type in either a merger inquiry or a market investigation. Effective divestiture process
Objective of process
23. An effective divestiture process will protect the competitive potential of the divestiture package before disposal and will enable a suitable purchaser to be secured in an acceptable timescale. The process should also allow prospective purchasers to make an appropriately informed acquisition decision.
Protecting the divestiture package
24. Divesting parties may have significant incentives to run down or neglect the business or assets of a divestment package, and/or continue to extract know-how and other commercially sensitive information from the divestment package. Such incentives, if acted upon, are likely to reduce the future competitive impact of the divestment package. The resulting asset risk may also be influenced by such factors as the length and complexity of the divestiture process and the pace at which customer goodwill and employee relations may erode.
25. To protect against these forms of asset risk, the CC will generally seek undertakings from the relevant parties which impose a general duty to maintain the divestiture package in good order and not to undermine the competitive position of the package. The CC may also require ‘hold-separate’ undertakings to mitigate asset risk. These will require the divestiture package to be held and managed separately from the retained business. Protection measures specified in final undertakings may sometimes continue existing measures specified in any interim undertakings that have been accepted by the CC (although interim undertakings can only be accepted in market investigations following publication of the final report). The appointment of a hold-separate manager or management team may also be required to manage the assets/business to be divested so as to maintain their competitiveness and establish separation from the retained assets.12 Establishing separation may be a more complex issue than in merger inquiries.
Use of monitoring trustees
26. Where divestiture undertakings are in place, the CC will normally require the appointment of an independent monitoring trustee to oversee the parties’ compliance with the undertakings and, if applicable, the performance of the hold-separate manager. The trustee will have an overall duty to perform in accordance with his or her agreed mandate and the directions of the CC. The trustee will monitor the ongoing management of the divestiture package and the conduct of the divestiture process. The CC will have the right to propose and direct measures necessary to ensure compliance with the undertakings. The trustee will report to the CC at regular intervals.
The divestiture period
27. The CC will state in its report the period in which the parties should achieve effective disposal of a divestiture package to a suitable purchaser (ie the ‘initial divestiture period’). However, this period will normally be excised from the report if it is considered that disclosure to third parties may undermine the divestiture process. The
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12 The appointment of a hold-separate manager is particularly likely where strong incentives exist for the current senior management of the divestiture package to operate the divestiture package on behalf of the divesting party and/or if there is a high risk of deterioration of the business, for example through loss of key customers or members of staff. length of this period will depend on the circumstances of the case but will normally have a maximum duration of six months in relatively straightforward divestiture cases. The CC, when determining the initial divestiture period, will seek to balance factors which favour a shorter duration, such as minimizing asset risk and giving rapid effect to the remedy, with factors that favour a longer duration such as canvassing a sufficient selection of potential suitable purchasers to facilitate effective disposal and adequate due diligence. In general, the CC would expect that the period permitted for divestiture in market investigations would be sufficient for the divesting company to realize an approximation-to-fair market value for the divestiture package. The initial divestiture period may be extended by the CC where this is necessary to achieve an effective disposal.
28. While the divesting parties are responsible for securing a suitable purchaser in the initial divestiture period, the CC will keep the progress of the divestiture process under close review through regular reporting and, where applicable, the scrutiny of a monitoring trustee.
Use of divestiture trustees
29. If the divesting parties cannot procure divestiture to a suitable purchaser within the initial divestiture period, then, unless this period is extended by the CC, an independent divestiture trustee may be mandated to dispose of the package within a specified period (the trustee’s divestiture period) at the best available price in the circumstances, subject to prior approval by the CC of the purchaser and the divestiture arrangements. If the CC has reason to expect that parties will not procure divestiture to a suitable purchaser within the initial divestiture period, the CC may require that a divestiture trustee is appointed before the end of the initial divestiture period, or in unusual cases, at the outset of the divestiture process. The role of a divestiture trustee is distinct from that of a monitoring trustee, but the two roles may be performed by the same person subject to consideration of any potential conflict of interest. The CC may require a divestiture trustee to be selected and made ready prior to the end of a divestiture period in order to prevent any delay in appointment following the end of the divestiture period.
Review of divestiture documentation
30. The CC will wish to ensure, before providing its final approval of the divestiture at the end of the divestiture process, that the divestiture agreement and relevant supporting documentation convey all assets required to be divested, and contain no provisions that are inconsistent with the remedial objectives of the divestiture. For example, continuing links between the purchaser and the parties, as outlined in paragraph 21, may undermine competitive incentives.
Intellectual property remedies
Introduction
31. The licensing or assignment of IP, including patents, licences and brands, may be viewed generally as a specialized form of asset divestiture. However, in certain cases, the terms of a licence may contain ongoing behavioural elements such that the remedy is a structural/behavioural hybrid. The key element is the extent to which
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13 The Tesco/Co-op store acquisition inquiry (2008) is an instance where the CC has required the appointment of a divestiture trustee from the outset of the divestiture period. any material link between licensor and licensee will exist following award of the licence. A remedy that requires an assignment or licence of an IP right that is exclusive, irrevocable and non-terminable with no performance-related royalties will effectively be treated by the CC as structural in form and subject to similar consideration and evaluation as an asset divestiture. A licence that requires a licensee to rely on the licensor for updates of the technology or continuing access to specialist inputs or know-how will be regarded as a behavioural commitment and is generally subject to greater risks of not being an effective remedy.
32. For licensing of IP alone to be effective as a remedy, it must be sufficient to enhance significantly the acquirer’s ability to compete with other parties in the market and thus address the AEC.(^{14}) Such a remedy may not be effective if the IP needs to be accompanied by other resources (for example, technical expertise and sales networks) to enable effective competition if these are unlikely to be available in potential acquirers of the IP.
33. In view of the possible risks to effectiveness, as outlined in paragraph 32, that may result from using IP remedies, the CC will generally prefer to divest a business including IPRs, where this is feasible, rather than rely on licensing narrowly defined IP alone. This is because divestiture of a business including IPRs is more likely to include all that the acquirer needs to compete effectively with other parties in the market.
**Design factors**
34. The appropriate design of an IP remedy may be influenced by several case-specific factors such as:
(a) **The form and jurisdiction of the relevant IP (eg patent, exclusive licence, trade mark etc).** The CC will wish to ensure that the IP to be divested is sufficient to enable a purchaser to compete effectively. This may sometimes include less easily transferable forms of IP (eg ‘know-how’).(^{15}) Where there is uncertainty regarding the scope of a licence or its terms and conditions, the parties may be required to divest the underlying right and accept a licence back.
(b) **The relative specialization of the IP.** Highly specialized IP may impose particular constraints on selecting a suitable acquirer as there may be few parties competent to use the IP.(^{16})
(c) **The rate of innovation expected in the relevant market.** A high rate of innovation may imply a shorter required duration for a licensing remedy than in a more stable market.
(d) **Forms of payment for IP.** The form of payment (eg one-off payment, royalties or profit shares) may have an effect on competitive incentives.
35. IPRs generally enable the remuneration of investment in innovation by granting time-limited exclusivity. In considering the design and scope of IP remedies, the CC will
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(^{14}) In the *Thermo Electron Manufacturing/GV Instruments* merger inquiry (2007) the CC rejected a licensing remedy proposed by the parties on the basis that it would not adequately restore competition lost by the merger.
(^{15}) See, for example, the Shell/BASF case in which the EC found that difficulties in transferring ‘know-how’ and other types of IP could have significantly reduced the scope and effectiveness of a licensing commitment (as outlined in Appendix D of the ICN’s Merger Remedies Review Project).
(^{16}) The *Nufarm/AH Marks* merger inquiry is an example of an IP-style remedy where the field of suitable acquirers was particularly constrained. recognize the need for preserving incentives for innovation while addressing competitive concerns.
36. Remedies relating to the transfer of IPRs may have international repercussions due, for instance, to international filing and licensing of patent rights. International cooperation with other competition authorities is therefore often particularly necessary in these cases.
Section 2: Behavioural remedies
Introduction
37. Behavioural remedies are designed to regulate the ongoing conduct of parties so as to address an AEC and/or its adverse effects. In market investigations the CC may use behavioural measures as a main remedy or as an adjunct to other measures (eg structural measures or recommendations).
38. The variety of market features and possible behavioural measures that may be encountered on individual investigations is extensive. This guidance therefore seeks to outline the CC’s general approach to behavioural remedies, making reference to the types of measure that have been implemented in investigations to date, rather than dealing with all possibilities.
39. In the rest of this section some general issues are first considered relating to the design, monitoring and enforcement of behavioural remedies and their duration (paragraphs 40 to 45). The two main categories of behavioural remedies are then considered, namely enabling measures (paragraphs 46 to 85) and measures to control outcomes (paragraphs 86 to 93). The former address an AEC by seeking to remove obstacles to competition or otherwise stimulating competition within a market, whereas the latter seek to prevent the exercise of significant market power and thereby control the detrimental effects arising from an AEC rather than remedy the AEC itself. A comprehensive and timely solution to an AEC may require both categories of remedy.
General issues
Design, monitoring and enforcement
40. Behavioural remedies seek to change aspects of business conduct from what may be expected based on businesses’ incentives and resources. The design of behavioural remedies should seek to avoid four particular forms of risk to enable these measures to be as effective as possible:
(a) Specification risks—These risks arise if the form of conduct required to address the AEC or its detrimental effects cannot be specified with sufficient clarity to provide an effective basis for monitoring and compliance. The intended operation of the measure needs to be clear to the persons to whom it is directed and other relevant parties, so that it is apparent what conduct constitutes compliance and what does not. For example, a commitment to permit access on FRND terms, without further clarification of what this means in practice, may create significant specification risk as the provision may be insufficiently specific to allow effective enforcement. Markets that are subject to frequent change in products or supply arrangements may be particularly prone to specification risk if the definition of required conduct is vulnerable to such changes. (b) **Circumvention risks**—It is possible that other adverse forms of behaviour may arise if particular forms of behaviour are restricted.(^{17}) For example, if prices are controlled a firm may reduce product quality. To avoid or reduce these risks, behavioural measures will generally need to deal with all the likely substantial forms in which enhanced market power may be applied. In some cases this may not be feasible or may make the behavioural measures too complex to monitor and/or enforce.
(c) **Distortion risks**—These are risks that behavioural remedies may create market distortions that reduce the effectiveness of these measures and/or increase their effective costs. Distortion risks may result from remedies overriding market signals or encouraging circumvention behaviour. For example, prohibiting the use of long-term contracts may result in a lack of incentives to compete for new business.
(d) **Monitoring and enforcement risks**—Even clearly specified remedies may be subject to significant risks of ineffective monitoring and enforcement. This may be due to a variety of causes such as the volume and complexity of information required to monitor compliance, limitations in monitoring resources, asymmetry of information between the monitoring agency and the business concerned and the long timescale of enforcement relative to a rapidly moving market.
41. For behavioural remedies to have the desired impact it is important that there are effective and adequately resourced arrangements in place for monitoring and enforcement so that there is a powerful threat that non-compliance will be detected and that action will be taken to enforce compliance where this is necessary.
42. The OFT, or the relevant sectoral regulator where appropriate, is responsible for monitoring and enforcing compliance of remedies under the Act.(^{18}) Customers and competitors of the firms subject to behavioural remedies may be in a strong position to report to the OFT, or the relevant sectoral regulator, on instances of non-compliance where they have appropriate resources and incentives to do so. However, such persons may be inhibited from fulfilling this reporting role by lack of resources and verifiable information, lack of understanding of the measures, fear of reprisals and other disincentives.
43. In view of constraints on the OFT’s resources and the possible limitations in the reliance that can be placed on the reporting role of customers and competitors, it may be necessary for the CC to seek undertakings from the relevant parties to appoint and remunerate a third party monitor to enable the OFT, or the relevant sectoral regulator, to fulfil its monitoring responsibilities effectively.(^{19}) Alternatively monitoring may be facilitated by the CC making an order requiring the relevant parties to publish certain information(^{20}) or to produce compliance reports that have been verified by an independent third party.(^{21}) The likelihood of effective monitoring will be significantly increased if it is possible to involve a sectoral regulator in the monitoring regime.
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(^{17}) This general phenomenon may be sometimes referred to as a ‘waterbed effect’.
(^{18}) Section 162.
(^{19}) For example, in *Northern Irish personal banking* the Lending Standards Board (LSB) played an important role in monitoring compliance with the CC’s remedies. The duties of a third party monitor might include arbitrating disputes and advising the CC and/or OFT of relevant market developments as well as monitoring compliance.
(^{20}) The *Home Credit* market investigation provides an example where parties were required to publish product and pricing information on a website.
(^{21}) The *PPI* market investigation provides an example where the largest providers were required to produce compliance reports and to have these verified by an independent third party. 44. A behavioural remedy may seek to prevent certain conduct that may be prohibited under the CA98’s Chapter II Prohibition or under Article 102 TFEU. Similarly, a behavioural remedy may seek to prevent the making of agreements that may be prohibited under the CA98’s Chapter I Prohibition or Article 101 TFEU. The CC recognizes the importance of ex post competition enforcement. However, the CC has an obligation to achieve as comprehensive a solution to the AEC and its detrimental effects as is reasonable and practicable. The CC will therefore normally prefer to specify its own remedial measures rather than rely on the general provisions of competition law, as this has the advantages that the CC measures can be designed to take account of the circumstances of the case and the provisions for monitoring and enforcement can be fully defined.
Duration
45. As behavioural remedies are designed to have ongoing effects on business conduct throughout the period they are in force, the duration of these measures is a material consideration. The CC may specify a limited duration if measures are designed to have a transitional effect. Where measures need to apply as long as an AEC persists and as this period can rarely be predicted during the course of an inquiry, the CC will generally rely on the relevant parties applying for variation or cancellation of the measures on the basis of a change of circumstances or possibly recommend that the OFT reviews the need for the measures after a given period. However, the CC may, in addition, specify a long-stop date in a ‘sunset clause’ beyond which the measures will definitely not apply. The period used for the long-stop date will depend on the circumstances of the case.
Enabling measures
46. Enabling measures aim to remedy an AEC by removing obstacles to competition or otherwise stimulating competition. Most enabling measures that have been introduced by the CC to date may be classified as:
(a) market-opening measures;
(b) informational remedies; or
(c) measures to restrain the impact of vertical relationships.
Market-opening measures
47. Market-opening measures are aimed at removing impediments to effective competition, such as barriers to entry, expansion and/or switching. Such impediments may result from structural features of the market (eg barriers to entry) or from the behaviour of individual firms in that market (eg exclusionary conduct).
48. This is a diverse category of remedies. The specific aim of any market-opening measure and the particular mechanism that is used in any case, will depend on the market features that have been identified as preventing, restricting or distorting
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22 Section 162. For example, in 2007, acting on the basis of advice from the OFT, the CC decided to release the UK’s four largest clearing banks from most of the Transitional Undertakings given by them in 2002 following the investigation into The supply of banking services by clearing banks to small and medium-sized enterprises under the Fair Trading Act 1973.
23 This is not an exhaustive classification. For example, in a situation where the CC found an AEC resulting from tacit coordination, remedy options might include enabling measures designed to prevent or restrict the flow of information between market participants, alongside other measures (eg structural remedies or measures to facilitate new entry). competition and the practical opportunities available for addressing those features. Market-opening measures can be further subdivided into the following two categories:
(a) Firm-specific measures to restrain horizontal market power.
(b) Market-wide measures to reduce barriers to entry, expansion and switching.
**Firm-specific measures to restrain horizontal market power**
49. Where a firm enjoys significant market power it may be able to use the strength of this position in a number of ways to limit or restrain competition. These may include:
(a) requiring customers to enter into long-term and/or exclusive contracts;
(b) creating switching costs for customers through, for example, volume discounts or contractual penalties;
(c) bundling or tying the sale of particular products; and
(d) selective discounting or exclusionary conduct.
50. Remedies may be introduced that prohibit, restrict or discourage types of behaviour, such as those listed above, where these have been found to prevent, restrict or distort competition. The selection and design of these measures will depend critically on the circumstances revealed by the inquiry and the need to manage specification, circumvention, monitoring and enforcement risks. Where circumstances point to the use of these measures, the CC will follow the general approach of considering the anticompetitive conduct that has been identified as having an AEC. It will then consider the measures that may be taken to prevent or limit this conduct and the effectiveness and costs of these measures.
51. As an example of the types of consideration relevant to this approach, the use of long-term and/or exclusive contracts by a firm with significant market power may create a barrier to entry or expansion. However, if, in the relevant market, firms need to invest heavily to acquire new customers (for example, by investing in new facilities or systems) requiring a firm with significant market power to have contracts that are short term in nature may generate distortion risks as this could reduce incentives to compete for new contracts if firms do not have sufficient opportunity to recoup their initial investment. In implementing a constraint on the use of long-term contracts, the CC will therefore seek an appropriate balance between facilitating switching and permitting sufficient incentives to compete for new contracts.
52. Likewise, selective discounting or price discrimination by a firm with market power can also have the effect of creating barriers to entry or expansion when used systematically to reduce prices to particular customers that are more likely to switch to other suppliers. Measures to restrict selective discounting or price discrimination may therefore sometimes be necessary to address an AEC. However, measures restricting selective discounting or price discrimination may themselves generate significant distortion risk by adversely affecting the competitive dynamics of a market if maintained in the long term. They may therefore be most appropriate as a transitional measure until other sources of competition develop.
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24 The CC considered introducing measures designed to reduce the scope for selective discounting in the LPG market investigation. 53. The CC will have particular regard to avoiding circumvention risk in implementing measures limiting the behaviour of firms with significant market power that has been found to prevent, distort or restrict competition. This is because firms with significant market power may readily evolve new forms of behaviour to replace prohibited or restricted conduct.
*Market-wide measures to reduce barriers to entry, expansion and switching*
54. Market-opening measures may also be applied where incumbency advantages and other barriers to entry or switching have been found to prevent, restrict or distort competition. In this type of situation, market-opening measures to address these features may be applied to a market as a whole or, if this is not necessary and/or practicable, to the largest suppliers within the market.
55. The selection and design of these measures will depend critically on the specific features that have been identified as preventing, restricting or distorting competition. The types of measures that might be considered by the CC include:
(a) measures to address barriers to switching; and
(b) measures to reduce incumbency advantages and other barriers to entry and expansion.
56. In some markets, customers may be put off switching suppliers by a perception that switching is costly, complex, time consuming and/or risky. This perception may be grounded in customers’ own experience. Where barriers to switching have been identified as causing competition problems, measures may be introduced to make it easier for customers to switch. For example, the CC may introduce obligations on a customer’s existing supplier to cooperate with the proposed new supplier to ensure that costs and disruption to customers are minimized. Generally a new supplier will have significant incentives to make the switching process as easy as possible for the customer and will not normally require corresponding obligations.
57. Another factor that can deter customers from switching is if an important attribute of their current service is not transferable (or ‘portable’) from one provider to another and this leads them to remain loyal to their current supplier. For example, customers may wish to retain their existing telephone number if they change suppliers and may be deterred from doing so if this were not possible. Interventions to increase the portability of product attributes are most likely to be beneficial when the attribute that customers value is easily identifiable and the ownership rights of the attribute are easily transferable to rival firms or customers. In assessing remedies of this type, the CC is likely to evaluate the extent of any material benefits to customers associated with non-portability such as, for example, being able to identify the network to which a call is being made.
58. Remedies may also be introduced to address competition problems in markets where some existing providers have significant incumbency advantages over other providers (eg potential entrants), which are found to act as a barrier to entry and/or expansion. In some cases, ‘incumbency advantages’ may result from good com-
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25 For example, in the LPG market investigation, the CC found that a major barrier to switching was the requirement to replace a customer’s existing tank with one owned and operated by the new supplier. This was costly and disruptive to customers. To overcome this barrier to switching the CC developed and implemented a ‘tank transfer’ remedy requiring suppliers to transfer the ownership of the LPG tank from one supplier to another when a customer switched. The tank transfer remedy was accompanied by other measures aimed at preventing contract terms that acted as a barrier to switching and informational remedies to raise customers’ awareness of the options available to them. commercial decisions made in the past (eg to invest in and patent a successful new technology) and interventions to overcome these sources of competitive advantage may risk undermining dynamic incentives to invest and innovate. In other situations the source of incumbency advantages may result from firms having preferential access to key resources, information or customers and it may be possible to intervene to promote competition without adversely affecting dynamic incentives.26
59. A further potential source of incumbency advantage, which may sometimes require intervention, is the ‘point-of-sale advantage’. This occurs when a particular supplier has systematically better access to customers than potential rivals. A range of possible approaches might be taken to remedying competition problems resulting from a point-of-sale advantage. For example:
- customers may be encouraged to search for alternatives (eg through informational remedies) before they reach a particular point of sale;
- providers who enjoy a point-of-sale advantage may be prohibited from completing a sale until a customer has an opportunity to shop around,27 or
- providers who enjoy a point-of-sale advantage may be required to offer customers a choice of products at the point of sale.28
60. In considering such alternatives, the CC will consider the effectiveness and proportionality of different approaches, for example their impact on the behaviour of customers and suppliers as well as whether there are benefits to customers associated with purchasing a product at a particular point of sale.29
Information remedies
61. Informational remedies can be used to address competition problems that are caused by shortfalls in the information that customers have to enable them to make informed purchasing or switching decisions. Informational remedies can lead to changes in customer behaviour, for example by reducing search costs, increasing customers’ awareness of alternatives and making it easier for customers to make comparisons between products when making an initial purchase or when switching suppliers. Informational remedies can also lead to changes in suppliers’ behaviour—for example, suppliers may improve their offering, in order that their products appear attractive in terms of the information that customers receive. Information remedies may also facilitate new entry, if a lack of awareness by customers of alternatives was a factor that was restricting entry.30
62. The CC has introduced informational remedies in six market investigations completed to date (April 2013) under the Act,31 as well as in complex monopoly
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26 For example, in the Home Credit market investigation, the CC found that an existing home credit lender had a critical incumbency advantage in lending to its existing customer base over all other potential lenders. This was its knowledge of its customers’ repayment history in relation to loans taken out with it. This acted as a barrier to customer switching and as a barrier to entry and expansion. It also served to restrict competition from mainstream lenders. As part of a package of measures, the CC required the largest home credit lenders to share their repayment data with other lenders by entering into agreements with at least two credit reference agencies.
27 For example, the point-of-sale prohibition in the PPI market investigation.
28 For example, the so-called ‘guest beer’ provision in the ‘Beer Orders’.
29 For example, in the PPI market investigation and the subsequent remittal, the CC considered the implications of any loss of convenience for the assessment of the proportionality of including the point-of-sale prohibition in the remedy package.
30 A survey of the economic literature on different types of informational remedies may be found in Garrod et al, Assessing the effectiveness of potential remedies in consumer markets, OFT research paper 994, April 2008.
31 Store Cards, LPG, Home Credit, Northern Irish personal banking, PPI, ROSCOs. investigations under the Fair Trading Act 1973, such as Extended Warranties.\\textsuperscript{32} Informational remedies put in place by the CC include:
(a) obliging firms to submit information about their products for publication on price comparisons sites (eg Home Credit, PPI);
(b) standardization of pricing structures\\textsuperscript{33} (eg PPI single-premium prohibition);
(c) mandatory disclosure of price and other key messages at the point of sale and in marketing materials (eg Extended Warranties, Northern Irish personal banking);
(d) requirement to offer written quotations that remain valid for a fixed period (eg Extended Warranties, PPI);
(e) requirement to provide information to existing customers in regular statements (eg Store Cards, Northern Irish personal banking, PPI);
(f) requirements to provide information to customers about their rights to switch and the switching process (LPG, Northern Irish personal banking, PPI);
(g) requirements to provide or extend ‘cooling-off’ periods (eg Extended Warranties); and
(h) requirements to provide financial information underpinning the pricing of products and services to potential franchise operators (eg ROSCOs).
63. The CC’s starting point for the selection of appropriate informational remedies will generally be the identification of the particular barrier to search or other information shortfall which is causing the AEC. This will help identify the information or message that needs to be communicated to customers: for example, if switching is suppressed because many customers have a mistaken belief that they are unable to switch suppliers, then an informational remedy could focus on correcting this misperception.
64. The CC will also consider how information may best be communicated to customers (eg via a website, through companies’ marketing material, or by periodic statements to customers). The choice between these options may depend on a number of factors, including:
(a) The ways in which customers currently obtain information about the product. It may be more practicable to introduce informational remedies that build on existing sources of information used by customers.\\textsuperscript{34}
(b) Customers’ ability to access particular information channels. For example, the level of Internet access among a customer base is likely to be relevant to consideration of whether to require firms to disclose prices on a price-comparison website.
(c) The nature of the information to be provided to customers. For example, the CC will generally consider whether information needs to be tailored to individual
\\textsuperscript{32} Extended warranties on domestic electrical goods (2003).
\\textsuperscript{33} This type of remedy is more prescriptive than most informational remedies as it can constrain the type of product that can be offered. It therefore has some characteristics of a measure that controls outcomes.
\\textsuperscript{34} For example, in the Home Credit market investigation, some of the informational remedies required information to be included on customers’ payment books as this was a document that customers were likely to retain and look at regularly. customers (eg via a customer statement) or whether a common message needs to be communicated to all customers (eg in marketing materials).
65. Any obligation to provide information to customers will usually fall on the providers of the product under investigation. If information is to be provided using a medium over which providers have control, the CC may find it necessary to specify in some detail what information is to be provided and how. This is particularly likely to be the case if:
(a) the disclosure is intended to help customers make comparisons between providers and a standard format for disclosure will help achieve this objective; or
(b) providers have incentives to conceal or marginalize information that presents them in an unfavourable light or which encourages their customers to switch or shop around.
66. The CC will also have regard to the potential benefits of taking a less prescriptive approach. The cost to firms of complying with informational remedies will generally be lower if they have some flexibility as to how they meet their requirements. It may also be necessary to allow some flexibility, in order to ‘future proof’ the remedy, so that it is still effective in relation to new or unusual situations or products.
67. In considering the design of informational remedies, the CC will generally be mindful of how the remedy is likely to interact with existing obligations on firms relating to information provision. For example, the content of advertisements may already be regulated (as was the case in Home Credit) or firms may already be required to give various disclosures to customers at the point of sale (as was the case in PPI). The CC will look, where possible, to exploit positive synergies between existing regulations and CC proposed remedies. It may sometimes be possible to implement informational remedies by building on existing mechanisms for communication with customers. Where this is the case, this may be a lower cost option than requiring the establishment of a new form of communication.
68. In specifying information remedies, the CC will look to ensure that information is provided at a time that the recipient can make use of it. For example, informational remedies that are intended to help customers search the market and compare products will tend to be most effective when customers see this information before they have made their main purchase decision. So, for example, providing price and product information in writing after a sale has been concluded—while sometimes
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35 For example, in Store Cards, information on the option to pay by direct debit and any APR that was over 25 per cent was provided to customers on statements; and in Northern Irish personal banking, information on charges relating to overdrafts was required to be communicated in marketing materials. Similarly, in PPI the CC is requiring PPI providers to provide existing customers with a personalized annual review and to include a small number of ‘key messages’ (which are not customer-specific) in their marketing material.
36 In some circumstances (eg an obligation to publish information on an existing website) a third party may control the final presentation of information to customers. In such cases the CC would need to be satisfied that the way in which information was provided by a third party would be effective in addressing the competition problem identified. This may give rise to a recommendation to the third party concerned.
37 See, for example, Consumers and mortgage disclosure documentation, September 2006, FSA, p9 and Insight Research PPI forms consumer testing, April 2009, CC, p4.
38 For example, the recent review on the Northern Ireland Personal Current Account Banking Order took into account the information obligations banks face under two European Directives (the Payment Services Directive and the Consumer Credit Directive) and under other UK regulations (eg the FSA’s Banking Conduct of Business Sourcebook).
39 For example, in PPI, the CC is obliging firms to provide information to the Money Advice Service for publication in its comparative tables, rather than developing a new site. required for consumer protection—may only have a limited impact on search behaviour.
69. Informational remedies that are intended to facilitate switching will tend to be most effective if they are targeted at those customers who are able to switch, at a time when they are likely to be interested in switching (eg on invoices or statements setting out how much they have paid over a period).
70. The CC may consider whether introducing an information remedy might have the unintended consequence of facilitating coordination between suppliers. As not all markets are conducive to coordination and as suppliers will generally have better information than customers about the prices charged by their competitors, this is most likely to be a material risk if the conditions for coordination are met and if prices are opaque to competitors in the absence of the remedy (eg because prices are subject to individually negotiated discounts).
71. The CC will consider carrying out specific customer research into informational remedies (or ‘road-testing’) before they are put in place. Road-testing may be carried out during a market investigation to inform choices between alternative remedy options and the design of individual options. The CC has also carried out road-testing after publication of the CC’s final report, to fine-tune the detail of particular remedies prior to final implementation.
Restraining the impact of vertical relationships
72. Competition problems can sometimes arise where individual firms are active at different levels of the supply chain of particular goods or services (vertical integration). Similar problems can arise from contractual arrangements between firms active at different levels of the supply chain (vertical arrangements). Where a party has significant market power at one or more levels of the supply chain, vertical integration and/or vertical arrangements (collectively, vertical relationships) may contribute to an AEC, typically through the firm’s incentive and ability to disadvantage competitors by foreclosing access to key inputs, facilities or customers and/or exploiting access to confidential information.
73. For example, if, as illustrated below, the manufacturer (Compco) of most of a key industry component also owned a major user of this component (Prodco1) then the ability of other users (Prodco2 and Prodco3) to compete could be disadvantaged by the combined entity through restricting supply of this component to Prodco2 and Prodco3 or making use of information concerning component orders by Prodco2 and Prodco3.
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40 There is evidence from the academic literature that consumers can display a ‘status quo’ bias, which makes them more reluctant to change decisions that they have already made than to consider alternatives when making an initial choice. See, for example, FSA, Financial Capability: A Behavioural Economics Perspective, July 2008.\
41 For example, in Northern Irish personal banking, a switching leaflet was required to be provided alongside customers’ annual summaries.\
42 For an example of how such a risk might materialize, see ‘Government-Assisted Oligopoly Coordination? A Concrete Case’, S Albæk, P Mallgaard and PB Overgaard, 1997, Journal of Industrial Economics, 45(4), pp429–443. The CC considered the possibility that informational remedies could facilitate coordination in the LPG and Home Credit market investigations.\
43 See Road Testing of Consumer Remedies, London Economics, July 2009.\
44 For example, in PPI, the CC appointed market researchers after the final report to conduct focus groups with PPI customers, to see how customers reacted to different specifications of personal PPI quote and annual review forms. The findings of this research informed the development of the two forms, which were used as the basis for schedules to the resulting Order. 74. An AEC resulting from vertical relationships might be remedied by structural measures. Such measures might involve vertical separation (eg requiring divestiture of ProdCo1), but could also involve reducing the significant market power that the combined entity has at the critical stage of the supply chain (eg partial divestiture of Compco).
75. If vertical relationships produce substantial RCBs that would be largely reduced by structural measures, or if divestiture is otherwise not appropriate or feasible, then behavioural measures may be selected by the CC that enable continued access to necessary products or facilities on appropriate terms and/or measures that prevent the combined entity exploiting privileged access to information.
Access remedies
76. Access remedies seek to address competition problems resulting from vertical relationships by enabling competitors to have access on appropriate terms to the products and facilities of a combined entity that they require to be an effective competitor.
77. An access remedy will normally need to specify an access commitment by the firm concerned to third parties in sufficient detail so that third parties and monitoring agencies can enforce the commitment effectively. This will include details of the product or facility to be provided, including quality and technical parameters, and the terms of supply of the product or facility, including service levels and the basis of pricing. The latter may be particularly complex and may be subject to some of the same issues that are encountered with price caps, as discussed in paragraphs 90 to 93. If the access commitment is not specified or monitored in sufficient detail then the measure may be vulnerable to specification risk and the combined entity may be able to avoid its obligations readily. In such circumstances the CC may need to consider alternative forms of remedy (eg divestiture) that are likely to be more effective.
78. To overcome specification risk, the CC will also generally require that an access remedy should make explicit provision for accommodating future changes, for
______________________________________________________________________
45 Or in the case of vertical arrangements, prohibiting the commercial arrangements between Compco and Prodco1. example, in product specifications or supply arrangements. Where a market is likely to be subject to frequent technological change or other wide-ranging market developments, there is likely to be a significant risk that an access remedy will become ineffective if the terms of the access commitment do not accommodate these changes. However, significant technological change might also reduce the market power that results in the AEC (eg if—see Figure 1—effective substitutes are developed for the component supplied by Compco).
79. In some supply arrangements, certain factors that are not easily specified may be particularly important for competitive access, for example quality of product support, priority for system upgrades, and quality of management assigned to a customer’s account. Such factors may result in ‘soft biases’ in access to supply that may generate significant circumvention risk and may significantly undermine the purpose and suitability of an access remedy.46
80. In certain circumstances it may be possible to simplify the specification of an access remedy by obliging the combined entity to supply a particular product on FRND terms where supplies to external customers are provided on the same or similar terms as apply to its own businesses (see paragraph 40). For this to be effective, the nature of FRND terms must deal adequately with the circumstances of external customers and must be transparent to customers and monitoring agencies in sufficient detail to enable effective enforcement.
81. The use of FRND terms may still leave competitors vulnerable to a margin squeeze by the combined entity as it may have an incentive to charge all downstream businesses, including its own, a uniformly high price since reduced profitability in its downstream business can be offset by higher profitability in its upstream business. The CC may therefore require that use of FRND terms is accompanied by provisions to protect against a margin squeeze (eg submission of regular reports demonstrating full cost recovery in the downstream business).
82. Where it is necessary to preserve access to a key facility owned or controlled by a vertically integrated company and the usage and capacity of the facility is readily assessed, the CC may determine that the most practical and effective means of providing access to competitors is to cap usage of the facility by the combined entity and require it to auction remaining capacity to third parties.47 This would be effectively a form of ‘virtual divestiture’ as considered in paragraph 14.
‘Firewall’ measures
83. ‘Firewall’ measures48 seek to prevent a vertically integrated company from accessing and using privileged information generated by competitors’ use of the company’s facilities or products. For example, in Figure 1, in the absence of firewall provisions, Prodco1 may be able to exploit privileged information regarding the orders and deliveries of key components from Compco to Prodco2 and Prodco3.
84. Firewall measures prevent access to privileged information by effectively insulating the firm or division generating the information from other group companies. This is generally achieved by restricting information flows and use of shared services,
46 In the London Stock Exchange plc merger inquiry (2005), the CC rejected a solely behavioural access commitment to clearing and settlement services due, in part, to the likely difficulty of ‘soft biases’. 47 In the Centrica/Dynegy Storage merger inquiry (2003), the CC required Centrica to restrict its usage of the Rough Gas Storage Facility to a percentage of total capacity to prevent foreclosure of access. 48 These may be referred to alternatively as ‘Chinese wall’ measures. physically separating premises and staff, and regulating transfers of management and any permitted interactions between relevant staff.49
85. To ensure effective compliance with firewall provisions, the relevant firm will normally need to commit significant resources to educating staff about the requirements of the measures and supporting the measures with disciplinary procedures and independent monitoring.
**Controlling outcomes**
86. Remedies that control or restrict the outcomes of business processes, such as price caps, supply commitments and service level agreements, seek to prevent firms from exercising market power. As such, these remedies seek to restrict the customer detriment arising from an AEC, rather than addressing its cause.
87. In order to overcome specification risk, remedies that control outcomes normally need to specify in significant detail the products or services that are subject to control and the basis of the control, for example, the application of price indices to a price cap. The remedy will generally also need to specify how the control will deal with changes, such as the introduction of new products.
88. Measures to control outcomes are often used in regulated sectors, where it may not be feasible to introduce effective competition. The introduction of such measures is also a potential outcome of market investigations, particularly where it is not possible to identify effective ways of addressing the causes of the AEC or where competition-enhancing measures are likely to take a long time to remove the customer detriment that results from the AEC. However, such measures are vulnerable to the main risks associated with behavioural remedies (see paragraph 40) and this can have a negative impact on their effectiveness and cost. Specifically:
(a) Defining appropriate parameters for the control measure—for example, the level of a price cap—may be complex and, in some cases impractical, and the measure may therefore be vulnerable to specification risks. This is especially likely where any of the following conditions apply:
(i) Pricing in the relevant market is naturally volatile, for example because of variability in input costs.
(ii) Products or services are differentiated rather than homogeneous; this may increase the complexity of any control in order to capture adequately the diversity of products offer.
(iii) Prices are individually negotiated, which may also increase the complexity of any control measure.
(iv) Supply arrangements and products are subject to significant ongoing change, which require the control measure to change to reflect new developments.
(b) This class of remedy directly overrides market signals with the result that it may generate distortion risks over time that increase the effective cost of the remedy or reduce its effectiveness. For example, a supply commitment for a particular product may discourage product innovation. While it may sometimes be possible
49 The Centrica/Dynegy Storage merger inquiry provides an example of the measures that may be required by the CC to make firewalls effective. to design measures to minimize distortion risk (sometimes referred to as ‘incentive regulation’) this may be at the expense of increasing the complexity of the control.
(c) The control may be vulnerable to circumvention risks. For example, a price cap may be circumvented by a firm reducing the quality of controlled products or restricting the supply of controlled products. It may be sometimes possible to add preventative provisions to reduce the risk of circumvention, though this may be at the expense of increasing the complexity of the control.
(d) Monitoring and enforcement may be costly and intrusive and, in the absence of an industry-specific adjudicator or regulator, may lack effectiveness, especially where the form of remedy is complex.
89. In view of these risks the CC will not generally use remedies that control outcomes unless other, more effective, remedies are not feasible or appropriate. In addition, where this class of remedy is employed, it is most likely to be used on a temporary basis unless there is no alternative to a continuing regulatory solution.
**Price caps**
90. Price caps are likely to be the most common form of measure for controlling outcomes and illustrate many of the issues outlined above.
91. Different approaches may be adopted to defining the products and prices to be controlled depending on the circumstances of the case:
(a) Prices of all affected products may be individually capped. This may be impractical where a large number of products are involved and may be inflexible in dealing with product changes.
(b) The average price of a basket of products may be capped. This allows greater flexibility in taking account of shifts in demand between products but the weighting of the constituents of the basket may be problematic and subject to distortion, for example, if revenue-weighting is used and the firm introduces a number of low-cost product variants.
(c) The price cap may apply to key benchmark products. This approach could greatly simplify monitoring and compliance but is only likely to be effective if a few key products are likely to continue to account for a large proportion of sales and the
______________________________________________________________________
50 Monitoring and enforcement of measures to control outcomes may be facilitated by the existence or appointment of a sufficiently resourced monitoring or adjudication body and/or a specialist industry regulator. For example, in the Macquarie UK Broadcast Ventures/National Grid Wireless Group merger inquiry, an independent adjudicator was appointed to resolve disputes arising in relation to the commitments that formed the package of behavioural remedies in this case. The adjudicator is paid for by the parties but is accountable to the OFT and under the guidance of Ofcom. In reaching its decision in this case, the CC had regard to the fact that Ofcom already had regulatory responsibilities for the relevant market.
51 Measures to control outcomes have been considered but rejected in a number of market investigations to report to date, including, for example, ROSCOS and Store Cards.
52 For example, in the Classified Directories market investigation, consideration was given to how new local and re-scoped directories should be taken into account in order to avoid circumvention of the price control. The final remedies package included a provision within the price cap which set maximum prices that Yell could charge in new directories created as a result of re-scoping.
53 For example, in the Classified Directories market investigation it was noted that although a basket may be preferable for regulated monopolies, its use on an incumbent facing emerging competition may not be beneficial. In this instance it was considered that the greater flexibility that a basket mechanism would give to Yell would enable it to target price-sensitive customers of its competitors and so undermine emerging competition. It would also enable it to target less price-sensitive Yell customers with price increases. Finally, it was also noted that a basket control introduced greater complexity, making it more difficult for customers and the OFT to monitor compliance. pricing of other products is expected to remain closely related to the benchmark products.
(d) The price cap may be to particular product terms (eg ‘hidden charges’). Again, this approach could simplify monitoring and compliance and may increase the overall level of price transparency for customers, though it may result in a ‘waterbed effect’ whereby other charges increase.54
92. The CC will seek a basis for the price cap which will restrict the extent to which a firm’s market power is reflected in prices. The basis of a price cap may take a variety of forms:
(a) Prices may be benchmarked to the prices of products in analogous markets that are determined by competition. In practice, this may only be feasible in limited circumstances due to the lack of an analogous market.
(b) Prices may be determined on the basis of input cost data and an approved return on capital. This resembles the approach adopted by many sectoral regulators but generally requires a highly resource-intensive regulatory process backed by extensive information-gathering and enforcement powers to be effective.
(c) A hybrid approach may be taken whereby an initial price reduction is determined on the basis of input cost data and an approved return on capital, with subsequent changes to the level of the price cap being updated by reference to an index that is representative of input cost changes after incorporating current productivity gains.55 The CC will wish to use an index which has robust data sources which cannot be influenced by the parties subject to the price control. Use of such an index may provide a broad approximation to a competitive price outcome in the short term but is at risk of departing significantly from such an outcome in the medium to long term.
93. The CC will generally require that price caps are accompanied by measures to prevent circumvention risk that may arise, for example, through the merged entity restricting the supply or service levels of price-controlled products or reducing product quality.
Section 3: Recommendations
94. The CC can decide to make recommendations to others, either on their own or in combination with other measures as part of a solution to an AEC. The most common instances where the CC is likely to use recommendations are where it does not have jurisdiction to implement undertakings or orders directly, for instance where the area concerned is governed by a regulator or government department. Recommendations may also be included as a ‘fallback’ remedy, if it is uncertain whether the CC will be able to achieve its preferred remedy itself—for example, if this depends on parties being prepared to offer satisfactory undertakings.56
54 For example, in the Home Credit market investigation, the CC increased the value of the rebates paid to customers when they settled a loan early.
55 For example, variation to the original FirstBus/SBH Undertakings was made to allow revenue to rise by a hybrid index calculated using costs from the Confederation of Passenger Transport UK (CPT) Scotland index, rather than the original 1997 fare cap which was based on increases to RPI. This was because there was concern that the previous method was distorting competition by restricting fare increases below increases in bus industry costs.
56 For example, in Groceries, a recommendation was made to BIS that if the CC did not receive satisfactory undertakings from the parties in relation to the establishment of an Ombudsman then BIS should take action to establish the Ombudsman. 95. Recommendations will be directed to the party that is best able to implement the necessary action. It will, of course, be for the person to whom a recommendation is addressed to decide whether to act on the recommendation. The Government has made a commitment to give a public response to any recommendation made to it within 90 days of the publication of a CC report. In its response, the Government will set out where it does or does not propose to make changes in light of the report, or where it proposes to consult on options. The Government will take into account all public policy and welfare considerations, including considerations of Better Regulation, in making its assessment.
96. The CC has made recommendations in five market investigations to report to date (April 2013)—Home Credit, ROSCOs, PPI, Groceries, BAA Airports. Recommendations have been used to address a diverse range of market features and have had structural and behavioural elements, for example:
(a) Improvements to the information provided to customers. For example, in Home Credit, the CC made a recommendation to BIS to require additional information on the Annual Statement that already had to be produced by lenders subject to the Consumer Credit Act.
(b) Changes to the policy and regulatory framework applying to a market. In BAA Airports, the CC made recommendations to the Department for Transport (DfT) and CAA about future airport regulation and airports policy.
(c) Changes to the operation of rail franchising. In ROSCOs, the CC made recommendations to the DfT and to Transport Scotland about the operation of the rail franchise system, for example the introduction of longer rail franchise periods.
(d) Changes to the operation of the planning regime. In Groceries, one element of the remedies package was a recommendation to the Department for Communities and Local Government (CLG) that a competition test for grocery store developments should be introduced into the planning system.
097. The fact that recommendations are not binding on the party to which they are addressed represents an intrinsic risk to their effectiveness as a remedy. A recommendation may not be accepted, may not be implemented in a way that is consistent with the CC’s intentions, or may become redundant following a change of policy. There may be a risk to the effectiveness of a wider package of remedies, if the success of other measures in the package is dependent on a recommendation being followed.
098. In evaluating the effectiveness of a recommendation as a potential remedy, the CC will form a view on the likelihood that the recommendation will be acted on and the timescale over which this might be expected to occur. In reaching this view, the CC will have regard both to the stated policy of the body to which the recommendation is to be directed and to the possibility that that stated policy may change, either in light of the CC’s recommendation or subsequent events.
099. Before making a recommendation, the CC will consult with the body to which the recommendation may be directed as well as parties likely to be affected by it. This will enable the CC to understand the benefits and risks of implementing the recommendation, to inform decisions about the specification of any recommendation, as well as informing the CC’s judgement about the likelihood of the recommendation being accepted.
100. When considering the specification of a recommendation, the CC will normally consider a range of factors including:
(a) what change is required to remove or reduce the obstacle to competition that has been identified;
(b) who is best placed to take the action necessary to effect the necessary change;
(c) how that change might be best achieved by the party to which the recommendation is addressed; and
(d) the likelihood of a recommendation being implemented, the timescale within this would happen under different assumptions and the likelihood that change, if implemented, would be sustained.
101. In relation to these factors, the CC will have regard to the degree of complexity and the number of institutions involved in making the change. Recommendations that are relatively straightforward to specify and to introduce are generally more likely to be implemented than recommendations which are more complex or which require closely coordinated action by a large number of bodies.
102. There may sometimes be a trade-off between these factors. For example, the ideal outcome from a competition perspective might be very difficult to achieve in a reasonable timescale, whereas it may be possible to achieve a material improvement in competition by means of a recommendation that can be implemented more quickly. In such circumstances, the CC will weigh up the relative merits of increased certainty of implementation against the possibility of achieving a better outcome, but with less certainty or over a longer timescale.
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35670139072cd9669db3873ca285635cc649081f | Apprenticeship Data
The government introduced a number of changes in April 2017 to encourage employers to offer more apprenticeship opportunities to both their current employees and to new staff joining their organisations. One of the changes introduced requires public sector organisations who employ more than 250 staff to have a target to achieve an average 2.3% of their workforce on apprenticeship programmes.
Each year (until 2021) the council is required to tell the government how they are progressing against their target and to make this information available to the public. Cambridgeshire County Council including its maintained schools data is set out here:
| Figure | Description | Value | |--------|-------------|-------| | A | The number of employees whose employment in England by the body began in the reporting period in question (1st April 2017 - 31st March 2018) | 1530 | | B | The number of apprentices who began to work for the body in that period and whose apprenticeship agreements also began in that period. This includes employees who were already working for the body before beginning their apprenticeship, as well as new apprentice hires. | 50 | | C | The number of employees employed in England that the body has at the end of that period. | 9,831 | | D | The number of apprentices who work for the body at the end of that period. | 49 | | E | Figure B expressed as a percentage of figure A. | 3.27% | | F | Figure D expressed as a percentage of figure C. | 0.50% | | G | The number of apprentices who worked for the body immediately before that period. | 5 | | H | Headcount on the day before the first day of each reporting period in the target period | Core 4,783, Schools 6,179 | | I | Figure B expressed as a percentage of figure H | Core 0.94%, Schools 0.11% |
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13f7d498eb22ad3ea859b6944c2442a3e5b94837 | ## Contents
| Section | Page | |------------------------------------------------------------------------|------| | Foreword by the Secretary of State | 2 | | Report of the Permanent Secretary | 3 | | **Performance report** | 5 | | Overview | 6 | | Our purpose | 6 | | What we set out to achieve | 6 | | Our highlights in 2019-20 | 8 | | Where we spent our money in 2019-20 | 10 | | Our business model | 12 | | How we are organised: our organisational structure | 13 | | How we are organised: our group | 14 | | Risks affecting delivery of our objectives | 15 | | Performance analysis | 20 | | Our performance | 20 | | Looking ahead | 26 | | Performance against United Nations sustainable development goals | 27 | | Financial review | 29 | | Sustainability report | 39 | | Other performance reporting | 42 | | **Accountability report** | 45 | | Corporate governance report | 46 | | Statement of Accounting Officer’s responsibilities | 46 | | Directors’ report | 48 | | Report of the lead non-executive director | 50 | | Governance statement | 51 | | Staff report | 63 | | Remuneration report | 80 | | Statement of Parliamentary Supply | 91 | | Parliamentary accountability disclosures | 102 | | The Certificate of the Comptroller and Auditor General to the House of Commons | 110 | | The Report of the Comptroller and Auditor General to the House of Commons | 114 | | **Financial Statements** | 115 | | Consolidated Statement of Comprehensive Net Expenditure | 116 | | Consolidated Statement of Financial Position | 117 | | Consolidated Statement of Cash Flows | 119 | | Consolidated Statement of Changes in Taxpayers’ Equity (Departmental Group) | 122 | | Notes to the Accounts | 123 | | **Trust Statement** | 225 | | Foreword by the Accounting Officer | 226 | | Statement of Accounting Officer’s responsibilities for the Trust Statement | 229 | | The Trust Statement Audit Report of the Comptroller and Auditor General to the House of Commons | 231 | | Statement of Revenue, Other income and Expenditure | 234 | | Statement of Financial Position | 235 | | Statement of Cash Flows | 236 | | Notes to the Trust Statement | 237 | | **Annexes** | 245 | | Annex A: Common core tables | 246 | | Annex B: Glossary | 253 | Foreword by the Secretary of State
BEIS is playing a crucial role in securing the UK’s long-term future. It has been at the forefront of the fight against coronavirus, and is now leading Britain’s recovery by tackling climate change, unleashing innovation and backing business. We will continue to build on the many achievements outlined in this report over the coming years to create a stronger, greener future.
Tackling Climate Change
Co-hosting the COP26 UN Climate talks next year gives us the opportunity to reinforce the UK’s position as a world leader in climate action. Over the past year BEIS has continued its work to achieve net zero emissions by 2050. The deadline of coal phaseout was brought forward to 2024. Construction began on the world’s largest offshore wind development, which will power 4.5 million UK homes. We are investing £800 million in Carbon Capture, Usage and Storage (CCUS) infrastructure, enabling us to establish the UK’s first CCUS power plant. We know there is more to do and further opportunities to be seized as the UK leads a global green industrial revolution, creating thousands of jobs across the country.
Unleashing Innovation
We are using science and research to unite and level up our country, give people opportunities, and make the UK a science superpower. In March, we committed to increasing research and development investment to £22 billion per year by 2025. UK businesses are leaders in developing high-potential technologies, from nuclear fusion to space and satellite technology, electric vehicles, and developing a state-of-the-art climate supercomputer. Our unprecedented investment in science will strengthen research and build the foundations for the new industries of tomorrow.
Backing Business
The Government’s ambition is for Britain to be the best country in the world to start and scale a business. We have invested in our key industries and local economies to level up opportunities across the UK. For workers, we saw the biggest cash increase ever for the lowest-paid with a new National Living Wage of £8.72 per hour, and we introduced new rights for paid parental bereavement leave.
Fighting Coronavirus
BEIS has been at the forefront of the Government’s response to the Coronavirus pandemic. The Department worked quickly to ease regulatory burdens on business, produce workplace guidance safeguarding workers while supporting the economy, and agree measures with the energy industry to protect vulnerable consumers. Through the British Business Bank, BEIS has made available over £50 billion in business loans. Grants have also been given out to nearly 900,000 small businesses and individuals. We established the Vaccine Taskforce to marshal the collective effort of government, academia, industry and healthcare to produce a vaccine as quickly as possible.
Clearly, challenges remain, but I have been impressed by how business and government have come together to respond to Coronavirus. I am also immensely proud of the way that BEIS has risen to the challenges of the pandemic, working at pace to support the economy and safeguard jobs. I want to see this continue, driving a green recovery in jobs and industry and levelling up across the UK. Report of the Permanent Secretary
It is an honour to become Permanent Secretary during such an important time as we work to help businesses, workers and consumers respond to, and recover from, coronavirus. On behalf of the Department, I would like to thank Alex Chisholm for his leadership as BEIS Permanent Secretary until April 2020, and Sam Beckett for her stewardship of the Department from April to July.
The Department has rapidly mobilised to best support the response to coronavirus. We found ways to collaborate ever more closely with businesses and their representative organisations to deliver vital grants, loans and advice to all sectors of the economy. We set up a PPE Make Unit to support the national effort to produce essential equipment and established the Vaccine Taskforce to drive forward and co-ordinate efforts to research and produce a coronavirus vaccine.
Our strong global leadership on climate change was recognised when the UK was selected to co-host with Italy the COP26 UN climate talks. BEIS is leading on cross-Government policy development ahead of the conference next November. The Government doubled international climate finance spend from £5.8 billion to £11.6 billion, and continued to invest in green technologies – for example by doubling the size of the Energy Innovation Programme to £1 billion and providing £1 billion over five years to boost automotive green technologies.
Creating the right conditions to unleash innovation remains a top priority for the Department. This year Government announced the largest ever increase in R&D funding, reaching £22 billion by 2024-25. Individual projects included a £36 million world-first National Timing Centre and a £40 million investment in quantum technology. We provided £179 million investment to support the next generation of scientists, mathematicians and engineers, as well as introducing the first ever Stephen Hawking Fellowship. The Space Industry Act was passed into law, enabling the expansion of commercial space activities in the UK and creating the potential for hundreds of highly-skilled jobs and billions in investment.
We continue to focus on making the UK the best place to work and grow a business, whether through our work on the National Living Wage or through our support to help businesses preparing for the end of the Transition Period. In particular this year we boosted support for SMEs, announcing the expansion of the British Business Bank’s venture capital and debt support programmes. The UK is also making strong progress on improving gender diversity in senior business positions following the Hampton-Alexander review: a third of FTSE 100 board positions are now held by women.
I am immensely proud of all that the Department has delivered over the past year, during a period of considerable turbulence. We stand ready for our critical role in the year ahead. Page intentionally left blank Performance report Overview
The overview section, pages 6 to 19 provides a summary of the annual report and accounts. It includes a summary of our performance, expenditure and risks during the year, and our organisational structure as at the reporting date.
Our purpose
Our purpose is to build an economy which is fairer, cleaner, more innovative, and attracts investment from all over the world.
What we set out to achieve
BEIS began the 2019-20 financial year with five objectives as published in June 2019, in the Department’s Single Departmental Plan (SDP). These included:
- delivering an ambitious industrial strategy;
- maximising investment opportunities and bolster UK interests as we leave the EU;
- promoting competitive markets and responsible business practices;
- ensuring the UK has a reliable, low cost and clean energy system; and
- building a flexible, innovative, collaborative, and business facing department.
With the change in government during the financial year, BEIS reprioritised its aims focusing on the following four priorities:
- Getting businesses ready for Brexit and the opportunities beyond
- Leading the world in tackling climate change
- Solving the Grand Challenges facing our society
- Making the UK the best place in the world to work and do business
Following the UK leaving the EU on 31 January 2020 and the main aim of the first priority above being achieved the Department continued to focus on the following three priorities and aims.
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1 This priority represented the following aims:
- Deliver a Brexit that works for businesses. Help every UK business get ready for Brexit
- Prepare businesses to take advantage of new trading relationships and markets opened around the world
- Forge an outward looking, free trading, entrepreneurial and creative UK economy outside of the EU.
Note: The second and third aims of Getting business ready for Brexit and opportunities beyond were incorporated into Making the UK the best place in the world to work and grow a business. Leading the world in tackling climate change
- Achieve net zero greenhouse gas emissions and end our contribution to global warming by 2050.
- Drive economic growth through the race to cut carbon, becoming a leader in green technologies and clean energy on the path to net zero.
- Accelerate climate action through strong global leadership
Solving the Grand Challenges facing our society
- Increase productivity and improve lives by tackling our Grand Challenges in life sciences, artificial intelligence, automation and space.
- Making the UK a science superpower through backing ideas and supporting talent from home and abroad.
- Invest in R&D and innovation to drive discovery and unleash potential
Making the UK the best place in the world to work and grow a business.
- Forge an outward-looking economy, supporting businesses all over the UK to take advantage of new trading relationships with the EU and around the world
- Reform corporate governance and improve boardroom diversity so the top of UK businesses better serve and reflect the whole society
- Create fairer, inclusive, flexible workspaces so everyone has the chance to succeed and balance work and home life. Our highlights in 2019-20
Helped businesses, workers and consumers affected by coronavirus, by introducing loans, guarantees and cash grants, easing regulatory burdens and providing greater flexibility on competition law, annual leave and the testing of new products.
Supported the UK’s world-class scientists by launching a new simplified process to apply for research funding, helping to free researchers to focus more exclusively on undertaking trailblazing research.
Led the world in tackling climate change by being the first major economy to legislate to end our contribution to carbon emissions and announcing that we will double our international climate finance spend from £5.8 billion to £11.6 billion over the next five years. This global leadership was recognised when the UK was chosen to co-host the COP26 UN climate talks.
Took steps towards achieving net zero by 2050. Since 1990 we have grown our economy by 75% whilst cutting emissions by 43%. Renewable sources provided more electricity to UK homes and businesses than fossil fuels for the first time in the third quarter of 2019, with less than 1% of electricity generated by coal-fired power.
Positioned the UK at the global forefront of new automotive technology development, investing up to £1 billion over 5 years in R&D and the development of UK supply chains for the large-scale production of electric vehicles.
Backed ground-breaking research and innovation in the UK through key strategic investments, including £1.2 billion to develop a state-of-the-art climate supercomputer, £200 million for a world-leading genomics project and £220 million for the initial design of a fusion power station. Prepared businesses for EU Exit by creating a £15 million Business Readiness Fund for business groups and trade associations to help firms prepare and running the Brexit Business Readiness Roadshow with more than 30 events over five weeks spanning the breadth of the UK.
Created new legislation to lay the groundwork for our future outside the EU, covering areas such as product safety and metrology, employment rights, carbon emissions and renewable energy.
Introduced a new right to paid parental bereavement leave, which will mean that working parents who lose a child under the age of 18 will get two weeks’ statutory leave.
Increased the National Living Wage to £8.72 per hour, a 6.2% pay rise for the lowest-paid workers representing the biggest cash increase ever and bringing the rate to the target of 60% of median earnings.
Safeguarded 3,200 jobs in the steel industry by supporting the sale of British Steel, marking the start of a new chapter for UK steel.
Continued our work to build a flexible, innovative, collaborative and business-facing department. In particular, responding effectively to the coronavirus crisis by rapidly mobilising staff onto work on the response to coronavirus; implementing at pace our new IT collaboration platform ensuring we continued to work effectively following the move from office to home working; and by supporting staff with caring responsibilities. Where we spent our money in 2019-20
For the year ended 31 March 2020, the Departmental Group incurred spend of £14.1 billion(^2). Of this £3.1 billion related to the Core Department and Agencies, and £11.0 billion related to our partner organisations and designated bodies.
The diagram opposite shows the major areas of spend. The majority of the Departmental spend, and policy delivery is through it’s Partner Organisations, including:
- **£7,793 million** by UK Research and Innovation (UKRI), on funding for Science and Research
- **£2,379 million** by the Nuclear Decommissioning Authority (NDA) on managing our energy legacy safely and responsibly.
- **£445 million** by UK Space Agency (UKSA) on delivering an excellent space programme with the maximum economic, scientific and policy benefit for the UK.
- **£479 million** by the British Business Bank (BBB), through the Enable programme, Northern Powerhouse Investment Fund, Midlands Engine Investment Fund and Cornwall and Isles of Scilly Investment Fund, on supporting small business in the UK at all stages of their development.
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(^2) The expenditure corresponds to the net Total DEL expenditure for our Departmental Group. DEL is the controllable budget total issued by HM Treasury on behalf of Parliament, that we use to fund delivery of our strategic objectives. It excludes AME expenditure which represents volatile, demand-led spend and technical accounting matters. These concepts are fully explained in the Financial Review on page 29. Where we spent our money in 2019-20
£14,066m
- Delivering affordable energy for households and businesses £83m
- Ensuring that our energy system is reliable and secure £5m
- Government as Shareholder £98m
- Delivering an ambitious industrial strategy £894m
- Capability £435m
- Maximise investment opportunities and bolster UK interests £339m
- Science and Research £293m
- Managing our energy legacy safely and responsibly £238m
- Taking action on climate change and decarbonisation £187m
- Promote competitive markets and responsible business practices £107m
- UK Atomic Energy Authority £117m
- Diamond Light Source Ltd £108m
- ACAS £51m
- Coal Authority £35m
- UK SBS Ltd £35m
- Partner organisations – Other £5m
- UKRI £7,793m
- Nuclear Decommissioning Authority £2,379m
- BBB £479m
- UKSA £445m
- Insolvency Service (£20m)
## Our business model
| Our work and stakeholders | |---------------------------| | Following ministerial priorities, we design and implement policy relating to our priorities: leading the world in tackling climate change, solving the Grand Challenges facing our society and making the UK the best place in the world to work and grow a business. | | We build strong and collaborative relationships with stakeholders, including: businesses and business representative organisations; workers and their unions; and consultations with the wider public. We also work closely with and other government departments. |
| Our people | |------------| | Our Core Department is made up of 4,345 people with regional offices across the UK. We are organised in seven groups; each led by a Director General, and these groups are in turn divided into 40 Directorates. |
| Our partner organisations | |---------------------------| | We also deliver our businesses through 40 partner organisations. These range from large organisations such as UK Research and Innovation and the Nuclear Decommissioning Authority, through medium-size organisations working on regulation such as the Competition and Markets Authority, to advisory committees including the Committee for Climate Change. |
| Our funding | |-------------| | Our annual funding is agreed with Treasury and Parliament. In 2019-20, we were responsible for the efficient stewardship of £14.1 billion of Departmental funds. | How we are organised: our organisational structure
### Our ministers
| Position | Name | |----------|------| | Secretary of State for Business, Energy and Industrial Strategy | Rt Hon Alok Sharma MP | | Minister of State for Business, Energy and Clean Growth | The Rt Hon Kwasi Kwarteng MP | | Parliamentary Under Secretary of State, Minister for Business and Industry | Nadhim Zahawi MP | | Parliamentary Under Secretary of State, Minister for Science, Research, and Innovation | Amanda Solloway MP | | Parliamentary Under Secretary of State, Minister for Small Business, Consumers and Labour Markets | Paul Scully MP | | Parliamentary Under Secretary of State, Minister for Climate Change and Corporate Responsibility | Lord Callanan | | Minister for Investment (jointly with the Department for International Trade) | Lord Grimstone |
### Our management: non-executives
| Role | Name | |------|------| | Lead non-executive board member | Archie Norman | | Non-executive board member | Nigel Boardman | | Non-executive board member | Leena Nair | | Non-executive board member | Stephen A. Carter | | Non-executive board member | Carolyn McGall | | Non-executive board member | Kathryn Parsons | | Non-executive board member | Stuart Quickenden |
### Our management: senior officials
| Role | Name | |------|------| | Acting Director General, Corporate Services | Doug Watkins | | Director General, Energy Transformation and Clean Growth | Julian Critchlow | | Director General, Energy and Security | Joanna Whittington | | Director General, Industrial strategy, Science and Innovation | Jo Shanmugalingam | | Director General, Market Frameworks | Jaee Samant | | Acting Director General, Trade, Europe and analysis | Ashley Ibbett | | BEIS Scientific Adviser | Professor John Loughhead | | Chief Financial Officer | Tom Taylor | | Chief Economic Adviser | Mike Keoghan | | Director, Policy Delivery, and Private Office | Chris Thompson | | Director, Communications | Craig Woodhouse |
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3 Alex Chisholm was the Permanent Secretary and Principal Accounting Officer until 9 April 2020, then Sam Beckett became Acting Permanent Secretary and Principal Accounting Officer from 14 April 2020, until Sarah Munby was appointed the Permanent Secretary and Principal Accounting Officer from 20 July 2020. How we are organised: our group
Public sector bodies can be grouped by level of control the Core Department has over them.
- **Our executive Agencies** act as an arm of the Core Department, undertaking executive functions, rather than policy advice.
- **Other bodies in the Departmental Group** are separate legal entities, but the Core Department usually sets their strategic framework, appoints the chair and all non-executive members of board, and is consulted on the appointment of the CEO.
- **The wider Departmental Group** includes other public-sector bodies which work to achieve our objectives but have more authority over their policies and are not consolidated into the group financial statements. See our Accounting Officer System Statement, published separately, for greater detail.
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### Core Department and Agencies
- Insolvency Services
- Copyright Tribunal
- Council for Science and Technology
- Government Office for Science
- Industrial Development Advisory Board
- Committee on Fuel Poverty
- Low Pay Commission
- UK Space Agency
- Office of Manpower Economics
- Office of Product Safety and Standards
- Office of the Regulator of Community Interest Companies
- Regulatory Policy Committee
- Nuclear Liabilities Financing Assurance Board
### Consolidated Departmental Group
- Advisory, Conciliation and Arbitration Service (ACAS)
- British Business Bank Plc
- Central Arbitration Committee
- Certification Officer
- Civil Nuclear Police Authority
- Coal Authority
- Committee on Radioactive Waste Management
- Committee on Climate Change
- Competition Appeal Tribunal
- Competition Service
- Electricity Settlements Company
- Financial Reporting Council
- Low Carbon Contracts Company Ltd
- Nuclear Decommissioning Authority
- Oil and Gas Authority
- UK Atomic Energy Authority
- UK Green Infrastructure Platform Ltd
- UK Shared Business Services Ltd
- UK Research and Innovation
### Wider departmental group
- British Hallmarking Council
- British Nuclear Fuels Limited
- Companies House
- Competition & Markets Authority
- Groceries Code Adjudicator
- Independent Complaints Reviewer
- Intellectual Property Office
- International Nuclear Services Limited
- Land Registry
- Met Office
- National Nuclear Laboratory
- National Physical Laboratory
- Nuclear Liabilities Fund
- OFGEM
- Ordnance Survey
- Post Office Ltd
- Pubs Code Adjudicator
- Small Business Commissioner
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4 These entities have been re-classified by ONS in 2018-19. See footnote 2 in note 27: list of bodies within the Departmental Group, for an explanation of the impact of this change. Risks affecting delivery of our objectives
Risk Management
Our risk management framework continued to develop and improve over the last year, further information on this can be found in the governance statement section of this report.
The BEIS risk management framework is structured around the following five principles, which complement and build upon those outlined in the Orange Book.
| Principle | Description | |-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Accountable | Risk management is the responsibility of all staff. Senior management should ensure that roles and responsibilities are clear, communicated, understood and embedded at all levels of the organisation. This includes equipping staff with the skills to manage risk and understand where they can afford to take more risk, what necessitates immediate escalation / corrective action. | | Open | Senior management should ensure that risk discussions are transparent and considered integral to making informed decisions (e.g. policy making, strategy setting, planning, Programme and Project Management). | | Evidence-Based | All staff should consult with relevant stakeholders to produce timely and accurate risk information via the online reporting system and the control and assurance record to support decision-making. | | Proportionate | Risk management processes should enable – not drive – our work. So all staff should consistently review and identify risk as part of their business activity using existing governance arrangements. | | Consistent | All staff should consistently review and identify risk as part of their business activity e.g. using existing governance arrangements - such as committees, team meetings or deep dives - to increase visibility and focus on meaningful actions. |
The table below describes our risk profile: principal risks we have faced during the financial year and the mitigating actions taken.
Key:
Icons in the table map the risk to our objectives
| Relative severity | Change during the year | |-------------------|------------------------| | H High | Increasing risk | | M Medium | Stable | | L Low | Decreasing risk |
Solving the Grand Challenges facing our society
Making the UK the best place in the world to work, and to grow a business
Leading the world in tackling climate change | Risk | Mitigating activities | Risk severity and direction of risk trend | |----------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------| | Failure to meet carbon budgets due to ineffective measures to mitigate climate change and promote clean energy investment | ➔ We have developed and implemented further policies to deliver emission reductions in line with Clean Growth Strategy and Net Zero commitments, and committed additional funding in areas including energy, industry, transport and low carbon buildings.\
➔ We continue to refine and strengthen our analysis of future emissions and the potential contribution of different policy areas to reducing emissions.\
➔ We have strengthened governance including through a new Climate Action Strategy Committee, chaired by the Prime Minister, to drive further action on domestic and international climate change.\
➔ We became the first major economy in the world to set a legally binding target to reach net zero greenhouse gas emissions by 2050.\
➔ We published the Green Finance Strategy, setting out plans to mobilise capital into low carbon investments. | H | | Catastrophic or severe incident affecting energy or nuclear critical national infrastructure | ➔ We work with the Office for Nuclear Regulation (ONR) to ensure safety and security standards are maintained, including strengthening regulatory framework where necessary.\
➔ We continue to ensure robust safety and security (physical, personnel and cyber) arrangements are in place at civil nuclear sites.\
➔ We maintain a robust capability building programme to increase BEIS preparedness to lead an effective and coordinated cross-government response.\
➔ We undertake a programme of collaboration through regular engagement with industry to identify vulnerabilities and mitigate cyber risks not addressed through regulation.\
➔ We work with HM Government and industry partners to ensure physical and personnel security standards in the energy sector are proportionate and robust. | L | | Risk | Mitigating activities | Risk severity and direction of risk trend | |---------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------| | Sensitive information is lost or compromised through cyber-attack, theft, mistakes or leaks, or a security incident at work harms BEIS ministers, staff or visitors. | ➔ We continue to develop a culture of security through staff awareness campaigns to reinforce simple security behaviours – technical and physical defences are not enough on their own.\
➔ We continue to maintain strong and tested cyber defences.\
➔ We are building a more coherent approach to personnel security to mitigate the insider threat and minimise the security vulnerabilities caused by staff mistakes.\
➔ We maintain a risk-adjusted and systematic approach to monitoring and assuring security in BEIS and its Partner Organisations.\
➔ We are working with other government departments to realise the benefits of security centralisation and professionalism across government. | BEIS is satisfied that all possible avenues are in place to mitigate this risk, however, the rating remains high due to the increasing nature of cyber-attacks and reflecting the importance of staff safety. | | Failure to attract, develop and retain sufficiently skilled staff and support their wellbeing | ➔ We have ensured senior leaders maintain oversight of teams, tracking that leave is taken, hours worked are proportionate and flexible working options are considered.\
➔ We carried out extensive workforce planning to develop resourcing plans, ensure the correct mix of grades in each profession, and review strategy and international capability.\
➔ We actively monitor the results of our People survey to improve staff retention with new learning and development packages and the appointment of Wellbeing Champions.\
➔ We carry out an annual Wellbeing survey and act on the results. | Over the financial year this risk has increased due to the increasing remit of the Department. | | We may lack the strategic and cultural flexibility to manage the impacts of a rapid change to priorities | ➔ To support strategic decision-making we maintain a robust reporting system to ensure that risks and issues are identified early and considered by senior leaders.\
➔ We have a dedicated team developing our Target Operating model, to strengthen the Department’s capability.\
➔ We continued to identify future trends through horizon scanning of our external environment and recruited people with the necessary commercial, technical and operational skills. | |
### Risk Mitigating activities Risk severity and direction of risk trend
| Risk | Mitigating activities | Risk severity and direction of risk trend | |----------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------| | Inadequate availability, quality, or understanding of evidence base underpinning policy development and delivery. | ➔ We produce Quality Assurance (QA) scores for all business critical models. Our overall score is above target.\
➤ We completed a review of analytical governance and strengthened frameworks in place for assurance of analysis used in decision making.\
➤ We increased early monitoring requirements at policy development stage and improved mechanisms for reviewing implementation of monitoring through departmental boards.\
➤ We continued to develop a central archive of completed appraisal, monitoring and evaluation activity to support better, more efficient analysis and policy development.\
➤ We published the latest Areas of Research Interest. | M |
### Closed or deescalated risks Mitigating activities Narrative
| Closed or deescalated risks | Mitigating activities | Narrative | |-----------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Failure to prepare for EU Exit | ➔ We have continuously assessed delivery requirements and developed a prioritisation strategy to manage EU Exit work.\
➤ We have redeployed and mobilised staff to priority EU Exit areas.\
➤ We have worked with other government departments to ensure a coherent cross-Whitehall governance structure for negotiations and identify and resolve strategic trade-offs.\
➤ We have engaged with HM Treasury to develop a strong evidence base, based on a sectoral analysis of impacts, to refine low-alignment scenario planning and refine BEIS’s flexible business support package.\
➤ We have led broad engagement with businesses, in coordination with other government departments, to deliver readiness messaging, as well as developing material, including online checklists and a self-certification tool for businesses. | The changing nature of the challenges of Brexit and the impact of external factors resulted in this risk remaining high through most of the financial year with an improved picture towards the point when the risk was closed. | Closed or deescalated risks
We fail to adapt employment legislation leading to a rise in unfair employment practices and a failure to deliver ‘good quality work’.
- We have progressed consultations and preparation of clauses to deliver on ‘Good Work Plan’ commitments.
- We have developed robust quality of work metrics.
- We collaborated with DfE to monitor the development and implementation of skills reform programmes, e.g. national retraining schemes, apprenticeships devolution of the adult education budget and T-levels.
As a result of the Employment Rights Bill being announced, this risk has been de-escalated. The risk is now being monitored and managed by the Director General.
As a result of political uncertainty and potential economic upheaval following EU Exit, which could be compounded by a challenging Spending Review for the Strategy, there is a risk that partners across government, local areas and industry will not sufficiently engage with and support the Industrial Strategy.
- Ensuring Spending Review bids by departments are aligned with the Industrial Strategy.
- Work with ministers, No.10, and HM Treasury to define ambition and ensure resources are available for implementation.
- Use cross-Government Programme Board, Cabinet Committee and partnerships with local government, Local Enterprise Partnerships, businesses, civic society and academia to drive implementation and measure the impact on the economy.
- Work closely with EU Exit colleagues recognising the potential synergies with Industrial Strategy, and to remain aware of how the negotiations could affect our ability to improve productivity and drive growth across the whole country.
- Effectively engage with UK industry and business through events and comprehensive communications.
Whilst this area is a high priority the specific risk has been closed as the Department refocused its attention towards the Grand Challenges and unleashing innovation.
COVID-19 response risk management practices
The COVID-19 pandemic response has presented the Department with significant challenges. In order to manage the associated risks, BEIS has put in place a programme of work pulling expertise from across the Department. A central Project Management Office has been established to effectively manage the Departmental response. Additionally, the strategic risk management function has supported the programme to design a risk management process in line with the Departmental Framework and to identify and manage emerging COVID-19 risks.
The BEIS Risk Management Framework and Risk Appetite Statement are reviewed and refreshed on an annual basis. This assessment will be reviewed taking account of COVID-19 to provide effective risk management to deliver Government policies. Performance analysis
Our performance
BEIS reviewed and updated its Departmental priorities this year. The structure of this report follows those updated priorities, which differ from those in the Single Departmental Plan (SDP) published in June 2019. An additional section is included reflecting on BEIS’s response to COVID-19 pandemic.
Leading the world in tackling climate change
This departmental priority is an increase in our ambition and strengthening of our commitment to the Department’s fourth objective published in the Department’s SDP to Ensure the UK has a reliable, low-cost, and clean energy system.
Domestic work
In June 2019, the UK became the first major economy in the world to legislate to end its contribution to global warming by 2050. The target will require the UK to bring all greenhouse gas emissions to net zero by 2050, compared with the previous target of at least 80% reduction from 1990 levels. This is one of the most ambitious targets in the world and demonstrates the leadership the UK is providing internationally in this area.
To support the achievement of this target:
- we introduced the Smart Export Guarantee, which ensures that small-scale electricity generators installing solar, wind or other forms of renewable generation will be paid for each unit of electricity they provide to the network;
- we awarded nine companies with £26 million of funding to advance the rollout of carbon capture, utilisation and storage in the UK, which is a crucial step towards ending the UK’s contribution to global warming. £4.2 million of this will go to Tata Chemicals Europe’s plant in Cheshire to contribute to the construction of a facility to capture and utilise 40,000 tonnes of carbon dioxide a year - the equivalent of 22,000 cars;
- we announced £142.9 million investment in green projects, including:
- Greenhouse Gas Removal Technologies – £31.52 million – this will support the UK in its net zero ambitions, by driving forward approaches to remove greenhouse gases from the sky on a large scale;
- Clean Air: Addressing the Challenge of Indoor & Outdoor Pollution – £22 million – the next decade will see declining transport pollution but increases in other areas like household products and adhesives. This project will look at tackling emerging air pollutants indoors and outdoors, such as air fresheners and cleaning products, to minimise their effects on public health;
- cleaner food systems for healthy people and a healthy planet – £47 million — this will transform UK diets to be healthier and more sustainable through changes in production, manufacturing, retail and consumption;
- reusing and recycling materials in innovative ways – £30 million – this programme will drive forward new research to support opportunities to re-use and recycle materials across sectors such as food, water, textiles, and electronics – as well accelerating new, greener manufacturing technologies; and
- Sustainable Management of Marine Resources – £12.43 million – This programme will ensure that the UK realises sustainable societal and economic benefits through better management of the UK’s marine resources.
- in February 2020, as part of the BEIS £505 million Energy Innovation Programme and additional UKRI funding, we announced a £90 million package to tackle emissions from homes and heavy industry. This included funding for the development of Europe’s first large scale, low carbon hydrogen plants in Merseyside and Aberdeen, which could generate enough clean energy to heat over 200,000 homes;
• we published the Green Finance Strategy, which sets out a comprehensive approach to greening financial systems, mobilising finance for clean and resilient growth, and capturing the resulting opportunities for UK firms; and
• the Prime Minister chaired the first meeting of the new Climate Action Strategy Committee, which will drive further action across government and play an essential role in co-ordinating our strategy to reach net zero emissions.
International work
The UK cannot solve the challenges of climate change alone, so we are working internationally as well as domestically to tackle the issue. Our leadership has driven change on the ground and shifted the debate and mobilised finance internationally:
• In September 2019 at the United Nations, the UK committed to doubling our International Climate Finance (ICF) to £11.6 billion between 2021-22 and 2025-26. This will help developing countries make the transition to low-carbon and climate resilient development. As part of the ICF, we launched the new Ayrton Fund of up to £1 billion to allow British and other scientists from around the world to work in partnership with developing countries to drive the clean energy transition. At the G7 Summit in August 2019, the UK also pledged to contribute £1.44 billion to the Green Climate Fund over the next four years. This doubles the UK’s previous contribution of £720 million between 2014 and 2019; and
• We announced an investment package worth over £100 million for clean energy and energy efficiency at the African Investment Summit. Solar farms in Kenya, geothermal power stations in Ethiopia and clean energy storage across sub-Saharan Africa will receive funding and see leading UK scientists and financial experts working with their African counterparts to realise the continent’s huge potential for renewable energy. The Prime Minister also announced an end to UK direct bilateral support for thermal coal mining or coal power plants overseas.
Solving the Grand Challenges facing our society
The Industrial Strategy sets out Grand Challenges to put the UK at the forefront of the industries of the future, ensuring that the UK takes advantage of major global changes, improving people’s lives and the country’s productivity.
The first 4 Grand Challenges are focused on the global trends which will transform our future:
Future of mobility
• We announced up to £1 billion additional funding to develop and embed the next generation of cutting-edge automotive technologies. This funding will be used to develop UK supply chains for the large-scale production of electric vehicles and will also be used for further research and development in our world leading research centres. It will accelerate mass production of key technologies in the UK through major investments in the manufacturing of batteries, electric motors, power electronics, and hydrogen fuel cells, along with their component and materials supply chains; and
• As part of the Faraday Battery Challenge, we announced £23 million government investment to keep the UK at the forefront of developing the latest electric vehicle technology. This forms part of the total £274 million that will be awarded to consortia across the UK through the Faraday Battery Challenge, part of the government’s Industrial Strategy Challenge Fund (ISCF).
Ageing society
• We announced a new dedicated investment programme of around £600 million to unlock the potential of the UK’s best health and life science innovations. The funding will comprise a £200 million investment through the government-owned British Business Bank alongside private sector investment, which is expected to contribute a further £400 million, allowing companies to grow and ensure the UK remains a world-leader in life sciences innovation; and
- We launched the world’s largest genetics project, the £200 million whole genome sequencing project of 500,000 volunteers in the UK Biobank. The new project aims to improve the prevention, diagnosis and treatment of a wide range of serious and life-threatening illnesses including cancer, heart diseases, diabetes, arthritis and dementia, through genetic research that can explain why some people develop these conditions and others do not.
**Artificial intelligence and data**
- We announced the UK’s first ever tourism sector deal, which will revolutionise the way data is used by the sector, through the creation of a new Tourism Data Hub. The deal will also support the creation of an additional 10,000 apprenticeships for people building their careers in the tourism and hospitality sectors;
- We launched a new Cambridgeshire and Peterborough Local Industrial Strategy, which is designed to maximise productivity and innovation in the area’s leading life sciences, food production, artificial intelligence, and advanced manufacturing sectors, and features a Skills and Apprentices Hub to support the local economy; and
- We announced funding to support up to 2,200 students through 41 Doctoral Training Partnerships, as well as encourage more young people, particularly girls, to study science, technology, engineering and mathematics (STEM) subjects at school and university, and pursue a STEM-related career. The investment includes:
- £179 million for PhDs, formally known as Doctoral Training Partnerships, at over 40 UK universities in physical sciences, maths and engineering to develop the skills for ground-breaking research and high-tech industries like cyber security and chemical manufacturing. Part of the investment will go into pilots looking at how best to attract and support those from non-academic backgrounds to undertake this type of training; and
- £8.9 million to continue funding science education programmes including Science Learning Partnerships and Stimulating Physics Networks, which aim to improve science teaching and increase the take up of science at GCSE level and A level and ultimately encourage young people to pursue a STEM-related career.
**Clean Growth**
- We announced £300 million investment to develop cleaner, greener forms of transport. The government will provide £125 million, which will be supported by industry co-investment of up to £175 million to support exciting new technologies including flying urban taxis, electric passenger planes and even freight-carrying drones; and
- We announced a £98 million investment, allowing both UK researchers and small businesses to seize the opportunities in science and innovation and industries of the future. Of this, £78 million will be invested in 78 scientists and researchers through the government’s Future Leaders Fellowships scheme. The remaining £20 million will be allocated to 20 universities to develop new University Enterprise Zones (UEZs) across the country to provide vital specialist support to small businesses in pioneering industries – like Artificial Intelligence (AI), clean growth, smart energy and agri-food.
**Making the UK the best place in the world to work, and to grow a business**
This departmental priority combines the Department’s second and third objectives published in the Department’s SDP to Maximise investment opportunities and bolster UK interest as we leave the EU and Promote competitive markets and responsible businesses practices, now the UK has left the EU.
Our work towards delivering this objective is directed towards providing support for employees and businesses and regulating the market.
**Supporting Employees**
- In 2020, we legislated to increase the National Living Wage (NLW) by 6.2%, from £8.21 per hour to £8.72 per hour – the biggest cash increase ever. Nearly 3 million workers are now benefitting from the increases to the NLW and minimum wage rates for younger workers, according to estimates from the independent Low Pay Commission;
- 3,200 high-skilled jobs in Scunthorpe, Skinningrove and on Teesside were safeguarded by the completion of a deal to sell British Steel to leading Chinese steelmaker Jingye Group. The sale followed extensive discussions between the government, the Official Receiver, Special Managers, unions, suppliers and employees. It marks a critical step in securing a long-term, sustainable future for steelmaking in Yorkshire and the Humber and the North East. As part of the deal, Jingye Group pledged to invest £1.2 billion over 10 years to modernise British Steel sites and boost energy efficiency;
- We announced we were building on measures designed to support working parents as part of the Good Work Plan by extending legal protections against redundancy for new mothers returning to work by six months. Parents returning from adoption and shared parental leave will also be protected;
- We introduced regulations in Parliament which mean that from the 6th April employed parents who suffer the loss of a child under the age of 18 are now entitled to two weeks statutory Parental Bereavement Leave and Pay; and
- As announced in the Queen’s Speech and at Budget, we intend to legislate to give parents of children in neonatal care access to additional weeks of leave and pay to support them during this traumatic time and when they return to work.
**Supporting Businesses**
- We widened eligibility for Relief for Energy Intensive Industries to enable more businesses to benefit from support schemes, whilst investing in their greener future;
- We made £15 million of funding available to support trade associations and other business representative organisations to work with businesses across the UK to understand the steps they should take to be ready for Brexit;
- In 2019-20, we ran advertising campaigns to support business growth including advertising to support businesses to prepare for Brexit as part of the Cabinet Office ‘Get Ready’ campaign, workers on national and living wage and to help future proof skills relevant to the engineering industry;
- We published the Business Productivity Review, which was jointly undertaken with HM Treasury. It outlines plans to spend £56 million to support business productivity and highlights ten key actions to drive forward change and improve productivity; and
- We announced £88 million of new government investment to help close the productivity gap between the UK and major world economies:
- £43 million in government investment will support top researchers and analysts to explore how to turbocharge UK productivity levels through a new ambitious productivity institute; tackling barriers such as productivity imbalances between sectors and regions, poor management practices and skills investment; and
- a further £45 million will be specifically invested by the government into the development of cutting-edge supercomputer software, set to transform whole sectors from agriculture and advanced aerospace to Formula One and pharmaceuticals with hyper-accurate weather predictions – helping them plan and in turn boost their productivity. Regulation
- We announced tough new powers for the Competition and Markets Authority to fine businesses directly who have broken consumer law. The move will help tackle the loyalty penalty and practices such as subscription traps and unfair cancellation charges. Firms that overcharge or mislead their customers could be hit with direct fines without the need to go through a court; and
- We consulted on creating a single labour market enforcement body, which will have powers to enforce minimum wage and holiday payments. We will also crackdown on non-disclosure agreements.
COVID-19
The global pandemic emerged at the end of 2019-20 and BEIS moved quickly to put in place the Government’s response to the COVID-19 crisis:
- On Monday 23 March, we launched the Coronavirus Business Interruption Loan Scheme (CBILS) through the British Business Bank, to provide government-backed loans of up to £5 million to small and medium businesses.
Since 1 April 2020, the government has continued to support the economy through the following schemes, and as at 16 August 2020:
- the CBILS has approved £13.68 billion of support;
- the Coronavirus Large Business Interruption Loan Scheme (CLBILS) was launched on Monday 20 April to provide government-backed loans of up to £200 million to larger businesses and it has approved £3.50 billion of support;
- the Bounce Back Loan Scheme (BBLS) was launched on Monday 4 May to provide government-backed loans of up to £50,000 to small and medium businesses and it has approved £35.47 billion of support; and
- the Future Fund was launched on Wednesday 20 May to provide convertible loans of up to £5 million where government investment is matched by third-party investors and it has approved £588.3 million of support.
- We announced over £12.3 billion of grant support for eligible small businesses and businesses in the retail, hospitality, and leisure sectors to mitigate the impact of COVID-19;
- We amended the Working Time Regulations 1998 to allow workers who cannot take holiday due to the coronavirus to carry most, or all, of their leave into the next two leave years. This ensures that workers will not lose their leave entitlements and gives flexibility to business at a time when it is needed most;
- We enabled businesses to apply for a three-month extension for filing their accounts and guaranteed that any business citing issues as a result of COVID-19 will be automatically and immediately granted an extension. We also announced that we would legislate to offer further flexibilities covering requirements on companies to file information and to run their general meetings;
- We agreed new emergency measures with the energy industry to protect the domestic energy supply of those most in need. All customers with pre-payment meters can speak to their supplier about options to keep them supplied, such as nominating a third party for credit top ups, having a discretionary fund added to their credit or being sent a pre-loaded top up card. More broadly, any energy customer in financial distress will also be supported by their supplier, which could include debt repayments and bill payments being reassessed, reduced or paused where necessary, while disconnection of credit meters will be completely suspended;
- We temporarily eased administrative requirements to fast-track supplies of Personal protective equipment to NHS staff and protect companies hit by the pandemic;
- We announced changes to support UK companies facing insolvency measures. These included the introduction of corporate restructuring tools to give companies a better chance of survival, such as a moratorium to give companies time to seek rescue. The measures also included temporarily suspending parts of insolvency law to help directors continue trading through the emergency and ensure ongoing access to much-needed supplies such as energy and raw materials;
- We announced funding for six coronavirus research projects, including two focused on vaccination trials, which will benefit from a share of £20 million in government investment. Two government-backed projects will receive new funding, enabling pre-clinical and clinical vaccine trials, as well as supporting researchers to develop manufacturing processes to produce a vaccine at a million-dose scale. Other projects receiving funding examine how existing treatments could be repurposed to treat coronavirus, developing antibodies to help target the virus, and examining how people at greatest risk of catching it could be identified; and
- Through a £20 million investment, a consortium of the UK’s leading clinicians and scientists will look for breakthroughs that help the UK respond to this and future pandemics and save lives. COVID-19 Genomics UK Consortium – comprised of the NHS, Public Health Agencies, Wellcome Sanger Institute, and numerous academic institutions – will deliver large scale, rapid sequencing of the cause of the disease and share intelligence with hospitals, regional NHS centres and the government. Looking ahead
What we are aiming to achieve We will lead Britain’s recovery, rebuilding a more dynamic, green and productive economy and preparing businesses and workers for opportunities outside of the EU.
Fighting Coronavirus We will support a safe return to work, restoring livelihoods and rebuilding consumer confidence. We will help businesses to bounce back, putting in place a future programme of support for business and workers, as well as more targeted support to deliver a job rich recovery that contributes to delivering net zero. In addition, we will protect lives by significantly and rapidly increasing domestic vaccines research capability and capacity for production, through the work of the Vaccine Taskforce.
Backing Business We will increase opportunity by levelling up economic activity across all parts of the UK, supporting SMEs and helping business create jobs. We will take steps to remove regulatory barriers and promote regulations that supercharge growth and investment. Through reform measures we will regain public trust in the audit, governance and insolvency regimes. As the transition period draws to a close, we will seize the opportunities of global free trade and play an important part in negotiations on the EU and Rest of World Free Trade Agreements.
Unleashing innovation We will make the UK a science super power by backing ideas, eliminating bureaucracy and supporting talent from home and abroad. We will translate our biggest increase in R&D spend into world-beating innovation, catalysing private sector investment to promote the development of cutting-edge technology. We will put UK research funding on a firm footing after EU Exit, laying the groundwork for the establishment of a ‘high risk, high payoff’ new UK agency for research, due to open in 2021.
Tackling Climate Change We will drive the green recovery by setting out measures to decarbonise transport, buildings, energy and industry; deploy carbon capture, usage and storage at scale; and significantly increase offshore wind capacity. We will lay the groundwork for establishing a Gigafactory to manufacture electric car batteries in the UK within the next three years. In preparation to host a successful COP26 in November 2021, we will push for countries to renew their climate change to accelerate urgent climate action to protect our planet. Performance against United Nations sustainable development goals
The Sustainable Development Goals (SDGs) succeed the Millennium Development Goals (MDGs), which ended in 2015. They were developed by United Nations (UN) member states and include 17 global goals for 2016 – 2030. UK government departments are required to look within their single departmental plans to identify policies and programmes which support delivery of the SDGs. BEIS contributes mainly to goals 7, 9 and 13.
| Sustainable development goals | Progress in 2019-20 | BEIS delivery area | |------------------------------|---------------------|--------------------| | **Goal 7**<br>Ensure access to affordable, reliable, sustainable and modern energy for all | In 2014, the government introduced in legislation a fuel poverty target for England to improve as many fuel poor homes as is reasonably practicable to a minimum energy efficiency rating of Band C, by the end of 2030. This year, we ran a consultation to update the fuel poverty strategy. The Smart Metering Implementation Programme is an important national modernisation programme that will bring benefits to consumers, businesses and the nation as a whole. We published the latest assessment of the costs and benefits of the smart meter roll-out based on the most up-to-date evidence from the programme. | | | **Goal 9**<br>Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation | The Industrial Strategy looked at global trends, areas of UK strength and where there is scope for productivity enhancement to identify four Grand Challenges. Among measures to respond to these challenges, we have:\
• published the joint BEIS/HM Treasury Business Productivity Review, which sets out 10 key actions that will support businesses to become more productive, backed by £56 million funding;\
• awarded £2 million to the winners of a competition for our Centre for Connected and Autonomous Vehicles to support the development of cyber-security testing capability. | | | **Goal 13**<br>Take urgent action to combat climate change and its impacts | In June 2019 the UK became the first major economy in the world to legislate to end its contribution to global warming by 2050. The target will require the UK to bring all greenhouse gas emissions to net zero by 2050, compared with the previous target of at least 80% reduction from 1990 levels. The UK, in partnership with Italy, will host the UN’s 26th Conference of the Parties (COP26) to the UN Framework Convention on Climate Change (UNFCCC) in Glasgow from 1-12 November 2021 – the largest political summit hosted by the UK in decades, with up to 150 world leaders and 30,000 delegates attending. | | | **Goal 1**<br>End poverty in all its forms | In December, we announced that the National Living Wage (NLW) was increased by 6.2% in 2020 – the biggest cash increase ever. Nearly three million workers now benefit from the increases to the NLW and minimum wage rates for younger workers, according to estimates from the independent Low Pay Commission. | | | Sustainable development goals | Progress in 2019-20 | BEIS delivery area | |-------------------------------|---------------------|--------------------| | **Goal 5**<br>Achieve gender equality and empower all women and girls | The Hampton-Alexander Review focuses on improving women’s representation in senior roles, and this year’s report shows that women are now holding 32.4% of all FTSE 100 board positions – up from 30.2% last year and the strongest year of progress since 2011. Following successful campaigning and pressure from investors, ‘One & Done’ boards (a term to describe firms that are appointing a token woman to their board) have reduced from 74 to 39 this year. Only two all-male boards remain, down from 152 in 2011. | | | **Goal 8**<br>Promote sustained inclusive and sustainable economic growth, full and productive employment and decent work for all | To ensure that businesses are prepared to seize the economic opportunities arising from the UK’s exit from the EU we developed sector specific measures to support businesses through the transition and ensured that the UK’s trade negotiations contain provisions for small and medium-sized enterprises. We implemented the secondary legislation reforms of the Matthew Taylor Review which includes protections for agency workers and published the Good Work Plan, which sets out our vision for the future of the UK labour market. | | | **Goal 11**<br>Make cities and human settlements inclusive, safe, resilient and sustainable | As part of the government’s commitment to level up regions outside of London and the south east we:\
• published six Local Industrial Strategies, including those for Greater Manchester, the West of England, Oxford and Cambridge; and\
• worked with the Marches Local Enterprise Partnership to publish a new 10-year energy plan that will see half of the region’s electricity produced by renewable sources by 2030, a national pilot scheme developed for overcoming disruption to the National Grid and fuel poverty cut to below ten per cent. | | | **Goal 12**<br>Ensure sustainable consumption and production patterns | Ministers have always maintained that the exploration of England’s shale gas reserves could only proceed if the science shows that it is safe, sustainable and of minimal disturbance to those living and working nearby. Based on the report by the Oil and Gas Authority, ministers took the decision to suspend fracking for shale gas in England. | | Financial review
Expenditure
How expenditure is presented
The Department’s expenditure is reported in the financial Statements, in the Statement of comprehensive net expenditure (SoCNE) (page 116) and the Statement of Parliamentary Supply (SoPS) (page 91), but on different bases. The financial statements are prepared in accordance with accounting standards and guidance which are explained in more detail in the Department’s accounting policies in note 1.1 and on a similar basis to the rules generally applied by private sector businesses.
The Departmental Group’s net operating expenditure was £33.5 billion and £26.3 billion for the Core Department and Agencies.
The SoPS is specific to the public sector. It reports the Department’s expenditure against the control limits that Parliament has voted on. The SoPS presents total expenditure for the Departmental Group of £33.8 billion, compared to the Department’s Budget £31.2 billion. These figures are calculated in accordance with HM Treasury’s Consolidated Budgeting Guidance, which differs in several respects from the accounting basis above. It is against these limits that the Department is held accountable for its performance and use of taxpayers’ funds.
The summaries and explanations of key movements in this section is based on the SoPS, except where otherwise stated.
Overview of expenditure in 2019-20
| | 2019-20 Budget £m | 2019-20 Outturn £m | 2018-19 Outturn £m | |----------------------|-------------------|--------------------|--------------------| | TME | 31,168 | 33,844 | (94,221) | | Resource DEL | 3,555 | 2,838 | 1,246 | | Capital DEL | 11,835 | 11,228 | 10,814 | | Total DEL | 15,390 | 14,066 | 12,060 | | Resource AME | 15,055 | 19,915 | (105,865) | | Capital AME | 723 | (137) | (416) | | Total AME | 15,778 | 19,778 | (106,281) |
1 The TME outturn corresponds to ‘total voted and non-voted’ outturn in the SoPS. 2 The TME outturn is the total of Voted and Non-Voted in the Statement of Parliamentary Supply. 3 This expenditure is analysed in ‘Where we spent our money’ on pages 10 and 11. This expenditure does not represent cash spend. The Departmental Group’s performance in any year is impacted by accounting ‘fair value’ movements. As they are non-cash adjustments, they do not feature in standard descriptions of spend, such as in ‘Where we spent our money’, shown in the Performance report.
The significant movements in resource AME this year come from, the recognition movements in the fair value of the Contracts for Difference, changes to discount rates and cost estimate adjusting provisions in particular the NDA’s nuclear decommissioning provision.
Variations in our expenditure against the budget and the previous years are explained below in further detail.
**Comparison of expenditure to previous years recognised in SOPS**
The Department’s key areas of net expenditure recognised in SOPS for the last three years are shown in the table below.
| | 2019-20 £m | 2018-19 £m | 2017-18 £m | |--------------------------------|------------|------------|------------| | Nuclear Decommissioning Authority | 6,751 | (99,592) | 73,218 | | Science and research | 7,785 | 7,511 | 6,740 | | Contracts for Difference | 3,543 | (2,971) | 3,558 | | UK Research & Innovation (Innovate UK) | 1,077 | 1,052 | 973 | | Coal Authority | 58 | (1,993) | 1,545 | | Green Investment Bank and Green Infrastructure Platform | 9 | 11 | 24 | | Renewable Heat Incentive | 846 | 818 | 687 | | International Climate Finance | 339 | 321 | 330 | | Post Office | 92 | 228 | 140 | | Redundancy payment service | 431 | 319 | 260 | | COVID-19 business support | 10,976 | – | – | | Green Investment Bank sale receipts | – | – | (1,621) | | Other | 1,937 | 75 | 179 | | **Total** | **33,844** | **(94,221)** | **86,033** |
In 2019-20, there has been a high variation on expenditure recognised in the financial statement from (£94.4 billion) in 2018-19 to £33.5 billion in 2019-20. This has been primarily driven by a small change in discount rates in 2019-20 compared to the change in discount rates between 2018-19 and 2017-18, which resulted in (£99.6 billion) movement in the NDA’s nuclear decommissioning provision being recognised in 2018-19. 2019-20 includes the cost of the COVID-19 business support grants of £11.0 billion. 2019-20 has also seen an increase in the Contracts for Difference (CFDs) fair value movement and net £6.8 billion movement in the NDA’s nuclear decommissioning provision. 2019-20 – Other category includes the in year funding to the Official Receiver in respects of British Steel Limited, expenditure incurred by the British Business Bank and expenditure relating to the restarted Capacity Market Payment Scheme. Spending on areas such as UK Research & Innovation (Innovate UK), and International Climate Finance have remained broadly consistent. CFDs and Capacity Market Payments
The increase in the estimated discounted value of CFD payments (excluding HPC) from (£12.9 billion) in 2018-19 to (£16.5 billion) in 2019-20 resulted in a £5.3 billion expense reported in the SoCNE which is off set by payments of (£1.8 billion). The increase is mainly due to the award of 22 further CFDs in October 2019 as a result of Allocation Round 3 and the updated forecast of the wholesale electricity prices that are expected to be achieved by generators, offset by payments made during the year 2019-20.
During the year, the European Commission (EC) conducted an investigation into the GB Capacity Market, resulting in the scheme being deemed State Aid compliant. This resulted in the Electricity Settlements Company and National Grid to restart their respective Capacity Market activities. This resulted in £1.5 billion of Capacity Market payments being made in 2019-20 compared to £0.2 billion in 2018-19. These payments are off-set by the recognition of levy income.
Discount rates
In 2018-19 the provision expense reported in the Statement of net expenditure, was (£97.7 billion) which was primarily driven by the reduction in discount rates prescribed by HM Treasury from (1.56%) in 2017-18 to (0.11%) in 2018-19. In 2019-20, the equivalent real discount rate for cash outflows expected after ten years prescribed by HM Treasury has reduced further to (0.01%) this resulted in a smaller change recognised in the SoCNE in 2019-20 of (£0.2 billion) compared to (£9.6 billion) in 2018-19 relating to the nuclear decommissioning provision. In 2019-20, in addition to the impact of the discount rate change, the nuclear provision liability has increased by £6.9 billion due to cost estimate changes. Further detail of the movements in provisions can be found in note 18.1 for Nuclear provisions and note 18.2 for Other provisions.
Comparison of Outturn to Budget
| | Outturn £m | Budget £m | Variances £m | % | |----------------------|------------|-----------|--------------|-----| | TME | 33,844 | 31,168 | (2,676) | (8.6%) | | Resource DEL | 2,838 | 3,555 | 717 | 20.2% | | Capital DEL | 11,228 | 11,835 | 607 | 5.1% | | Total DEL | 14,066 | 15,390 | 1,324 | 8.6% | | Resource AME | 19,915 | 15,055 | (4,860) | (32.3%) | | Capital AME | (137) | 723 | 860 | 119.0% | | Total AME | 19,778 | 15,778 | (4,000) | (25.4%) |
The variances are the TME (Voted and Non-Voted) against Budget (Voted and Non-Voted), this is different to the presentation in the SoPS which compares Voted Expenditure against Voted Budget. Explanations for the key variances from budget are as follows, split by budget line headings from the SoPS.
TME
Our TME budget was £31.2 billion; against this the Department had an Outturn of £33.8 billion. The Department spent an additional £2.6 billion in excess of its Budget. This has resulted in the Department breaching its control total and receiving a regularity audit qualification; this was due to the recognition of COVID-19 business support grants in 2019-20.
Resource DEL
The Estimate was £3.6 billion. Outturn against the Estimate was £2.8 billion; £717m lower than budget. This is primarily due to contingency not required following the successful sale of British Steel Limited which completed in March 2020. Capital DEL
The Estimate was £11.83 billion. Outturn against the Estimate was £11.2 billion, £607 million lower than budget. A significant proportion of the underspends is attributed to fewer capital calls by financial institutions under the Enterprise Financial Guarantees schemes operated by the British Business Bank on behalf of the Core Department. The extent of annual capital calls is not wholly predictable, as it is intrinsically linked to the financing needs of the underlying business.
Resource AME
The Estimate was £15.1 billion, and Outturn was £19.9 billion, exceeding the Estimate by £4.9 billion, due to the recognition of a £10.8 billion provision for the cost of the government’s COVID-19 business support grants, which is off-set by underspends, principally due to accounting valuation adjustments, including:
- The NDA’s nuclear decommissioning provision primarily increased by changes in cost estimates, which were £1.4 billion less than the Estimate, which reflect uncertainties when budgeted for the provision.
- CfD liabilities, which increased by £3.6 billion, from (£12.9 billion) to (£16.5 billion). This was £3.1 billion lower than the Estimate due to budgetary contingency in the forecast of the wholesale electricity prices.
- A potential provision relating to the Official Receiver of £1.1 billion was not required.
Resource AME – Excess Vote
The sudden and serious adverse impacts on society and the economy of the COVID-19 pandemic necessitated an urgent Government response including announcements in March of two schemes to provide grant support to businesses affected by the crisis. These announcements along with actions taken by the Department to ensure these cash grants were paid to eligible businesses as soon as possible, had the effect of creating a constructive obligation on the Department and a provision for £10.8 billion has been reported in note 18 of the accounts. At the time of the announcements and subsequent actions, there was insufficient time to request increased budgetary cover through a Supplementary Estimate for this non-cash expenditure and, as a result, the Voted Resource AME control total has been exceeded by £4.9 billion resulting in a qualified audit opinion on regularity and an Excess Vote.
Capital AME
The £860 million underspend on capital AME is almost entirely due to lower than expected demand by Post Office Limited for its working capital funding from the Core Department at the year-end. Expenditure on Official Development Assistance
Official Development Assistance (ODA) is government aid that targets economic development in developing countries. ODA spend is reported on a cash basis and for the calendar year.
Our total ODA spend in 2019 was £957.4 million – £622.5 million on R&I, and £334.9 million on climate and energy. To maximise effectiveness, we aim to monitoring, evaluation and learning to identify opportunities for improvement.
R&I ODA activities in 2019-20
On R&I, we:
- launched 12 pioneering research hubs for research into complex development problems;
- supported the first cohort of African Independent Research Fellows to establish independent careers;
- celebrated five years of the Leaders in Innovation Fellowship which has supported over 1000 innovators to commercialise innovations; and
- The Newton Prize awarded funding to research projects in environmental conservation and strengthening energy infrastructure to withstand extreme weather.
Climate and energy ODA activities in 2019-20
On climate and energy, we spent:
- £166.5m to support delivering breakthrough energy storage solutions at scale in developing countries;
- £20m to support small scale renewable energy projects in sub-Saharan Africa;
- £12.5m to boost the uptake of greener construction practices; and
- £9.4m for technical assistance and grants to support new business models that can transform supply chains at risk from deforestation.
BEIS ODA spend by sector
| Sector code | Sector | 2019 £m | |-------------|---------------------------------------------|---------| | 111 | Education, Level Unspecified | 51.6 | | 112 | Basic Education | 2.3 | | 114 | Post-Secondary Education | 9.1 | | 121 | Health, General | 116.0 | | 122 | Basic Health | 1.2 | | 123 | Non-communicable diseases | 0.8 | | 130 | Population Policies/Programmes & Reproductive Health | 0.5 | | 140 | Water and supply sanitation | 2.2 | | 151 | Government & Civil Society-general | 5.2 | | 152 | Conflict, Peace & Security | 2.0 | | 160 | Other Social Infrastructure & Services | 4.6 | | 210 | Transport & Storage | 0.8 | | 220 | Communications | 0.2 | | 231 | Energy Policy | 18.0 | | 232 | Energy generation, renewable sources | 222.6 | | 240 | Banking & Financial Services | 0.1 | | 250 | Business & Other Services | 0.1 | | 311 | Agriculture | 57.9 | | 312 | Forestry | 15.8 | | 313 | Fishing | 1.9 | | 321 | Industry | 20.5 | | 322 | Mineral Resources & Mining | 2.1 | | 323 | Construction | 0.2 | | 410 | General Environment Protection | 122.6 | | 430 | Other Multisector | 273.9 | | 720 | Emergency Response | 0.2 | | 740 | Disaster Prevention & Preparedness | 1.3 | | 910 | Administrative Costs of Donors | 23.6 | | 998 | Unallocated/unspecified | 0.1 | | **Total** | | **957.4** |
Notes
1. The BEIS ODA spend for 2019 provided are provisional. The final official statistics will be published by the Department for International Development in November 2020.
2. Sector codes used by the OECD Development Assistance Committee (DAC); http://www.oecd.org/ Consolidated Statement of Financial Position
The Department remains in a net liability position as at 31 March 2020. The liability has increased from (£139 billion) at 31 March 2019 to (£158 billion) at 31 March 2020. The most significant assumptions and items impacting the Statement of Financial Position are explained below. They include
a. Contracts for Difference (CfDs) and recognition of Hinkley Point C (HPC); b. Impact of changes in discount rates; c. Nuclear Decommissioning provision, and d. COVID-19 business support provision.
(a) Contracts for Difference and recognition of Hinkley Point C
CfDs are designed to incentivise investment in a mix of low carbon electricity generation technologies which will help the UK meet its renewable and decarbonisation targets.
CfD contracts do this by agreeing with a generator a strike price for electricity supplied, thereby providing certainty needed for private investment, while protecting consumers from having to continue to pay higher support costs when electricity prices are high. The support payments paid (or repaid) in future will be calculated from the difference between the ‘strike’ price and the average market price.
Low Carbon Contracts Company (LCCC)
Difference payments under the CfDs are funded through a levy paid by licensed energy suppliers. The LCCC is the company established by Government to collect this levy, manage the CfDs and pay or receive the contracted difference payments. The LCCC is managing all 73 CfD contracts.
Accounting for fair value
In order to comply with the relevant accounting standards, the Department is required to estimate the ‘fair value’ of future CfD payments. Difference payments under CfDs can be positive (an asset) or negative (a liability) and are currently recognised as a liability. The matching asset arising from the statutory obligation on suppliers is not recognised under the FReM. The CfD liability figure is calculated using a model that estimates eligible generation, by CfD holders and combines this with forecast expected demand for electricity and electricity prices over the term of the contract (which are affected by a large number of factors including forecast expected generation mix and demand for electricity). The figures in the financial statements represent management's best current estimate within a range of scenarios and will be subject to change over time.
- In accordance with accounting standards the initial fair value of any contract is deferred i.e. not recognised in the accounts. As at 31 March 2020, the cumulative value of the deferred differences of the CfDs (excluding HPC) was (£22.3 billion) and (£73.1 billion) (including HPC) (31 March 2019: (£23.3 billion) (excluding HPC)).
- The Department recognises all subsequent movements of fair value on CfD contracts, whose cumulative value was (£89.6 billion) (including HPC) at 31 March 2020 (31 March 2019: (£35.2 billion)) through the Statement of Comprehensive Net Expenditure.
- The Department recognises a liability, which was (£16.5 billion) as at 31 March 2020 (31 March 2019: (£12.9 billion)) on the Statement of Financial Position.
The tables below show movements in the year. Further details on the CfDs are in the note 9 to the financial statements.
HPC
During the current year, as explained further in note 1.26, BEIS updated its Dynamic Dispatch Model to estimate wholesale electricity prices out to 2060. As a result, it is considered that the criteria for recognition have been met and accordingly HPC CFD has been recognised in the financial statements for the first time in 2019-20. At 31 March 2020 the deferred value of HPC was £50.8 billion. See note 9 for further information. Effect on the Statement of Financial Position
| | 2019-20 £bn | 2018-19 £bn | |------------------|-------------|-------------| | 01-Apr | 12.9 | 15.9 | | Changes in FV on exiting recognised contracts | 4.4 | (2.7) | | Release of CfD liability relating to terminated contracts | – | – | | Payments made to generators | (1.7) | (1.0) | | Deferred differences recognised | 0.9 | 0.7 | | 31-Mar | 16.5 | 12.9 |
Movements in fair value
| | 2019-20 £bn | 2018-19 £bn | |------------------|-------------|-------------| | 01-Apr | 35.2 | 39.2 | | Changes in fair value on exiting recognised contracts | 4.4 | (2.7) | | Additions | 0.9 | – | | Recognition of HPC CFD during the year | 50.8 | – | | Release of CfD liability relating to terminated contracts | – | (0.3) | | Payments made to generators | (1.7) | (1.0) | | 31-Mar | 89.6 | 35.2 |
Effect on the Statement of Comprehensive Net Expenditure
| | 2019-20 £bn | 2018-19 £bn | |------------------|-------------|-------------| | Contract for difference derivatives | 5.3 | (2.0) | | comprising: | | | | Changes in FV on exiting recognised contracts | 4.4 | 2.7 | | Release of CfD liability relating to terminated contracts | – | – | | Deferred differences recognised | 0.9 | 0.7 |
(b) Impact of changes in discount rates
Discount rates
Some of our priorities carry obligations that are very long-term and will involve expenditure over decades to come. The eventual costs of these long-term projects are uncertain but we are required to present a single number in the annual accounts. This single number is based on our best estimate of costs, technology and other relevant factors, adjusted to reflect the changing value of money over time.
The worth of the Department’s future cash flows are calculated at present value in accordance with accounting standards. This present value reflects the time value of money. The accounts use a number of different discount rates depending on the nature of the transaction and the regulation applicable.
In the past, the time value of money has usually been positive which means money could be invested in the present for a return in the future that would exceed the rate of inflation – this is known as a positive ‘real’ return. Government bonds are seen as a low risk form of investments. Usually, therefore, government bonds bring a lower rate of return than other investments. As bonds pay a fixed cash amount when they mature, the higher the price paid for the bonds now, the lower the rate of return is considered to be. Following the global financial crisis, demand for lower–risk investments increased, particularly government bonds. As a result, the price of government bonds rose. This has resulted in government bonds providing a negative ‘real’ return. The long-term discount rate has been negative since 2015. In 2019-20, the long term discount rate remains negative but not to as significant extent as in prior years.
When negative discount rates are applied to the Department’s long-term obligations, this has the effect of significantly increasing the reported value of the liabilities, however, with the decrease of the negative discount rate this has resulted in a decrease in the report value of the liabilities this year. Even when the cash the Department expects to pay has not changed substantially, year on year. But not all rates are negative. For investment appraisal government continues to use positive rates, to ensure that projects are correctly appraised and generate future benefits. These accounts use positive discount rates to determine the present value of future income generated from assets and investments. When positive rates have been used to discount future cash receipts, then the present value of them is lower than the cash the Department will receive. The following tables set out the specific material balances in our accounts that have been discounted. The impact of the discounting can be assessed by comparing the discounted value with the undiscounted value.
**Impact on assets.**
Assets have been discounted at positive rates. This means that the present value is lower than the cash the Department expects to receive. For financial instruments we are required to use the prescribed HM Treasury discount rate of 0.7% real and 3.7% nominal, or the rate of return implicit in the contract if higher. For the repayable launch investments, we assessed the implicit rate to be 3.5% plus RPI; 2019-20: RPI was 3.35% (2018-19: RPI was 2.6%) giving an implicit rate of 6.85% (2018-10: 6.10%).
**Impact on liabilities.**
Liabilities continue to be discounted at a negative rate in 2019-20. The present value of the liabilities is therefore higher than the value the Department expects to pay in the future. The discount rate has been negative since 2015 because return on government bonds has been lower than inflation due to increased demand for government bonds since the financial crisis.
The specific assets and liabilities that have been discounted are shown the in table below. Provisions from the NDA and the Coal Authority relate to the expected future cost of managing the energy legacy. The fair value of the CfD has been adjusted using the 0.7% real term discount rate.
| Nuclear decommissioning provisions | 2019-20 | 2018-19 | Rationale | |------------------------------------|---------|---------|-----------| | Short term < 2 years | -1.36% | -1.22% | Set by HM Treasury Public Expenditure System (PES) Secretariat 7 December 2019 | | Short term 2 – 5 years | -1.46% | -1.31% | | | Medium-term 6 -10 years | -1.42% | -0.94% | | | Long-term > 10 years | -0.01% | -0.11% | |
| CfD financial instruments | | | | |------------------------------------|---------|---------|-----------| | Real rate (as cashflows are in real terms) | 0.70% | 0.70% | as above |
| Coal pensions | | | | |------------------------------------|---------|---------|-----------| | Real rate + 3% RPI (as contractual figures are in nominal values) | 3.7% | 3.70% | as above: financial instruments discount rate (non-indexed) |
| Repayable launch investments | | | | |------------------------------------|---------|---------|-----------| | Higher of the implicit rate of return or the financial instrument’s rate | 3.50% | 3.50% | Risk-free rate for government investment appraisal set by HM Treasury Green Book, adjusted for inflation | | RPI 3.35% | | | | | RPI 2.60% | | | |
**Notes**
1 HM Treasury provided nominal and Inflation rates for discounting provisions for 2018-19, rather than Real rates as they have in prior years. The values above are real rates for 2019-20 and 2018-19 taking into account the nominal and inflation rates for 2019-20 and 2018-19. Further details of the nominal and inflation rates are given in the Departmental Group Accounting Policies note 1.23 The impact of discounting
| | 2019-20 With discounting £m | 2019-20 Without discounting £m | 2019-20 Impact of discounting £m | 2018-19 With discounting £m | 2018-19 Without discounting £m | 2018-19 Impact of discounting £m | |----------------------|-----------------------------|--------------------------------|----------------------------------|-----------------------------|--------------------------------|----------------------------------| | **Assets** | | | | | | | | Repayable launch | 833 | 1,098 | (265) | 1,058 | 1,348 | (290) | | investments | | | | | | | | Coal pensions | 808 | 916 | (108) | 920 | 1,058 | (138) | | **Liabilities** | | | | | | | | NDA nuclear provision| 134,677 | 131,864 | 2,813 | 129,709 | 123,311 | 6,398 | | Coal Authority provision | 2,306 | 2,275 | 31 | 2,299 | 2,174 | 125 | | **Financial instruments** | | | | | | | | CfD liability | 85,583 | 100,903 | (15,320) | 35,249 | 37,176 | (1,927) |
(c) NDA provisions
NDA manage the clean-up and decommissioning of 17 nuclear licensed sites across the UK – such as former nuclear power stations and research centres. Some of these sites date from the earliest days of nuclear power. Unlike modern nuclear facilities, decommissioning of these sites was not built into plans or designs.
Decommissioning of sites will take many decades. In part, this is because plans often include periods of ‘care and maintenance’, where sites are made safe and put into an interim state, allowing residual amounts of radioactive material to decay over time. By doing this, the final stages of decommissioning will be easier and safer to complete.
NDA’s best estimate of the future costs of the estate over the next 100+ years on an undiscounted basis is £132 billion. This figure is based on dealing with an assumed inventory of materials with varied radiological characteristics and using the extant strategy for retrieval and disposal of the resulting materials over several decades. Each of these elements is uncertain in its own right – the cost of developing the necessary technology and plants to deal with these activities is also uncertain. The quality of the forecast becomes less certain the longer the projection.
NDA has reviewed the methodologies used in the calculation, taking into account HM Treasury Green Book guidance and the need to remove optimism bias. Projects like these could typically have a range of estimates from -50% to +300%. In light of uncertainties in the estimate, NDA considers it prudent to present a credible range of outcomes. The range presented for the current year is for undiscounted costs of £115 billion to £246 billion.
(d) COVID-19 business support grant provision
As detailed in note 1.26 the government’s COVID-19 business support grants have been recognised in 2019-20, resulting in a provision for £10.8 billion being recognised in note 18.2. These grants have been paid out in 2020-21, clearing the liability. Sustainability report
Introduction We are committed to sustainability in the way we make policy, procure goods and services and impact the environment.
As part of our commitments to environmental sustainability, we take part in the Greening Government Commitments (GGC). In line with GGC, we report on our greenhouse gas emissions, waste arising, and water and paper use in this report.
Sustainability in policy development
Rural proofing Rural proofing is about recognising the impact of our policies in rural areas, to ensure policy outcomes are fair and reasonable in these areas.
The Cities and Local Growth Unit (CLGU) works to encourage economic growth and productivity in all parts of England, Towns in rural areas, such as Bloxwich and Todmorden are being supported to develop Town Deals. Rural coastal towns have received the Coastal Communities Fund.
Climate change adaptation Climate change adaptation refers to adapting to the consequences of climate change. We contribute to the cross-government National Adaptation Plan, published every 5 years. It sets out how risks of extreme weather events will be managed (e.g. flood resilience measures) for communities, the built environment, businesses and local government.
Sustainable procurement
Suppliers We use Crown Commercial Service frameworks to procure our goods and services. The procurement service works with its partners to ensure sustainability goals are achieved.
Engagement with small and medium enterprises We have achieved the government target of 33% direct procurement and through the supply chain two years ahead of schedule. We continue to promote opportunities with SMEs through open competition, early market engagement and use of government frameworks wherever we can.
Prompt payments It is government policy to pay 90% of undisputed invoices within 5 days, with the remainder paid in 30 days. In 2019-20, the Core Department paid 94.3% of undisputed invoices within 5 days and 99.1% within 30 days.
The most common reasons for invoices to be unpaid within 30 days are due to: amounts on the purchase order not matching the receipt, or a supplier has used a different address or bank details, which does not match the invoice. These issues need to be resolved before payments are made.
Environmental sustainability
Green Guardians Our Green Guardians network, a group of staff volunteers, supports BEIS in achieving its environmental sustainability targets through being a strong staff engagement channel on initiatives that support our GGC targets.
Greenhouse gas emissions We continue to make significant progress in reducing our greenhouse gas emissions, in line with the targets set by the GGC, through consolidation of our estate and energy efficiency improvements.
Waste We have fully segregated our waste streams by installing bins for recycling a variety of materials. We have also eradicated the majority of consumer single use plastics throughout the Department. Water & paper We are accredited to ISO 50001 (energy efficiency) and ISO1400 (waste management). We are reviewed annually against these standards and we will seek continuous improvement in both. We have a closed paper cycle whereby all paper is recycled for reuse.
Food and catering We are committed to sustainable, and where possible, British food products, and have eliminated single use plastics from our catering provision.
Sustainable construction We have had no new builds in the last year. We work with the Government Property Agency who hold our leases to ensure any construction work prioritises sustainability and reaches the government’s buying standard.
Biodiversity & the natural environment We have no significant impact on biodiversity. HMLR continues to work with FM providers on a phased plan to improve the biodiversity at all sites appropriate for such activity; in the past year this has been achieved at Hull and Fylde with plans for Durham and Plymouth progressing.
At Hull and Fylde, HMLR have built on the existing landscape and vegetation to increase the sites’ biodiversity value. Vegetation and habitats that support native species of plants and invertebrates have been prioritised and nurtured, whilst new plants and bug houses have been added to support the habitats.
Summary of progress on Greening Government Commitments
| | Targets by 2019-20 compared to the 2009-10 Baseline | Progress in 2019-20 | |--------------------------------|---------------------------------------------------|---------------------| | Total GHG Emissions | reduce by 66% | 71% reduction | | Number of domestic flights | reduce by 30% | 71% reduction | | Total non-hazardous waste arising | reduce generally | 73.68% increase | | Waste to landfill | reduce proportion to 10% | reduced to 4.57% in 2019-20 | | Waste recycled, reused, composted | increase generally | 68.27% increase | | Volume of water used | reduce generally | 55.63% reduction | | Reams of paper procured | reduce by 50% | 83.29% reduction |
Notes 1 66% is the new 2020 target for BEIS. The original target of 40% has been exceeded; in 2016-17, we had achieved 51% reduction. Further information is available at the GGC page on gov.uk.
## Reporting on Greening Government Commitments
| Greenhouse gas emissions | 2019-2020 | 2018-2019 | 2017-18 | 2016-17 | Baseline 2009-10 | |--------------------------|-----------|-----------|---------|---------|------------------| | **Emissions, tonnes CO₂e** | | | | | | | Scope 1<sup>1</sup> | 4,730 | 6,644 | 8,007 | 6,109 | 17,837 | | Scope 2<sup>2</sup> and 3<sup>3</sup> | 13,905 | 16,037 | 22,325 | 25,480 | 46,507 | | **Total** | 18,634 | 22,681 | 30,332 | 31,589 | 64,344 | | **Related energy consumption, MWh** | | | | | | | Electricity: non-renewable | 14,242 | 28,661 | 29,221 | 30,360 | 45,324 | | Electricity: renewable | 15,968 | 15,596 | 17,429 | 19,541 | 38,676 | | Gas | 11,282 | 20,347 | 36,186 | 29,071 | 62,905 | | District heating | 24 | 114 | 149 | 125 | – | | Other heat | 802 | 9,210 | 6,824 | 2,664 | 9,865 | | **Total** | 42,318 | 73,928 | 89,809 | 81,761 | 156,770 | | **Related expenditure, £’000** | | | | | | | Energy | 7,349 | 7,460 | 6,755 | 6,467 | n/a | | CRC licence<sup>4</sup> | n/a | 298 | 598 | 497 | n/a | | Official business travel<sup>5, 6</sup> | 13,035 | 16,907 | 7,559 | 11,660 | n/a | | **Total** | 20,384 | 21,015 | 14,912 | 18,624 | n/a | | **Domestic business flights** | | | | | | | Total number of domestic flights<sup>7</sup> | 3,860 | 4,503 | 2,689 | 5,125 | 8,078 | | **Waste** | | | | | | | Total waste generated, tonnes | 1,971 | 2,137 | 2,468 | 2,159 | 7,541 | | Non-hazardous: to landfill | 90 | 300 | 289 | 197 | 2,986 | | Non-hazardous: reused/ recycled | 1,248 | 1,293 | 1,779 | 1,775 | 4,107 | | Non-hazardous: composted/ bio-digestion | 63 | 79 | 49 | 60 | 25 | | ICT waste: reused | 2 | – | – | – | 7 | | ICT waste: recycled | 36 | 30 | 11 | 51 | 2 | | Incinerated: e.g. food waste | 532 | 536 | 389 | 181 | 448 | | **Total disposal cost, £’000** | 553 | 404 | 468 | 432 | n/a | | **Water and paper** | | | | | | | Water consumption, m³ | 125,774 | 115,907 | 110,457 | 126,468 | 283,495 | | Water supply and sewage costs, £’000 | 461 | 489 | 325 | 329 | n/a | | Paper procured, reams | 47,509 | 71,335 | 61,825 | 97,893 | 441,134 |
### Notes
Entities include: i. BEIS Core Department, ii. Companies House, iii. Intellectual Property Office, iv. Land Registry, v. Natural Environment Research Council, vi. Nuclear Decommissioning Authority, and vii. Ordnance Survey
1. Scope 1: direct emissions from sources owned or controlled
2. Scope 2: indirect emissions from consumption of purchased electricity or sources of energy generated upstream
3. Scope 3: other indirect emissions occurring as a consequence of BEIS’ operations, but not directly owned or controlled by BEIS
4. CRC ended in 2018-19
5. 2018/19 expenditure on official business travel data has been updated to include Land Registry and some data for IPO not previously captured.
6. Expenditure on official business travel for NERC does not include international flights
7. Domestic flight figures for 2018-19 and 2019-20 now count each part of a return journey as one flight, in line with the GGC reporting requirement. In previous years, a return journey counted as one flight.
8. Some data for March 2020 has been estimated (in line with reporting guidance methodologies) due to issues posed by COVID-19 Other performance reporting
Anti-bribery and anti-corruption
No cases of bribery or corruption were identified within BEIS this year.
We have continued to work with other departments and organisations to maintain standards and implement best practice. Our policy on gifts, hospitality and bribery and corruption has been refreshed and updated. A standard template Gifts and Hospitality register has been produced for each directorate to record gifts and hospitality over a value of £15 and any reciprocal gifts given. These registers are reviewed by the BEIS Counter Fraud team.
We have ongoing collaboration with other government departments on high risk areas such as overseas funding, and we have continued to manage risks with an internal dimension and those involving overseas delivery partners.
Fraud, anti-bribery and corruption awareness continues to be promoted by the BEIS Counter Fraud team, through workshops, network meetings and the availability of training. This includes mandatory training for front-line staff and managers in high risk areas. We have seen an increase of nearly 20% in training uptake. Communications activity is ongoing – the national “Take Five – To Stop Fraud” campaign messaging has been adopted both internally and with BEIS partner organisations.
Public correspondence
We aim to respond to 80% of our correspondence within 15 working days.
In 2019-20, we received 5,099 written enquiries from members of the public, and responded to 87% of cases within 15 working days. The graph shows our monthly performance. Advertising campaigns
Our communications directorate contributes to the successful delivery of major policy areas. We communicate through a range of marketing, press and public relations, digital and internal channels and partnership activities that are insight driven and robustly evaluated. We do, where necessary, engage in publicity and advertising to draw attention to important campaigns with the right audiences.
In 2019-20 we ran advertising campaigns to support business growth including advertising to support businesses to prepare for Brexit as part of the Cabinet Office ‘Get Ready’ campaign, workers on national and living wage and to help future proof skills relevant to the engineering industry.
Complaints to the Parliamentary Ombudsman
| No. complaints accepted for investigation | 6 | |------------------------------------------|---| | (a) Investigations fully upheld | 0 | | (b) Investigations partly upheld | 3 | | (c) Investigations not upheld | 4 |
Note Figures for (b) and (c) may include complaints accepted in earlier years.
These figures have been obtained directly from the Parliamentary and Health Service Ombudsman for the period 2018-19, and provide the most recent data available. Neither the 2018-19 nor the 2019-20 Parliamentary Complaints Statistics reports have been published.
The Ombudsman only accepts complaints that have been through the BEIS internal complaints process. We aim to answer all formal complaints via [email protected] within 20 working days. Only a small percentage of complaints we receive are escalated to the Ombudsman.
Sarah Munby Permanent Secretary and Principal Accounting Officer 11 September 2020 Page intentionally left blank Accountability report Corporate governance report
Statement of Accounting Officer’s responsibilities
Under the Government Resources and Accounts Act 2000 (the GRAA), HM Treasury has directed the Department for Business, Energy and Industrial Strategy to prepare, for each financial year, consolidated resource accounts detailing resources acquired, held or disposed of, and the use of resources, during the year by the Department (inclusive of its Agencies) and its sponsored non-departmental public bodies and other arm’s-length public bodies designated by order made under the GRAA by Statutory Instrument 2020 no 17 (together known as the ‘Departmental Group’, consisting of the Core Department and sponsored bodies listed at note 28 to the accounts). The accounts are prepared on an accruals basis and must give a true and fair view of the state of affairs of the Department and Departmental Group, and of the income and expenditure, Statement of Financial Position and cash flows of the Departmental Group for the financial year.
In preparing the accounts, the Accounting Officer of the Department is required to comply with the requirements of Government Financial Reporting Manual and in particular to:
- observe the Accounts Direction issued by the Treasury, including the relevant accounting and disclosure requirements, and apply suitable accounting policies on a consistent basis;
- ensure that the Department has in place appropriate and reliable systems and procedures to carry out the consolidation process;
- make judgements and estimates on a reasonable basis, including those judgements involved in consolidating the accounting information provided by non-departmental and other arm’s-length public bodies;
- state whether applicable accounting standards as set out in the Government Financial Reporting Manual have been followed, and disclose and explain any material departures in the accounts;
- prepare the accounts on a going concern basis;
- confirm that the Annual Report and Accounts as a whole is fair, balanced and understandable and take personal responsibility for the Annual Report and Accounts and the judgements required for determining that it is fair, balanced and understandable.
HM Treasury has appointed the Permanent Head of the Department as Accounting Officer of the Department for Business, Energy and Industrial Strategy.
The Accounting Officer of the Department has also appointed the Chief Executives (or equivalents) of its sponsored non-departmental and other arm’s length public bodies as Accounting Officers of those bodies.
The Accounting Officer of the Department is responsible for ensuring appropriate systems and controls are in place to ensure any grants the Department makes to its sponsored bodies are applied for the purposes intended and that such expenditure and the other income and expenditure of the sponsored bodies are properly accounted for, for the purposes of consolidation within the resource accounts. Under their terms of appointment, the Accounting Officers of the sponsored bodies are accountable for the use, including the regularity and propriety, of the grants received and the other income and expenditure of the sponsored bodies. The responsibilities of an Accounting Officer, including responsibility for the propriety and regularity of the public finances for which the Accounting Officer is answerable, for keeping proper records and for safeguarding the assets of the Department or non-departmental or other arm’s length public body for which the Accounting Officer is responsible, are set out in Managing Public Money published by HM Treasury.
**Accounting Officer’s confirmation**
As Accounting Officer, I have taken all the steps I ought to have taken to make myself aware of any relevant audit information and to establish that the Department’s auditors are aware of that information. So far as I am aware, there is no relevant audit information of which the auditors are unaware.
**Sarah Munby**\
Permanent Secretary and Principal Accounting Officer\
11 September 2020 Directors’ report
The directors’ report includes individuals who have had responsibility for BEIS during the year, and up to the reporting date. Senior officials comprise members of the Executive Committee.
Ministers
Rt Hon Alok Sharma MP from 14 Feb 2020 Secretary of State for Business, Energy, and Industrial Strategy
Rt Hon Kwasi Kwarteng MP from 24 Jul 2019 Minister of State (Minister for Business, Energy and Clean Growth)
Nadhim Zahawi MP from 26 Jul 2019 Parliamentary Under Secretary of State (Minister for Business and Industry)
Amanda Solloway MP from 14 Feb 2020 Parliamentary Under Secretary of State (Minister for Science, Research, and Innovation)
Paul Scully MP from 14 Feb 2020 Parliamentary Under Secretary of State (Minister for Small Business, Consumers and Labour Markets)
Lord Callanan from 14 Feb 2020 Parliamentary Under Secretary of State (Minister for Climate Change and Corporate Responsibility)
Lord Grimstone from 18 Mar 2020 Minister for Investment (jointly with the Department for International Trade)
Senior officials
Sarah Munby from 20 Jul 2020 Permanent Secretary
Julian Critchlow Director General
Joanna Whittington Director General
Jo Shanmugalingam from 15 Jul 2019 Director General
Jae Samant Director General
Professor John Loughhead Director General
Tom Taylor Chief Financial Officer; Director
Craig Woodhouse from 15 Jul 2019 Director
Ashley Ibbett from 14 Apr 2020 Director General (interim)
Mike Keogh from 14 Apr 2020 Director
Chris Thompson from 14 Apr 2020 Director
Doug Watkins from 13 Jul 2020 Acting Director General (interim) previously a Director
1 Sarah Munby was a Director General from 15 July 2019 to 20 July 2020, when she was appointed the Permanent Secretary taking over from Sam Beckett who was the Acting Permanent Secretary from 14 April 2020 to 19 July 2020. Non-executive directors
Archie Norman DB, Lead non-executive
Nigel Boardman DB, ARAC Chair
Leena Nair DB, NOMS Chair
Stephen A. Carter DB
Carolyn McCall DB
Kathryn Parsons DB
Stuart Quickenden DB ARAC
Elaine Clements from 10 Apr 2019 ARAC
Louise Fisher NOMS
Bryan Ingleby ARAC
Adrian Kamellard from 10 Apr 2019 ARAC
Catherine Pridham PIC
Leavers
Those who left ministerial, executive, and non-executive positions during the year
Ministers
Rt Hon Greg Clark MP To 24 Jul 2019 Secretary of State for Business, Energy, and Industrial Strategy
Rt Hon Claire Perry MP To 24 Jul 2019 Minister of State for Energy and Clean Growth
Rt Hon Chris Skidmore MP To 25 Jul 2019; then from 10 Sep 2019 to 13 Feb 2020 Minister of State for Universities, Research, and Innovation
Andrew Stephenson MP From 04 Apr to 25 Jul 2019 Parliamentary Under Secretary of State, Minister for Business, and Industry
Rt Hon Jake Berry MP From 07 Jun to 25 Jul 2019 Parliamentary Under Secretary of State, Minister for Northern, Powerhouse and Local Growth
Rt Hon Lord Henley To 26 Jul 2019 Parliamentary Under Secretary of State
Rt Hon Jo Johnson MP From 24 Jul to 05 Sep 2019 Minister of State for Universities, Science, Research and Innovation
Kelly Tolhurst MP To 13 Feb 2020 Parliamentary Under Secretary of State, Minister for Small Business, Consumers and Corporate Responsibility
Rt Hon Andrea Leadsom MP From 24 Jul 2019 to 13 Feb 2020 Secretary of State for Business, Energy, and Industrial Strategy
Lord Duncan From 26 Jul 2019 to 13 Feb 2020 Parliamentary Under Secretary of State, Minister for Northern, Powerhouse and Local Growth
Senior officials
Gareth Davies To 03 May 2019
Gavin Lambert Interim from 15 Apr to 12 Jul 2019
Sam Lister To 05 Feb 2020
Nick Chism Interim from 15 Apr to 12 Jul 2019
Alex Chisholm To 09 Apr 2020
Caleb Deeks To 09 Apr 2020
Sarah Harrison To 10 Jul 2020
Sam Beckett To 24 August 2020
Non-executive directors
Claire Davies To 1 Jun 2019 ARAC
Myriam Madden To 30 Jan 2020 ARAC Report of the lead non-executive director
The last 12 months have seen a great deal of change. Most of this reporting period has been largely dominated by preparing for EU Exit, with or without a deal, and on moving into the transition period. The end of the reporting period has, of course, been dominated by the COVID-19 pandemic and the Government’s response to that. In both of these events, BEIS has played a central role in preparing and planning for the UK’s economic future.
The Board has also seen a period of change, as it has been led by three different Secretaries of State, with largely different Ministerial teams, and there have also been significant changes in the Department’s senior team. The membership of the Non-Executive Board Members has not changed since last year and providing continuity and support to the Department. The Department’s Non-Executive Board Members continue to be engaged in Departmental business, providing challenge, valuable expertise and an independent voice across a range of areas. The Board has come together in both formal and informal settings to help drive the Departmental agenda and, more recently, provide advice and support as the Department responds to the COVID-19 pandemic. Throughout the reporting period, the Department’s Audit and Risk Assurance Committee, led by Nigel Boardman, has been very active and has continued to provide independent challenge and scrutiny. It has helped to improve the way that the Department approaches risk, as well as the assurance and compliance environment, and has actively fostered links with the ARAC committees in the Department’s Partner Organisations.
Looking at the year ahead, this year will continue to be challenging for BEIS as the Department’s delivery agenda has grown substantially. I, and my non-executive colleagues, will endeavour to continue to support and advise the Department as the country moves towards the recovery phase of the pandemic, to EU Exit and beyond. I wish to thank the dedicated and excellent staff for their vital work and look forward to continuing to support them as they work to deliver the government’s objectives, which are vital on both the national and international stage. Governance statement
Overview The governance statement sets out how the Department is governed and how decisions are made at the top executive level, and summarises the topics discussed by the Board, the Executive Committee and their delegated committees. It sets out the governance of the Department’s partner organisations (POs) and considers the risk management of the Department and its internal controls.
Our board structure
- **Nominations and governance committee**
- Role: senior level remuneration and succession planning
- **Departmental board**
- Role: directs strategy, performance management and risk management
- **Audit and risk assurance committee**
- Role: assurance of audit and risk control functions.
- **Executive Committee**
- Role: manages the day-to-day running of BEIS – resource, policies and programmes, including Brexit programme
- **People and operations committee**
- Role: manages human resources, estates and digital
- **Performance and risk committee**
- Role: monitors frameworks for performance against targets, budgets and risks
- **Projects and investment committee**
- Role: approvals of key investment proposals and projects
- **Shadow people and operations committee**
- Role: staff advisory body
- **Challenge function for performance and risk committee**
- Role: to support P&R committee in its’ assessment of Performance and Risk report
- **Keyholder panel for the projects and investments committee**
- Role: assurance of investment proposals
## Board and committee attendance
The table below shows board attendance from 1 April 2019 to 31 March 2020, where scheduled meetings were held. Where members were unable to attend meetings in person, they were able to share their views in advance with the chair.
| Departmental Board | Nominations and governance committee | Audit and risk assurance committee | Executive committee | |--------------------|--------------------------------------|-----------------------------------|---------------------| | **Total number of meetings held** | 4 | 1 | 6 | 25 | | **x /x = number attended /number eligible to attend** | | | | |
### Ministers
| Name | Departmental Board | Nominations and governance committee | Audit and risk assurance committee | Executive committee | |------|--------------------|--------------------------------------|-----------------------------------|---------------------| | Rt Hon Greg Clark MP (to 24 Jul 2019) | 1 /2 | | | | | Rt Hon Andrea Leadsom MP (from 24 Jul 2019 to 13 Feb 2020) | 2 /2 | | | | | Rt Hon Alok Sharma MP (from 13 Feb 2020) | 1 /1 | | | | | Rt Hon Kwasi Kwarteng MP (from 24 Jul 2019) | 1 /2 | | | | | Rt Hon Chris Skidmore MP (until 24 Jul 2019; then from 10 Sep 2019 to 13 Feb 2020) | 2 /2 | | | | | Rt Hon Claire Perry MP (to 24 Jul 2019) | 1 /2 | | | | | Rt Hon Jo Johnson MP (from 24 Jul to 5 Sep 2019) | 1 /1 | | | | | Nadim Zahawi MP (from 26 Jul 2019) | 2 /2 | | | | | Kelly Tolhurst MP (to 13 Feb 2020) | 1 /4 | | | | | Lord Duncan (from 26 Jul 2019 to 13 Feb 2020) | 1 /2 | | | | | Lord Callanan (from 14 Feb 2020) | 0 /1 | | | | | Paul Scully MP (from 13 Feb 2020) | 1 /1 | | | | | Amanda Solloway MP (from 14 Feb 2020) | 1 /1 | | | |
### Senior officials/executive directors
| Name | Departmental Board | Nominations and governance committee | Audit and risk assurance committee | Executive committee | |------|--------------------|--------------------------------------|-----------------------------------|---------------------| | Alex Chisholm | 4 /4 | 1 /1 | 1/6 | 23/25 | | Sam Beckett | 1 /1 | | | 20 /25 | | Nick Chism (to 5 Feb 2020) | | | | 12/21 | | Julian Critchlow | 1 /1 | | | 23/25 | | Sarah Harrison | 3 /4 | 4/6 | | 18/25 | | John Loughhead | | | | 17/25 | | Sarah Munby (from 15 Jul 2019) | 1 /1 | | | 15/19 | | Jae Samant | 4 /4 | | | 21 /25 | | Jo Shannmugalingam (from 15 Jul 2019) | 1 /1 | | | 13 /19 | | Joanna Whittington | 1 /1 | | | 22/25 | | Gavin Lambert (interim DG from 30 Apr to 18 Jul 2019) | | | | 4 /7 | | Sam Lister (interim DG from 30 Apr to 18 Jul 2019) | | | | 5 /7 | | Tom Taylor | 3 /4 | 6/6 | | 20 /25 | | Caleb Deeks | 1 /1 | | | 23 /25 | | Doug Watkins | | | | 20 /25 | | Craig Woodhouse (from 15 Jul 2019) | | | | 17 /19 |
### Non-executive directors
| Name | Departmental Board | Nominations and governance committee | Audit and risk assurance committee | Executive committee | |------|--------------------|--------------------------------------|-----------------------------------|---------------------| | Archie Norman | 4 /4 | | | | | Nigel Boardman | 4 /4 | | | 6/6 | | Leena Nair | 3 /4 | 0 /1 | | | | Stephen A. Carter | 3 /4 | | | | | Carolyn McCall | 3 /4 | | | | | Kathryn Parsons | 4 /4 | | | | | Stuart Quickenden | 4 /4 | | | 6/6 | | Elaine Clements | | | | 6/6 | | Claire Davies (to 1 Jun 2019) | | | | 6/6 | | Louise Fisher | | | | 2/2 | | Bryan Ingleby | | | | 6/6 | | Adrian Kamellard | | | | 6/6 | | Myriam Madden (to 30 Jan 2020) | | | | 4/6 |
## Coverage of Departmental Board discussions
| Strategy | Discussion | Action | Progress | |----------|------------|--------|----------| | Strategy | Future economy | The board discussed support to UK businesses and economy if World Trade Organisation (WTO) rules were in effect. | BEIS revised its policy, developing sector analysis under WTO rules scenario | | Brexit | The Board continued discussions on departmental preparations for Brexit – focused on communications plans, trade and negotiation options facing the UK. | The Board commissioned business-related sector analysis to discuss at future board meetings. | | Project Kingfisher and Sectoral and Regional Competitiveness | Project Kingfisher refers to cross-government preparations to respond to potential economic impacts of Brexit. The Board discussed BEIS’ approach to using business intelligence to monitor, anticipate and coordinate responses to economic impacts on business. | The Board’s suggestions were incorporated into policy development | | New Work Agenda | Non-executive directors (NEDs) led the discussion on the New work agenda (NWA) from a business perspective, challenged the thinking and assumptions | The Board identified apprenticeships need to be part of NWA; joint working with DfE continued. | | UKRI | The Board discussed UKRI’s operating context, related challenges and support required to enable it to develop its leadership capabilities and grow as an organization. | BEIS offered advice and the next phase of UKRI’s growth | | Net Zero carbon emissions | The Board discussed the challenges of climate change and meeting net zero targets; provided guidance on next steps for reducing the Department’s emissions. | Endorsed plans for cross Whitehall policy cooperation, and CoP 26 Bid | | Competition and Consumers | The Board welcomed need for policy reform, while challenging the early stage policy assumptions, definitions and purpose | The policy was revised to reflect the board suggestions on purpose, clarity and focus. | | Governance and risk | BEIS’ objectives and priorities | The Board provided challenge on BEIS’ forward work programme for 2019; continued setting priorities to strengthen governance overall. | The work programme has been amended based on the steer from the Board. | | Single Departmental Plan | The Board’s discussion on BEIS objectives and priorities supported the development of the Single Departmental Plan (SDP). | The lead non-executive board member contributed to the development of the SDP. | | Risk appetite and risk management | The Board endorsed the Risk Appetite Statement; encouraged ARAC members to observe board meetings; endorsed the programme for ARAC NEDs to attend POs ARAC meetings. | We embedded the risk appetite statement throughout BEIS. The online reporting tool was enhanced to allow POs to record and report against risks. This provides assurance that risks are correctly managed and recorded. | | Operations | People Survey | The Board considered results from the 2019 People Survey; discussed plans to raise engagement scores and develop leadership initiatives. | The work-place transformation programme has been reshaped as result of board input. | | The 21st Century Workplace: Progressive, Modern and Innovative | The Board critically evaluated how to set the foundations for transforming the workplace, while building capability to maximise the use of technology. | Shaping our Future objectives were revised to reflect the Board’s suggestions on ambition and boldness. | Board’s evaluation of its effectiveness
All departments are requested by the Cabinet Office to carry out an annual board effectiveness evaluation. The Board completed a light touch assessment for 2019-2020, as a more in-depth board evaluation assessment is expected in 2020-2021 in line with Cabinet Office guidance.
Overall, the Board’s evaluation of its effectiveness indicated that the composition of the Board is sound and effective. However, more work needs to be done to ensure better communication and visibility between the Board and delegated Committees to improve governance.
In addition to formal board meetings, Board members met for introductory meetings with the newly appointed Secretaries of State in September 2019 and March 2020. Non-Executive Board members have also been active in supporting the executive team throughout the year by providing guidance and advice on a range of issues.
Highlights of Nominations and governance committee
The success of any organisation is based on valuing its people. This involves having a good strategy for personal and career development. The Nominations and governance committee (NGC) only met once in 2019-2020, but instead considered issues by correspondence. During 2019-2020, NGC has focused on:
- senior level talent in BEIS; and
- the implementation of the staff performance management systems.
Highlights of Audit and risk assurance committee
Audit and risk assurance committee (ARAC) plays a crucial role in supporting the effective governance in BEIS. During 2019-20 ARAC has worked to:
- improve the risk management procedures through critical challenge and reviewing the risk registers and risk framework;
- build a relationship with POs that is strong and transparent;
- examine financial management and financial reporting;
- oversee the process to ensure the appropriate recognition of Hinkley Point C in the accounts;
- working with NAO & GIAA to test and monitor the delivery of their audit plans;
- improve the internal assurance structure and processes by providing guidance;
- monitor BEIS’ application of the Business Appointment Rules – rules to prevent former civil servants and ministers being able to profit from their knowledge within Whitehall;
- introduce an exchange programme for ARAC members and PO ARAC members;
- consider how legal risks should be better identified, reported and managed throughout the group- this work will be ongoing through the next reporting year;
- ensure the Department’s implementation of recommendations from NAO, GIAA and Public Accounts Committee (PAC);
- support the launch of the Controls and Assurance Tool (CAT) for teams to log and self-assess the first and second lines of defense;
- oversee the development and rollout of the new departmental risk management framework; and;
- start a rolling programme to seek governance assurance from individual DGs at ARAC meetings.
Highlights of Executive committee
Executive committee (ExCo) is the key body to which the Departmental Board delegates the day-to-day management of BEIS. Over the last year, ExCo has focused on:
- the Industrial Strategy and Grand Challenges;
- monitoring the performance of the Department’s major programmes;
- delivering Net Zero;
- business planning and the SDP; • the delivery capacity and target operating model of the department; • the diversity and inclusion strategy; and • the refresh of the departmental risk register, including risk horizon scanning.
Brexit programme In addition, the committee holds fortnightly meetings on the Brexit programme to manage identified Brexit related issues. Following Brexit, the committee meetings now have an additional focus on free trade agreements and progress on EU engagement.
Highlights of ExCo subcommittees
People and operations committee People and operations committee (POPCo) considers matters relating to human resources, accommodation, security and IT. In the last 12 months to March 2020, POPCo has worked to: • establish the BEIS graduate and experienced entrant programme; • monitor the success of the performance management system; • promote diversity and inclusion policy; • review the health and safety policy; • oversee the works of the estate and security team; and • oversee the works of the estate and security team.
Performance and risk committee Performance and risk committee (P&R) reviews matters relating to performance and risks. In 2019, it underwent a thorough review which led to a renewed mandate to: • provide assurance on the performance and delivery of major programmes including those delivered by our POs; • provide assurance on the departmental Risk Framework; • review departmental risk and risks associated with delivery programme – especially where this was operating outside the BEIS Risk Appetite Statement; • review performance against agreed milestones and outcomes and provided assurance on the use of the BEIS monitoring and evaluation framework; and • assess performance against the Department’s internal control and assurance framework.
Projects and investments committee The Project and investment committee (PIC) reviews investment proposals over £20 million or those considered risky, novel or contentious. During 2019-20, PIC: • initiated the fast-track process so no-deal Brexit contingency investments could be reviewed in a timely manner; • maintained high standards and supported the development of business cases; and • ensured the approvals processes are well aligned to promote a streamlined approach.
COVID-19 adjustments At the very end of the reporting period, a specific COVID-19 ExCo was set up to respond to the Coronavirus pandemic. This had a larger composition than the Departmental ExCo, and met frequently during the first stage of the pandemic to steer the Department’s response to the pandemic and to consider the effects on our staff. The governance relating to Coronavirus will be reported fully in next year’s annual report and accounts.
Additionally, all committee meetings have been held remotely since the 18 March 2020. These meetings have been successful and productive, largely down to the flexibility of committee members. All meetings have been set up and supported by the Governance Secretariat. Register of interests
Board Members are required to declare any personal or business interests which may influence their judgement, or be perceived to, when performing their duties. BEIS has an established procedure for considering, approving and recording conflicts of interest. In addition to this at the commencement of each Board meeting, members of the Board are required to declare any interests they may have. In 2019-20 there was only one conflict of interests registered during the meeting and it was addressed accordingly.
Biographies of our leadership team
Biographies of our Board members are available at https://www.gov.uk/government/organisations/department-for-business-energy-and-industrial-strategy/about/our-governance
Board appointments
There have been changes in both Ministerial and executive appointments to the board. The board composition has reflected changes to the Ministerial leadership of the Department in 2019-2020 as all members of the Ministerial team have been appointed to the board. There have also been changes to the executive team on the board. Please refer to the table on committee and board attendance for further detail.
Compliance with the corporate governance code
Our approach to governance is in line with ‘the code’ – Corporate Governance in Central Government Departments: Code of Good Practice without exception.
Since BEIS is responsible for corporate governance and champions women on boards, BEIS seeks to be a leader in this area too. There are two targets for Board membership: Lord Davies’ target for 33% female Board membership and Sir John Parker’s target of one BAME Board member. By March 2020, BEIS Board’s gender diversity was at 35% and included four BAME members.
Quality of data used by the Board
Departmental Board meetings covered a variety of topics. Board papers were of high quality.
The meetings were efficient, and challenge was encouraged. BEIS’s governance team provides a comprehensive secretariat service to the Board and committees to ensure the effective and efficient administration of the Board and its activities.
Governance of our POs
In 2019-20, BEIS had 40 POs with a wide span of policy and operational responsibilities. We receive assurance on risks and delivery through; the BEIS corporate reporting system; day to day relationship through sponsors and DG accountability for the organisations; PO governance statements; and our ARAC members engaging with individual PO ARACs.
Significant issues arising within POs are covered in their respective governance statements. BEIS has over-sight of its POs throughout the year and considers any significant issues presented in their governance statements.
Grants to local government
In 2019-20, the Department provided £189.46 million as grants to local authorities under section 31 of the Local Government act 2003. £151 million of this was in relation to the COVID-19 response grants.
Quality assurance of analytical models
BEIS has had a single modelling quality assurance (QA) process since April 2017, which complies with the AQuA book. Our modelling integrity team co-ordinates independent assurance for models and plans. This ensures our models are based on appropriate understanding of evidence and risks.
We have identified 80 analytical models in use across BEIS with 90% of these having the required level of assurance. Those models that are non-compliant have plans to reach compliance targets in 2020-21. We ensure our contacts in POs undertaking modelling are aware of BEIS QA guidelines. Effectiveness of our risk management and internal controls
The Government Internal Audit Agency (GIAA) provides the internal audit service for BEIS. For 2019-20, the Group Chief Internal Auditor provided a “moderate” opinion.
The GIAA concluded that BEIS has continued with the positive trend in internal control, while committing resources to Brexit preparations and implementing complex policy programmes, such as the Industrial Strategy and the Clean Growth Strategy.
GIAA has acknowledged the implications that BEIS’ response to the COVID-19 pandemic will have in 2020, but this has not detracted from their conclusions for 2019-20.
The audit of our risk management framework and practice positioned BEIS as a top performing department and a catalogue of good practice is being drawn from across BEIS.
No audits received an unsatisfactory opinion, and only two a limited opinion, for which actions are in hand to address the recommendations made by internal auditors.
Progress made on risk management
In 2019-2020, BEIS delivered several risk management initiatives that have been recognised across government and have been replicated in other departments. We refreshed our risk management framework and continued to embed it, working with our network of deputy director risk champions.
We developed and introduced a risk appetite statement, working with the Audit and Risk Assurance Committee and seeking views from key colleagues across government. We fed into a review of the Performance and Risk Committee, resulting in a revised term of reference with a sharper focus on risk. We continued to develop our online risk management tool and ensured directorate and group level risks were being reported on regularly to enable better oversight of the risk landscape of the Department and to facilitate a more robust process for risk escalation.
We opened our reporting tool to our POs, who report quarterly to BEIS, to submit their reports. We introduced league tables of compliance to support this work and to assess the quality of the content uploaded. Finally, we refreshed the Departmental risk register through a horizon scanning session with our Executive Committee, to ensure these remained relevant given the changing environment.
While a huge amount of work was done over the year, it is recognised that most of the focus has been on getting the right processes and tools in place. There is more work to do to embed a risk management culture across the Department and to improve open and transparent risk management between BEIS and its POs.
Internal controls environment
BEIS aims to continuously improve the efficiency and effectiveness of the internal control environment within the Department. During the course of 2019-20 actions have been taken to communicate expectations around compliance to staff, improve our processes to make it easier for staff to comply with controls, and provide Management Information (MI) to help senior managers understand how effectively they are operating.
Work completed includes:
- continuing to ensure that audit actions are implemented in a timely fashion with 78% of internal audit actions due in 2019/20 completed;
- launching a line manager hub and surgery to help line managers understand their key responsibilities and improving access to guidance and support;
- launching an improved Oracle interface to help staff do things more easily and accurately across Finance, HR and the Procurement processes;
- providing new sources of MI to help SCS understand the quality of our data and improve compliance with HR processes; and • successfully piloted an online Controls and Assurance Tool (CAT) during 2019-20, which is providing a means of systematically assessing how effectively the Department’s controls are being implemented.
Although BEIS has made progress throughout 2019-20, the Department recognises there is still further work to be done around culture of compliance. Traditionally weak areas such as recording starters and leavers remains an area for continued focus, with the implications this has for overpayments and return of IT equipment and security passes. Process and compliance improvement work within the Department will aim to make further progress in these key areas, which GIAA through their audit work in FY2020-21 will help to assess. While 78% of actions due in 2019/20 have been completed, there were 37 overdue actions. To address this, we are improving our tracking and reporting of actions, to make it easier to assess how the Department is performing in addressing audit recommendations.
Work will also continue to improve the functionality of the new Oracle interface, including by linking processes such as expenses to enable a more accurate and timely reimbursement of claims. The approach to MI is being expanded, including prompt payment, finances and expenses, which will help improve our insight to how effectively controls are operating. Following the initial rollout, the CAT is also being developed further to better align with the Department’s risk framework, make better use of new sources of MI, and reflect work to map the Departments controls and assurance processes.’
Data protection
BEIS notified the Information Commission’s Office (ICO) of one personal data breach assessed as meeting the ICO’s reporting guidelines. The ICO determined regulatory action was not appropriate but made one recommendation which BEIS has administered.
Information security
No significant cyber breaches were reported in 2019-20. Malicious content on the web continues to be a significant risk to the Department. We have seen a growth in the volume of generic Phishing emails as well as increases in whaling (phishing targeted at specific high value targets). We continue to work to ensure all our services meet ISO27001 standards, recently completing a significant cyber security assessment under the GBEST scheme and adding a Security Operations Centre.
Counter-fraud and error
During 2019-20, levels of fraud detected across the BEIS group of organisations were similar to previous years. We continue to be successful in preventing fraud. We are also starting to recover funds following successful prosecutions of frauds committed in previous years. There was a continued increase of attempted frauds against the public imitating BEIS and its POs.
We achieved an overall ‘green’ rating from the Cabinet Office in taking forward our action plan and worked with them to implement improvements. The level of staff in key roles who have completed counter fraud training has increased following successful awareness campaigns, which were well received.
Towards the end of 2019-20, our focus was on the enhanced risks of fraud and error associated with the COVID-19 business support and loan guarantee schemes. These will inevitably dominate much of what we do in the next reporting period.
Ministerial directions
Ministerial directions are formal, technical instructions from the Secretary of State which allow the Department to proceed with a spending proposal in a situation where the Accounting Officer has raised an objection. The Accounting Officer is accountable to parliament for ensuring that all expenditure meets the standards under Managing Public Money (MPM) and has a duty to seek a direction if they believe one of the four criteria (regularity, propriety, value for money or feasibility) will not be met. If a direction is given, the Accounting Officer will no longer be challenged by the Public Accounts Committee on why they took forward the policy. However, they might still need to explain the course of the action and the minister’s reasoning.
During the 2019-20 financial year, and up to the date of this report, ten ministerial directions were issued.
**British Steel Limited**
A Ministerial Direction was given for the continuation of the Official Receiver’s (OR) indemnity to pursue a sale of British Steel Limited (BSL).
When BSL entered compulsory liquidation on 22 May 2019, the OR issued a deadline of 10 November 2019 for bidders to give the OR suitable confidence that a sale could complete shortly. Without this, the OR would commence a shutdown process of the BSL site. By the deadline date, significant progress had been made with a potential buyer, but the Department was yet to see a rigorous business plan.
HMG support to continue the sales process would not satisfy the minimum value for money consideration. However, the justification for site sale were the wider benefits – the closure of the site would result in job losses, impacting the local economy and would also have a significant strategic impact on the UK steel sector with key sectors such as construction and rail being disrupted.
The Ministerial Direction was given on 11 November 2019 authorising the continuation of support to British Steel.
On 9 March 2020, the sale of BSL was completed by the OR.
**Coronavirus Business Interruption Loan Scheme**
A second Ministerial direction was given, authorising the Coronavirus Business Interruption Loan Scheme (CBILS) to temporarily replace the Enterprise Finance Guarantee (EFG) Scheme, increasing the loan value available to £5 million and to introduce a twelve-month interest free period.
Given the speed at which the scheme was developed, there was little robust data available to conclude that they met the value for money requirements of MPM. At the time of introducing the scheme, there were also that were subject to State Aid approval. Discussions with the Commission had provided comfort that they expected the Schemes to be approved, but formal notification had not been received.
The Ministerial Direction was given on 22 March 2020 proceed with the introduction of the scheme.
**Support fund for retail, hospitality and leisure businesses**
A third Ministerial Direction was given authorising a grant fund to help protect businesses in the retail, hospitality and leisure sectors from the impact of COVID-19.
Any assessment carried out by the Department in relation to the fund would have been comparing immeasurable and unknown benefits against significant and known costs. It was not possible for the Department to reliably demonstrate the economic impact of the proposal and provide the necessary assurance that is represented value for money in line with the requirements of MPM.
The Ministerial Direction was given on 23 March 2020 to proceed with the implementation of the fund.
**Small Businesses Grant Fund**
A fourth Ministerial Direction was given authorising a grant fund to help protect small businesses from the impact of COVID-19.
The absence of available evidence meant that the Department was unable to provide a reliable value for money measurement by weighing the possible benefits against costs. There were also concerns around the feasibility of the scheme due to the speed local authorities were expected to make payments and the related operational difficulties to administer the fund efficiently.
The Ministerial Direction was given on 23 March 2020 to proceed with the delivery of the scheme. Coronavirus Business Interruption Loan – Changes to Scheme
A fifth Ministerial Direction was given authorising changes to the Coronavirus Business Interruption Loan Scheme (CBILS), including removing the requirement for a personal guarantee for loans under £250,000, and removing the requirement for borrowers to show that they would have been unable to secure finance outside of a government backed loan.
The speed at which events unfolded did not allow sufficient time for a full value for money assessment to be undertaken and there remained risks around the ability to deliver at this volume. Uncertainties over likely demand and future costs of the scheme, and provision of budget cover were highlighted.
The Ministerial Direction was given on 2 April 2020 to proceed with the changes to the scheme.
Coronavirus Large Business Interruption Loan Scheme
A sixth Ministerial Direction was given authorising the introduction a new scheme to support firms that have a turnover of more than £45 million per annum, to be known as the Coronavirus Large Business Interruption Loan Scheme (CLBILS).
Due to the speed at which the intervention was developed, it was difficult to assess ex-ante whether value for money was likely to be achieved meaning a wide range of outcomes are possible.
The Ministerial Direction was given on 16 April 2020 to proceed with the introduction of the scheme.
Local Authority Discretionary Grants
A seventh Ministerial Direction was given authorising the introduction of the COVID-19 Local Authority Discretionary Grants Fund. This fund provides local authorities with discretion to administer a grant scheme to help support small businesses in their localities who are not in scope of either of the existing grant schemes.
As with the previous two COVID-19 business grant schemes there were uncertainties around the value for money of the scheme. And on the basis of available information at the time, it was not possible to construct a business case to clearly demonstrate that the funding represented value for money to the standards expected by MPM.
The Ministerial Direction was given on 1 May 2020 to proceed with the introduction of the scheme.
Bounce Back Loan Scheme
An eighth Ministerial Direction was given authorising the introduction of the ‘Bounce Back’ Loan (BBL) Scheme which enables businesses to access loans of up to £50,000, capped at 25% of turnover, with 100% of the lending risk assumed by government.
The direction was required because of uncertainty around the value for money case and risk to regularity and propriety of the scheme from fraud and error. Whilst steps were planned to tackle fraud, the eventual level could not be reliably estimated in advance.
The Ministerial Direction was given on 1 May 2020 to proceed with the introduction of the scheme.
Future Fund
A ninth Ministerial Direction was given to implement the Future Fund, which aims to provide an incentive for equity funds and angel investors to continue to support the development trajectory of innovative, high-growth businesses. It is designed to encourage investors to continue to back companies that would have received investment in the absence of the pandemic and are now struggling to raise their next funding round.
The view of Accounting Officer was that whilst standards around feasibility, regularity and propriety had been met, based on the limited information and the range of analysis that had been conducted, it was not possible to conclude that the scheme represented value for money at the time. The Ministerial Direction was given on 19 May 2020 to proceed with the introduction of the Future Fund.
OneWeb A tenth Ministerial Direction was given authorising the purchase, via a consortium, of OneWeb, a satellite technology company with the ambition to provide global broadband. A UK based company, representing an opportunity for UK interests globally.
Professional financial advice on OneWeb’s prospects was sought, which determined that a positive return on the investment might be achieved. However, it was also noted that a broad range of uncertainties and possible outcomes around the case remained, making it hard to be confident in the underlying assumptions or the likely returns.
Due to the time and data available, HM Treasury had not subjected the investment to the scrutiny of a full Green Book compliant business case, including considering whether alternative options for investment might provide a better return.
UK Space Agency were consulted for an independent technical assessment and highlighted a high likelihood of further investment being required, increasing the risk that further HMG investment would be required in order to realise the potential benefits.
The view of the Accounting Officer was that whilst risks around regularity, propriety and feasibility were manageable, value for money required a direction.
The Ministerial Direction was given on 26 June 2020 to proceed with the purchase of OneWeb.
Effectiveness of our whistle blowing arrangements
Internal whistle blowing Our procedures are accessible to all employees and offer six different routes for employees to raise concerns, including via an external whistleblowing hotline. In 2019-20 we had a low number of whistleblowing concerns raised, which is consistent with previous years. In our 2019 People Survey we had an increased majority of staff reporting that they had confidence that any concerns raised under the Civil Service Code would be properly investigated.
External whistle blowing A small number of whistle blowers reported concerns during 2019-20. We have discussed internally and with POs, ways in which we can help staff come forward. We are looking to extend our awareness campaign in this area and offer workshops to cover the topic. Some of our Agencies have also chosen to access our external whistleblowing hotline. The volume of calls to this line is low. Cases have predominantly been referred to us through HR and the National Audit Office. Accounting Officer’s conclusion
I have considered the evidence provided regarding the annual governance statement and the independent assurance provided by ARAC. BEIS received a “moderate” opinion on the framework of governance, risk management and control within the Department for 2019-20. Even though the opinion remained the same as last year, the Department has continued to make improvements to our governance, risk management and control environment throughout the past year.
Last year BEIS successfully delivered a significant amount of policy work and progressed its major programmes such as the Industrial Strategy and the move to a Net Zero, whilst planning and preparing for Brexit. At the same time the Department faces challenges in aligning the work and priorities of other government bodies in order to achieve its objectives in 2020-2021.
During 2020-21, our top priority will be on delivering the COVID-19 response and steering the economic recovery. We will also focus on:
- working on Brexit negotiations and delivering Net Zero;
- implementing a proportionate assurance regime over the third parties delivering the grant, loan and guarantee schemes;
- embedding a culture of compliance and improving internal assurance mapping processes;
- enhancing the departmental Knowledge Management capability;
- BEIS’s litigation and cyber security risks and reporting on these; and
- further developing the POs governance framework, with strong links between BEIS and UKGI.
Sarah Munby Permanent Secretary and Principal Accounting Officer 11 September 2020 Staff report
Overview The staff report highlights employee matters in the year. It also provides required disclosures on staff activity, staff numbers and expenditure in 2019-20.
Introduction This year we have continued to make BEIS a great place to work in what has been a challenging and positive year for the Department. We continue to make improvements in staff engagement and launched our new Diversity & Inclusion Strategy. We supported the Department’s work on exiting the EU through a largescale mobilisation of people across the Department to meet new priorities. This helped us learn how to be agile and responsive to new challenges, which has proved vital now that we are supporting the Department’s response to COVID-19.
Employee matters
Health, safety, and well-being We consider the wellbeing of our people very important and we have an exceptionally good well-being offer.
We offer events covering all areas of wellbeing, such as training in resilience, stress management, mental health talks, disability awareness, and an annual sports day.
We have over 200 staff trained as Mental Health First Aiders based throughout our offices. The mental health first aider role gives first support to those who seek help due to a mental health concern.
We also offer the Employee Assistance Programme – phone-based counselling, on work and life issues, free, confidential, and available to all employees.
In 2019, we published the BEIS Voluntary reporting on disability, mental health, and wellbeing’. This framework shows what we have achieved in supporting staff and building resilience for good mental health.
We have a strong record in providing a safe and supportive work environment. In 2019-20, there were three reported injuries within ‘reporting of injuries, diseases and dangerous occurrences Regulations 2013’. We encourage staff to ask for reasonable adjustments as part of our workstation assessment programme.
COVID-19 adjustments The Department has played and continues to play a vital role in the UK’s response to the COVID-19 incident, supporting businesses, workers and the economy. As a department we moved from being predominantly office-based, to working almost entirely remotely in a matter of days, in accordance with public health advice. The success of our organisation’s response has been as much about people’s agility and flexibility as the technology. We have placed a strong emphasis on health, safety and wellbeing, ensuring that people are well supported to work from home. We work closely with Civil Service HR on the short and long-term implications of COVID-19.
Diversity and inclusion We focus heavily on diversity and inclusion. We are all different in some way. We each experience the world differently and have stories to tell about it. We make the most of these differences to solve important and complex policy issues facing the country, business and the environment. In doing so, we continue to make BEIS a great place to work.
1 https://www.gov.uk/government/publications/disability-mental-health-and-wellbeing-support-in-our-workplace-beis-voluntary-report-2019 During the year we have:
- increased the diversity of our workforce;
- rolled out micro behaviours training to over 700 staff;
- undergone the Stonewall Workplace Equality Index 2020. We were ranked 137 out of 503 employers, up from 270 out of 445 employers last year; and
- in the 2019 people survey, maintained a score of 83% for ‘inclusion and fair treatment’, up from 80% in 2017.
**Employee engagement**
In the 2019 BEIS people survey; we achieved a response rate of 92%. Overall, our results have remained stable when compared with 2018. The outcomes for eight of the nine survey themes have either stayed the same or improved.
This is a positive result given this had been a year with additional pressure and change for all. It is also within the context of the significant progress we have made in the Engagement Index and other key areas since 2016.
Our former Transformation programme, which launched in 2017, delivered several critical improvements, such as a new pay deal which takes BEIS into the top 50% across Whitehall, a new performance management system (PMS), an overhaul of technology, launch of the BEIS intranet and extensive business skills training.
**Shared parental leave**
During 2019-2020, 35 of our employees took advantage of BEIS’ policy on shared parental leave (SPL) and pay (ShPP).
It is a statutory entitlement to parents and adopters. It gives parents the choice to shorten the mother’s maternity leave and pay and share the balance as SPL and ShPP. We continue to promote this flexibility to our employees.
**Gender pay gap**
The mean pay of male employees vs mean pay of female employees had a difference of 10.1%. The median gender pay gap was 10.2%. This continues the trend in narrowing the gap, and are the lowest figures since reporting was introduced in 2017.
**Bonus gap**
The mean bonus pay to relevant male employees vs mean bonus pay to relevant female employees had a difference of 12.7%. The median bonus gap was 17.9%. Although figures have fluctuated in previous years, these remain in line with previous years.
**Bonus proportions**
As in 2018, the proportion of men who received a bonus was 83.4%; the proportion of women who received a bonus was 83.7%.
**Quartile pay bands**
The proportions of male and female employees in the bottom quartile was 60/40 split in favour of women. The proportions of male and female employees in the top quartile was 60/40 split in favour of men. Figures are in line with 2017.
**Closing the gender pay gap**
To close the gender pay gap, one of our main priorities is to increase representation of women at senior levels. To do this, we aim to retain a workforce that is diverse, talented, and supported to achieve its potential.
On recruitment, we have introduced initiatives to produce job adverts that are more inclusive and to ensure interview panels are more diverse. We also overhauled our approach to performance management in 2018-19. We moved us away from lengthy processes, to conversations with a real focus on development. This will allow us monitor diversity of outcomes on performance more easily.
The full Gender Pay Gap report for 2019 can be found at [https://www.gov.uk/government/publications/beis-gender-pay-gap-report-and-data-2019](https://www.gov.uk/government/publications/beis-gender-pay-gap-report-and-data-2019) Executive pay gap This is disclosed under ‘fair pay’ as part of the remuneration report on page 87.
Staff policies applied for disabled staff We are committed to ensuring equality for all our people, including those with disabilities. We make clear in our job application process – candidates with a disability who apply for a post under the guaranteed interview scheme, automatically go forward to the interview stage, provided they meet the minimum criteria. We also promote external vacancies in a range of diversity media. Where staff are identified as needing reasonable adjustments, these will be provided.
We have an active staff network – Capability Action Network (CAN) – which champion the needs of people with disabilities and long-term health conditions. They work with HR and other areas of the Department to create positive change. As a result of feedback from CAN new line managers will now undertake an e-learning course on ‘disability inclusive management’ as part of their induction.
Sickness absence data Average working days lost to sickness absence in 2019-20 for the Core Department, UKSA and INSS were 3.5, 9.3 and 6.6, respectively. Staff composition
Figures represent full-time equivalent (FTE) persons on payroll as at 31 March 2020.
| Gender | Men | Women | Total | |--------|-----|-------|-------| | All employees | 2,269 | 2,040 | 4,309 | | All employees % | 53% | 47% | 100% | | All senior civil servants | 133 | 109 | 242 | | Executive committee | 10 | 6 | 16 |
Disability
Declaration rate: 75%. Representation for staff who have declared:
- No: 84%
- Yes: 10%
- Prefer not to say: 6%
Ethnicity
Declaration rate: 79%. Representation for staff who have declared:
- White: 78%
- BAME: 18%
- Prefer not to say: 4%
Sexual orientation
Declaration rate: 80%. Representation for staff who have declared:
- Straight: 84%
- LGBT+: 8%
- Prefer not to say: 8%
## Trade union facility time
| Union officials | Core Department and Agencies | Other agencies not consolidated in the accounts¹ | Total | |-----------------|------------------------------|-----------------------------------------------|-------| | Number of employees who were relevant union officials | 42 | 44 | 86 | | Full-time equivalent persons | 38.80 | 41.85 | 80.65 |
### Number of employees by working hours spent on facility time
| Working hours | Core Department and Agencies | Other agencies not consolidated in the accounts¹ | Total | |---------------|------------------------------|-----------------------------------------------|-------| | 0% of working hours | 4 | 6 | 10 | | 1 - 50% of working hours | 38 | 38 | 76 |
### Facility time as a % of pay bill
| Facility time as a % of pay bill | Core Department and Agencies | Other agencies not consolidated in the accounts¹ | Total | |----------------------------------|------------------------------|-----------------------------------------------|-------| | Total cost of facility time (£) | 101,858 | 108,116 | 209,974 | | Total pay bill (£) | 365,640,202 | 208,105,626 | 573,745,828 | | Facility time as a % of pay bill | 0.03% | 0.05% | 0.08% |
### Paid trade union activities
| Paid trade union activities | Core Department and Agencies | Other agencies not consolidated in the accounts¹ | Total | |-----------------------------|------------------------------|-----------------------------------------------|-------| | (Hours spent on paid trade union activities ÷ total paid facility time hours) * 100 | 0.00% | 7.37% | 7.37% |
### Notes
1 agencies not consolidated in Departmental Group accounts: CH, IPO, Met Office Number of senior civil servants by salary band
The table below shows the number of full-time equivalent (FTE) senior civil servants (SCS) by salary bands, in the Core Department. It includes those on open-ended contracts and fixed term contracts. Salary ranges represent actual salary rates; bonuses are not included.
| Salary range | Number of SCS staff as at 31 March 2020 | Number of SCS staff as at 31 March 2019 | |--------------------|----------------------------------------|----------------------------------------| | £60,000 - £64,999 | – | 3 | | £65,000 - £69,999 | 35 | 74 | | £70,000 - £74,999 | 84 | 54 | | £75,000 - £79,999 | 31 | 21 | | £80,000 - £84,999 | 20 | 13 | | £85,000 - £89,999 | 4 | 9 | | £90,000 - £94,999 | 28 | 26 | | £95,000 - £99,999 | 9 | 6 | | £100,000 - £104,999| 6 | 5 | | £105,000 - £109,999| 2 | 2 | | £110,000 - £114,999| 3 | 3 | | £115,000 - £119,999| 2 | 2 | | £120,000 - £124,999| 1 | 5 | | £125,000 - £129,999| 7 | 5 | | £130,000 - £134,999| 1 | 3 | | £135,000 - £139,999| – | 1 | | £140,000 - £144,999| 2 | 3 | | £145,000 - £149,999| 2 | 1 | | £150,000 - £154,999| 1 | 1 | | £155,000 - £159,999| 1 | 1 | | £160,000 - £164,999| 1 | 2 | | £170,000 - £174,999| 1 | 1 | | £180,000 - £184,999| 2 | 2 | | **Total** | **242** | **242** |
The remuneration of civil servants is based on performance ratings. The performance ratings are determined by the permanent secretary and directors general in post during the year. Names of those in post are listed in the box below.
Permanent secretary and directors general between 1 April 2019 to 31 March 2020
- **Alex Chisholm** Permanent Secretary
- **Sam Beckett** Director General
- **Nick Chism** Chief Business Adviser (to 5 February 2020)
- **Julian Critchlow** Director General
- **Sarah Harrison** Director General
- **John Loughhead** Chief Scientific Adviser
- **Sarah Munby** Director General (from 15 July 2019)
- **Jae Samant** Director General
- **Jo Shanmugalingam** Director General
- **Joanna Whittington** Director General
- **Gavin Lambert** Director General (interim) (from 15 April 2019 to 12 July 2019)
- **Sam Lister** Director General (interim) (from 15 April 2019 to 12 July 2019)
- **Gareth Davies** Director General (to 3 May 2019) Analysis of staff numbers and costs
Audited information
Staff numbers
The average number of full time equivalent persons employed in 2019-20 is shown in the table below.
| Number of staff by category | Permanent employed staff | Others | Ministers | Special advisers | Total 2019-20 | Total 2018-19 | |-----------------------------|--------------------------|--------|-----------|------------------|---------------|---------------| | Core | 4,345 | 182 | 6 | 3 | 4,536 | 4,062 | | Agency | 1,854 | 57 | – | – | 1,911 | 1,743 | | Non departmental public bodies (NDPBs) | 13,370 | 1,031 | – | – | 14,401 | 14,562 | | Total | 19,569 | 1,270 | 6 | 3 | 20,848 | 20,367 | | Of which: | | | | | | | | Core Department and Agencies | 6,199 | 239 | 6 | 3 | 6,447 | 5,805 | | NDPBs and other designated bodies | 13,370 | 1,031 | – | – | 14,401 | 14,562 | | Total | 19,569 | 1,270 | 6 | 3 | 20,848 | 20,367 |
Staff costs
During the year, £19,608,726 of staff costs were capitalised, (2018-19: £18,519,467) and 354 employees (2018-19: 386 employees) in the Departmental Group were engaged on capital projects during the reporting period.
Staff severance costs for current and prior year are included in wages and salaries. Further detail on exit packages is included on page 71.
| Permanent employed staff | Others | Total 2019-20 | Total 2018-19 | |--------------------------|--------|---------------|---------------| | Wages and salaries | 855 | 73 | 928 | 855 | | Social security costs | 95 | – | 95 | 86 | | Other pension costs | 217 | – | 217 | 179 | | Sub total | 1,167 | 73 | 1,240 | 1,120 | | Less recoveries in respect of outward secondments | – | – | – | (1) | | Total net costs | 1,167 | 73 | 1,240 | 1,119 | | Of which: | | | | | | Core Department and Agencies | 372 | 18 | 390 | 330 | | NDPBs and other designated bodies | 795 | 55 | 850 | 789 | | Total net costs | 1,167 | 73 | 1,240 | 1,119 | Pension schemes
Principal Civil Service Pension Scheme
Nuclear site licence companies are not included in these pension schemes. The Principal Civil Service Pension Scheme (PCSPS) and the Civil Servant and Other Pension Scheme (CSOPS), known as “Alpha”, are an unfunded multi-employer defined benefit scheme in which the Department is unable to identify its share of the underlying assets and liabilities. The scheme actuary valued the PCSPS as at 31 March 2016. Further details can be found in the resource accounts of the Cabinet Office Civil Superannuation (www.civilservicepensionscheme.org.uk/about-us/resource-accounts/).
For 2019-20, employer contributions of £100,753,599 were payable to the PCSPS (2018-19: £65,627,469) at one of four rates in the range 26.6% to 30.3% (2018-19: 20.0% to 24.5%) of pensionable pay, based on salary bands.
The scheme’s actuary reviews employer contributions usually every four years following a full scheme valuation. The contribution rates are set to meet the cost of the benefits accruing during 2019-20 to be paid when the member retires and not the benefits paid during this period to existing pensioners.
Employees can opt to open a partnership pension account, a stakeholder pension with an employer contribution. Employers’ contributions of £1,221,237 (2018-19: £1,192,970) were paid to one or more of the panel of three appointed stakeholder pension providers. Employer contributions are age-related and range from 8% to 14.75%. Employers also match employee contributions up to 3% of pensionable earnings. In addition, employer contributions of £17,180 (2018-19: £12,811), 0.5% (2018-19: 0.5%) were payable to the PCSPS to cover the cost of the future provision of lump sum benefits on death in service and ill health retirement of these employees.
Contributions due to the partnership pension providers at 31 March 2020 were £11,448 (2018-19: £38,599). Contributions prepaid at that date were £nil (2018-19: £nil).
In 2019-20, 43 persons (2018-19: 18 persons) across the Departmental Group retired early on ill-health grounds; the total additional accrued pension liabilities in the year amounted to £2,319,227 (2018-19: £1,134,823).
Other pension schemes
Employer contributions to other pension schemes in 31 March 2020, amounted to £232,281,655 (2018-19: £261,129,179). Employer contributions include employers’ contributions, current service costs and where appropriate past service costs of funded pension schemes. Further details can be found in the accounts of the Department’s NDPBs and other designated bodies. A list of these bodies is provided in note 27.
Nuclear site licence companies: staff numbers and costs
Staff costs for nuclear site licence companies (SLCs) are disclosed separately, as they are included in the amounts shown for utilisation in the NDA’s nuclear decommissioning provision in note 18 rather than being reported as staff costs in the Statement of Comprehensive Net Expenditure.
| Permanent employed staff | Others | Total | Total | |--------------------------|--------|-------|-------| | Number of staff (full time equivalent) | 14,324 | 1,104 | 15,428 | 15,869 | | Wages and salaries (£m) | 797 | 67 | 864 | 826 | | Social security costs (£m) | 90 | – | 90 | 88 | | Other pension costs (£m) | 144 | – | 144 | 148 | | Total costs (£m) | 1,031 | 67 | 1,098 | 1,062 | Exit packages
Audited information
Redundancy and other departure costs have been paid in accordance with the provisions of the Civil Service Compensation Scheme, a statutory scheme made under the Superannuation Act 1972. The table below shows the total cost of exit packages agreed and accounted for in 2019-20 (2018-19 comparative figures are also given). £19,975,567 exit costs were paid in 2019-20, the year of departure (2018-19: £3,133,979). Where the Department has agreed early retirements, the additional costs are met by the Department and not by the Civil Service pension scheme. Ill-health retirement costs are met by the Pension Scheme and are not included in the table.
| Exit package cost band | Number of compulsory redundancies | Number of other departures agreed | Total number of exit packages by cost band | |------------------------|-----------------------------------|----------------------------------|------------------------------------------| | | 2019-20 | 2018-19 | 2019-20 | 2018-19 | 2019-20 | 2018-19 | | Less than £10,000 | 2 | 7 | 11 | 23 | 13 | 30 | | £10,000 - £25,000 | 2 | 33 | 25 | 25 | 27 | 58 | | £25,000 - £50,000 | 19 | 13 | 32 | 25 | 51 | 38 | | £50,000 - £100,000 | 16 | – | 70 | 13 | 86 | 13 | | £100,000 - £150,000 | 1 | 1 | 25 | 4 | 26 | 5 | | £150,000 - £200,000 | – | – | 17 | – | 17 | – | | More than £200,000 | 1 | – | 35 | – | 36 | – | | Total number of exit packages | 41 | 54 | 215 | 90 | 256 | 144 |
Of which:
- Core Department and Agencies
- NDPBs and other designated bodies
| Total number of exit packages | 41 | 54 | 215 | 90 | 256 | 144 |
Total cost (£)
| | 2019-20 | 2018-19 | 2019-20 | 2018-19 | 2019-20 | 2018-19 | |------------------------|----------|----------|----------|----------|----------|----------| | Core Department and Agencies | – | – | 95,000 | 677,852 | 95,000 | 677,852 | | NDPBs and other designated bodies | 2,175,747 | 1,092,442 | 22,377,319 | 2,947,889 | 24,553,066 | 4,040,331 | | Total | 2,175,747 | 1,092,442 | 22,377,319 | 2,947,889 | 24,553,066 | 4,040,331 | Staff on loan
As at 31 March 2020, 1 member of staff permanently employed by the Core Department was attached on loan to another organisation on a short-term basis (loan duration up to six months) and 114 staff on a long-term basis (loan duration longer than six months). 2 people were attached to the Core Department on loan from other organisations on a short-term basis and 60 on a long-term basis. Costs relating to staff on short-term loans were charged to Administration budgets in cases where the Core Department paid the cost or would have been charged to Administration budgets had the Core Department paid the cost.
| Grade | Outward staff loans | Inward staff loans | |------------------------------|---------------------|--------------------| | | Less than 6 months | More than 6 months | Less than 6 months | More than 6 months | | Administrative assistant | – | – | – | – | | Executive officer | – | 6 | – | – | | Higher executive officer | – | 32 | – | 4 | | Senior executive officer | – | 18 | – | 6 | | Grade 7 | – | 39 | 1 | 31 | | Grade 6 | – | 11 | 1 | 12 | | Senior civil service | 1 | 8 | – | 7 | | Total | 1 | 114 | 2 | 60 |
EU Exit
An average of approximately 1,130 full-time equivalent staff were engaged on activities relating to EU Exit during 2019-20 (2018-19: 1,030).
Consultancy and Temporary staff expenditure
The Departmental Group’s expenditure on consultancy in 2019-20 was £55.6 million (2018-19: £61.9 million). The consultancy expenditure of executive agencies was £2.5 million (2018-19: nil) and the consultancy expenditure relating to arm’s length bodies was £41.7 million (2018-19: £51.9 million) of which £27.7 million (2018-19: £30.8 million) was related to Site Licence Companies. Consultants are hired to work on projects in a number of specific situations: where the Department does not have the skills set required; where the particular requirement falls outside the core business of civil servants; or where an external, independent perspective is required. When used appropriately, consultancy can be a cost effective and efficient way of getting the temporary and skilled external input that the Department needs. The Departmental Group’s expenditure on temporary staff in 2019-20 was £73 million (2018-19: £70 million), as detailed in the Staff costs note above. The increase year-on-year relates mainly to temporary staff recruited to support work associated with EU Exit preparations. We are committed to the consistent application of the Cabinet Office’s 2010 controls on consultancy and other spending. Off-payroll engagements
The tables below present data on our off-payroll engagements. Off-payroll engagements refer to workers who are paid off-payroll, without deducting tax and national insurance at source, typically contractors.
Table 1a: Off-payroll engagements as of 31 March 2020, for more than £245 per day and that last longer than 6 months
| At time of reporting, number that have existed for: | Total number | Less than 1 year | 1 to 2 years | 2 to 3 years | 3 to 4 years | 4 years or more | |---------------------------------------------------|--------------|-----------------|--------------|--------------|--------------|----------------| | **Core Department and Agencies** | | | | | | | | Core Department | 26 | 12 | 11 | 2 | 1 | 0 | | Insolvency Service | 4 | 1 | 3 | 0 | 0 | 0 | | UK Space Agency | 9 | 6 | 3 | 0 | 0 | 0 | | **Consolidated in the Departmental Group accounts, (excluding nuclear site licence companies)** | | | | | | | | Advisory, Conciliation and Arbitration Service | 1 | 0 | 0 | 1 | 0 | 0 | | Civil Nuclear Police Authority | 8 | 4 | 1 | 3 | 0 | 0 | | Coal Authority | 1 | 1 | 0 | 0 | 0 | 0 | | Competition Appeal Tribunal and Competition Service | 2 | 0 | 1 | 0 | 0 | 1 | | Diamond Light Source Ltd | 6 | 3 | 0 | 1 | 0 | 2 | | The Financial Reporting Council Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | Low Carbon Contracts Company Ltd | 1 | 1 | 0 | 0 | 0 | 0 | | Nuclear Decommissioning Authority | 36 | 15 | 13 | 4 | 3 | 1 | | Nuclear Decommissioning Authority Archives Ltd | 1 | 0 | 1 | 0 | 0 | 0 | | Radioactive Waste Management Ltd | 20 | 12 | 4 | 0 | 0 | 4 | | Oil and Gas Authority | 2 | 0 | 1 | 1 | 0 | 0 | | South Tees Site Company Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | UK Atomic Energy Authority | 110 | 29 | 37 | 15 | 7 | 22 | | UK Research and Innovation | 31 | 14 | 10 | 3 | 0 | 4 | | Innovate UK Loans Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | STFC Innovations Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | UK Shared Business Services Ltd | 13 | 0 | 8 | 4 | 1 | 0 | | **Not consolidated in the Departmental Group accounts** | | | | | | | | Groceries Code Adjudicator | 1 | 0 | 1 | 0 | 0 | 0 | | Pubs Code Adjudicator | 2 | 0 | 0 | 1 | 1 | 0 | | Small Business Commissioner | 2 | 2 | 0 | 0 | 0 | 0 | | **Total** | 276 | 100 | 94 | 35 | 13 | 34 | Table 2a: New off-payroll engagements, or those that reached 6 months in duration, between 1 April 2019 and 31 March 2020, for more than £245 per day and that last longer than 6 months
| Core Department and Agencies | Total number | Number assessed as in scope of IR35 assessment | Number assessed as outside scope of IR35 assessment | Number engaged directly (via PSC contracted to the Department) and are on the Departmental payroll | Number reassessed for consistency assurance purposes during the year | Number that saw change to IR35 status following the consistency review | |-----------------------------|--------------|-----------------------------------------------|---------------------------------------------------|---------------------------------------------------------------------------------|-------------------------------------------------|-------------------------------------------------| | Core Department | 19 | 5 | 14 | 0 | 0 | 0 | | Insolvency Service | 20 | 16 | 4 | 0 | 20 | 0 | | UK Space Agency | 23 | 9 | 14 | 0 | 0 | 0 | | Consolidated in the Departmental Group accounts, (excluding nuclear site licence companies) | | | | | | | | Advisory, Conciliation and Arbitration Service | 2 | 0 | 2 | 0 | 0 | 0 | | Central Arbitration Committee | 0 | 0 | 0 | 0 | 0 | 0 | | Civil Nuclear Police Authority | 8 | 0 | 8 | 0 | 8 | 0 | | Coal Authority | 1 | 0 | 1 | 0 | 0 | 0 | | Committee on Climate Change | 0 | 0 | 0 | 0 | 0 | 0 | | Competition Appeal Tribunal and Competition Service | 0 | 0 | 0 | 0 | 0 | 0 | | Diamond Light Source Ltd | 6 | 0 | 6 | 0 | 6 | 0 | | The Financial Reporting Council Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | Low Carbon Contracts Company Ltd | 3 | 2 | 1 | 0 | 1 | 0 | | Nuclear Decommissioning Authority | 15 | 4 | 11 | 0 | 0 | 0 | | Nuclear Decommissioning Authority Archives Ltd | 1 | 1 | 0 | 0 | 0 | 0 | | Radioactive Waste Management Ltd | 15 | 15 | 0 | 0 | 0 | 0 | | Oil and Gas Authority | 3 | 0 | 3 | 0 | 0 | 0 | | South Tees Site Company Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | UK Atomic Energy Authority | 56 | 56 | 0 | 0 | 0 | 0 | | AEA Insurance Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | UK Research and Innovation | 33 | 13 | 20 | 0 | 0 | 0 | | Innovate UK Loans Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | STFC Innovations Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | UK Shared Business Services Ltd | 13 | 0 | 13 | 0 | 11 | 0 | | Not consolidated in the Departmental Group accounts | | | | | | | | Pubs Code Adjudicator | 0 | 0 | 0 | 0 | 0 | 0 | | Small Business Commissioner | 2 | 2 | 0 | 0 | 0 | 0 | | Total | 220 | 123 | 97 | 0 | 46 | 0 | Table 3a: Off-payroll engagements of board members, and/or, senior officials with significant financial responsibility, between 1 April 2019 and 31 March 2020
| Core Department and Agencies | Number of off-payroll engagements of board members, and/or senior officials with significant financial responsibility | Total number of individuals on payroll and off-payroll that have been deemed ‘board members and/or senior officials with significant financial responsibility’ during the financial year | |-----------------------------|-----------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------| | Core Department | 0 | 31 | | Insolvency Service | 0 | 11 | | UK Space Agency | 0 | 9 | | **Consolidated in the Departmental Group accounts, (excluding nuclear site licence companies)** | | | | Advisory, Conciliation and Arbitration Service | 0 | 6 | | Central Arbitration Committee | 0 | 0 | | Certification Office for Trade Union and Employers’ Associations | 0 | 0 | | British Business Bank plc | 0 | 10 | | British Business Aspire Holdco Ltd | 0 | 2 | | British Business Finance Ltd | 0 | 10 | | British Business Financial Services Ltd | 0 | 4 | | British Business Investments Ltd | 0 | 4 | | British Patient Capital Limited | 0 | 3 | | BBB Patient Capital Holdings Ltd | 0 | 3 | | Capital for Enterprise Fund Managers Ltd | 0 | 3 | | Capital for Enterprise (GP) Ltd | 0 | 2 | | Capital for Enterprise Limited | 0 | 2 | | The Start-Up Loans Company | 0 | 2 | | Civil Nuclear Police Authority | 0 | 7 | | Coal Authority | 0 | 11 | | Committee on Climate Change | 0 | 14 | | Competition Appeal Tribunal and Competition Service | 2 | 6 | | Diamond Light Source Ltd | 0 | 6 | | The Financial Reporting Council Ltd | 0 | 2 | | Low Carbon Contracts Company Ltd | 0 | 8 | | Nuclear Decommissioning Authority | 0 | 17 | | Nuclear Decommissioning Authority Archives Ltd | 0 | 0 | | Radioactive Waste Management Ltd | 1 | 8 | | Oil and Gas Authority | 0 | 1 | | South Tees Site Company Ltd | 0 | 2 | | UK Atomic Energy Authority | 2 | 14 | | AEA Insurance Ltd | 2 | 2 | | UK Research and Innovation | 1 | 26 | | Innovate UK Loans Ltd | 0 | 0 | | STFC Innovations Ltd | 0 | 0 | | UK Shared Business Services Ltd | 0 | 2 | Number of off-payroll engagements of board members, and/or senior officials with significant financial responsibility
| Not consolidated in the Departmental Group accounts | Total number of individuals on payroll and off-payroll that have been deemed ‘board members and/or senior officials with significant financial responsibility’ during the financial year | |-----------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | British Hallmarking Council | 0 | 1 | | Groceries Code Adjudicator | 0 | 1 | | Pubs Code Adjudicator | 1 | 3 | | Small Business Commissioner | 2 | 4 | | **Total** | **11** | **237** |
Notes to table 3a: details of the exceptional circumstances that led to the engagements and duration of engagements
**Competition Appeal Tribunal and Competition Service**
One off-payroll member was appointed as a training provider, as the President of the Tribunal has a statutory duty to provide training to members of the Tribunal. They have been a member of the Tribunal since its inception in 2000 and have knowledge of its processes and case histories. They are a fellow of the Higher Education Academy among other qualifications. The President and the Registrar of the Tribunal view it as very important that the training provider continues to develop and deliver training, as well as support other engagements.
Duration: appointed in 2013, and the contract was renewed in 2015 and 2017.
The other off-payroll member also had been a member of the Tribunal sitting on cases with new legislation was appointed to the training committee. The second member assists the first member to prepare training materials, and they also provide the training along with the first member. They are gaining understanding of the training activities to provide training in the absence of the first member.
Duration: appointed in January 2019.
**Radioactive Waste Management**
The off-payroll person is a Swedish national with unique experience in successfully leading the delivery of the GDF programme in Sweden.
Duration: contract ended 31 March 2020, and in process of being renewed on-payroll
**UKAEA**
The two off-payroll appointments were of non-Exec Board members who reached the end of their appointment during the year, but were retained on a short term basis pending the appointment of new non-Exec Board members.
**AEAIL**
AEAIL does not employ anyone. AEAIL is a captive insurance company registered in the Isle of Man and subject to their tax and NI legislation. The two AEAIL directors are off-payroll by default and are paid a small fee by AEAIL.
Duration: From 2002 and 2005 respectively. UKRI The off-payroll person is the Chief Financial Officer. The appointment was due to the importance of the post and the need to fill swiftly on an interim basis. Duration: From 14 July 2019, and their appointment ran until 30 June 2020. From 1 July 2020 their appointment was extended as Chief Operating Officer.
Pubs Code Adjudicator The off-payroll person was extensively involved in developing the Pubs Code and has sound knowledge of a highly complex area of policy. Duration: From April 2017.
The Small Business Commissioner The two, off-payroll persons are non-executive directors for the Advisory Board and Audit, Risk & Assurance Board. These members have T&C to work with the SBC for 4 years. Duration: From 7 January 2019. SLCs: off-payroll engagements
SLCs deliver work for NDA, and fall within the Departmental accounting boundary; however, they operate with a high degree of autonomy. Although SLCs have a higher number of off-payroll workers, they represent a small proportion of the overall workforce. Due to the specialised and project driven nature of their work, there is a need to bring in unique skills and experience which cannot be found in house.
Table 1b: Off-payroll engagements as of 31 March 2020, for more than £245 per day and that last longer than 6 months
| Total number | Less than 1 year | 1 to 2 years | 2 to 3 years | 3 to 4 years | 4 years or more | |--------------|-----------------|--------------|--------------|--------------|----------------| | Dounreay Site Restoration Ltd | 29 | 2 | 7 | 2 | 1 | 17 | | LLW Repository Ltd | 32 | 16 | 10 | 2 | 2 | 2 | | Magnox Ltd | 111 | 5 | 18 | 33 | 16 | 39 | | Sellafield Ltd | 197 | 38 | 38 | 27 | 12 | 82 | | Total | 369 | 61 | 73 | 64 | 31 | 140 |
Table 2b: New off-payroll engagements or those that reached 6 months in duration, between 1 April 2019 and 31 March 2020, for more than £245 per day and that last longer than 6 months
| Total number | Number assessed as in scope of IR35 assessment | Number assessed as outside scope of IR35 assessment | Number engaged directly (via PSC contracted to the Department) and are on the Departmental payroll | Number reassessed for consistency/assurance purposes during the year | Number that saw change to IR35 status following the consistency review | |--------------|-----------------------------------------------|---------------------------------------------------|-------------------------------------------------|-------------------------------------------------|-------------------------------------------------| | Dounreay Site Restoration Ltd | 5 | 5 | 0 | 0 | 0 | 0 | | LLW Repository Ltd | 7 | 0 | 7 | 0 | 0 | 0 | | Magnox Ltd | 8 | 2 | 6 | 0 | 8 | 0 | | Sellafield Ltd | 46 | 19 | 27 | 0 | 19 | 12 | | Total | 66 | 26 | 40 | 0 | 27 | 12 |
### Table 3b: Off-payroll engagements of board members, and/or, senior officials with significant financial responsibility, between 1 April 2019 and 31 March 2020
| Organisation | Number of off-payroll engagements of board members, and /or senior officials with significant financial responsibility | Total number of individuals on payroll and off-payroll that have been deemed ‘board members and /or senior officials with significant financial responsibility’ during the financial year | |-------------------------------------|-------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------| | Dounreay Site Restoration Ltd | 8 | 11 | | LLW Repository Ltd | 1 | 9 | | Magnox Ltd | 0 | 9 | | Sellafield Ltd | 0 | 1 | | **Total** | **9** | **30** |
**Notes to table 3b: details of the exceptional circumstances that led to the engagements, and duration of engagements**
**Dounreay Site Restoration Ltd**
All 8 persons have been seconded from the PBO, and Dounreay incur their costs.
Duration of engagements is as follows:
- i) from 07 Jan 2020,
- ii) from 20 Nov 2019,
- iii) from 25 Nov 2019,
- iv) from 23 Sep 2019,
- v) from 16 Nov 2018,
- vi) from 01 June 2018,
- vii) from 16 May 2017,
- viii) from 02 Sep 2015.
**LLW Repository Ltd**
The 1 off-payroll post holder was supplied by the parent body organisation as required by contractual arrangements with NDA.
Duration: From 1 Dec 2015. Remuneration report
Remuneration policy
**Ministers** Remuneration of ministers is determined in accordance with the provisions of the Ministerial and other Salaries Act 1975 (as amended by The Ministerial and other Salaries Order 1996) and the Ministerial and other Pensions and Salaries Act 1991.
**Senior civil servants** The Senior Salaries Review Body provides independent advice to the Prime Minister on the remuneration of senior civil servants. The review body considers economic considerations such as local variations in labour markets and funds available to departments. Further information about the work of the review body can be found at [https://www.gov.uk/government/organisations/review-body-on-senior-salaries](https://www.gov.uk/government/organisations/review-body-on-senior-salaries).
**Service contracts** The Constitutional Reform and Governance Act 2010 requires Civil Service appointments to be made on merit on the basis of fair and open competition. The Recruitment Principles published by the Civil Service Commission specify the circumstances when appointments may be made otherwise. Unless otherwise stated below, the officials covered by this report hold appointments which are open-ended. Early termination, other than for misconduct, would result in the individual receiving compensation as set out in the Civil Service Compensation Scheme. Further information about the work of the Civil Service Commission can be found at [https://civilservicecommission.independent.gov.uk](https://civilservicecommission.independent.gov.uk).
Ministers’ remuneration Salary and pension entitlements of ministers of the Department for the year ending 31 March 2020 are set out in the tables below.
**Ministers – single total figure of remuneration**
**Audited information** Where ministers have moved to or from another department during the year, details of any remuneration relating to their subsequent or prior roles will be in that department’s remuneration report. Ministers who transfer from another department continue being paid at the appropriate rate of pay with effect from the first day of the month following the date of appointment. Former ministers who transfer to other departments are paid at their current rate of pay up to the end of the month. Any increase in ministers’ salaries on transfer from the date of appointment is paid by their new department. | Role | Name | 2019-20 | 2018-19 | |-----------------------------|-------------------------------------------|---------|---------| | | | Salary | Full year equivalent salary if different | Pension benefits to nearest £1,000 | Total to nearest £1,000 | Salary | Full year equivalent salary if different | Pension benefits to nearest £1,000 | Total to nearest £1,000 | | Secretary of State | Rt Hon Alok Sharma MP (from 13 February 2020) | 8,729 | 67,505 | 3,000 | 12,000 | – | – | – | – | | | Rt Hon Andrea Leadsom MP (from 24 July 2019 to 13 February 2020) | 54,421 | 67,505 | 8,000 | 62,000 | – | – | – | – | | | Rt Hon Greg Clark MP (to 24 July 2019) | 38,107 | 67,505 | 6,000 | 44,000 | 67,505 | – | 17,000 | 84,000 | | Ministers of State | Rt Hon Kwasi Kwarteng MP (from 24 July 2019) | 21,320 | 31,680 | 5,000 | 27,000 | – | – | – | – | | | Lord Grimstone (from 18 March 2020) | – | – | – | – | – | – | – | – | | | Rt Hon Chris Skidmore MP (from 5 December 2018 to 25 July 2019 and from 10 September 2019 to 13 February 2020) | 30,223 | 31,680 | 3,000 | 33,000 | 10,219 | 31,680 | 3,000 | 13,000 | | | Rt Hon Jo Johnson MP (from 24 July 2019 to 5 September 2019) | 11,511 | 31,680 | 1,000 | 12,000 | – | – | – | – | | | Rt Hon Claire Perry MP (to 24 July 2019) | 17,884 | 31,680 | 3,000 | 21,000 | 31,680 | – | 7,000 | 39,000 | | Parliamentary Under-Secretaries of State | Nadhim Zahawi MP (from 26 July 2019) | – | – | – | – | – | – | – | – | | | Lord Callanan (from 13 February 2020) | 13,880 | 107,335 | 4,000 | 18,000 | – | – | – | – | | | Paul Scully MP (from 13 February 2020) | 2,893 | 22,375 | 1,000 | 4,000 | – | – | – | – | | | Amanda Solloway MP (from 13 February 2020) | 2,893 | 22,375 | 1,000 | 4,000 | – | – | – | – | | | Lord Duncan (from 26 July 2019 to 13 February 2020) | 75,419 | 107,335 | 8,000 | 84,000 | – | – | – | – | | | Kelly Tolhurst MP (from 19 July 2018 to 13 February 2020) | 20,510 | 22,375 | 5,000 | 25,000 | 15,072 | 22,375 | 4,000 | 19,000 | | | Rt Hon Lord Henley (to 26 July 2019) | 34,336 | 107,335 | – | 34,000 | 105,076 | – | 17,000 | 122,000 | | | Rt Hon Jake Berry MP (from 7 June 2019 to 24 July 2019) | – | – | – | – | – | – | – | – | | | Andrew Stephenson MP (from 4 April 2019 to 25 July 2019) | 7,272 | 22,375 | 2,000 | 9,000 | – | – | – | – | Notes
1 Salary information excludes employers’ national insurance contributions. None of the ministers of the Department received benefits in kind during the year. Ministers in the House of Commons are remunerated on a different basis to those in the House of Lords as explained in Notes to the Remuneration report.
2 The value of pension benefits accrued during the year is calculated as (real increase in pension multiplied by 20) less (contributions made by the individual). Real increase excludes increases due to inflation or any increase or decrease due to transfer of pension rights.
3 Previously Secretary of State for International Development.
4 Salary includes £16,876 statutory payment on cessation of Ministerial office.
5 Salary for 2019-20 includes £16,876 statutory payment on cessation of Ministerial office.
6 Previously Parliamentary Under-Secretary of State at Department for Exiting the European Union.
7 Minister of State jointly at Department for International Trade; does not draw salary or pension benefits.
8 Minister of State jointly at Department for Education but paid by Department for Business, Energy and Industrial Strategy; salary for 2019-20 includes £7,920 statutory payment on cessation of Ministerial office; Minister of State at Department of Health and Social Care between 25 July 2019 and 10 September 2019.
9 Minister of State jointly at Department for Education but paid by Department for Business, Energy and Industrial Strategy; salary includes £7,920 statutory payment on cessation of Ministerial office.
10 Salary for 2019-20 includes £7,920 statutory payment on cessation of Ministerial office.
11 Does not draw salary or pension benefits; previously Parliamentary Under-Secretary of State at Department for Education.
12 Full year equivalent salary includes £36,366 Lords Office Holders Allowance.
13 Jointly Parliamentary Under-Secretary of State at Northern Ireland Office but paid by Department for Business, Energy and Industrial Strategy; salary includes £17,742 statutory payment on cessation of Ministerial office; full year equivalent salary includes £36,366 Lords Office Holders Allowance; previously Parliamentary Under-Secretary of State at Scotland Office.
14 Subsequently Parliamentary Under-Secretary of State at Department for Transport
15 Full year equivalent salary includes £36,366 Lords Office Holders Allowance.
16 Parliamentary Under-Secretary of State jointly at Ministry of Housing, Communities and Local Government and paid by that Department; subsequently Minister of State jointly at Cabinet Office and Ministry of Housing, Communities and Local Government.
17 Previously Government Whip, Lord Commissioner of HM Treasury; subsequently Minister of State jointly at Foreign and Commonwealth Office and Department for International Development.
## Ministers – pension benefits
### Audited information
| | Pension benefits at age 65 as at 31 March 2020 | Real increase in pension at age 65 | CETV at 31 March 2020 | CETV at 31 March 2019 | Real increase in CETV | |----------------------|-----------------------------------------------|-----------------------------------|-----------------------|-----------------------|-----------------------| | | £’000 | £’000 | £’000 | £’000 | £’000 | | **Secretary of State** | | | | | | | Rt Hon Alok Sharma MP (from 13 February 2020) | 0–5 | 0–2.5 | 33 | 31 | 2 | | Rt Hon Andrea Leadsom MP (from 24 July 2019 to 13 February 2020) | 0–5 | 0–2.5 | 64 | 54 | 5 | | Rt Hon Greg Clark MP (to 24 July 2019) | 10–15 | 0–2.5 | 148 | 142 | 3 | | **Ministers of State** | | | | | | | Rt Hon Kwasi Kwarteng MP (from 24 July 2019) | 0–5 | 0–2.5 | 8 | 3 | 2 | | Lord Grimstone (from 18 March 2020) | – | – | – | – | – | | Rt Hon Chris Skidmore MP (from 5 December 2018 to 25 July 2019 and from 10 September 2019 to 13 February 2020) | 0–5 | 0–2.5 | 12 | 7 | – | | Rt Hon Jo Johnson MP (from 24 July 2019 to 5 September 2019) | 0–5 | 0–2.5 | 51 | 50 | – | | Rt Hon Claire Perry MP (to 24 July 2019) | 0–5 | 0–2.5 | 39 | 35 | 2 | | **Parliamentary Under-Secretaries of State** | | | | | | | Nadhim Zahawi MP (from 26 July 2019) | – | – | – | – | – | | Lord Callanan (from 13 February 2020) | 0–5 | 0–2.5 | 62 | 59 | 3 | | Paul Scully MP (from 13 February 2020) | 0–5 | 0–2.5 | 1 | – | 1 | | Amanda Solloway MP (from 13 February 2020) | 0–5 | 0–2.5 | 1 | – | 1 | | Lord Duncan (from 26 July 2019 to 13 February 2020) | 0–5 | 0–2.5 | 40 | 31 | 3 | | Kelly Tolhurst MP (from 19 July 2018 to 13 February 2020) | 0–5 | 0–2.5 | 8 | 5 | 1 | | Rt Hon Lord Henley (to 26 July 2019) | 0–5 | – | 46 | 45 | – | | Rt Hon Jake Berry MP (from 7 June 2019 to 24 July 2019) | – | – | – | – | – | | Andrew Stephenson MP (from 4 April 2019 to 25 July 2019) | 0–5 | 0–2.5 | 7 | 6 | – |
### Notes
1. Where ministers joined or left during the year, their CETV opening or closing amounts are as at their joining or leaving dates. See Notes to the Remuneration report for explanation of CETV.
2. Does not draw salary or pension benefits.
3. Does not draw salary or pension benefits. Senior officials’ remuneration
Salary and pension entitlements of officials of the Core Department who were members of the Departmental Board or Executive Committee during the year ending 31 March 2020 are set out in the tables below.
### Senior officials – single total figure of remuneration
**Audited information**
Where officials have moved to or from a similar senior role in another department during the year, details of any remuneration relating to their subsequent or prior roles will be in that department’s remuneration report.
| Name | 2019-20 Salary | 2019-20 Bonus | 2019-20 Pension | 2019-20 Total | 2018-19 Salary | 2018-19 Bonus | 2018-19 Pension | 2018-19 Total | |-----------------------------|----------------|---------------|-----------------|---------------|----------------|---------------|-----------------|---------------| | Alex Chisholm | 180-185 | – | 15-20 | 70 | 270-275 | 180-185 | – | 5-10 | 70 | 255-260 | | Sam Beckett | 130-135 | – | 10-15 | 68 | 210-215 | 125-130 | – | 10-15 | 38 | 175-180 | | Nick Chism (from 1 June 2018 to 5 February 2020) | 115-120 | 140-145 | – | 47 | 165-170 | 115-120 | 140-145 | – | 46 | 160-165 | | Julian Critchlow (from 14 May 2018) | 140-145 | – | – | – | 140-145 | 120-125 | 140-145 | – | – | 120-125 | | Sarah Harrison | 140-145 | – | 10-15 | 67 | 220-225 | 140-145 | – | – | 71 | 210-215 | | John Loughhead | 130-135 | – | – | 67 | 200-205 | 130-135 | – | – | 62 | 190-195 | | Sarah Munby (from 15 July 2019) | 75-80 | 110-115 | – | 31 | 105-110 | – | – | – | – | – | | Jo Samant | 125-130 | – | – | 45 | 170-175 | 125-130 | – | – | 99 | 220-225 | | Jo Sharmugalingam (from 15 July 2019) | 65-70 | 95-100 | – | 82 | 150-155 | – | – | – | – | – | | Joanna Whittington (from 8 October 2018) | 155-160 | – | – | 57 | 215-220 | 75-80 | 155-160 | – | 23 | 95-100 | | Gavin Lambert (interim, from 15 April 2019 to 12 July 2019) | 25-30 | 100-105 | – | 9 | 30-35 | – | – | – | – | – | | Sam Lister (interim, from 15 April 2019 to 12 July 2019) | 30-35 | 130-135 | – | 13 | 45-50 | – | – | – | – | – | | Gareth Davies (to 3 May 2019) | 10-15 | 130-135 | – | 19 | 30-35 | 130-135 | – | 10-15 | 49 | 190-195 | | Tom Taylor | 125-130 | – | 5-10 | 41 | 180-185 | 125-130 | – | 5-10 | 76 | 210-215 | | Caleb Deeks | 100-105 | – | 5-10 | 60 | 170-175 | 100-105 | – | 0-5 | 61 | 165-170 | | Doug Watkins (from 1 September 2018) | 125-130 | – | 0-5 | 69 | 195-200 | 70-75 | 120-125 | 10-15 | 57 | 135-140 | | Craig Woodhouse (from 15 July 2019) | 90-95 | 125-130 | – | 36 | 125-130 | – | – | – | – | – | Notes
1 Salary information excludes employers’ national insurance contributions. No benefits in kind or compensation for loss of office were received by any senior officials during the year. Where officials have moved to or from a similar senior role in another department during the year, details of any remuneration relating to their subsequent or prior roles will be in that department’s remuneration report.
2 The value of pension benefits accrued during the year is calculated as (real increase in pension multiplied by 20) plus (real increase in any lump sum) less (contributions made by the individual). Real increase excludes increases due to inflation or any increase or decrease due to transfer of pension rights.
3 Contracted and remunerated as 90% of full time equivalent; full time equivalent of salary is 145-150 (2018-19: 145-150).
4 Contracted and remunerated as 85% of full time equivalent; full time equivalent of full year equivalent salary is 130-135.
5 Contracted and remunerated as 85% of full time equivalent; full time equivalent of full year equivalent salary is 115-120.
6 Subsequently Director General at Department for Digital, Culture, Media and Sport.
7 Subsequently Director General at Department for Transport.
8 Pension figure for 2018-19 increased from 47 to 76 as result of retrospective update to salary data and consequently total from 180-185 to 210-215.
## Senior officials – pension benefits
### Audited information
| Name | Age Range | Real increase in pension and related lump sum at pension age | CETV at 31 March 2020 | CETV at 31 March 2019 restated | Real increase in CETV | Employer contribution to partnership pension account | |-----------------------------|-----------|-------------------------------------------------------------|-----------------------|---------------------------------|-----------------------|------------------------------------------------------| | Alex Chisholm | 30-35 | 2.5-5 | 402 | 332 | 39 | – | | Sam Beckett | 55-60 | 2.5-5 plus lump sum of 0-2.5 | 1,040 | 947 | 44 | – | | Nick Chism (from 1 June 2018 to 5 February 2020) | 5-10 | 2.5-5 | 68 | 32 | 25 | – | | Julian Critchlow (from 14 May 2018) | – | – | – | – | – | – | | Sarah Harrison | 55-60 | 2.5-5 | 1,007 | 914 | 45 | – | | John Loughhead | 15-20 | 2.5-5 | 277 | 224 | 46 | – | | Sarah Munby (from 15 July 2019) | 0-5 | 0-2.5 | 16 | - | 10 | – | | Jaae Samant | 50-55 | 2.5-5 plus lump sum of (2.5)-0 | 956 | 886 | 24 | – | | Jo Shannugalingam (from 15 July 2019) | 20-25 | 2.5-5 plus lump sum of 5-7.5 | 340 | 284 | 48 | – | | Joanna Whittington (from 8 October 2018) | 40-45 | 2.5-5 plus lump sum of (2.5)-0 | 745 | 674 | 31 | – | | Gavin Lambert (interim, from 15 April 2019 to 12 July 2019) | 25-30 | 0-2.5 plus lump sum of (2.5)-0 | 380 | 374 | 3 | – | | Sam Lister (interim, from 15 April 2019 to 12 July 2019) | 20-25 | 0-2.5 | 240 | 233 | 5 | – | | Gareth Davies (to 3 May 2019) | 45-50 | 0-2.5 | 629 | 614 | 13 | – | | Tom Taylor | 45-50 | 2.5-5 plus lump sum of (2.5)-0 | 801 | 743 | 18 | – | | Caleb Deeks | 30-35 | 2.5-5 | 366 | 319 | 27 | – | | Doug Watkins (from 1 September 2018) | 60-65 | 2.5-5 plus lump sum of 2.5-5 | 1,244 | 1,139 | 49 | – | | Craig Woodhouse (from 15 July 2019) | 0-5 | 0-2.5 | 18 | – | 11 | – |
### Notes
1. Where senior officials joined or left during the year, their CETV opening or closing amounts are as at their joining or leaving dates. See Notes to the Remuneration report for explanation of CETV.
2. Not a member of Civil Service pension arrangements during the year.
3. CETV as at 31 March 2019 increased from 720 to 743 as result of retrospective update to salary data. Fee entitlements for non-executive board members
Audited information
The table below shows fee entitlements for non-executive directors who were members of the Departmental Board during the year ending 31 March 2020.
| Name | 2019-20 Fee entitlement | 2019-20 Full year equivalent if different | 2018-19 Fee entitlement | 2018-19 Full year equivalent if different | |-----------------------------|--------------------------|------------------------------------------|--------------------------|------------------------------------------| | Archie Norman | 20-25 | | 20-25 | | | Nigel Boardman (from 25 June 2018) | 20-25 | | 15-20 | 20-25 | | Leena Nair (from 25 June 2018) | 20-25 | | 15-20 | 20-25 | | Stephen Carter¹ | 15-20 | | 15-20 | | | Dame Carolyn McCall | 15-20 | | 15-20 | | | Kathryn Parsons | 15-20 | | 15-20 | | | Stuart Quickenden¹ | 15-20 | | 15-20 | |
Notes 1 Fee entitlement waived.
Fair pay disclosure
Audited information
The table below shows the relationship during the year ending 31 March 2020 between the remuneration of the highest-paid director and the median remuneration of the workforce across the Core Department and two agencies, Insolvency Service and UK Space Agency. Remuneration figures include salary, non-consolidated performance-related pay and benefits-in-kind. They do not include severance payments, employer pension contributions and the cash equivalent transfer value of pensions.
| | 2019-20 | 2018-19 | |--------------------------------|---------|---------| | Remuneration band of highest paid director | £200,000-£205,000 | £185,000-£190,000 | | Median remuneration of workforce | £40,464 | £38,971 | | Ratio of highest paid director to median | 5.00 | 4.81 | | Remuneration range of workforce including directors | £17,031 to £218,484 | £18,200 to £194,747 | | Number of people remunerated in excess of highest paid director | 1 | 1 | Notes to the Remuneration report
The information in the Remuneration report relates solely to the Core Department with the exception of the Fair pay disclosure which relates to the Core Department and two of its Agencies. Similar information relating to chief executives and most senior managers of the Agencies and other bodies of the Departmental family is given in the separate annual reports and accounts of the relevant bodies.
Salary
‘Salary’ includes gross salary; overtime; reserved rights to London weighting or London allowances; recruitment and retention allowances; private office allowances and any other allowance to the extent that it is subject to UK taxation. This report is based on accrued payments made by the Department and thus recorded in these accounts. In respect of ministers in the House of Commons, departments bear only the cost of the additional ministerial remuneration; the salary for their services as an MP (£79,468 from 1 April 2019) and various allowances to which they are entitled are borne centrally. However, the arrangement for ministers in the House of Lords is different in that they do not receive a salary but rather an additional remuneration which cannot be quantified separately from their ministerial salaries. This total remuneration, as well as the allowances to which they are entitled, is paid by the Department and is therefore shown in full in the figures above.
Bonuses
Bonuses are based on performance levels attained and are made as part of the appraisal process. Bonuses relate to the performance in the year in which they become payable to the individual. The bonuses reported in 2019-20 relate to performance in 2018-19 and the comparative bonuses reported for 2018-19 relate to performance in 2017-18.
Ministerial pensions
Pension benefits for ministers are provided by the Parliamentary Contributory Pension Fund (PCPF). The scheme is made under statute and the rules are set out in the Ministers’ etc Pension Scheme 2015, available at http://qna.files.parliament.uk/ws-attachments/170890/original/PCPF_MINISTERIAL_SCHEME_FINAL_RULES.doc. Those ministers who are Members of Parliament may also accrue an MP’s pension under the PCPF, details of which are not included in this report. A new MP’s pension scheme was introduced from May 2015 although members who were MPs and aged 55 or older on 1 April 2013 have transitional protection to remain in the previous MPs’ final salary pension scheme. Benefits for ministers are payable from State Pension age under the 2015 scheme. Pensions are re-valued annually in line with Pensions Increase legislation both before and after retirement. The contribution rate from May 2015 is 11.1% and the accrual rate is 1.775% of pensionable earnings. The figure shown for pension value includes the total pension payable to the member under both the pre- and post-2015 ministerial pension schemes.
Ministerial pensions: Cash Equivalent Transfer Value
The Cash Equivalent Transfer Value (CETV) is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member’s accrued benefits and any contingent spouse’s pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the pension benefits they have accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total ministerial service, not just their current appointment as an minister. CETVs are calculated in accordance with The Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 and do not take account of any actual or potential reduction to benefits. resulting from Lifetime Allowance Tax which may be due when pension benefits are taken.
**Ministerial pensions: Real increase in the value of the CETV**
This is the element of the increase in accrued pension funded by the Exchequer. It excludes increases due to inflation and contributions paid by the minister. It is worked out using common market valuation factors for the start and end of the period.
**Civil Service pensions**
Pension benefits are provided through the Civil Service pension arrangements. From 1 April 2015 a new pension scheme for civil servants was introduced – the Civil Servants and Others Pension Scheme or alpha, which provides benefits on a career average basis with a normal pension age equal to the member’s State Pension Age (or 65 if higher). From that date all newly appointed civil servants and the majority of those already in service joined alpha. Prior to that date, civil servants participated in the Principal Civil Service Pension Scheme (PCSPS). The PCSPS has four sections: three providing benefits on a final salary basis (classic, premium or classic plus) with a normal pension age of 60; and one providing benefits on a whole career basis (nuvos) with a normal pension age of 65.
These statutory arrangements are unfunded with the cost of benefits met by monies voted by Parliament each year. Pensions payable under classic, premium, classic plus, nuvos and alpha are increased annually in line with Pensions Increase legislation. Existing members of the PCSPS who were within 10 years of their normal pension age on 1 April 2012 remained in the PCSPS after 1 April 2015. Those who were between 10 years and 13 years and 5 months from their normal pension age on 1 April 2012 will switch into alpha sometime between 1 June 2015 and 1 February 2022. All members who switch to alpha have their PCSPS benefits ‘banked’, with those with earlier benefits in one of the final salary sections of the PCSPS having those benefits based on their final salary when they leave alpha. (The pension figures quoted for officials show pension earned in PCSPS or alpha – as appropriate. Where the official has benefits in both the PCSPS and alpha the figure quoted is the combined value of their benefits in the two schemes.) Members joining from October 2002 may opt for either the appropriate defined benefit arrangement or a ‘money purchase’ stakeholder pension with an employer contribution (partnership pension account).
Employee contributions are salary-related and range between 4.6% and 8.05% for members of classic, premium, classic plus, nuvos and alpha. Benefits in classic accrue at the rate of 1/80th of final pensionable earnings for each year of service. In addition, a lump sum equivalent to three years’ initial pension is payable on retirement. For premium, benefits accrue at the rate of 1/60th of final pensionable earnings for each year of service. Unlike classic, there is no automatic lump sum, classic plus is essentially a hybrid with benefits for service before 1 October 2002 calculated broadly as per classic and benefits for service from October 2002 worked out as in premium. In nuvos a member builds up a pension based on their pensionable earnings during their period of scheme membership. At the end of the scheme year (31 March) the member’s earned pension account is credited with 2.3% of their pensionable earnings in that scheme year and the accrued pension is uprated in line with Pensions Increase legislation. Benefits in alpha build up in a similar way to nuvos, except that the accrual rate is 2.32%. In all cases members may opt to give up (commute) pension for a lump sum up to the limits set by the Finance Act 2004.
The partnership pension account is a stakeholder pension arrangement. The employer makes a basic contribution of between 8% and 14.75% (depending on the age of the member) into a stakeholder pension product chosen by the employee from a panel of providers. The employee does not have to contribute, but where they do make contributions, the employer will match these up to a limit of 3% of pensionable salary (in addition to the employer’s basic contribution). Employers also contribute a further 0.5% of pensionable salary to cover the cost of centrally-provided risk benefit cover (death in service and ill health retirement).
The accrued pension quoted is the pension the member is entitled to receive when they reach pension age, or immediately on ceasing to be an active member of the scheme if they are already at or over pension age. Pension age is 60 for members of classic, premium and classic plus, 65 for members of nuvos, and the higher of 65 or State Pension Age for members of alpha. (The pension figures quoted for officials show pension earned in PCSPS or alpha – as appropriate. Where the official has benefits in both the PCSPS and alpha the figure quoted is the combined value of their benefits in the two schemes but note that part of that pension may be payable from different ages.)
Further details about the Civil Service pension arrangements can be found at the website https://www.civilservicepensionscheme.org.uk/.
Civil Service pensions: Cash Equivalent Transfer Value
The Cash Equivalent Transfer Value (CETV) is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member’s accrued benefits and any contingent spouse’s pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the benefits accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total membership of the pension scheme, not just their service in a senior capacity to which disclosure applies.
The figures include the value of any pension benefit in another scheme or arrangement which the member has transferred to the Civil Service pension arrangements. They also include any additional pension benefit accrued to the member as a result of their buying additional pension benefits at their own cost. CETVs are worked out in accordance with The Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 and do not take account of any actual or potential reduction to benefits resulting from Lifetime Allowance Tax which may be due when pension benefits are taken.
Civil Service pensions: Real increase in CETV
This reflects the increase in CETV that is funded by the employer. It does not include the increase in accrued pension due to inflation, contributions paid by the employee (including the value of any benefits transferred from another pension scheme or arrangement) and uses common market valuation factors for the start and end of the period. Statement of Parliamentary Supply
Audited information
Overview
In addition to the primary statements prepared under IFRS, the Government Financial Reporting Manual (FReM) requires the Department for Business, Energy and Industrial Strategy to prepare a Statement of Parliamentary Supply (SoPS) and supporting notes.
The SoPS and related notes are subject to audit, as detailed in the Certificate and Report of the Comptroller and Auditor General to the House of Commons.
The SoPS is a key accountability statement that shows, in detail, how an entity has spent against their Supply Estimate. Supply is the monetary provision (for resource and capital purposes) and cash (drawn primarily from the Consolidated Fund), that Parliament gives statutory authority for entities to utilise. The Estimate details supply and is voted on by Parliament at the start of the financial year.
Should an entity exceed the limits set by their Supply Estimate, called control limits, their accounts will receive a qualified opinion.
The format of the SoPS mirrors the Supply Estimates, published on gov.uk, to enable comparability between what Parliament approves and the final outturn.
The SoPS contain a summary table, detailing performance against the control limits that Parliament have voted on, cash spent (budgets are compiled on an accruals basis and so outturn will not tie directly to cash spent) and administration.
Non-voted Budgets generally comprise CFERs (Consolidated Fund Extra Receipts) that represent operating income or expenditure financed directly from the Consolidated Fund as a standing service or from the National Insurance Fund. Non-voted expenditure does not require Parliamentary authority, but is included within budgets set by HMT for completeness.
Estimates and Outturn spend are disclosed gross (gross expenditure and income) for activities of the Core Department and net for the activities of the Departmental Group’s arm’s length bodies.
The supporting notes on pages 94 to 101 detail the following: Outturn by Estimate line, providing a more detailed breakdown (note 1); a reconciliation of Outturn to Net operating expenditure in the SoCNE, to tie the SoPS to the financial statements (note 2); a reconciliation of Outturn to Net cash requirement (note 3); and, an analysis of income payable to the Consolidated Fund (note 4).
### Summary table 2019-20
| SoPS note | Outturn | Estimate | 2019-20 Outturn vs Estimate: saving/ (excess) | 2018-19 Outturn total | |-----------|---------|----------|---------------------------------------------|----------------------| | | Voted | Non-voted| Total | Voted | Non-voted | Total | Voted | Total | Voted | Total | Voted | Total | Voted | Total | Voted | Total | Voted | Total | | | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | | Departmental Expenditure Limit | | | | | | | | | | | | | | | | | | | Resource 1.1 | 3,586,479 | (748,104) | 2,838,375 | 4,402,890 | (848,000) | 3,554,890 | 816,411 | 716,515 | 1,246,489 | | | | | | | | | | | Capital 1.2 | 11,227,917 | - | 11,227,917 | 11,842,219 | (7,000) | 11,835,219 | 614,302 | 607,302 | 10,813,932 | | | | | | | | | | | Total DEL | 14,814,396 | (748,104) | 14,066,292 | 16,245,109 | (855,000) | 15,390,109 | 1,430,713 | 1,323,817 | 12,060,421 | | | | | | | | | | | Annually Managed Expenditure | | | | | | | | | | | | | | | | | | | | Resource 1.1 | 19,483,001 | 431,123 | 19,914,124 | 14,588,019 | 467,000 | 15,055,019 | (4,894,982) | (4,859,105) | (105,864,889) | | | | | | | | | | | Capital 1.2 | 5,500 | (142,400) | (136,900) | 865,249 | (142,400) | 722,849 | 859,749 | 859,749 | (416,665) | | | | | | | | | | | Total AME | 19,488,501 | 288,723 | 19,777,224 | 15,453,268 | 324,600 | 15,777,868 | (4,035,233) | (3,999,356) | (106,281,554) | | | | | | | | | | | Total Budget | 34,302,897 | (459,381) | 33,843,516 | 31,698,377 | (530,400) | 31,167,977 | (2,604,520) | (2,675,539) | (94,221,133) | | | | | | | | | | | Resource 1.1 | 23,069,480 | (316,981) | 22,752,499 | 18,990,909 | (381,000) | 18,609,909 | (4,078,571) | (4,142,590) | (104,618,400) | | | | | | | | | | | Capital 1.2 | 11,233,417 | (142,400) | 11,091,017 | 12,707,468 | (149,400) | 12,558,068 | 1,474,051 | 1,467,051 | 10,397,267 | | | | | | | | | | | Total Budget | 34,302,897 | (459,381) | 33,843,516 | 31,698,377 | (530,400) | 31,167,977 | (2,604,520) | (2,675,539) | (94,221,133) | | | | | | | | | | | Non-budget expenditure | 299,766 | - | 299,766 | 340,682 | - | 340,682 | 40,916 | 40,916 | - | | | | | | | | | | | Total Budget and non-budget | 34,602,663 | (459,381) | 34,143,282 | 32,039,059 | (530,400) | 31,508,659 | (2,563,604) | (2,634,623) | (94,221,133) | | | | | | | | | |
Figures in the areas outlined in a thick line cover the voted control limits voted by Parliament. Refer to the Supply Estimates guidance manual, available on gov.uk, for detail on the control limit voted by Parliament.
Significant variances between Outturn and the Estimate are explained in the financial review on pages 29 to 38.
The Department has incurred an Excess of £9.7 billion in relation to voted Resource Annually Managed Expenditure for the Estimate Line: Deliver an ambitious industrial strategy in SoPS 1.1 due to COVID-19 emergency interventions by the Government, namely the Small Business Grant Fund and the Retail, Hospitality and Leisure Grant Fund. Due to the timing of the COVID-19 response in March 2020, this expenditure was incurred without the necessary parliamentary approval by way of a Supplementary Estimate. Further information in relation to these schemes can be seen on note 18 and note 28 of the accounts. This has led to a total Excess of Resource AME of £4.9 billion. The Department will seek parliamentary approval by way of an Excess Vote in the next Supply and Appropriation Act.
### Net cash requirement 2019-20
| SoPS note | Outturn | Estimate | Outturn vs Estimate: saving/(excess) | Outturn total | |-----------|---------|----------|-------------------------------------|---------------| | | £'000 | £'000 | £'000 | £'000 | | Net cash requirements | 3 | 15,708,936 | 18,171,944 | 2,463,008 | 13,787,150 |
### Administration costs 2019-20
| SoPS note | Outturn | Estimate | Outturn vs Estimate: saving/(excess) | Outturn total | |-----------|---------|----------|-------------------------------------|---------------| | | £'000 | £'000 | £'000 | £'000 | | Administration costs | 1.1 | 502,428 | 538,798 | 36,370 | 460,580 |
Although not a separate voted limit, any breach of the administration budget, will also result in an excess vote.
# SOPS note 1. Outturn detail, by Estimate Line
## SoPS 1.1 Analysis of Resource Outturn by Estimate Line
| Resource spending in DEL: voted expenditure | Administration | Programme | Estimate | Outturn vs Estimate: saving/ (excess) | Resource Outturn | |---------------------------------------------|----------------|-----------|----------|----------------------------------------|-----------------| | | Gross | Income | Net | Gross | Income | Net | Total | Virements | Total inc. virements | Total | | A Deliver an ambitious industrial strategy | – | – | – | 924,328 | (15,803) | 908,525 | 908,525 | 1,464,590 | – | 1,464,590 | 556,065 | 182,286 | | B Maximise investment opportunities and bolster UK interests | – | – | – | 73,644 | (419) | 73,225 | 73,225 | 65,206 | 8,019 | 73,225 | – | 70,705 | | C Promote competitive markets and responsible business practices | 784 | – | 784 | 121,242 | (18,038) | 103,204 | 103,204 | 103,901 | 187 | 103,988 | – | 94,443 | | D Delivering affordable energy for households and businesses | – | – | – | 38,976 | (2) | 38,974 | 38,974 | 39,532 | – | 39,532 | 558 | 44,155 | | E Ensuring that our energy system is reliable and secure | – | – | – | 12,554 | (7,831) | 4,723 | 4,723 | 11,586 | – | 11,586 | 6,863 | 4,756 | | F Taking action on climate change and decarbonisation | – | – | – | 32,664 | (146) | 32,518 | 32,518 | 29,693 | 2,825 | 32,518 | – | 24,829 | | G Managing our energy legacy safely and responsibly | – | – | – | 234,205 | (19) | 234,186 | 234,186 | 236,758 | (2,572) | 234,186 | – | 251,870 | | H Science and Research | (2) | – | (2) | 6,177 | (16) | 6,161 | 6,159 | 34 | 6,125 | 6,159 | – | 4,608 | | I Capability | 404,986 | (20,752) | 384,234 | 31,542 | (185) | 31,357 | 415,591 | 496,254 | (60,120) | 436,134 | 20,543 | 393,848 | | J Government as Shareholder | 4,326 | (17) | 4,309 | 133,303 | (123,994) | 9,309 | 13,618 | 101,237 | – | 101,237 | 87,619 | 62,819 | | K Deliver an ambitious industrial strategy (ALB) net | – | – | – | 21,077 | – | 21,077 | 21,077 | 22,000 | – | 22,000 | 923 | 15,147 | | L Promote competitive markets and responsible business practices (ALB) net | 7,779 | – | 7,779 | 46,964 | – | 46,964 | 54,743 | 54,978 | – | 54,978 | 235 | 54,635 | | M Ensuring that our energy system is reliable and secure (ALB) net | – | – | – | (2,756) | – | (2,756) | (2,756) | 1 | – | 1 | 2,757 | (2,667) | | N Taking action on climate change and decarbonisation (ALB) net | 5,354 | – | 5,354 | 2,906 | – | 2,906 | 8,260 | 5,055 | 3,205 | 8,260 | – | 6,069 | Science and Research (ALB) net
Capability (ALB) net
Government as Shareholder (ALB) net
NDA and SLC expenditure (ALB) net
P
Q
R
S
523,197
52,929
105
34,693
7,410
4,833
–
Nuclear Safeguards Development
Managing our energy legacy safely and responsibly (CFER)
–
AD Deliver an ambitious industrial strategy (ALB) net
– –
Government as Shareholder
–
–
–
AC Renewable Heat Incentive
AB
–
Science and Research
Managing our energy legacy safely and responsibly
Y
Capability
Ensuring that our energy system is reliable and secure
X
Z
Promote competitive markets and responsible business practices
W
AA
–
Maximise investment opportunities and bolster UK interests
V –
Deliver an ambitious industrial strategy
U
–
523,197
Resource spending in AME: voted expenditure
Total resource spending in DEL
–
– –
Nuclear Decommissioning Authority Income (CFER)
Total non-voted DEL
T
Resource spending in DEL: non-voted expenditure
Total voted DEL
Managing our energy legacy safely and responsibly (ALB) net
O
Gross £’000
–
–
–
–
–
–
–
–
–
–
(20,769)
–
–
–
–
(20,769)
–
–
–
–
–
48,748
105
3,250,504
–
–
36,202
17,149 846,092
– – –
54,912 (55,895)
– –
(173,978)
–
72,052
701
–
–
–
–
– 10,758,343
502,428
–
–
– –
–
3,250,504
–
502,428
1,277,289
–
34,693
52,929
23,886 223,755
4,833
Gross £’000
7,410
Administration Income Net £’000 £’000
–
–
(6,913)
–
–
(29,419)
478
–
–
(25,154)
(914,557)
(748,104)
–
–
(748,104)
(166,453)
–
–
–
–
–
Income £’000
Resource Outturn
36,202
846,092
10,236
(55,895)
54,912
(203,397)
478
72,052
701
10,733,189
2,335,947
(748,104)
–
–
(748,104)
3,084,051
1,277,289
48,748
–
223,755
23,886
Programme Net £’000
36,202
846,092
10,236
(55,895)
54,912
(203,397)
478
72,052
701
10,733,189
2,838,375
(748,104)
–
–
(748,104)
3,586,479
1,330,218
48,853
34,693
231,165
28,719
Total £’000
18,500
1,010,000
(5,874)
(50,581)
91,252
(67,956)
1
72,000
5,000
1,048,811
3,554,890
(848,000)
–
–
(848,000)
4,402,890
1,433,358
38,452
1,500
274,998
23,857
17,702
–
16,110
–
–
(78,370)
477
52
–
(17,702)
–
–
–
–
–
–
–
10,401
33,193
(6,125)
4,862
Total Virements £’000 £’000
Estimate
36,202
1,010,000
10,236
(50,581)
91,252
(146,326)
478
72,052
5,000
1,031,109
3,554,890
(848,000)
–
–
(848,000)
4,402,890
1,433,358
48,853
34,693
268,873
28,719
Total inc. virements £’000
–
163,908
–
5,314
36,340
57,071
–
–
4,299
9,702,080
716,515
(99,896)
–
–
(99,896)
816,411
103,140
–
–
37,708
–
Outturn vs Estimate: saving/ (excess) £’000
2019-20
(21,100)
817,898
1,035
(12,990)
205,985
(297,497)
(295)
79,000
6,044
(312,599)
1,246,489
(1,455,648)
(475,000)
(2,275)
(978,373)
2,702,137
1,175,337
(19,479)
30,475
276,226
32,075
Total £’000
2018-19 Resource Outturn
Accountability report 95
| Resource | 2018-19 Outturn | 2019-20 Estimate | Outturn vs Estimate: saving/(excess) | |----------|----------------|-----------------|-------------------------------------| | **Resource Outturn** | **£'000** | **£'000** | **£'000** | | **Total inc. virements** | **Total Gross Income** | **Net Gross Income** | **Total Gross Income** | | **Administration** | 973 | 973 | 973 | | **Programme** | 973 | 973 | 973 | | **Total** | 1,946,001 | 1,946,001 | 1,946,001 |
The total Estimate columns include virements. Virements are the allocation of provision in the Estimates that do not require parliamentary authority (because Parliament does not vote to that level of detail and delegates to HM Treasury). Further information on virements are provided in the Supply Estimates manual, available on gov.uk.
Significant variances between Outturn and Estimate are explained in the financial review on pages 29 to 38.
The Outturn vs Estimate columns differ slightly from those shown in the Statement of Parliamentary Supply as this table includes a prior period adjustment for Feedback Funding and BIS (Postal Services Act 2011) Company Limited as a non-budget item due to an update in the classification of transactions. Further details are given in note 26.
The total Estimate columns include virements. Virements are the allocation of provision in the Estimates that do not require parliamentary authority (because Parliament does not vote to that level of detail and delegates to HM Treasury). Further information on virements are provided in the Supply Estimates manual, available on gov.uk.
Significant variances between Outturn and Estimate are explained in the financial review on pages 29 to 38.
The Outturn vs Estimate columns differ slightly from those shown in the Statement of Parliamentary Supply as this table includes a prior period adjustment for Feedback Funding and BIS (Postal Services Act 2011) Company Limited as a non-budget item due to an update in the classification of transactions. Further details are given in note 26.
The Department has Prior Period Adjustments (PPAs) as a result of recognising the capital spend in an arm’s length body following its consolidation into the Departmental boundary. It is proper for the department to seek parliamentary authority for the provision that should have been sought previously. In 2019-20, the following such PPAs have been made, which have been included within voted Supply in the Estimate.
### SoPS 1.2. Analysis of capital Outturn by Estimate line
| Capital spending in DEL: voted expenditure | 2019-20 | 2018-19 | |-------------------------------------------|---------|---------| | **Capital Outturn** | **Estimate outturn vs Estimate, savings/(excess)** | **Capital Outturn** | | **Gross** | **Income** | **Net total** | **Total** | **Virements** | **Total inc. virements** | **Total** | | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | | A Deliver an ambitious industrial strategy | 340,134 | (354,574) | (14,440) | 24,046 | – | 24,046 | 38,486 | (54,606) | | B Maximise investment opportunities and bolster UK interests | 276,255 | (10,383) | 265,872 | 271,640 | – | 271,640 | 5,768 | 243,957 | | C Promote competitive markets and responsible business practices | 3,861 | – | 3,861 | 4,666 | – | 4,666 | 805 | 2,682 | | D Delivering affordable energy for households and businesses | 44,702 | (200) | 44,502 | 39,988 | 4,514 | 44,502 | – | 32,718 | | E Ensuring that our energy system is reliable and secure | 291 | – | 291 | 430 | – | 430 | 139 | (626) | | F Taking action on climate change and decarbonisation | 156,962 | (2,735) | 154,227 | 251,585 | – | 251,585 | 97,358 | 73,121 | | G Managing our energy legacy safely and responsibly | 3,600 | (139) | 3,461 | 4,102 | – | 4,102 | 641 | 4,278 | | H Science and Research | 754,310 | (62,516) | 691,794 | 727,786 | – | 727,786 | 35,992 | 563,177 | | I Capability | 19,703 | – | 19,703 | 121,340 | (4,577) | 116,763 | 97,060 | 30,305 | | J Government as Shareholder | 111,431 | (47,204) | 64,227 | 13,797 | 50,430 | 64,227 | – | 175,871 | | L Promote competitive markets and responsible business practices (ALB net) | 1,193 | – | 1,193 | 1,160 | 33 | 1,193 | – | 1,059 | | N Taking action on climate change and decarbonisation (ALB) net | 27 | – | 27 | 399 | – | 399 | 372 | 255 | | O Managing our energy legacy safely and responsibly (ALB net) | 12,919 | – | 12,919 | 14,650 | – | 14,650 | 1,731 | 9,503 | | P Science and Research (ALB) net | 7,786,590 | – | 7,786,590 | 7,859,518 | – | 7,859,518 | 72,928 | 7,530,042 | | Q Capability (ALB) net | 30 | – | 30 | – | 30 | 30 | – | 2,482 | | R Government as Shareholder (ALB) net | 396,476 | – | 396,476 | 697,112 | (50,430) | 646,682 | 250,206 | 197,015 | | S NDA and SLC expenditure (ALB net) | 1,797,184 | – | 1,797,184 | 1,810,000 | – | 1,810,000 | 12,816 | 2,002,699 | | **Total voted DEL** | **11,705,668** | **(477,751)** | **11,227,917** | **11,842,219** | – | **11,842,219** | **614,302** | **10,813,932** |
### Capital spending in DEL: non-voted expenditure
| Nuclear Decommissioning Authority Income (CFER) | – | – | – | (7,000) | – | (7,000) | (7,000) | – |
### Capital Outturn Estimate outturn vs Estimate, savings/(excess)
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | | £’000 | £’000 | | Gross | £’000 | £’000 | | Income | £’000 | £’000 | | Net total | £’000 | £’000 | | Total | £’000 | £’000 | | Virements | £’000 | £’000 | | Total inc. virements | £’000 | £’000 | | Capital Outturn | £’000 | £’000 |
#### Total non-voted DEL
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | | £’000 | £’000 | | Total capital spending in DEL | 11,705,668 | (477,751) | | | 11,227,917 | 11,835,219 | | | 607,302 | 10,813,932 |
#### Capital spending in AME: voted expenditure
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | | £’000 | £’000 | | Managing our energy legacy safely and responsibly | 29,419 | – | | Science and Research | 1,263 | – | | Government as Shareholder | 5,379,000 | (5,342,000) | | Deliver an ambitious industrial strategy (ALB) net | 365 | – | | Science and Research (ALB) net | (59,496) | – | | Government as Shareholder (ALB) net | (3,051) | – | | Total voted AME | 5,347,500 | (5,342,000) |
#### Capital spending in AME: non-voted expenditure
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | | £’000 | £’000 | | Managing our energy legacy safely and responsibly (CFER) | – | (142,400) | | Total non-voted AME | – | (142,400) | | Total capital spending in AME | 5,347,500 | (5,484,400) | | | 113,900 | 722,849 | | | 859,749 | (416,665) |
#### Non-budget
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | | £’000 | £’000 | | Prior period adjustments | – | – | | Total capital and non-budget spending | 17,053,168 | (5,962,151) | | | 11,091,017 | 12,558,068 | | | 1,467,051 | 10,397,267 |
The total Estimate columns include virements. Virements are the allocation of provision in the Estimates that do not require parliamentary authority (because Parliament does not vote to that level of detail and delegates to HM Treasury).
Further information on virements are provided in the Supply Estimates manual, available on gov.uk.
Significant variances between Outturn and Estimate are explained in the financial review on pages 29 to 38. SoPS note 2. Reconciliation of outturn to net operating expenditure
As noted in the overview to the SoPS, Outturn and the Estimates are compiled against the budgeting framework – which is similar to, but different from IFRS. Therefore, this reconciliation bridges the resource Outturn to Net operating expenditure, linking the SoPS to the financial statements.
The prior year comparatives present the Net operating expenditure as reported at 31 March 2019.
| Add: | 2019-20 | 2018-19 | |---------------------------------------------------------------------|---------|---------| | NDA remedial decommissioning costs which are capital in budgets but taken through the SoCNE | 1,797,204 | 2,002,699 | | Capital Grants | 1,411,680 | 1,507,472 | | Share of profit/loss of joint ventures and associates | 5,763 | (187,156) | | Other non-budget | 176,418 | (43,793) | | Research and Development costs | 7,800,260 | 7,405,902 | | **Total** | **34,243,590** | **(93,933,276)** |
| Less: | | | |--------------------------------------------------------------------|---------|---------| | Non-budgetary income | (4,032) | – | | Non-budget, non voted items in respect of BIS (Postal Services Act 2011) Company Limited and B Company Limited | (23) | (42,930) | | Expected return on pension scheme assets | (39,265) | (40,825) | | NDA income scored in SoPS only | 30,243 | 126,783 | | Capital Income in SoCNE | (32,758) | (54,521) | | Research and Development income | (467,966) | (488,889) | | CFER: other income | – | – | | Prior period adjustments | (299,766) | – | | Other: | | | | Impact of intra group transactions | 23,060 | 60,583 | | Other differences | 39,284 | 12,814 | | **Total** | **(751,223)** | **(426,985)** |
Net Expenditure for the period in Consolidated Statement of Comprehensive Net Expenditure
| SoCNE | 33,492,367 | (94,360,261) | SoPS note 3. Reconciliation of Net resource Outturn to Net cash requirement
As noted in the overview to the SoPS, Outturn and the Estimates are compiled against the budgeting framework – not on a cash basis. Therefore, this reconciliation bridges the resource and capital Outturn to the Net cash requirement.
| SoPS note | Outturn £'000 | Estimate £'000 | 2019-20 Outturn vs Estimate: saving/(excess) £'000 | |-----------|---------------|----------------|-----------------------------------------------| | Total resource Outturn | 23,052,265 | 18,950,591 | (4,101,674) | | Total capital Outturn | 11,091,017 | 12,558,068 | 1,467,051 |
Adjustments for ALBs
- Remove voted resource and capital: (19,711,841) (24,758,234) (5,046,393)
- Removal of intra-group transactions: 57,322 (57,322)
- Add cash in grant-in-aid: 11,307,613 12,000,066 692,393
- Add share purchase and loans: 67,506 – (67,506)
- Less share capital repayment: (8,534) – 8,534
Adjustments to remove non-cash items
- Depreciation: 39,540 (32,146) (71,686)
- New provisions and adjustments to previous provisions: (10,767,459) (1,274,604) 9,492,855
- Prior Period Adjustments: (299,766) (340,682) (40,916)
- Other non-cash items: (69,322) 74,932 144,254
Adjustments to reflect movements in working balances
- Increase/(decrease) in receivables: (82,758) 50,000 132,758
- (Increase)/decrease in payables: 311,841 147,770 (164,071)
- Use of provisions: 248,501 265,843 17,342
- Financial guarantees called in: 13,630 – (13,630)
Total: (18,893,727) (13,867,115) 5,026,612
Removal of non-voted budget items
- Other non-voted budget items: 459,381 530,400 71,019
Total: 459,381 530,400 71,019
Net cash requirement: 15,708,936 18,171,944 2,463,008 SoPS note 4. Amounts of income to the Consolidated Fund
SopS 4.1 Analysis of income payable to the Consolidated Fund
In addition to the cash retained by the Department, the following income is payable to the consolidated fund (cash receipts being shown in italics).
The type of income allowed to be retained by the Department is set out in the ambit of the Supply Estimate. Income of a type not included in the Estimate, or in excess of amounts agreed with HM Treasury, is required to be surrendered to the Consolidated Fund. This includes the commercial income of the Nuclear Decommissioning Authority, Coal Pension surpluses and income generated by the BIS (Postal Services Act 2011) Company, which forms the bulk of the amounts shown above, together with other miscellaneous receipts.
| Description | 2019-20 Outturn total | 2018-19 Outturn total | |-------------------------------------------------------|-----------------------|-----------------------| | | accruals £'000 | cash basis £'000 | accruals £'000 | cash basis £'000 | | Operating income of the NDA within the Ambit | 623,962 | 556,000 | 654,497 | 654,497 | | Income outside the ambit of the Estimate | 142,945 | 142,945 | 193,362 | 193,362 | | [Excess] cash surrenderable to the Consolidated Fund | 142,400 | 142,400 | 617,400 | 617,400 | | Total amount payable to the Consolidated Fund | 909,307 | 841,345 | 1,465,259 | 1,465,259 |
SoPS 4.2: Consolidated Fund income
BEIS also collects income as an agent for the consolidated fund. This income is disclosed separately in the Trust Statement, pages 231 to 241, and is not included in SoPS 4.1 – income payable to the consolidated fund.
Details are also provided in the individual accounts of the Insolvency Service for items which are not included in note 4.1. Parliamentary accountability disclosures
Losses and special payments
Audited information
The disclosures in this note are in accordance with Managing Public Money, the official guidance on handling public funds.
Losses statement
| | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |----------------------|------------------------------|--------------------|------------------------------|--------------------| | Total number of losses | 11,986 | 12,300 | 8,955 | 9,719 | | RPS receivable impairment (£m) | 446 | 446 | 358 | 358 | | Other losses (£m) | 30 | 35 | 27 | 28 | | Total value of losses (£m) | 476 | 481 | 385 | 386 |
Details of cases over £300,000: constructive losses: Core Department
The Core Department holds onerous leases for properties on the Department’s estate for which £54 million has been provided as at 31 March 2020 (31 March 2019: £113 million); payments in 2019-20 totalled £16.8 million (2018-19: £26.6 million).
Details of cases over £300,000: claims written-off due to insolvency: Core Department
In April 2019 HMG entered into a commercial agreement with British Steel to allow it to meet its EU ETS obligations. Under a Deed of Forfeiture HMG bought £119 million of EU ETS allowances to meet British Steel’s 2018 EU ETS liability. The Deed of Forfeiture stipulated transaction and arrangement fees of £12 million to be paid by British Steel Limited to the Department. As British Steel filed for compulsory liquidation on 22 May 2019, the £12 million in fees are unlikely to be recoverable and have therefore been written-off.
Details of cases over £300,000: claims abandoned: Agencies
Redundancy Payment Service (RPS) receivable impairment: most of the redundancy payments made from the National Insurance Fund (NIF) are in respect of employees of insolvent companies. Repayment of debt is recovered from the sale of the assets of the insolvent company. A small proportion of the debt (11%) is preferential, and as such has a higher recovery rate. HMRC record the impairment of the RPS receivable in NIF accounts. The RPS receivable impairment for 2019-20 is £446 million (2018-19: £358 million). Special payments
Special payments include extra-contractual, ex gratia, compensation and special severance payments.
| | 2019-20 | 2018-19 | |--------------------------|---------|---------| | Core Department and Agencies | 410 | 417 | | Departmental Group | | | | Core Department and Agencies | 6 | 13 | | Departmental Group | | |
Details of cases over £300,000
In connection with the withdrawal of a court action, the Core Department agreed to meet £600,000 of the claimant’s legal costs.
Gifts and hospitality
Managing Public Money states that annual reports should include a note on gifts made by departments if their total value exceeds £300,000. Gifts with a value of more than £300,000 should be noted individually. During 2019-20, the Core Department did not give, nor did it receive, any reportable gifts above £300,000.
The Core Department’s gifts and hospitality policy expects the highest level of standards of behaviour from civil servants when deciding whether to accept or decline gifts and hospitality offered, as set out within the Civil Service Code and Managing Public Money. There are also constraints in giving hospitality to ensure that claims are proportionate, necessary, justifiable, modest, and defensible under public scrutiny and delivering value for money from the use of public funds.
The policy applies to BEIS’s Civil Service staff, contractors, agents, and non-executive directors who are bound by the Civil Service Code. This policy does not apply to Ministers and special advisers who are covered under the Ministerial Code and Cabinet Office Code of Conduct for Special Advisers respectively. Additionally, Special Advisors gifts and hospitality registers are published on a quarterly basis, including nil returns.
Fees and charges
Audited information
The Core Department provides a limited number of services for which it charges fees. Any such fees are set to comply with the cost allocation and charging requirements set out in HM Treasury and Office of Public Sector Information guidance.
The Insolvency Service sets its fees to recover costs; it has a range of fees covering four areas:
- case administration: the average costs of administering bankruptcy cases, compulsory company liquidation cases and completing debt relief orders;
- insolvency practitioner regulations: the cost of authorising and monitoring insolvency practitioners and registering individual voluntary arrangements;
- estate accounting: the cost of financial transactions on insolvency cases using the Insolvency Service account; and
- debt relief orders: the cost of considering an application for a debt relief order by the Official Receiver.
Details of charging polices relating to partner organisations may be found in their respective published accounts. Remote contingent liabilities
Audited information
The Departmental Group has entered into the following contingent liabilities by offering guarantees, indemnities or letters of comfort. None of these is a contingent liability within the meaning of IAS 37, as the likelihood of a transfer of economic benefit in settlement is too remote. However, they are required to be disclosed under the requirements of the Government Financial Reporting Manual and Managing Public Money.
Detail of quantifiable and unquantifiable remote contingent liabilities is presented in the sections below.
Quantifiable
Measurement of quantifiable contingent liabilities is carried out following the requirements of IAS 37, given the reporting requirements of Managing Public Money. Managing Public Money requires that the full potential costs of such contracts be reported to Parliament.
| 1 April 2019 | Increase / (Decrease) in year | Liabilities crystallised in year | Obligations expired in year | 31 March 2020 | Amount reported to Parliament by Departmental Minute | |--------------|-------------------------------|---------------------------------|-----------------------------|---------------|-----------------------------------------------------| | £m | £m | £m | £m | £m | £m | | The Core Department has indemnified Cornwall Council for any liability relating to the European Regional Development Fund (ERDF) that might arise from the transfer of Wave Hub due to (a) any breach of the ERDF Funding Agreements which occurred on or before the transfer date of 31 March 2017 and (b) any action or omission by the Core Department or Wave Hub in relation to the ERDF Funding Agreements prior to the transfer which leads to finding of an Irregularity by any competent authority. | 18 | – | – | – | 18 | 18 | | The Core Department has indemnified the Coal Authority against potential claims arising from remunerated advisory work undertaken for other public sector bodies where settlement exceeds the Authority’s professional indemnity insurance. | 3 | – | – | – | 3 | – | | Total | 21 | – | – | – | 21 | 18 | Unquantifiable remote contingent liabilities: Core Department
Statutory guarantees
- Under section 9 of the British Aerospace Act 1980, the government is liable to discharge any outstanding liability of BAE Systems plc which vested in the company on 1 January 1981 in the event of its being wound up other than for the purpose of reconstruction or amalgamation.
Statutory indemnities
- Indemnities have been given to UK Atomic Energy Authority to cover certain indemnities provided by the Authority to carriers and British Nuclear Fuels plc against certain claims for damage caused by nuclear matter in the course of carriage.
- Indemnities have been given to bankers of the Insolvency Service against certain liabilities arising in respect of non-transferable “account payee” cheques due to insolvent estates and paid into the Insolvency Service's account.
- Indemnity has been given to National Grid’s liabilities with regards to the interconnector linking the UK and France.
Intellectual property
- A liability to the European Patent Office could arise under Article 40 of the European Patent Convention of 1973 as the UK is one of the contracting states.
- A liability to the World Intellectual Property Organisation could arise under Article 57 of the Patent Cooperation Treaty as the UK is one of the contracting states.
Data usage indemnities
- An indemnity has been provided to Pöyry PLC relating to the use of their yield curve data for the sale of Green Investment Bank. The Core Department has indemnified Pöyry PLC for any liability that occurs as a result of using their information in the sale process that may be brought by bidders in relation to the transaction.
Legal costs
- A contingent liability exists in relation to various ongoing legal cases. The cost is dependent on the outcome of cases which currently cannot be reliably estimated.
- Under an agreement with the Financial Reporting Council, if the amount held in the Council's legal costs fund falls below £1 million in any year, an additional grant will be made to cover legal costs subsequently incurred in that year.
Indemnities against personal liability
- Indemnities have been given to the directors appointed by the Core Department to wholly owned subsidiaries. These indemnities are against personal liability following any legal action against the companies.
- Indemnities have been provided to directors appointed to the Low Carbon Contracts Company Limited and Electricity Settlements Company Limited against personal liability following any legal action against the companies, to be triggered only after all other means have been exhausted i.e. company and directors’ insurance and recovery of costs through their levies.
- Indemnities have been provided to the Low Carbon Contracts Company Limited and Electricity Settlements Company Limited in respect of their officers, to be triggered only after all other means have been exhausted i.e. company and directors’ insurance and recovery of costs through their levies.
- Indemnities have been provided to trustees of the Nuclear Liabilities Fund appointed by the Secretary of State against personal liability in the event of legal action against the Fund.
- Indemnities have been provided to trustees of the Nuclear Liabilities Fund appointed by British Energy (now EDF Energy) against personal liability in the event of legal action against the Fund, to be triggered only in the event of failed recourse to indemnities from EDF Energy. • Indemnities have been provided to the Official Receiver relating to their actions as administrator of SSI Redcar with respect to administration of the site.
• An indemnity has been provided to the Official Receiver as liquidator of British Steel Limited for actions undertaken as Receiver in respect of any claims and proceedings that are made against the Receiver personally.
• Indemnities have been provided to the Oil and Gas Authority in respect of certain liabilities that could arise from the actions or omissions of its directors and otherwise arising from a director holding or having held office in the company.
• Indemnities have been provided to the MCS Service Company Limited and trustees of the MCS Charitable Foundation for any liability that might arise as a result of actions taken and decisions made for which the Core Department was ultimately responsible prior to transfer to the Company and Charitable Foundation of responsibility for the Microgeneration Certification Scheme (MCS) in April 2018.
Insurance claims
• A statutory liability will arise under the Nuclear Installations Act 1965 for third-party claims in excess of the operator’s liability in the event of a nuclear accident in the UK.
• A contingent liability exists in relation to Incidents/Accidents Insurance claims for exposure to ionising radiation pursued outside the existing UK Atomic Energy Authority insurance scheme.
• The Core Department has indemnified Elexon Limited against third party claims relating to the design and/or implementation of the Contracts for Difference and Capacity Markets settlement systems which are not covered by insurance and/or guarantees by their sub-contractors.
Losses or damages under agreements
• An indemnity has been provided for any losses or damages caused to other parties to the Energy Research Partnership consortium agreement.
Environmental clean-up
• A contingent liability exists in relation to the costs of retrieving and disposing of sealed radioactive sources under the Environmental Permitting (England and Wales) Regulations 2016 in the event that a company keeping such sources becomes insolvent.
• A contingent liability arises in relation to the remediation of land contaminated by a nuclear occurrence as the Secretary of State is deemed to be the appropriate person to bear responsibility under section 9 of The Radioactive Contaminated Land (Modification of Enactments) (England) (Amendment) Regulations 2007 SI 2007/3245.
• Under the United Nations Convention on the Law of the Sea (UNCLOS) 1982, OSPAR decision 98/3, the Energy Act 2004 and the Petroleum Act 1998, the department would become responsible for decommissioning most oil, gas and renewable energy installations in the event that operators are unable to fulfil their decommissioning commitments.
Others
• A liability could arise through non-compliance with the Cogeneration Directive (2004/8/EC) in the event of incorrect certification of combined heat and power plants by contractors of the Department.
• A contingent liability exists in respect of the risks associated with the Core Department assuming responsibility for uplifts in pension contributions for the UK Atomic Energy Authority’s non-active pension scheme members.
• The Secretary of State Investor Agreement (SOSIA) provides protections in certain scenarios where the Hinkley Point C nuclear plant is shut down for reasons that are political or due to certain changes in insurance arrangements or certain changes in law. Payments under the SOSIA would be expected in the first instance to be made using funds from the Supplier Obligation but in certain circumstances they could also come direct from the Secretary of State, relying on spending powers granted under the relevant Appropriation Act or, if payments were to be made over a period longer than two years, seeking a new spending power at the time. The payments could be up to around £22 billion excluding non-decommissioning operational costs that may be incurred after any shutdown. However, the liability to make payments under the SOSIA is almost entirely within the control of HM Government.
Unquantifiable remote contingent liabilities: Agencies and departmental ALBs in Departmental Group
- UKSA has an unquantifiable contingent liability arising from the international (UN) convention, which requires the UK Government to be ultimately liable for third party costs from accidental damage arising from UK space activities. To manage the risk to the Government, the Outer Space Act 1986 requires licensees to indemnify HMG against any proven third party costs. In March 2015 the Outer Space Act 1986 was amended to cap the previously unlimited liability for licensed activities. The cap is set at €60 million for the majority of missions. This amendment came into force from 1 October 2015 and was designed to adequately balance the risk to the UK Government whilst ensuring UK space operators remain competitive internationally. There is a requirement on licensees to obtain third party liability insurance (set at €60 million for the majority of missions) for the duration of the licensed activity, with the UK Government a named beneficiary. The UK government is therefore exposed to a potential liability for third party costs which are not recoverable from the licensee. The liability is unidentifiable at the time of reporting.
- UKRI collaborates with a number of other international partners in the funding, management and operation of technical facilities which are not owned by UKRI. In the event of a decision to withdraw from any of these arrangements, it is likely that UKRI would assist in the search for a replacement partner to ensure that technical commitments were met. The most significant international collaborations are in respect of CERN and ESO. For both of these facilities there is the possibility that UKRI would be obliged to contribute to decommissioning costs arising from a decision taken to discontinue operations. The decisions to decommission are not wholly within UKRI’s control.
- The NDA has non-quantifiable contingent liabilities arising from indemnities given as part of the contracts for the management of the nuclear site license companies. These indemnities are in respect of the uninsurable residual risk that courts in a country which is not party to the Paris and Brussels Conventions on third party liability in the field of nuclear energy may accept jurisdiction to determine liability in the event of a nuclear incident. Indemnities are in place in respect of LLWR and Dounreay as set out in the relevant Parent Body Agreements. In addition, indemnities are provided to the previous Parent Body Organisations (PBOs) of Magnox and Sellafield covering the periods of their ownership. Other potential or expected liabilities
The Department has entered into the following arrangements, details of which are provided in the interests of transparency. Neither of them is a contingent liability requiring disclosure under IAS 37, the Government Financial Reporting Manual or Managing Public Money as the obligating events did not exist at the reporting date.
Hinkley Point C Funded Decommissioning Programme (FDP) and Waste Transfer Contracts (WTCs)
The contract with NNB Generation Company Limited (NNB) to build Hinkley Point C (HPC) nuclear power plant includes a Contract for Difference between NNB and the Low Carbon Contracts Company Ltd, an FDP and associated FDP documents including WTCs between NNB and the Core Department.
The FDP and related documents including WTCs require NNB to make prudent provision for their waste and decommissioning liabilities. To meet their liabilities, the operator must set up a fund with an independent governance framework and will pay into it so that it is on track to fund the liabilities that arise from decommissioning and waste management. The fund will report annually to the Secretary of State and a full review will be conducted every five years to ensure that the fund is on track to meet all its liabilities. If it is off track, the operator will be required to take corrective action. These liabilities are strictly the operator’s responsibility and the probability of taxpayers picking up these liabilities is remote.
Alongside the FDP, the government has entered into two WTCs. These set out terms on which the government will take title to and liability for the spent fuel and intermediate level waste (ILW) from the site after decommissioning in order to dispose of the waste safely. The WTCs have generally been prepared in line with the government’s published waste transfer pricing methodology. Although the WTCs provide a default price based on today’s best estimate, they allow the waste transfer price to be set after a specified later date. The final price agreed is subject to a cap, but the likelihood of the future costs exceeding the agreed cap is considered remote.
Capacity agreements
These are statutory arrangements between National Grid, as system operator, and capacity providers. They require the capacity provider to be able to provide a given level of capacity in relevant delivery years when called upon to do so by National Grid.
The European Court of Justice (ECJ) ruling on 15 November 2018 resulted in a ‘Standstill Period’ for the Capacity Market during which no State Aid (in the form of capacity payments) was paid to capacity providers in relation to the annulled Main Scheme Approval. The European Commission (EC) appealed the ECJ’s decision and on 24 October 2019, the Department was informed by the EC that it had completed its State Aid investigation into the Capacity Market and that the Capacity Market scheme complies with EU State Aid rules. On 25 October 2019, the Department notified ESC and National Grid to restart their respective Capacity Market activities.
At a capacity auction, applicants who offer the lowest bid can win a capacity agreement. A capacity auction relates to delivery of capacity approximately 4 years ahead (T-4). Most recently, the capacity agreements resulting from the 2019 T-3 and T-4 capacity auction held in February and March 2020, are for the Delivery Year commencing in 2022/23 and 2023/24. Also, the capacity agreements resulting from the 2019 T-1 capacity auction, held in January 2020, are for the delivery year commencing in 2020/21. In addition to T-1, T-3 and T-4, the interim periods are covered by Transitional arrangements. There are currently 8 live capacity auctions out of a total of 13, which have been awarded from the start of the scheme in 2014 for the delivery year commencing 2016/17.
2 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/42629/3798-waste-transfer-pricing-methodology.pdf The Department has responsibility for administering the settlement process. This role is undertaken by the Electricity Settlements Company (ESC). The obligation for ESC to make capacity payments only arises when the respective levy is received from licensed suppliers and the generator provides the agreed level of capacity. The potential income and payments arising from these arrangements are outlined in the following table:
| | As at 31 March 2020 | As at 31 March 2019 | |--------------------------------|---------------------|---------------------| | | £m | £m | | Capacity Market – ESC | 1,236 | 2,699 | | Income from levy – ESC | (1,236) | (2,699) | | **Total Departmental Group** | **5,696** | **–** |
**Regularity of Expenditure**
**Audited information**
The Department ensures that the concept of regularity is understood and complied with in all its operational activities. It ensures compliance with HM Treasury’s Managing Public Money. The Comptroller & Auditor General has qualified his regularity opinion on these accounts (see page 110). This is due to an Excess Vote in the Department’s Resource Annually Managed Expenditure (AME) budget as a result of the COVID-19 emergency interventions by the Government, namely the Small Business Grant Fund and the Retail, Hospitality and Leisure Grant Fund. Due to the timing of the COVID-19 response in March 2020, this expenditure was incurred without the necessary parliamentary approval by way of a Supplementary Estimate. Further information in relation to these schemes can be seen on note 18 and note 28 of the accounts. This has led to a total Excess of Resource AME of £4.9 billion. The Department will seek parliamentary approval by way of an Excess Vote in the next Supply and Appropriation Act.
Sarah Munby Permanent Secretary and Principal Accounting Officer 11 September 2020 The Certificate of the Comptroller and Auditor General to the House of Commons
Opinion on financial statements I certify that I have audited the financial statements of the Department for Business, Energy and Industrial Strategy (“the Department”) and of its Departmental Group for the year ended 31 March 2020 under the Government Resources and Accounts Act 2000. The Department comprises the Core Department and its Agencies. The Departmental Group consists of the Department and the bodies designated for inclusion under the Government Resources and Accounts Act 2000 (Estimates and Accounts) Order 2019. The financial statements comprise: the Department’s and Departmental Group’s Statements of Comprehensive Net Expenditure, Financial Position, Cash Flows, Changes in Taxpayers’ Equity; and the related notes, including the significant accounting policies. These financial statements have been prepared under the accounting policies set out within them.
I have also audited the Statement of Parliamentary Supply and the related notes, and the information in the Accountability Report that is described in that report as having been audited.
In my opinion:
- the financial statements give a true and fair view of the state of the Department’s and the Departmental Group’s affairs as at 31 March 2020 and of the Department’s net expenditure and Departmental Group’s net expenditure for the year then ended; and
- the financial statements have been properly prepared in accordance with the Government Resources and Accounts Act 2000 and HM Treasury directions issued thereunder.
Emphasis of matter – Provision for nuclear decommissioning and Contracts for Difference (CfDs) derivative. Without qualifying my opinion, I draw attention to the disclosures made in notes 1.26 and 18.1 to the financial statements concerning the uncertainties inherent in the nuclear decommissioning provisions. As set out in these notes, given the very long timescales involved and the complexity of the plants and materials being handled, a considerable degree of uncertainty remains over the value of the liability for decommissioning nuclear sites designated by the Secretary of State. Significant changes to the liability could occur as a result of subsequent information and events which are different from the current assumptions adopted.
Finally, I also draw attention to the disclosures made in notes 1.26 and 9 to the financial statements concerning the measurement of liabilities relating to CfDs. As set out in these notes, there is a high degree of estimation uncertainty inherent in forecasting electricity generation volumes and wholesale electricity prices into the late 2030s (and 2060s for the purposes of the Hinkley Point C CFD) and there is a great deal of subjectivity involved in selecting a wholesale electricity price forecast input that conforms to the principles of fair value. Significant changes to the liability could occur as a result of subsequent information and events which are different from the current assumptions adopted. Qualified Opinion on regularity
In my opinion, except for the excess described in the basis for qualified opinion paragraph, in all material respects:
- the Statement of Parliamentary Supply properly presents the outturn against voted Parliamentary control totals for the year ended 31 March 2020 and shows that those totals have not been exceeded; and
- the income and expenditure recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.
Basis for Qualified opinion on regularity
Parliament authorised a Resource Annually Managed Expenditure limit for the Departmental Group of £14,588 million. Against this limit, the Departmental Group incurred actual outturn of £19,483 million, breaching the authorised limit by £4,895 million, due to the recognition of a provision, as shown in the Statement of Parliamentary Supply.
Basis of opinions
I conducted my audit in accordance with International Standards on Auditing (ISAs) (UK) and Practice Note 10 ‘Audit of Financial Statements of Public Sector Entities in the United Kingdom’. My responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of my certificate. Those standards require me and my staff to comply with the Financial Reporting Council’s Revised Ethical Standard 2016. I am independent of the Department in accordance with the ethical requirements that are relevant to my audit and the financial statements in the UK. My staff and I have fulfilled our other ethical responsibilities in accordance with these requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.
Conclusions relating to going concern
I have nothing to report in respect of the following matters in relation to which the ISAs (UK) require me to report to you where:
- the Department’s use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
- the Department have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Department’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Responsibilities of the Accounting Officer for the financial statements
As explained more fully in the Statement of Accounting Officer’s Responsibilities, the Accounting Officer is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Auditor’s responsibilities for the audit of the financial statements
My responsibility is to audit, certify and report on the financial statements in accordance with the Government Resources and Accounts Act 2000. An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs (UK), I exercise professional judgment and maintain professional scepticism throughout the audit. I also:
- identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Department’s internal control.
- evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the group financial statements. I am responsible for the direction, supervision and performance of the group audit. I remain solely responsible for my audit opinion.
- Conclude on the appropriateness of the Department’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my report. However, future events or conditions may cause the group to cease to continue as a going concern.
I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.
I am required to obtain evidence sufficient to give reasonable assurance that the Statement of Parliamentary Supply properly presents the outturn against voted Parliamentary control totals and that those totals have not been exceeded. The voted Parliamentary control totals are Departmental Expenditure Limits (Resource and Capital), Annually Managed Expenditure (Resource and Capital), Non-Budget (Resource) and Net Cash Requirement. I am also required to obtain evidence sufficient to give reasonable assurance that the expenditure and income recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.
**Other Information**
The Accounting Officer is responsible for the other information. The other information comprises information included in the annual report, but does not include the parts of the Accountability Report described in that report as having been audited, the financial statements and my auditor’s report thereon. My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon. In connection with my audit of the financial statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard.
Opinion on other matters
In my opinion:
• the parts of the Accountability Report to be audited have been properly prepared in accordance with HM Treasury directions made under the Government Resources and Accounts Act 2000;
• in the light of the knowledge and understanding of the group and the parent and its environment obtained in the course of the audit, I have not identified any material misstatements in the Performance Report or the Accountability Report; and
• the information given in the Performance and Accountability Reports for the financial year for which the financial statements are prepared is consistent with the financial statements.
Matters on which I report by exception
I have nothing to report in respect of the following matters which I report to you if, in my opinion:
• adequate accounting records have not been kept or returns adequate for my audit have not been received from branches not visited by my staff; or
• the financial statements and the parts of the Accountability Report to be audited are not in agreement with the accounting records and returns; or
• I have not received all of the information and explanations I require for my audit; or
• the Governance Statement does not reflect compliance with HM Treasury’s guidance.
Report
My report on the qualification in respect of the excess vote is at page 114.
Gareth Davies Comptroller and Auditor General
15 September 2020 National Audit Office 157-197 Buckingham Palace Road Victoria London SW1W 9SP The Report of the Comptroller and Auditor General to the House of Commons
Introduction The Department for Business, Energy and Industrial Strategy (“the Department”) is the government department responsible for building an economy which is fairer, cleaner, more innovative, and attracts investment from all over the world. Its priorities include promoting competitive markets and ensuring that the UK has a reliable, low cost and clean energy system.
The net expenditure of government departments is authorised by the annual Supply and Appropriation Acts of Parliament and their associated Supply Estimates. These Acts set a series of expenditure limits on each department’s spending, and net cash requirement. Expenditure beyond any of these limits is considered a breach of a control total and results in an ‘Excess Vote’. Such expenditure potentially undermines parliamentary control over public spending. Where these limits are breached, I qualify my regularity opinion on the financial statements.
Parliament authorised a Resource Annually Managed Expenditure (RAME) limit of £14,588 million for the Department in 2019-20. This limit means that the Department was required to incur RAME expenditure of less than £14,588 million. However, the outturn against the RAME limit was £19,483 million, and the authorised limit was therefore breached by £4,895 million. I have therefore qualified my regularity opinion on the Department’s financial statements in this respect.
Grants to businesses (in relation to COVID-19) The government announced in March 2020 that qualifying businesses could expect to receive support in the form of grants to help counteract the adverse financial effects bought about by the coronavirus pandemic. Businesses eligible for either Small Business Rates Relief or Rural Rate Relief received a grant of £10,000 each, and those with a rateable value between £15,000 and £51,000 received a grant of £25,000 each. The Department has the responsibility of managing the schemes and payments are being administered to businesses by local authorities.
The announcements and actions taken prior to 31 March 2020 to ensure that cash was paid out to businesses as soon as possible created a constructive obligation under IAS 37. As a result, the Department has recognised a provision of £10,824 million representing the Department’s estimate of total payments to be made under the schemes.
Government departments prepare and agree two Supply Estimates during the year, the Main Estimate in or around May each year and the Supplementary Estimate before the year-end in or around February each year. At the time of submitting the Supplementary Estimate, the Department could not anticipate the impact of the COVID-19 pandemic or the urgent action that it would require to support the economy. However, as the Department could not allow for these grant schemes in its Supplementary Estimate, the recognition of the £10,824 million provision meant that the Department exceeded their control total, as detailed on page 109 of the Annual Report. This breach requires an Excess Vote from HM Treasury and leads to a regularity qualification in the audit opinion.
Gareth Davies Comptroller and Auditor General
15 September 2020 National Audit Office 157-197 Buckingham Palace Road Victoria London SW1W 9SP Financial Statements
## Consolidated Statement of Comprehensive Net Expenditure
for the period ended 31 March 2020
| Note | Core Department and Agencies | 31 March 2020 | 31 March 2019 restated | |------|-----------------------------|---------------|------------------------| | | £m | £m | £m | | Income from sale of goods and services | 6.1 | (257) | (4,798) | (749) | (3,260) | | Total operating income | | (257) | (4,798) | (749) | (3,260) | | Staff costs | 3 | 390 | 1,240 | 330 | 1,119 | | Purchase of goods and services | 4.1 | 1,597 | 4,301 | 1,424 | 2,942 | | Depreciation and impairment charges | 4.2 | 18 | 440 | 48 | 600 | | Provision expense | 4.3 | 10,869 | 17,873 | 59 | (97,721) | | Grants | 4.4 | 14,006 | 9,410 | 12,907 | 8,280 | | Other operating expenditure | 33 | 27 | 3 | (5) | | Total operating expenditure | 26,913 | 33,291 | 14,771 | (84,785) | | Net operating expenditure | 26,656 | 28,493 | 14,022 | (88,045) | | Finance income | 6.2 | (212) | (334) | (214) | (370) | | Finance expense | 5 | (125) | (18) | (249) | (3,775) | | Contracts for difference derivatives | 9 | – | 5,346 | – | (1,991) | | Share of post-tax loss/(profits) of associates and joint ventures | 13 | – | 5 | – | (186) | | Net expenditure for the year from operations | 26,319 | 33,492 | 13,559 | (94,367) | | Net expenditure for the year | 26,319 | 33,492 | 13,559 | (94,367) |
### Other Comprehensive Income and Expenditure
Net (gain)/loss on:
- Items that will not be reclassified to net operating expenditure:
- revaluation of property, plant and equipment | – | (57) | – | (145) |
- revaluation of intangible assets | – | (13) | – | (19) |
- Items that may be reclassified subsequently to net operating costs:
- revaluation of investments | 166 | 116 | (35) | (63) |
- other revaluation movements | 12 | (2) | 56 | 2 |
- actuarial (gains)/losses | – | (88) | – | 69 |
- joint venture and associate other movements | – | – | – | (35) |
Total other comprehensive net income and expenditure | 178 | (44) | 21 | (191) |
Comprehensive net expenditure for the year | 26,497 | 33,448 | 13,580 | (94,558) |
All operations are continuing.
Further analysis of staff costs can be found in the Staff note in the Accountability Report on page 69.
The notes on pages 123 to 223 form part of these Accounts.
## Consolidated Statement of Financial Position
**as at 31 March 2020**
| Note | 31 March 2020 | 31 March 2019 restated | 1 April 2018 | |------|---------------|-------------------------|--------------| | | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | | Non-current assets: | £m | £m | £m | £m | £m | £m | | Property, plant and equipment | 7 | 306 | 3,605 | 294 | 3,533 | 276 | 3,414 | | Investment properties | 2 | 121 | – | – | 117 | 23 | 145 | | Intangible assets | 8 | 101 | 230 | 14 | 167 | 9 | 145 | | Investment and loans in public bodies | 10 | 3,392 | 1,706 | 3,348 | 1,758 | 2,996 | 1,630 | | Other financial assets | 11 | 967 | 4,120 | 1,196 | 4,118 | 1,028 | 4,194 | | Recoverable contract costs | 12 | – | 1,425 | – | 1,620 | – | 3,346 | | Derivative financial instruments | 22 | – | – | 7 | 7 | 47 | 78 | | Investment in joint ventures and associates | 13 | – | 967 | – | 1,039 | – | 367 | | Trade and other receivables | 14 | 740 | 848 | 813 | 938 | 932 | 1,090 | | Total non-current assets | 5,508 | 13,022 | 5,672 | 13,297 | 5,311 | 14,409 | | Current assets: | | | | | | | | Inventories | – | 51 | – | 37 | – | 31 | | Non-current assets held for sale | – | 6 | – | 20 | – | 15 | | Trade and other receivables | 14 | 538 | 2,258 | 447 | 1,565 | 544 | 1,343 | | Investments and loans in public bodies | 15 | 687 | 672 | 666 | 620 | 732 | 732 | | Other financial assets | 11 | – | – | – | – | 142 | 142 | | Derivative financial instruments | 22 | 9 | 9 | 17 | 17 | 31 | 31 | | Cash and cash equivalents | 16 | 1,039 | 2,158 | 1,283 | 2,078 | 1,246 | 2,034 | | Total current assets | 2,273 | 5,154 | 2,413 | 4,337 | 2,695 | 4,328 | | Total assets | 7,781 | 18,176 | 8,085 | 17,634 | 8,006 | 18,737 | | Current liabilities: | | | | | | | | Trade payables and other liabilities | 17 | (2,782) | (6,484) | (2,908) | (5,652) | (2,283) | (4,954) | | Provisions for liabilities and charges | 18 | (11,047) | (14,065) | (260) | (3,050) | (278) | (3,332) | | Financial guarantees and loan commitment liabilities | 19 | (17) | (17) | (11) | (11) | (16) | (16) | | Derivative financial instruments | 22 | – | – | (1) | (13) | – | (11) | | Note | 31 March 2020 | 31 March 2019 restated | 1 April 2018 | |------|---------------|------------------------|--------------| | | Core Department and Agencies £m | Departmental Group £m | Core Department and Agencies £m | Departmental Group £m | Core Department and Agencies £m | Departmental Group £m | | Total current liabilities | (13,846) | (20,566) | (3,180) | (8,726) | (2,577) | (8,313) | | Non-current assets plus/less net current assets/ liabilities | (6,065) | (2,390) | 4,905 | 8,908 | 5,429 | 10,424 | | Non-current liabilities: | | | | | | | | Trade payables and other liabilities | 17 | (883) | (2,467) | (1,141) | (2,901) | (1,203) | (2,901) | | Provisions for liabilities and charges | 18 | (1,702) | (136,034) | (1,920) | (131,416) | (2,176) | (237,603) | | Financial guarantees and loan commitment liabilities | 19 | (74) | (221) | (43) | (219) | (45) | (45) | | Derivative financial instruments | 9, 22 | – | (16,464) | (2) | (12,923) | – | (15,904) | | Retirement benefit obligations | 20 | – | (87) | – | (921) | – | (686) | | Total non-current liabilities | (2,659) | (155,273) | (3,106) | (148,380) | (3,424) | (257,139) | | Total assets less liabilities | (8,724) | (157,663) | 1,799 | (139,472) | 2,005 | (246,715) | | Taxpayers’ equity and other reserves: | | | | | | | | General fund | (9,266) | (160,292) | 1,077 | (142,297) | 995 | (250,098) | | Revaluation reserve | 542 | 1,998 | 722 | 2,155 | 1,010 | 2,915 | | Charitable funds | – | 402 | – | 438 | – | 314 | | Non-controlling interests | – | 229 | – | 232 | – | 154 | | Total equity | (8,724) | (157,663) | 1,799 | (139,472) | 2,005 | (246,715) |
Core Department and Agencies comprise the Core Department and the UK Space Agency and Insolvency Service.
The notes on pages 123 to 223 form part of these Accounts.
Sarah Munby Permanent Secretary and Principal Accounting Officer 11 September 2020
## Consolidated Statement of Cash Flows
for the period ended 31 March 2020
| Note | Core Department and Agencies | 2019-20 | Core Department and Agencies | 2018-19 restated | |------|-----------------------------|---------|-----------------------------|------------------| | | £m | £m | £m | £m | | **Cash flows from operating activities** | | | | | | Net operating cost | (26,319) | (33,492) | (13,559) | 94,367 | | Adjustment for non-cash expenditure | 10,735 | 23,584 | (151) | (103,003) | | (Increase)/decrease in inventories | – | (14) | – | (6) | | (Increase)/decrease in trade and other receivables | 14 | (18) | (603) | 216 | | Less movements in receivables relating to items not passing through the Consolidated Statement of Comprehensive Net Expenditure | 101 | 227 | (71) | (71) | | Increase/(decrease) in trade payables and other liabilities | 17 | (384) | 398 | 563 | | Less movements in payables relating to items not passing through the Consolidated Statement of Comprehensive Net Expenditure | 73 | (470) | (730) | (1,531) | | Use of provisions | 18 | (249) | (3,039) | (284) | | Financial guarantees called in | 19 | (13) | (13) | (11) | | Expenditure funded by the National Insurance Fund (RPS) | 4.1 | 430 | 430 | 320 | | Payments to retirement benefit obligations | – | (106) | – | (144) | | **Net cash outflow from operating activities** | (15,644) | (13,098) | (13,707) | (12,535) | | **Cash flows from investing activities** | | | | | | Purchase of property, plant and equipment | (38) | (295) | (46) | (312) | | Purchase of intangible assets | (123) | (150) | (8) | (36) | | Proceeds of disposal of property, plant and equipment | – | 31 | – | 3 | | Proceeds of disposal of investment property | – | – | 20 | 20 | | Proceeds of disposal of intangible assets | – | 2 | – | – | | Proceeds of disposal of assets held for sale | – | 5 | – | – | | Loan redeemed from Post Office Limited | 15 | 5,342 | 5,342 | 6,360 | | Loans made to Post Office Limited | 15 | (5,379) | (5,379) | (6,240) | | Repayments of loans and investments | 32 | 745 | 33 | 754 | | Payments to the Contracts for Difference generators | 9 | – | (1,803) | – | | Other investments and loans made | (242) | (1,091) | (330) | (1,004) | | Repayments of Public Dividend Capital | 16 | – | – | – | | Launch investment receipts | 340 | 340 | 230 | 230 | | Venture capital fund redemptions | 7 | 106 | 7 | 121 | | Venture capital fund investments | – | (255) | – | (235) | | Dividends from Joint ventures and associates | 13 | – | 94 | – | | Disposal of Joint venture and associates | – | 2 | – | – | | Investment in Joint ventures and associates | 13 | – | (30) | – | | Investment in shares | (19) | (19) | (125) | – | | **Net cash outflow from investing activities** | (64) | (2,355) | (99) | (1,269) | | Note | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |------|-----------------------------|--------------------|-----------------------------|--------------------| | | 2019-20 | 2018-19 restated | 2019-20 | 2018-19 restated | | | £m | £m | £m | £m | | Cash flows from financing activities | | | | | | From Consolidated Fund (supply) – current year | 15,465 | 15,465 | 14,139 | 14,139 | | Advances from the Contingencies Fund | – | – | 5 | 5 | | Repayments to the Contingencies Fund | – | – | (7) | (7) | | From the National Insurance Fund | 430 | 436 | 320 | 320 | | Payments in respect of the National Insurance Fund | 4.1 | (430) | (436) | (320) | (320) | | Other adjustments relating to financing activities | – | 3 | – | – | | Disposal of shares | – | – | – | 3 | | **Net financing** | **15,465** | **15,468** | **14,137** | **14,140** | | Net increase/(decrease) in cash and cash equivalents in the period before adjustment for receipts and payments to the Consolidated Fund | (243) | 15 | 331 | 336 | | Receipts due to the Consolidated Fund which are outside the scope of the Department’s activities | 841 | 907 | 1,463 | 1,465 | | Payments of amounts due to the Consolidated Fund | (842) | (842) | (1,757) | (1,757) | | **Net increase/(decrease) in cash and cash equivalents in the period after adjustment for receipts and payments to the Consolidated Fund** | **(244)** | **80** | **37** | **44** | | Cash and cash equivalents opening balance | 1,283 | 2,078 | 1,246 | 2,034 | | Cash and cash equivalents at the end of the period | 16 | 1,039 | 2,158 | 1,283 | 2,078 | Statement of Changes in Taxpayers’ Equity (Core Department and Agencies)
for the period ended 31 March 2020
| Note | General Fund | Revaluation Reserve | Taxpayers’ equity | Total Reserves | |------|--------------|---------------------|------------------|---------------| | | £m | £m | £m | £m | | **Balance at 1 April 2018** | 995 | 1,010 | 2,005 | 2,005 | | IFRS 9 opening balance adjustments | 277 | (263) | 14 | 14 | | **Revised balance at 1 April 2018** | 1,272 | 747 | 2,019 | 2,019 | | Net parliamentary funding – drawn down | 14,139 | – | 14,139 | 14,139 | | Net parliamentary funding – deemed | 928 | – | 928 | 928 | | National Insurance Fund – RPS | 4.1 | 320 | – | 320 | | Supply (payable)/receivable adjustment | 17 | (1,280) | – | (1,280) | | Income payable to the Consolidated Fund | (675) | – | (675) | (675) | | Decrease in RPS receivables | 14 | (71) | – | (71) | | Net expenditure for the year | (13,559) | – | (13,559) | (13,559) | | **Non-Cash Adjustments:** | | | | | | Auditors’ remuneration | 4.1 | 1 | – | 1 | | **Movements in Reserves:** | | | | | | Other comprehensive net expenditure for the year | – | (21) | (21) | (21) | | Transfers between reserves | 1 | (1) | – | – | | Other movements | 1 | (3) | (2) | (2) | | **Balance at 31 March 2019** | 1,077 | 722 | 1,799 | 1,799 | | **Balance at 1 April 2019** | 1,077 | 722 | 1,799 | 1,799 | | Net parliamentary funding – drawn down | 15,465 | – | 15,465 | 15,465 | | Net parliamentary funding – deemed | 1,280 | – | 1,280 | 1,280 | | National Insurance Fund – RPS | 436 | – | 436 | 436 | | Supply (payable)/receivable adjustment | 17 | (1,036) | – | (1,036) | | Income payable to the Consolidated Fund | (169) | – | (169) | (169) | | Net expenditure for the year | (26,319) | – | (26,319) | (26,319) | | **Non-Cash Adjustments:** | | | | | | Auditors’ remuneration | 4.1 | 1 | – | 1 | | **Movements in Reserves:** | | | | | | Other comprehensive net income for the year | – | (178) | (178) | (178) | | Transfers between reserves | 2 | (2) | – | – | | Other movements | (3) | – | (3) | (3) | | **Balance at 31 March 2020** | (9,266) | 542 | (8,724) | (8,724) |
## Consolidated Statement of Changes in Taxpayers’ Equity (Departmental Group)
for the period ended 31 March 2020
| Note | General Fund restated | Revaluation Reserve | Taxpayers’ Equity restated | Charitable Funds – Unrestricted/Restricted | Non controlling interest | Total Reserves restated | |------|-----------------------|---------------------|---------------------------|------------------------------------------|-------------------------|------------------------| | | £m | £m | £m | £m | £m | £m | | **Balance at 31 March 2018** | (250,098) | 2,915 | (247,183) | 314 | 154 | (246,715) | | IFRS 9 opening balance adjustment | 941 | (926) | 15 | – | – | 15 | | **Balance at 1 April 2018** | (249,157) | 1,989 | (247,168) | 314 | 154 | (246,700) | | Net parliamentary funding – drawn down | 14,139 | – | 14,139 | – | – | 14,139 | | Net parliamentary funding – deemed | 928 | – | 928 | – | – | 928 | | National Insurance Fund – RPS | 4.1 | 320 | – | 320 | – | 320 | | Supply (payable)/receivable adjustment | 14, 17 | (1,280) | – | (1,280) | – | (1,280) | | Income payable to the Consolidated Fund | (1,331) | – | (1,331) | – | – | (1,331) | | Decrease in RPS receivables | 14 | (71) | – | (71) | – | (71) | | Net expenditure for the year | 94,367 | – | 94,367 | – | – | 94,367 | | Amounts paid from distributable reserves | (131) | – | (131) | – | – | (131) | | **Non-Cash Adjustments:** | | | | | | | | Auditors’ remuneration | 4.1 | 1 | – | 1 | – | 1 | | **Movements in Reserves:** | | | | | | | | Other Comprehensive net (expenditure)/ income for the year | (34) | 225 | 191 | – | – | 191 | | Transfers between reserves | (55) | (60) | (115) | 124 | (9) | – | | Minority interest | – | – | – | – | 87 | 87 | | Other movements | 7 | 1 | 8 | – | – | 8 | | **Balance at 31 March 2019** | (142,297) | 2,155 | (140,142) | 438 | 232 | (139,472) | | **Balance at 1 April 2019** | (142,297) | 2,155 | (140,142) | 438 | 232 | (139,472) | | Net parliamentary funding – drawn down | 15,465 | – | 15,465 | – | – | 15,465 | | Net parliamentary funding – deemed | 1,280 | – | 1,280 | – | – | 1,280 | | National Insurance Fund – RPS | 436 | – | 436 | – | – | 436 | | Supply (payable)/receivable adjustment | 17 | (1,036) | – | (1,036) | – | (1,036) | | Income payable to the Consolidated Fund | (791) | – | (791) | – | – | (791) | | Net expenditure for the year | (33,492) | – | (33,492) | – | – | (33,492) | | Amounts paid from distributable reserves | (108) | – | (108) | – | – | (108) | | **Non-Cash Adjustments:** | | | | | | | | Auditors’ remuneration | 4.1 | 1 | – | 1 | – | 1 | | **Movements in Reserves:** | | | | | | | | Other comprehensive net (expenditure)/ income for the year | 88 | (44) | 44 | – | – | 44 | | Transfers between reserves | 166 | (112) | 54 | (36) | (18) | – | | Minority interest | – | – | – | – | 15 | 15 | | Other movements | (4) | (1) | (5) | – | – | (5) | | **Balance at 31 March 2020** | (160,292) | 1,998 | (158,294) | 402 | 229 | (157,663) |
The notes on pages 123 to 223 form part of these accounts. Notes to the Accounts
1. Accounting policies, judgements and estimates
1.1 Basis of accounting
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adapted and interpreted by the HM Treasury 2019-20 Government Financial Reporting Manual (FReM) and as set out in the Accounts Direction to the Department pursuant to section 5(2) of the Government Resources and Accounts Act 2000 (GRAA) except as described at 1.2 below. Where the FReM permits a choice of accounting policy, the policy selected is that judged to be most appropriate to the particular circumstances of the Department and its consolidated entities (the Departmental Group) for the purpose of giving a true and fair view. The policies adopted by the Departmental Group are described below; they have been applied consistently to items considered material to the accounts.
The Consolidated Statement of Financial Position (SoFP) shows significant net liabilities, primarily relating to Contracts for Difference derivatives and provisions for nuclear decommissioning which will be settled over many years. Liabilities in excess of those to be funded by the Departmental Group will be met by future funding voted by Parliament annually in Supply and Appropriation Acts. There is no reason to believe the resources to settle these liabilities will not be forthcoming. It has accordingly been considered appropriate to adopt a going concern basis for the preparation of these financial statements.
1.2 Accounting convention
These accounts have been prepared under the historical cost convention modified to measure Property, plant and equipment (except specific waste management assets), Intangibles, Investment properties and Financial instruments at fair value to the extent required or permitted under IFRS as set out in these accounting policies.
The Department has agreed with HM Treasury that specific nuclear waste management assets should be measured at historical cost less any impairment losses where there is no reliable and cost effective valuation methodology; this is a departure from the FReM requirement to report Property, plant and equipment at fair value. Public Dividend Capital and shares in consolidated bodies held by the Core Department are carried at historical cost less any impairment in accordance with the FReM.
1.3 Presentational currency
The financial statements are presented in pounds sterling, the functional currency of the Departmental Group. Transactions denominated in a foreign currency are translated into sterling at the rate of exchange on the date of each transaction. In preparing the financial statements, monetary assets and liabilities denominated in foreign currencies are translated at the rates prevailing at the reporting date. All translation differences of monetary assets and liabilities are included in Net expenditure for the year. Values are rounded to the nearest million pounds (£m) unless the FReM requires a lower threshold.
1.4 Basis of consolidation
The Departmental Group accounts consolidate the balances of the Core Department and designated bodies listed in note 27, which fall within the departmental boundary as defined in the FReM and make up the ‘Departmental Group’, excluding transactions and balances between them. Where the Office for National Statistics (ONS) designates a body retrospectively such that the body should have been designated for consolidation in a prior period, the accounts are voluntarily restated to reflect the position from the effective date of classification. The consolidated bodies prepare accounts in accordance with either the FReM, the Charities’ Statement of Recommended Practice (for charities), or the Companies Act 2006 (for limited companies). For those bodies that do not prepare accounts in accordance with the FReM, adjustments are made at consolidation if necessary where differences would have a significant effect on the accounts. The Core Department and its designated bodies are all domiciled in the UK.
1.5 Changes in accounting policies
Accounting policies are unchanged compared to those in the 2018-19 Departmental Group financial statements.
1.6 New accounting standards adopted in the year and FReM changes
No new accounting standards have been adopted in these financial statements. The FReM 2019-20 has been updated to include details concerning the adaptations and interpretations related to IFRS 16 ‘Leases’. Further details are provided in note 1.7 below.
1.7 Applicable accounting standards issued but not yet adopted
The revised Conceptual Framework for Financial Reporting
The International Accounting Standards Board (IASB) issued the revised Conceptual Framework for Financial Reporting in March 2018. It replaces the Conceptual Framework issued in September 2010. The revised Conceptual Framework is effective for annual reporting period beginning on or after 1 January 2020. It will be adopted by the FReM from 1 April 2020. The Conceptual Framework sets out the fundamental concepts for financial reporting. It helps ensure that the Standards are conceptually consistent and that similar transactions are treated in the same way.
One of the main updates in the revised Conceptual Framework was new guidance in recognising liabilities and assets when there is significant uncertainty. This would have affected the Departmental Group’s key judgement that the Contract for Difference (CfD) for Hinkley Point C (HPC) was unable to be recognised in the Departmental Group’s Statement of Financial Position (SoFP) due to the significant uncertainty of the HPC’s CfD valuation. Under the revised Conceptual Framework, HPC’s CfD would be recognised. However, the expected impact of adopting the revised Conceptual Framework will be negligible due to the CfD for HPC being recognised in these financial statements (see note 1.26).
IFRS 16 ‘Leases’
IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ and will now be adopted by the public sector in 2021-22. The Financial Reporting Advisory Board (FRAB) agreed in March 2020 to a further year’s deferral from 2020-21 to 2021-22. The Departmental Group will adopt IFRS 16 from 1 April 2021. Entities in the Departmental Group who report under IFRS and the Companies Act, have adopted IFRS 16 from 1 April 2019, in line with their Companies Act reporting requirements. These adjustments have been reversed in the preparation of the Departmental Group accounts and the Departmental Group has continued to apply IAS 17 for the 2019-20 financial year.
IFRS 16 represents a significant change in lessee accounting by removing the distinction between operating leases (off-statement of financial position financing) and finance leases (on-statement of financial position financing) and introducing a single lessee accounting model. IFRS 16 requires the recognition of all leases as on-statement of financial position financing with exemption given to low value leases and short-term leases, i.e. leases with a lease term of less than 12 months as mandated by the FReM. This will result in the recognition of a right-to-use asset, measured at the present value of future lease payments, and a matching liability in the SoFP. Upon transition, the FReM has mandated the use of practical expedient in IFRS 16, which means the Department, only applies the standard to contracts which were previously identified as leases under IAS 17 and IFRIC 4. In addition, the FReM has also mandated that upon transition, the prior year comparatives will not be restated and a cumulative catch up will be recognised in the Statement of Change in Taxpayers Equity along with opening balance transition adjustments in the SoFP to recognise the right of use assets and right of use liabilities. The overall impact of the new accounting standard on the Statement of Comprehensive Net Expenditure (SoCNE) is expected to be immaterial, whilst there is expected to be material right-to-use assets of circa £355 million and a corresponding right of use lease liabilities recognised in the SoFP, if the standard was adopted on 1 April 2021. The expected impact is based on the value of operating lease and finance lease commitments the Departmental Group has in place at 31 March 2020 that are expected to be in place at 1 April 2021 per note 21 and 21.2.1. The overall impact on net assets of the Departmental Group is expected to be immaterial.
**IFRS 17 ‘Insurance Contracts’**
IFRS 17 ‘Insurance Contracts’ replaces IFRS 4 ‘Insurance Contracts’, which requires reporters to identify insurance contracts, and for those contracts recognise an insurance contract liability. The insurance contract liability is calculated as the present value of future insurance cashflows (the fulfilment cash flows) plus a subsequent risk adjustment. The IASB announced the deferral of IFRS 17 by two years until 1 January 2023 and therefore, the implementation timetable in the public sector is being extended to at least 1 April 2023. The Departmental Group is currently assessing the impact of the IFRS 17 adoption.
**1.8 Operating income**
Operating income relates directly to the operating activities of the Departmental Group and includes income from contracts with customers, levies, grants and income from the Mineworkers’ Pension Scheme.
The Departmental Group is required to identify receipts which it collects on behalf of the Consolidated Fund; these are not recognised as income but instead are disclosed in a separate Trust Statement published alongside these accounts and in note 4 in the Statement of Parliamentary Supply (SoPS) in the Accountability Report.
**Operating income from contracts with customers**
Income from contracts with customers are allocated to individual promises, or performance obligations, on a stand-alone selling price basis, and is recognised when the related performance obligation is satisfied, either over time or at a point in time.
The performance obligations are typically satisfied upon delivery of goods and services in accordance with the contractually defined timescales. The payment terms for the invoices are typically 30 days. Where the Departmental Group receives consideration prior to the transfer of goods and services, the amount is recorded as contract liabilities. Where the Departmental Group has transferred goods and services to a customer and the right to consideration is conditioned on something other than the passage of time, the amount is recorded as contract assets.
The measurement of income takes account of significant financing components, variable consideration, and any discounts or rebates.
**Levies**
Levy income is recognised in the Departmental Group accounts when an event has occurred that creates an obligation on a counterparty to pay the levy, the amount can be reliably measured, and it is probable that the assisted economic benefits from the taxable event will flow to the Departmental Group. Levies are typically set on an annual basis, invoiced monthly, quarterly or bi-annually, and accounted for in the period to which the invoices are related to and performance obligations are satisfied.
The Low Carbon Contracts Company Ltd (LCCC) and Electricity Supply Company Ltd (ESC) are permitted to retain levies collected under statute and classified as taxes in the National accounts. This income is recognised by LCCC and ESC in the same period as the related expenditure. LCCC and ESC do not prepare their individual accounts under FReM and have judged that IFRS 15 does not apply to income from electricity suppliers. IFRS 15 is applicable to the Departmental Group’s remaining levy income under FReM guidance. The Departmental Group is not permitted by the FReM to recognise tax income relating to future years, whereas LCCC, which does not apply the FReM, is able to. Adjustments are made on consolidation to ensure compliance with the Departmental Group accounting policy. There are no changes in the recognition and measurement of levy income under IFRS 15.
**Grant income**
Grant income including European funding is recognised when there is reasonable assurance that there are no conditions attached, or that any such conditions have been complied with and it is certain the grant will be received. Research grants and fellowships are recognised in line with a schedule of pre-agreed payment profiles, which include matching considerations over the period of the grant duration and to the period which they relate. Where the terms and conditions do not specify a pre-agreed payment profile or other matching considerations, obligations are recognised in full. Where the profile indicates an unclaimed and/or unpaid amount exists at the reporting date, such sums are accrued.
**Income from the Mineworkers’ Pension Scheme**
Income arising from the Government guarantee of certain benefits payable to members and beneficiaries of the Mineworkers’ Pension Scheme is recognised when the Core Department becomes entitled to the income and the value can be reliably measured.
**In 2018-19 the Departmental Group adopted IFRS 15 ‘Revenue from Contracts with Customers’**
IFRS 15 ‘Revenue from Contracts with Customers’ replaced IAS 18 ‘Revenue’ and IAS 11 ‘Construction Contracts’ and was adopted by the public sector from 1 April 2018. IFRS 15 requires the Departmental Group to apportion revenue earned from contracts to individual promises, or performance obligations, on a stand-alone selling price basis, based on a five-step model. The FReM removed the option to adopt IFRS 15 retrospectively, and therefore any difference between the previous carrying amount and the carrying amount under IFRS 15 was recognised as adjustments to opening balances on 1 April 2018.
The impacts on significant income streams of adopting IFRS 15 in 2018-19 are set out below:
**Sales of goods and services**
Within the scope of IFRS 15, the stream of income that has been significantly affected was £850 million from the service contracts held by Nuclear Decommissioning Authority (NDA) for fuel reprocessing, waste and product storage, and the transportation of spent fuel, waste and products. Due to the limited availability of consistent historical data relating to the contracts and the extent to which the contracts and associated assumptions have changed over time, NDA obtained a derogation from HM Treasury to apply IFRS 15 on first-time adoption in 2018-19 on a prospective basis, and therefore, was not required to report any retrospective adjustments for prior years. A derogation was granted to the Departmental Group to this effect.
In order to produce a consistent measurement of fulfilment of the remaining performance obligations under the waste treatment elements of the respective spent fuel reprocessing contracts, NDA has determined that the remaining revenue on overseas reprocessing contracts would be recognised over the remainder of the period in which waste treatment services for all wastes produced by the Thorp reprocessing plant would be completed (currently expected to conclude in 2025). This meant that the completion of the programme will be treated as a single performance obligation under a single contract and as a result there was a non-recurring adjustment to the contract loss provision in NDA’s and the Departmental Group’s SoFP.
**Levy income**
IFRS 15 is applicable to the Departmental Group’s levy income under the FReM guidance. There were no changes in the recognition and measurement of levy income under the adoption of IFRS 15. Fees, charges and recharges
The Departmental Group’s income from fees, charges and recharges was reassessed under the adoption of IFRS 15. However, there were no changes in the recognition or measurement of fees, charges and recharges on the adoption of IFRS 15.
Grant income
Under the FReM, grants and grants-in-aid should be accounted for in accordance with IAS 20 ‘Accounting for Government Grants and Disclosure of Government Assistance’ as interpreted by the FReM. The grant income is and continues to be out of the scope of IFRS 15.
Income from Mineworkers’ Pension Scheme
Income of £474 million was recognised during 2018-19 (£nil in 2019-20) relating to the Government guarantee of certain benefits payable to members and beneficiaries of the Mineworkers’ Pension Scheme. The Government is entitled to a portion of any periodic valuation surpluses determined by the Government Actuary following triennial valuations. The cash amounts are to be received annually up to 2027. The Coal Pension receivables have been classified as held at amortised cost under IFRS 9 ‘Financial Instruments’. The associated income, therefore, is out of scope of IFRS 15.
1.9 Staff costs
Staff costs are recognised as expenses when the Departmental Group becomes obligated to pay them, including the cost of any untaken leave entitlement.
1.10 Grants payable
Grants payable are recognised when the grant recipient has performed the activity that creates an entitlement to the grant under the terms of the scheme and include estimates for claims not yet received. Grant contributions to international organisations in the form of promissory notes are recognised as expenses when they become payable on demand with the Department exercising no further control over disbursement.
1.11 Taxation
The Core Department and its Agencies are exempt from corporation tax by way of Crown exemption. Some consolidated bodies are subject to corporation tax on taxable profits. Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to HM Revenue and Customs, based on tax rates and laws that are enacted or substantively enacted by the reporting date.
Value Added Tax (VAT) is accounted for in the accounts, in that the amounts are shown net of VAT except for irrecoverable VAT, which is aggregated with the cost of purchased items.
Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets are recognised for all tax-deductible temporary differences, carry forward of unused tax credits and unused tax losses to the extent that it is probable that taxable profit will be available in future years against which they can be utilised.
1.12 Property, plant and equipment (PPE)
Assets are capitalised as PPE if they are intended for use on a continuing basis and their original carrying value, on an individual or asset pool basis, exceeds the relevant capitalisation threshold which ranges from £1,000 to £10,000 across the Departmental Group. Exceptions are: a) assets held by the NDA on designated nuclear sites are only recognised where the economic element of their value at the reporting date exceeds £100,000 and the proportion of asset value relating to commercial activity exceeds 10%; and b) operational mine water schemes and subsidence pumping stations are held by the Coal Authority at £nil value because they are used to address pollution caused by past mining activities where the economic benefits have already been received. To the extent that it has been recognised as a provision under IAS 37, the estimated cost of decommissioning facilities is recognised as part of the carrying value of the asset at initial recognition and depreciated over its useful life.
**Valuation of PPE**
PPE is carried at fair value except for nuclear waste management assets held at historical cost (see note 1.2) and assets under construction which are held at cost. In accordance with the FReM, assets that have short useful lives or are of low value are carried at depreciated historical cost less impairment as a proxy for fair value.
Non-specialist land and buildings are measured at current value in existing use using professional valuations. Specialist land and buildings are measured at depreciated replacement cost which represents the present value of the asset’s remaining service potential.
**Revaluation of PPE**
Any accumulated depreciation at the date of revaluation is eliminated and the resulting net book value restated to equal the revalued amount. Any revaluation increase arising is credited to the revaluation reserve except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense in which case the increase is credited to net expenditure for the year to the extent of the decrease previously charged. A decrease in carrying amount arising on revaluation is charged as an expense to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset. On de-recognition, any revaluation surplus remaining in the Revaluation reserve attributable to the asset is transferred directly to the General Fund.
**Depreciation of PPE**
Apart from freehold and long leasehold land which are not depreciated, PPE assets are depreciated to estimated residual values on a straight-line basis over the following estimated useful lives:
| Asset Type | Useful Life | |------------------------------------------------|----------------------| | Freehold buildings | 10 – 60 years | | Leasehold land and buildings | 10 – 60 years or remaining life of lease | | Agricultural buildings | Up to 60 years | | Dwellings | Up to 60 years | | Leasehold improvements | Shorter of estimated remaining useful life or outstanding term of lease | | Computer equipment | 2 – 10 years | | Plant and machinery | 3 – 50 years or remaining life of lease | | Office machinery (included in plant and machinery), furniture, fixtures and fittings | 2 – 11 years or remaining life of lease | | Transport equipment | 2 – 14 years | | Ships (included in transport equipment) | Minimum of 20 years | | Aircraft (included in transport equipment) | Minimum of 15 years | | Assets under construction | Not depreciated until available for use as intended by management |
Residual values and useful lives are reviewed and adjusted if appropriate at each reporting date.
**1.13 Investment property**
The Departmental Group holds a number of properties which have been classified as investment properties and are measured using the fair value model specified in IAS 40. Gains and losses arising from changes in fair value are recognised in net expenditure for the year. 1.14 Intangible non-current assets
Intangible non-current assets are capitalised if they are intended for use on a continuing basis and their original carrying value, on an individual or asset pool basis, exceeds the relevant capitalisation threshold which ranges from £1,000 to £10,000 across the Departmental Group. There are no active markets for the majority of the Departmental Group’s intangible non-current assets which are valued at the lower of depreciated replacement cost and value in use using a valuation technique (for example for income-generating assets); where there is no value in use, depreciated replacement cost is used. Where there is an active market, the valuation is derived from the active market. Assets of low value or with short useful lives are carried at cost less accumulated amortisation and impairment losses as a proxy for fair value. They are amortised on a straight-line basis over the following periods:
| Asset Type | Amortisation Period | |-----------------------------------|---------------------| | Software licenses | 3 – 10 years | | Internally developed software | Up to 10 years | | Website development costs | 2 – 5 years | | Patents, licenses and royalties | 7 – 15 years |
1.15 Impairment of PPE and intangible non-current assets
The Departmental Group reviews carrying amounts at each reporting date. If an indicator for impairment occurs then the recoverable amount of the asset (the higher of fair value less costs to sell and value in use) is estimated and an impairment loss recognised to the extent that it is lower than the carrying amount. Losses arising from a clear consumption of economic benefit are charged to net expenditure for the year. Losses that do not result from a loss of economic value or service potential are taken to the revaluation reserve to the extent that a revaluation reserve exists for the impaired asset; otherwise to Net expenditure for the year.
1.16 Assets held for sale
Assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable, the asset is available for immediate sale in its present condition and the asset is actively marketed for sale. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Assets held for sale are measured at the lower of a) carrying amount and b) fair value less costs to sell.
1.17 Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and other short term highly liquid investments which are readily convertible to known amounts of cash are subject to insignificant risk of changes in value and have an original maturity of three months or less. Any bank overdraft amounts are included within trade payables and other liabilities.
1.18 Leases
The Departmental Group continues to apply IAS 17 ‘Leases’ for 2019-20, recognising leases assets as either operating or finance leases. Leases are classified as finance leases when the risks and rewards of ownership are transferred substantially to the lessee; all other leases are classified as operating leases.
Finance leases
Departmental Group as lessor
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Departmental Group’s net investment in the lease. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Departmental Group’s net investment outstanding in respect of the leases. Departmental Group as lessee
Assets subject to finance leases and the associated liabilities for future payments (if any) are recognised in the SoFP.
Operating leases
Departmental Group as lessor
Assets subject to operating leases are recognised in the SoFP with rental income plus initial direct costs incurred in arranging the lease, including incentives to the lessee to enter into the lease, recognised on a straight-line basis over the lease term.
Departmental Group as lessee
Rentals payable under operating leases, including benefits received and receivable as incentives to enter into leases, are expensed on a straight-line basis over the term of the lease.
1.19 Subsidiaries, associates and joint ventures
Subsidiaries and public sector joint ventures are consolidated where designated within the Departmental Group boundary (note 27); those outside the Departmental Group boundary are measured in accordance with IFRS 9. Equity investments in associates or joint ventures outside the public sector are initially recorded at cost and subsequently adjusted to reflect the Departmental Group’s share of net profit or loss of the associate or joint venture.
1.20 Financial instruments
Financial assets and liabilities are measured initially at fair value plus transaction costs unless carried at fair value through profit or loss in which case transaction costs are charged to Net expenditure for the year. Fair value is determined by reference to quoted prices where an active market exists for the instrument; otherwise it is determined using generally accepted valuation techniques including discounted estimated cash flows. A regular way purchase or sale of financial assets shall be recognised and derecognised, as applicable, using settlement date accounting.
Financial assets
Financial assets are derecognised when the rights to receive future cash flows have expired or are transferred and the risks and rewards of ownership have been substantially transferred.
Categories of financial asset
Financial assets are categorised as one of the following:
- **Amortised cost** are financial assets whose cash flows are the solely payments of principal and interests and the business model of which is to hold for collecting contractual cash flows only. They are initially recognised at fair value and thereafter at amortised cost using the effective interest method less any impairment. The effective interest rate method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period.
- **Fair value through Other Comprehensive Income (FVOCI)** are either:
(i) debt instruments whose cash flows are the solely payments of principal and interests and the business model of which is to hold for both collecting contractual cash flows and selling.
(ii) equity instruments that are neither held for trading nor contingent consideration recognised in a business combination, as the Departmental Group has made an irrevocable election at initial recognition.
After initial recognition, these assets are subsequently carried at fair value. Gains and losses in fair value are recognised directly in equity. On de-recognition, the cumulative gain or loss previously recognised in equity is recognised in Net expenditure for the year for debt instruments and transferred to General Fund for equity instruments. • **Fair value through profit or loss (FVTPL)** are any financial assets that are not measured at amortised cost or FVOCI. Transaction costs and any subsequent movements in the valuation of the asset are recognised in net expenditure for the year.
**Impairment of financial assets**
Financial assets other than equity instruments and those at FVTPL are assessed for impairment at each reporting date using the expected credit loss (ECL) model. The three-stage model based on the level of credit risk is applied to any financial assets other than long term trade receivables, contract assets which do contain a significant financing component and lease receivables within the scope of IAS 17 as follows:
- For financial assets with low credit risk or assets that have not had a significant increase in credit risk since initial recognition, 12-month ECL are recognised and interest revenue is calculated on the gross carrying amount of the asset without the reduction of credit allowance.
- For financial assets that have had a significant increase in credit risk since initial recognition but that do not have objective evidence of impairment, lifetime ECL are recognised and interest revenue is calculated on the gross carrying amount of the asset.
- For financial assets that have objective evidence of impairment at the reporting date, lifetime ECL are recognised and interest revenue is calculated on the net carrying amount net of credit allowance.
Impairment gains or losses, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised in accordance with the Standard, are recognised in profit or loss.
For long term trade receivables, contract assets which do not contain a significant financing component and lease receivables within the scope of IAS 17 ‘Leases’, the simplified approach is applied and lifetime ECL are recognised as dictated by the FReM.
**Financial liabilities**
Financial liabilities are derecognised when the obligation is discharged, cancelled or expires. The Departmental Group’s financial liabilities excluding derivatives are initially recognised at fair value including directly attributable transaction costs, and subsequently at amortised cost using the effective interest rate method.
**Derivative financial instruments**
Derivatives are initially recognised at fair value and subsequently at fair value. Gains/losses in fair value are recognised in net expenditure for the year unless hedge accounting is applied.
The Departmental Group has two classes of derivative financial instrument, foreign exchange contracts to which hedge accounting is applied and CfDs to which hedge accounting is not applied.
**Forward foreign exchange contracts**
Forward contracts are held as cash flow hedges to reduce exposure to foreign currency risk. The effective portions of changes in their fair values are recognised in equity. Gains and losses relating to ineffective portions are recognised immediately in Net expenditure for the year. Amounts accumulated in equity are recycled to Net expenditure for the year in the same period as the hedged item.
**Contracts for Difference (CfDs)**
CfDs are held to incentivise investment in low carbon electricity generation by agreeing strike prices with electricity generators which are counterparties to the contracts. The counterparty pays, or is paid, the difference between the strike price and the reference price (a measure of the average market price of electricity) at the time of electricity supply. CfDs are measured at FVTPL, initially at their transaction price (£nil) with subsequent changes in fair value (as measured by a valuation model) recognised in Net expenditure for the year. Where the valuation model estimate of fair value at initial recognition is different from the transaction price, the difference is deferred and amortised to Net expenditure for the year over the contract settlement period (note 9).
**In 2018-19 the Departmental Group adopted IFRS 9 ‘Financial Instruments’**
IFRS 9 ‘Financial Instruments’ replaced IAS 39 ‘Financial Instruments: Recognition and Measurement’ and was adopted by the public sector from 1 April 2018. The FReM removed the option to adopt IFRS 9 retrospectively, and therefore the Departmental Group recognised any adjustments to the carrying amounts of financial assets and liabilities at the date of transition in the opening retained earnings and other reserves of the previous period. Consequently, amendments to IFRS 7 ‘Financial Instruments: Disclosures’ were also applied to the previous period only. The adoption of IFRS 9 resulted in changes to the accounting policies for classification, measurement and impairment of financial assets in the 2018-19 financial statements. These accounting policies are unchanged in the 2019-20 financial statements.
**Classification and measurement of financial assets**
IFRS 9 contains three principal classification categories for financial assets: amortised cost, fair value through other comprehensive income (FVOCI), and fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is based on the business model in which a financial asset is managed and its contractual cash flow characteristics. IFRS 9 removes the previous IAS 39 categories of held to maturity, loans and receivables and available for sale. Derivatives embedded in contracts where the host is a financial asset in scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.
Under IFRS 9, the requirement for classifying and measuring financial assets is that:
- Loans and other debt instruments are classified as either amortised cost, FVOCI or FVTPL, dependent on the business model and cash flow characteristics of the financial assets
- Investments in equity instruments are classified as FVTPL, unless an irrevocable election is made on initial recognition to recognise subsequent changes in fair value in Other Comprehensive Income (OCI). The election is only available to equity instruments that are not held for trading.
- Derivatives are classified as FVTPL
**Classification and measurement of financial liabilities**
Financial liabilities are classified and subsequently measured at amortised cost, except for:
- Financial liabilities at fair value through profit or loss, which is applied to derivatives and other financial liabilities designated as such at initial recognition
- Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the consideration received for the transfer
- Financial guarantee contracts and loan commitments
**Impairment**
IFRS 9 replaced the ‘incurred loss model’ in IAS 39 with a forward looking ‘expected credit loss’ (ECL) model. The ECL model applies to financial assets measured at amortised cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments and FVTPL financial assets. The impairment methodology is detailed in the financial instruments note 22.
(a) **Reconciliation of carrying amounts of financial assets under IAS 39 and IFRS 9**
The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 on 1 April 2018: The Investment fund and Receivables reconciliation in table below has been restated to include the restatement relating to BIS Postal Service Company (see note 26) for more information. The application of IFRS 9 in 2018-19 resulted in the reclassifications set out in the table above and explained below:
- Cash and cash equivalents, receivables, loans to public sector bodies, and term deposits that were classified as ‘loans and receivables’ and ‘held to maturity’ were measured at ‘amortised cost’. There were no changes in terms of measurement for these assets upon transition.
- Loans to private sector entities that were classified as ‘loans and receivables’ under IAS 39 meet the solely payments of principal and interest test for cash flows characteristics. The objective of the business model is achieved by collecting the contractual cash flows only and therefore, they were classified as ‘amortised cost’ under IFRS 9. An adjustment for the impairment allowance of £2 million calculated under the ECL model was recognised in retained earnings at 1 April 2018.
- Bonds were classified as ‘available for sale’ and were measured at ‘amortised cost’ under IFRS 9 in 2018-19. The Departmental Group’s intention is to hold these bonds for collecting contractual cash flows only. Sale of the bonds only happens infrequently when there is an increase in the assets’ credit risk. Their cash flows are solely payments of principal and interest. Upon transition, the cumulative gain previously recognised in OCI was removed from equity and applied against the fair value of the financial asset at the reclassification date resulting in an adjustment of £1 million to retained earnings and carrying amount of the asset at 1 April 2018. From available for sale (IAS 39) to Amortised Cost
| | £m | |----------------------|-----| | Fair value as at 31 March 2018 | 59 | | Fair value gain/ (loss) that would have been recognised during the year if the financial asset had not been reclassified. | (1) |
- Repayable launch investments were classified as ‘available for sale’ with the revaluation movements previously going through OCI. As the repayments are contingent on the sales of the products, they do not meet the solely payments of principal and interest test and are measured at ‘FVTPL’. On adoption, the cumulative gain or loss previously recognised in Revaluation Reserve of £235m as at 31 March 2018 was transferred to the Taxpayer’s Equity.
- Ordinary shares in consolidated public sector entities were held at Cost under IAS 39/IAS 27; this continues to be permitted under IFRS 9/IAS 27.
- Ordinary shares in non-consolidated public sector entities in accordance with the FReM were classified as ‘available for sale’. The Departmental Group intends to hold these, for long-term strategic purposes, and as permitted by IFRS 9, designated these investments at the date of initial application as measured at ‘FVOCI’.
- Ordinary shares in private sector entities were classified as ‘available for sale’ under IAS 39. The Departmental Group intends to hold these for long term strategic purposes, and as permitted by IFRS 9, designated these investments at the date of initial application as measured at ‘FVOCI’.
- Investment funds were classified as ‘available for sale’. The holdings are standard investment funds with either a limited life or redeemable units, and measured at ‘FVTPL’ as they are debt instruments that do not meet the solely payments of principal and interest test.
- On adoption, the cumulative gain or loss previously recognised in Revaluation Reserve of £926 million as at 31 March 2018 was transferred to the Taxpayer’s Equity.
- The category transfer of £31 million from investment funds to ordinary shares in non-public sector entities was related to the ordinary share holding in the Global Climate Partners Fund, which is an investment company rather than a standard limited partnership fund with a limited life.
- Loans that were previously classified as ‘available for sale’ within the Other Investments category are those held by UKGIP. As they are held to sell, not to collect contractual cash flows, they fail the business model test and were classified as ‘FVTPL’ under IFRS 9.
- Derivatives were classified as ‘fair value through profit and loss’ under IAS 39 and remain measured at ‘FVTPL’ under IFRS 9. However, embedded derivatives are no longer assessed separately from the host financial asset which lead to a category transfer of £31 million from derivatives to investment funds. (b) **Reconciliation of carrying amounts of financial liabilities under IAS 39 and IFRS 9**
The following table reconciles the carrying amounts of financial liabilities under IAS 39 to the carrying amounts under IFRS 9 on 1 April 2018:
| Restated Carrying amount under IAS 39 at 31 March 2018 £m | Reconciliation | Carrying amount under IFRS 9 at 1 April 2018 £m | Amortised cost £m | FVTPL designated £m | FVTPL mandatory £m | Other £m | |---|---|---|---|---|---|---| | **Fair value through profit or loss** | | | | | | | | Derivatives | (15,915) | – | – | (15,915) | – | – | (15,915) | – | | **Other liabilities** | | | | | | | | | Payables | (2,175) | – | – | (2,175) | (2,175) | – | – | – | | Financial guarantee liabilities | (61) | – | 16 | (45) | – | – | – | (45) | | Loan commitment liabilities | – | (184) | – | (184) | – | (184) | – | – | | **Total financial liabilities** | (18,151) | (184) | 16 | (18,319) | (2,175) | (184) | (15,915) | (45) |
The explanations of changes to financial liabilities under IFRS 9 are set out below:
- The Core Department’s financial guarantee liabilities were remeasured under IFRS 9, leading to £16 million decrease in the carrying amount, which was recognised in the adjustment to the general fund opening balances.
- The British Business Bank (BBB)’s Enterprise Capital Fund commitments to provide loans under market rates were designated under IFRS 9 to be measured at fair value through profit or loss because the Departmental Group of financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented investment strategy and information is provided internally on that basis to the key management personnel. For clarity, the loan commitment liabilities were transferred out from provisions to be disclosed together with financial guarantee liabilities. (c) Impacts of transition to financial statement line items
The following table summarises the impact of transition to IFRS 9 on assets, revaluation reserve and general fund at 31 March 2018. The Receivables and Other financial assets reconciliation in the table below has been restated to include the restatement relating to BIS Postal Service Company (see note 26 for more information).
| Restated | Closing balance under IAS 39 at 31 March 2018 | Gross carrying amount remeasurement under IFRS 9 | Expected credit loss remeasurement under IFRS 9 | Remeasurement under IFRS 9 | Opening balance under IFRS 9 at 1 April 2018 | |----------|---------------------------------------------|-----------------------------------------------|-----------------------------------------------|--------------------------|---------------------------------------------| | | £m | £m | £m | £m | £m | | Receivables | 2,001 | – | – | (2) | (6) | 1,993 | | Total impact on current assets | n/a | – | – | (2) | (6) | n/a | | Other financial assets | 4,336 | (430) | 27 | (25) | 5 | 3,913 | | Investments in joint ventures and associates | 367 | 461 | – | – | – | 828 | | Total impacts on non-current assets | n/a | 31 | 27 | (25) | 5 | n/a | | Derivatives | (15,806) | (31) | – | – | – | (15,837) | | Provisions | (240,935) | 184 | – | – | – | (240,751) | | Financial guarantee and loan commitment liabilities | (61) | (184) | 16 | – | – | (229) | | Total impacts on non-current liabilities | n/a | (31) | 16 | – | – | n/a | | General fund | 250,098 | (926) | (43) | 27 | 1 | 249,157 | | Revaluation reserve | (2,915) | 926 | – | – | – | (1,989) | | Total impacts on reserves | n/a | – | (43) | 27 | 1 | n/a |
1.21 Financial guarantees and loan commitments
Financial guarantee contract liabilities
Financial guarantees are initially recognised at fair value on the date the guarantee was given and subsequently remeasured at the higher of a) the amount of loss allowance determined in accordance with IFRS 9 ‘Financial Instruments’ and b) the amount initially recognised less when appropriate, cumulative amortisation in accordance with IFRS 15 ‘Revenue from Contracts with Customers’.
Loan commitments at below market rate
The Departmental Group accepts a lower than market rate of return from Enterprise Capital Fund investments in order to encourage private sector investors to invest alongside. Although the Departmental Group expects to make a positive return from these investments, this return is less than that required by the private sector. The Departmental Group has, at initial recognition, elected to irrevocably designate the liability related to these loan commitments as measured at fair value through profit or loss because the group of financial assets and financial liabilities is managed, and its performance is evaluated on a fair value basis, in accordance with a documented investment strategy, and information is provided internally on that basis to the key management personnel.
1.22 Pensions
The accounting for each of the Departmental Group’s pension plans is dependent on its nature.
Funded defined-benefit pension schemes
The Departmental Group has nine funded defined-benefit pension schemes, the Medical Research Council Pension Scheme (MRCPS), two schemes through the NDA and six others through the nuclear site licence companies. The net liabilities recognised in the SoFP for funded defined benefit schemes are calculated by independent actuaries by deducting the fair value of scheme assets (at bid prices) from the present value of defined benefit obligations (estimated using the projected unit credit method, less any amounts receivable from third parties). Where the scheme is in surplus, the asset recognised in these statements is limited to the present value of benefits available from future refunds from the plan, reductions in future contributions to the plan or on settlement of the plan and takes into account the adverse effect of any minimum funding requirements. Actuarial gains and losses are recognised as Other Comprehensive Income and Expenditure except for site licence companies where they are included in provision expense relating to the Nuclear Decommissioning provision.
**Unfunded defined benefit pension schemes**
The Departmental Group contributes towards a number of unfunded defined benefit pension schemes of which employees are members: these include the Principal Civil Service Pension Scheme (PCSPS), the Civil Servant and Other Pension Scheme (CSOPS) and the Combined Pension Scheme of the UKAEA. The participating employers in these schemes are unable to identify their share of the underlying net liability; as such these schemes are accounted for as defined contribution pension schemes, with employers contributions charged to the SoCNE in the period to which they relate. Further information regarding PCSPS and CSOPS is presented in the Staff Report.
**Defined contribution pension schemes**
Contributions are charged to the SoCNE when they become payable. The Departmental Group has no further liabilities in respect of benefits to be paid to members.
More information about the Departmental Group’s pension schemes can be found in the accounts of the consolidated entities, including in note 3 for the Core Department, and of the pension schemes themselves.
### 1.23 Provisions
A provision is recognised when it is probable that an outflow of economic benefits will be required to settle a present obligation (legal or constructive) that can be reliably measured and which results from a past event. Where the time value of money is material the provision is measured at present value using discount rates prescribed by HM Treasury. HM Treasury issues nominal rates that do not take account of inflation, unlike real rates. Using these nominal rates, the cash flows are inflated using the following inflation rates provided by HM Treasury except where a more appropriate forecast has been identified for specific provisions.
| Cash outflows expected within two years | Nominal discount rate | Inflation rate | Equivalent real discount rate | Nominal discount rate | Inflation rate | Equivalent real discount rate | |----------------------------------------|-----------------------|----------------|-------------------------------|-----------------------|----------------|-------------------------------| | Cash outflows expected between two and five years | 0.51% | 1.9% | (1.36%) | 0.76% | 2.0% | (1.22%) | | Cash outflows expected between five and ten years | 0.55% | 2.0% | (1.42%) | 1.14% | 2.1% | (0.94%) | | Cash outflows expected after ten years | 1.99% | 2.0% | (0.01%) | 1.99% | 2.1% | (0.11%) |
**Nuclear decommissioning provisions**
Where expenditure in settlement of a provision is expected to be recovered from a third party, the recoverable amount is treated as a separate asset (note 12). Provision charges in the SoCNE are shown net of changes in these recoverable amounts. 1.24 Contingent assets and liabilities
Where an outflow of economic benefits from a past event is possible but not probable, the Departmental Group discloses a contingent liability. In addition to contingent liabilities disclosed in these financial statements in accordance with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’, certain statutory and non-statutory contingent liabilities where the likelihood of a transfer of economic benefit is remote are disclosed in the Accountability Report for Parliamentary reporting and accountability purposes.
Where an inflow of economic benefits from a past event is probable, the Departmental Group discloses a contingent asset. Estimates of the financial effects are disclosed where practicable; where the time value of money is material, contingent liabilities and assets are stated at discounted amounts and the amount reported to Parliament separately noted. Remote contingent liabilities reported in the Accountability Report are stated at the amounts reported to Parliament.
1.25 Third party assets
The Departmental Group holds, as custodian or trustee, certain cash balances belonging to third parties. These balances are not recognised in the financial statements since neither the Departmental Group nor Government more generally has a direct beneficial interest in them.
1.26 Judgements, estimates and assumptions
Preparation of financial statements requires management to make judgements, estimates and assumptions based on experience and expected events that affect the reported amounts of assets and liabilities, income and expenditure. Key accounting judgements applied in these statements are described below.
Judgements
Recognition of Hinkley Point C CfD (note 9)
The Department (through LCCC) entered into HPC CfD on 29 September 2016. This project has a maximum lifetime generation cap of 910,000,000MWh. The contract will expire at the earlier of 35 years after the start date of the second reactor or when the total CfD payments made have reached the generation cap.
Under IFRS, the Conceptual Framework sets out the concepts which underlie the preparation and presentation of financial statements. The Conceptual Framework deals with, amongst other things, the definition, recognition and measurement of the elements from which financial statements are constructed. Paragraph 4.38 of the Conceptual Framework states that an element should be recognised in the accounts if:
a) it is probable that any future economic benefit associated with the item will flow to or from the entity; and
b) the item has a cost or value that can be measured with reliability (defined as using information that is complete, neutral and free from error).
The HPC CfD duration is more than double (35 years) the length of other CfDs (15 years) entered into by the Department (through LCCC). This has made it considerably more challenging for management to provide a reliable single point fair value estimate for HPC CfD. In order to perform a reliable estimate of the valuation one of the required key inputs is wholesale electricity prices in each year out to 2060. Historically the Department (through LCCC) had not been able to obtain wholesale electricity price forecasts which cover the unusually long period of the contract, thereby preventing a reliable estimate being made. As a result of this the Department has previously been unable to recognise HPC CfD in the financial statements. Update on the recognition of Hinkley Point C CfD during 2019-20
During the year the Department using the Dynamic Dispatch Model (DDM), has been able to estimate reliably wholesale electricity prices out to 2060. The Department’s DDM model forecasts wholesale electricity prices out to 2050. However, in the current year, the Department has deemed it possible to ‘freeze’ the 2050 model forecasts for all subsequent years out to 2060. The main driver facilitating the Department’s ability to do this has been the government’s commitment in 2019-20 to bring all greenhouse gas emissions to Net Zero by 2050, therefore giving more certainty over potential generation mixes into the future. Legislation now commits the UK to an economy wide target of Net Zero carbon emissions. The Department’s modelling strategy is designed to optimise the costs of decarbonisation across the economy, which determines the power sector demand, and the maximum level of emissions. The Department have picked generation mixes which optimise the cost of the power sector. In the absence of any exogenous change, the Department anticipate that the UK would maintain an optimised system ad-infinitum. As a result of this, the Department has been effectively able to ‘freeze’ the 2050 model for all subsequent years. Therefore, the generation mix and associated system costs and wholesale price of electricity that the Department project for 2050, remains constant for the remaining period of the forecast.
In addition to the availability of the DDM forecast, the Department (through LCCC) was able to commission an independent third party to provide a forecast for the power market in Great Britain to 2065. The forecast received from the third party has been used as reference to support the reasonableness of the internally generated price series.
As a result, the reasonableness of the underlying assumptions of the forecast to 2060, management deem the valuation of the HPC CfD as a reliable estimate that is complete, neutral and free from error. Therefore, in line with the recognition criteria for the other CfDs, the recognition criteria for HPC CfD is considered to have been met. As HPC CfD’s fair value calculation is based on the data from the same model, the same valuation technique is used across the whole portfolio.
Accounting treatment of Hinkley Point C CfD
The date of initial recognition of the Hinkley Point C CfD is the date it becomes capable of reliable measurement in accordance with the requirements of IFRS 13 and the Conceptual Framework. The Department (through LCCC) has determined that the estimated fair value of the instrument at the reporting date is a reasonable proxy for its fair value at the date of initial recognition. This judgement is not sensitive to the specific date of initial recognition during the financial year, which is a matter of professional judgement.
On recognition the HPC CfD has followed the same accounting treatment as that adopted for the other CfDs recognised in the financial statements. The accounting of the fair value of the HPC CfD, the impact of its recognition within the portfolio, and relevant sensitivity analysis are shown in note 9.
As there were no wholesale price forecasts available prior to the authorisation of the prior year financial statements to reliably estimate the value of Hinkley Point C CfD and considering the reliable estimate of the wholesale price forecast to 2060 has only become available in the current financial year therefore, management believes no prior period adjustment is required.
Small Business Grant Fund and Retail, Hospitality and Leisure Grant Fund recognition point (note 4.4 and note 28)
The Small Business Grant Fund was announced by the Chancellor during his Budget speech on 11 March 2020 and subsequently extended during the Chancellor’s speech on 17 March 2020 setting out the government’s economic response to COVID-19. The Retail, Hospitality and Leisure Grant Fund was also announced during the Chancellors speech on 17 March 2020. The Guidance to Local Authorities (LAs) setting out how LAs would manage the grants on behalf of the Department was issued on 24 March 2020. The Guidance to Businesses the ultimate grant recipients was issued on 1 April 2020, the same day as funding was provided from the Departments to LAs to make grant payments. Due to the impact of COVID-19, LAs were encouraged to make early payments to eligible grant recipients from their own funds. The Department under the Guidance to LAs and Section 31 grant notification are legally obligated to reimburse the LAs. Therefore the Core Department has recognised a grant accrual of £151 million in note 4.4, for grants paid out by the LAs before the 1 April 2020.
The Core Department has recognised a provision of £10.8 billion, in addition to the £151 million recognised as a grant accrual. This is because the announcements and payments made prior to 31 March 2020 created a constructive obligation under IAS 37. This amount is based on eligibility and payments information received from LAs after 31 March 2020 and has been limited by the closure of the scheme which is disclosed as an Adjusting Event in note 28. As a result of recognising this constructive obligation, the Department’s expenditure has increased by £10.8 billion. This has resulted in a breach of the control limited voted by Parliament and a regularity qualification.
**Capacity Market restart (note 4.1 and note 6.1)**
On 15 November 2018, the European Court of Justice (ECJ) annulled the European Commission (EC) decision of July 2014 to grant State Aid clearance to the Capacity Market. The ruling resulted in a ‘Standstill Period’ for the Capacity Market in which no State Aid could be paid out pending the EC’s redetermination. As a result of this the ESC was not able to make any Capacity Market payments during the ‘Standstill Period’ and, additionally, no supplier charge was collected.
The EC appealed the ECJ’s decision and, separately, also undertook a formal investigation into the UK’s notification of the Capacity Market scheme in order to inform its ‘re-decision’ on whether to grant State Aid clearance. On 24 October 2019, the Department was informed by the EC that it had completed its State Aid investigation into the Capacity Market and that the Capacity Market scheme complies with EU State Aid rules. On 25 October 2019, the Department notified ESC and National Grid to restart their respective Capacity Market activities.
Following the successful restart of the Capacity Market, circa £1.17 billion of invoices were raised to suppliers in November 2019 relating to the Standstill Period. This in turn enabled payment of the required £1.15 billion to Capacity Providers (that had been deferred as a result of the Standstill Period).
No Capacity Market supplier charge income or respective capacity payment expense was recognised in 2018-19 for the 2018/19 Delivery Year (1 October to 30 September) due to the suspension of the Capacity Market. Out of the £1.15 billion capacity payment made for the Standstill Period, £0.99 billion related to the 2018/19 Delivery Year of which £0.54 billion would have been recognised in the financial year ending 31 March 2019 had there been no standstill. The collection of retrospective supplier charge and capacity payment made for the 2018/19 Delivery Year is recognised as income and expense, respectively, in the current financial year.
**Estimates**
In accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, revisions to accounting estimates are recognised prospectively. Revisions of the estimates and assumptions below could cause material adjustment to the carrying amounts of assets and liabilities within the next financial year.
**Income recognition (note 6.1)**
A number of significant accounting judgements have been performed to apply IFRS 15 to the recognition of revenue and costs from contracts with customers held by the NDA, including the determination of transaction price of each contract, the allocation of transaction price to each performance obligation, the timing of satisfaction of performance obligations, and the accounting treatment of contract costs. Detail is included in NDA’s financial statements.
**Useful lives of non-current assets**
There is uncertainty in relation to estimated useful lives of non-current assets; these are reviewed as at the reporting date and updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence or legal or other limits on their use. Impairment of assets (note 4.2, 7, 8, 10, 11, 13, 14, 15, and 22)
Impairment of non-financial assets is measured by comparing the carrying value of the asset or cash generating unit with management’s estimate of its recoverable amount. Impairment of financial assets is measured using the expected credit loss model (note 1.20).
Fair value of Repayable Launch Investments (note 11.1)
The econometric model used to estimate future cash flows from Repayable Launch Investments includes a number of assumptions including on future economic growth.
Fair value of private equity investments (note 11.2)
A range of valuation techniques are used for private equity investments, including discounted cash flows and net asset values.
Redundancy Payments Service receivable (note 14)
There is uncertainty in the estimate of the amount to be realised by the Insolvency Service from sale of assets of insolvent employers.
CfD contracts (note 9)
The significant uncertainties affecting measurement of Financial Investment Decision Enabling for Renewables (FIDeR) and CfD contracts, which facilitate investment in low-carbon electricity generation, are described in the note.
Fair value of financial guarantees (note 19)
Fluctuations in the fair value of financial guarantees measured using modelling techniques.
Provisions (note 18)
Provision discount rates set by HM Treasury are updated annually and have a material effect on liabilities. There are other significant uncertainties in relation to measurement of the liabilities reported in note 18, in particular in relation to future decommissioning costs to be incurred by the NDA, UKAEA and Coal Authority, which are described in the note.
1.27 Prior Period Adjustments
In accordance with the FReM, where a prior period adjustment is identified as a result of an error, the Departmental Group will correct all material prior period errors retrospectively in the first set of financial statements authorised for issued after their discovery by:
- Restating the comparative amounts for the prior periods presented in which the error occurred;
- If the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.
However, if it is impracticable to determine the period-specific effects of an error on comparative information for one or more prior periods presented, the Departmental Group will restate the opening balances of assets, liabilities and equity for the earliest period for which retrospective restatement is practicable.
The option to adopt retrospectively has been removed by the FReM for IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue from Contracts with Customers’, therefore, there was no restatement of 31 March 2018 comparatives made for the adoption of the new accounting standards in 2018-19.
There is a restatement in 2019-20 in relation to adjustments to the adoption of IFRS 9 and adjustments to the Departmental Group’s prior period Outturn. The prior period adjustments and their impact on the comparative amounts for the prior periods represented in which the error occurred are detailed in note 26. 2. Reporting by operating segment
In accordance with the relevant reporting requirements, including IFRS 8 – Operating Segments, the Statement of Parliamentary Supply (SoPS) and supporting notes reflect net resource and capital Outturn in line with the control totals voted by Parliament. The figures within SoPS 1.1 provide the income and expenditure totals associated with key business activities within the Departmental Group and therefore reflect the management information reporting to the Board during the period.
3. Staff costs
Staff costs comprise:
| Permanently employed staff | 2019-20 | 2018-19 | |---------------------------|---------|---------| | Wages and salaries | £m | £m | £m | £m | | Permanently employed | 855 | 73 | 928 | 855 | | Social security costs | 95 | – | 95 | 86 | | Other pension costs | 217 | – | 217 | 179 | | **Sub total** | **1,167**| **73** | **1,240**| **1,120**| | Less recoveries in respect of outward secondments | – | – | – | (1) | | **Total net costs** | **1,167**| **73** | **1,240**| **1,119**|
Of which:
| Core Department and Agencies | 2019-20 | 2018-19 | |------------------------------|---------|---------| | Wages and salaries | £m | £m | £m | £m | | Permanently employed | 372 | 18 | 390 | 330 | | Social security costs | 795 | 55 | 850 | 789 | | **Total net costs** | **1,167**| **73** | **1,240**| **1,119**|
For further information on staff costs and numbers, please see the Staff Report and the Remuneration Report which includes staff costs for nuclear site licence companies (SLC’s) which are not included in the table above. SLC’s staff costs are not included in the table above as they are included in the amount shown for utilisation in the NDA’s nuclear decommissioning provision in note 18. 4. Operating expenditure
4.1 Purchase of goods and services
| | Core Department and Agencies | 2019-20 | 2018-19 restated | |--------------------------------|------------------------------|---------|------------------| | | £m | £m | £m | | Rentals under operating leases | 44 | 57 | 30 | | Accommodation and office equipment costs | 16 | 212 | 42 | | Legal, professional and consultancy costs | 150 | 342 | 142 | | Finance, HR, IT and support costs | 151 | 170 | 110 | | Training and other staff costs | 8 | 23 | 10 | | Travel and subsistence costs | 11 | 52 | 11 | | Advertising and publicity | 6 | 16 | 3 | | Programme management and administration of grants and awards | 39 | 179 | 40 | | Capacity Market payments | – | 1,483 | – | | Professional and international subscriptions | 365 | 612 | 283 | | Enforcement costs of employment related policies | 30 | 30 | 30 | | Donations | – | 21 | – | | Funding Paternity, Adoption and Shared Parental Leave policy | 72 | 72 | 79 | | Purchase of geographical and scientific equipment | – | 40 | – | | Purchase of weather information and weather related services | 101 | 101 | 108 | | Redundancy payments service | 430 | 430 | 320 | | Sponsorship costs | – | – | 2 | | Payment of taxes and levies | – | 2 | – | | Subsidy to Post Office Limited | 50 | 50 | 62 | | Energy intensive industries subsidies | 105 | 105 | 141 | | Other purchase of goods and services cost | 10 | 304 | 11 | | **Total** | **1,597** | **4,301**| **1,424** |
**Purchase of goods and services**
Purchase of goods and services – Legal, professional and consultancy services has been restated, see note 26 for further details.
**Audit fees**
Audit fees are included under the heading ‘Legal, professional and consultancy costs’.
**Core Department**
During the year the Core Department did not purchase any non-audit services from its auditor, the National Audit Office. The non-cash auditors’ remuneration of £700,000 (2018-19: £625,570) comprises £640,000 (2018-19: £570,000) for the cost of the audit of the Departmental Group, £20,000 (2018-19: £20,000) for the Trust Statement, and £40,000 (2018-19: £35,750) for the audit of the UK Atomic Energy Authority Pension Scheme Accounts.
**Agencies**
During the year the Agencies did not purchase any non-audit services from their auditor, the National Audit Office. Details of the non-cash auditors’ remuneration of £167,000 (2018-19: £152,000) can be found in the accounts of the individual Agencies. NDPBs and other designated bodies
The cash remuneration of £2,787,121 (2018-19: £2,287,880) relates to the statutory audit of NDPBs and other designated bodies and includes fees of £191,000 relating to the 2018-19 audits. Of this amount, £2,299,250 (2018-19: £1,955,291) was payable to the NAO and £487,871 (2018-19: £332,589) was payable to auditors other than the NAO.
In 2019-20, £nil was payable to the NAO (2018-19: £nil) and £240,267 was payable to auditors other than the NAO (2018-19: £127,546) for non-audit services. Further details can be obtained from the accounts of the NDPBs and other designated bodies.
Redundancy Payments Service
INSS, an Agency of the Department, is responsible for the approval and processing of claims under the Redundancy Payment Service (RPS), which is financed from the National Insurance Fund. Redundancy payments are made from the National Insurance Fund to employees whose employers have failed to make payments due or who were insolvent.
The Insolvency Service has a service level agreement with HM Revenue and Customs. Claims processed fall into two categories:
- RP1 (which covers redundancy pay, holiday pay and arrears of pay).
- RP2 (pay in lieu of notice).
There is associated income arising from two sources:
- Solvent Recovery – where money is recovered from solvent employers to meet the costs of redundancy payments made by the RPS.
- Insolvent Recovery – INSS becomes a creditor receiving a dividend if there are sufficient funds in the insolvency of the employer.
Expenditure in respect of RPS in 2019-20 totalled £496 million (2018-19: £320 million) against income of £66 million (2018-19: £nil million). The net amount totalled £430 million (2018-19: £320 million).
Payments of taxes and levies
During 2018-19, UK Research and Innovation (UKRI) was required to pay corporation tax on the chargeable gain arising on the transfer of assets from the predecessor Research Councils into UKRI. The total value of this payment was £143 million. This was a one-off transaction in 2018-19.
Capacity market payments
Capacity payment expenses for the 2018/19 Delivery Year have been recognised in 2019-20 due to the suspension of the Capacity Market in 2018-19 (see note 1.26).
4.2 Depreciation and impairment charges
| | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |--------------------------------|------------------------------|--------------------|------------------------------|--------------------| | Amortisation of recoverable contract costs | – | 101 | – | 166 | | Depreciation | 21 | 231 | 18 | 256 | | Amortisation | 3 | 65 | 2 | 45 | | Impairment of property, plant and equipment | 4 | 26 | 2 | 59 | | Impairment of investments and remeasurement of expected credit losses | (10) | 17 | 26 | 74 | | Total | 18 | 440 | 48 | 600 |
### 4.3 Provision expense
| Increase/(decrease) in nuclear provisions due to changes in discount rate | Core Department and Agencies £m | 2019-20 | Core Department and Agencies £m | 2018-19 | |---|---|---|---|---| | | | 20 | 247 | (37) | (95,984) | | Increase/(decrease) in other provisions due to changes in discount rate | 7 | (20) | (127) | (2,799) | | Other provision movements relating to Small Business Grant Fund and Retail, Hospitality and Leisure Grant Fund | 10,824 | 10,824 | – | – | | Other provision movements excluding bad debt provisions and financial guarantee liabilities | (21) | 6,812 | 210 | 1,057 | | **Total increase/(decrease) in provisions excluding bad debt provisions and financial guarantee liabilities** | 10,830 | 17,863 | 46 | (97,726) | | Total increase/(decrease) in bad debt provisions | – | – | 1 | 1 | | Total increase/(decrease) in financial guarantee liabilities and loan commitment liabilities | 39 | 10 | 12 | 4 | | **Total** | 10,869 | 17,873 | 59 | (97,721) |
Included in the table above is a provision relating to COVID-19 Grant Funding. The Core Department has recognised a provision relating to the Small Business Grant Fund and the Retail, Hospitality and Leisure Grant Fund which was announced by the Chancellor on 11 March 2020 due to the COVID-19 pandemic. The provision has been recognised for claims that were not paid by local authorities to eligible businesses at 31 March 2020, but which are reasonably expected to be claimed during 2020-21.
The provision expense in 2019-20 was primarily driven by cost estimate changes of the NDA’s nuclear decommissioning provision which increased the nuclear decommission liability estimate by £6.9 billion. The significant provision expense in 2018-19 was primarily driven by the reduction in discount rates for cash outflows expected after ten year from an equivalent real discount rate of prescribed by HM Treasury applied in 2017-18 of (1.56%) to an equivalent real discount rate prescribed by HM Treasury applied in 2018-19 of (0.11%). In 2019-20, the equivalent real discount rate for cash outflows expected after ten prescribed by HM Treasury has reduced to (0.01%), which had a less significant impact on the 2019-20 provision expense. Further detail of the movements in provisions can be found in note 18.1 for Nuclear provisions and note 18.2 for Other provisions. 4.4 Grants
| Grant in aid | Core Department and Agencies £m | 2019-20 | Core Department and Agencies £m | 2018-19 represented | |-------------|---------------------------------|---------|---------------------------------|---------------------| | Grant in aid | 11,308 | – | 10,978 | – | | Post Office network reform | 42 | 42 | 168 | 168 | | Market frameworks | 67 | 67 | 66 | 66 | | Science and research | 521 | 6,730 | 486 | 6,342 | | International Climate Fund | 291 | 297 | 244 | 247 | | Renewable Heat Incentive | 846 | 846 | 818 | 818 | | Innovation programmes | 125 | 610 | 113 | 596 | | Heat Infrastructure Team | 29 | 29 | 2 | 2 | | Small Business Grant Fund and Retail, Hospitality and Leisure Grant Fund | 151 | 151 | – | – | | Resource grants to central government bodies | 588 | 588 | – | – | | Other grants | 38 | 50 | 32 | 41 | | Total | 14,006 | 9,410 | 12,907 | 8,280 |
The allocation of grants between categories in the table above has been represented for 2018-19 based on the revised disclosure for 2019-20. This is solely a disclosure adjustment as the total grants were correctly reported in the BEIS 2018-19 Annual Report and Accounts.
Core Department
On 22 May 2019, British Steel Limited filed for compulsory liquidation. The court appointed Official Receiver took control of the company and, with the assistance of the EY Special Managers, was responsible for running an independent sales process. Owing to the difficulty and expense of the liquidation of a steel manufacturer, and the risk of personal liability arising from the operation of an insolvency involving a steel installation, the Official Receiver requested and was granted an indemnity from the Government.
The indemnity was given in respect of claims, proceedings, costs and expenses arising in the ordinary course of the Official Receiver’s statutory functions as liquidator of the company. In providing the Official Receiver with an indemnity the Government enabled the Official Receiver to discharge his statutory duties through continuing to trade the business while undertaking an independent sales process during which a buyer was ultimately secured.
The total funding paid to the Official Receiver in the year to 31 March 2020 was £588 million and is shown in the above note. The funding was voted through the Supplementary Estimates laid before Parliament on 12 February 2020. On 9 March 2020, the sale of British Steel Limited to the Chinese Steelmaker Jingye Group was completed by the Official Receiver. During the financial year 2020-21 there will continue to be funding provided to the Official Receiver to complete the wind up of British Steel Ltd including assets not purchased by Jingye. The total cost of the liquidation will fluctuate until the liquidation accounts are finalised.
In April 2019 HMG entered into a commercial agreement with British Steel to allow it to meet its EU ETS obligations. Under a Deed of Forfeiture HMG bought £119 million of EU ETS allowances to meet British Steel’s 2018 EU ETS liability. In return, the Core Department received all 5.6 million of British Steel’s 2019 free allocation of ETS allowances when allocated in February 2020, which are included within intangible assets in note 8. 5. Finance expense
| | Core Department and Agencies | 2019-20 | Core Department and Agencies | 2018-19 restated | |--------------------------------|------------------------------|---------|------------------------------|------------------| | | £m | £m | £m | £m | | Change in fair value – financial assets | (113) | 50 | (214) | (150) | | Net loss/(gain) on foreign exchange | – | (1) | – | 2 | | Unrealised foreign exchange rate losses | 1 | 1 | 2 | 2 | | Bank charges | – | – | – | 1 | | Interest payable | – | 36 | – | 33 | | Expected return on funded pension scheme assets | – | (39) | – | (41) | | Interest on pension liabilities | – | 38 | – | 38 | | Borrowing costs on provisions | (13) | (103) | (37) | (3,660) | | **Total** | (125) | (18) | (249) | (3,775) |
Finance expense – Changes in fair value – financial assets and Unrealised foreign exchange rate losses have been restated, see note 26 for further details.
In 2018-19 and 2019-20, the HM Treasury prescribed nominal and inflation rates were positive. However, the resulting real discount rates remained negative in 2018-19 and 2019-20, leading to a negative expense for borrowing costs on provisions. The borrowing costs on provision negative expense is primarily driven by the unwind of the discount on the NDA’s nuclear decommissioning provision. The 2019-20 equivalent real discount rate for cash outflows expected after ten prescribed by HM Treasury has reduced to (0.01%) from (0.11%) in 2018-19, this has resulted in a reduction in the borrowing cost negative expense on the nuclear decommissioning provision. Further detail of the movements in provisions can be found in note 18.1 for Nuclear provisions and note 18.2 for Other provisions.
6. Income
6.1 Operating income
| | Core Department and Agencies | 2019-20 | Core Department and Agencies | 2018-19 | |--------------------------------|------------------------------|---------|------------------------------|---------| | | £m | £m | £m | £m | | **Income from sales of goods and services:** | | | | | | Income from contracts with customers | | | | | | Fees, charges and recharges to/from external customers and central Government organisations | 148 | 317 | 139 | 250 | | Levy income | 11 | 3,347 | 10 | 1,212 | | Sales of goods and services | 10 | 804 | 11 | 936 | | Miscellaneous income | 6 | 82 | 8 | 99 | | **Other income** | | | | | | European Union funding | 1 | 20 | 4 | 26 | | Current grants and capital grants | 81 | 228 | 102 | 262 | | Coal pension receipts | – | – | 475 | 475 | | **Total** | 257 | 4,798 | 749 | 3,260 |
In 2018-19, income of £475 million in relation to the final sum receivable from the September 2017 valuation of the Mineworkers’ Pension Scheme was recognised. Further cash was received in 2019-20 which is reducing the Coal Pension receivables disclosed in note 14. Capacity Market supplier charge income relating to the 2018/19 Delivery Year has been recognised in Levy Income in 2019-20 due to the suspension of the Capacity Market in 2018-19. £1,483 million of Capacity Market supplier charge income has been recognised in 2019-20 (2018-19: £176 million) (see note 1.26).
Included in the sales of goods and services line above is £703 million of income from the NDA (2018-19: £828 million) relating to contract income under IFRS 15. The most significant contracts of the Departmental Group are held by the NDA. The table below shows the main types of contract, the main areas of performance obligations therein, and for each category:
- the revenue recognised in the reporting period [A]
- the revenue expected to be recognised in future reporting periods (being the aggregate amount allocation to performance obligations that are wholly or partially unsatisfied at the reporting date) [B]
- an indication of when NDA expects to recognise the remaining contract price
| Contract type | Categories of performance obligation | [A] £m | [B] £m | 2020-2025 | 2026-2038 | 2039-2087 | |---------------------------------------------------|--------------------------------------|--------|--------|-----------|-----------|-----------| | Spent fuel reprocessing and associated waste management | Spent fuel storage | 12 | 710 | 53 | 138 | 519 | | | Interim storage wastes | 85 | 419 | 419 | 0 | 0 | | | Treatment of wastes | 64 | 314 | 314 | 0 | 0 | | | Storage of treated wastes | 4 | 172 | 20 | 52 | 100 | | | Storage of products | 19 | 840 | 84 | 219 | 537 | | Spent fuel receipts | Receipt of spent fuel | 215 | 4,076 | 1,644 | 2,432 | 0 | | Other storage contracts | Storage of materials | 67 | 1,087 | 299 | 579 | 209 | | Storage and destorage of residues | Storage | 4 | 10 | 10 | 0 | 0 | | | Destorage | 1 | 24 | 21 | 3 | 0 | | Waste substitution | Destorage | 0 | 72 | 47 | 25 | 0 | | Legacy waste management | Waste management | 6 | 171 | 171 | 0 | 0 | | Transfer of ownership of materials and flasks | | 166 | 0 | 0 | 0 | 0 | | Total | | 643 | 7,895 | 3,082 | 3,448 | 1,365 |
The remaining revenue to be recognised in future reporting periods comprises:
- Payments from customers made on account
- Expected remaining future payments from customers
### 6.2 Finance income
| | Core Department and Agencies | 2019-20 | Core Department and Agencies | 2018-19 restated | |--------------------------------------|-----------------------------|---------|-------------------------------|------------------| | | £m | £m | £m | £m | | Effective Interest for FVTPL assets | 25 | 25 | 30 | 30 | | Effective Interest for amortised cost assets | 29 | 29 | 36 | 36 | | Interest income for amortised cost assets | 10 | 84 | 10 | 74 | | Interest income for FVTPL assets | 10 | 54 | 7 | 63 | | Dividend income for FVTPL assets held at the period end | – | 97 | – | 122 | | Dividend income from investments in joint ventures, associates and public dividend capital | 138 | 45 | 131 | 45 | | Total | 212 | 334 | 214 | 370 | Core Department
In 2019-20 the Core Department recognised dividend income of £138 million (2018-19: £131 million). This includes a dividend of £94 million from Enrichment Holdings Limited (EHL) (2018-19: £87 million), which is eliminated on consolidation. In the Departmental Group accounts, EHL is consolidated and its investment in URENCO is recognised as an associate. The Department recognises its share of URENCO’s profit for the year in Other operating expenditure and a fair value movement in Other Comprehensive Income.
Departmental Group
In 2019-20 the Departmental Group received dividend income of £142 million (2018-19: £168 million restated), comprising distributions from investment funds and dividend income of £90 million (2018-19: £119 million restated) recognised from BIS (Postal Services Act 2011) Company. See note 26 for further details.
### Property, plant and equipment
| Departmental Group 2019-20 | Land | Buildings | Dwellings | Leasehold | Improvements | Information Technology | Plant and Machinery | Furniture, Fixtures and Fittings | Transport Equipment | Assets under Construction | Total | |---------------------------|------|-----------|-----------|-----------|--------------|------------------------|-------------------|-----------------------------|-------------------|--------------------------|-------| | Cost or valuation | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | | Balance at 1 April 2019 | 243 | 2,471 | 41 | 56 | 257 | 6,204 | 22 | 328 | 22 | 328 | 10,204| | Additions | 7 | 11 | 11 | 11 | 127 | 4 | 4 | 226 | 4 | 226 | 2,352 | | Disposals | (3) | (1) | (1) | (1) | (127) | (1) | (1) | (65) | (1) | (65) | (257) | | Impairments | 10 | 15 | 19 | 36 | 2 | 2 | 2 | 10 | 2 | 10 | (172) | | Transfers in/out of boundary | 4 | 67 | 15 | 19 | 36 | 2 | 2 | 10 | 2 | 10 | (172) | | Revaluations | 14 | 18 | 19 | 19 | 19 | 19 | 19 | 19 | 19 | 19 | 80 | | At 31 March 2020 | 271 | 2,580 | 42 | 71 | 234 | 6,161 | 26 | 286 | 26 | 286 | 10,307| | Depreciation | (7) | (1,000) | (32) | (191) | (5,207) | (13) | (221) | (6,671) | (6,671) | (6,671) | (6,671) | | Balance at 1 April 2019 | (1) | (49) | (1) | (5) | (29) | (132) | (2) | (12) | (12) | (12) | (231) | | Charged in year | 2 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | (231) | | Impairments | 2 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | (231) | | Revaluations | (2) | (10) | (1) | (1) | (1) | (1) | (1) | (1) | (1) | (1) | (3) | | At 31 March 2020 | (28) | (1,038) | (36) | (172) | (5,240) | (14) | (177) | (6,702) | (6,702) | (6,702) | (6,702) | | Carrying amount at 31 March 2020 | 243 | 1,545 | 42 | 35 | 62 | 921 | 12 | 109 | 636 | 3,605 | | Carrying amount at 1 April 2019 | 236 | 1,471 | 41 | 24 | 66 | 997 | 9 | 107 | 582 | 3,533 | | Asset financing: | | | | | | | | | | | | | Owned | 190 | 1,527 | 42 | 35 | 61 | 921 | 12 | 109 | 12 | 109 | 3,533 | | Finance leased | 50 | 18 | | | | | | | | | 71 | | On balance sheet (SoFP) PFI and other service concession arrangements | - | - | - | - | - | - | - | - | - | - | - | | Of the total: | | | | | | | | | | | | | Core Department and Agencies | 18 | 110 | 30 | 9 | 78 | 56 | 5 | 306 | 5 | 306 | 3,290 | | NDPBs and other designated bodies | 226 | 1,426 | 42 | 5 | 63 | 943 | 7 | 100 | 690 | 3,290 | | Carrying amount at 31 March 2020 | 243 | 1,545 | 42 | 35 | 62 | 921 | 12 | 109 | 636 | 3,605 | | Departmental Group 2018-19 | Land £m | Buildings £m | Dwellings £m | Leasehold Improvements £m | Information Technology £m | Plant and Machinery £m | Furniture, Fixtures and Fittings £m | Transport Equipment £m | Assets under Construction £m | Total £m | |---------------------------|---------|--------------|--------------|--------------------------|---------------------------|------------------------|-----------------------------|------------------------|-----------------------------|---------| | **Cost or valuation** | | | | | | | | | | | | Balance at 1 April 2018 | 303 | 4,055 | 40 | 74 | 232 | 6,208 | 18 | 324 | 506 | 11,760 | | Additions | 4 | 2 | – | 2 | 6 | 32 | 4 | 4 | 258 | 312 | | Disposals | – | (1,842) | – | (13) | (8) | (122) | (1) | (2) | – | (1,988) | | Impairments | (41) | (7) | – | – | – | 3 | – | (6) | – | (51) | | Transfers in/out of boundary | – | (4) | – | (12) | (2) | – | – | – | 3 | (15) | | Reclassifications | – | 71 | – | 5 | 28 | 73 | 1 | 5 | (195) | (12) | | Revaluations | (23) | 196 | 1 | – | 1 | 10 | – | 3 | 10 | 198 | | **At 31 March 2019** | 243 | 2,471 | 41 | 56 | 257 | 6,204 | 22 | 328 | 582 | 10,204 | | **Depreciation** | | | | | | | | | | | | Balance at 1 April 2018 | – | (2,749) | – | (42) | (171) | (5,177) | (12) | (195) | – | (8,346) | | Charged in year | – | (56) | (1) | (7) | (29) | (142) | (2) | (19) | – | (256) | | Disposals | – | 1,839 | – | 13 | 8 | 121 | 1 | 2 | – | 1,984 | | Impairments | – | – | – | (1) | – | (7) | – | – | – | (8) | | Transfers in/out of the boundary | – | – | – | 5 | 1 | – | – | – | 6 | | | Reclassifications | – | – | – | – | – | 1 | – | (1) | – | – | | Revaluations | (7) | (34) | 1 | – | – | (3) | – | (8) | – | (51) | | **At 31 March 2019** | (7) | (1,000) | – | (32) | (191) | (5,207) | (13) | (221) | – | (6,671) | | Carrying amount at 31 March 2019 | 236 | 1,471 | 41 | 24 | 66 | 997 | 9 | 107 | 582 | 3,533 | | Carrying amount at 1 April 2018 | 303 | 1,306 | 40 | 32 | 61 | 1,031 | 6 | 129 | 506 | 3,414 | | **Asset financing:** | | | | | | | | | | | | Owned | 211 | 1,471 | 41 | 24 | 64 | 997 | 9 | 107 | 582 | 3,506 | | Finance leased | 25 | – | – | – | – | – | – | – | – | 25 | | On balance sheet (SoFP) PFI and other service concession arrangements | – | – | – | – | – | – | – | – | – | 2 | | **Carrying amount at 31 March 2019** | 236 | 1,471 | 41 | 24 | 66 | 997 | 9 | 107 | 582 | 3,533 | | **Of the total:** | | | | | | | | | | | | Core Department and Agencies | 18 | 98 | – | 20 | 5 | 81 | 2 | – | 70 | 294 | | NDPBs and other designated bodies | 218 | 1,373 | 41 | 4 | 61 | 916 | 7 | 107 | 512 | 3,239 | | **Carrying amount at 31 March 2019** | 236 | 1,471 | 41 | 24 | 66 | 997 | 9 | 107 | 582 | 3,533 | Property, plant, and equipment (PPE) held by the Departmental Group
The professional valuations of land and buildings undertaken within the Departmental Group were prepared in accordance with the Royal Institute of Chartered Surveyors (RICS) Valuation Standards (6th Edition), the ‘Red Book’. Unless otherwise stated, land and buildings are professionally revalued every five years and where appropriate in the intervening period, relevant indices are used. The most significant land and buildings at 31 March 2020 were held by Nuclear Decommissioning Authority (NDA) and UK Research and Innovation (UKRI).
In accordance with the FReM the majority of Leasehold improvements, Information Technology, Furniture, Fixtures and Fittings and Plant and Machinery are held at depreciated historic cost as a proxy for fair value as the assets have short useful lives or low values. Land, Freehold Buildings, Dwellings, Transport Equipment and the remainder of Plant and Machinery are held at fair value based on professional valuations.
Within the Departmental Group, a variety of valuation techniques are used depending upon whether the PPE asset is a specialised asset or a non-specialised asset. Where the PPE asset is a specialised asset, then a depreciated replacement cost valuation is used, for example by scientific institutes. Where the PPE asset is a non-specialised asset, then an existing-use valuation is used, for example for land and office buildings. Depreciated replacement cost (DRC) valuations are based on a number of unobservable inputs; these would be classified as level 3 in accordance with IFRS 13. Existing-use value (EUV) valuations are based on a number of market corroborated but unobservable inputs e.g. land valuations are based on similar prices per hectare adjusted for the specific location of the land, whilst other EUV valuations use specific unobservable inputs, e.g. rental yields. The EUV valuations inputs are classified as level 2 and level 3 in accordance with IFRS 13.
The Departmental Group does not hold any material individual PPE assets. Therefore there are no individually material level 3 assumptions included in the overall Departmental Group fair value of PPE. For there to be a material movement in the fair value of PPE, this would require a significant increase in a number of level 3 valuation assumptions across the Departmental Group.
The most significant valuations in the Departmental Group relate to land and buildings held by UKRI. Due to the COVID-19 pandemic and resulting lockdown, with consequential impacts on the economy, it is anticipated that there will be an effect on the indices used by UKRI to revalue their land and buildings in between professional valuations.
UKRI have estimated the potential financial impact of changes to those indices that are available as close to the year end as possible. The results all indicate some reduction in asset value ranging from 1.5% to the extreme case removing all upward revaluations recognised by UKRI in the year. This results in a potential movement of between £19.5 million and £52.4 million. Due to the unclear reliability of indices over the period and the coming months, and UKRI management’s view that any fall in values for their land and buildings is likely to be temporary, current valuations have been maintained and not adjusted for any uncertain potential reduction.
Further information can be found in the financial statements of the individual bodies’ accounts.
## 8. Intangible assets
| Departmental Group 2019-20 | Information Technology | Software Licences | Websites | Patents | Licences & Others | Assets under Construction | Total | |---------------------------|------------------------|-------------------|---------|---------|------------------|--------------------------|-------| | | £m | £m | £m | £m | £m | £m | £m | | **Cost or Valuation** | | | | | | | | | Balance at 1 April 2019 | 157 | 97 | 1 | 318 | – | 24 | 597 | | Additions | 5 | 19 | – | – | 119 | 7 | 150 | | Disposals | (10) | (7) | – | – | – | (2) | (19) | | Impairments | – | (1) | – | – | – | – | (1) | | Reclassifications | (51) | 61 | – | – | – | (10) | – | | Transfers in/(out) | 4 | – | – | – | – | (4) | – | | Revaluations | – | – | – | 13 | (32) | – | (19) | | **At 31 March 2020** | 105 | 169 | 1 | 331 | 87 | 15 | 708 | | **Amortisation** | | | | | | | | | Balance at 1 April 2019 | (127) | (54) | (1) | (248) | – | – | (430) | | Charged in year | (16) | (35) | – | (14) | – | – | (65) | | Disposals | 10 | 7 | – | – | – | – | 17 | | Reclassifications | 59 | (59) | – | – | – | – | – | | **At 31 March 2020** | (74) | (141) | (1) | (262) | – | – | (478) | | Carrying amount at 31 March 2020 | 31 | 28 | – | 69 | 87 | 15 | 230 | | Carrying amount at 1 April 2019 | 30 | 43 | – | 70 | – | 24 | 167 | | **Asset financing:** | | | | | | | | | Owned | 31 | 28 | – | 69 | 87 | 15 | 230 | | Carrying amount at 31 March 2020 | 31 | 28 | – | 69 | 87 | 15 | 230 | | **Of the total:** | | | | | | | | | Core Department and Agencies | 3 | 2 | – | – | 87 | 9 | 101 | | NDPBs and other designated bodies | 28 | 26 | – | 69 | – | 6 | 129 | | Carrying amount at 31 March 2020 | 31 | 28 | – | 69 | 87 | 15 | 230 |
### Departmental Group 2018-19
| Information Technology | Software Licences | Websites | Patents | Licences & Others | Assets under Construction | Total | |------------------------|-------------------|---------|---------|-------------------|---------------------------|-------| | £m | £m | £m | £m | £m | £m | £m | | **Cost or Valuation** | | | | | | | | At 1 April 2018 | 152 | 72 | 1 | 297 | – | 7 | 529 | | Additions | 2 | 1 | – | – | – | 33 | 36 | | Disposals | – | (2) | – | – | – | – | (2) | | Reclassifications | 1 | 24 | – | – | – | (13) | 12 | | Transfers in/(out) | 2 | 2 | – | – | – | (3) | 1 | | Revaluations | – | – | – | 21 | – | – | 21 | | **At 31 March 2019** | 157 | 97 | 1 | 318 | – | 24 | 597 | | **Amortisation** | | | | | | | | At 1 April 2018 | (114) | (34) | (1) | (235) | – | – | (384) | | Charged in year | (13) | (19) | – | (13) | – | – | (45) | | Disposals | – | 1 | – | – | – | – | 1 | | Transfers in/(out) | – | (2) | – | – | – | – | (2) | | **At 31 March 2019** | (127) | (54) | (1) | (248) | – | – | (430) | | **Carrying amount at** | | | | | | | | 31 March 2019 | 30 | 43 | – | 70 | – | 24 | 167 | | **Carrying amount at** | | | | | | | | 1 April 2018 | 38 | 38 | – | 62 | – | 7 | 145 | | **Asset financing:** | | | | | | | | Owned | 30 | 43 | – | 70 | – | 24 | 167 | | **Carrying amount at** | | | | | | | | 31 March 2019 | 30 | 43 | – | 70 | – | 24 | 167 | | **Of the total:** | | | | | | | | Core Department and | 4 | 2 | – | – | – | 8 | 14 | | Agencies | | | | | | | | NDPBs and other | 26 | 41 | – | 70 | – | 16 | 153 | | designated bodies | | | | | | | | **Carrying amount at** | | | | | | | | 31 March 2019 | 30 | 43 | – | 70 | – | 24 | 167 |
All software licenses are acquired separately.
All Information Technology (IT) assets are internally generated. IT assets are initially classified as assets under construction and are not amortised until they are commissioned, at which time they are re-classified as IT.
### Core Department
In April 2019 HMG entered into a commercial agreement with British Steel to allow it to meet its EU ETS obligations. Under a Deed of Forfeiture HMG bought £119 million of EU ETS allowances to meet British Steel’s 2018 EU ETS liability. In return, the Core Department received all 5.6 million of British Steel’s 2019 free allocation of ETS allowances when allocated in February 2020, which are included within intangible assets.
### Departmental Group
The Departmental Group holds its intangible assets at valuation. In accordance with the FReM, the Departmental Group adopts cost less amortisation as a proxy for fair value as the intangible assets have short lives. The exception to this is patents which are held at fair value based on a valuation model. The model uses a variety of assumptions to estimate the value of future income streams from the patents to determine the fair value; these include an estimate for future royalty income derived from the consensus forecast data from industry specialists, which are adjusted for expected future USD/GBP exchange rates, the territories in which the patents are applicable and potential threats to future income (such as competitor products and regulatory approval). In accordance with IFRS 13, these assumptions would be classed as level 3 assumptions. The carrying amount of the patents at 31 March 2020 is £69 million (2018-19: £70 million) and there would need to be a substantial increase in expected royalty income to result in a material increase in the fair value of the patents.
9. Derivative financial instruments
The most significant items included within Derivatives on the Consolidated Statement of Financial Position (SoFP) are the Contracts for Difference (CfDs).
CfDs
CfDs are a mechanism used to support investment in UK low carbon generation projects. CfDs have been established as a contract between the ‘Generator’ and the Low Carbon Contracts Company Ltd (LCCC), a company wholly owned by the Government and consolidated within the Department’s accounts.
CfDs have been classified as derivatives in accordance with IFRS 9 ‘Financial Instruments’ and recognised at their ‘fair value’ by deferring the difference between fair value and transaction price at initial recognition. Any subsequent gain or loss in fair value is recognised in the Statement of Comprehensive Net Expenditure.
The fair value of any derivative is assessed by reference to IFRS 13 ‘Fair Value Measurement’, which provides three options for assessment. Fundamentally the value should always reference an open market place but where no market place exists, an option is available for internally generated fair value. The different options are hierarchical and classed as Level 1, 2, or 3 inputs, where Level 1 is based on market prices, Level 2 is based on observable data other than market prices and Level 3 is used where Level 1 or 2 data is unavailable.
The fair value of the Department’s CfDs has been calculated using the income approach based on Level 3 inputs, which reflects the present value (PV) of future cash flows that are expected to occur over the contract term of the CfD. The discount rate which has been used to determine the PV for financial reporting is the Financial Instrument real rate of 0.7% set by HM Treasury Public Expenditure System (PES) Secretariat on 6 December 2019.
By contrast, for investment decisions and project appraisal, the Department is required to use the social discount rate of 3.5% published in HM Treasury’s Green Book. As the cash flows from Hinkley Point C (HPC) CfD are expected to occur over a 35 year period from 2025 to 2060, the valuation for financial reporting based on the 0.7% discount rate will be significantly higher than the economic valuation based on the 3.5% discount rate, even where all other inputs are the same.
The deferred difference between the fair value of the liability on day one and the transaction price is amortised over the contract life of the CfDs, which commences from the earlier of i) the actual start date of generation or ii) the end of the Target Commissioning Window (TCW) identified in the CfD, as this is the point at which the contractual liability will start to unwind (i.e. it is the point at which the potential payment period under the CfD commences).
The significance of these two dates is that they are the part of the contractual provisions which determine when the right to potential CfD payments starts. The contract payment period is typically for 15 years, but specific exceptions exist:
- for contracts relating to biomass conversion which have an expiration date in 2027;
- the contract for HPC nuclear generating plant which will expire at the earlier of 35 years after the start date of the second reactor or when the total CfD payments made have reached the Generation Cap (i.e. 910,000,000 MWh). CfDs may be signed many years in advance of actual generation. The main benefit to generators is the fact that they can derive economic benefit from these contracts across the payment period life of the contract and the added certainty which the CfD contract provides helps them to finance the project.
Under the legislation, there is an obligation placed on licensed electricity suppliers to fund the CfD liabilities as they crystallise through the Supplier Obligation Levy. The future levy amounts which will be received from the licensed suppliers will be accounted for within LCCC and will be triggered by the generation and supply of low carbon electricity.
As at 31 March 2020 LCCC was counterparty to 73 contracts recognised in the accounts, including HPC and 22 CfD contracts signed in the year after the Allocation Round 3 (AR3) (at 31 March 2019: 53 contracts). During the year LCCC recognised the HPC CfD in the financial statements, as historically it was not recognised in the Statement of Financial Position.
**Measurement differences relating to day one recognition**
All CfDs (including Hinkley Point C) are issued for £nil consideration through the CfD auction process, this being deemed the transaction price. The transaction price for CfDs differs from the fair value at initial recognition measured using a valuation model, mainly because the transaction price is not established in an active market. If there are significant unobservable inputs used in the valuation technique (Level 3), the financial instrument is recognised at the transaction price and any difference between the transaction price and fair value at initial recognition measured using a valuation model is deferred.
A single point valuation has been used for the recognition of HPC and AR3 CfDs, as the valuation as at 31 March 2020 is considered a reasonable proxy for the day one recognition. Therefore, in line with other CfDs, the measurement difference, being the difference between the transaction price and fair value of HPC and AR3 CfDs as at 31 March 2020, has been deferred.
The following table represents the difference between the CfD liability at initial recognition and at the reporting date:
| Core Department and Agencies | LCCC CfDs (exc. HPC) | LCCC HPC | Departmental Group Total | |-----------------------------|----------------------|----------|-------------------------| | £m | £m | £m | £m | | CfD liability as at 31 March 2018 recognised on the Consolidated Statement of Financial Position | – | 15,892 | – | 15,892 | | Re-measurement of the CfD liability | – | (2,743) | – | (2,743) | | Release of liability relating to terminated contracts | – | 39 | – | 39 | | Payments to the CfD generators | – | (980) | – | (980) | | Deferred difference recognised during the year | – | 713 | – | 713 | | CfD liability as at 31 March 2019 recognised on the Consolidated Statement of Financial Position | – | 12,921 | – | 12,921 | | Other non-CfD liabilities as at 31 March 2019 | 2 | – | – | 2 | | Carrying value of non-current derivative liabilities as at 31 March 2019 | 2 | 12,921 | – | 12,923 | | Remeasurement of the CfD liability | – | 4,406 | – | 4,406 | | Payments to the CfD generators | – | (1,803) | – | (1,803) | | Deferred difference recognised during the year | – | 940 | – | 940 | | CfD liability as at 31 March 2020 recognised on the Consolidated Statement of Financial Position | – | 16,464 | – | 16,464 | | Other non-CfD liabilities as at 31 March 2020 | – | – | – | – | | Carrying value of non-current derivative liabilities as at 31 March 2020 | – | 16,464 | – | 16,464 |
During the year, the net movement of £5,346 million (2018-19: (£1,991 million)) in the fair value of CfDs is recognised in the Statement of Comprehensive Net Expenditure. Movement in deferred measurement differences
The following table shows the movement in deferred day one loss.
| Core Department and Agencies | LCCC CfDs exc. HPC £m | LCCC HPC £m | Departmental Group Total £m | |-----------------------------|------------------------|-------------|-----------------------------| | Deferred measurement differences as at 31 March 2018 | – | 23,309 | – | 23,309 | | Measurement differences recognised in respect of terminated CfDs | – | (268) | – | (268) | | Deferred measurement differences recognised during the year | – | (713) | – | (713) | | Deferred measurement differences as at 31 March 2019 | – | 22,328 | – | 22,328 | | Measurement differences deferred during the year | – | 905 | 50,826 | 51,731 | | Deferred measurement differences recognised during the year | – | (940) | – | (940) | | Deferred measurement differences as at 31 March 2020 | – | 22,293 | 50,826 | 73,119 |
Fair value measurement of CfDs
The fair value of CfDs represents the LCCC’s best estimate of the payments which the LCCC will be committed to make, if and when the generators supply low carbon electricity in accordance with their contractual terms. They are based upon the estimates of future electricity prices to forecast the potential liabilities using the Dynamic Dispatch Model (DDM) owned by the Department.
Should no low carbon electricity be supplied in accordance with the contractual terms, then the LCCC is not under any obligation to make these payments.
Fair value of CfDs (financial liabilities at fair value through profit and loss)
The following table provides an analysis of financial instruments which are measured subsequent to initial recognition at fair value and grouped into input levels 1 to 3 within the fair value hierarchy based on the degree to which the fair value is observable:
| Level 1 £m | Level 2 £m | Level 3 £m | Total £m | |------------|------------|------------|----------| | Balance at 31 March 2019 | – | – | 35,249 | 35,249 | | Balance at 31 March 2020 | – | – | 89,583 | 89,583 |
Comparative values in the table above exclude the liability for Hinkley Point C CfD as this CfD was recognised in the current year. In the current year the fair value attributable to Hinkley Point C CfD is £50.8 billion.
Reconciliation of CfDs
The following table shows the impact of the fair value of all CfDs which have been recognised in these accounts, classified under level 3, by using the assumptions described below (all held by LCCC):
### Key inputs and underlying assumptions for CfDs
For the key inputs into the model, the underlying assumptions are set out below.
#### Estimated future forecast wholesale electricity prices
Forecast wholesale electricity prices used to estimate the fair value of CfDs are derived from the DDM which has been developed by the Department to facilitate/inform policy decisions by modelling investor behaviour in response to fuel and carbon prices and policy environment. The DDM estimates the wholesale price by:
- calculating the short run marginal cost (SRMC) of each plant (including a representation of plants in interconnected markets), taking account of start-up and shut-down costs
- calculating the available output of intermittent renewables
- calculating the half hourly demand for electricity by taking into account demand side response
- determining the marginal plant required to meet demand
Economic, climate, policy, generation and demand assumptions are external inputs to the model including demand load curves for both business and non-business days and seasonal impacts. Specific assumptions can also be modelled for domestic and non-domestic sectors and smart meter usage.
The forecast trajectory of electricity prices is uncertain. In the valuation, LCCC’s management has used the DDM reference case to calculate the fair value and the impact of low and high cases have been disclosed within sensitivities. Low and high cases have also been published by the Department and are based on the Department’s fossil fuel price assumptions for 2019, which presents low and high assumptions for the wholesale prices of oil, gas and coal.
In the valuation, the wholesale price has been reduced to reflect the price the wind generator is likely to receive. Additionally, wholesale electricity forward prices have been used for the liquid trading horizon (covering the nearest 2 years period). On windy days, the price that wind generators receive is likely to be reduced. The effect of reduced prices for wind generation adds approximately £2.3 billion to the valuation.
#### Estimated future wholesale electricity generation
**a. Transmission Loss Multiplier (TLM)**
TLM reflects the fact that electricity is lost as it passes through the transmission system from generators to suppliers. If the TLM is incorrect, this will have implications for the volume of electricity subject to CfD payments. Any change in TLM will be corrected through adjustments in strike prices although the change in TLM is expected to be immaterial. b. Start date
Generators nominate a Target Commissioning Date (TCD) in their binding application form for a CfD, and this date is specified in their CfD following contract award. However, the generator is free to commission at any time within their Target Commissioning Window (TCW), a period of one year from the start of the TCW for most technologies, with no penalty, or after the end of the TCW and up to their ‘Longstop Date’ (one to two years after the end of the TCW depending on technology) with a penalty in the form of reduction of contract length for each day they are late in commissioning after the end of the TCW. The contract can be terminated if the generator has not commissioned 95% (or 85% for Investment Contracts and offshore wind) of their revised installed capacity estimate by the end of the Longstop Date. The valuation uses the latest estimate from generators on the start date.
The Target Commissioning Dates for reactor one and reactor two of the Hinkley Point C project are 1 December 2025 and 1 June 2026 respectively. The TCW for reactor one is 1 May 2025 to 30 April 2029. The TCW for reactor two is 1 November 2025 to 31 October 2029. Any change to the start date will change the timing of future cash flows and impact on the discounted fair value.
c. Installed capacity
The figure for the maximum installed capacity was provided by the generator in its application for a CfD and specified in its CfD contract following allocation. Thereafter the installed capacity figure can only be reduced by the generator for a permitted contractual construction event (which is a narrowly defined concept) or by the difference by which the relevant project has an installed capacity of 95% (or 85% in the case of offshore wind) of its current contractual installed capacity figure and 100%. The actual output of the generator will depend on the load factor.
The Hinkley Point C CfD does not have an installed capacity cap and is only entitled to CfD payment support up to a generation cap of 910,000,000 MWh.
d. Load factor
Load factor is defined as the actual power output of a project as a proportion of its rated installed capacity. It is a percentage figure which is used to transform installed capacity into actual power output (generation). Load factor assumptions are based on reference factors published by the Department for given technology types; however, actual power outputs are sensitive to technological and environmental factors which may impact actual cash flows. Plant specific load factors (where a minimum of 6 months’ generation data is available) is also available for consideration when valuing the CfDs.
Strike price
The strike price is an agreed price which determines the payments made to the generator under the contract with reference to its low carbon output and the market reference price. The relevant strike price is specified in each CfD and is not intended to change for the duration of the project other than through indexation to CPI and certain network charges or in the event of certain qualifying change in law. The strike price used in the valuation of the CfDs is the 2020-21 strike price and reflects the CPI rate for January 2020 in-line with the requirements of the CfD contract.
The relevant strike price for the Hinkley Point C CfD is specified at £92.50/MWh in real 2012 terms and is not intended to change for the 35 year contract duration, other than through indexation to CPI and certain network and balance charges, the event of certain qualifying changes in law, or the additional factors discussed below. If a CfD in relation to Sizewell C is entered into before the reactor one start date, then the applicable strike price shall be reduced with effect from the date of satisfaction of the Sizewell C condition by £3/MWh. The LCCC’s management’s assumption with regards to Sizewell C has not changed since last year hence the use of £92.50/MWh in calculating the fair value of Hinkley Point C CfD.
Equity gain share for Hinkley Point C
The equity gain share mechanism consists of two separate components: (i) a mechanism to capture gains above specified levels where the Hinkley Point C project outperforms relative to the original base case assumptions; and (ii) a mechanism to capture gains above specified levels arising from the sale of equity and economic interests (direct or indirect) in the Hinkley Point C project.
In each case, as and when the Internal Rate of Return (IRR) thresholds are reached:
- If the relevant IRR is more than 11.4%, the LCCC will receive 30% of any gain above this level.
- If the relevant IRR is more than 13.5%, the LCCC will receive 60% of any gain above this level.
No adjustment to the valuation has been made for equity gain share on the grounds that none of the conditions outlined have been met.
**Construction gain share for Hinkley Point C**
If the construction costs of Hinkley Point C come in under budget, the strike price will be adjusted downwards so that the gain (or saving) is shared with the LCCC. The gain share is 50/50 for the first billion pounds, with savings in excess of this figure being shared 75% to the LCCC and 25% to the generator, NNB Generation Company (HPC) Limited (NNBG).
If the outturn cost of construction is less than assumed then by reducing the strike price, the amounts paid out to NNBG under the CfD will reduce and hence the benefit of the lower construction costs is shared between NNBG and ultimately consumers. There is, however, no similar upward adjustment if the construction cost of Hinkley Point C is over budget.
No adjustment to the valuation has been made for construction gain share on the grounds that there has not been any construction gain during the year.
**OPEX reopener for Hinkley Point C**
The strike price may be adjusted upwards if the operational expenditure costs are more than assumed and downwards if they are less. There are two operational expenditure reopener dates, at 15 years and 25 years after the first reactor start date. The rationale behind the reopener is that the strike price is based on long-term assumptions on operational expenditure costs. The reopener provides a way of mitigating long-term cost risks for both parties.
No adjustment to the valuation has been made for OPEX reopener on the grounds that the OPEX reopener dates have not yet been reached.
**Sensitivity Analysis**
Long term system forecasts are not generally seen as a single most likely outcome with degrees of uncertainty either side. Rather there are multiple sets of inputs that are internally consistent and credible. A set of these inputs is usually used as a ‘scenario’ and multiple deliberately different scenarios are used to illustrate different possible futures when undertaking long term forecasting. Therefore, individual forecasts may use a very different set of assumptions such as generation mix, carbon and fuel costs, electricity demand and interconnector capacity, but still be within what we would describe as the ‘universe of reasonableness’.
In order to value the CfD liabilities LCCC’s management have used future wholesale electricity prices derived from the selected DDM reference case scenario. The Department has been able to estimate wholesale electricity prices out to 2060 by effectively ‘freezing’ the 2050 model for all subsequent years. The main driver facilitating the Department’s ability to do this has been the government’s commitment in the year to bring all greenhouse gas emissions to Net Zero by 2050 (this giving more certainty over potential generation mixes into the future).
The two reference case scenarios provided (with alternative levels of demand) represents the Department’s view of the optimal generation mix (from the perspective of whole system costs) to achieve net zero by 2050. The reference case scenario that was deemed the most reasonable estimate of the two by management and used for the valuation produces a forecast price of £39.81 per MWh in 2040 and £37.55 per MWh in 2050 (and 2060). These represent the Department’s view of the optimal generation mix from the perspective of whole system cost to achieve net zero by 2050 based on low and high assumptions for future wholesale prices of oil, gas and coal. Under these high/low fossil fuel prices scenarios the forecast price is £42.41/£33.53 per MWh in 2040 and £42.04/£33.35 per MWh in 2050 (and 2060). The impact on the CfD valuation of using these alternative scenarios is shown in the table below.
It should be noted that independent third-party forecasters may use a very different set of assumptions for their net zero by 2050 scenarios (e.g. different generation mix, commodity prices, carbon prices, electricity demand and/or interconnector capacity) and that these different assumptions may produce a future electricity price outside of the bounds of the range implied by the DDM high and low demand cases. Independent third-party forecasters with a more pessimistic view on decarbonisation may also use scenarios under which net zero is achieved at a later date. These scenarios will also use different generation mix, commodity price and electricity demand assumptions and may produce electricity prices further outside the bounds of the range implied by the DDM high and low cases.
Having undertaken appropriate due diligence management is satisfied that, whilst significant, the estimation uncertainty associated with future wholesale electricity prices is not fundamental as to prevent recognition. Available independent third-party price forecasts that management have reviewed indicate a forecasting range of £16.20-£64.87 per MWh at 2040 and £14.72-£64.82 per MWh at 2050. It should be noted however that this range may not represent the full range of market views.
An additional element in the calculation of the CfD liability is the discount rate that is applied. Uncertainty increases with time and so the choice of discount rate plays a significant part in determining how much uncertainty is weighted into a present value calculation; a higher discount rate places less weight on increasingly more uncertain years of a present value calculation. As in the previous year the LCCC has used the HM Treasury discount rate of 0.7% for valuing financial instruments such as CfDs. In the table below we have illustrated the impact of using a different rate (the social discount rate of 3.5%, as published in the HM Treasury Green Book).
The following table shows the impact on the fair value of CfDs, classified under level 3, by applying reasonably possible alternative assumptions to the valuation obtained using DDM. Due to the significance and uniqueness of Hinkley Point C CfD the impact (and certain assumptions) have been shown separately.
| Change in fair value of CfDs if: | Favourable/ (Unfavourable) changes | Favourable/ (Unfavourable) changes | Favourable/ (Unfavourable) changes | |---------------------------------|-----------------------------------|-----------------------------------|-----------------------------------| | | HPC CfD | Other CfDs | Total Impact | | DDM High Case | 4,083 | 8,815 | 12,898 | | DDM Low Case | (4,552) | (5,866) | (10,418) | | Discount rate of 3.5% | 23,109 | 7,081 | 30,190 |
**Specific to CfDs exc. HPC:**
| | Favourable/ (Unfavourable) changes | |--------------------------------|-----------------------------------| | 10% more load factor | – | | 10% less load factor | – | | Estimated Commissioning Date moves backward by one year | – | | Generation starts at the earliest possible date | – |
**Specific to HPC CfD:**
| | Favourable/ (Unfavourable) changes | |--------------------------------|-----------------------------------| | At generation cap | (28) | | 10% less load factor | 5,083 | | Generation starts at the earliest possible date | 55 | | Generation start date delayed by 15 months | (65) | | Sizewell C strike price adjustment | 2,709 | The fair value is highly dependent upon the actual capacity generated once the plant is built and the electricity prices which will prevail at the time of generation. The favourable and unfavourable changes show how the impact of changes in capacity and prevailing electricity prices will affect the fair value of the CfDs due to the change in the level of cash flows. As the sensitivity analysis illustrates, the overall fair value movements are subject to material uncertainty.
**Significant unobservable inputs**
The following table discloses the valuation techniques and significant unobservable inputs for CfDs recognised at fair value and classified as Level 3 along with the range of values used for these significant unobservable inputs. Comparative values in the table below exclude the liability for HPC as the HPC CfD was recognised in the current year.
| Year | Fair value of CfDs £m | Valuation technique | Significant unobservable input | Range Min – Max £/MWh | |------|-----------------------|---------------------|-------------------------------|------------------------| | 2019 | 35,249 | DCF | Electricity prices | 44.55 – 67.73 | | 2020 | 89,583 | DCF | Electricity prices | 32.69 – 60.46 |
**10. Investments and loans in other public sector bodies**
| | Ordinary shares £m | Public Dividend Capital £m | Other investments and loans £m | Core Department and Agencies Total £m | Elimination of shares and other investments and loans held in NDPBs £m | NDPBs Ordinary Shares £m | Departmental Group Total £m | |------------------|--------------------|---------------------------|-------------------------------|--------------------------------------|-------------------------------------------------|--------------------------|-----------------------------| | **Balance at 1 April 2018** | 2,346 | 81 | 569 | 2,996 | (1,826) | 460 | 1,630 | | Additions | 125 | – | 305 | 430 | (352) | – | 78 | | Redemptions | – | – | (24) | (24) | 24 | – | – | | (Impairments)/Impairment reversal | (30) | – | – | (30) | 30 | – | – | | Revaluations | 38 | – | – | 38 | – | 29 | 67 | | Unwinding of discount | – | – | 1 | 1 | (1) | – | – | | Loans repayable within 12 months transferred to current assets | – | – | (63) | (63) | 46 | – | (17) | | **Balance at 31 March 2019** | 2,479 | 81 | 788 | 3,348 | (2,079) | 489 | 1,758 | | Additions | 19 | – | 238 | 257 | (148) | – | 109 | | Redemptions | – | (16) | (1) | (17) | – | – | (17) | | (Impairments)/Impairment reversal | (39) | – | – | (39) | 39 | – | – | | Revaluations | (162) | – | 20 | (142) | (20) | 44 | (118) | | Loans repayable within 12 months transferred to current assets | – | – | (15) | (15) | (11) | – | (26) | | **Balance at 31 March 2020** | 2,297 | 65 | 1,030 | 3,392 | (2,219) | 533 | 1,706 | 10.1 Ordinary Shares in other public sector bodies
| | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |--------------------------------|------------------------------|--------------------|------------------------------|--------------------| | | 31 March 2020 | 31 March 2019 | | | | Balance at 1 April | 2,479 | 1,404 | 2,346 | 1,337 | | Additions | 19 | 19 | 125 | – | | (Impairments)/Impairment reversal | (39) | – | (30) | – | | Revaluations | (162) | (118) | 38 | 67 | | Balance at 31 March | 2,297 | 1,305 | 2,479 | 1,404 |
Comprising
Ordinary Shares held within the Departmental boundary – held at cost 1,524 – 1,564 –
Ordinary Shares held outside the Departmental boundary – held at fair value 773 1,305 915 1,404
Balance at 31 March 2,297 1,305 2,479 1,404
Core Department
Ordinary Shares in other public sector bodies held within the Departmental boundary
In accordance with the FReM, ordinary shares held within the Departmental boundary are carried at historical cost less any provision for impairment. They are eliminated on consolidation.
British Business Bank Plc (BBB)
The Core Department through the Secretary of State (SoS) holds 1,496,407,933 ordinary shares (31 March 2019: 1,496,407,933), each with a nominal value of £1. The Core Department made £nil (31 March 2019: £125 million) of share capital additions in BBB during the year. The Core Department’s holding had a cost of £1,496 million at 31 March 2020 (31 March 2019: £1,496 million).
The principal objective of the company is to address long-standing, structural gaps in the supply of finance and bring together in one place Government finance support for small and mid-sized businesses.
UK Green Infrastructure Platform (UKGIP)
The Core Department through the SoS holds 90% of the share capital of UK Green Infrastructure Platform Limited in the form of 900 ordinary shares (31 March 2019: 900), each with a nominal value of £1.
UKGIP’s share capital was acquired for £93 million and the recognition of a shareholder loan of £40 million. The Core Department’s holding had a cost less provision for impairment of £25 million at 31 March 2020 (31 March 2019: £65 million). The total loan outstanding at 31 March 2020 was £nil (31 March 2019: £8 million) which is included within the Loans and investments in public sector bodies note.
UKGIP was established to enable Government to retain an interest in five existing GIB investments. The Green Investment Group is the remaining 10% shareholder. The primary activity of UK GIP is to hold green investments and identify opportunities to realise them in a way which returns best value for taxpayers’ money.
UK Shared Business Services Limited (UKSBS)
The Core Department though the SoS holds 62,016,358 non-voting shares and one voting share in UKSBS, held at cost less provision for impairment of £3 million at 31 March 2020 (31 March 2019: £3 million). The company is a specialist business services organisation that provides finance, procurement, grants, information systems and HR and payroll services to the public sector. Its main objective is to improve the economy, efficiency and effectiveness of corporate services to BEIS bodies.
**Low Carbon Contracts Company Limited (LCCC)** The Core Department through the SoS holds one ordinary share in LCCC with a nominal value of £1. The principal objective of the company is to be the counterparty to and manage Contracts for Difference (CfDs) throughout their lifetime.
**Electricity Settlements Company Limited (ESC)** The Core Department through the SoS holds one ordinary share in ESC with a nominal value of £1. The principal objective of the company is to oversee settlement of the Capacity Market agreements.
**Enrichment Holdings Limited (EHL)** The Core Department through the SoS holds two shares of £1 each in EHL with a nominal value of £2.
EHL has been set up as a holding company, along with a subsidiary company, Enrichment Investments Limited (EIL), solely to hold the Government’s one third share in Urenco Limited, an entity operating in the civil uranium enrichment sector.
**BIS (Postal Services Act 2011) Company Limited** The Core Department through the SoS holds one ordinary share in BIS (Postal Services Act 2011) Company Limited with a nominal value of £1.
The principal objective of the company is to dispose of the assets transferred to it from the Royal Mail Pension Plan (RMPP).
**South Tees Site Company Limited (STSC)** The Core Department through the SoS holds one ordinary share in STSC with a nominal value of £1. The principal objective of the company is to secure and manage the South Tees Site.
**Postal Services Holding Company Limited (PSH)** The Core Department through the SoS holds 50,005 ordinary shares in PSH which is 100% of the issued share capital at a historic cost of £430 million at 31 March 2020 (31 March 2019: £430 million). The Core Department through the SoS also owns one special share in PSH, relating to certain areas for which Special Shareholder’s consent is required.
The Core Department’s holding had a cost less provision for impairment of £nil at 31 March 2020 (31 March 2019: £nil). PSH is currently in the process of liquidation due to the cessation of its primary activities.
The principal objective of the company prior to cessation was to hold and manage its shares in Post Office Limited (POL), which prior to cessation were transferred to the Core Department.
**Ordinary Shares held outside of the Departmental boundary** Shares held outside of the Departmental boundary are carried at fair value.
**Post Office Limited (POL)** The Core Department through the SoS holds 50,003 ordinary shares in POL at a nominal value of £1 each which is 100% of the issued share capital. There is a special share in POL (nominal value of £1) which is held directly by the Secretary of State for BEIS. This shareholding is held at fair value, but as there is no active market for these shares the net asset value of POL is considered to be a reasonable approximation for fair value. The fair value of the investments, held by the Core Department, as at 31 March 2020 was £145 million (31 March 2019: £256 million).
The principal objective of POL is to provide retail post office services through its national network of branches.
**British Nuclear Fuels Limited (BNFL)**
The Core Department holds 50,000 ordinary shares in BNFL at a nominal value of £1 each. The Secretary of State for BEIS holds 49,999 ordinary shares and the Treasury Solicitor holds one ordinary share.
The Core Department’s shareholding is held at fair value, but because there is no active market for these shares the net asset value of BNFL is considered to be a reasonable approximation of fair value. The fair value as at 31 March 2020 was £325 million (31 March 2019: £324 million).
**Ordnance Survey Limited (OSL)**
The Core Department through the SoS holds 34,000,002 ordinary shares in OSL at a nominal value of £1 each which is 100% of the issued share capital.
The shareholding is held at fair value, but as there is no active market for these shares the net asset value of OSL is considered to be a reasonable approximation for fair value. The fair value as at 31 March 2020 was £151 million (31 March 2019: £179 million).
The principal objective of OSL is to produce mapping products and mapping data information.
**NPL Management Limited (NPLML)**
The Core Department through the SoS holds 76 ordinary shares in NPLML which is 100% of the issued share capital.
NPLML has been set up to manage and operate the National physical laboratory.
The shareholding is held at fair value, but as there is no active market for these shares the net asset value of NPLML is considered to be a reasonable approximation for fair value. The fair value as at 31 March 2020 was £70 million (31 March 2019: £78 million).
**NNL Holdings Limited (NNLH)**
The Core Department through the SoS holds two shares of £1 each in NNLH with a nominal value of £1 each.
NNLH has been set up as a holding company, to hold all the shares in the National Nuclear Laboratory Limited.
The shareholding is held at fair value but because there is no active market for these shares the net asset value of NNLH is considered to be a reasonable approximation of fair value. The fair value as at 31 March 2020 was £81 million (31 March 2019: £79 million).
**NDPBs and other designated bodies**
**NDA subsidiaries**
The NDA controls the following subsidiaries, all of which are outside the Departmental Group boundary and not consolidated into these accounts. The holdings are valued at fair value. As there is no active market, the net assets of the entities are considered the most appropriate approximation of fair value and amounted to £533 million as at 31 March 2020 (31 March 2019: £489 million). | Name | Country of incorporation | Nature of business | Holding entity | Proportion of ordinary shares held | |-------------------------------------------|--------------------------|--------------------------------------------------------|----------------|-----------------------------------| | Direct Rail Services Limited | UK | Rail transport services within the UK | NDA | 100% | | International Nuclear Services France SAS (i) | France | Transportation of spent fuel | NDA | 100% | | International Nuclear Services Japan KK (i) | Japan | Transportation of spent fuel | NDA | 100% | | International Nuclear Services Limited | UK | Contract management and the transportation of spent fuel, reprocessing products and waste | NDA | 100% | | NDA Properties Limited | UK | Property management | NDA | 100% | | Pacific Nuclear Transport Limited (i) | UK | Transportation of spent fuel, reprocessing products and waste | NDA | 68.75% | | Rutherford Indemnity Limited | Guernsey | Nuclear insurance | NDA | 100% |
(i) Ownership through International Nuclear Services Limited.
### 10.2 Public Dividend Capital (PDC)
| Companies House | UK Intellectual Property Office | Met Office | Total | |-----------------|---------------------------------|------------|-------| | £m | £m | £m | £m | | Balance at 1 April 2018 | 16 | 6 | 59 | 81 | | Additions | – | – | – | – | | Redemptions | – | – | – | – | | Impairments | – | – | – | – | | Balance at 31 March 2019 | 16 | 6 | 59 | 81 | | Additions | – | – | – | – | | Redemptions | (16) | – | – | (16) | | Impairments | – | – | – | – | | Balance at 31 March 2020 | – | 6 | 59 | 65 |
PDC is held by the Core Department. In accordance with the FReM, PDC is carried at historical cost less any impairment.
The Office of National Statistics (ONS) determines whether an entity is classified to the public sector and if classified to the public sector, whether an entity is included in the consolidation boundary for a department, in 2018-19 the ONS reclassified Companies House from a public corporation (a non-consolidated public body) to a central government body (a consolidated body). This will result in Companies House being consolidated into the Departmental Group accounts, this will occur, once Companies House’s legal trading fund status has been revoked. The Revocation Order Statutory Instrument (SI) 2019: No.1337, was laid on 15 October 2019 and comes into force on 1 April 2020. Therefore, Companies House will be consolidated in the 2020-21 Departmental Group accounts. See note 27 for further details.
#### 10.2.1 Share of net assets and results for Public Dividend Capital holdings outside the Departmental consolidation boundary
The Department is required to disclose its share of the net assets and the results for the year of other public sector bodies, which are outside of the Departmental boundary. The following disclosures relate to the Department’s trading funds. For all bodies, information for 2019-20 was derived from their draft unaudited accounts. The information for 2018-19 was derived from their audited accounts. The accounts were prepared on an IFRS basis, in accordance with the requirements of the FReM.
### 10.3 Loans in public sector bodies
| | Core Department and Agencies | 31 March 2020 | Core Department and Agencies | 31 March 2019 | |----------------------|-----------------------------|---------------|-----------------------------|---------------| | | £m | £m | £m | £m | | Balance at 1 April | 788 | 273 | 569 | 211 | | Additions | 238 | 90 | 305 | 79 | | Repayments | (1) | (1) | (24) | – | | Unwind of discount | – | – | 1 | – | | Revaluations | 20 | – | – | – | | Loans repayable within 12 months transferred to current assets | (15) | (26) | (63) | (17) | | **Balance at 31 March** | **1,030** | **336** | **788** | **273** |
**Core Department**
**Loans in other public sector bodies**
The balance comprises a number of loans to public sector bodies, the most significant loans making up the balance are detailed below:
**Energy Efficiency Loans**
The Core Department’s energy efficiency loans scheme was set up under the Environmental Protection Act 1990 to help businesses and public sector organisations reduce their energy costs by providing interest free loans for the implementation of energy efficiency projects.
The total carrying amount with public sector bodies is £255 million at 31 March 2020 (31 March 2019: £212 million). The non-current element of the loans is £202 million at 31 March 2020 (31 March 2019: £169 million) included in the table above; the current element of these loans is £53 million at 31 March 2020 (31 March 2019: £43 million), which is included in note 15. The loans are accounted for at amortised cost under IFRS 9.
These loans are to non-consolidated public sector entities and are not eliminated on consolidation.
**Fleetbank Funding Limited Loan (Enable Funding programme)**
The Core Department’s loan to Fleetbank Funding Limited is to provide funding to support the Enable Funding programme, managed by the British Business Bank. This was launched in November 2014 and aimed at improving the provision of asset and lease finance to smaller UK businesses.
The total carrying amount of the Fleetbank Funding Limited loan is £410 million at 31 March 2020 (31 March 2019: £339 million). The non-current element of the loans is £410 million at 31 March 2020 (31 March 2019: £303 million) included in the table above; the current element of these loans is £nil at 31 March 2020 (31 March 2019: £36 million), which is included in note 15. The loans are accounted for at amortised cost under IFRS 9.
This loan is to an entity that is consolidated within these financial statements and the loan is eliminated on consolidation.
**Northern Powerhouse Investment Limited and Midlands Engine Investment Limited Loans**
The Core Department has loans with Northern Powerhouse Investment Fund and Midlands Engine Investment Fund. The funds are matched by funding from the European Investment Bank. The funds are set up to provide commercially-focused finance to help small and medium sized enterprises start up and grow.
The carrying amount of the loan investments in these entities is £140 million at 31 March 2020 (31 March 2019: £109 million). The loans are accounted for at cost under IAS 27.
These loans are to consolidated bodies and are eliminated on consolidation.
**Met Office Loans**
The Core Department’s loan with the Met Office funds UK membership of EUMETSAT. EUMETSAT is a non-EU international organisation set up to develop, launch and monitor meteorological satellites which provide global data for weather forecasting.
The total carrying amount of the Met Office loan is £118 million at 31 March 2020 (31 March 2019: £91 million). The non-current element of the loans is £104 million at 31 March 2020 (31 March 2019: £81 million) included in the table above; the current element of these loans is £14 million at 31 March 2020 (31 March 2019: £10 million), which is included in note 15. The loans are accounted for at amortised cost under IFRS 9.
These loans are to non-consolidated bodies and are not eliminated on consolidation.
### 10.4 Special Shares
The Secretary of State holds one Special Share in each of the entities listed below. The list is a summary and not a comprehensive record of the terms of each respective shareholding. Further details can be obtained from the annual report and financial statements of each body or their Articles of Association.
The Core Department does not recognise the special or ‘golden’ shares on its Statement of Financial Position.
| Body in which Share is held and type and value of Share | Significant terms of Shareholding | |--------------------------------------------------------|----------------------------------| | Postal Services Holding Company Limited. £1 Special Rights Preference Share | • Created in January 2001 (formerly called Royal Mail Holdings plc)\
• It may be redeemed at any time by the shareholder\
• The consent of the special shareholder is required for a number of decisions, including:\
− Appointments to the Board (the special shareholder can also make appointments to the Board)\
− Setting (and approving any material changes in) the remuneration packages of the Directors\
− Borrowing\
− Disposing of substantial assets of the business and shareholdings\
− Voluntary winding-up of the company\
− Varying certain of the company’s Articles of Association, including the rights of the special shareholder.\
Note: The company is now in members’ voluntary liquidation and control of its affairs has been passed to the Joint Liquidators. | | Body in which Share is held and type and value of Share | Significant terms of Shareholding | |--------------------------------------------------------|----------------------------------| | **Post Office Limited (“POL”)**<br>£1 Special Rights Redeemable Preference Share | • Created in April 2012\
• Special Shareholder is entitled to attend and speak at any general meeting or any meeting of any other class of shareholders of POL, but the Special Share does not carry voting rights or any other rights at any such meeting.\
• It may be redeemed at any time by the Special Shareholder, POL cannot redeem the Special Share without prior consent of the Special Shareholder.\
• The consent of the special shareholder is required for a number of decisions, including:\
– Varying POL’s Articles of Association, including the rights of the special shareholder;\
– Appointment or removal from office of any Director of POL;\
– Approval of (including material variations) Directors’ remuneration and terms of employment;\
– Adoption of (and any material variation in) POL’s strategic plan;\
– Substantial alterations in the nature of the business carried on by POL;\
– Sale of material assets in the absence of which POL would not be able to deliver its strategic plan;\
– Incurring of any borrowing exceeding pre-set limits as agreed with HM Treasury;\
– Issuing or allotment of shares or granting of share rights in the company; and\
– Voluntary winding-up of the company or member of the group.\
– Any transaction which will result in a commitment or liability – either individually or when taken together with related relevant transactions – of an amount in excess of £50m. | | **BAE Systems plc**<br>£1 Special Rights Preference Share | • Created in 1985 (but subsequently amended).\
• No time limit.\
• Provides for a 15% limit on any individual foreign shareholding, or group of foreign shareholders acting in concert, in the company.\
• Requires a simple majority of the Board and the Chief Executive to be British.\
• Requires any Executive Chairman to be British and, if both the Chairman and Deputy Chairman are non-executives, requires at least one of them to be British. | | **Rolls Royce Holdings plc**<br>£1 Special Rights Non-Voting Share | • Created in 1987 (but subsequently amended and transferred to Rolls-Royce Holdings plc).\
• No time limit.\
• Provides for a 15% limit on any individual foreign shareholding, or group of foreign shareholders acting in concert, in the company.\
• Requires a simple majority of the Board to be British.\
• Allows either the Chairman or the Chief Executive to be either an EU or US citizen provided that the other is a British citizen.\
• Provides for a veto over the material disposal of assets of the group.\
• Provides for a veto for a proposed voluntary winding up. | | **EDF Energy Nuclear Generation Group Limited**<br>(formerly British Energy Group plc)<br>£1 Special Share | • British Energy Group plc Special Share created on 13 January 2005 and held jointly by the Secretary of State for Business, Energy and Industrial Strategy and the Secretary of State for Scotland.\
• The consent of the Special Shareholder, which can only be refused on grounds of national security (except in relation to an amendment to the company’s Articles of Association), is required in respect of:\
– various amendments to the company’s Articles of Association;\
– any purchase of more than 15% of the company’s shares;\
– the issue of shares carrying voting rights of 15% or more in the company;\
– variations to the voting rights attaching to the company’s shares; and\
– the giving of consent in respect of the issue of shares by, the sale of shares in or amendments to the Articles of Association of various subsidiaries in certain cases. | | Body in which Share is held and type and value of Share | Significant terms of Shareholding | |--------------------------------------------------------|----------------------------------| | **British Energy Bond Finance Limited (formerly British Energy Holdings plc)**<br>£1 Special Share | • British Energy Holdings plc Special Share created on 13 January 2005 and held jointly by the Secretary of State for Business, Energy and Industrial Strategy and the Secretary of State for Scotland.<br>• The consent of the Special Shareholder, which can only be refused on grounds of national security (except in relation to an amendment to the company’s Articles of Association), is required in respect of:<br> – various amendments to the company’s Articles of Association; and<br> – the giving of consent in respect of the issue of shares by, the sale of shares in or amendments to the Articles of Association of various subsidiaries in certain cases. | | **EDF Energy Nuclear Generation Limited (formerly British Energy Generation Ltd)**<br>£1 Special Share | • British Energy Generation Ltd Special Share created in 1996 is held solely by the Secretary of State for Business, Energy and Industrial Strategy.<br>• The consent of the Special Shareholder, which can only be refused on grounds of national security (except in relation to an amendment to the company’s Articles of Association), is required in respect of:<br> – various amendments to the company’s Articles of Association;<br> – the disposal of any of the nuclear power stations owned by the company; and<br> – prior to the permanent closure of such a station, the disposal of any asset which is necessary for the station to generate electricity. | | **British Energy Ltd (formerly British Energy plc)**<br>£1 Special Share | • British Energy plc Special Share created in 1996 is held solely by the Secretary of State for Business, Energy and Industrial Strategy.<br>• The consent of the Special Shareholder, which can only be refused on grounds of national security (except in relation to an amendment to the company’s Articles of Association), is required in respect of:<br> – various amendments to the company’s Articles of Association; and<br> – the giving of consent in respect of the issue of shares by, the sale of shares in or amendments to the Articles of Association of various subsidiaries in certain cases.<br>• The company has no significant assets or liabilities as a result of the restructuring scheme, which came into effect on 14 January 2005. | | **Nuclear Liabilities Fund Ltd**<br>£1 Special Rights Redeemable Preference Share | • Created in 1996.<br>• The Secretary of State for Business, Energy and Industrial Strategy has a Special ‘A’ Share (there is also a ‘B’ Share held by British Energy).<br>• The consent of the Special Shareholder is required for any of the following:<br> – to change any of the provisions in the Memorandum of Association or Articles of Association;<br> – to alter the share capital or the rights attached thereto;<br> – the company to create or issue share options;<br> – the ‘B’ Special Shareholder or any of the Ordinary shareholders to dispose or transfer any of their rights in their shares;<br> – the company to pass a members voluntary winding-up resolution;<br> – the company to recommend, declare or pay a dividend;<br> – the company to create, issue or commit to give any loan capital;<br> – the company to issue a debenture; or<br> – the company to change its accounting reference date. |
### 10.5 Membership Fund
The Secretary of State for Business, Energy and Industrial Strategy has a share in the membership fund of the Carbon Trust. The members’ fund at 31 March 2020 was £nil (31 March 2019: £nil). 11. Other financial assets
| Note | 31 March 2020 | 31 March 2019 restated | |------|---------------|------------------------| | | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | | Balance at 1 April | 1,196 | 4,118 | 1,170 | 4,336 | | IFRS 9 adjustments | – | – | – | (423) | | Revised balance at 1 April | 1,196 | 4,118 | 1,170 | 3,913 | | Additions | 3 | 1,246 | 25 | 1,171 | | Repayments | (346) | (1,172) | (236) | (1,051) | | Effective interest | 25 | 25 | 29 | 29 | | Unwinding of discount | – | – | – | 2 | | Revaluations | 89 | (37) | 212 | 100 | | Impairments | – | (60) | (4) | (69) | | Impairment reversals | – | – | – | 23 | | Balance at 31 March | 967 | 4,120 | 1,196 | 4,118 |
Comprising:
- Repayable launch investments 11.1 833 833 1,058 1,058
- Other loans and investments 11.2 134 3,287 138 3,060
Balance at 31 March 967 4,120 1,196 4,118
Other financial assets – Other loans and investments have been restated, see note 26 for further details.
Other financial assets analysed between current and non-current assets:
| | 31 March 2020 | 31 March 2019 restated | |------|---------------|------------------------| | | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | | Due within twelve months | – | – | – | – | | Due after twelve months | 967 | 4,120 | 1,196 | 4,118 | | Total | 967 | 4,120 | 1,196 | 4,118 |
11.1 Repayable launch investments
| | 31 March 2020 | 31 March 2019 | |------|---------------|---------------| | | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | | Balance at 1 April | 1,058 | 1,058 | 1,047 | 1,047 | | Repayments | (340) | (340) | (230) | (230) | | Effective interest | 25 | 25 | 29 | 29 | | Revaluations | 90 | 90 | 212 | 212 | | Balance at 31 March | 833 | 833 | 1,058 | 1,058 |
Repayable Launch Investments (RLI) are held by the Core Department.
The Core Department has determined that RLI are classified as ‘fair value through profit or loss financial assets’ in accordance with IFRS 9. Fair value gains and losses are therefore recognised directly in the SoCNE.
The Core Department, under the provisions of the 1982 Civil Aviation Act, provides repayable launch investment to companies to fund a proportion of the non-recurring eligible design and development capital costs on civil aerospace development products. Each product supported is covered by separate contractual terms and conditions. Under these contracts, periodic repayments become due when products are delivered or at other specific points. The portfolio of investments is valued twice annually and the valuations are based on forecast annual income arising under each contract.
**Measurement and carrying values**
RLI contracts are initially recognised at fair value which is the transaction price. After initial recognition, the value is the discounted forecast value of future income streams, excluding accrued income which is included in receivables when products are delivered. The value of future income streams is predominantly driven by the Core Department’s view of the applicable programme’s performance in the global market over the period of the contract’s life; a number of activities inform this view and some are described below.
The Core Department uses a variety of sources to inform a forecast of deliveries for individual programmes. This can include using: an internal delivery forecast model and market share model, forecast delivery schedules and other data directly provided from the RLI recipient companies, publicly available aircraft delivery forecasts, specifically commissioned consultant programme forecasts as well as commentary and views from industry experts.
The approach taken is entirely dependent on the programme in question.
Other valuation variables include inflation measures – or proxies (such as RPI, RPIX, gilt rates and GDP deflators). Some contracts entitle the Core Department to a share of aircraft or engine spare part and support income, and the valuation of these contracts is based on analysis of past income streams and forecasts of future demand. The forecast income streams are adjusted by inflation of 2.35% and then are discounted to present value using a constant discount rate of 3.5% representing the effective rate of return of the investment portfolio.
The carrying value of RLI is influenced by the interaction of key drivers such as aircraft or engine deliveries and economic variables. The Core Department uses Monte-Carlo simulation to understand the effect of different scenarios for these drivers on the valuation of each contract. The Core Department considers that the carrying value is a reasonable approximation of the fair value of RLI.
The carrying value of the investments derived from the discounted cash flow model at 31 March 2020 was £833 million (31 March 2019: £1,058 million). The historic cost, including repayments to date and excluding accrued income, of the portfolio at 31 March 2020 was £279 million (31 March 2019: £389 million).
**Sensitivity analysis**
The Core Department has developed a Monte-Carlo based approach which uses the software package @Risk to assess the impact of uncertainty on forecast income, overall contract values, and enhance the robustness of the valuation process. Uncertainties are addressed by constructing different scenarios for the key drivers and then assigning probabilities to these scenarios to implement a Monte-Carlo simulation of the contracts on a contract-by-contract basis. The key variables include: programme development delays, changes to entry into service and out of service dates, production levels, market shares and economic variables used as inflation measures.
The contracts are highly complex and generally distinct from each other in their terms and structure, yet there are cases of significant interdependencies between contracts and correlations between variables.
The model is iterated ten thousand times to produce distributions of income for each contract and thus the overall portfolio. Each iteration of the model produces an income forecast. These are collated and used to form an income distribution. It is from this distribution that the value of the portfolio is calculated.
In order to give an assessment of potential volatility for the portfolio, we calculate the 5th and 95th percentiles from the income distribution – 90% of all the iterations outputted from the Monte-Carlo simulation lie between these particular percentile points. The lower (5th) and upper (95th) points which define this interval were £772 million and £866 million respectively, at 31 March 2020 (2018-19: £999 million and £1,076 million). Risk
Market risk This constitutes the largest area of potential risk in the portfolio as the primary method of the calculation of income streams is based on the forecasts of aircraft or engine deliveries. The Core Department uses internal analysis, company information and third-party information to forecast deliveries and ultimately future income on each investment over the life of the investment period. Deliveries in the short term are driven by variables which include manufacturer production plans, market cycles, customer demand and availability of financing. Medium and longer-term deliveries will be affected by overall market growth and the market attractiveness of an aircraft programme. A negative shift in outlook may result in the Core Department not being able to recover its investment in whole or in part, although once deliveries have commenced some level of income is usually due to the Core Department. The valuation has sought to take account of the economic downturn as a result of COVID-19 and this has been reflected in updated forecasts. The Core Department aims to minimise risk of under-recovery of investments by carrying out a full evaluation of each business case submitted for launch investment support, and by ongoing monitoring programmes for the substantive life of the contracts to allow it to assess exposure to risks (including project risk, market risk and technical risk). Some contacts have fixed payment terms rather than payments on delivery of aircrafts, mitigating the market risk further.
Interest rate risk A number of the contracts use retail price indexes (such as RPI and RPIX) or other surrogates as a tool to inflate the value of income due to the Core Department over time. As such there is a risk relating to the forecasting of these indexes and surrogates within the valuation, although we estimate that the risk is relatively low and the overall impact relatively minor.
Foreign exchange risk The Core Department has a small number of contracts which may deliver a US Dollar denominated income in their later stages which would be translated into pounds sterling. We assess these income streams as relatively low value, thus exchange rate risk exists but is minimal in the context of the overall portfolio.
Credit risk Company failure could result in the Core Department’s investment not being recovered in whole or in part. The Core Department seeks to offset this low probability risk by analysing the financial health of any applicant at the time of application for launch investment and reviewing financial health as part of the programme monitoring activity. In addition, contracts aim to contain provisions which will (as a minimum) not disadvantage the Core Department compared to other creditors in the event of a corporate failure. The Core Department takes steps to monitor the payments that become due to companies under launch investment contracts to ensure they comply with the terms of the contracts. Finally, the contracts also require the company’s auditors to confirm that all payments have been made correctly and to identify any errors made.
Other risk The Core Department’s investments are exposed to wider risks such as economic downturns or market shocks from natural or non-natural events. These risks may adversely impact the value and timing of the income received by the Core Department. The Core Department seeks to manage this risk by actively monitoring such events when they arise to assess any potential impact.
### 11.2 Other loans and investments
| | Gilts and bonds | Term deposits | Private sector loans | Property related holdings | Private sector shares | Equities (listed securities) | Private equities | Investment funds | Other investments | Total | |----------------------|-----------------|---------------|----------------------|--------------------------|----------------------|----------------------------|-----------------|-----------------|------------------|-------| | **Balance at 31 March 2018** | 59 | 14 | 598 | 42 | – | 269 | 317 | 1,321 | 669 | 3,289 | | IFRS 9 adjustment – transfers between categories | – | – | 61 | (42) | 99 | (269) | (317) | 544 | (76) | – | | IFRS 9 adjustment – Other | (1) | – | 2 | – | – | – | – | 37 | (461) | (423) | | **Balance at 1 April 2018 restated** | 58 | 14 | 661 | – | 99 | – | – | 1,902 | 132 | 2,866 | | Additions | 8 | – | 391 | – | 108 | – | – | 655 | 7 | 1,169 | | Redemptions | (25) | (1) | (228) | – | (24) | – | – | (515) | (28) | (821) | | Revaluations | – | – | – | – | (16) | – | – | (54) | (43) | (113) | | Unwinding of discount| 2 | – | – | – | – | – | – | – | – | 2 | | Impairments | – | – | (63) | – | (3) | – | – | – | – | (66) | | Impairment reversal | – | – | 23 | – | – | – | – | – | – | 23 | | **Balance at 31 March 2019 restated** | 43 | 13 | 784 | – | 164 | – | – | 1,988 | 68 | 3,060 | | Additions | 6 | – | 604 | – | 22 | – | – | 608 | 6 | 1,246 | | Repayments | (8) | (7) | (450) | – | (17) | – | – | (320) | (30) | (832) | | Revaluations | – | – | – | – | (8) | – | – | (75) | (44) | (127) | | Impairments | – | – | (61) | – | – | – | – | 1 | – | (60) | | **Balance at 31 March 2020** | 41 | 6 | 877 | – | 161 | – | – | 2,202 | – | 3,287 | | Of the total: | | | | | | | | | | | | Core Department and Agencies | – | – | 2 | – | 44 | – | – | 88 | – | 134 | | NDPBs and other designated bodies | 41 | 6 | 875 | – | 117 | – | – | 2,114 | – | 3,153 | | **Balance at 31 March 2020** | 41 | 6 | 877 | – | 161 | – | – | 2,202 | – | 3,287 |
Other financial assets – Other loans and investments – Investment Funds have been restated, see note 26 for further details. **NDPBs and other designated bodies**
**Private sector loans**
British Business Bank (BBB), Fleetbank Funding Ltd (FFL) and UK Research and Innovation (UKRI) have entered into loan agreements with parties within the private sector. The loans within the Departmental Group are carried at historic cost as a proxy for amortised cost because the NDPBs and other designated bodies have determined that there is no material difference between historical cost and amortised cost.
As at 31 March 2020, £877 million of loans were held by NDPBs and other designated bodies (31 March 2019: £784 million).
The value of loans held by BBB as at 31 March 2020 was £500 million (31 March 2019: £432 million). The conditions attached to each loan vary depending on the details of the arrangement. Repayment schedules have been agreed and all loans are expected to be repaid at the end of the loan term. During the reporting period BBB made loans of £50 million (31 March 2019: £26 million) to private companies through the BFP Small Business scheme. BBB provides invoice discount finance and peer to peer lending through the Investment Programme funds which were valued at £257 million at 31 March 2020 (31 March 2019: £233 million). BBB provides loans to start ups and small businesses via The Start Up Loans Company which were valued at £110 million at 31 March 2020 (31 March 2019: £137 million). The amortised cost valuations include Expected credit loss (ECL) provisions taking account of the impacts of Covid-19 based on the available information at the reporting date. Further information on the ECL provisions are given in note 22.
During 2019-20, FFL made loans of £288 million (31 March 2019: £141 million) to private companies through the Enable Loan Programme scheme. The value of loans held by FFL as at 31 March 2020 was £366 million (31 March 2019: £330 million).
As part of the review undertaken on financial instruments on transition to IFRS 9 on 1 April 2018, it was identified that £61 million of financial instruments held by BBB that were disclosed as Investment funds, and would be more appropriately disclosed as a private sector loan. The balance at 31 March 2018 was transferred to the Private sector loan category. Remeasurement of the loan value including related expected credit losses led to an adjustment on adoption of IFRS 9 of £2 million to BBB's private sector loans.
**Private sector shares, Equities (listed securities) and Private equities**
At 31 March 2020 the Departmental Group held £161 million of private sector shares (31 March 2019: £164 million). These were held by BIS (Postal Services Act 2011) Company Ltd, Nesta Trust, and UKRI. These are measured at ‘fair value through profit or loss’, with fair value movements going directly to the SoCNE.
The fair values are estimated based on a variety of valuation techniques, adopted by the investment managers that comply with the International Private Equity and Venture Capital Valuation (IPEV) Guidelines or the valuation guidelines produced by the British Venture Capital Association (BVCA). Valuation techniques used include the use of earnings multiples, discounted cash flows analysis, and net asset values.
Nesta Trust holds the majority of private sector shares – they include holdings in a range of large companies and smaller early stage investments with a total value at 31 March 2020 of £98 million (31 March 2019: £104 million).
Private sector shares were split between listed securities and private equities as at 31 March 2018. Following the IFRS 9 review, reclassification between categories was made to ensure a consistent disclosure in 2018-19. In particular, £39 million of listed securities and £3 million of private equities were transferred into private sector shares, with the remainder £544 million (made up of £230 million Equities (listed securities) and £314 million Private equities) being transferred to investment funds. In addition, £25 million was reclassified from Other investments to Private sector shares and £32 million was reclassified from Investment funds, relating to holdings in Private sector shares. Investment funds
BBB, Nesta Trust, BIS (Postal Services Act 2011) Company Limited, Northern Powerhouse Investment Limited and Midlands Engine Investments Limited hold investment funds. The value invested at 31 March 2020 was £2,202 million (31 March 2019: £1,988 million restated). In accordance with IFRS 9, the investments are measured at ‘fair value through profit or loss’ with fair value movements going directly to the SoCNE.
BBB held investment funds valued at £1,495 million at 31 March 2020 (31 March 2019: £1,281 million). The most significant investment is in the Business Finance Partnership (BFP) for medium sized businesses at 31 March 2020, this was valued at £408 million (31 March 2019: £435 million). The BFP aims to increase the supply of capital through non-bank lending channels and, in the longer term, to help to diversify the sources of finance available to businesses. BBB also has an investment fund in Enterprise Capital Funds which were valued at £252 million at 31 March 2020 (31 March 2019: £222 million), and a long-term venture and growth capital investment fund in British Patient Capital valued £316 million at 31 March 2020 (31 March 2019: £198 million). The fair values of the Investment Funds held by BBB are based on valuations at 31 December 2019 updated for cash movements. They do not include any valuation adjustment calculated by the fund managers to take account of the impact of Covid-19 on the valuations at 31 March 2020. The expected fair value adjustment based on draft fund managers reports of between -2% to -6% of the fair value of the Investment funds held by BBB has not been included in the BBB valuations at 31 March 2020 as it would be an immaterial adjustment.
The fair value of the investments in BPSA as at 31 March 2020 was £215 million (31 March 2019 restated: £274 million). These investments primarily comprised investments in European and North American unquoted shares. The fair value of the Investment Funds held by BPSA include a valuation adjustment of circa -8% calculated by the fund managers to take account of the impact of Covid-19 on the valuations at 31 March 2020.
In 2017-18, prior to the adoption of IFRS 9, under IAS 39 Investment Funds were classified as ‘available-for-sale financial assets’ with fair value movements recognised in Other comprehensive income. As part of the implementation review for IFRS 9, it was identified that financial investments of £42 million previously disclosed as Property related holdings, £230 million previously disclosed as Equities (listed securities), £314 million previously disclosed as Private equites and £50 million previously disclosed as Other investments, were reclassified as Investments funds which better represent their nature. £61 million was transferred out of investment funds to private sector loans, and £31 million was transferred out into private sector shares.
Under IFRS 9, embedded derivatives are no longer assessed separately from the host instrument, leading to the transfer of BBB’s £31 million of embedded derivatives to the investment fund category, prior to the adoption of IFRS 9, under IAS 39 this was disclosed as a Derivative.
In addition, the IFRS 9 adjustment – other has been restated by £6 million due to the BPSA restatement along with the prior year in-year movements as explained in note 26. 12. Recoverable contract costs
The Departmental Group has commercial agreements in place under which some or all of the expenditure required to settle nuclear provisions will be recovered from third parties. Net recoverable costs at 31 March 2020 were £1,425 million (31 March 2019: £1,620 million).
| Recoverable contract costs relating to nuclear provisions | Departmental Group 31 March 2020 | Departmental Group 31 March 2019 | |----------------------------------------------------------|----------------------------------|----------------------------------| | Gross recoverable contract costs | 5,087 | 5,046 | | Less applicable payments received on account | (3,304) | (3,092) | | Less associated contract loss provisions | (358) | (334) | | Balance at 31 March | 1,425 | 1,620 |
The above balances relate to the Nuclear Decommissioning Authority. The movements in gross recoverable contract costs during the year were:
| Movements in gross recoverable contract costs | Departmental Group 31 March 2020 | Departmental Group 31 March 2019 | |---------------------------------------------|----------------------------------|----------------------------------| | Gross recoverable contract costs at 1 April | 5,046 | 7,081 | | Increase/(decrease) in year | 334 | (1,510) | | Unwinding of discount | (7) | (83) | | Release in year – continuing operations | (185) | (276) | | Amortisation of recoverable contract costs | (101) | (166) | | Balance at 31 March | 5,087 | 5,046 |
The gross balance of recoverable contract costs of £5,087 million (31 March 2019: £5,046 million) comprises £1,516 million (31 March 2019: £1,617 million) of past costs which were incurred before the revenue recognition period of the related contracts and will be amortised in future years in line with revenue and £3,571 million (31 March 2019: £3,429 million) of probable future costs which form part of the nuclear decommissioning provision (note 18.1) and will be released as they are incurred. Further details are published in the NDA’s accounts.
The movement in the gross recoverable contract costs during the year broken down by the type of costs are detailed in the table below:
| Historic costs | Future costs | Total costs | Historic costs | Future costs | Total costs | |----------------|--------------|-------------|----------------|--------------|-------------| | £m | £m | £m | £m | £m | £m | | Balance at 1 April | 1,617 | 3,429 | 5,046 | 1,783 | 5,298 | 7,081 | | Increase/(decrease) in the year | – | 334 | 334 | – | (1,510) | (1,510) | | Unwinding of discount | – | (7) | (7) | – | (83) | (83) | | Amortisation | (101) | – | (101) | (166) | – | (166) | | Release in year | – | (185) | (185) | – | (276) | (276) | | Balance at 31 March | 1,516 | 3,571 | 5,087 | 1,617 | 3,429 | 5,046 | The historic costs within the above are deemed contract assets under IFRS 15 ‘Revenue from Contracts with Customers’. The opening balances, amortisation in period and closing balances for each main contract type are:
| Departmental Group 2019-20 | Departmental Group 2018-19 | |---------------------------|---------------------------| | Spent fuel reprocessing and associated waste management | Spent fuel receipt and management | Total | Spent fuel reprocessing and associated waste management | Spent fuel receipt and management | Total | | £m | £m | £m | £m | £m | £m | | Balance at 1 April | 1,026 | 591 | 1,617 | 1,162 | 621 | 1,783 | | Amortisation | (71) | (30) | (101) | (136) | (30) | (166) | | Balance at 31 March | 955 | 561 | 1,516 | 1,026 | 591 | 1,617 |
Contract assets under IFRS 15 are deemed financial instruments for the purposes of IFRS 9 ‘Financial Instruments’ and, therefore, are ordinarily required to be reviewed for expected credit loss impairment. The above contract asset balances comprise costs which have been previously incurred and are now being amortised in each reporting period. They are matched in full by payments on account and, therefore, a credit loss impairment is not required.
13. Investments in joint ventures and associates
| Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |-----------------------------|--------------------|-----------------------------|--------------------| | 31 March 2020 | £m | 31 March 2019 | £m | | Balance at 1 April | – | 1,039 | – | 367 | | Opening balance transfer of investments | – | – | – | 461 | | Revised balance at 1 April | – | 1,039 | – | 828 | | Additions | – | 30 | – | 37 | | Dividends | – | (94) | – | (87) | | Disposals | – | (2) | – | – | | Profit/(Loss) | – | (5) | – | 186 | | Impairments | – | – | – | (1) | | Revaluations | – | (1) | – | 76 | | Balance at 31 March | – | 967 | – | 1,039 |
NDPBs and other designated bodies
The Francis Crick Institute Limited (the “Crick”)
The Crick was established in 2010 to deliver a world class interdisciplinary biomedical research centre. UKRI holds 42% (31 March 2019: 42%) of the ordinary shares in the Crick. The remaining shares are held by Cancer Research UK, University College London, the Wellcome Trust, Kings College London and Imperial College of Science, Technology and Medicine. The Crick became fully operational in 2016-17 following the completion of the Crick building. The value of the Departmental Group’s investment at 31 March 2020 is £299 million (31 March 2019: £304 million), reflecting Departmental Group’s share of net assets. This includes a £8 million upwards revaluation adjustment in 2019-20 (2018-19: £48 million) which aligns the Crick’s property, plant and equipment accounted for under the ‘historic cost’ model to the Departmental Group’s revaluation model.
The principal place of business is Midland Road, London. The results of the Crick are summarised below:
| Summarised financial information | 2019-20 | 2018-19 | |----------------------------------|---------|---------| | Current assets | 56 | 85 | | Non-current assets | 561 | 559 | | Current liabilities | (35) | (34) | | Revenue | 162 | 153 | | Profit/(loss) from continuing activities | (29) | 4 |
| Other financial information | 2019-20 | 2018-19 | |----------------------------------|---------|---------| | Cash and cash equivalents | 30 | 34 | | Depreciation and amortisation | (39) | (39) | | Capital commitments | 3 | 4 |
**URENCO**
URENCO is an international supplier of enrichment services. The Department holds 33% (31 March 2019: 33%) of the ordinary share capital through Enrichment Holdings Limited. From the adoption of IFRS 9, the Department has accounted for its investment in URENCO as an associate rather than a financial investment. At 31 March 2020, the Department’s holding is valued at £444 million (2018-19: £551 million)
The principal place of business is Bells Hill, Stokes Poges, Buckinghamshire.
| Summarised financial information | 2019-20 | 2018-19 | |----------------------------------|---------|---------| | Current assets | 1,340 | 804 | | Non-current assets | 4,227 | 4,846 | | Current liabilities | (339) | (351) | | Non-current liabilities | (3,614) | (3,646) | | Revenue | 1,582 | 1,732 | | Profit/(loss) from continuing activities | 7 | 452 |
| Other financial information | 2019-20 | 2018-19 | |----------------------------------|---------|---------| | Cash and cash equivalents | 275 | 216 | | Current financial liabilities (excl trade and other payables and provisions) | (31) | (30) | | Non-current financial liabilities (excl trade and other payables and provisions) | (1,561) | (1,848) | | Depreciation and amortisation | (312) | (284) | | Amortisation of intangible assets | – | (7) | | Interest income | 65 | 61 | | Interest expense | (159) | (155) | 14. Trade and other receivables
| | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |--------------------------------|------------------------------|--------------------|------------------------------|--------------------| | | 31 March 2020 | 31 March 2019 restated | | Amounts falling due within one year: | £m | £m | £m | £m | | Trade receivables | 171 | 1,251 | 109 | 740 | | Other receivables: | | | | | | VAT and other taxation | 21 | 176 | 22 | 144 | | Staff receivables | 1 | 2 | 2 | 3 | | RPS receivables | 30 | 30 | 57 | 57 | | Other | 177 | 250 | 143 | 184 | | Contract Assets | 12 | 109 | 6 | 38 | | Prepayments and accrued income | 126 | 440 | 108 | 399 | | | 538 | 2,258 | 447 | 1,565 | | Amounts falling due after more than one year: | £m | £m | £m | £m | | Trade receivables | 9 | 61 | 9 | 59 | | RPS receivables | 42 | 42 | – | – | | Other receivables | 689 | 699 | 804 | 833 | | Contract Assets | – | 6 | – | 5 | | Prepayments and accrued income | – | 40 | – | 41 | | | 740 | 848 | 813 | 938 | | Total receivables at 31 March | 1,278 | 3,106 | 1,260 | 2,503 |
Trade and other receivables has been restated, see note 26 for further details.
**Core Department**
Other receivables held by the Core Department include a discounted receivable of £808 million (31 March 2019: £920 million) relating to the Government guarantee of certain benefits payable to members and beneficiaries of the Mineworkers’ Pension Scheme made after privatisation of the British Coal Corporation in 1994. The amount receivable by the Core Department within 1 year is £142 million (31 March 2019: £142 million), with the amount receivable not within 1 year £666 million (31 March 2019: £778 million).
The undiscounted amount is £916 million (31 March 2019: £1,058 million). The agreement relating to the guarantee entitles the Government to a portion of any periodic valuation surpluses, generally determined by the Government Actuary following triennial valuations, the most recent valuation was at 30 September 2017. The receivables have been classified as Amortised Cost assets in accordance with IFRS 9: Financial Instruments. In accordance with IFRS 9 the receivable is initially recognised at fair value which equates to the future cash flows being discounted at HM Treasury’s financial instrument nominal rate of 3.7%. No additional income was recognised in 2019-20 (2018-19: £475 million) in relation to an additional sum receivable from the September 2017 valuation (note 6.1). A contingent asset in relation to a similar financial guarantee for the British Coal Staff Superannuation Scheme is disclosed in note 24. More information about the pension schemes can be found at [http://www.mps-pension.org.uk](http://www.mps-pension.org.uk) and [https://www.bcsss-pension.org.uk](https://www.bcsss-pension.org.uk).
**Agencies**
The Redundancy Payment Service (RPS) receivable is shown net of an annual impairment. The impairment is calculated by the Insolvency Service using a model which is approved by HMRC. The model calculates the recoverable debt as £72 million as at 31 March 2020 (31 March 2019: £57 million). In line with IFRS 9, RPS debts have been grouped into similar types, in this case they have been grouped between preferential or non-preferential debts. Analysis of historic trends of recovery of these types of debts has revealed that the best estimate of recovery is 6% for non-preferential and 37.8% for preferential (31 March 2019: 5.5% for non-preferential and 40.7% for preferential). 15. Investments and loans in public sector bodies: current
| | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |------------------------|-----------------------------|--------------------|-----------------------------|--------------------| | **31 March 2020** | £m | £m | £m | £m | | Balance at 1 April | 666 | 620 | 732 | 732 | | Additions | 5,379 | 5,379 | 6,240 | 6,240 | | Repayments | (5,373) | (5,353) | (6,369) | (6,369) | | Loans repayable within 12 months transferred from non-current assets | 15 | 26 | 63 | 17 | | **Balance at 31 March**| 687 | 672 | 666 | 620 |
**Core Department**
The most significant item included above is a loan facility to Post Office Limited (POL). Since October 2003 the Core Department has made available to POL a revolving loan facility of up to £950 million, which was increased by a further £50m in December 2019 to £1,000 million. This is to help the company fund its daily in-branch working capital requirements to deliver services through the network, such as social benefits payments and access to cash. The facility was due to mature in March 2018 but was extended to run until 31 March 2021. The outstanding balance at 31 March 2020 was £602 million (31 March 2019: £565 million) which is included in the £687 million (31 March 2019: £666 million) above.
16. Cash and cash equivalents
| | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |------------------------|-----------------------------|--------------------|-----------------------------|--------------------| | **31 March 2020** | £m | £m | £m | £m | | Balance at 1 April | 1,283 | 2,078 | 1,246 | 2,034 | | Net change in cash and cash equivalent balances | (244) | 80 | 37 | 44 | | **Balance at 31 March**| 1,039 | 2,158 | 1,283 | 2,078 |
The following balances at 31 March were held at:
- The Government Banking Service (GBS) 1,038 1,881 1,282 1,828
- Commercial banks and cash in hand 1 277 1 250
**Balance at 31 March** 1,039 2,158 1,283 2,078
Cash and cash equivalents has been restated, see note 26 for further details. 17. Trade payables and other liabilities
| Amounts falling due within one year: | Core Department and Agencies | 31 March 2020 | £m | Core Department and Agencies | 31 March 2019 | £m | |-------------------------------------|-----------------------------|---------------|----|-----------------------------|---------------|----| | VAT, social security and other taxation | 10 | 132 | 10 | 108 | | Trade payables | 38 | 580 | 79 | 195 | | Other payables | 348 | 1,013 | 552 | 1,020 | | Contract liabilities (see note 17.1) | 6 | 514 | 5 | 474 | | Other accruals and deferred income | 1,342 | 3,139 | 979 | 2,569 | | Amounts issued from the Consolidated Fund for supply but not spent at year end | 1,036 | 1,036 | 1,280 | 1,280 | | Consolidated Fund Extra Receipts due to be paid to the Consolidated Fund: | | | | | | Received | 2 | 70 | 3 | 6 | | | 2,782 | 6,484 | 2,908 | 5,652 | | Amounts falling due after more than one year: | | | | | | Trade Payables | – | 4 | – | 7 | | Contract liabilities (see note 17.1) | – | 1,479 | – | 1,691 | | Other payables, accruals and deferred income | 883 | 984 | 1,141 | 1,203 | | | 883 | 2,467 | 1,141 | 2,901 | | Total payables at 31 March | 3,665 | 8,951 | 4,049 | 8,553 |
17.1 Contract liabilities
| Balance at 1 April | Core Department and Agencies | 31 March 2020 | £m | Core Department and Agencies | 31 March 2019 | £m | |---------------------|-----------------------------|---------------|----|-----------------------------|---------------|----| | IFRS 15 Adjustment to opening balances | – | – | – | 2,290 | | Revised balance at 1 April | 5 | 2,165 | – | 2,290 | | Additions | 1 | 297 | 5 | 703 | | Release to SOCNE | – | (469) | – | (828) | | Balance at 31 March | 6 | 1,993 | 5 | 2,165 |
Of the total
| Due within 1 year | Core Department and Agencies | 31 March 2020 | £m | Core Department and Agencies | 31 March 2019 | £m | |-------------------|-----------------------------|---------------|----|-----------------------------|---------------|----| | Due in over 1 year | – | 1,479 | – | 1,691 | | Balance at 31 March | 6 | 1,993 | 5 | 2,165 | Included under accruals and deferred income are:
**Core Department**
Promissory note liabilities with maturities of less than one year of £380 million (31 March 2019: £284 million) and with maturities greater than one year of £926 million (31 March 2019: £1,140 million) which represent amounts owed for various ODA (Official Development Assistance) programmes to which the Core Department has contributed.
Other payables falling due within one year include £240 million (2018-19; £525 million) payable to the British Business Bank (BBB) relating to the un-invested portion of its loan from the Nuclear Liabilities Fund (NLF). Repayments of £285 million (2018-19; £75 million) were made in year. Since it is an intercompany transaction, it is eliminated from the Departmental Group balance. See more detail on the NLF loan in the narrative for NDPBs and other designated bodies that follows.
**NDPBs and other designated bodies**
The majority of contract liabilities are the sums received on account by the Nuclear Decommissioning Authority relating to income from long term contracts to be recognised within one year of £502 million (31 March 2019: £461 million) and after one year of £1,478 million (31 March 2019: £1,691 million); more details are available in the Nuclear Decommissioning Authority’s accounts.
Included in Other payables due within one year in the table above is a loan to BBB from the NLF. In August 2018 BBB received a loan from the NLF, a non-consolidated central government fund of the Departmental Group. The purpose of this investment by NLF into BBB, is for the NLF to achieve a higher rate of return than the NLF has on its investments in the National Loans Fund (NaLF) in previous years. The carrying amount of the borrowing from NLF as at 31 March 2020 was £532 million (31 March 2019: £604 million).
### 18. Provisions for liabilities and charges
| Note | 31 March 2020 | 31 March 2019 | |------|---------------|---------------| | | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | | **Current liabilities:** | | | | | | Not later than one year | 11,047 | 14,065 | 260 | 3,050 | | **Total current liabilities** | 11,047 | 14,065 | 260 | 3,050 | | **Non-current liabilities:** | | | | | | Later than one year and not later than five years | 645 | 13,200 | 883 | 12,235 | | Later than five years | 1,057 | 122,834 | 1,037 | 119,181 | | **Total non-current liabilities** | 1,702 | 136,034 | 1,920 | 131,416 | | **Total at 31 March** | 12,749 | 150,099 | 2,180 | 134,466 | | **Total provisions** | | | | | | Nuclear | 18.1 | 1,208 | 135,925 | 1,346 | 131,094 | | Other | 18.2 | 11,541 | 14,174 | 834 | 3,372 | | **Total at 31 March** | 12,749 | 150,099 | 2,180 | 134,466 | The provision liabilities in tables 18.1 and 18.2 below have been discounted to present value using discount rates as provided by HM Treasury. Discounting as at 31 March 2019 and 31 March 2020 has been applied to nominal cash flows which include allowance for future inflation using a forecast of consumer price inflation provided by HM Treasury except where a more appropriate forecast has been identified for specific provisions. HM Treasury required this change in 2018-19, and the same basis applies for 2019-20. The impact of the change in the discounting approach is included in the “Change in discount rate” movement of provisions.
| Cash outflows expected within two years | Nominal discount rate | Inflation rate | Equivalent real discount rate | Nominal discount rate | Inflation rate | Equivalent real discount rate | |----------------------------------------|-----------------------|----------------|-------------------------------|-----------------------|----------------|-------------------------------| | Cash outflows expected between two and five years | 0.51% | 1.9% | (1.36%) | 0.76% | 2.0% | (1.22%) | | Cash outflows expected between five and ten years | 0.55% | 2.0% | (1.42%) | 1.14% | 2.1% | (0.94%) | | Cash outflows expected after ten years | 1.99% | 2.0% | (0.01%) | 1.99% | 2.1% | (0.11%) |
Allowances for future inflation and discounting can impact on reported liabilities significantly; uninflated, undiscounted equivalent values are provided in the descriptions of the provisions below to illustrate the effect.
## 18.1 Nuclear provisions
| | British Energy | UK Atomic Energy Authority Decommissioning | Core Department and Agencies Total | NDA Decommissioning | NDA Contract loss | Departmental Group Total | |--------------------------------|----------------|-------------------------------------------|-----------------------------------|---------------------|------------------|------------------------| | **Balance at 1 April 2018** | £m | £m | £m | £m | £m | £m | | Net amount deducted from recoverable contract costs | – | – | – | – | – | – | | Unwinding of discount | (17) | (5) | (22) | (3,615) | (15) | (3,652) | | Change in discount rate | (4) | (33) | (37) | (95,969) | 22 | (95,984) | | Provided in the year | 25 | 146 | 171 | (1,114) | (427) | (1,370) | | Recoverable contract cost release in year | – | – | – | (276) | – | (276) | | Provisions utilised in the year| (178) | – | (178) | (2,599) | (157) | (2,934) | | **Balance at 31 March 2019** | 924 | 422 | 1,346 | 129,709 | 39 | 131,094 | | Net amount deducted from recoverable contract costs | – | – | – | – | (25) | (25) | | Unwinding of discount | (14) | (1) | (15) | (135) | (3) | (138) | | Change in discount rate | 13 | 7 | 20 | 216 | 11 | 247 | | Provided in the year | 22 | – | 22 | 7,667 | 143 | 7,832 | | Provisions not required written back | – | (3) | (3) | – | – | (3) | | Recoverable contract costs – release in year | – | – | – | (185) | – | (185) | | Provisions utilised in the year| (162) | – | (162) | (2,595) | (125) | (2,822) | | **Balance at 31 March 2020** | 783 | 425 | 1,208 | 134,677 | 40 | 135,925 |
### Estimated forward discounted cash flows as at 31 March 2020
| | £m | £m | £m | £m | £m | £m | |--------------------------------|----------------|-------------------------------------------|-----------------------------------|---------------------|------------------|------------------------| | Not later than one year | 144 | – | 144 | 2,941 | – | 3,085 | | Later than one year and not later than five years | 387 | 9 | 396 | 12,349 | 8 | 12,753 | | Later than five years | 252 | 416 | 668 | 119,387 | 32 | 120,087 | | **Total forward cash flows as at 31 March 2020** | 783 | 425 | 1,208 | 134,677 | 40 | 135,925 | Core Department
British Energy
As a result of the restructuring of British Energy (BE) in January 2005, the Government assists BE (now EDF Energy Nuclear Generation Limited) in meeting its contractual historic fuel liabilities. The provision is based on the forecast payment schedule up to 2029 which is set out in the waste processing contracts agreed between BE, BNFL and the Core Department. The discounted liability at 31 March 2020 is £783 million (31 March 2019: £924 million). Payments are adjusted in line with the Retail Prices Index and the liability includes allowance for future inflation using a forecast for the Index from the Office for Budget Responsibility. The undiscounted liability at 31 March 2020, at prices as at the reporting date so excluding the impact of future inflation, is £726 million (31 March 2019: £956 million).
UK Atomic Energy Authority (UKAEA) Decommissioning
The provision represents the estimated costs of decommissioning the Joint European Torus facility at UKAEA’s Culham site, including the storage, processing and eventual disposal of radioactive wastes. The Core Department retains the liability for these costs. Cost estimates in the detailed Life Time Plan for decommissioning are reviewed annually and include an element of uncertainty given that much of the work will not be undertaken until well into the future; timing of expenditure is dependent on the closure date of the facility. The discounted liability at 31 March 2020 is £425 million (31 March 2019: £422 million); the undiscounted liability at 31 March 2020, at prices as at the reporting date so excluding the impact of future inflation, is £401 million (31 March 2019: £402 million).
NDPBs and other designated bodies
NDA Decommissioning
The NDA’s nuclear decommissioning liability represents NDA’s best estimate of the costs of decommissioning plant and equipment on each of the designated nuclear licensed sites in accordance with the published strategy.
The programme of decommissioning work will take until 2137 but, in preparing the estimate, the NDA has focused in particular on the first 20 years which represent £58 billion out of the total £135 billion provision (31 March 2019: £50 billion out of £130 billion). The estimates are necessarily based on assumptions about the processes and methods likely to be used to discharge the obligations and reflect the latest technical knowledge, existing regulatory requirements, Government policy and commercial agreements. Given the very long timescale and the complexity of the plants and material being handled, considerable uncertainty remains in the cost estimate, particularly in the later years. Discounting of the forward cash flow estimates to present value also has a significant impact on the liability reported in the Statement of Financial Position of £135 billion at 31 March 2020 (31 March 2019: £130 billion). The undiscounted equivalent of this reported liability is £132 billion at 31 March 2020 (31 March 2019: £123 billion). The Departmental Group auditors continue to include an emphasis of matter paragraph in their audit certificate concerning the overall measurement uncertainty.
The NDA has commercial agreements in place under which a portion of the expenditure required to settle certain elements of the decommissioning provision are recoverable from third parties. Changes in future cost estimates of discharging these particular elements are therefore matched by a change in recoverable contract costs. In accordance with IAS 37, these recoverable amounts are not offset against the decommissioning provision but are treated as a separate asset (note 12).
Sensitivity Analysis
An increase of 0.5% in the discount rate would reduce the provision to £116 billion, whilst a decrease in discount rate of 0.5% would increase the provision to £159 billion.
The change in discount rates (see page 184) in the current financial year produced a decrease of £3,818 million (2019: £107,764 million increase). This figure excludes the change relating to inflation plus the recoverable contract costs off-setting balance which otherwise result in a decrease of £169 million. Analysis of expected timing of discounted cash flows for the NDA Nuclear Provision is as follows:
| | Waste | Research | Sellafield | Fuel Manufacturing & Generation | Others | 2019-20 Total | 2018-19 Total | |----------------------|-------|----------|-----------|---------------------------------|--------|---------------|---------------| | Up to 1 year | 90 | 183 | 2,080 | 475 | 113 | 2,941 | 2,735 | | 2 to 5 years | 497 | 758 | 8,877 | 1,834 | 383 | 12,349 | 11,149 | | 6 to 20 years | 2,802 | 1,592 | 31,869 | 5,681 | 695 | 42,639 | 36,405 | | 21 to 50 years | 3,667 | 117 | 32,596 | 8,712 | 645 | 45,737 | 38,752 | | 50 years + | 4,233 | 55 | 23,110 | 3,440 | 364 | 31,202 | 41,617 | | | | | | | | 11,289 | 2,705 | | | | | | | | 98,532 | 20,142 | | | | | | | | 2,200 | 134,668 | | | | | | | | 130,658 | | | Deduction in respect of Site Licence Companies pension receivable from NDA | (191) | (949) | | | | | | Total NDA Decommissioning Provisions | 134,677 | 129,709 | | | | |
| Sensitivity | Waste | Research | Sellafield | Fuel M&G | Others | 2019-20 Total | 2018-19 Total | |-------------|-------|----------|-----------|----------|--------|---------------|---------------| | Increase | 25,912| 173 | 83,558 | 2,014 | 110 | 111,767 | 117,341 | | Reduction | (3,860)| (346) | (13,926) | (2,014) | (220) | (20,366) | (24,333) |
The NDA calculates its provision based on management’s best estimate of the future costs of the decommissioning programme, which is expected to take until 2137 to complete. The NDA also considers credible risks and opportunities which may increase or decrease the cost estimate, but which are deemed less probable than the best estimate. These are the basis of the sensitivities identified above, and the key sensitivities are as follows:
- Waste activities cover the Low Level Waste Repository and the Geological Disposal Facility (GDF), with the key sensitivities being in the timing and costs of constructing and operating the GDF. The above range from a reduction of £3,860 million to an increase of £25,912 million and reflect three separate sensitivities:
- The potentially higher costs of constructing and operating the GDF itself, which dependent on the location and construction requirements of the facility, could be up to £22,780 million higher (or £3,797 million lower) than the base case assumption
- The impact of the timing of the facility’s construction and operations. The current planned date for the facility to receive waste is 2045. NDA has identified a risk that the construction and opening of the facility may be delayed beyond 2045 (Further information on this can be found in the Governance Statement of the NDA’s Annual Report and Accounts). A delay to this date may increase the cost of the facility itself, along with the cost of interim storage of waste at sites across the NDA estate. A delay of a small number of years is considered to be within the overall tolerance of the estimate for GDF construction and waste transfer, and is not considered to have a material impact on the provision estimate. A longer delay of say 20 years could materially impact the provision, by approximately £2,100 million.
- A delay of 20 years would not necessarily increase the underlying costs of the facility, but would increase the discounted value of the estimate by approximately £1 billion due to the effect of long term negative discount rates.
- Activities on the sites primarily used for research (Dounreay, Harwell, and Winfrith) are concerned with final decommissioning of assets and site clearance. Sites will be cleared by 2080. Options are being explored to accelerate site clearance, which in the case of Dounreay would reduce the provision by £346 million; an increase in the cost and/or a delay of past the latest anticipated Interim State date (2033) would increase the provision by up to £173 million. • Sellafield represents activities associated with operation of the site, reprocessing and eventual decommissioning, and includes all site overheads. Principal sensitivities are around the cost of delivering the plan, particularly the costs of new construction, decommissioning and post operational clean out (POCO) work in the long-term (beyond the next twenty years). The potential costs range from a £13,926 million reduction against the current estimate, to a £83,558 million increase.
• fuel manufacturing and generation (which for this purpose includes Magnox and Springfields) programme of work includes defueling the generating stations and preparing for interim Care and Maintenance (complete by 2030) followed by a final site clearance phase around 2070 to 2107. The main cost risk is in the final site clearance phase, which may increase costs by £2,014 million. Conversely a reduction in the costs associated with this phase may reduce costs by £2,014 million.
Further details are reported in the Financial Review on page 29 of the Annual Report and in the NDA Annual Report and Accounts.
**Contract loss**
Contract loss provisions have been recognised by the Nuclear Decommissioning Authority to cover anticipated shortfalls between total income and total expenditure on relevant long term contracts. The amounts are disclosed net after deduction of amounts relating to recoverable contract costs (note 12). The amount provided in the year for contract losses relates to changes in estimates of the costs of existing contracts. The discounted liability at 31 March 2020 is £40 million (31 March 2019: £39 million). Further detail, including movement on the gross provision, can be found in the accounts of the NDA.
### 18.2 Other provisions
| Business support grant | Concessionary fuel | British Shipbuilders | Legacy ailments | Other | Core and Agencies total | Coal Authority | Early departure costs and restructuring | Other | Departmental Group total | |------------------------|--------------------|----------------------|----------------|-------|------------------------|----------------|----------------------------------------|-------|------------------------| | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | | Balance at 1 April 2018| – | 463 | 201 | 124 | 254 | 1,042 | 4,328 | 85 | 195 | 5,650 | | Change in discount rate| – | (42) | (56) | (11) | (18) | (127) | (2,634) | – | (38) | (2,799) | | Provided in the year | – | – | – | 8 | 47 | 55 | 776 | 12 | 10 | 853 | | Provisions not required written back | – | (11) | (1) | – | (3) | (15) | (74) | (1) | (2) | (92) | | Provisions utilised in the year | – | (40) | (7) | (18) | (41) | (106) | (28) | (16) | (4) | (154) | | Unwinding of discount | – | (7) | (3) | (2) | (3) | (15) | (69) | (1) | (1) | (86) | | Balance at 31 March 2019| – | 363 | 134 | 101 | 236 | 834 | 2,299 | 79 | 160 | 3,372 | | Reclassifications | – | – | 6 | 62 | (68) | – | – | – | – | – | | Change in discount rate| – | 3 | 1 | 1 | 2 | 7 | (96) | – | 69 | (20) | | Provided in the year | 10,824 | 11 | 23 | 5 | 29 | 10,892 | 93 | 34 | 36 | 11,055 | | Provisions not required written back | – | – | (27) | (12) | (68) | (107) | (1) | (1) | (16) | (125) | | Provisions utilised in the year | – | (37) | (7) | (20) | (23) | (87) | (31) | (22) | (17) | (157) | | Unwinding of discount | – | (1) | 3 | (1) | 1 | 2 | 42 | – | 5 | 49 | | Balance at 31 March 2020| 10,824 | 339 | 133 | 136 | 109 | 11,541 | 2,306 | 90 | 237 | 14,174 |
**Estimated forward discounted cash flows as at 31 March 2020**
| Not later than one year | Later than one year and not later than five years | Later than five years | Total forward cash flows as at 31 March 2020 | |-------------------------|--------------------------------------------------|-----------------------|---------------------------------------------| | 10,824 | 36 | 119 | 184 | 10,824 | | 36 | 7 | 30 | 96 | 339 | | 17 | 17 | 46 | 73 | 133 | | 19 | 19 | 54 | 36 | 136 | | 10,903 | 33 | 249 | 389 | 11,541 | | 20 | 20 | 148 | 2,125 | 2,306 | | 24 | 24 | 36 | 34 | 90 | | 10,980 | 447 | 144 | 2,747 | 237 | | 14,174 | | | | 14,174 | Core Department
Business support grant
A constructive obligation was created for the Core Department by Government announcements and other associated actions in March 2020 relating to support grants to be paid to eligible businesses in England to ameliorate the adverse economic consequences of the COVID-19 pandemic. The grant is to be paid to recipients under two schemes, the Small Business Grant Fund and the Retail, Hospitality and Leisure Grant Fund, subject to the recipients meeting eligibility criteria assessed as at 11 March 2020. Subject to meeting these criteria, businesses are entitled to the grant on application while the schemes remain open. The grant is to be paid to businesses by local authorities acting as agents on behalf of the Department and applying the guidance at https://www.gov.uk/government/publications/coronavirus-covid-19-guidance-on-business-support-grant-funding. Local authorities reported total grant paid to recipients of £10,873 million as at 9 August 2020, £151 million of which had been paid over in 2019-20 (note 4.4). The Department estimates a further £102 million will be paid by the schemes’ closure date of 28 August 2020. The provision liability of £10,824 million as at 31 March 2020 (31 March 2019: £nil) is undiscounted and represents the Department’s estimate of total payments to be made under the schemes in 2020-21; there is some uncertainty associated with this estimate but the final outturn is not expected to be significantly different.
Concessionary fuel
The provision covers the cost of the Core Department’s responsibility, arising from government announced guarantees, to provide either solid fuel or a cash alternative to ex-miners formerly employed by British Coal and their dependants and to certain former employees who lost their entitlement as a consequence of the restructuring and run down of UK Coal in 2013 and 2015; it includes administration costs. Of the total of 40,000 current beneficiaries at 31 March 2020, 34,800 have opted for the cash alternative at an average cost per beneficiary of £779 per annum; the average annual cost of solid fuel for the remainder is £1,147 per beneficiary excluding delivery costs and VAT. The provision is based on standard female mortality rates and assumes beneficiaries will continue to switch their entitlement from solid fuel to cash in line with rates observed in the recent past. Costs are expected to be incurred up to 2062. The discounted liability at 31 March 2020 is £339 million (31 March 2019: £363 million); the undiscounted liability at 31 March 2020, at prices as at the reporting date so excluding the impact of future inflation, is £326 million (31 March 2019: £352 million).
British Shipbuilders
The provision covers the cost of personal injury compensation claims by former employees of British Shipbuilders and its subsidiaries arising primarily from exposure to asbestos during the course of their work. The Core Department has taken on full responsibility for the liabilities of the former Corporation which was abolished in March 2013. It is subject to considerable uncertainty. The discounted liability at 31 March 2020 is £133 million (31 March 2019: £134 million (£140 million including £6 million reclassified from Other)) and includes £23 million for administration costs which had not been included in prior years. The estimate for compensation claims is based on an actuarial review as at 31 March 2019 and includes allowance for future inflation judged appropriate by the actuary. Administration costs have been estimated by the Department.
British Coal Corporation Health Liabilities (Legacy ailments)
The provision covers the cost of compensation claims relating to personal injuries suffered by former British Coal mineworkers between 1947 and 1994, responsibility for which transferred to the Core Department on 1 January 1998 by a restructuring scheme under the Coal Industry Act 1994; it includes legal and administrative costs, including the storage and management of former British Coal records. The discounted liability at 31 March 2020 is £136 million (31 March 2019: £101 million (£163 million including £62 million reclassified from Other)). The undiscounted liability, at prices as at the reporting date so excluding the impact of future inflation, is £131 million (31 March 2019: £98 million (£159 million including £61 million reclassified from Other)) and is based on forecasts of settlement of claims, taking account of discussion with the Core Department’s legal advisors and claim handlers and recent actuarial estimates; it is subject to considerable uncertainty. The part of the undiscounted liability which relates to compensation claims is £74 million and comprises estimates at prices as at the reporting date of £9 million (31 March 2019: £11 million) for induced hearing loss, £52 million (31 March 2019: £68 million) for miscellaneous disease claims including phurnacite, mesothelioma, pneumoconiosis, pleural thickening, asbestos related conditions, vibration white finger, chronic obstructive pulmonary disease, cancer, pleural plaques and other minor benefits schemes, £4 million (31 March 2019: £19 million) for litigation by former British Coal Coke Oven Workers and £9 million for litigation by former employees of British Coal’s Coventry Homefire plant (31 March 2019: £nil). The current estimate is that liabilities will extend up to 2050.
**Onerous leases**
The liability of £109 million for ‘Other’ Core and agency provisions at 31 March 2020 includes £54 million of provisions for onerous leases for the Core Department in respect of office accommodation at 151 Buckingham Palace Road, 10-18 Victoria Street and other locations. The leases are held by the Government Property Agency but the obligation to finance their running costs remains with the Core Department. The Department has attempted to mitigate potential losses by subleasing but, has determined that, at the reporting date, neither current nor future potential subleases will recover the full costs incurred. The estimate of future income from subleasing as at 31 March 2020 is higher than at 31 March 2019, leading to a significant write-down of this liability. The discounted liability at 31 March 2020 is £54 million (31 March 2019: £113 million). The liabilities extend to 2026.
**NDPBs and other designated bodies**
**Coal Authority**
The Coal Authority provision relates predominantly to the Coal Authority’s responsibilities for mine water treatment, public safety and subsidence, and subsidence pumping stations. Significant uncertainties are associated with estimation of likely costs in respect of these liabilities. The discounted liability at 31 March 2020 is £2,306 million (31 March 2019: £2,299 million). The undiscounted liability at 31 March 2020 is £2,275 million (31 March 2019: £2,174 million). Further details are reported in the Coal Authority Annual Report and Accounts.
**Early departure costs and restructuring**
£78 million (31 March 2019: £67 million) of the restructuring provision relates to site licence companies and includes continuing annual payments under early retirement arrangements to individuals who retired early, or had accepted early retirement, before 31 March 2020 and will continue at least until the date at which the individual would have reached normal retirement age. The undiscounted equivalent is 31 March 2020 is £75 million (31 March 2019: £68 million). 19. Financial guarantee and loan commitment liabilities
| | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |--------------------------------|-----------------------------|--------------------|-----------------------------|--------------------| | | £m | £m | £m | £m | | Balance at 1 April | 54 | 230 | 61 | 61 | | IFRS 9 Adjustments to Opening Balances | – | – | (16) | 168 | | Revised balance at 1 April | 54 | 230 | 45 | 229 | | Additions | – | 10 | 20 | 58 | | Net remeasurement | 50 | 11 | – | (46) | | Called | (13) | (13) | (11) | (11) | | Balance at 31 March | 91 | 238 | 54 | 230 |
Comprising:
- Financial guarantee liabilities: 91, 91, 54, 54
- Loan commitment liabilities: –, 147, –, 176
Balance at 31 March: 91, 238, 54, 230
Of which:
- Current liability: 17, 17, 11, 11
- Non-current liability: 74, 221, 43, 219
Balance at 31 March: 91, 238, 54, 230
Following the introduction of IFRS 9 ‘Financial Instruments’ in 2018-19 the British Business Bank’s Enterprise Capital Fund commitments to provide loans under the market rate were designated to be measured at Fair Value through Profit or Loss. As a result, the Departmental Group has transferred out the loan commitment liabilities of £184 million as at 31 March 2018 from “Other provisions” to disclose separately together with financial guarantee liabilities.
20. Retirement benefit obligations
The Departmental Group consolidates nine defined benefit pension arrangements from its designated bodies including:
- UK Research and Innovation
- Nuclear Decommissioning Authority
- Nuclear site licence companies
All schemes are accounted for in accordance with IAS 19 ‘Employee Benefits’. They are subject to the UK regulatory framework and under the scope of the scheme specific funding requirement. The schemes’ trustees are responsible for operating these defined benefit plans and have a statutory responsibility for ensuring the schemes are sufficiently funded to meet current and future benefit payments.
Defined benefit scheme liabilities expose the Departmental Group to material financial uncertainty, arising from factors such as changes in life expectancy and in the amount of pensions payable. Some scheme investments, such as equities, should offer long-term growth in excess of inflation, but can be more volatile in the shorter term than government bonds.
The details of each scheme are discussed below.
**UK Research and Innovation (UKRI)**
UKRI operates the legacy Medical Research Council (MRC) defined benefit, final salary pension scheme. A full actuarial evaluation was undertaken as at 31 December 2016 which was rolled forward by the actuary to determine the approximate position as at 31 March 2020.
______________________________________________________________________
1 MRC pension scheme values have been provided in an IAS 19 GAD report, this current surplus figure includes some pension asset figures from 31 December 2019, the latest available information. Any subsequent movements in the valuations to 31 March 2020 are immaterial. The key assumptions are discount rate of 2.30% (2018-19: 2.40%) and rate of increase in pension payments of 2.00% (2018-19: 2.45%). A decrease of 0.5% in the discount rate would lead to an increase of approximately 10.0% in the total liability, while a decrease of 0.5% in the rate of increase in pensions would lead to an approximate 7.0% reduction.
Further details regarding the nature of the benefits provided, regulatory framework, actuarial assumptions, sensitivity analysis, key risks and risk management policy including asset-liability matching strategies, and any funding arrangements or funding policy that may affect future contributions can be found in the accounts of UKRI.
**Nuclear Decommissioning Authority (NDA)**
Two defined benefit pension schemes relate to the NDA – the Closed and Nirex sections of the Combined Nuclear Pension Plan (CNPP). Both are closed to new entrants. Full actuarial evaluations were undertaken as at 31 March 2016. The actuaries rolled forward the results to determine approximate positions as at 31 March 2020. Further details regarding the nature of the benefits provided, regulatory framework, actuarial assumptions, sensitivity analysis, key risks and risk management policy including asset-liability matching strategies, and any funding arrangements or funding policy that may affect future contributions can be found in the accounts of NDA.
**Nuclear site licence companies (SLCs)**
There are six defined benefit final salary pension schemes relating to the four SLCs comprising: a) the LLWR section of the CNPP (for LLW Repository Limited), b) the SLC section of the Magnox Electric Group of the ESPS and the Magnox Section of the CNPP (for Magnox Limited), c) the Group Pension Scheme SLC section of the CNPP and the Sellafield section of the CNPP (for Sellafield Limited) and d) the Dounreay Section of the CNPP (for Dounreay Site Restoration Limited). All are closed to new entrants. The most recent triennial actuarial valuations were undertaken as at 31 March 2016 for all six SLCs schemes. The actuaries rolled forward the results to determine approximate positions as at 31 March 2020.
Further details regarding the nature of the benefits provided, regulatory framework, key risks and risk management policy including asset-liability matching strategies, and any funding arrangements or funding policy that may affect future contributions can be found in the CNPP Statement of Investment Principles at [https://www.cnpp.org.uk/document-library/](https://www.cnpp.org.uk/document-library/), and in the Electricity Supply Pension Scheme’s Annual Reports at [https://megtpensions.com/finance-report](https://megtpensions.com/finance-report). | | 31 March 2020 | 31 March 2019 | |--------------------------------|---------------|---------------| | **Present value of defined benefit obligation at 1 April** | £m | £m | | Interest cost | 199 | 197 | | Current service cost | 253 | 248 | | Past service cost | 7 | 15 | | Benefits paid | (239) | (231) | | Actuarial (gains)/losses in financial assumption | (1,017) | 422 | | Actuarial (gains)/losses on defined benefit obligation due to demographic assumptions | (152) | (68) | | Employee contributions | 24 | 25 | | Transfer in | (28) | (13) | | **Present value of defined benefit obligation at 31 March** | 7,274 | 8,240 |
| | 31 March 2020 | 31 March 2019 | |--------------------------------|---------------|---------------| | **Fair value of assets at 1 April** | £m | £m | | Expected return on plan assets | 176 | 179 | | Employer contributions | 145 | 149 | | Benefits paid | (239) | (231) | | Actuarial gains/(losses) | (210) | 264 | | Employee contributions | 24 | 25 | | Transfer in | (28) | (13) | | **Fair value of assets at 31 March** | 7,187 | 7,319 |
| | 31 March 2020 | 31 March 2019 | |--------------------------------|---------------|---------------| | **Net liability at 31 March** | 87 | 921 |
The decrease in the net liability at 31 March 2020 compared to 31 March 2019 is primarily due to a decrease in the inflation rate applied to all defined benefit obligations between 31 March 2019 and 31 March 2020.
### Net (asset)/liability by scheme
| Scheme Description | Present value of defined benefit obligation £m | Fair value of assets £m | Net liability/ (asset) £m | Present value of defined benefit obligation £m | Fair value of assets £m | Net liability/ (asset) £m | |--------------------|-----------------------------------------------|-------------------------|--------------------------|-----------------------------------------------|-------------------------|--------------------------| | UK Research and Innovation – Medical Research Council | 1,465 | 1,563 | (98) | 1,605 | 1,649 | (44) | | LLW Repository Ltd – LLWR section of CNPP | 32 | 23 | 9 | 33 | 22 | 11 | | Magnox Ltd – SLC section of Magnox Electric Group of ESPS | 2,856 | 3,251 | (395) | 3,298 | 3,214 | 84 | | Magnox Ltd – Magnox section of CNPP | 133 | 118 | 15 | 161 | 120 | 41 | | Sellafield Ltd – Group Pension Scheme SLC section of CNPP | 584 | 624 | (40) | 707 | 682 | 25 | | Sellafield Ltd – Sellafield section of CNPP | 1,929 | 1,369 | 560 | 2,119 | 1,386 | 733 | | Dounreay Site Restoration Ltd – Dounreay section of CNPP | 145 | 105 | 40 | 159 | 106 | 53 | | Nuclear Decommissioning Authority | 130 | 134 | (4) | 158 | 140 | 18 | | **Total net liability at 31 March** | **7,274** | **7,187** | **87** | **8,240** | **7,319** | **921** |
### Asset allocation
| Asset Type | 31 March 2020 £m | 31 March 2019 £m | |------------|------------------|------------------| | Equities | 1,797 | 2,211 | | Property | 854 | 765 | | Government bonds | 1,910 | 1,933 | | Corporate bonds | 534 | 541 | | Other growth assets | 1,883 | 1,734 | | Other | 209 | 135 | | **Balance at reporting date** | **7,187** | **7,319** |
The Magnox schemes had a total asset balance of £3,365 million, of which £1,434 million were government bond assets and £1,339 million were other growth assets which were not quoted in an active market. The Sellafield schemes had £1,992 million of total assets, the majority of which, excluding the amount held in the Trustees’ bank account and some private equity investments due to their illiquid nature, had a quoted market value in an active market. The UKRI – MRC scheme’s total assets of £1,563 million included £904 million of quoted equities and £385 million of property assets. Expected contribution over the next accounting period
It is possible that the actual amount paid might be different to the estimated amount. This may be due to contributions, benefits payments or pensionable payroll differing from expected, changes to schemes’ benefits or settlement/curtailment events that are currently unknown.
| Organisation | 31 March 2020 £m | 31 March 2019 £m | |--------------|------------------|------------------| | UK Research and Innovation – Medical Research Council | 24 | 25 | | LLW Repository Ltd – LLWR section of CNPP | 1 | 1 | | Magnox Ltd – SLC section of Magnox Electric Group of ESPS | 32 | 27 | | Magnox Ltd – Magnox section of CNPP | 5 | 5 | | Sellafield Ltd – Group Pension Scheme SLC section of CNPP | 6 | 7 | | Sellafield Ltd – Sellafield section of CNPP | 75 | 78 | | Dounreay Site Restoration Ltd – DSRL section of CNPP | 6 | 6 | | Nuclear Decommissioning Authority | 1 | 1 | | **Total** | **150** | **150** |
Weighted average duration of the defined benefit obligation plans
| Organisation | 31 March 2020 Years | 31 March 2019 Years | |--------------|---------------------|---------------------| | UK Research and Innovation – Medical Research Council | 20 | 21 | | LLW Repository Ltd – LLWR section of CNPP | 27 | 20 | | Magnox Ltd – SLC section of Magnox Electric Group of ESPS | 16 | 16 | | Magnox Ltd – Magnox section of CNPP | 21 | 22 | | Sellafield Ltd – Group Pension Scheme SLC section of CNPP | 20 | 20 | | Sellafield Ltd – Sellafield section of CNPP | 20 | 20 | | Dounreay Site Restoration Ltd – DSRL section of CNPP | 20 | 20 | | Nuclear Decommissioning Authority | 19 | 23 |
Major actuarial assumptions for SLC schemes
| Organisation | 2019-20 | 2018-19 | 2019-20 | 2018-19 | 2019-20 | 2018-19 | 2019-20 | 2018-19 | |--------------|---------|---------|---------|---------|---------|---------|---------|---------| | Discount rate | 2.3% | 2.5% | 2.4% | 2.4% | 2.3% | 2.4% | 2.3% | 2.4% | | Inflation (Retail Price Index) | 2.4% | 3.5% | 2.6% | 3.2% | 2.4% | 3.5% | 2.4% | 3.5% | | Life expectancy in years at 65, currently aged 65 (male) | 21.3 | 21.8 | 21.9 | 21.8 | 21.3 | 21.8 | | Life expectancy in years at 65, currently aged 45 (male) | 22.4 | 22.9 | 23.0 | 22.9 | 22.4 | 22.9 | | Life expectancy in years at 65, currently aged 65 (female) | 23.2 | 23.7 | 23.8 | 23.7 | 23.2 | 23.7 | | Life expectancy in years at 65, currently aged 45 (female) | 24.5 | 25.0 | 25.0 | 25.0 | 24.5 | 25.0 | | Life expectancy in years at 60, currently aged 60 (male) | 27.8 | 28.0 | 25.9 | 28.0 | | Life expectancy in years at 60, currently aged 40 (male) | 28.5 | 29.0 | 27.1 | 29.0 | | Life expectancy in years at 60, currently aged 60 (female) | 29.8 | 30.0 | 27.9 | 30.0 | | Life expectancy in years at 60, currently aged 40 (female) | 30.6 | 31.1 | 29.2 | 31.1 | Major actuarial assumptions for NDA and UKRI
| | Nuclear Decommissioning Authority | UK Research and Innovation | |------------------------|-----------------------------------|---------------------------| | | 2019-20 | 2018-19 | 2019-20 | 2018-19 | | Discount rate | 2.3% | 2.5% | 2.3% | 2.4% | | Inflation (Retail Price Index) | 2.4% | 3.5% | n/a | 3.6% | | Life expectancy in years at 65, currently aged 65 (male) | 21.3 | 21.8 | 22.1 | 23.0 | | Life expectancy in years at 65, currently aged 45 (male) | 22.4 | 22.9 | 23.8 | 24.9 | | Life expectancy in years at 65, currently aged 65 (female) | 23.2 | 23.7 | 23.8 | 24.6 | | Life expectancy in years at 65, currently aged 45 (female) | 24.5 | 25.0 | 25.4 | 26.5 |
Sensitivity analysis
| | Dounreay Site Restoration Limited | LLW Repository Limited | Magnox Limited | Sellafield Limited | Nuclear Decommissioning Authority | UK Research and Innovation | |------------------------|----------------------------------|------------------------|----------------|-------------------|-----------------------------------|---------------------------| | | £m | £m | £m | £m | £m | £m | | 0.5 percentage point decrease in annual discount rate | 18 | 5 | 247 | 310 | 13 | 146 | | 0.5 percentage point increase in inflation assumption | 18 | 5 | 231 | 310 | 13 | 103 | | 1 year increase in life expectancy | 5 | 1 | 142 | 91 | 5 | 44 |
The table shows the increase in liability that would result from changes in these actuarial assumptions.
21. Capital and other commitments
Total minimum payments in respect of capital, lease and other commitments
| | Note | 31 March 2020 | 31 March 2019 | |------------------------|------|---------------|---------------| | | | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | | Contracted capital commitments | 21.1 | £m | £m | £m | £m | | Minimum future payments under: | | | | | | | Operating leases | 21.2 | 260 | 433 | 326 | 462 | | Finance leases | – | 5 | – | – | 28 | | Other financial commitments | 21.3 | 2,816 | 3,535 | 3,012 | 3,427 | | Total | | 3,085 | 6,608 | 3,360 | 5,846 |
21.1 Capital commitments
Contracted capital commitments not otherwise included in these financial statements:
| | 31 March 2020 | 31 March 2019 | |------------------------|---------------|---------------| | | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | | Property, plant and equipment | 9 | 521 | 17 | 271 | | Intangible assets | – | 1 | 5 | 20 | | Loans and Investments | – | 2,113 | – | 1,638 | | Total | | 9 | 2,635 | 22 | 1,929 | Core Department
The Core Department has not entered into any significant capital commitments.
NDPBs and other designated bodies
Capital commitments as at 31 March 2020 include the following significant items:
- Property, plant and equipment commitments for United Kingdom Research and Innovation (UKRI) of £488 million (31 March 2019: £231 million).
- Investment commitments of £1,601 million (31 March 2019: £1,203 million) for the British Business Bank plc (BBB) relating to undrawn investment commitments, £227 million (31 March 2019: £176 million) for Northern Powerhouse Investment Limited relating to capital calls to be utilised over the next seven years, £173 million (31 March 2019: £176 million) for Midlands Engine Investments Limited relating to capital calls to be utilised over the next eight years and £86 million (31 March 2019: £83 million) for the BIS (Postal Services Act 2011) Company Limited, which has capital calls relating to investments in respect of its private equity and property funds financial instruments.
21.2 Commitments under leases
21.2.1 Operating leases: Department as a lessee
Total future minimum lease payments under operating leases are given in the table below for each of the following periods:
| Obligations under operating leases comprise: | Core Department and Agencies | 31 March 2020 | Core Department and Agencies | 31 March 2019 | |---------------------------------------------|-----------------------------|---------------|-----------------------------|---------------| | Land: | | £m | £m | £m | | Not later than one year | – | 1 | – | 1 | | Later than one year and not later than five years | – | 2 | – | 2 | | Later than five years | – | 14 | – | 20 | | | | 17 | | 23 | | Buildings: | | | | | | Not later than one year | 56 | 72 | 57 | 73 | | Later than one year and not later than five years | 102 | 146 | 139 | 176 | | Later than five years | 95 | 183 | 122 | 172 | | | 253 | 401 | 318 | 421 | | Other: | | | | | | Not later than one year | 6 | 10 | 5 | 9 | | Later than one year and not later than five years | 1 | 5 | 3 | 9 | | | 7 | 15 | 8 | 18 | | Total | 260 | 433 | 326 | 462 |
The commitment for Buildings for the Core Department is £227 million at 31 March 2020 (31 March 2019: £295 million) which includes the lease on the property at 1 Victoria Street, London; this commitment is £145 million at 31 March 2020 (31 March 2019: £187 million). Further information about finance leases and sub-lease arrangements of the Agencies, NDPBs and other designated bodies can be found in the accounts of the relevant bodies. 21.2.2 Operating leases: Department as a lessor
Total future minimum lease receivables under operating leases are given in the table below:
| | Core Department and Agencies | 31 March 2020 | Core Department and Agencies | 31 March 2019 | |----------------------|-----------------------------|---------------|-----------------------------|---------------| | | £m | £m | £m | £m | | Receivables under operating leases for the following periods comprise: | | | | | | Not later than one year | 1 | 9 | – | 10 | | Later than one year and not later than five years | 1 | 25 | 1 | 25 | | Later than five years | – | 41 | 3 | 40 | | Total | 2 | 75 | 4 | 75 |
21.3 Other financial commitments
The Departmental Group has entered into non-cancellable contracts (which are not leases, PFI contracts or other service concession arrangements) for subscriptions to international bodies and various other expenditures. Future payments to which the Departmental Group is committed are as follows:
| | Core Department and Agencies | 31 March 2020 | Core Department and Agencies | 31 March 2019 | |----------------------|-----------------------------|---------------|-----------------------------|---------------| | | £m | £m | £m | £m | | Not later than one year | 485 | 769 | 484 | 698 | | Later than one year and not later than five years | 757 | 1,136 | 982 | 1,182 | | Later than five years | 1,574 | 1,830 | 1,546 | 1,547 | | Total | 2,816 | 3,535 | 3,012 | 3,427 |
21.3.1 International subscriptions
The financial commitments payable include subscriptions payable to international bodies, analysed by the period in which the payments are due:
| Organisation | Note | Within 1 Year | Later than 1 year and not later than 5 years | Total 31 March 2020 | Total 31 March 2019 | |---------------------------------------------------|------|---------------|---------------------------------------------|---------------------|---------------------| | International Atomic Energy Agency | a | 15 | 60 | 75 | 150 | | European Space Agency | b | 264 | 150 | – | 414 | | Other subscriptions | | 9 | 33 | 42 | 84 | | Core Department and Agencies total | | 288 | 243 | 117 | 648 | | European Organisation for Nuclear Research (CERN) | c | 159 | 96 | – | 255 | | Institut Laue Langevin (ILL) | d | 20 | 60 | – | 80 | | Other subscriptions | | 46 | 80 | 21 | 147 | | Departmental Group total | | 513 | 479 | 138 | 1,130 |
Notes
The Departmental Group is required to subscribe to a number of bodies on an on-going and continuous basis. These subscriptions are paid in Euros, Swiss Francs and pounds sterling. The subscriptions described below are paid in Euros or Swiss Francs and amounts paid are subject to fluctuations due to exchange rate differences. a) The Core Department is responsible for paying in the UK’s annual subscriptions to the International Atomic Energy Agency (IAEA). The IAEA is the UN-affiliated organisation responsible for ensuring the safe, secure and peaceful use of civil nuclear technologies, through monitoring nuclear safeguards, setting international standards and guidance for nuclear safety and security promoting nuclear applications for development.
b) The UK Space Agency pays international subscriptions to the European Space Agency (ESA) three times a year and these amounts are agreed several years in advance. The payments reported reflect existing commitments on forward exchange contracts placed with the Bank of England to cover periods until 1 October 2021. The annual subscriptions are to be set at a minimum of €300 million and will be aligned with the agreed ESA programmes activity. It is expected that these amounts will be paid by means of forward exchange contracts or amounts translated on the date of payment.
c) United Kingdom Research and Innovation (UKRI) shares the funding of the capital and running costs of CERN with other major scientific nations. There is a notice of withdrawal period of 12 months after the end of the current calendar year. The commitment is due to end in 2021.
d) The UK, through UKRI, has signed up to International Conventions, with respect to Institut Laue-Langevin (ILL). The 5th protocol of the Intergovernmental Convention was signed in July 2013 and will remain in force until 31 December 2023. Thereafter it shall be tacitly extended from year to year unless any of the governments give written notification to the other governments of its intention to withdraw from the Convention. Any such withdrawal will take effect upon the expiry of two years from the date of receipt of the notification by any of the other governments or on such later date as may be specified in the notification.
21.3.2 Other commitments
The financial commitments payable in future years include payments due under non-cancellable contracts to the following organisations:
| Organisation | Note | Within one year £m | Later than one year and not later than five years £m | Later than five years £m | 31 March 2020 £m | Total £m | |-------------------------------------|------|--------------------|-----------------------------------------------------|--------------------------|-----------------|----------| | Met Office | a | 93 | 442 | 1,423 | 1,958 | 1,893 | | Other commitments | | 104 | 72 | 34 | 210 | 194 | | Core Department and Agencies total | | 197 | 514 | 1,457 | 2,168 | 2,087 | | Other commitments | | 59 | 143 | 35 | 237 | 2 | | Departmental Group total | | 256 | 657 | 1,492 | 2,405 | 2,089 |
Core Department
The Core Department has entered into non-cancellable contracts which include agreements with the Met Office (a trading fund owned by the Department) to provide meteorological services including the Public Weather Service agreement which the Department manages on behalf of the government and for which the forward commitment is separately itemised above; this agreement is of indefinite duration but reviewed on an annual basis. 22. Financial instruments
The carrying amounts of financial instruments in each of the IFRS 9 categories are as follows:
| Financial assets | Note | 31 March 2020 | 31 March 2019 restated | |------------------|------|---------------|------------------------| | | | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | | Financial assets at amortised cost: | | £m | £m | £m | £m | | Cash and cash equivalents | 16 | 1,039 | 2,158 | 1,283 | 2,078 | | Receivables (i) | 14 | 1,140 | 2,511 | 1,146 | 2,021 | | Loans to public sector bodies (ii) & (iii) | 10.3, 15 | 1,431 | 1,008 | 1,285 | 893 | | Other financial assets and private sector loans | 2 | 924 | 2 | 840 | | Total financial assets at amortised cost | | 3,612 | 6,601 | 3,716 | 5,832 | | Financial assets elected at fair value through other comprehensive income (OCI): | | | | | | Ordinary shares in public sector companies (iv) | 10.1 | 773 | 1,305 | 915 | 1,404 | | Other financial assets | 11.2 | 44 | 61 | 46 | 58 | | Total financial assets elected at FVOCI | | 817 | 1,366 | 961 | 1,462 | | Financial assets mandatory at fair value through profit or loss (FVTPL) | | | | | | Repayable launch investments | 11.1 | 833 | 833 | 1,058 | 1,058 | | Derivatives – Forward contracts | | 9 | 9 | 24 | 24 | | Loans to public sector bodies (ii) & (iii) | 49 | – | – | – | – | | Other financial assets | 11.2 | 88 | 2,302 | 90 | 2,160 | | Total financial assets mandatory at FVTPL | | 979 | 3,144 | 1,172 | 3,242 | | Public dividend capital: | | | | | | Public dividend capital | 10.2 | 65 | 65 | 81 | 81 | | Total public dividend capital | | 65 | 65 | 81 | 81 | | Financial liabilities | | | | | | Financial liabilities as amortised cost: | | | | | | Payables (ii) | 17 | (1,434) | (2,835) | (1,924) | (2,623) | | Total financial liabilities as amortised cost | | (1,434) | (2,835) | (1,924) | (2,623) | | Financial liabilities mandatory at fair value through profit or loss (FVTPL): | | | | | | Derivatives – Forward contracts | | – | – | (3) | (15) | | Derivatives – Contracts for difference (CfD) | 9 | – | (16,464) | – | (12,921) | | Total financial liabilities mandatory at FVTPL | | – | (16,464) | (3) | (12,936) | | Financial liabilities designated at fair value through profit or loss (FVTPL): | | | | | | Loan commitment liabilities | 19 | – | (147) | – | (176) | | Total financial liabilities designated at FVTPL | | – | (147) | – | (176) | | Financial guarantee liabilities: | | | | | | Financial guarantee liabilities | 19 | (91) | (91) | (54) | (54) | | Total financial guarantee liabilities | | (91) | (91) | (54) | (54) |
Notes
i. The amounts disclosed above as payables and receivables exclude any assets or liabilities which do not arise from a contractual arrangement.
ii. Loans to public sector bodies comprises the loans detailed in note 15 and Other loans and investments in Other public sector bodies detailed in note 10.3. iii. Loans to public sector bodies in the Core Department for 2019-20 excludes £236 million (2018-19: £169 million) related to the loan investments in the Northern Powerhouse Investments Limited, Midlands Engine Investments Limited, Cornwall and Isles of Scilly Investments Limited and UK Climate Investments LLP, as these are accounted for at cost under IAS 27 – Separate Financial Statements.
iv. Ordinary shares in public sector companies excludes bodies that are consolidated in the Departmental Group, as these are held at cost, see note 10.1.
Financial risk management
IFRS 7 ‘Financial Instruments: Disclosure’ requires the disclosure of information which will allow users of financial statements to evaluate the significance of financial instruments on the Departmental Group’s financial performance and position and the nature and extent of its exposure to risks arising from these instruments.
As the cash requirements of the Departmental Group are largely met through the Estimates process, financial instruments play a more limited role in creating risk than would apply to a private sector body of a similar size.
The Departmental Group is however exposed to credit, market, interest rate, liquidity and commodity price risks due to the specific programmes and activities undertaken in pursuance of the Departmental Group’s objectives.
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.
Significant credit risks can be summarised as follows:
Core Department
Investment funds
Investee companies may not perform as expected and the Departmental Group may not recover its initial investment. The Core Department minimises the risk by monitoring the overall performance of the funds and to secure value for the Core Department as an investor. This includes a full evaluation of each business case submitted prior to committing funds.
Financial guarantees
The Core Department is exposed to credit risk from potential default by recipients of loans guaranteed by the Core Department, primarily in relation to the Enterprise Financial Guarantee (EFG) scheme. Lending institutions are responsible under the scheme for determining that prospective borrowers are commercially viable; they are required to apply normal commercial practice and losses are shared between the Core Department and lending institution. As at 31 March 2020 the Core Department has £539 million of EFG guarantees outstanding (31 March 2019: £588 million) which will expire over the next ten years as the underlying debt matures. Due to a cap on payouts which limits the Core Department’s exposure, the maximum amount that could be paid out if all loans defaulted is £179 million (31 March 2019: £260 million). However, not all loans are expected to default and an estimated liability of £91 million (31 March 2019: £54 million) has been recognised on the Statement of Financial Position.
NDPBs and other designated bodies
British Business Bank
The British Business Bank (BBB) investments are assessed by BBB’s Valuation Committee. BBB produces credit risk ratings for its investments based upon a risk grading of the financial obligor and the estimated Loss Given Default on that investment. Risk drivers which are assessed in setting the ratings include the financial viability and lending safety of the investment and, if available, the rating assigned by an external credit agency. This is mitigated by new product approval processes that assess default and loss rates, due diligence of delivery partners underwriting methods, and portfolio monitoring and default models being put in place.
**Credit risk rating and loss allowance**
The Departmental Group has the following financial assets subject to the expected credit loss model:
- Trade receivables, contract assets, and lease receivables
- Loans, bonds, and term deposits
- Cash and cash equivalents
**Trade receivable, contract assets and lease receivables**
The Core Department applies the IFRS 9 simplified approach using an allowance matrix to measure the lifetime expected loss allowance for trade receivables in accordance with the FReM guidance.
Trade receivables are grouped based upon credit risk characteristics and the number of past-due days. Default is defined as 90 days past due. The loss rates are estimated using the historic data for each aging group. Forward-looking information such as macroeconomic factors and entity specific situations are considered for entities with significant outstanding balances. Balances with other core central government departments are excluded from recognising stage-1 and stage-2 impairments following the FReM adaptions.
On this basis, the loss allowance as at 31 March 2020 determined as follows for trade receivables in the Core Department:
| 31 March 2020 | Core Department | Current | 1-30 days | 31-60 days | 61-90 days | 91+ days | Total | |---------------|-----------------|---------|-----------|------------|------------|----------|-------| | Expected Loss rate | 1% | 4% | 9% | 45% | 71% | | Gross carrying amount- trade receivables (excluding other government debt) (£m) | 2 | 0 | 1 | 0 | 5 | 8 | | Loss allowance (£m) | 0 | 0 | 0 | 0 | 4 | 4 |
| 31 March 2019 | Core Department | Current | 1-30 days | 31-60 days | 61-90 days | 91+ days | Total | |---------------|-----------------|---------|-----------|------------|------------|----------|-------| | Expected Loss rate | 11% | 7% | 2% | 52% | 100% | | Gross carrying amount- trade receivables (excluding other government debt) (£m) | 5 | 1 | 1 | 0 | 5 | 12 | | Loss allowance (£m) | 1 | 0 | 0 | 0 | 5 | 6 |
The loss allowance for trade receivable balances held by ALBs has been assessed at an organisation level and the total loss allowance estimated is immaterial for detailed disclosure on loss rates.
The movement in the allowance for provisions in respect of trade receivables during the year is disclosed below reflecting the allowance per the expected credit loss model under IFRS 9.
| 31 March 2020 | Core Department and Agencies | £m | 31 March 2019 | Core Department and Agencies | £m | |---------------|-------------------------------|-----|---------------|-------------------------------|-----| | Balance at 1 April | 15 | 22 | – | – | | IFRS 9 Adjustment to opening balances | – | – | 14 | 15 | | Net remeasurement | (2) | 1 | 1 | 7 | | Write-off | – | – | – | – | | Balance at 31 March | 13 | 23 | 15 | 22 | Loans, bonds and term deposits
Where possible, the Departmental Group monitors changes in credit risk by tracking published external credit ratings. For all assets other than those held by British Business Bank, an internal credit rating system, which was developed based on other established methodologies, was used to assign credit risks for loans that do not have external credit rating. 12-month and lifetime probabilities of default are based upon Moody’s published research on the global default rate adjusted for historical repayment data and any macro-economic pressures which could impact the entity’s ability to repay the loan.
The British Business Bank (BBB) investments are assessed by BBB’s Valuation Committee. BBB produces credit risk ratings for its investments based upon a risk grading of the financial obligator and the estimated Loss Given Default on that investment. Further details can be found in BBB’s annual report and accounts.
The following table presents an analysis of credit quality of loans, bonds and term deposits. It indicates whether assets were subject to a 12-month ECL or lifetime ECL allowance, and whether they were credit-impaired.
| Credit rating | 12 month ECL | Lifetime ECL not impaired | Lifetime ECL impaired | Total | 12 month ECL | Lifetime ECL not impaired | Lifetime ECL impaired | Total | |--------------------------------|--------------|---------------------------|-----------------------|-------|--------------|---------------------------|-----------------------|-------| | Low risk financial assets | 1,410 | – | – | 1,410 | 1,267 | – | – | 1,267 | | Medium risk financial assets | 284 | 62 | – | 346 | 310 | 25 | 2 | 337 | | High risk financial assets | 180 | 38 | – | 218 | 115 | 19 | – | 134 | | Default financial assets | – | – | 59 | 59 | – | – | 78 | 78 | | Total gross carrying amounts | 1,874 | 100 | 59 | 2,033 | 1,692 | 44 | 80 | 1,816 | | Loss allowance | (29) | (15) | (57) | (101) | (11) | (15) | (57) | (83) | | Carrying amount | 1,845 | 85 | 2 | 1,932 | 1,681 | 29 | 23 | 1,733 |
The Departmental Group does not hold any loans, bonds and term deposits measured at FVOCI.
The movement in the allowance for impaired loans, bonds and term deposits at amortised cost during the year was as follows.
| | 12m ECL | Lifetime ECL not impaired | Lifetime ECL credit impaired | Total | 12m ECL | Lifetime ECL not impaired | Lifetime ECL credit impaired | Total | |--------------------------------|---------|---------------------------|-----------------------------|-------|---------|---------------------------|-----------------------------|-------| | Balance at 1 April | 11 | 15 | 57 | 83 | – | – | – | – | | IFRS 9 Adjustment to opening balances | – | – | – | – | 11 | 11 | 45 | 67 | | Revised balance at 1 April | 11 | 15 | 57 | 83 | 11 | 11 | 45 | 67 | | Additions | 11 | 4 | – | 15 | 5 | 8 | 3 | 16 | | Net remeasurement | 5 | 12 | 15 | 32 | (3) | (2) | (1) | (6) | | Repayment | – | (7) | – | (7) | (1) | (2) | (2) | (5) | | Transfer to credit loss 12 month | – | (2) | 4 | 2 | – | – | – | – | | Transfer to credit loss not impaired | 2 | – | 9 | 11 | – | – | 12 | 12 | | Transfer to credit loss impaired | (3) | (10) | – | (13) | (1) | – | – | (1) | | Write-off | (1) | 7 | (27) | (21) | – | – | – | – | | Balance at 31 March | 25 | 19 | 58 | 102 | 11 | 15 | 57 | 83 | The primary reason for the increase in the loss allowance during 2019-20, is to take account of the Covid-19 pandemic economic impact on borrower’s ability to repay their loans.
**Cash and cash equivalents**
The Departmental Group held cash and cash equivalents of £2,158 million as at 31 March 2020 (31 March 2019 (restated): £2,078 million). The cash and cash equivalents are held with banks and financial institutions which are rated AA- to AA+ based on S&P ratings.
Impairment on cash and cash equivalents has been measured on the 12-month expected loss basis and reflects the short maturities of the exposures. The Departmental Group considers that cash and cash equivalents have a low credit risk based on the external credit ratings of the holding parties.
**Financial guarantee contracts and loan commitments**
BBB’s ECF loan commitments were designated to be measured at FVTPL and the credit risk is, therefore, reflected in their fair value.
**Collateral**
The Departmental Group holds collateral over loans held at amortised cost. The collateral held is in the form of cash and buildings. The value of the loan assets held which are secured by collateral is £1,084 million (31 March 2019 restated: £1,006 million). The value of the collateral held is lower than the value of the assets secured by the collateral. The collateral was considered in estimating the ECL.
**Market risk**
Market risk is the risk that fair values and future cash flows will fluctuate due to changes in market prices. Market risk generally comprises of:
**a) Foreign Currency risk**
**Core Department**
The Core Department is exposed to a small amount of currency risk with respect to Repayable Launch Investment contracts where income due from aircraft or engine sales may initially be based in US Dollars, but it is minimal in the context of the overall Repayable Launch Investment portfolio. Otherwise the Core Department’s exposure to foreign currency risk during the year was insignificant. Foreign currency income was negligible, and foreign currency expenditure was a small percentage of total expenditure (less than 1%).
All material assets and liabilities are denominated in pounds sterling.
**Agencies**
**Forward contracts**
UKSA pays an annual subscription in Euros to the European Space Agency (ESA) and has entered into forward contracts to mitigate the risk. These derivative contracts have been designated as cash flow hedges.
**NDPBs and other designated bodies**
**Forward contracts**
UKRI are subject to foreign currency risks and have entered into forward contracts to help mitigate these risks. These derivative contracts have been designated as cash flow hedges by UKRI and at the reporting date the hedges met the IFRS 9 effectiveness criteria. Cash and cash equivalents held in foreign currency
BIS (Postal Services Act 2011) Company Limited, UKRI and Nesta Trust are subject to minor foreign currency risk through the maintenance of bank accounts in foreign currencies (predominantly USD and EUR) to deal with day-to-day overseas transactions.
b) Interest Rate risk
Core Department
The Core Department does not invest or access funds from commercial sources, but it is exposed to interest rate risk with respect to the EFG – the Core Department is exposed to interest rate risk, as the majority of the loan guarantees are provided against variable rate loans. The banks’ usual lending practices mean that fixed rate loans are usually available only for small value short term loans. To minimise the risk of default due to interest rate rises, accompanied by a decline in the economic environment, the Core Department relies on the lenders assessment using best commercial practice to manage the risk of default.
NDPBs and other designated bodies
BBB holds both fixed and variable rate investments. Interest rate risk is regularly monitored to ensure that the mix of fixed and variable borrowing is appropriate. BBB does not use derivatives to hedge interest rate risk.
The impact of interest rates affects the discount rate used to arrive at the fair value of the CfD liability held by LCCC. Changes in interest rates which affect the discount rate would therefore affect the Statement of Financial Position valuation. However, the Departmental Group is not financially exposed to this risk because the liability is funded through a levy on suppliers.
c) Other Market risk
Core Department
The Core Department is exposed to wider risks relating to the performance of the economy as a whole. The main risks resulting from a downward movement in the economy include failures of investee companies of investment funds, loan defaults under the Core Department’s EFG Scheme and negative impacts on the Core Department’s repayable launch investment income and valuations from the potential resultant decrease in demand in the aerospace industry. For further information on the assessment of market risk in relation to Repayable Launch Investments, see note 11.1.
NDPBs and other designated bodies
The Nesta Trust is exposed to equity price risk due to its investment of a portion of its endowment assets in publicly listed equity investments. Nesta Trust minimises this risk by investing for the medium to long term, diversifying its equity investments over a number of managers with complementary styles, and invests in investment funds with large institutional investors. The performance of these investment managers is monitored regularly.
The valuations of fair value through profit or loss financial assets are based on the valuations provided by the fund managers in line with International Private Equity and Venture Capital (IPEV) Valuation Guidelines or the valuation guidelines produced by the British Venture Capital Association (BVCA). Valuation techniques used include the use of earnings multiples, discounted cash flows analysis, and net asset values. The valuations in the Core Department, BPSA and NESTA Trust have been updated to reflect the impact of COVID-19 as at 31 March 2020, based on the available information at 31 March 2020. These have seen a decrease in the valuations at 31 March 2020 of circa (8%). BBB have seen valuations movements between (2%) and (6%). As the economic impacts of COVID-19 become more certain the Departmental Group may see further fair value adjustments upwards or downwards. Inflation risk The amounts payable under the CfD contracts will be affected by the indexation of strike prices to reflect inflation and changes to wholesale electricity prices resulting from inflation. Inflation rates may not continue at the relatively low levels experienced in recent years; the Group is not financially exposed to this risk because the liability is funded through a levy on suppliers.
Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.
Core Department and Agencies In common with other government departments, the future financing of its liabilities is to be met by future grants of Supply, voted annually by Parliament. There is no reason to believe that future approvals will not be forthcoming, therefore, on this basis the liquidity risk to the Core Department and its Agencies is minimal.
NDPBs and other designated bodies Information about the Departmental Group’s objectives, policies and processes for managing and measuring risk can be found in the Governance Statement.
Commodity price risk Commodity price risk is the risk or uncertainty arising from possible price movements. The amounts payable under the CfD contracts are exposed to price risk through the fluctuations in future actual wholesale electricity prices, specifically, on how they will differ from the current forecast of future prices in the central scenario. However, the LCCC and the Departmental Group are not financially exposed to this risk because the liability is funded through a levy on suppliers. Financial instruments: fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
- Level 1 – uses quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Level 2 – uses inputs for the assets or liabilities other quoted prices, that are observable either directly or indirectly;
- Level 3 – uses inputs for the assets or liabilities that are not based on observable market data, such as internal models or other valuation method.
The following table presents the Departmental Group’s financial assets and liabilities that are measured at fair value at 31 March 2020 and 31 March 2019:
| Financial assets | 31 March 2020 | 31 March 2019 restated | |------------------|---------------|------------------------| | | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | | FVOCI elected | | | | | | | | | | Ordinary shares in public sector bodies | 10.1 | – | 1,305 | – | 1,305 | – | 1,404 | – | 1,404 | | Private sector shares | 11.2 | 8 | 47 | 25 | 80 | 8 | 47 | 21 | 76 | | Total financial assets at FVOCI | 8 | 1,352 | 25 | 1,385 | 8 | 1,451 | 21 | 1,480 | | FVTPL mandatory | | | | | | | | | | Debt and venture capital investments | | | | | | | | | | Repayable launch investments | 11.1 | – | – | 833 | – | 833 | – | – | 1,058 | | Investment funds | 11.2 | 145 | – | 2,057 | 2,202 | 187 | – | 1,801 | 1,988 | | Bonds | 11.2 | – | – | – | 1 | – | – | 1 | | Private sector shares | 11.2 | 81 | – | – | 81 | 88 | – | – | 88 | | Other investments | 11.2 | – | – | – | – | – | – | 68 | 68 | | Derivatives – Forward contracts | – | 9 | – | 9 | – | 24 | – | 24 | | Total financial assets at FVTPL mandatory | 226 | 9 | 2,890 | 3,125 | 276 | 24 | 2,927 | 3,227 | | Total financial assets measured at fair value | 234 | 1,361 | 2,915 | 4,510 | 284 | 1,475 | 2,948 | 4,707 | | Financial Liabilities | | | | | | | | | | FVTPL mandatory | | | | | | | | | | Loan commitment liabilities | 19 | – | – | (147) | (147) | – | – | (176) | (176) | | Total liabilities at FVTPL mandatory | – | – | (147) | (147) | – | – | (176) | (176) | | FVTPL designated | | | | | | | | | | Derivatives – Forward contracts | – | – | – | – | – | (15) | – | (15) | | Derivatives – CfD | 9 | – | – | (16,464) | (16,464) | – | – | (12,921) | (12,921) | | Total financial liabilities at FVTPL designated | – | – | (16,464) | (16,464) | – | (15) | (12,921) | (12,936) | | Total financial liabilities measured at fair value | – | – | (16,611) | (16,611) | – | (15) | (13,097) | (13,112) |
Transfers between levels of the fair value hierarchy are deemed to occur at the end of the reporting period. There were no transfers between level 1 and 2 during the year.
Specific valuation techniques used to value financial instruments include:
- The fair value of the CfDs has been calculated using the income approach based on level 3 inputs, which reflects the present value of future cash flows that are expected to occur over the contract term of the CfD.
- For details regarding the fair value measurement of RLI’s, refer to note 11.1.
- The fair value of forward foreign exchange contracts is determined using forward exchange rate at the reporting date based on Level 2 inputs, with the resulting value discounted back to present value. Other techniques, such as discounted cash flow analysis or for non-quoted ordinary shares and investment funds that are not actively traded, the net assets of the company/underlying fund are used. These are classified as level 3.
The fair value of Public Sector shares are based upon net assets and classified as level 2.
The following table presents the changes in level 3 instrument for the period ended 31 March 2020, excluding the CfDs which are disclosed in note 9.
| Ordinary shares in unlisted private equities | Repayable launch investments | Property related holdings, Investment funds and Other financial assets | Loan Commitment Liabilities | Total | |---------------------------------------------|------------------------------|---------------------------------------------------------------------|-----------------------------|-------| | £m | £m | £m | £m | £m | | Balance at 1 April | 21 | 1,058 | 1,869 | (176) | 2,772 | | Additions | 2 | – | 614 | (10) | 606 | | Repayments/disposals | – | (340) | (318) | 39 | (619) | | Revaluations | 1 | – | – | – | 1 | | Gains and losses recognised in SoCNE | 1 | 115 | (108) | – | 8 | | Balance at 31 March | 25 | 833 | 2,057 | (147) | 2,768 |
The following table presents the changes in level 3 instrument for the year ended 31 March 2019, excluding the CfDs which are disclosed in note 9.
| Ordinary shares in unlisted private equities | Repayable launch investments | Property related holdings, Investment funds and Other financial assets | Loan Commitment Liabilities | Total | |---------------------------------------------|------------------------------|---------------------------------------------------------------------|-----------------------------|-------| | £m | £m | £m | £m | £m | | Balance at 1 April | 308 | 1,047 | 1,567 | – | 2,922 | | IFRS 9 transfers into level 3 | 10 | – | 1 | – | 11 | | IFRS 9 transfer between different investment categories | (298) | – | 298 | – | – | | IFRS 9 transfers in/ (out) of fair value | – | – | (60) | (184) | (244) | | Revised balance at 1 April restated | 20 | 1,047 | 1,806 | (184) | 2,689 | | Additions | 18 | – | 504 | (38) | 484 | | Repayments/disposals | – | (230) | (335) | 46 | (519) | | Gains and losses recognised in SoCNE | (17) | 241 | (106) | – | 118 | | Balance at 31 March restated | 21 | 1,058 | 1,869 | (176) | 2,772 | Maturity profiles – discounted cashflows
The maturity profile of the discounted cashflows for the CfDs excluding Hinkley Point C is shown below:
| | < 1 year | 2-5 years | >5 years | Total | |----------------|----------|-----------|----------|-------| | £m | £m | £m | £m | £m | | As at 31 March 2019 | 871 | 4,441 | 7,609 | 12,921| | As at 31 March 2020 | 1,520 | 4,337 | 10,607 | 16,464|
23. Contingent liabilities
Core Department
The Core Department has the following contingent liabilities:
| Basis of Recognition | Description | |----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Unquantifiable | | | Core Department – | A guarantee has been given to the Financial Reporting Council that, if the Council’s general voluntary funding from external sources falls sufficiently for the Department to have to consider making legislation to activate the statutory levy under section 17 of the Companies (Audit, Investigations and Community Enterprise) Act 2004, the Department will make such a grant to cover the Council’s costs as is sufficient to meet the preconditions in those levy raising powers provided the requisite funding has not been made available through another grant. | | Financial Reporting | | | Council funding | | | Core Department – | Government guarantees were put in place on 31 October 1994, the day the schemes were changed to reflect the impact of privatisation of the coal industry. They are legally binding contracts between the scheme Trustees and the Secretary of State for Business, Energy and Industrial Strategy. The guarantees ensure that benefits earned by scheme members during their employment with British Coal, and any benefit improvements from surpluses which were awarded prior to 31 October 1994, will always be paid and will be increased each year in line with the Retail Prices Index. If, at any periodic valuation, the assets of the Guaranteed Fund of either scheme were to be insufficient to meet its liabilities, the assets must be increased to bring the Fund back into balance. This is a long-term contingent liability dependent on the performance of the schemes’ investments and their mortality experience. Further details regarding the schemes can be found in note 14. | | Deeds relating to the | | | Mineworkers’ Pension | | | Scheme and British Coal | | | Staff Superannuation | | | Scheme under Paragraph 2(9) of Schedule 5 to the Coal Industry Act 1994 | | | Core Department – | The Cabinet Secretary has provided a government-wide indemnity to Public Appointments Assessors (PAAs) against personal civil liabilities incurred in the execution of their PAA functions. | | Indemnity to Public Appointment Assessors | | | Core Department – | The Department has a range of potential civil nuclear liabilities arising through its association with the United Kingdom Atomic Energy Authority and British Nuclear Fuels Limited as well as ensuring that the government complies with its obligations under the various international nuclear agreements and treaties. | | Nuclear agreements and treaties | | | Core Department – | The Department inherited responsibility from British Coal to reimburse certain third parties for costs incurred meeting statutory environmental standards in the restoration of particular coal-related sites. | | Site restoration liabilities inherited from British Coal | | | Core Department – | The Nuclear Liabilities Fund was established in 1996 to meet certain costs of decommissioning eight nuclear power plants in the UK that have been owned and operated by EDF Energy Nuclear Generation Limited since 2009. A constructive obligation was created in 2002 when the government undertook to underwrite the Fund in respect of these liabilities to the extent that the assets of the Fund might fall short; any surplus generated by the Fund would be paid over to the government once the liabilities have been met. The total undiscounted estimated liability as at 31 March 2020 of £23.3 billion (31 March 2019: £20.9 billion) has a present value of £24.1 billion (31 March 2019: £22.3 billion). The value of the Fund as at 31 March 2020 is £9.4 billion (31 March 2019: £9.4 billion). It is not possible to quantify the extent to which the Fund might be in deficit or surplus with respect to the liabilities as at 31 March 2020 given the high level of uncertainty relating to estimation of decommissioning costs and investment returns on Fund assets over a future period exceeding 100 years. | | Nuclear Liabilities Fund | | In July 2018, the UK Government announced an extension of its guarantee of EU-funded projects after the UK has left the EU. The guarantee was originally announced in 2016. The UK left the EU on 31st January 2020. Under the terms of the Withdrawal Agreement, the European Union can exclude UK participation in Horizon 2020 EU-funded grants which involve security-related sensitive information. This means that for security related projects under the Horizon, there is a doubt over continued EU funding. The guarantee in relation to Horizon 2020 is unquantifiable due to the European Commission administering and holding the information in relation to the scheme. There are uncertainties around the total amount that may be payable if the settlement were to occur.
In order to encourage lending to smaller businesses, the Department has guaranteed a portion of net losses on designated loan portfolios of participating banks (in excess of an agreed ‘first loss’ threshold) in return for a fee under the ENABLE Guarantee programme administered by the British Business Bank. The Department has approved guarantee facilities totalling £1.4 billion (31 March 2019: £1 billion), of which £783 million is effective as at 31 March 2020 (31 March 2019: £283 million) with a potential loss to the Department of £356 million (31 March 2019: £45 million).
The Department guarantees lenders under the Enterprise Financial Guarantee (EFG) and Help to Grow (HTG) financial guarantee schemes administered by the British Business Bank. The Enterprise Financial Guarantee Scheme facilitates lending to viable businesses with the maximum obligation for the Department capped at £179 million at 31 March 2020 (31 March 2019: £205 million). The amount lent under the Help to Grow scheme was £3 million at 31 March 2020 (31 March 2019: £2.9 million) with a maximum potential liability for the department at 31 March 2020 of £1 million (31 March 2019: £1 million).
The Department, the Scottish Government and the Northern Ireland Executive have undertaken to support Ofgem’s costs for administering the Renewables Obligation scheme (around £4 million) if there is insufficient money in both the buy-out fund and late payment fund to cover these costs. The size of the 2019-20 buy-out fund will not be known until October 2020. It is dependent in part on the availability and price of Renewable Obligation Certificates (ROCs) – if there is a surplus of ROCs, suppliers may be more inclined to meet their obligations by submitting ROCs but ultimately much depends on supplier behaviour which is difficult to predict. The Department will have an indication of how many ROCs are available and whether there is likely to be a surplus after the end of the obligation year (31 March 2020) but will not know the size of the buy-out fund until October 2020.
The Department has indemnified Cornwall Council up to 2028 in respect of the transfer of Wave Hub to a maximum of £5 million.
The Departmental Group has the following contingent liabilities, which are either unquantifiable or quantifiable contingent liabilities of more than £1 million in either this financial year or prior financial year. Other liabilities are disclosed in our partner organisation accounts.
Under the Environmental Information Regulations 2004 – The Coal Authority is aware of potential legal proceedings in respect of past fees paid for Mining Information. In the eventuality of receiving formal notification to commence legal proceedings, the Coal Authority will strongly defend its position.
The Coal Authority is subject to various claims and legal actions in the ordinary course of its activities. Where appropriate, provisions are made in the accounts on the basis of information available and in accordance with guidance provided under the FReM and IFRS. The Coal Authority does not expect that the outcome of the above issues will materially affect its financial position. | Basis of Recognition | Description | |----------------------|-------------| | Coal Authority – Restructuring Scheme | Where liabilities transferred under the various Coal Authority Restructuring Schemes (CARS) have crystallised due to planning conditions, agreements, claims etc, provision has been made in these financial statements. It has not, however, been possible to quantify contingent liabilities that may arise in the future. It is expected that any costs will be covered by future allocations of grant in aid. | | Coal Authority – Subsidence damage and public safety liabilities | Licensees of mining operations are required to provide security to the Coal Authority to cover the anticipated future costs of settling subsidence damage liabilities within their areas of responsibility. Outside the areas of responsibility of the holders of licences under Part II of the 1994 Act, the Coal Authority is responsible for making good subsidence damage. Where an area of responsibility is extinguished this would transfer to the Coal Authority who would become responsible for the discharge of outstanding subsidence liabilities. The Coal Authority also has an ongoing liability to secure and keep secured the majority of abandoned coal mines. In all cases the liability for operating collieries is the responsibility of the licensees/lessees and security is held to address those liabilities. The above liabilities have been provided for within the Public Safety and Subsidence provision based on analysis of trends and claims experience. However, it is possible that significant, unexpected events outside of this provision may materialise. It is expected that any deficit will be covered by future allocations of grant in aid. | | CNPA – Legal Claims | There are a number of potential liabilities in respect of claims from employees. The timing and amounts of any payment are uncertain. These liabilities have not been provided for as the CNPA believes that the claims are unlikely to be successful and unlikely to lead to a transfer of economic benefits. | | Insolvency Service-Cheques Act 1992 | Following the enactment of the Cheques Act 1992, the Secretary of State for BEIS has indemnified the Insolvency Service’s bankers against certain liabilities arising in respect of non-transferable “account payee” cheques due to insolvent estates and paid into the accounts of the agency. | | NDA – Pension Schemes | Whilst not the lead employer, the NDA is the lead organisation and has ultimate responsibility for certain nuclear industry pension schemes, including the Combined Nuclear Pension Plan and the Magnox section of the ESPS. Provisions for known deficits are included within Nuclear Provisions. However, movements in financial markets may adversely impact the actuarial valuations of the schemes, resulting in an increase in scheme deficits and consequent increase in nuclear provision. | | UKRI – Indemnity to Roslin Institute | The former BBSRC sponsored Roslin institute transferred to the University of Edinburgh on 13 May 2008. BBSRC agreed to provide indemnity for any potential costs that arise as a result of past actions of the institute and indemnity for any fall in grant income of the Neuropathogenesis Unit as a result of the transfer. The proportion of settlement UKRI will fund declines on an annual basis and is limited to claims up to May 2023. | | Others | There are a number of potential liabilities for the Department in respect of claims from suppliers, employees and third parties which depend on actual or potential proceedings. The timing and amounts of any liabilities are uncertain. |
**Quantifiable**
| BBB – Financial guarantee (£3 million) | Under the Bank’s Help to Grow financial guarantee programme, the Bank has entered into financial guarantee agreements of £10.5 million (31 March 2019: £30 million). The Bank has guaranteed 75% of eligible lending to SMEs under these agreements and a counter guarantee is in place that guarantees 50% of the Bank’s 75% of eligible lending. As at 31 March 2020 the amount lent under these financial guarantee agreements was £3 million (31 March 2019: £3.2 million). During the year ending 31 March 2020 the remaining guarantee agreement originally totaling £30 million was reduced to £10.5 million, with no further amounts being lent under it. | | LCCC – Legal Dispute | There is an ongoing dispute between the company and another entity. The company has confidence in a favourable outcome. If the outcome is not as anticipated, the company will be required to make an annual payment from the interim levy of less than £10 million for the next several years. | | UKRI – (BBSRC) Contamination (£3 million) | As part of a Sale Agreement relating to a previous BBSRC site, BBSRC agreed to indemnify the purchaser against contamination resulting from dangerous substances. The indemnity was over a 10-year period commencing in 2013-14 and was capped at £3 million. |
### Basis of Recognition
| Description | Description | |-----------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | **UKRI – (BBSRC) Exit costs (£31 million)** | Prior to 31 March 2018, some staff at BBSRC strategically funded institutes were on BBSRC terms and conditions. Whilst their direct salary costs are paid by the institutes, BBSRC is liable for any exit costs for these staff. The date and number of staff to take exit packages in any one year is unknown; however, if all staff were to take exit packages, the maximum liability is estimated at £31 million, with the amount declining on an annual basis up to March 2022. | | **UKRI – (Innovate UK) Decommissioning costs (£2.6 million)** | UKRI has a contingent liability which may arise if UKRI has to provide a grant to NAREC (Natural Renewable Energy Centre) in order for it to be able to decommission a weather monitoring platform in the North Sea. This is currently collecting data to support the development of an offshore wind test site. This may take place anytime between three and 25 years from now dependent on the development of the site, at an estimated cost of £2.6 million. | | **UKRI – (STFC) Decommissioning costs (£1.8 million)** | A contingent liability exists for European Synchrotron Radiation Facility (ESRF) decommissioning costs associated with the dismantling of the facility and infrastructures. Decommissioning occurs on winding up of ESRF. If exit by the UK (or any other Member) results in ESRF being wound up, the Members are required to arrange for decommissioning of ESRF’s plant and buildings and to meet the costs of doing so in proportion to their share of capital at the time of dissolution. The contingent liability is estimated to be £1.8 million. | | **UKRI – (STFC) Reprocessing and staff commitments (£11.8 million)** | A contingent liability exists in respect of the Science and Technology Facilities Council (STFC)’s share of Institut Laue-Langevin (ILL) unfunded provisions for staff related costs (e.g. early retirement) and costs associated with reprocessing fuel elements. The contingent liability is estimated to be £11.8 million (31 March 2019: £13.6 million). | | **UKRI – Tax Status change (£45 million)** | Prior to the creation of UKRI, the Research Councils paid levels of tax consistent with charitable status, although they were not registered as charities. HMRC have confirmed that, due to changes in legislation, the Research Councils should not have been applying charitable tax reliefs after 1 April 2012 without registering as charities. To this end, UKRI has included £19.6 million of VAT and £4.1 million of Corporation Tax within their financial statements in respect of changes from HMRC for prior periods. In due course, UKRI will need to consider whether it should contact local authorities regarding charitable reliefs on business rates claimed by the Research Councils from 1 April 2012 to 31 March 2018. The maximum value of the contingent liability in respect of business rates is estimated to be £45 million. |
### 24. Contingent assets
#### Core Department
The Core Department has the following contingent assets:
| Basis of Recognition | Description | |--------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | **Quantifiable** | | | Core Department – Deed Relating to the British Coal Staff Superannuation Scheme (BCSSS) under Paragraph 2(9) of Schedule 5 to the Coal Industry Act 1994 (£1.8 billion) | Within twelve months of 31 March 2033, the trustee of the BCSSS shall pay to ‘the Guarantor’ (the Secretary of State) any surplus remaining on the scheme net of any amount retained for the obligation. The value of the surplus will depend on the value of scheme assets in relation to outstanding obligations. Based on the Government Actuary’s estimate of a £1.8 billion surplus as at 31 March 2018, the Department considers a receipt from the scheme to be probable. | Departmental Group
The Departmental Group has the following contingent assets:
| Basis of Recognition | Description | |----------------------|-------------| | Unquantifiable | | | Coal Authority – Restructuring Schemes | By virtue of the seventh and ninth Coal Authority Restructuring Schemes (CARS 7 and 9) the Coal Authority is the beneficiary of restrictive covenants and clawback provisions relating to land and properties sold by the British Coal Corporation. In the event that the purchasers are able to retrospectively secure added value by obtaining planning consent for alternative uses the Authority will receive a share of the added value. Quantification of this asset is not possible. |
25. Related-party transactions
The Core Department is the parent of the bodies listed in note 27 ‘List of bodies within the Departmental Group’ – these bodies are regarded as related parties and various material transactions have taken place during the reporting period between members of the Departmental Group. The related parties of the consolidating bodies are disclosed in their respective accounts. The Core Department is also the sponsor of Companies House, UK Intellectual Property Office (UKIPO), Met Office (Trading Funds), Ordnance Survey, NPL Management Limited, NNL Holdings Limited and British Nuclear Fuels.
The Core Department has had various material transactions with other government departments, government bodies and devolved administrations comprising the Northern Ireland Executive, Scottish Government and Welsh Government. The most significant of these transactions have been HM Treasury, Post Office, United Kingdom Research and Innovation, Nuclear Decommissioning Authority, HM Treasury’s consolidated fund and UK Space Agency.
No minister, board member, key manager of the Departmental Group or other related party have undertaken any material transactions with the Core Department during the year. Details of the Department’s ministers and senior managers are shown in the Remuneration Report.
A former Director General of the Core Department, Sarah Harrison, is an unpaid Non-Executive Director of the Government Property Agency which is an executive agency of the Cabinet Office and from which the Department leases the majority of its office accommodation.
In the course of allocating funding during the year, UKRI entered into material transactions with various Higher Education Institutions. Where these bodies have board members who are also members of university councils, each body operates a policy that precludes interested parties from voting on the funding to the university in which they have an interest. Further details of these transactions can be found in statutory accounts of UKRI.
26. Restatement of Statement of Financial Position and Statement of Comprehensive Net Expenditure as a result of changes to the Departmental boundary and other restatements
Prior period adjustments
BIS (Postal Services Act 2001) Company Limited (BPSA)
With the adoption of IFRS 9 ‘Financial Instruments’, all investment classifications and accounting judgments were re-assessed by BPSA. As a result of this, the unit of account of the investments held by BPSA was reassessed which led to changes in the recognition of investment movements and investment returns in the BPSA audited 2018-19 financial statements. These changes were identified after the 2018-19 Departmental Group accounts had been signed and laid in Parliament. The overall impact is an increase in the Departmental Group’s net assets of £7 million.
The disclosure impact in the SoFP was an increase in Other financial assets by £20 million (note 11). This was driven by:
- a reduction in Investment fund additions of £5 million,
- a reduction in Investment fund repayments of £101 million,
- a reduction in Investment fund revaluations of £82 million, and;
- an adjustment resulting from the adoption of IFRS 9 of £6 million.
The increase in Other financial assets of £20 million was partially offset by a reduction in Cash and cash equivalents of £10 million (note 16) and Trade and other receivables of £3 million (note 14).
The disclosure impact in the SoCNE was to recognise an increase of £80 million in the change in fair value of financial assets (note 5) and a decrease in Other operating expenditure of £32 million relating to profit on disposal of investments, off-set against an increase of £119 million of dividend and distribution from investment fund income (note 6.2).
As the disclosure impacts are material to the Departmental Group accounts, the Departmental Group’s comparatives have been restated in the 2019-20 Departmental Annual Report and Accounts. Had these adjustments been recognised in the Departmental Group Outturn in 2018-19, this would not have resulted in a control total breach. The Departmental Group Outturn adjustments are disclosed as a non-budget adjustment in 2019-20 SoPS and are broken down as follows: Note: HM Treasury’s Supply Estimate guidance manual requires that only increases in Outturn require non-budget cover in the 2019-20 Supplementary Estimate. The non-budget Outturn includes the decreases.
| Change in budgets and non-budget | Increases/(decrease) in Outturn £’000 | |----------------------------------|--------------------------------------| | 2018-19 – Capital AME – Government as Shareholder (ALB) net | 104,256 | | 2018-19 – Resource AME – Government as Shareholder (ALB) net | (39,661) | | 2018-19 – Resource DEL – Government as Shareholder (ALB) net | | | £10k increase in Admin (£1,255k) decrease in Programme | (1,245) | | Overall movement | 63,350 |
**Fleetbank Funding Limited (Fleetbank)**
Fleetbank holds the Enable loan investments, and from 1 April 2016 was consolidated into the Departmental Group accounts. It was identified that the investment additions (Capital DEL) of £141 million were incorrectly coded to non-budget spend in the Departmental Group Outturn in 2018-19. This adjustment has no impact on the presentation of the Departmental Group SoFP or SoCNE but does impact the SoPS as it is an increase in the Departmental Group’s Capital DEL Outturn. Had this adjustment been recognised in the Departmental Group’s Outturn in 2018-19, this would not have resulted in a control total breach. The Departmental Group Outturn cumulative adjustments are disclosed as a non-budget adjustment in 2019-20 SoPS and are broken down as follows:
| Change in budgets and non-budget | Increases/(decrease) in Outturn £’000 | |----------------------------------|--------------------------------------| | 2016-17 – Capital DEL – Government as Shareholder (ALB) net | 29,754 | | 2017-18 – Capital DEL – Government as Shareholder (ALB) net | 65,858 | | 2018-19 – Capital DEL – Government as Shareholder (ALB) net | 140,804 | | Overall movement | 236,416 | Impact of restatements on opening balances for the Departmental Group at 1 April 2019
| | Balance at 31 March 2019 per 2018-19 published accounts £m | Prior period adjustments £m | Restated balance at 1 April 2019 £m | |--------------------------------|-------------------------------------------------------------|-----------------------------|-------------------------------------| | **Consolidated Statement of Comprehensive Net Expenditure** | | | | | Operating Income | (3,260) | - | (3,260) | | Operating Expenditure | (84,817) | 32 | (84,785) | | Net expenditure for the year from continuing operations | (6,283) | (39) | (6,322) | | Other comprehensive net income and expenditure | (191) | - | (191) | | **Total comprehensive expenditure** | (94,551) | (7) | (94,558) | | **Consolidated Statement of Financial Position** | | | | | Non-current assets | | | | | Property, plant and equipment | 3,533 | - | 3,533 | | Investment properties | 117 | - | 117 | | Intangible assets | 167 | - | 167 | | Investments and loans in public bodies | 1,758 | - | 1,758 | | Other financial assets | 4,098 | 20 | 4,118 | | Recoverable contract costs | 1,620 | - | 1,620 | | Derivative financial instruments| 7 | - | 7 | | Investment in joint ventures and associates | 1,039 | - | 1,039 | | Trade and other receivables | 938 | - | 938 | | Current assets | | | | | Inventories | 37 | - | 37 | | Non-current assets held for sale| 20 | - | 20 | | Trade and other receivables | 1,568 | (3) | 1,565 | | Investments and loans in public bodies | 620 | - | 620 | | Derivative financial instruments| 17 | - | 17 | | Cash and cash equivalents | 2,088 | (10) | 2,078 | | **Current liabilities** | (8,726) | - | (8,726) | | **Non-current liabilities** | (148,380) | - | (148,380) | | **Taxpayer’s equity and other reserves** | | | | | General fund | 142,304 | (7) | 142,297 | | Revaluation reserve | (2,155) | - | (2,155) | | Charitable funds | (438) | - | (438) | | Non-controlling interests | (232) | - | (232) | 27. List of bodies within the Departmental Group
The table below shows the list of BEIS organisations that are included in the Government Resources and Accounts Act 2000 (Estimates and Accounts) Order 2019, known as the Designation Order, plus amendments from the Government Resources and Accounts Act 2000 (Estimate and Accounts) (Amendment) Order 2020, known as the Amendment Order. The individual Annual Report and Accounts for each of these bodies can be found on their own websites or via the Inside Government website (https://www.gov.uk/government/organisations/department-for-business-energy-and-industrial-strategy).
The bodies whose accounts have been consolidated within the Departmental Group accounts are shown in section (a) of the table. Bodies within the Departmental Group but not consolidated, such as where net assets are not considered material to the Departmental Group accounts, are indicated separately in section (b) of this table.
As a result of changes made in the 2019-20 Designation Order and Amendment Order some additional bodies are now included in the Departmental Group accounts boundary. Where boundary changes have an impact on previously reported financial results, these are shown in note 26.
| Designated Body | Status | Notes and website | |-----------------|--------|-------------------| | **(a) Bodies consolidated in Departmental Group accounts for 2019-20** | | **Agencies** | | Insolvency Service | Executive Agency | [gov.uk/government/organisations/insolvency-service](https://www.gov.uk/government/organisations/insolvency-service) | | UK Space Agency | Executive Agency | [gov.uk/government/organisations/uk-space-agency](https://www.gov.uk/government/organisations/uk-space-agency) | | **NDPBs and other designated bodies** | | Advisory, Conciliation and Arbitration Service | NDPB | [acas.org.uk](https://acas.org.uk) | | Central Arbitration Committee | NDPB (linked to ACAS) | Consolidated by ACAS | | Certification Office for Trade Union and Employers’ Associations | Other Public Body - Office Holder (linked to ACAS) | Consolidated by ACAS | | BIS (Postal Services Act 2011) Company Limited | Other Public Body – Limited Company | [beta.companieshouse.gov.uk/company/07941521](https://beta.companieshouse.gov.uk/company/07941521) | | British Business Bank plc | Other Public Body – Public Limited Company | [british-business-bank.co.uk](https://www.british-business-bank.co.uk) | | BBB Patient Capital Holdings Limited | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | British Business Investments Ltd | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | British Business Finance Ltd | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | British Business Financial Services Ltd | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | British Business Aspire Holdco Ltd | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | British Patient Capital Limited | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | Capital for Enterprise Fund Managers Limited | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | Capital for Enterprise (GP) Limited | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | Capital for Enterprise Limited | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | Designated Body (linked bodies are indicated in italics below their parent body) | Status | Notes and website | |---|---|---| | The Start-Up Loans Company | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | Civil Nuclear Police Authority | NDPB | [gov.uk/government/organisations/civil-nuclear-police-authority](gov.uk/government/organisations/civil-nuclear-police-authority) | | Coal Authority | NDPB | [gov.uk/government/organisations/the-coal-authority](gov.uk/government/organisations/the-coal-authority) | | Committee on Fuel Poverty | NDPB | [gov.uk/government/organisations/committee-on-fuel-poverty](gov.uk/government/organisations/committee-on-fuel-poverty) Costs are included in the Core Department’s expenditure. | | Committee on Radioactive Waste Management | NDPB | [gov.uk/government/organisations/committee-on-radioactive-waste-management](gov.uk/government/organisations/committee-on-radioactive-waste-management) Costs are included in the Core Department’s expenditure. | | Competition Service | NDPB | [catribunal.org.uk/about/competition-service](catribunal.org.uk/about/competition-service) | | Competition Appeal Tribunal | NDPB | [catribunal.org.uk](catribunal.org.uk) | | The Copyright Tribunal | NDPB | [gov.uk/government/organisations/copyright-tribunal](gov.uk/government/organisations/copyright-tribunal) No accounts produced as costs are included in the Core Department’s expenditure. It is funded by the Core Department and operated by UK Intellectual Property Office. | | Cornwall and Isles of Scilly Investments Limited | Other Public Body – Limited Company | [ciosif.co.uk](ciosif.co.uk) | | Council for Science and Technology | Expert Committee | [gov.uk/government/organisations/council-for-science-and-technology](gov.uk/government/organisations/council-for-science-and-technology) No accounts produced as costs are included in the Core Department’s expenditure. | | Diamond Light Source Limited | Other Public Body – Limited Company | [diamond.ac.uk](diamond.ac.uk) | | Dounreay Site Restoration Limited | Limited Company – NDA Site Licence Company | [dounreay.com](dounreay.com) Site Licence Company – private company, which operates sites on behalf of, and under contract from the NDA. | | Enrichment Holdings Ltd | Other Public Body – Limited Company | This is a special purpose vehicle for the Government’s investment in Urenco Limited. | | Enrichment Investments Limited | Limited Company (Subsidiary of Enrichment Holdings Limited) | Consolidated by Enrichment Holdings Limited | | Electricity Settlements Company Ltd | Other Public Body – Limited Company | [emrsettlement.co.uk](emrsettlement.co.uk) | | Fleetbank Funding Limited | Other Public Body – Limited Company | This is a vehicle for the government to facilitate the Enable Loan Guarantee Scheme | | The Financial Reporting Council Limited | Other Public Body – Limited Company | [frc.org.uk](frc.org.uk) | | Harwell Science and Innovation Campus Public Sector Limited Partnership | Other Public Body – Limited Partnership | Joint venture owned by UKRI and UK Atomic Energy Authority | | Designated Body | Status | Notes and website | |----------------|--------|-------------------| | **Industrial Development Advisory Board** | Expert Committee | [gov.uk/government/organisations/industrial-development-advisory-board](https://gov.uk/government/organisations/industrial-development-advisory-board) | | **LLW Repository Limited** | Limited Company – NDA Site Licence Company | [llwrsite.com](https://llwrsite.com) | | **Low Carbon Contracts Company Ltd** | Other Public Body – Limited Company | [lowcarboncontracts.uk](https://lowcarboncontracts.uk) | | **Low Pay Commission** | NDPB | [gov.uk/government/organisations/low-pay-commission](https://gov.uk/government/organisations/low-pay-commission) | | **Midlands Engine Investments Limited** | Other Public Body – Limited Company | [british-business-bank.co.uk/ourpartners/midlands-engine-investment-fund](https://british-business-bank.co.uk/ourpartners/midlands-engine-investment-fund) | | **The NESTA Trust** | Other Public Body – Charitable Trust | [nesta.org.uk/faqs/what_is_the_nesta_trust](https://nesta.org.uk/faqs/what_is_the_nesta_trust) | | **Northern Powerhouse Investments Limited** | Other Public Body – Limited Company | [british-business-bank.co.uk/ourpartners/northern-powerhouse-investment-fund](https://british-business-bank.co.uk/ourpartners/northern-powerhouse-investment-fund) | | **Nuclear Decommissioning Authority** | NDPB | [gov.uk/government/organisations/nuclear-decommissioning-authority](https://gov.uk/government/organisations/nuclear-decommissioning-authority) | | **Magnox Limited** | Limited Company (Subsidiary of NDA) | From 1 September 2019, consolidated by the Nuclear Decommissioning Authority. Prior to 1 September 2019, a company operating sites on behalf of, and under contract from the NDA. | | **Radioactive Waste Management Limited** | Limited Company (Subsidiary of NDA) | Consolidated by Nuclear Decommissioning Authority | | **Sellafield Limited** | Limited Company (Subsidiary of NDA) | [sellafieldsites.com](https://sellafieldsites.com) | | **Nuclear Liabilities Financing Assurance Board** | Expert Committee | [gov.uk/government/organisations/nuclear-liabilities-financing-assurance-board](https://gov.uk/government/organisations/nuclear-liabilities-financing-assurance-board) | | **Office of Manpower Economics** | Office of Department | [gov.uk/government/organisations/office-of-manpower-economics](https://gov.uk/government/organisations/office-of-manpower-economics) | | **Oil and Gas Authority** | Other Public Body – Limited Company | [ogaauthority.co.uk](https://ogaauthority.co.uk) | | **Postal Services Holding Company Limited** | Other Public Body – Limited Company | Company in liquidation. Former holding company for the government’s investment in Post Office Limited. | | **Regulatory Policy Committee** | NDPB | [gov.uk/government/organisations/regulatory-policy-committee](https://gov.uk/government/organisations/regulatory-policy-committee) |
*Designated Body (linked bodies are indicated in italics below their parent body)*
*Notes and website (further information about linked bodies or those closed during the year is also included)* | Designated Body (linked bodies are indicated in italics below their parent body) | Status | Notes and website | |---|---|---| | South Tees Site Company Limited | Other Public Body – Limited Company | [https://www.southteesdc.com/about-us/south-tees-site-company-ltd](https://www.southteesdc.com/about-us/south-tees-site-company-ltd) This is a vehicle for managing the government investment in the South Tees Site | | UK Climate Investments LLP | Other Public Body – Limited Liability Partnership | [greeninvestmentgroup.com/ukci](http://greeninvestmentgroup.com/ukci) Limited Liability Partnership between BEIS and UK Green Investment Bank | | UK Climate Investments Apollo Limited | Limited Company (Subsidiary of UKCI) | Consolidated by the UK Climate Investments LLP | | UK Climate Investments H1 Limited | Limited Company (Subsidiary of UKCI) | Consolidated by the UK Climate Investments LLP | | UK Climate Investments Indigo Limited | Limited Company (Subsidiary of UKCI) | Consolidated by the UK Climate Investments LLP | | UK Climate Investments Lakeside Limited | Limited Company (Subsidiary of UKCI) | Consolidated by the UK Climate Investments LLP | | UK Climate Investments VC Limited | Limited Company (Subsidiary of UKCI) | Consolidated by the UK Climate Investments LLP | | UK Green Infrastructure Platform Limited | Other Public Body – Limited Company | Investment vehicle managed by UK Green Investment Bank Limited on behalf of BEIS. | | United Kingdom Research and Innovation | NDPB | [ukri.org](http://ukri.org) | | Medical Research Council¹ | Part of UKRI | Former Research Council now part of UKRI | | The Science and Technology Facilities Council (STFC)¹,⁴ | Part of UKRI | Former Research Council now part of UKRI | | Innovate UK Loans Limited | Limited Company (Subsidiary of UKRI) | Consolidated by UKRI | | STFC Innovations Limited | Limited Company (Subsidiary of UKRI) | Consolidated by UKRI | | UK Shared Business Services Limited | Other Public Body – Limited Company | [uksbs.co.uk](http://uksbs.co.uk) | | United Kingdom Atomic Energy Authority¹ | NDPB | [gov.uk/government/organisations/uk-atomic-energy-authority](http://gov.uk/government/organisations/uk-atomic-energy-authority) (corporate) [ccfe.ukaea.uk](http://ccfe.ukaea.uk) (fusion research) | | AEA Insurance Limited | Part of UKAEA | Consolidated by United Kingdom Atomic Energy Authority |
(b) Bodies not consolidated in Departmental Group accounts for 2019-20
| Designated Body | Status | Notes and website | |---|---|---| | British Hallmarking Council | NDPB | [gov.uk/government/organisations/british-hallmarking-council](http://gov.uk/government/organisations/british-hallmarking-council) Turnover and net assets are not material to Departmental Group accounts. | | British Technology Investments Limited | Other Public Body – Limited Company | Turnover and net assets are not material to Departmental Group accounts. | | Committee on Climate Change¹ | NDPB | [theccc.org.uk/about](http://theccc.org.uk/about) Turnover and net assets are not material to Departmental Group accounts. | | Designated Body | Status | Notes and website | |----------------|--------|-------------------| | Daresbury SIC (PubSec) LLP | Other Public Body – Limited Liability Partnership | [https://beta.companieshouse.gov.uk/company/OC360004](https://beta.companieshouse.gov.uk/company/OC360004) A joint venture between the Science and Technology Facilities Council (UKRI) and Halton Borough Council. Turnover and net assets are not material to Departmental Group accounts. | | Daresbury Science & Innovation Campus Limited | Other Public Body – Limited Company | [www.sci-techdaresbury.com](http://www.sci-techdaresbury.com) A joint venture between the Science and Technology Facilities Council (UKRI) and Langtree. Turnover and net assets are not material to Departmental Group accounts. | | East Midlands Early Growth Fund Limited | Other Public Body – Limited Company | Recorded as investment in Core Department accounts. Turnover and net assets are not material to Departmental Group accounts. | | Groceries Code Adjudicator | Other Public Body – Office Holder | [gov.uk/government/organisations/groceries-code-adjudicator](https://www.gov.uk/government/organisations/groceries-code-adjudicator) Turnover and net assets are not material to Departmental Group accounts. | | NDA Archives Limited | Other Public Body – Subsidiary of NDA – Limited Company | Part of the NDA – [gov.uk/government/organisations/nuclear-decommissioning-authority](https://www.gov.uk/government/organisations/nuclear-decommissioning-authority) Turnover and net assets are not material to Departmental Group accounts. | | NW VCLF HF LLP | Other Public Body – Limited Liability Partnership | Recorded as investment in Core Department accounts. Turnover and net assets are not material to Departmental Group accounts. | | Pubs Code Adjudicator | Other Public Body – Office Holder | [gov.uk/government/organisations/pubs-code-adjudicator](https://www.gov.uk/government/organisations/pubs-code-adjudicator) Turnover and net assets are not material to Departmental Group accounts. | | Research Sites Restoration Limited | Other Public Body – Subsidiary of NDA – Limited Company | Part of the NDA – Dormant – Site Licence Company No costs or activities incurred in 2019-20 as the activities transferred to Magnox in 2016-17. | | Small Business Commissioner | NDPB | [https://www.smallbusinesscommissioner.gov.uk](https://www.smallbusinesscommissioner.gov.uk) Turnover and net assets are not material to Departmental Group accounts. |
**Notes:**
1. Entities fall in scope of the Trade Union (Facility Time Publication Requirements) Regulations 2017. Disclosure regarding Facility Time can be found in the relevant accounts.
2. During 2018-19 the Office of National Statistics (ONS) reclassified two of the Department’s non-consolidated Executive Agencies, HM Land Registry and Companies House, from Public Corporations to Central Government Bodies. This reclassification will result in Companies House being consolidated into the Departmental Group accounts from 1 April 2020. HM Land Registry will not be consolidated into the Departmental Group accounts as it has been classified by Cabinet Office as a Non-Ministerial Department having a separate Estimate to the Department and preparing its own separate accounts. The Department has received a derogation from HM Treasury to not consolidate Companies House until its Trading Fund status is revoked in Parliament. Companies House’s Trading Fund Revocation Order has been laid in Parliament and has an effective date of 1 April 2020. Companies House will be consolidated into the 2020-21 Departmental Accounts.
3. Magnox Ltd became a wholly owned subsidiary of the Nuclear Decommissioning Authority (NDA) on 1 September 2019.
4. The Science and Technology Facilities Council ceased to exist as of 30 March 2020.
5. Daresbury Science & Innovation Campus Limited was dissolved via voluntary strike off on 31 March 2020.
6. Events after the Reporting Period
Adjusting events
The Small Business Grant Fund and the Retail, Hospitality and Leisure Grant Fund schemes closed to new applicants from the end of August 2020, limiting the Department’s liability. Local Authorities provide weekly updates of payments made under the schemes, which has materially changed the total liability for the Department. Note 18.2 includes a provision of £10.8 billion relating to the expected outflow of cash to eligible businesses, in addition to the £151 million recognised as a grant accrual.
The total cash paid by Local Authorities to businesses as at 16 August 2020 was £10.9 billion. Further unaudited information on the spend can be found on the gov.uk website https://www.gov.uk/government/publications/coronavirus-grant-funding-local-authority-payments-to-small-and-medium-businesses
Non-adjusting events
The Nuclear Liabilities Fund was established in 1996 to meet certain costs of decommissioning eight nuclear power plants in the UK that have been owned and operated by EDF Energy Nuclear Generation Limited since 2009. Following discussion between HM Treasury and the Fund, on 23 June 2020 the Fund agreed to retain an existing deposit of £6.5 billion in the UK Exchequer in return for a contribution of £5.07 billion from the Core Department which will also be held by the Fund as a deposit in the Exchequer. The contribution by the Department was not related to any change in the Department’s assessment, as described in note 23, of the sufficiency of the Fund to meet the decommissioning liabilities prior to the Fund’s agreement to retain its deposit in the Exchequer.
On 3 July 2020, the Government announced that it led a successful bid to acquire OneWeb, which develops cutting-edge satellite technology in the UK and in the US. The Core Department for the Business, Energy and Industrial Strategy will invest $500 million and take a significant equity share in OneWeb.
Due to the COVID-19 pandemic, the government announced a number of support schemes for businesses. These schemes do not have a financial impact on the 2019-20 financial statements, unless otherwise stated.
The Coronavirus Business Interruption Loans (CBILS) were announced by the Chancellor on 11 March 2020. This scheme provides term loans, overdrafts, invoice finance and asset finance up to £5 million with an 80% guarantee to lenders. The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied charges. The scheme is available for businesses with a turnover up to £45 million. The term loans and asset facilities are for up to six years, whilst the overdrafts and invoice finance facilities are up to three years. Post year end, the terms associated with businesses meeting the criteria of whether they qualify for the loans have been relaxed meaning even more smaller businesses across the UK can access finance. Access has been opened up to those smaller businesses that would have previously met the requirements for a commercial facility, with insufficient security no longer a condition to access the scheme. As at 18 August 2020, £10.5 billion of loans have been provided under the scheme. The maximum amount that could be paid out if all loans defaulted is £8.4 billion. Not all loans are expected to default, with losses estimated as at September 2020 to be in a range of 10-25%. The initial indicative loss ranges are based on historic losses observed in prior programmes which most closely resemble the current COVID-19 interventions. However, no two programmes (or two economic downturns) are completely alike and the estimate will be revised as more data becomes available. This data will be used as an input into the loss forecasting models, which are currently being developed. Actual losses could be significantly different to forecast losses.
The Coronavirus Large Business Interruption Loan Scheme (CLBILS) supports large businesses to access loans, overdrafts and other finance, through an 80% guarantee to lenders. Businesses with an annual turnover over £45 million can apply for up to £200 million of finance, capped at the higher of 25% of turnover, twice the annual wage bill, or need for 12 months liquidity. The maximum term length is three years. As at 18 August 2020, £1.4 billion of loans have been provided under the scheme. The maximum amount that could be paid out if all loans defaulted is £1.1 billion. Not all loans are expected to default, with losses estimated as at September 2020 to be in a range of 5-20%. The initial indicative loss ranges are based on historic losses observed in prior programmes which most closely resemble the current COVID-19 interventions. However, no two programmes (or two economic downturns) are completely alike and the estimate will be revised as more data becomes available. This data will be used as an input into the loss forecasting models, which are currently being developed. Actual losses could be significantly different to forecast losses.
The Bounce Back Loan Scheme (BBLS) provides loans to businesses of up to £50,000 (interest and repayment free for the first 12 months paid for by a Business Interruption Payment grant), with a 100% government-backed guarantee for lenders. These loans have a term length of six years. As at 18 August 2020, £34.2 billion of loans have been provided under the scheme. The maximum amount that could be paid out if all loans defaulted is £34.2 billion. Not all loans are expected to default, with losses estimated as at September 2020 to be in a range of 35-60%. The initial indicative loss ranges are based on historic losses observed in prior programmes which most closely resemble the current COVID-19 interventions. However, no two programmes (or two economic downturns) are completely alike and the estimate will be revised as more data becomes available. This data will be used as an input into the loss forecasting models, which are currently being developed. Actual losses could be significantly different to forecast losses.
The Future Fund scheme issues convertible loans of between £125,000 and £5 million to innovative companies which are facing financing difficulties due to COVID-19. Each loan requires at least equal match funding from private investors and can be converted into equity in the company once the loan matures. As at 16 August 2020, £588.3 million of loans have been approved to 590 companies.
The Local Authority Discretionary Grants Fund was announced on 2 May 2020 and provides Local Authorities with grant funding for small businesses up to £617 million.
The Vaccines Taskforce was launched on 17 April 2020 to drive forward, expedite and co-ordinate efforts to research and then produce a coronavirus vaccine. The Department’s role is to identify and procure a portfolio of vaccine candidates including supporting vaccine manufacture, so that a vaccine can be secured and made available to the public as soon as possible. As a result, the Department has entered into a number of commercially sensitive contracts.
28.1 Date Accounts authorised for issue
BEIS’s Accounting Officer has authorised these Accounts to be issued on the same day as they were certified. Page intentionally left blank Trust Statement Foreword by the Accounting Officer
Overview The Trust Statement accounts for the income BEIS collects as an agent of the HMT Consolidated Fund. The amounts collected are passed to the Consolidated Fund. In 2019-20, BEIS collected income under the following schemes.
- EU emissions trading scheme (EU ETS)
- Carbon reduction commitment (CRC)
- Climate change agreements (CCA)
- Energy saving opportunity scheme (ESOS)
EU ETS
About EU ETS EU ETS is the largest emissions trading system to reduce GHG emissions; around 1,000 industrial plants in the UK participate in the system. It is a cap and trade system. It caps the amount of GHG emissions participants can emit; it allows trading of allowances so that total emissions stay within the cap. There are separate emission allowances for stationary installations and aircraft operators. EU allowances (EUA), while EU aviation allowances (EUAA) are allowances for aircraft operators.
Throughout 2019, UK’s access to the EU ETS registry was suspended as part of Brexit preparations. During this period the UK was unable to issue free allowances or hold national auctions. The suspension was lifted on 31 January 2020 when the UK and EU ratified the withdrawal agreement. Free allowances relating to 2019 and 2020 were issued to UK operators in February 2020, and UK auctions resumed in March 2020.
EU ETS financial summary
- In March 2020, the UK held two EUA auctions.
- 261 civil penalties were issued by the Environment Agency, regulator for stationary installations in England. Most of the penalties relate to non-compliance within the UK small emitter opt-out scheme. A penalty is charged for each tonne of CO₂ beyond the target. Some of these penalties relate to previous compliance years.
CRC
About CRC CRC is an energy efficiency scheme, mandatory for large, non-energy intensive organisations, using over 6GWh of qualifying electricity. There are over 5,000 participants across the scheme. Participants buy allowances for each tonne of equivalent carbon dioxide emissions.
CRC closed at the end of the 2018-19 compliance year to simplify the landscape for energy efficiency tax on businesses. July 2019 was the last time participants had to report under CRC, and in October 2019, surrender allowances for 2018-19 emissions. In April 2019, the reporting element of CRC was replaced by the Streamlined Energy and Carbon Reporting (SECR) framework.
2019-20 saw the fifth buy-to-comply sale (for compliance year 2018-19). The prices across the scheme are as follows;
| CRC scheme year | Compliance sale price | Forecast sale price | |-----------------|-----------------------|---------------------| | 2018-19 | £18.30 | £17.20 | | 2017-18 | £17.70 | £16.60 | | 2016-17 | £17.20 | £16.10 | | 2015-16 | £16.90 | £15.60 | | 2014-15 | £16.40 | £15.60 |
CRC financial summary
- CRC allowance sales in 2019-20 generated £280 million (2018-19: £440 million). There were 40 civil penalties levied against CRC participants.
- Civil penalties amounted to £249,078 (2018-19: £69,090). The costs incurred in administering the CRC scheme were borne by the Department as shown in note 3 and included within the Department’s Accounts. CCA
About CCA CCA is an energy efficiency scheme which is voluntary for businesses in energy intensive sectors. CCA is an agreement to meet stretching targets in exchange for a reduced Climate Change Levy (CCL) of up to 93%. The scheme was launched in April 2013 and runs until 31 March 2023.
CCA generates income from: • Charging income: annual payment made by participants to the Administrator; this is retained by the Environment Agency and will not feature in the Trust Statement. • Civil penalties for minor infractions received by the Administrator • Buy-out payments if targets are not met at the end of the 2-year target period.
CCA financial summary • In 2019-20, the income from buy-out payments generated £31.974 million (£107,760 in 2018-19) – shown in note 2.3 of the Trust Statement. The higher income in the current year is because 2019-20 was a period of primary reporting for Target Reporting Period III. By comparison, 2018-19 was a period of secondary reporting for Target Reporting Period II, where participants make further top-up buy-out payments after an audit or they receive a refund if they have overpaid. • 1 civil penalty was issued under the CCA scheme totalling £1,602 (2018-19: 2 civil penalties totalling £565).
ESOS
About ESOS ESOS is an energy assessment scheme, mandatory for all large organisations in the UK, established in response to the EU Energy Efficiency Directive Article 8 (4-6). Qualifying organisations must carry out audits every four years on energy use of their buildings, industrial processes and transport to identify cost-effective energy saving measures. The Scheme runs until 5 December 2027. Phase II ran until 5 December 2019, and Phase III runs until 5 December 2023. In Phase 1 there were 6,075 ultimate parent organisations in the scheme.
ESOS generates income from non-compliance penalties.
ESOS financial summary • In 2019-20, 12 penalties were issued which totalled £105,725 (2018-19: 28 penalties which totalled £272,202).
Governance statement The Department’s governance statement covers both the Accounts and the Trust Statement and is included in the Governance section of this report.
Remote contingent liabilities Audited information No remote contingent liabilities exist at the end of the reporting period.
Basis for preparation The HM Treasury Accounts Direction, issued in accordance with Section 2 of the Exchequer and Audit Departments Act 1921 requires the Department to prepare the Trust Statement to give a true and fair view of the state of affairs relating to the collection and allocation of the carbon allowance auction receipts for the EU Emissions Trading Schemes, the allowances sales from the CRC scheme, buy-out payments from the CCA Scheme and civil penalties receivable under the EU ETS, CRC, CCA and ESOS schemes. Regard is given to all relevant accounting and disclosure requirements given in Managing Public Money and other guidance issued by HM Treasury.
Accounting judgements As the Accounting Officer, it is my responsibility to apply suitable accounting policies in the preparation of the Trust Statement. Revenues are recognised in the period in which the event that generates the revenue takes place, consequently the anticipated proceeds from future auctions and licences as detailed in note 2 are not recognised as assets within this statement. All the transactions within the Trust Statement reflect transactions that have taken place.
Events after the reporting period Details of events after the reporting period are given in note 10 to the Trust Statement. Auditors
These financial statements have been audited, under the Exchequer and Audit Departments Act 1921, by the Comptroller and Auditor General, who is appointed under statute and reports to Parliament. The audit opinion is on pages 231 to 233. The auditor’s notional remuneration is included within the Department’s Accounts. There were no fees in respect of non-audit work. Statement of Accounting Officer’s responsibilities for the Trust Statement
Under section 2 of the Exchequer and Audit Departments Act 1921, HM Treasury has directed the Department for Business, Energy and Industrial Strategy to prepare for each financial year a Trust Statement in the form and on the basis set out in the Accounts Direction.
HM Treasury has appointed the Permanent Secretary as Accounting Officer of the Department for Business, Energy and Industrial Strategy with overall responsibility for preparing the Trust Statement and for transmitting it to the Comptroller and Auditor General.
The Accounting Officer is responsible for ensuring that: there is a high standard of financial management, including a sound system of internal control; that financial systems and procedures promote the efficient and economical conduct of business and safeguard financial propriety and regularity; that financial considerations are fully taken into account in decisions on policy proposals; and that risk is considered in relation to assessing value for money.
The Accounting Officer is responsible for the fair and efficient administration of the EU ETS including conducting the auction of EU Allowances in the UK for Phase III of the Scheme and Aviation allowances of the EU ETS, collection of the proceeds and onward transmission of the funds in their entirety to the Consolidated Fund.
The Accounting Officer is also responsible for the collection of CRC Allowances and CCA buy-out payments for onward transmission to the Consolidated Fund and, the collection of civil penalties levied under the EU ETS, CCA, CRC, and ESOS schemes for onward transmission to the Consolidated Fund.
The responsibilities of the Accounting Officer, including responsibility for the propriety and regularity of the public finances for which an Accounting Officer is answerable, for keeping proper records and for safeguarding the Department’s assets, are set out in Managing Public Money published by HM Treasury.
The Trust Statement must give a true and fair view of:
- the statement of affairs of the EU ETS, CCA Schemes and penalties issued under the EU ETS, ESOS, CCA and CRC Schemes
- the state of affairs of the CRC Allowance Scheme sales which are recognised on a cash received basis
- the revenue collected, and expenditure incurred together with the net amounts surrendered to the Consolidated Fund
In preparing the Trust Statement, the Accounting Officer is required to comply with the requirements of the Government Financial Reporting Manual and in particular to:
- observe the Accounts Direction issued by HM Treasury, including the relevant accounting and disclosure requirements, and apply suitable accounting policies on a consistent basis
- make judgements and estimates on a reasonable basis
- state whether applicable accounting standards as set out in the Government Financial Reporting Manual have been followed, and disclose and explain any material departures in the accounts
- prepare the Trust Statement on a going-concern basis Accounting Officer’s confirmation
As the Accounting Officer, I have taken all the steps that I ought to have taken to make myself aware of any relevant audit information and to establish that the Department’s auditors are aware of that information. So far as I am aware, there is no relevant audit information of which the auditors are unaware. The annual report and accounts as a whole is fair, balanced and understandable. I take personal responsibility for the annual report and accounts and the judgements required for determining that it is fair, balanced and understandable.
Sarah Munby Permanent Secretary and Principal Accounting Officer 11 September 2020 The Trust Statement Audit Report of the Comptroller and Auditor General to the House of Commons
Opinion on financial statements I have audited the financial statements of Department for Business, Energy and Industrial Strategy Trust Statement (“the Trust Statement”) for the year ended 31 March 2020 under the Exchequer and Audit Departments Act 1921. The financial statements comprise the Statement of Revenue, Other Income and Expenditure, the Statement of Financial Position, the Statement of Cash Flows and the related notes, including the significant accounting policies. These financial statements have been prepared under the accounting policies set out within them.
In my opinion: • The Trust Statement gives a true and fair view of the state of affairs of balances stemming from: the collection of EU Emissions Trading Scheme (ETS) auction receipts; Carbon Reduction Commitment (CRC) allowance sales; Climate Change Agreements (CCA) receipts; and EU ETS, CRC, CCA, and Energy Savings Opportunity Scheme (ESOS) civil penalties as at 31 March 2020 and of the net revenue for the year then ended; and • the financial statements have been properly prepared in accordance with the Exchequer and Audit Departments Act 1921 and HM Treasury directions issued thereunder.
Opinion on regularity In my opinion, in all material respects the income and expenditure recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.
Basis of opinions I conducted my audit in accordance with International Standards on Auditing (ISAs) (UK) and Practice Note 10 ‘Audit of Financial Statements of Public Sector Entities in the United Kingdom’. My responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of my certificate. Those standards require me and my staff to comply with the Financial Reporting Council’s Revised Ethical Standard 2016. I am independent of the Department in accordance with the ethical requirements that are relevant to my audit and the financial statements in the UK. My staff and I have fulfilled our other ethical responsibilities in accordance with these requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.
Conclusions relating to going concern I have nothing to report in respect of the following matters in relation to which the ISAs (UK) require me to report to you where: • the Department’s use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or • the Department have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Department’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Responsibilities of the Accounting Officer for the audit of the financial statements As explained more fully in the Statement of Accounting Officer’s Responsibilities for the Trust Statement, the Accounting Officer is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Auditor’s responsibilities for the audit of the financial statements My responsibility is to audit and report on the financial statements in accordance with the Exchequer and Audit Departments Act 1921. An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs (UK), I exercise professional judgment and maintain professional scepticism throughout the audit. I also:
- identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Department’s internal control.
- evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Conclude on the appropriateness of the Department’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Department’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my report. However, future events or conditions may cause the Department to cease to continue as a going concern.
I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.
I am required to obtain evidence sufficient to give reasonable assurance that the income and expenditure recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.
Other information
The Accounting Officer is responsible for the other information. The other information comprises information included in the Accounting Officer’s foreword to the Trust Statement and Statement of the Accounting Officer’s responsibility for the Trust Statement, but does not include the financial statements and my auditor’s report thereon. My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon. In connection with my audit of the financial statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard.
Opinion on other matters
In my opinion:
- the information given in the Accounting Officer’s foreword to the Trust Statement and Statement of the Accounting Officer’s responsibility for the Trust Statement for the financial year for which the financial statements are prepared is consistent with the financial statements.
**Matters on which I report by exception**
I have nothing to report in respect of the following matters which I report to you if, in my opinion:
- adequate accounting records have not been kept or returns adequate for my audit have not been received from branches not visited by my staff; or
- the financial statements are not in agreement with the accounting records and returns; or
- I have not received all of the information and explanations I require for my audit; or
- the Governance Statement does not reflect compliance with HM Treasury’s guidance.
**Report**
I have no observations to make on these financial statements.
______________________________________________________________________
**Gareth Davies**\
**Comptroller and Auditor General**
National Audit Office\
157-197 Buckingham Palace Road\
Victoria\
London\
SW1W 9SP\
15 September 2020 Statement of Revenue, Other income and Expenditure
for the year ended 31 March 2020
| Note | 2019-20 £’000 | 2018-19 £’000 | |------|---------------|---------------| | **Revenue** | | | | License fees and taxes | | | | EU ETS auction income | 2.1 | 201,388 | 1,270,535 | | CRC allowance sales | 2.2 | 280,462 | 440,280 | | CCA buy-out payments income | 2.3 | 31,974 | 108 | | **Total licence fees and taxes** | | 513,824 | 1,710,923 | | Fines and penalties | | | | Civil penalties – EU ETS | | 8,485 | 2,745 | | Civil penalties – CRC | | 250 | 69 | | Civil penalties – CCA | | 2 | 1 | | Civil penalties – ESOS | | 106 | 272 | | **Total fines and penalties** | 2.4 | 8,843 | 3,087 | | **Total revenue and other income** | | 522,667 | 1,714,010 | | **Expenditure** | | | | Foreign exchange and interest – EU ETS | 3.1 | 195 | (1,269) | | Credit losses – debts written off | 3.2 | (9) | – | | **Total expenditure** | | 186 | (1,269) | | **Net revenue for the Consolidated Fund** | | 522,853 | 1,712,741 |
There were no recognised gains or losses accounted for outside of the above Statement of Revenue, Other Income and Expenditure.
The notes on pages 237 to 241 form part of this statement.
## Statement of Financial Position
**as at 31 March 2020**
| Note | 31 March 2020 | 31 March 2019 | |------|---------------|---------------| | | £'000 | £'000 | | **Current assets** | | | | Receivables and accrued fees | 4 | 9,400 | 2,797 | | Cash and cash equivalents | 5 | 33,181 | 27,898 | | **Total current assets** | | 42,581 | 30,695 | | **Current liabilities** | | | | Payables | 6 | (639) | (324) | | **Total current liabilities** | | (639) | (324) | | **Net current assets** | | 41,942 | 30,371 | | **Total net assets** | | | | Represented by: | | 41,942 | 30,371 | | **Balance on Consolidated Fund Accounts** | | 41,942 | 30,371 |
The notes on pages 237 to 241 form part of this statement.
______________________________________________________________________
**Sarah Munby**\
Permanent Secretary and\
Principal Accounting Officer\
11 September 2020 Statement of Cash Flows
for the year ended 31 March 2020
| Note | 2019-20 | 2018-19 | |------|---------|---------| | | £'000 | £'000 | | Net cash flows from operating activities | A | 516,565 | 1,711,335 | | Cash paid to the Consolidated Fund | 7 | (511,282) | (1,707,358) | | Increase/(decrease) in cash in this period | B | 5,283 | 3,977 |
Notes to the Statement of Cash Flows
| Note | 2019-20 | 2018-19 | |------|---------|---------| | | £'000 | £'000 | | A: Reconciliation of Net Cash Flow to Movement in Net Funds | | | | Net Revenue for the Consolidated Fund | 7 | 522,853 | 1,712,741 | | (Increase)/decrease in receivables and accrued fees | 4 | (6,603) | (1,326) | | Increase/(decrease) in payables | 6 | 315 | (80) | | Net cash flows from operating activities | | 516,565 | 1,711,335 | | B: Analysis in changes in Net Funds | | | | Increase/(decrease) in cash in this period | | 5,283 | 3,977 | | Net Funds as at 1 April (net cash at bank) | 5 | 27,898 | 23,921 | | Net Funds as at 31 March (closing balance) | 5 | 33,181 | 27,898 | Notes to the Trust Statement
1. Accounting Policies
1.1 Basis of accounting
The Trust Statement is prepared in accordance with the accounts direction issued by HM Treasury under section 2 of the Exchequer and Audit Departments Act 1921. The Trust Statement is prepared in accordance with the accounting policies detailed below. These have been agreed between the Department for Business, Energy and Industrial Strategy (the Department) and HM Treasury and have been developed in accordance with International Financial Reporting Standards (IFRS) and other relevant guidance. The accounting policies have been applied consistently in dealing with items considered material in relation to the accounts.
The income and associated expenditure contained in the Departmental Trust Statement are those flows of funds which the Department administers on behalf of the Consolidated Fund.
The financial information in the Trust Statement is rounded to the nearest £’000.
The Trust Statement is presented in pounds sterling, which is the functional currency of the Department.
1.2 Accounting convention
The Trust Statement has been prepared in accordance with the historical cost convention.
1.3 Revenue recognition
IFRS 15 ‘Revenue from Contracts with Customers’ was adopted on 1 April 2018. This replaced IAS 18 ‘Revenue’ and IAS 11 ‘Construction Contracts’. The FReM extends the definition of a contract under IFRS 15 para 9 to include legislation and regulations which enable an entity to obtain revenue that is not classified as a tax by the Office of National Statistics (ONS). As both EU ETS auction income and CRC allowances sales are classified as taxes by ONS and CCA income meets the definition of a tax under ONS’s guidance, IFRS 15 is not applicable to the material revenue streams of the BEIS Trust Statement.
Income from these schemes is recognised as follows:
- EU ETS receipts represent proceeds from the auction of carbon allowances under Phase III and aviation allowances of the EU ETS. Revenue is recognised at the close of each competitive auction, when the revenue can be measured reliably.
- Revenue in respect of CRC allowance sales is recognised on a cash received basis by agreement with HM Treasury.
- Revenue in respect of CCA buy-out payments is recognised on an accruals basis, albeit the recognition point is when the income is received.
- Revenue in respect of civil penalties is recognised when the penalty is imposed.
All result in a cash flow to the Consolidated Fund. This has resulted in no difference to the income recognition methodology applied in previous years.
CRC participants may request refunds for over-surrendered allowances (note 9 Contingent Liabilities refers). These are accounted for in the period in which the refund request is authorised and processed.
1.4 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognised in the Statement of Financial Position when the Department becomes a party to the contractual provisions of an instrument.
1.5 Financial assets
For the purposes of this Trust Statement, the Department holds financial assets in the following categories:
- Receivables held at amortised cost;
- Cash and cash equivalent.
Both receivables and cash and cash equivalents are held at amortised cost following the adoption of IFRS 9 ‘Financial Instruments’ as a replacement for IAS 39 ‘Financial Instruments: Recognition and Measurement’ from 1 April 2018. There were no changes in terms of measurement for these assets upon transition.
Receivables held at amortised cost comprise:
- for EU ETS the amounts due from primary participants in respect of established auction liabilities for which, at the financial year end, payments had not been received. The amounts due are calculated at the close of each auction and have a maturity of less than three months;
- civil penalties levied against participants in the EU ETS, ESOS, CCA and CRC schemes, amounts for which have not been received at the financial year end.
Cash and cash equivalents comprise current balances with banks and other financial institutions, which are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value and have an original maturity of three months or less.
1.6 Financial liabilities
For the purposes of this Trust Statement the Department holds financial liabilities in the following category:
- Other financial liabilities
Other financial liabilities comprise:
- Payables in the Statement of Financial Position. Payables are amounts established as due at the reporting date, but where payment is made subsequently. Since these balances are expected to be settled within 12 months of the reporting date there is no material difference between fair value, amortised cost and historical cost.
The adoption of IFRS 9 has not had a significant effect on the Department’s accounting policies for financial liabilities
1.7 Foreign currency
Transactions that are denominated in a foreign currency are translated into sterling at the rate of exchange ruling on the date of each transaction. Monetary assets and liabilities denominated in foreign currency at the year-end are translated at the rates ruling at that date unless a forward rate has been fixed with the Bank of England. All translation differences are included in the Statement of Revenue, Other Income and Expenditure for the period. 2. Revenue
2.1 Revenue from EU ETS
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | EU ETS – phase III auctions income | 201,388 | 1,258,836 | | EU ETS – aviation auctions income | – | 11,699 | | **Total** | 201,388 | 1,270,535 |
During 2019, the UK’s access to the EU ETS registry was suspended as part of Brexit preparations, therefore the UK was unable to issue free allowances or hold national auctions. The suspension was lifted on 31 January 2020 when the UK and EU ratified the withdrawal agreement. Free allowances relating to 2019 and 2020 were issued to UK operators in February 2020, and UK auctions resumed in March 2020.
Auction dates and units auctioned for EUA Phase III and EUAA, are available on the Intercontinental Exchange website on the auction calendar link at [www.theice.com/emissions/auctions](http://www.theice.com/emissions/auctions).
2.2 Revenue from CRC
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | CRC allowance sales | 280,462 | 440,280 | | **Total** | 280,462 | 440,280 |
2.3 Revenue from CCA
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | CCA buy-out payment income receivable | 31,974 | 108 | | **Total** | 31,974 | 108 |
In 2019-20, the income from buy-out payments generated £31,974 million (£107,760 in 2018-19). This increase is due to 2019-20 being the primary reporting period income for Target Reporting Period III. The income for the prior year comparative is lower due to 2018-19 being a period of secondary reporting for Target Reporting Period II which entailed top up payments as a result of audit or refunds only.
2.4 Revenue from civil penalties
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | Levied under EU ETS | 8,485 | 2,745 | | Levied under CRC | 250 | 69 | | Levied under CCA | 2 | 1 | | Levied under ESOS | 106 | 272 | | **Total** | 8,843 | 3,087 |
There were 261 penalties totalling £9,277,406 (2018-19: 209 penalties totalling £2,745,088) levied under the EU ETS scheme. An adjustment of EU ETS income in relation to prior years has been included within this figure, resulting in the net value for EU ETS income being £8,485,007. There were 40 penalties totalling £249,708 (2018-19: 6 penalties totalling £69,090) levied under the CRC scheme. 12 penalties totalling £105,725 (2018-19: 28 penalties totalling £272,202) were levied under the ESOS scheme. 1 penalty totalling £1,602 (2018-19: 2 penalties totalling £565) was (were) levied under the CCA scheme. 3. Expenditure and disbursements
3.1 Costs incurred in the collection of receipts
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | Foreign currency translation (gains)/losses – EU ETS | (195) | 1,248 | | Interest charges on Euro auction bank account – EU ETS | – | 21 | | **Total** | (195) | 1,269 |
3.2 Credit losses
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | De-recognition of ESOS penalty | 9 | – | | **Total** | 9 | – |
Expenditure incurred to administer EU ETS, CRC, CCA and ESOS are provided below. These costs are included in the BEIS accounts because there is no express statutory provision to deduct them from the revenue collected and paid to the Consolidated Fund.
EU ETS: £1,532,423 (2018-19: £668,113) CRC: £321,800 (2018-19: £368,211) CCA: £361,599 (2018-19: £357,643) ESOS: £1,028,290 (2018-19: £915,405)
4. Receivables and accrued fees
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | Civil Penalties receivable | 9,400 | 2,797 | | **Total** | 9,400 | 2,797 |
5. Cash and cash equivalents
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | Balance as at 1 April | 27,898 | 23,921 | | Net change in cash and cash equivalent balances | 5,283 | 3,977 | | **Balance at 31 March** | 33,181 | 27,898 |
The following balances at 31 March were held at:
Government Banking Service | 33,181 | 27,898 |
**Total** | 33,181 | 27,898 |
6. Payables
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | Other | 639 | 324 | | **Total** | 639 | 324 |
7. Balance on the Consolidated Funds accounts
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | Balance on the consolidated Fund as at 1 April | 30,371 | 24,988 | | Net revenue for the Consolidated Fund | 522,853 | 1,712,741 | | Less amounts paid to the Consolidated Fund | (511,282) | (1,707,358) | | **Balance on the Consolidated Fund as at 31 March** | 41,942 | 30,371 | 8. Financial Instruments
8.1 Classification and categorisation of financial instruments
| | 2019-20 £’000 | 2018-19 £’000 | |----------------------|---------------|---------------| | Financial assets | | | | Cash | 33,181 | 27,898 | | Civil penalties receivable | 9,400 | 2,797 | | Total financial assets | 42,581 | 30,695 | | Financial liabilities| | | | Other Payables | (639) | (324) | | Total financial liabilities | (639) | (324) |
8.2 Risk exposure to financial instruments
EU ETS EU ETS is exposed to foreign currency risk due to the timing difference in recognising proceeds at the auction, and converting proceeds into Sterling one day after the close of the auction. This results in either an exchange loss or gain. As shown in note 3.1 there was an exchange gain of £194,813 incurred in 2019-20 (2018-19: loss of £1,247,957).
EU ETS is not exposed to interest rate or liquidity risk. Its exposure to market risk is limited due to there being a current demand for carbon allowances. Civil penalties are subject to credit risk, but this risk is assessed by management as minimal due to the nature of the participants in the scheme.
CRC CRC allowance sales are subject to credit risk, but this risk is assessed by management as low. This is borne out in the results from previous years of the scheme. The civil penalties imposed under CRC are subject to credit risk, but this risk is assessed by management as minimal due to the nature of the participants in the scheme.
CCA CCA buy-out payment revenue is subject to credit risk, but this risk is assessed by management as low, due to the nature of participants in the scheme. All fees under the regime are received in sterling minimising any other risks.
Information to help evaluate the significance of financial instruments on the Department’s financial performance and position and the nature and extent of the Department’s exposure to other risks can be found in note 22 to the Department’s Accounts.
9. Contingent liability
CRC A contingent liability exists for refunds the Department may have to pay to CRC participants who have over-surrendered allowances. This is as a result of legislation included in the CRC Order 2013. The refunds are contingent upon participants being able to prove the over-surrender was due to a reporting error and must be agreed by the Secretary of State.
The Department is unable to quantify the amount of future refunds, but based on the most recent information available from the scheme administrators, the refunds are not expected to be significant. Future refunds will be paid as and when they fall due out of future scheme receipts.
CCA A contingent liability exists in the secondary reporting phase of each Target Reporting Period. This is where a participant has undergone review or audit procedures and it is deemed they have overpaid. Thus, the participant is due a refund. The department must retain sufficient funds in order to cover these refunds.
10. Events after the reporting period
On the 1st June 2020, the UK Emission Trading scheme was announced, as a result of the UK leaving the EU ETS scheme at the end of the year.
There were no other significant events after the reporting period that require disclosure.
The Accounting Officer has duly authorised the issue of the Trust Statement on the date of the Comptroller and Auditor General’s audit certificate. Annex D: Annexes to the Trust Statement
Accounts Direction given by HM Treasury in accordance with Section 2 of the Exchequer and Audit Departments Act 1921
This direction applies to those government departments listed in appendix 2.
The Department shall prepare a Trust Statement ("the Statement") for the financial year ended 31 March 2020 for the revenue and other income, as directed by the Treasury, collected by the department as an agent for others, in compliance with the accounting principles and disclosure requirements of the edition of the Government Financial Reporting Manual by HM Treasury ("FReM") which is in force for 2019-20.
The Statement shall be prepared, as prescribed in appendix 1, so as to give a true and fair view of (a) the state of affairs relating to the collection and allocation of taxes, licence fees, fines and penalties and other income by the Department as agent and of the expenses incurred in the collection of those taxes, licence fees, fines and penalties insofar as they can properly be met from that revenue and other income; (b) the revenue and expenditure; and (c) the cash flows for the year then ended.
The Statement shall also be prepared so as to provide disclosure of any material expenditure or income that has not been applied to the purposes intended by Parliament or material transactions that have not conformed to the authorities which govern them.
When preparing the Statement, the Department shall comply with the guidance given in the FReM (Chapter 8). The Department shall also agree with HM Treasury the format of the Principal Accounting Officer’s Foreword to the Statement, and the supporting notes, and the accounting policies to be adopted, particularly in relation to revenue recognition. Regard shall also be given to all relevant accounting and disclosure requirements in Managing Public Money and other guidance issued by HM Treasury, and to the principles underlying International Financial Reporting Standards.
Compliance with the requirements of the FReM will, in all but exceptional circumstances, be necessary for the accounts to give a true and fair view. If, in these exceptional circumstances, compliance with the requirements of the FReM is inconsistent with the requirement to give a true and fair view, the requirements of the FReM should be departed from only to the extent necessary to give a true and fair view. In such cases, informed and unbiased judgement should be used to devise an appropriate alternative treatment which should be consistent with both the economic characteristics of the circumstances concerned and the spirit of the FReM. Any material departure from the FReM should be discussed in the first instance with HM Treasury.
The Statement shall be transmitted to the Comptroller and Auditor General for the purpose of his examination and report by a date agreed with the Comptroller and Auditor General and HM Treasury to enable compliance with the administrative deadline for laying the audited accounts before Parliament before the Summer Recess.
The Trust Statement, together with this direction (but with the exception of the related appendices) and the Report produced by the Comptroller and Auditor General under section 2 of the Exchequer and Audit Departments Act 1921 shall be laid before Parliament at the same time as the Department’s Resource Accounts for the year unless the Treasury have agreed that the Trust Statement may be laid at a later date.
Vicky Rock Director, Public Spending Her Majesty’s Treasury 19 December 2019 Appendix 1: Trust Statement for the year ended 31 March 2020
1. The Trust Statement shall include:
- a Foreword by the Principal Accounting Officer
- a Statement of the Principal Accounting Officer’s Responsibilities
- a Governance Statement
- a Statement of Revenue, Other Income and Expenditure
- a Statement of Financial Position
- a Cash Flow Statement
- such notes as may be necessary to present a true and fair view
2. The notes shall include among other items:
- the accounting policies, including the policy for revenue recognition and estimation techniques and forecasting techniques together with statements explaining any significant uncertainty surrounding estimates and forecasts
- a breakdown of material items within the accounts
- any assets, including intangible assets and contingent liabilities
- summaries of losses, write-offs and remissions
- post balance sheet events
- any other notes agreed with HM Treasury and the National Audit Office
Appendix 2: Application of the accounts direction
| Sponsoring Department | Income stream | Responsible entity | |-----------------------|------------------------|--------------------| | Department for Business, Energy and Industrial Strategy | EU Emissions Allowance | BEIS | | | Fines and Penalties | BEIS | | | CRC allowances | BEIS | | | Climate Change Agreements | BEIS | Page intentionally left blank Annexes Annex A: Common core tables
Table 1 – Public spending
This table provides a summary of Departmental net expenditure using the same headings as voted within the Estimate.
| Resource DEL | 2015-16 Outturn £'000 | 2016-17 Outturn £'000 | 2017-18 Outturn £'000 | 2018-19 Outturn £'000 | 2019-20 Outturn £'000 | 2020-21 Plans £'000 | |--------------|------------------------|------------------------|------------------------|------------------------|------------------------|------------------------| | Deliver an ambitious industrial strategy | 433,415 | 419,912 | 377,129 | 182,286 | 908,525 | 12,694,436 | | Maximise investment opportunities and bolster UK interests | 19,368 | 25,651 | 40,218 | 70,705 | 73,225 | 65,060 | | Promote competitive markets and responsible business practices | 96,204 | 77,895 | 106,951 | 116,245 | 81,333 | 194,383 | | Delivering affordable energy for households and businesses | 342,329 | 36,365 | 32,381 | 44,155 | 38,974 | 34,268 | | Ensuring that our energy system is reliable and secure | 11,560 | 5,823 | 4,201 | 4,756 | 4,723 | 14,240 | | Taking action on climate change and decarbonisation | 95,211 | 27,236 | 91,076 | 24,829 | 32,518 | 15,805 | | Managing our energy legacy safely and responsibly | 306,343 | 291,203 | 265,752 | 251,870 | 234,186 | 215,461 | | Science and Research | 13,540 | (1,985) | 5,088 | 4,608 | 6,159 | 3,692 | | Capability | 361,322 | 307,082 | 320,301 | 393,848 | 415,591 | 706,293 | | Government as Shareholder | 175,114 | 152,037 | 92,179 | 41,017 | 36,273 | 72,738 | | Deliver an ambitious industrial strategy (ALB) net | – | 5,433 | 15,172 | 15,147 | 21,077 | 43,010 | | Promote competitive markets and responsible business practices (ALB) net | 49,295 | 48,127 | 51,648 | 54,635 | 54,743 | 58,340 | | Ensuring that our energy system is reliable and secure (ALB) net | 674 | 1,707 | (1,628) | (2,667) | (2,756) | 1 | | Taking action on climate change and decarbonisation (ALB) net | 4,894 | 2,399 | 4,834 | 6,069 | 8,260 | 5,136 | | Managing our energy legacy safely and responsibly (ALB) net | 46,977 | 39,234 | 34,711 | 32,075 | 28,719 | 25,537 | | Science and Research (ALB) net | 88,406 | 257,413 | 234,283 | 276,226 | 231,165 | 279,600 | | Capability (ALB) net | 39,218 | 39,818 | 33,635 | 30,475 | 34,693 | 1,500 | | Government as Shareholder (ALB) net | (30,023) | (34,034) | (73,072) | (20,724) | 48,853 | 991,308 | | NDA and SLC expenditure (ALB) net | 1,414,542 | 1,287,445 | 1,254,752 | 1,175,337 | 1,330,218 | 1,382,000 | | Nuclear Decommissioning Authority Income (CFER) | (974,558) | (1,026,768) | (1,176,795) | (978,373) | (748,104) | (862,000) | | Nuclear Safeguards Development | – | – | 1,189 | (2,275) | – | – | | Managing our energy legacy safely and responsibly (CFER) | – | – | – | (475,000) | – | – | | **Total Resource DEL** | **2,493,831** | **1,961,993** | **1,714,005** | **1,245,244** | **2,838,375** | **15,940,808** | | Of which: | 2015-16 Outturn £’000 | 2016-17 Outturn £’000 | 2017-18 Outturn £’000 | 2018-19 Outturn £’000 | 2019-20 Outturn £’000 | 2020-21 Plans £’000 | |------------------------------------------------------------------------|------------------------|------------------------|------------------------|------------------------|------------------------|------------------------| | Staff costs | 548,832 | 519,570 | 533,290 | 605,821 | 682,747 | * | | Purchase of goods and services | 2,111,285 | 1,977,969 | 1,938,532 | 1,936,315 | 3,394,359 | * | | Income from sales of goods and services | (1,144,381) | (1,172,788) | (1,079,179) | (996,751) | (764,171) | (864,518) | | Current grants to local government (net) | 25,513 | 12,055 | 9,587 | 22,388 | 183,159 | 12,421,000 | | Current grants to persons and non-profit bodies (net) | 548,517 | 178,351 | 135,838 | 133,554 | 177,281 | 230,472 | | Current grants abroad (net) | 41,307 | 58,511 | 59,465 | 72,274 | 51,593 | 92,734 | | Subsidies to private sector companies | 246,476 | 274,038 | 526,638 | 141,423 | 100,481 | 1,124,000 | | Subsidies to public corporations | 183,035 | 145,239 | 95,170 | 61,530 | 50,081 | 50,000 | | Net public service pensions | – | – | (9) | (12) | (13) | – | | Rentals | (47,642) | 40,608 | 49,177 | 37,077 | 46,630 | 34,456 | | Depreciation | 268,978 | 355,397 | 266,467 | 310,652 | 331,470 | 336,685 | | Take up of provisions | (30) | 780 | (165) | – | (32,162) | – | | Change in pension scheme liabilities | 35 | 128 | 1,372 | 547 | 579 | – | | Other resource | (288,094) | (427,865) | (822,178) | (1,079,574) | (1,383,659) | (210,778) |
**Resource AME**
| Deliver an ambitious industrial strategy | (7,428) | 215,413 | 17,448 | (312,599) | 10,733,189 | (73,373) | | Maximise investment opportunities and bolster UK interests | (457) | 1,844 | 1,586 | 6,044 | 701 | – | | Promote competitive markets and responsible business practices | 101,525 | 134,029 | 6,171 | 79,228 | 72,282 | 87,133 | | Ensuring that our energy system is reliable and secure | (309,667) | (3,204) | (415) | (295) | 478 | – | | Taking action on climate change and decarbonisation | 841,397 | (1,337,205) | – | – | – | – | | Managing our energy legacy safely and responsibly | (308,924) | (258,615) | (885,264) | (297,497) | (203,397) | (147,336) | | Science and Research | 49,871 | 41,888 | 45,578 | 205,985 | 54,912 | 70,489 | | Capability | (21,783) | (6,012) | 13,557 | (12,990) | (55,895) | (70,681) | | Government as Shareholder | (60,043) | (13,342) | (72,885) | 807 | 10,006 | 28,585 | | Renewable Heat Incentive | 372,420 | 545,426 | 687,275 | 817,898 | 846,092 | 1,150,000 | | Deliver an ambitious industrial strategy (ALB) net | 7,741 | (10,850) | 4,967 | (14,444) | 36,202 | 18,000 | | Promote competitive markets and responsible business practices (ALB) net| (161) | (59) | 87 | 57 | 973 | 73 | | Taking action on climate change and decarbonisation (ALB) net | 9,281,975 | 1,065,496 | 3,558,227 | (2,971,284) | 3,543,428 | – | | Managing our energy legacy safely and responsibly (ALB) net | 1,906,630 | 2,025 | 1,507,140 | (2,022,249) | 22,826 | 117,909 | | Science and Research (ALB) net | 107,287 | 91,411 | 94,536 | 41,299 | 149,372 | 10,903 | | Capability (ALB) net | 2 | (400) | – | 1 | 4 | (535) | Capital DEL Deliver an ambitious industrial strategy Maximise investment opportunities and bolster UK interests Promote competitive markets and responsible business practices Delivering affordable energy for households and businesses Ensuring that our energy system is reliable and secure Taking action on climate change and decarbonisation Managing our energy legacy safely and responsibly Science and Research Capability Government as Shareholder Deliver an ambitious industrial strategy (ALB) net
Total Resource Budget Of which: Depreciation
Government as Shareholder (ALB) net Nuclear Decommissioning Authority (ALB) net Promote competitive markets and responsible business practices Total Resource AME Of which: Staff costs Purchase of goods and services Income from sales of goods and services Current grants to persons and non-profit bodies (net) Subsidies to private sector companies Rentals Depreciation Take up of provisions Release of provision Change in pension scheme liabilities Unwinding of the discount rate on pension scheme liabilities Other resource 5,485,209 415,244
104,450,067 10,395,932
298,132 303,527 1,040 42,201 (548) 39,569 7,747 2,596,657 10,181 7,871 5
76,838,051
– 36,665 – 429,011 545,426 (718) 59,847 2,984,041 (352,371) 20,375 38,095 (237,155)
– 23,450 – 429,826 372,420 (81) 10,126,954 91,967,474 (692,733) 19,199 37,423 (327,696)
289,783 319,887 (10,906) 131,102 5,071 54,871 5,017 442,991 11,929 225,668 –
– 101,425 – 353,221 687,275 (2,456) 4,397,424 71,236,030 (316,703) 34,554 36,924 (1,403,648)
£’000 (26,656) 2,850,516 231,511 3,523,216
£’000 (56,337) 89,797,932 254,256 101,956,236
142,364 289,791 4,751 43,633 60 51,578 7,944 2,634,812 18,777 (98,418) 32
4,663,891
£’000 (25,633) 69,911,856 259,815 75,124,046
Outturn
Outturn
Outturn
2017-18
2016-17
2015-16
(54,606) 243,957 5,940 32,718 (626) 73,121 4,278 563,177 30,305 172,613 –
(1,572,216)
(104,659,306)
4,404 145,292 (3) 416,439 817,898 (2,198) (1,882,868) (101,359,925) (3,078,344) 29,717 37,782 (1,032,744)
£’000 47,451 (101,791,292) 319,330 (105,904,550)
Outturn
2018-19
(14,440) 265,872 6,643 44,502 291 154,227 3,461 691,794 19,703 61,445 –
5,906,589
22,752,499
5,165 164,120 (5) 513,128 846,092 (2,069) 5,575,119 17,774,375 (3,035,901) 32,501 38,348 (1,996,749)
£’000 (99,851) 4,371,679 431,123 19,914,124
Outturn
2019-20
(307,300) 492,100 22,623 89,700 300 440,570 – 1,789,689 153,679 25,545 –
383,274
30,688,306
-
-
– 587,146 1,150,000 – 46,589 13,365,248 (266,243) – 80 (136,622)
£’000 11,582,331 1,576,000 398,000 14,747,498
Plans
2020-21
248 Annual report and accounts 2019-20
| Annexes | 2015-16 | 2016-17 | 2017-18 | 2018-19 | 2019-20 | 2020-21 | |---------|---------|---------|---------|---------|---------|---------| | Outturn | Outturn | Outturn | Outturn | Outturn | Outturn | Outturn | | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | | Promote competitive markets and responsible business practices (ALB) net | 940 | 1,027 | 1,377 | 1,059 | 1,193 | 1,160 | | Ensuring that our energy system is reliable and secure (ALB) net | 975 | 1,005 | – | – | – | – | | Taking action on climate change and decarbonisation (ALB) net | 959 | 601 | 39 | 255 | 27 | 275 | | Managing our energy legacy safely and responsibly (ALB) net | 12,243 | 8,778 | 13,559 | 9,503 | 12,919 | 11,600 | | Science and Research (ALB) net | 6,260,785 | 4,257,684 | 4,761,522 | 7,530,042 | 7,786,590 | 8,131,694 | | Capability (ALB) net | 641 | 480 | 43 | 2,482 | 30 | – | | Government as Shareholder (ALB) net | 595,189 | 1,202,419 | 534,901 | 337,819 | 396,476 | 585,213 | | NDA and SLC expenditure (ALB) net | 1,827,695 | 1,970,695 | 2,051,013 | 2,002,699 | 1,797,184 | 2,086,000 | | Nuclear Decommissioning Authority Income (CFER) | (51,639) | – | – | – | – | – | | Total Capital DEL | 10,123,201 | 10,749,071 | 10,457,778 | 10,954,736 | 11,227,917 | 13,522,848 | | Of which: | | | | | | | | Staff costs | 480,039 | 477,555 | 480,982 | 502,376 | 535,339 | * | | Purchase of goods and services | 572,620 | 400,772 | 498,431 | 833,595 | 819,845 | * | | Income from sales of goods and services | (131,102) | (258,776) | (276,222) | (260,137) | (273,845) | – | | Current grants to persons and non-profit bodies (net) | 4,666,325 | 3,098,274 | 3,582,865 | 5,744,797 | 6,274,041 | 7,515,329 | | Current grants abroad (net) | 302,460 | 317,400 | 330,130 | 340,794 | 346,659 | 342,350 | | Subsidies to public corporations | (2,655) | 151,078 | 98,737 | – | 4,808 | – | | Capital support for local government (net) | 54,528 | 42,270 | 41,473 | 5,826 | 1,588 | 85,000 | | Capital grants to persons & non-profit bodies (net) | 999,113 | 424,678 | 482,446 | 888,564 | 725,074 | 754,790 | | Capital grants to private sector companies (net) | 155,115 | 239,455 | 21,138 | 32,893 | 96,127 | 666,460 | | Capital grants abroad (net) | 425,981 | 525,993 | 483,289 | 308,624 | 449,475 | 647,825 | | Capital support for public corporations | 229,301 | 184,126 | 81,835 | 204,229 | 94,985 | 59,710 | | Purchase of assets | 2,059,177 | 2,242,318 | 2,412,651 | 2,345,321 | 2,176,780 | 2,365,162 | | Income from sales of assets | (92,106) | (65,827) | (142,274) | (23,144) | (36,518) | – | | Net lending to the private sector and abroad | 571,866 | 1,062,304 | 319,670 | 163,080 | 88,455 | 132,170 | | Other capital | (167,461) | 1,907,451 | 2,042,627 | (132,082) | (74,896) | 33,838 |
**Capital AME**
| Maximise investment opportunities and bolster UK interests | 2,310 | – | – | – | – | – | | Managing our energy legacy safely and responsibly | 61,891 | (38,273) | 611,792 | 35,412 | 29,419 | 29,382 | | Science and Research | – | 834 | 864 | 1,212 | 1,263 | – | | Government as Shareholder | 210,202 | 129,181 | (1,909) | (120,000) | 37,000 | 800,000 | | Renewable Heat Incentive | (22) | – | – | – | – | – | | Deliver an ambitious industrial strategy (ALB) net | 17,299 | 84,842 | (3,474) | (16,387) | 365 | 10,000 | | | 2015-16 Outturn | 2016-17 Outturn | 2017-18 Outturn | 2018-19 Outturn | 2019-20 Outturn | 2020-21 Plans | |--------------------------|----------------|----------------|----------------|----------------|----------------|---------------| | | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | | Science and Research (ALB) net | (55,972) | (61,156) | (63,845) | (59,692) | (59,496) | – | | Government as Shareholder (ALB) net | (430,678) | (129,935) | (119,122) | (11,143) | (3,051) | (47,270) | | Managing our energy legacy safely and responsibly (CFER) | – | – | – | (141,811) | (142,400) | (142,400) | | Government as Shareholder | – | – | (1,621,078) | – | – | – | | Government as Shareholder (ALB) net | (1,434,995) | – | – | – | – | – | | **Total Capital AME** | (1,629,965) | (14,507) | (1,196,772) | (312,409) | (136,900) | 649,712 | | Of which: | | | | | | | | Staff costs | (16,992) | (18,461) | (18,719) | (15,325) | (14,078) | – | | Purchase of goods and services | – | 834 | (7,325) | (2,330) | (4,890) | – | | Capital grants to persons & non-profit bodies (net) | (22) | – | – | – | – | – | | Capital grants to private sector companies (net) | (12,798) | (4,819) | (184,787) | – | – | – | | Capital grants abroad (net) | 2,310 | – | – | – | – | – | | Capital support for public corporations | 223,000 | 134,000 | 129,250 | (120,000) | 37,000 | 800,000 | | Purchase of assets | 350 | 54,158 | 318 | – | – | – | | Income from sales of assets | (32,150) | 15 | – | – | – | – | | Net lending to the private sector and abroad | (1,922,761) | (141,781) | (1,732,112) | (169,341) | (145,086) | (179,670) | | Other capital | 129,098 | (38,453) | 616,603 | (5,413) | (9,846) | 29,382 | | **Total Capital Budget** | 8,493,236 | 10,734,564 | 9,261,006 | 10,642,327 | 11,091,017 | 14,172,560 |
**Total Departmental spending**
| | 102,547,371 | 15,804,529 | 81,435,166 | (92,444,763) | 27,936,927 | 44,477,592 | |--------------------------|----------------|----------------|----------------|----------------|----------------|---------------| | Of which: | | | | | | | | Total DEL | 12,348,054 | 12,355,667 | 11,905,316 | 11,889,328 | 13,734,822 | 29,126,971 | | Total AME | 90,199,317 | 3,448,862 | 69,529,850 | (104,334,091) | 14,202,105 | 15,350,621 |
1 Includes impairments 2 Pension schemes report under FRS 17 accounting requirements. These figures therefore include cash payments made and contributions received, as well as certain non-cash items. 3 Total Departmental spending is the sum of the resource budget and the capital budget less depreciation. Similarly, total DEL is the sum of the resource budget DEL and capital budget DEL less depreciation in DEL, and total AME is the sum of resource budget AME and capital budget AME less depreciation in AME.
- Figures for Plans for staff costs and purchase of goods and services, which include assumptions on future price and pay movements, are redacted in line with HMT guidance. Notes:
2019-20 Outturn figures differ slightly from those shown in the Statement of Parliamentary Supply as this table includes a Prior Period Adjustment for Fleetbank Funding and BIS (Postal Services Act 2011) Company Limited due to an update in the classification of transactions.
2019-20 Outturn figures differ slightly between lines from those shown in the Statement of Parliamentary Supply as expenditure for Insolvency Service is shown here against Promote competitive markets and responsible business practices to reflect current Estimate structures, but was recorded against Government as Shareholder in the 2019-20 Estimate.
The large increase in spend in 2020-21 on Deliver an ambitious industrial strategy Resource DEL is due to the COVID-19 Business Support Grants.
The large increase in spend in 2015-16 on Delivering affordable energy for households and businesses Resource DEL is due to the Government Electricity Rebate.
Resource DEL expenditure for Nuclear Safeguards Development is shown separately in 2017-18 as this expenditure was funded through a Contingencies Fund advance, pending passage of the Nuclear Safeguards Bill through Parliament. Repayment of that advance in 2018-19 was made against Capability DEL, offset by the credit shown against Nuclear Safeguards Development.
The receipt in 2018-19 against Managing our energy legacy safely and responsibly (CFER) Resource DEL relates to income from coal pension scheme surpluses.
The increase in spend in 2016-17 and 2017-18 against Science and Research Capital DEL and decrease against Science and Research (ALB) Capital DEL reflects the reclassification of expenditure for the Higher Education Funding Council for England (HEFCE) for Science and Research following the Machinery of Government transfer of HEFCE to the Department for Education. With effect from 2018-19 this expenditure falls under Research England as part of UKRI, under Science and Research (ALB).
The figures for Depreciation in Resource AME include the movement in fair value for Contracts for Difference, shown against Taking action on climate change and decarbonisation and Taking action on climate change and decarbonisation (ALB).
The large movements in take up of provisions within Resource AME in 2015-16, 2017-18 and 2018-19 is due to movements in the long term discount rate for provisions. This largely impacts the lines for Nuclear Decommissioning Authority and Managing our energy legacy safely and responsibly (ALB).
The receipt in 2017-18 against Government as Shareholder (CFER) Capital AME reflects the proceeds from the sale of the Green Investment Bank.
In their role as administrator of the Government’s GB Renewable Heat Incentive scheme, Ofgem made/accrued payments to scheme participants totalling £846,091,674.27 in the financial year 2019-20. Based on Ofgem’s sampling of the population and subject to our detailed assumptions, we can be 95% confident that the estimated value of error for GB Renewable Heat Incentive scheme payments made or accrued in the financial year 2019-20 is between the upper and lower limits of £12,886,310 and £21,780,552. Based on the same assumptions, the most likely estimated value of error for the same period is £17,333,431. This is less than 3 per cent of scheme spend in 2019-20. Table 2 – Administration Budget
| Resource DEL | 2015-16 Outturn £’000 | 2016-17 Outturn £’000 | 2017-18 Outturn £’000 | 2018-19 Outturn £’000 | 2019-20 Outturn £’000 | 2020-21 Plans £’000 | |--------------|------------------------|------------------------|------------------------|------------------------|------------------------|------------------------| | Deliver an ambitious industrial strategy | 583 | – | – | – | – | – | | Promote competitive markets and responsible business practices | 4,703 | 5,126 | 4,690 | 4,680 | 5,093 | 1,540 | | Managing our energy legacy safely and responsibly | – | (3,801) | – | – | – | – | | Science and Research | 59 | – | 2 | – | (2) | 398 | | Capability | 327,944 | 288,546 | 280,222 | 350,166 | 384,234 | 476,969 | | Promote competitive markets and responsible business practices (ALB) net | 8,630 | 7,362 | 8,735 | 8,783 | 7,779 | 8,669 | | Taking action on climate change and decarbonisation (ALB) net | 3,752 | 3,535 | 3,447 | 3,353 | 5,354 | 5,135 | | Managing our energy legacy safely and responsibly (ALB) net | 10,191 | 12,104 | 7,044 | 6,912 | 4,833 | 7,941 | | Science and Research (ALB) net | 4,685 | 986 | 3,371 | 5,547 | 7,410 | 4,300 | | Capability (ALB) net | 39,218 | 39,818 | 33,635 | 30,475 | 34,693 | 1,500 | | Government as Shareholder (ALB) net | 251 | 162 | 27 | 62 | 105 | 1,937 | | NDA and SLC expenditure (ALB) net | 34,992 | 38,195 | 42,121 | 50,612 | 52,929 | 65,000 | | **Total Administration Budget** | **435,008** | **392,033** | **383,294** | **460,590** | **502,428** | **573,389** |
Of which:
| Item | 2015-16 | 2016-17 | 2017-18 | 2018-19 | 2019-20 | 2020-21 | |------|---------|---------|---------|---------|---------|---------| | Staff costs | 365,590 | 329,069 | 326,207 | 385,642 | 434,897 | * | | Purchase of goods and services | 145,800 | 159,274 | 154,657 | 177,288 | 162,338 | * | | Income from sales of goods and services (net) | (135,538) | (37,585) | (31,151) | (10,220) | (3,726) | (2,038) | | Current grants to persons and non-profit bodies (net) | 29 | 38 | 493 | 425 | 325 | 154 | | Current grants abroad (net) | 108 | 106 | 170 | 184 | 538 | – | | Subsidies to private sector companies | – | – | 9 | – | – | – | | Subsidies to public corporations | – | – | – | 28 | – | – | | Net public service pensions | – | – | (9) | (12) | (13) | – | | Rentals | 31,852 | 30,117 | 34,299 | 22,485 | 33,391 | 27,650 | | Depreciation¹ | 29,956 | 27,034 | 22,901 | 18,850 | 26,902 | 27,764 | | Take up of provisions | 2 | – | (50) | – | 3 | – | | Change in pension scheme liabilities | 25 | 106 | 184 | 141 | 205 | – | | Other resource | (2,816) | (116,126) | (124,416) | (134,221) | (152,432) | (38,611) |
¹ Includes impairments.
- Figures for Plans for staff costs and purchase of goods and services, which include assumptions on future price and pay movements, are redacted in line with HMT guidance. Annex B: Glossary
**ACAS:** Advisory, Conciliation and Arbitration Service
**AFS:** available for sale
**AHRC:** Arts and Humanities Research Council
**AI:** artificial intelligence
**ALB:** arm’s-length bodies
**AME:** Annually Managed Expenditure
**ARAC:** Audit and Risk Assurance Committee
**BAES:** BAE Systems
**BBB:** British Business Bank Plc
**BBIL:** British Business Investments Ltd
**BBLS:** Bounce Bank Loan Scheme
**BBSRC:** Biotechnology and Biological Sciences Research Council
**BEIS:** Department for Business, Energy and Industrial Strategy
**BFP:** Business Finance Partnership
**BNFL:** British Nuclear Fuels Ltd
**BVCA:** British Venture Capital Association
**CAT:** Competition Appeal Tribunal
**CBILS:** Coronavirus Business Interruption Loan Scheme
**CCA:** Climate Change Agreements
**CCL:** Climate Change Level
**CERN:** European Organisation for Nuclear Research
**CfD:** Contracts for Difference
**CFP:** Committee on Fuel Poverty
**CLBILS:** Coronavirus Large Business Interruption Loan Scheme
**CNPA:** Civil Nuclear Police Authority
**CNPP:** Civil Nuclear Pension Plan
**COVID-19:** Coronavirus pandemic
**CRC:** Carbon Reduction Commitment
**CSOPS:** Civil Servant and Other Pension Scheme
**DDM:** Dynamic Dispatch Model
**Defra:** Department for Food, Environment and Rural Affairs
**DEL:** Departmental Expenditure Limit
**DfE:** Department for Education
**ECF:** Enterprise Capital Fund
**EDFE:** EDF Energy Nuclear Generation Limited
**ECL:** Expected Credit Loss
**EFG:** Enterprise Financial Guarantee
**EHL:** Enrichment Holdings Limited
**EII:** Energy Intensive Industries
**EMR:** Electricity Market Reform
**EPSRC:** Engineering and Physical Sciences Research Council
**ERDF:** European Regional Development Fund
**ESA:** European Space Agency
**ESC:** Electricity Settlements Company
**ESRC:** Economic and Social Research Council
**EU:** European Union Allowance
**EUAA:** European Union Aviation Allowance
**EUETS:** EU Emissions Trading Scheme
**EUV:** existing-use value
**FDP:** Funded Decommissioning Programme
**FF:** Future Fund scheme
**FIDeR:** Financial Investment Decision Enabling for Renewables
**FLS:** Future Leaders Scheme
**FRC:** Financial Reporting Council
**FReM:** Government Financial Reporting Manual
**FVTOCI:** fair value through other comprehensive income
**FVTPL:** fair value through profit or loss
**GCRF:** Global Challenges Research Fund
**GDF:** Geological Disposal Facility
**GDPR:** General Data Protection Regulation
**GGC:** Greening Government Commitments
**GPA:** Government Property Agency
**GRAA:** Government Resources and Accounts Act
**HMT:** HM Treasury
**HPC:** Hinkley Point C UKAEA: UK Atomic Energy Authority UKGIP: UK Green Infrastructure Platform Ltd UKIIF: UK Innovation Investment Fund UKRI: UK Research and Innovation UKSA: UK Space Agency UKSBS: UK Shared Business Services Ltd VAT: Value-Added Tax WTC: Waste Transfer Contract
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2d16ea6c19fc3f60b9e906f955adc5b3211d1173 | # Contents
| Section | Page | |------------------------------------------------------------------------|------| | Foreword by the Secretary of State | 2 | | Report of the Permanent Secretary | 3 | | **Performance report** | 5 | | Overview | 6 | | Our purpose | 6 | | What we set out to achieve | 6 | | Our highlights in 2019-20 | 8 | | Where we spent our money in 2019-20 | 10 | | Our business model | 12 | | How we are organised: our organisational structure | 13 | | How we are organised: our group | 14 | | Risks affecting delivery of our objectives | 15 | | Performance analysis | 20 | | Our performance | 20 | | Looking ahead | 26 | | Performance against United Nations sustainable development goals | 27 | | Financial review | 29 | | Sustainability report | 39 | | Other performance reporting | 42 | | **Accountability report** | 45 | | Corporate governance report | 46 | | Statement of Accounting Officer’s responsibilities | 46 | | Directors’ report | 48 | | Report of the lead non-executive director | 50 | | Governance statement | 51 | | Staff report | 63 | | Remuneration report | 80 | | Statement of Parliamentary Supply | 91 | | Parliamentary accountability disclosures | 102 | | The Certificate of the Comptroller and Auditor General to the House of Commons | 110 | | The Report of the Comptroller and Auditor General to the House of Commons | 114 | | **Financial Statements** | 115 | | Consolidated Statement of Comprehensive Net Expenditure | 116 | | Consolidated Statement of Financial Position | 117 | | Consolidated Statement of Cash Flows | 119 | | Consolidated Statement of Changes in Taxpayers’ Equity (Departmental Group) | 122 | | Notes to the Accounts | 123 | | **Trust Statement** | 225 | | Foreword by the Accounting Officer | 226 | | Statement of Accounting Officer’s responsibilities for the Trust Statement | 229 | | The Trust Statement Audit Report of the Comptroller and Auditor General to the House of Commons | 231 | | Statement of Revenue, Other income and Expenditure | 234 | | Statement of Financial Position | 235 | | Statement of Cash Flows | 236 | | Notes to the Trust Statement | 237 | | **Annexes** | 245 | | Annex A: Common core tables | 246 | | Annex B: Glossary | 253 | Foreword by the Secretary of State
BEIS is playing a crucial role in securing the UK’s long-term future. It has been at the forefront of the fight against coronavirus, and is now leading Britain’s recovery by tackling climate change, unleashing innovation and backing business. We will continue to build on the many achievements outlined in this report over the coming years to create a stronger, greener future.
Tackling Climate Change
Co-hosting the COP26 UN Climate talks next year gives us the opportunity to reinforce the UK’s position as a world leader in climate action. Over the past year BEIS has continued its work to achieve net zero emissions by 2050. The deadline of coal phaseout was brought forward to 2024. Construction began on the world’s largest offshore wind development, which will power 4.5 million UK homes. We are investing £800 million in Carbon Capture, Usage and Storage (CCUS) infrastructure, enabling us to establish the UK’s first CCUS power plant. We know there is more to do and further opportunities to be seized as the UK leads a global green industrial revolution, creating thousands of jobs across the country.
Unleashing Innovation
We are using science and research to unite and level up our country, give people opportunities, and make the UK a science superpower. In March, we committed to increasing research and development investment to £22 billion per year by 2025. UK businesses are leaders in developing high-potential technologies, from nuclear fusion to space and satellite technology, electric vehicles, and developing a state-of-the-art climate supercomputer. Our unprecedented investment in science will strengthen research and build the foundations for the new industries of tomorrow.
Backing Business
The Government’s ambition is for Britain to be the best country in the world to start and scale a business. We have invested in our key industries and local economies to level up opportunities across the UK. For workers, we saw the biggest cash increase ever for the lowest-paid with a new National Living Wage of £8.72 per hour, and we introduced new rights for paid parental bereavement leave.
Fighting Coronavirus
BEIS has been at the forefront of the Government’s response to the Coronavirus pandemic. The Department worked quickly to ease regulatory burdens on business, produce workplace guidance safeguarding workers while supporting the economy, and agree measures with the energy industry to protect vulnerable consumers. Through the British Business Bank, BEIS has made available over £50 billion in business loans. Grants have also been given out to nearly 900,000 small businesses and individuals. We established the Vaccine Taskforce to marshal the collective effort of government, academia, industry and healthcare to produce a vaccine as quickly as possible.
Clearly, challenges remain, but I have been impressed by how business and government have come together to respond to Coronavirus. I am also immensely proud of the way that BEIS has risen to the challenges of the pandemic, working at pace to support the economy and safeguard jobs. I want to see this continue, driving a green recovery in jobs and industry and levelling up across the UK. Report of the Permanent Secretary
It is an honour to become Permanent Secretary during such an important time as we work to help businesses, workers and consumers respond to, and recover from, coronavirus. On behalf of the Department, I would like to thank Alex Chisholm for his leadership as BEIS Permanent Secretary until April 2020, and Sam Beckett for her stewardship of the Department from April to July.
The Department has rapidly mobilised to best support the response to coronavirus. We found ways to collaborate ever more closely with businesses and their representative organisations to deliver vital grants, loans and advice to all sectors of the economy. We set up a PPE Make Unit to support the national effort to produce essential equipment and established the Vaccine Taskforce to drive forward and co-ordinate efforts to research and produce a coronavirus vaccine.
Our strong global leadership on climate change was recognised when the UK was selected to co-host with Italy the COP26 UN climate talks. BEIS is leading on cross-Government policy development ahead of the conference next November. The Government doubled international climate finance spend from £5.8 billion to £11.6 billion, and continued to invest in green technologies – for example by doubling the size of the Energy Innovation Programme to £1 billion and providing £1 billion over five years to boost automotive green technologies.
Creating the right conditions to unleash innovation remains a top priority for the Department. This year Government announced the largest ever increase in R&D funding, reaching £22 billion by 2024-25. Individual projects included a £36 million world-first National Timing Centre and a £40 million investment in quantum technology. We provided £179 million investment to support the next generation of scientists, mathematicians and engineers, as well as introducing the first ever Stephen Hawking Fellowship. The Space Industry Act was passed into law, enabling the expansion of commercial space activities in the UK and creating the potential for hundreds of highly-skilled jobs and billions in investment.
We continue to focus on making the UK the best place to work and grow a business, whether through our work on the National Living Wage or through our support to help businesses preparing for the end of the Transition Period. In particular this year we boosted support for SMEs, announcing the expansion of the British Business Bank’s venture capital and debt support programmes. The UK is also making strong progress on improving gender diversity in senior business positions following the Hampton-Alexander review: a third of FTSE 100 board positions are now held by women.
I am immensely proud of all that the Department has delivered over the past year, during a period of considerable turbulence. We stand ready for our critical role in the year ahead. Page intentionally left blank Performance report Overview
The overview section, pages 6 to 19 provides a summary of the annual report and accounts. It includes a summary of our performance, expenditure and risks during the year, and our organisational structure as at the reporting date.
Our purpose
Our purpose is to build an economy which is fairer, cleaner, more innovative, and attracts investment from all over the world.
What we set out to achieve
BEIS began the 2019-20 financial year with five objectives as published in June 2019, in the Department’s Single Departmental Plan (SDP). These included:
- delivering an ambitious industrial strategy;
- maximising investment opportunities and bolster UK interests as we leave the EU;
- promoting competitive markets and responsible business practices;
- ensuring the UK has a reliable, low cost and clean energy system; and
- building a flexible, innovative, collaborative, and business facing department.
With the change in government during the financial year, BEIS reprioritised its aims focusing on the following four priorities:
- Getting businesses ready for Brexit and the opportunities beyond
- Leading the world in tackling climate change
- Solving the Grand Challenges facing our society
- Making the UK the best place in the world to work and do business
Following the UK leaving the EU on 31 January 2020 and the main aim of the first priority above being achieved the Department continued to focus on the following three priorities and aims.
______________________________________________________________________
1 This priority represented the following aims:
- Deliver a Brexit that works for businesses. Help every UK business get ready for Brexit
- Prepare businesses to take advantage of new trading relationships and markets opened around the world
- Forge an outward looking, free trading, entrepreneurial and creative UK economy outside of the EU.
Note: The second and third aims of Getting business ready for Brexit and opportunities beyond were incorporated into Making the UK the best place in the world to work and grow a business. Leading the world in tackling climate change
- Achieve net zero greenhouse gas emissions and end our contribution to global warming by 2050.
- Drive economic growth through the race to cut carbon, becoming a leader in green technologies and clean energy on the path to net zero.
- Accelerate climate action through strong global leadership
Solving the Grand Challenges facing our society
- Increase productivity and improve lives by tackling our Grand Challenges in life sciences, artificial intelligence, automation and space.
- Making the UK a science superpower through backing ideas and supporting talent from home and abroad.
- Invest in R&D and innovation to drive discovery and unleash potential
Making the UK the best place in the world to work and grow a business.
- Forge an outward-looking economy, supporting businesses all over the UK to take advantage of new trading relationships with the EU and around the world
- Reform corporate governance and improve boardroom diversity so the top of UK businesses better serve and reflect the whole society
- Create fairer, inclusive, flexible workspaces so everyone has the chance to succeed and balance work and home life. Our highlights in 2019-20
Helped businesses, workers and consumers affected by coronavirus, by introducing loans, guarantees and cash grants, easing regulatory burdens and providing greater flexibility on competition law, annual leave and the testing of new products.
Supported the UK’s world-class scientists by launching a new simplified process to apply for research funding, helping to free researchers to focus more exclusively on undertaking trailblazing research.
Led the world in tackling climate change by being the first major economy to legislate to end our contribution to carbon emissions and announcing that we will double our international climate finance spend from £5.8 billion to £11.6 billion over the next five years. This global leadership was recognised when the UK was chosen to co-host the COP26 UN climate talks.
Took steps towards achieving net zero by 2050. Since 1990 we have grown our economy by 75% whilst cutting emissions by 43%. Renewable sources provided more electricity to UK homes and businesses than fossil fuels for the first time in the third quarter of 2019, with less than 1% of electricity generated by coal-fired power.
Positioned the UK at the global forefront of new automotive technology development, investing up to £1 billion over 5 years in R&D and the development of UK supply chains for the large-scale production of electric vehicles.
Backed ground-breaking research and innovation in the UK through key strategic investments, including £1.2 billion to develop a state-of-the-art climate supercomputer, £200 million for a world-leading genomics project and £220 million for the initial design of a fusion power station. Prepared businesses for EU Exit by creating a £15 million Business Readiness Fund for business groups and trade associations to help firms prepare and running the Brexit Business Readiness Roadshow with more than 30 events over five weeks spanning the breadth of the UK.
Created new legislation to lay the groundwork for our future outside the EU, covering areas such as product safety and metrology, employment rights, carbon emissions and renewable energy.
Introduced a new right to paid parental bereavement leave, which will mean that working parents who lose a child under the age of 18 will get two weeks’ statutory leave.
Increased the National Living Wage to £8.72 per hour, a 6.2% pay rise for the lowest-paid workers representing the biggest cash increase ever and bringing the rate to the target of 60% of median earnings.
Safeguarded 3,200 jobs in the steel industry by supporting the sale of British Steel, marking the start of a new chapter for UK steel.
Continued our work to build a flexible, innovative, collaborative and business-facing department. In particular, responding effectively to the coronavirus crisis by rapidly mobilising staff onto work on the response to coronavirus; implementing at pace our new IT collaboration platform ensuring we continued to work effectively following the move from office to home working; and by supporting staff with caring responsibilities. Where we spent our money in 2019-20
For the year ended 31 March 2020, the Departmental Group incurred spend of £14.1 billion. Of this £3.1 billion related to the Core Department and Agencies, and £11.0 billion related to our partner organisations and designated bodies.
The diagram opposite shows the major areas of spend. The majority of the Departmental spend, and policy delivery is through it’s Partner Organisations, including:
- **£7,793 million** by UK Research and Innovation (UKRI), on funding for Science and Research
- **£2,379 million** by the Nuclear Decommissioning Authority (NDA) on managing our energy legacy safely and responsibly.
- **£445 million** by UK Space Agency (UKSA) on delivering an excellent space programme with the maximum economic, scientific and policy benefit for the UK.
- **£479 million** by the British Business Bank (BBB), through the Enable programme, Northern Powerhouse Investment Fund, Midlands Engine Investment Fund and Cornwall and Isles of Scilly Investment Fund, on supporting small business in the UK at all stages of their development.
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2 The expenditure corresponds to the net Total DEL expenditure for our Departmental Group. DEL is the controllable budget total issued by HM Treasury on behalf of Parliament, that we use to fund delivery of our strategic objectives. It excludes AME expenditure which represents volatile, demand-led spend and technical accounting matters. These concepts are fully explained in the Financial Review on page 29. Where we spent our money in 2019-20
£14,066m
- Core Department
- Executive agencies
- Partner organisations
UKRI £7,793m
UKSA £445m
Nuclear Decommissioning Authority £2,379m
BBB £479m
UK Atomic Energy Authority £117m
Diamond Light Source Ltd £108m
ACAS £51m
Coal Authority £35m
UK SBS Ltd £35m
Partner organisations – Other £5m
Ensuring that our energy system is reliable and secure £5m
Delivering affordable energy for households and businesses £83m
Government as Shareholder £98m
Promote competitive markets and responsible business practices £107m
Taking action on climate change and decarbonisation £187m
Managing our energy legacy safely and responsibly £238m
Science and Research £293m
Maximise investment opportunities and bolster UK interests £339m
Deliver an ambitious industrial strategy £894m
Where we spent our money in 2019-20
£14,066m 12
Annual report and accounts 2019-20
Our business model Our work and stakeholders Following ministerial priorities, we design and implement policy relating to our priorities: leading the world in tackling climate change, solving the Grand Challenges facing our society and making the UK the best place in the world to work and grow a business. We build strong and collaborative relationships with stakeholders, including: businesses and business representative organisations; workers and their unions; and consultations with the wider public. We also work closely with and other government departments. Our people
4,345 people
Our Core Department is made up of 4,345 people with regional offices across the UK. We are organised in seven groups; each led by a Director General, and these groups are in turn divided into 40 Directorates. Our partner organisations
40 partner organisations £14.1 billion
We also deliver our businesses through 40 partner organisations. These range from large organisations such as UK Research and Innovation and the Nuclear Decommissioning Authority, through medium-size organisations working on regulation such as the Competition and Markets Authority, to advisory committees including the Committee for Climate Change. Our funding Our annual funding is agreed with Treasury and Parliament. In 2019-20, we were responsible for the efficient stewardship of £14.1 billion of Departmental funds.
### How we are organised: our organisational structure
#### Our ministers
| Position | Name | |----------|------| | Secretary of State for Business, Energy and Industrial Strategy | Rt Hon Alok Sharma MP | | Minister of State for Business, Energy and Clean Growth | The Rt Hon Kwasi Kwarteng MP | | Parliamentary Under Secretary of State Minister for Business and Industry | Nadhim Zahawi MP | | Parliamentary Under Secretary of State Minister for Science, Research, and Innovation | Amanda Solloway MP | | Parliamentary Under Secretary of State, Minister for Small Business, Consumers and Labour Markets | Paul Scully MP | | Parliamentary Under Secretary of State, Minister for Climate Change and Corporate Responsibility | Lord Callanan | | Minister for Investment (jointly with the Department for International Trade) | Lord Grimstone |
#### Our management: senior officials
| Position | Name | |----------|------| | Permanent Secretary and Principal Accounting Officer | Sarah Munby³ | | Acting Director General, Corporate Services | Doug Watkins | | Director General, Energy Transformation and Clean Growth | Julian Critchlow | | Director General, Energy and Security | Joanna Whittington | | Director General, Industrial strategy, Science and Innovation | Jo Shanmugalingam | | Director General, Market Frameworks | Jaee Samant | | Acting Director General, Trade, Europe and analysis | Ashley Ibbett | | BEIS Scientific Adviser | Professor John Loughhead | | Chief Financial Officer | Tom Taylor | | Chief Economic Adviser | Mike Keoghan | | Director, Policy Delivery, and Private Office | Chris Thompson | | Director, Communications | Craig Woodhouse |
#### Our management: non-executives
| Role | Name | |------|------| | Lead non-executive board member | Archie Norman | | Non-executive board member | Nigel Boardman | | Non-executive board member | Leena Nair | | Non-executive board member | Stephen A. Carter | | Non-executive board member | Carolyn McGall | | Non-executive board member | Kathryn Parsons | | Non-executive board member | Stuart Quickenden |
³ Alex Chisholm was the Permanent Secretary and Principal Accounting Officer until 9 April 2020, then Sam Beckett became Acting Permanent Secretary and Principal Accounting Officer from 14 April 2020, until Sarah Munby was appointed the Permanent Secretary and Principal Accounting Officer from 20 July 2020. How we are organised: our group
Public sector bodies can be grouped by level of control the Core Department has over them.
- **Our executive Agencies** act as an arm of the Core Department, undertaking executive functions, rather than policy advice.
- **Other bodies in the Departmental Group** are separate legal entities, but the Core Department usually sets their strategic framework, appoints the chair and all non-executive members of board, and is consulted on the appointment of the CEO.
- **The wider Departmental Group** includes other public-sector bodies which work to achieve our objectives but have more authority over their policies and are not consolidated into the group financial statements. See our Accounting Officer System Statement, published separately, for greater detail.
### Core Department and Agencies
- Insolvency Services
- Copyright Tribunal
- Council for Science and Technology
- Government Office for Science
- Industrial Development Advisory Board
- Committee on Fuel Poverty
- Low Pay Commission
- UK Space Agency
- Office of Manpower Economics
- Office of Product Safety and Standards
- Office of the Regulator of Community Interest Companies
- Regulatory Policy Committee
- Nuclear Liabilities Financing Assurance Board
### Consolidated Departmental Group
- Advisory, Conciliation and Arbitration Service (ACAS)
- British Business Bank Plc
- Central Arbitration Committee
- Certification Officer
- Civil Nuclear Police Authority
- Coal Authority
- Committee on Radioactive Waste Management
- Committee on Climate Change
- Competition Appeal Tribunal
- Competition Service
- Electricity Settlements Company
- Financial Reporting Council
- Low Carbon Contracts Company Ltd
- Nuclear Decommissioning Authority
- Oil and Gas Authority
- UK Atomic Energy Authority
- UK Green Infrastructure Platform Ltd
- UK Shared Business Services Ltd
- UK Research and Innovation
### Wider departmental group
- British Hallmarking Council
- British Nuclear Fuels Limited
- Companies House
- Competition & Markets Authority
- Groceries Code Adjudicator
- Independent Complaints Reviewer
- Intellectual Property Office
- International Nuclear Services Limited
- Land Registry
- Met Office
- National Nuclear Laboratory
- National Physical Laboratory
- Nuclear Liabilities Fund
- OFGEM
- Ordnance Survey
- Post Office Ltd
- Pubs Code Adjudicator
- Small Business Commissioner
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4 These entities have been re-classified by ONS in 2018-19. See footnote 2 in note 27: list of bodies within the Departmental Group, for an explanation of the impact of this change. Risks affecting delivery of our objectives
Risk Management
Our risk management framework continued to develop and improve over the last year, further information on this can be found in the governance statement section of this report.
The BEIS risk management framework is structured around the following five principles, which complement and build upon those outlined in the Orange Book.
| Principle | Description | |-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Accountable | Risk management is the responsibility of all staff. Senior management should ensure that roles and responsibilities are clear, communicated, understood and embedded at all levels of the organisation. This includes equipping staff with the skills to manage risk and understand where they can afford to take more risk, what necessitates immediate escalation / corrective action. | | Open | Senior management should ensure that risk discussions are transparent and considered integral to making informed decisions (e.g. policy making, strategy setting, planning, Programme and Project Management). | | Evidence-Based | All staff should consult with relevant stakeholders to produce timely and accurate risk information via the online reporting system and the control and assurance record to support decision-making. | | Proportionate | Risk management processes should enable – not drive – our work. So all staff should consistently review and identify risk as part of their business activity using existing governance arrangements. | | Consistent | All staff should consistently review and identify risk as part of their business activity e.g. using existing governance arrangements - such as committees, team meetings or deep dives - to increase visibility and focus on meaningful actions. |
The table below describes our risk profile: principal risks we have faced during the financial year and the mitigating actions taken.
Key:
Icons in the table map the risk to our objectives
| Relative severity | Change during the year | |-------------------|------------------------| | High | Increasing risk | | Medium | Stable | | Low | Decreasing risk |
Solving the Grand Challenges facing our society
Making the UK the best place in the world to work, and to grow a business
Leading the world in tackling climate change | Risk | Mitigating activities | Risk severity and direction of risk trend | |----------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------| | Failure to meet carbon budgets due to ineffective measures to mitigate climate change and promote clean energy investment | ➔ We have developed and implemented further policies to deliver emission reductions in line with Clean Growth Strategy and Net Zero commitments, and committed additional funding in areas including energy, industry, transport and low carbon buildings.\
➔ We continue to refine and strengthen our analysis of future emissions and the potential contribution of different policy areas to reducing emissions.\
➔ We have strengthened governance including through a new Climate Action Strategy Committee, chaired by the Prime Minister, to drive further action on domestic and international climate change.\
➔ We became the first major economy in the world to set a legally binding target to reach net zero greenhouse gas emissions by 2050.\
➔ We published the Green Finance Strategy, setting out plans to mobilise capital into low carbon investments. | H | | Catastrophic or severe incident affecting energy or nuclear critical national infrastructure | ➔ We work with the Office for Nuclear Regulation (ONR) to ensure safety and security standards are maintained, including strengthening regulatory framework where necessary.\
➔ We continue to ensure robust safety and security (physical, personnel and cyber) arrangements are in place at civil nuclear sites.\
➔ We maintain a robust capability building programme to increase BEIS preparedness to lead an effective and coordinated cross-government response.\
➔ We undertake a programme of collaboration through regular engagement with industry to identify vulnerabilities and mitigate cyber risks not addressed through regulation.\
➔ We work with HM Government and industry partners to ensure physical and personnel security standards in the energy sector are proportionate and robust. | L | | Risk | Mitigating activities | Risk severity and direction of risk trend | |---------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------| | Sensitive information is lost or compromised through cyber-attack, theft, mistakes or leaks, or a security incident at work harms BEIS ministers, staff or visitors. | ➔ We continue to develop a culture of security through staff awareness campaigns to reinforce simple security behaviours – technical and physical defences are not enough on their own.\
➔ We continue to maintain strong and tested cyber defences.\
➔ We are building a more coherent approach to personnel security to mitigate the insider threat and minimise the security vulnerabilities caused by staff mistakes.\
➔ We maintain a risk-adjusted and systematic approach to monitoring and assuring security in BEIS and its Partner Organisations.\
➔ We are working with other government departments to realise the benefits of security centralisation and professionalism across government. | BEIS is satisfied that all possible avenues are in place to mitigate this risk, however, the rating remains high due to the increasing nature of cyber-attacks and reflecting the importance of staff safety. | | Failure to attract, develop and retain sufficiently skilled staff and support their wellbeing | ➔ We have ensured senior leaders maintain oversight of teams, tracking that leave is taken, hours worked are proportionate and flexible working options are considered.\
➔ We carried out extensive workforce planning to develop resourcing plans, ensure the correct mix of grades in each profession, and review strategy and international capability.\
➔ We actively monitor the results of our People survey to improve staff retention with new learning and development packages and the appointment of Wellbeing Champions.\
➔ We carry out an annual Wellbeing survey and act on the results. | Over the financial year this risk has increased due to the increasing remit of the Department. | | We may lack the strategic and cultural flexibility to manage the impacts of a rapid change to priorities | ➔ To support strategic decision-making we maintain a robust reporting system to ensure that risks and issues are identified early and considered by senior leaders.\
➔ We have a dedicated team developing our Target Operating model, to strengthen the Department’s capability.\
➔ We continued to identify future trends through horizon scanning of our external environment and recruited people with the necessary commercial, technical and operational skills. | |
### Risk Mitigating activities Risk severity and direction of risk trend
| Risk | Mitigating activities | Risk severity and direction of risk trend | |----------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------| | Inadequate availability, quality, or understanding of evidence base underpinning policy development and delivery. | ➔ We produce Quality Assurance (QA) scores for all business critical models. Our overall score is above target.\
➔ We completed a review of analytical governance and strengthened frameworks in place for assurance of analysis used in decision making.\
➔ We increased early monitoring requirements at policy development stage and improved mechanisms for reviewing implementation of monitoring through departmental boards.\
➔ We continued to develop a central archive of completed appraisal, monitoring and evaluation activity to support better, more efficient analysis and policy development.\
➔ We published the latest Areas of Research Interest. | M |
### Closed or deescalated risks Mitigating activities Narrative
| Closed or deescalated risks | Mitigating activities | Narrative | |-----------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Failure to prepare for EU Exit | ➔ We have continuously assessed delivery requirements and developed a prioritisation strategy to manage EU Exit work.\
➔ We have redeployed and mobilised staff to priority EU Exit areas.\
➔ We have worked with other government departments to ensure a coherent cross-Whitehall governance structure for negotiations and identify and resolve strategic trade-offs.\
➔ We have engaged with HM Treasury to develop a strong evidence base, based on a sectoral analysis of impacts, to refine low-alignment scenario planning and refine BEIS’s flexible business support package.\
➔ We have led broad engagement with businesses, in coordination with other government departments, to deliver readiness messaging, as well as developing material, including online checklists and a self-certification tool for businesses. | The changing nature of the challenges of Brexit and the impact of external factors resulted in this risk remaining high through most of the financial year with an improved picture towards the point when the risk was closed. | Closed or deescalated risks
We fail to adapt employment legislation leading to a rise in unfair employment practices and a failure to deliver ‘good quality work’.
- We have progressed consultations and preparation of clauses to deliver on ‘Good Work Plan’ commitments.
- We have developed robust quality of work metrics.
- We collaborated with DfE to monitor the development and implementation of skills reform programmes, e.g. national retraining schemes, apprenticeships devolution of the adult education budget and T-levels.
As a result of the Employment Rights Bill being announced, this risk has been de-escalated. The risk is now being monitored and managed by the Director General.
As a result of political uncertainty and potential economic upheaval following EU Exit, which could be compounded by a challenging Spending Review for the Strategy, there is a risk that partners across government, local areas and industry will not sufficiently engage with and support the Industrial Strategy.
- Ensuring Spending Review bids by departments are aligned with the Industrial Strategy.
- Work with ministers, No.10, and HM Treasury to define ambition and ensure resources are available for implementation.
- Use cross-Government Programme Board, Cabinet Committee and partnerships with local government, Local Enterprise Partnerships, businesses, civic society and academia to drive implementation and measure the impact on the economy.
- Work closely with EU Exit colleagues recognising the potential synergies with Industrial Strategy, and to remain aware of how the negotiations could affect our ability to improve productivity and drive growth across the whole country.
- Effectively engage with UK industry and business through events and comprehensive communications.
Whilst this area is a high priority the specific risk has been closed as the Department refocused its attention towards the Grand Challenges and unleashing innovation.
COVID-19 response risk management practices
The COVID-19 pandemic response has presented the Department with significant challenges. In order to manage the associated risks, BEIS has put in place a programme of work pulling expertise from across the Department. A central Project Management Office has been established to effectively manage the Departmental response. Additionally, the strategic risk management function has supported the programme to design a risk management process in line with the Departmental Framework and to identify and manage emerging COVID-19 risks.
The BEIS Risk Management Framework and Risk Appetite Statement are reviewed and refreshed on an annual basis. This assessment will be reviewed taking account of COVID-19 to provide effective risk management to deliver Government policies. Performance analysis
Our performance
BEIS reviewed and updated its Departmental priorities this year. The structure of this report follows those updated priorities, which differ from those in the Single Departmental Plan (SDP) published in June 2019. An additional section is included reflecting on BEIS’s response to COVID-19 pandemic.
Leading the world in tackling climate change
This departmental priority is an increase in our ambition and strengthening of our commitment to the Department’s fourth objective published in the Department’s SDP to Ensure the UK has a reliable, low-cost, and clean energy system.
Domestic work
In June 2019, the UK became the first major economy in the world to legislate to end its contribution to global warming by 2050. The target will require the UK to bring all greenhouse gas emissions to net zero by 2050, compared with the previous target of at least 80% reduction from 1990 levels. This is one of the most ambitious targets in the world and demonstrates the leadership the UK is providing internationally in this area.
To support the achievement of this target:
- we introduced the Smart Export Guarantee, which ensures that small-scale electricity generators installing solar, wind or other forms of renewable generation will be paid for each unit of electricity they provide to the network;
- we awarded nine companies with £26 million of funding to advance the rollout of carbon capture, utilisation and storage in the UK, which is a crucial step towards ending the UK’s contribution to global warming. £4.2 million of this will go to Tata Chemicals Europe’s plant in Cheshire to contribute to the construction of a facility to capture and utilise 40,000 tonnes of carbon dioxide a year - the equivalent of 22,000 cars;
- we announced £142.9 million investment in green projects, including:
- Greenhouse Gas Removal Technologies – £31.52 million – this will support the UK in its net zero ambitions, by driving forward approaches to remove greenhouse gases from the sky on a large scale;
- Clean Air: Addressing the Challenge of Indoor & Outdoor Pollution – £22 million – the next decade will see declining transport pollution but increases in other areas like household products and adhesives. This project will look at tackling emerging air pollutants indoors and outdoors, such as air fresheners and cleaning products, to minimise their effects on public health;
- cleaner food systems for healthy people and a healthy planet – £47 million — this will transform UK diets to be healthier and more sustainable through changes in production, manufacturing, retail and consumption;
- reusing and recycling materials in innovative ways – £30 million – this programme will drive forward new research to support opportunities to re-use and recycle materials across sectors such as food, water, textiles, and electronics – as well accelerating new, greener manufacturing technologies; and
- Sustainable Management of Marine Resources – £12.43 million – This programme will ensure that the UK realises sustainable societal and economic benefits through better management of the UK’s marine resources.
- in February 2020, as part of the BEIS £505 million Energy Innovation Programme and additional UKRI funding, we announced a £90 million package to tackle emissions from homes and heavy industry. This included funding for the development of Europe’s first large scale, low carbon hydrogen plants in Merseyside and Aberdeen, which could generate enough clean energy to heat over 200,000 homes;
• we published the Green Finance Strategy, which sets out a comprehensive approach to greening financial systems, mobilising finance for clean and resilient growth, and capturing the resulting opportunities for UK firms; and
• the Prime Minister chaired the first meeting of the new Climate Action Strategy Committee, which will drive further action across government and play an essential role in co-ordinating our strategy to reach net zero emissions.
International work
The UK cannot solve the challenges of climate change alone, so we are working internationally as well as domestically to tackle the issue. Our leadership has driven change on the ground and shifted the debate and mobilised finance internationally:
• In September 2019 at the United Nations, the UK committed to doubling our International Climate Finance (ICF) to £11.6 billion between 2021-22 and 2025-26. This will help developing countries make the transition to low-carbon and climate resilient development. As part of the ICF, we launched the new Ayrton Fund of up to £1 billion to allow British and other scientists from around the world to work in partnership with developing countries to drive the clean energy transition. At the G7 Summit in August 2019, the UK also pledged to contribute £1.44 billion to the Green Climate Fund over the next four years. This doubles the UK’s previous contribution of £720 million between 2014 and 2019; and
• We announced an investment package worth over £100 million for clean energy and energy efficiency at the African Investment Summit. Solar farms in Kenya, geothermal power stations in Ethiopia and clean energy storage across sub-Saharan Africa will receive funding and see leading UK scientists and financial experts working with their African counterparts to realise the continent’s huge potential for renewable energy. The Prime Minister also announced an end to UK direct bilateral support for thermal coal mining or coal power plants overseas.
Solving the Grand Challenges facing our society
The Industrial Strategy sets out Grand Challenges to put the UK at the forefront of the industries of the future, ensuring that the UK takes advantage of major global changes, improving people’s lives and the country’s productivity.
The first 4 Grand Challenges are focused on the global trends which will transform our future:
Future of mobility
• We announced up to £1 billion additional funding to develop and embed the next generation of cutting-edge automotive technologies. This funding will be used to develop UK supply chains for the large-scale production of electric vehicles and will also be used for further research and development in our world leading research centres. It will accelerate mass production of key technologies in the UK through major investments in the manufacturing of batteries, electric motors, power electronics, and hydrogen fuel cells, along with their component and materials supply chains; and
• As part of the Faraday Battery Challenge, we announced £23 million government investment to keep the UK at the forefront of developing the latest electric vehicle technology. This forms part of the total £274 million that will be awarded to consortia across the UK through the Faraday Battery Challenge, part of the government’s Industrial Strategy Challenge Fund (ISCF).
Ageing society
• We announced a new dedicated investment programme of around £600 million to unlock the potential of the UK’s best health and life science innovations. The funding will comprise a £200 million investment through the government-owned British Business Bank alongside private sector investment, which is expected to contribute a further £400 million, allowing companies to grow and ensure the UK remains a world-leader in life sciences innovation; and
- We launched the world’s largest genetics project, the £200 million whole genome sequencing project of 500,000 volunteers in the UK Biobank. The new project aims to improve the prevention, diagnosis and treatment of a wide range of serious and life-threatening illnesses including cancer, heart diseases, diabetes, arthritis and dementia, through genetic research that can explain why some people develop these conditions and others do not.
**Artificial intelligence and data**
- We announced the UK’s first ever tourism sector deal, which will revolutionise the way data is used by the sector, through the creation of a new Tourism Data Hub. The deal will also support the creation of an additional 10,000 apprenticeships for people building their careers in the tourism and hospitality sectors;
- We launched a new Cambridgeshire and Peterborough Local Industrial Strategy, which is designed to maximise productivity and innovation in the area’s leading life sciences, food production, artificial intelligence, and advanced manufacturing sectors, and features a Skills and Apprentices Hub to support the local economy; and
- We announced funding to support up to 2,200 students through 41 Doctoral Training Partnerships, as well as encourage more young people, particularly girls, to study science, technology, engineering and mathematics (STEM) subjects at school and university, and pursue a STEM-related career. The investment includes:
- £179 million for PhDs, formally known as Doctoral Training Partnerships, at over 40 UK universities in physical sciences, maths and engineering to develop the skills for ground-breaking research and high-tech industries like cyber security and chemical manufacturing. Part of the investment will go into pilots looking at how best to attract and support those from non-academic backgrounds to undertake this type of training; and
- £8.9 million to continue funding science education programmes including Science Learning Partnerships and Stimulating Physics Networks, which aim to improve science teaching and increase the take up of science at GCSE level and A level and ultimately encourage young people to pursue a STEM-related career.
**Clean Growth**
- We announced £300 million investment to develop cleaner, greener forms of transport. The government will provide £125 million, which will be supported by industry co-investment of up to £175 million to support exciting new technologies including flying urban taxis, electric passenger planes and even freight-carrying drones; and
- We announced a £98 million investment, allowing both UK researchers and small businesses to seize the opportunities in science and innovation and industries of the future. Of this, £78 million will be invested in 78 scientists and researchers through the government’s Future Leaders Fellowships scheme. The remaining £20 million will be allocated to 20 universities to develop new University Enterprise Zones (UEZs) across the country to provide vital specialist support to small businesses in pioneering industries – like Artificial Intelligence (AI), clean growth, smart energy and agri-food.
**Making the UK the best place in the world to work, and to grow a business**
This departmental priority combines the Department’s second and third objectives published in the Department’s SDP to Maximise investment opportunities and bolster UK interest as we leave the EU and Promote competitive markets and responsible businesses practices, now the UK has left the EU.
Our work towards delivering this objective is directed towards providing support for employees and businesses and regulating the market.
**Supporting Employees**
- In 2020, we legislated to increase the National Living Wage (NLW) by 6.2%, from £8.21 per hour to £8.72 per hour – the biggest cash increase ever. Nearly 3 million workers are now benefitting from the increases to the NLW and minimum wage rates for younger workers, according to estimates from the independent Low Pay Commission;
- 3,200 high-skilled jobs in Scunthorpe, Skinningrove and on Teesside were safeguarded by the completion of a deal to sell British Steel to leading Chinese steelmaker Jingye Group. The sale followed extensive discussions between the government, the Official Receiver, Special Managers, unions, suppliers and employees. It marks a critical step in securing a long-term, sustainable future for steelmaking in Yorkshire and the Humber and the North East. As part of the deal, Jingye Group pledged to invest £1.2 billion over 10 years to modernise British Steel sites and boost energy efficiency;
- We announced we were building on measures designed to support working parents as part of the Good Work Plan by extending legal protections against redundancy for new mothers returning to work by six months. Parents returning from adoption and shared parental leave will also be protected;
- We introduced regulations in Parliament which mean that from the 6th April employed parents who suffer the loss of a child under the age of 18 are now entitled to two weeks statutory Parental Bereavement Leave and Pay; and
- As announced in the Queen’s Speech and at Budget, we intend to legislate to give parents of children in neonatal care access to additional weeks of leave and pay to support them during this traumatic time and when they return to work.
**Supporting Businesses**
- We widened eligibility for Relief for Energy Intensive Industries to enable more businesses to benefit from support schemes, whilst investing in their greener future;
- We made £15 million of funding available to support trade associations and other business representative organisations to work with businesses across the UK to understand the steps they should take to be ready for Brexit;
- In 2019-20, we ran advertising campaigns to support business growth including advertising to support businesses to prepare for Brexit as part of the Cabinet Office ‘Get Ready’ campaign, workers on national and living wage and to help future proof skills relevant to the engineering industry;
- We published the Business Productivity Review, which was jointly undertaken with HM Treasury. It outlines plans to spend £56 million to support business productivity and highlights ten key actions to drive forward change and improve productivity; and
- We announced £88 million of new government investment to help close the productivity gap between the UK and major world economies:
- £43 million in government investment will support top researchers and analysts to explore how to turbocharge UK productivity levels through a new ambitious productivity institute; tackling barriers such as productivity imbalances between sectors and regions, poor management practices and skills investment; and
- a further £45 million will be specifically invested by the government into the development of cutting-edge supercomputer software, set to transform whole sectors from agriculture and advanced aerospace to Formula One and pharmaceuticals with hyper-accurate weather predictions – helping them plan and in turn boost their productivity. Regulation
- We announced tough new powers for the Competition and Markets Authority to fine businesses directly who have broken consumer law. The move will help tackle the loyalty penalty and practices such as subscription traps and unfair cancellation charges. Firms that overcharge or mislead their customers could be hit with direct fines without the need to go through a court; and
- We consulted on creating a single labour market enforcement body, which will have powers to enforce minimum wage and holiday payments. We will also crackdown on non-disclosure agreements.
COVID-19
The global pandemic emerged at the end of 2019-20 and BEIS moved quickly to put in place the Government’s response to the COVID-19 crisis:
- On Monday 23 March, we launched the Coronavirus Business Interruption Loan Scheme (CBILS) through the British Business Bank, to provide government-backed loans of up to £5 million to small and medium businesses.
Since 1 April 2020, the government has continued to support the economy through the following schemes, and as at 16 August 2020:
- the CBILS has approved £13.68 billion of support;
- the Coronavirus Large Business Interruption Loan Scheme (CLBILS) was launched on Monday 20 April to provide government-backed loans of up to £200 million to larger businesses and it has approved £3.50 billion of support;
- the Bounce Back Loan Scheme (BBLS) was launched on Monday 4 May to provide government-backed loans of up to £50,000 to small and medium businesses and it has approved £35.47 billion of support; and
- the Future Fund was launched on Wednesday 20 May to provide convertible loans of up to £5 million where government investment is matched by third-party investors and it has approved £588.3 million of support.
- We announced over £12.3 billion of grant support for eligible small businesses and businesses in the retail, hospitality, and leisure sectors to mitigate the impact of COVID-19;
- We amended the Working Time Regulations 1998 to allow workers who cannot take holiday due to the coronavirus to carry most, or all, of their leave into the next two leave years. This ensures that workers will not lose their leave entitlements and gives flexibility to business at a time when it is needed most;
- We enabled businesses to apply for a three-month extension for filing their accounts and guaranteed that any business citing issues as a result of COVID-19 will be automatically and immediately granted an extension. We also announced that we would legislate to offer further flexibilities covering requirements on companies to file information and to run their general meetings;
- We agreed new emergency measures with the energy industry to protect the domestic energy supply of those most in need. All customers with pre-payment meters can speak to their supplier about options to keep them supplied, such as nominating a third party for credit top ups, having a discretionary fund added to their credit or being sent a pre-loaded top up card. More broadly, any energy customer in financial distress will also be supported by their supplier, which could include debt repayments and bill payments being reassessed, reduced or paused where necessary, while disconnection of credit meters will be completely suspended;
- We temporarily eased administrative requirements to fast-track supplies of Personal protective equipment to NHS staff and protect companies hit by the pandemic;
- We announced changes to support UK companies facing insolvency measures. These included the introduction of corporate restructuring tools to give companies a better chance of survival, such as a moratorium to give companies time to seek rescue. The measures also included temporarily suspending parts of insolvency law to help directors continue trading through the emergency and ensure ongoing access to much-needed supplies such as energy and raw materials;
- We announced funding for six coronavirus research projects, including two focused on vaccination trials, which will benefit from a share of £20 million in government investment. Two government-backed projects will receive new funding, enabling pre-clinical and clinical vaccine trials, as well as supporting researchers to develop manufacturing processes to produce a vaccine at a million-dose scale. Other projects receiving funding examine how existing treatments could be repurposed to treat coronavirus, developing antibodies to help target the virus, and examining how people at greatest risk of catching it could be identified; and
- Through a £20 million investment, a consortium of the UK’s leading clinicians and scientists will look for breakthroughs that help the UK respond to this and future pandemics and save lives. COVID-19 Genomics UK Consortium – comprised of the NHS, Public Health Agencies, Wellcome Sanger Institute, and numerous academic institutions – will deliver large scale, rapid sequencing of the cause of the disease and share intelligence with hospitals, regional NHS centres and the government. Looking ahead
What we are aiming to achieve We will lead Britain’s recovery, rebuilding a more dynamic, green and productive economy and preparing businesses and workers for opportunities outside of the EU.
Fighting Coronavirus We will support a safe return to work, restoring livelihoods and rebuilding consumer confidence. We will help businesses to bounce back, putting in place a future programme of support for business and workers, as well as more targeted support to deliver a job rich recovery that contributes to delivering net zero. In addition, we will protect lives by significantly and rapidly increasing domestic vaccines research capability and capacity for production, through the work of the Vaccine Taskforce.
Backing Business We will increase opportunity by levelling up economic activity across all parts of the UK, supporting SMEs and helping business create jobs. We will take steps to remove regulatory barriers and promote regulations that supercharge growth and investment. Through reform measures we will regain public trust in the audit, governance and insolvency regimes. As the transition period draws to a close, we will seize the opportunities of global free trade and play an important part in negotiations on the EU and Rest of World Free Trade Agreements.
Unleashing innovation We will make the UK a science super power by backing ideas, eliminating bureaucracy and supporting talent from home and abroad. We will translate our biggest increase in R&D spend into world-beating innovation, catalysing private sector investment to promote the development of cutting-edge technology. We will put UK research funding on a firm footing after EU Exit, laying the groundwork for the establishment of a ‘high risk, high payoff’ new UK agency for research, due to open in 2021.
Tackling Climate Change We will drive the green recovery by setting out measures to decarbonise transport, buildings, energy and industry; deploy carbon capture, usage and storage at scale; and significantly increase offshore wind capacity. We will lay the groundwork for establishing a Gigafactory to manufacture electric car batteries in the UK within the next three years. In preparation to host a successful COP26 in November 2021, we will push for countries to renew their climate change to accelerate urgent climate action to protect our planet. Performance against United Nations sustainable development goals
The Sustainable Development Goals (SDGs) succeed the Millennium Development Goals (MDGs), which ended in 2015. They were developed by United Nations (UN) member states and include 17 global goals for 2016 – 2030. UK government departments are required to look within their single departmental plans to identify policies and programmes which support delivery of the SDGs. BEIS contributes mainly to goals 7, 9 and 13.
| Sustainable development goals | Progress in 2019-20 | BEIS delivery area | |------------------------------|---------------------|--------------------| | **Goal 7**<br>Ensure access to affordable, reliable, sustainable and modern energy for all | In 2014, the government introduced in legislation a fuel poverty target for England to improve as many fuel poor homes as is reasonably practicable to a minimum energy efficiency rating of Band C, by the end of 2030. This year, we ran a consultation to update the fuel poverty strategy. The Smart Metering Implementation Programme is an important national modernisation programme that will bring benefits to consumers, businesses and the nation as a whole. We published the latest assessment of the costs and benefits of the smart meter roll-out based on the most up-to-date evidence from the programme. | | | **Goal 9**<br>Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation | The Industrial Strategy looked at global trends, areas of UK strength and where there is scope for productivity enhancement to identify four Grand Challenges. Among measures to respond to these challenges, we have:\
• published the joint BEIS/HM Treasury Business Productivity Review, which sets out 10 key actions that will support businesses to become more productive, backed by £56 million funding;\
• awarded £2 million to the winners of a competition for our Centre for Connected and Autonomous Vehicles to support the development of cyber-security testing capability. | | | **Goal 13**<br>Take urgent action to combat climate change and its impacts | In June 2019 the UK became the first major economy in the world to legislate to end its contribution to global warming by 2050. The target will require the UK to bring all greenhouse gas emissions to net zero by 2050, compared with the previous target of at least 80% reduction from 1990 levels. The UK, in partnership with Italy, will host the UN’s 26th Conference of the Parties (COP26) to the UN Framework Convention on Climate Change (UNFCCC) in Glasgow from 1-12 November 2021 – the largest political summit hosted by the UK in decades, with up to 150 world leaders and 30,000 delegates attending. | | | **Goal 1**<br>End poverty in all its forms | In December, we announced that the National Living Wage (NLW) was increased by 6.2% in 2020 – the biggest cash increase ever. Nearly three million workers now benefit from the increases to the NLW and minimum wage rates for younger workers, according to estimates from the independent Low Pay Commission. | | | Sustainable development goals | Progress in 2019-20 | BEIS delivery area | |-------------------------------|---------------------|-------------------| | **Goal 5**<br>Achieve gender equality and empower all women and girls | The Hampton-Alexander Review focuses on improving women’s representation in senior roles, and this year’s report shows that women are now holding 32.4% of all FTSE 100 board positions – up from 30.2% last year and the strongest year of progress since 2011. Following successful campaigning and pressure from investors, ‘One & Done’ boards (a term to describe firms that are appointing a token woman to their board) have reduced from 74 to 39 this year. Only two all-male boards remain, down from 152 in 2011. | | | **Goal 8**<br>Promote sustained inclusive and sustainable economic growth, full and productive employment and decent work for all | To ensure that businesses are prepared to seize the economic opportunities arising from the UK’s exit from the EU we developed sector specific measures to support businesses through the transition and ensured that the UK’s trade negotiations contain provisions for small and medium-sized enterprises. We implemented the secondary legislation reforms of the Matthew Taylor Review which includes protections for agency workers and published the Good Work Plan, which sets out our vision for the future of the UK labour market. | | | **Goal 11**<br>Make cities and human settlements inclusive, safe, resilient and sustainable | As part of the government’s commitment to level up regions outside of London and the south east we:\
• published six Local Industrial Strategies, including those for Greater Manchester, the West of England, Oxford and Cambridge; and\
• worked with the Marches Local Enterprise Partnership to publish a new 10-year energy plan that will see half of the region’s electricity produced by renewable sources by 2030, a national pilot scheme developed for overcoming disruption to the National Grid and fuel poverty cut to below ten per cent. | | | **Goal 12**<br>Ensure sustainable consumption and production patterns | Ministers have always maintained that the exploration of England’s shale gas reserves could only proceed if the science shows that it is safe, sustainable and of minimal disturbance to those living and working nearby. Based on the report by the Oil and Gas Authority, ministers took the decision to suspend fracking for shale gas in England. | | Financial review
Expenditure
How expenditure is presented
The Department’s expenditure is reported in the financial Statements, in the Statement of comprehensive net expenditure (SoCNE) (page 116) and the Statement of Parliamentary Supply (SoPS) (page 91), but on different bases. The financial statements are prepared in accordance with accounting standards and guidance which are explained in more detail in the Department’s accounting policies in note 1.1 and on a similar basis to the rules generally applied by private sector businesses.
The Departmental Group’s net operating expenditure was £33.5 billion and £26.3 billion for the Core Department and Agencies.
The SoPS is specific to the public sector. It reports the Department’s expenditure against the control limits that Parliament has voted on. The SoPS presents total expenditure for the Departmental Group of £33.8 billion, compared to the Department’s Budget £31.2 billion. These figures are calculated in accordance with HM Treasury’s Consolidated Budgeting Guidance, which differs in several respects from the accounting basis above. It is against these limits that the Department is held accountable for its performance and use of taxpayers’ funds.
The summaries and explanations of key movements in this section is based on the SoPS, except where otherwise stated.
Overview of expenditure in 2019-20
| | 2019-20 Budget £m | 2019-20 Outturn £m | 2018-19 Outturn £m | |----------------------|-------------------|--------------------|--------------------| | TME | 31,168 | 33,844 | (94,221) | | Resource DEL | 3,555 | 2,838 | 1,246 | | Capital DEL | 11,835 | 11,228 | 10,814 | | Total DEL | 15,390 | 14,066 | 12,060 | | Resource AME | 15,055 | 19,915 | (105,865) | | Capital AME | 723 | (137) | (416) | | Total AME | 15,778 | 19,778 | (106,281) |
1 The TME outturn corresponds to ‘total voted and non-voted’ outturn in the SoPS. 2 The TME outturn is the total of Voted and Non-Voted in the Statement of Parliamentary Supply. 3 This expenditure is analysed in ‘Where we spent our money’ on pages 10 and 11.
Our budget framework
HM Treasury sets the budgetary framework for government spending.
The total amount a department spends is referred to as the Total Managed Expenditure (TME); which split into:
- Annually Managed Expenditure (AME)
- Departmental Expenditure Limit (DEL)
HMT do not set firm AME budgets. They are volatile or demand-led in a way the Department cannot control. The Department monitors AME forecasts closely and updates them annually.
HMT set firm limits for DEL budgets, as DEL budgets are understood and controllable. The limit is set at spending reviews which occur every three to five years.
DEL budgets are classified into resource and capital.
Resource DEL includes a further split into:
- ‘programme’ budgets for frontline service provision
- ‘admin’ budgets such as back-office functions, rent and IT
Capital DEL includes a further split into
- ‘financial transactions’ for loans given or shares purchased.
- ‘general capital’ for spending on all other assets or investments This expenditure does not represent cash spend. The Departmental Group’s performance in any year is impacted by accounting ‘fair value’ movements. As they are non-cash adjustments, they do not feature in standard descriptions of spend, such as in ‘Where we spent our money’, shown in the Performance report.
The significant movements in resource AME this year come from, the recognition movements in the fair value of the Contracts for Difference, changes to discount rates and cost estimate adjusting provisions in particular the NDA’s nuclear decommissioning provision.
Variations in our expenditure against the budget and the previous years are explained below in further detail.
**Comparison of expenditure to previous years recognised in SOPS**
The Department’s key areas of net expenditure recognised in SOPS for the last three years are shown in the table below.
| | 2019-20 £m | 2018-19 £m | 2017-18 £m | |--------------------------------|------------|------------|------------| | Nuclear Decommissioning Authority | 6,751 | (99,592) | 73,218 | | Science and research | 7,785 | 7,511 | 6,740 | | Contracts for Difference | 3,543 | (2,971) | 3,558 | | UK Research & Innovation (Innovate UK) | 1,077 | 1,052 | 973 | | Coal Authority | 58 | (1,993) | 1,545 | | Green Investment Bank and Green Infrastructure Platform | 9 | 11 | 24 | | Renewable Heat Incentive | 846 | 818 | 687 | | International Climate Finance | 339 | 321 | 330 | | Post Office | 92 | 228 | 140 | | Redundancy payment service | 431 | 319 | 260 | | COVID-19 business support | 10,976 | – | – | | Green Investment Bank sale receipts | – | – | (1,621) | | Other | 1,937 | 75 | 179 | | **Total** | **33,844** | **(94,221)** | **86,033** |
In 2019-20, there has been a high variation on expenditure recognised in the financial statement from (£94.4 billion) in 2018-19 to £33.5 billion in 2019-20. This has been primarily driven by a small change in discount rates in 2019-20 compared to the change in discount rates between 2018-19 and 2017-18, which resulted in (£99.6 billion) movement in the NDA’s nuclear decommissioning provision being recognised in 2018-19. 2019-20 includes the cost of the COVID-19 business support grants of £11.0 billion. 2019-20 has also seen an increase in the Contracts for Difference (CFDs) fair value movement and net £6.8 billion movement in the NDA’s nuclear decommissioning provision. 2019-20 – Other category includes the in year funding to the Official Receiver in respects of British Steel Limited, expenditure incurred by the British Business Bank and expenditure relating to the restarted Capacity Market Payment Scheme. Spending on areas such as UK Research & Innovation (Innovate UK), and International Climate Finance have remained broadly consistent. CFDs and Capacity Market Payments
The increase in the estimated discounted value of CFD payments (excluding HPC) from (£12.9 billion) in 2018-19 to (£16.5 billion) in 2019-20 resulted in a £5.3 billion expense reported in the SoCNE which is off set by payments of (£1.8 billion). The increase is mainly due to the award of 22 further CFDs in October 2019 as a result of Allocation Round 3 and the updated forecast of the wholesale electricity prices that are expected to be achieved by generators, offset by payments made during the year 2019-20.
During the year, the European Commission (EC) conducted an investigation into the GB Capacity Market, resulting in the scheme being deemed State Aid compliant. This resulted in the Electricity Settlements Company and National Grid to restart their respective Capacity Market activities. This resulted in £1.5 billion of Capacity Market payments being made in 2019-20 compared to £0.2 billion in 2018-19. These payments are off-set by the recognition of levy income.
Discount rates
In 2018-19 the provision expense reported in the Statement of net expenditure, was (£97.7 billion) which was primarily driven by the reduction in discount rates prescribed by HM Treasury from (1.56%) in 2017-18 to (0.11%) in 2018-19. In 2019-20, the equivalent real discount rate for cash outflows expected after ten years prescribed by HM Treasury has reduced further to (0.01%) this resulted in a smaller change recognised in the SoCNE in 2019-20 of (£0.2 billion) compared to (£9.6 billion) in 2018-19 relating to the nuclear decommissioning provision. In 2019-20, in addition to the impact of the discount rate change, the nuclear provision liability has increased by £6.9 billion due to cost estimate changes. Further detail of the movements in provisions can be found in note 18.1 for Nuclear provisions and note 18.2 for Other provisions.
Comparison of Outturn to Budget
| | Outturn £m | Budget £m | Variances £m | % | |----------------------|------------|-----------|--------------|-----| | TME | 33,844 | 31,168 | (2,676) | (8.6%) | | Resource DEL | 2,838 | 3,555 | 717 | 20.2% | | Capital DEL | 11,228 | 11,835 | 607 | 5.1% | | Total DEL | 14,066 | 15,390 | 1,324 | 8.6% | | Resource AME | 19,915 | 15,055 | (4,860) | (32.3%) | | Capital AME | (137) | 723 | 860 | 119.0% | | Total AME | 19,778 | 15,778 | (4,000) | (25.4%) |
The variances are the TME (Voted and Non-Voted) against Budget (Voted and Non-Voted), this is different to the presentation in the SoPS which compares Voted Expenditure against Voted Budget. Explanations for the key variances from budget are as follows, split by budget line headings from the SoPS.
TME
Our TME budget was £31.2 billion; against this the Department had an Outturn of £33.8 billion. The Department spent an additional £2.6 billion in excess of its Budget. This has resulted in the Department breaching its control total and receiving a regularity audit qualification; this was due to the recognition of COVID-19 business support grants in 2019-20.
Resource DEL
The Estimate was £3.6 billion. Outturn against the Estimate was £2.8 billion; £717m lower than budget. This is primarily due to contingency not required following the successful sale of British Steel Limited which completed in March 2020. Capital DEL The Estimate was £11.83 billion. Outturn against the Estimate was £11.2 billion, £607 million lower than budget. A significant proportion of the underspends is attributed to fewer capital calls by financial institutions under the Enterprise Financial Guarantees schemes operated by the British Business Bank on behalf of the Core Department. The extent of annual capital calls is not wholly predictable, as it is intrinsically linked to the financing needs of the underlying business.
Resource AME The Estimate was £15.1 billion, and Outturn was £19.9 billion, exceeding the Estimate by £4.9 billion, due to the recognition of a £10.8 billion provision for the cost of the government’s COVID-19 business support grants, which is off-set by underspends, principally due to accounting valuation adjustments, including:
- The NDA’s nuclear decommissioning provision primarily increased by changes in cost estimates, which were £1.4 billion less than the Estimate, which reflect uncertainties when budgeted for the provision.
- CfD liabilities, which increased by £3.6 billion, from (£12.9 billion) to (£16.5 billion). This was £3.1 billion lower than the Estimate due to budgetary contingency in the forecast of the wholesale electricity prices.
- A potential provision relating to the Official Receiver of £1.1 billion was not required.
Resource AME – Excess Vote The sudden and serious adverse impacts on society and the economy of the COVID-19 pandemic necessitated an urgent Government response including announcements in March of two schemes to provide grant support to businesses affected by the crisis. These announcements along with actions taken by the Department to ensure these cash grants were paid to eligible businesses as soon as possible, had the effect of creating a constructive obligation on the Department and a provision for £10.8 billion has been reported in note 18 of the accounts. At the time of the announcements and subsequent actions, there was insufficient time to request increased budgetary cover through a Supplementary Estimate for this non-cash expenditure and, as a result, the Voted Resource AME control total has been exceeded by £4.9 billion resulting in a qualified audit opinion on regularity and an Excess Vote.
Capital AME The £860 million underspend on capital AME is almost entirely due to lower than expected demand by Post Office Limited for its working capital funding from the Core Department at the year-end. Expenditure on Official Development Assistance
Official Development Assistance (ODA) is government aid that targets economic development in developing countries. ODA spend is reported on a cash basis and for the calendar year.
Our total ODA spend in 2019 was £957.4 million – £622.5 million on R&I, and £334.9 million on climate and energy. To maximise effectiveness, we aim to monitoring, evaluation and learning to identify opportunities for improvement.
R&I ODA activities in 2019-20
On R&I, we:
- launched 12 pioneering research hubs for research into complex development problems;
- supported the first cohort of African Independent Research Fellows to establish independent careers;
- celebrated five years of the Leaders in Innovation Fellowship which has supported over 1000 innovators to commercialise innovations; and
- The Newton Prize awarded funding to research projects in environmental conservation and strengthening energy infrastructure to withstand extreme weather.
Climate and energy ODA activities in 2019-20
On climate and energy, we spent:
- £166.5m to support delivering breakthrough energy storage solutions at scale in developing countries;
- £20m to support small scale renewable energy projects in sub-Saharan Africa;
- £12.5m to boost the uptake of greener construction practices; and
- £9.4m for technical assistance and grants to support new business models that can transform supply chains at risk from deforestation.
BEIS ODA spend by sector
| Sector code | Sector | 2019 £m | |-------------|---------------------------------------------|---------| | 111 | Education, Level Unspecified | 51.6 | | 112 | Basic Education | 2.3 | | 114 | Post-Secondary Education | 9.1 | | 121 | Health, General | 116.0 | | 122 | Basic Health | 1.2 | | 123 | Non-communicable diseases | 0.8 | | 130 | Population Policies/Programmes & Reproductive Health | 0.5 | | 140 | Water and supply sanitation | 2.2 | | 151 | Government & Civil Society-general | 5.2 | | 152 | Conflict, Peace & Security | 2.0 | | 160 | Other Social Infrastructure & Services | 4.6 | | 210 | Transport & Storage | 0.8 | | 220 | Communications | 0.2 | | 231 | Energy Policy | 18.0 | | 232 | Energy generation, renewable sources | 222.6 | | 240 | Banking & Financial Services | 0.1 | | 250 | Business & Other Services | 0.1 | | 311 | Agriculture | 57.9 | | 312 | Forestry | 15.8 | | 313 | Fishing | 1.9 | | 321 | Industry | 20.5 | | 322 | Mineral Resources & Mining | 2.1 | | 323 | Construction | 0.2 | | 410 | General Environment Protection | 122.6 | | 430 | Other Multisector | 273.9 | | 720 | Emergency Response | 0.2 | | 740 | Disaster Prevention & Preparedness | 1.3 | | 910 | Administrative Costs of Donors | 23.6 | | 998 | Unallocated/unspecified | 0.1 | | **Total** | | **957.4** |
Notes
1. The BEIS ODA spend for 2019 provided are provisional. The final official statistics will be published by the Department for International Development in November 2020.
2. Sector codes used by the OECD Development Assistance Committee (DAC); http://www.oecd.org/ Consolidated Statement of Financial Position
The Department remains in a net liability position as at 31 March 2020. The liability has increased from (£139 billion) at 31 March 2019 to (£158 billion) at 31 March 2020. The most significant assumptions and items impacting the Statement of Financial Position are explained below. They include
a. Contracts for Difference (CfDs) and recognition of Hinkley Point C (HPC); b. Impact of changes in discount rates; c. Nuclear Decommissioning provision, and d. COVID-19 business support provision.
(a) Contracts for Difference and recognition of Hinkley Point C
CfDs are designed to incentivise investment in a mix of low carbon electricity generation technologies which will help the UK meet its renewable and decarbonisation targets.
CfD contracts do this by agreeing with a generator a strike price for electricity supplied, thereby providing certainty needed for private investment, while protecting consumers from having to continue to pay higher support costs when electricity prices are high. The support payments paid (or repaid) in future will be calculated from the difference between the ‘strike’ price and the average market price.
Low Carbon Contracts Company (LCCC)
Difference payments under the CfDs are funded through a levy paid by licensed energy suppliers. The LCCC is the company established by Government to collect this levy, manage the CfDs and pay or receive the contracted difference payments. The LCCC is managing all 73 CfD contracts.
Accounting for fair value
In order to comply with the relevant accounting standards, the Department is required to estimate the ‘fair value’ of future CfD payments. Difference payments under CfDs can be positive (an asset) or negative (a liability) and are currently recognised as a liability. The matching asset arising from the statutory obligation on suppliers is not recognised under the FReM. The CfD liability figure is calculated using a model that estimates eligible generation, by CfD holders and combines this with forecast expected demand for electricity and electricity prices over the term of the contract (which are affected by a large number of factors including forecast expected generation mix and demand for electricity). The figures in the financial statements represent management's best current estimate within a range of scenarios and will be subject to change over time.
- In accordance with accounting standards the initial fair value of any contract is deferred i.e. not recognised in the accounts. As at 31 March 2020, the cumulative value of the deferred differences of the CfDs (excluding HPC) was (£22.3 billion) and (£73.1 billion) (including HPC) (31 March 2019: (£23.3 billion) (excluding HPC)).
- The Department recognises all subsequent movements of fair value on CfD contracts, whose cumulative value was (£89.6 billion) (including HPC) at 31 March 2020 (31 March 2019: (£35.2 billion)) through the Statement of Comprehensive Net Expenditure.
- The Department recognises a liability, which was (£16.5 billion) as at 31 March 2020 (31 March 2019: (£12.9 billion)) on the Statement of Financial Position.
The tables below show movements in the year. Further details on the CfDs are in the note 9 to the financial statements.
HPC
During the current year, as explained further in note 1.26, BEIS updated its Dynamic Dispatch Model to estimate wholesale electricity prices out to 2060. As a result, it is considered that the criteria for recognition have been met and accordingly HPC CFD has been recognised in the financial statements for the first time in 2019-20. At 31 March 2020 the deferred value of HPC was £50.8 billion. See note 9 for further information. Effect on the Statement of Financial Position
| | 2019-20 £bn | 2018-19 £bn | |------------------|-------------|-------------| | 01-Apr | 12.9 | 15.9 | | Changes in FV on exiting recognised contracts | 4.4 | (2.7) | | Release of CfD liability relating to terminated contracts | – | – | | Payments made to generators | (1.7) | (1.0) | | Deferred differences recognised | 0.9 | 0.7 | | 31-Mar | 16.5 | 12.9 |
Movements in fair value
| | 2019-20 £bn | 2018-19 £bn | |------------------|-------------|-------------| | 01-Apr | 35.2 | 39.2 | | Changes in fair value on exiting recognised contracts | 4.4 | (2.7) | | Additions | 0.9 | – | | Recognition of HPC CFD during the year | 50.8 | – | | Release of CfD liability relating to terminated contracts | – | (0.3) | | Payments made to generators | (1.7) | (1.0) | | 31-Mar | 89.6 | 35.2 |
Effect on the Statement of Comprehensive Net Expenditure
| | 2019-20 £bn | 2018-19 £bn | |------------------|-------------|-------------| | Contract for difference derivatives | 5.3 | (2.0) | | comprising: | | | | Changes in FV on exiting recognised contracts | 4.4 | 2.7 | | Release of CfD liability relating to terminated contracts | – | – | | Deferred differences recognised | 0.9 | 0.7 |
(b) Impact of changes in discount rates
Discount rates
Some of our priorities carry obligations that are very long-term and will involve expenditure over decades to come. The eventual costs of these long-term projects are uncertain but we are required to present a single number in the annual accounts. This single number is based on our best estimate of costs, technology and other relevant factors, adjusted to reflect the changing value of money over time.
The worth of the Department’s future cash flows are calculated at present value in accordance with accounting standards. This present value reflects the time value of money. The accounts use a number of different discount rates depending on the nature of the transaction and the regulation applicable.
In the past, the time value of money has usually been positive which means money could be invested in the present for a return in the future that would exceed the rate of inflation – this is known as a positive ‘real’ return. Government bonds are seen as a low risk form of investments. Usually, therefore, government bonds bring a lower rate of return than other investments. As bonds pay a fixed cash amount when they mature, the higher the price paid for the bonds now, the lower the rate of return is considered to be. Following the global financial crisis, demand for lower–risk investments increased, particularly government bonds. As a result, the price of government bonds rose. This has resulted in government bonds providing a negative ‘real’ return. The long-term discount rate has been negative since 2015. In 2019-20, the long term discount rate remains negative but not to as significant extent as in prior years.
When negative discount rates are applied to the Department’s long-term obligations, this has the effect of significantly increasing the reported value of the liabilities, however, with the decrease of the negative discount rate this has resulted in a decrease in the report value of the liabilities this year. Even when the cash the Department expects to pay has not changed substantially, year on year. But not all rates are negative. For investment appraisal government continues to use positive rates, to ensure that projects are correctly appraised and generate future benefits. These accounts use positive discount rates to determine the present value of future income generated from assets and investments. When positive rates have been used to discount future cash receipts, then the present value of them is lower than the cash the Department will receive. The following tables set out the specific material balances in our accounts that have been discounted. The impact of the discounting can be assessed by comparing the discounted value with the undiscounted value.
**Impact on assets.**
Assets have been discounted at positive rates. This means that the present value is lower than the cash the Department expects to receive. For financial instruments we are required to use the prescribed HM Treasury discount rate of 0.7% real and 3.7% nominal, or the rate of return implicit in the contract if higher. For the repayable launch investments, we assessed the implicit rate to be 3.5% plus RPI; 2019-20: RPI was 3.35% (2018-19: RPI was 2.6%) giving an implicit rate of 6.85% (2018-10: 6.10%).
**Impact on liabilities.**
Liabilities continue to be discounted at a negative rate in 2019-20. The present value of the liabilities is therefore higher than the value the Department expects to pay in the future. The discount rate has been negative since 2015 because return on government bonds has been lower than inflation due to increased demand for government bonds since the financial crisis.
The specific assets and liabilities that have been discounted are shown the in table below. Provisions from the NDA and the Coal Authority relate to the expected future cost of managing the energy legacy. The fair value of the CfD has been adjusted using the 0.7% real term discount rate.
| Nuclear decommissioning provisions | 2019-20 | 2018-19 | Rationale | |------------------------------------|---------|---------|-----------| | Short term < 2 years | -1.36% | -1.22% | Set by HM Treasury Public Expenditure System (PES) Secretariat 7 December 2019 | | Short term 2 – 5 years | -1.46% | -1.31% | | | Medium-term 6 -10 years | -1.42% | -0.94% | | | Long-term > 10 years | -0.01% | -0.11% | |
| CfD financial instruments | | | | |------------------------------------|---------|---------|-----------| | Real rate (as cashflows are in real terms) | 0.70% | 0.70% | as above |
| Coal pensions | | | | |------------------------------------|---------|---------|-----------| | Real rate + 3% RPI (as contractual figures are in nominal values) | 3.7% | 3.70% | as above: financial instruments discount rate (non-indexed) |
| Repayable launch investments | | | | |------------------------------------|---------|---------|-----------| | Higher of the implicit rate of return or the financial instrument’s rate | 3.50% | 3.50% | Risk-free rate for government investment appraisal set by HM Treasury Green Book, adjusted for inflation | | RPI 3.35% | | | | | RPI 2.60% | | | |
**Notes**
1 HM Treasury provided nominal and Inflation rates for discounting provisions for 2018-19, rather than Real rates as they have in prior years. The values above are real rates for 2019-20 and 2018-19 taking into account the nominal and inflation rates for 2019-20 and 2018-19. Further details of the nominal and inflation rates are given in the Departmental Group Accounting Policies note 1.23 The impact of discounting
| | 2019-20 With discounting £m | 2019-20 Without discounting £m | 2019-20 Impact of discounting £m | 2018-19 With discounting £m | 2018-19 Without discounting £m | 2018-19 Impact of discounting £m | |----------------------|-----------------------------|--------------------------------|---------------------------------|-----------------------------|--------------------------------|---------------------------------| | **Assets** | | | | | | | | Repayable launch | 833 | 1,098 | (265) | 1,058 | 1,348 | (290) | | investments | | | | | | | | Coal pensions | 808 | 916 | (108) | 920 | 1,058 | (138) | | **Liabilities** | | | | | | | | NDA nuclear provision| 134,677 | 131,864 | 2,813 | 129,709 | 123,311 | 6,398 | | Coal Authority provision | 2,306 | 2,275 | 31 | 2,299 | 2,174 | 125 | | **Financial instruments** | | | | | | | | CfD liability | 85,583 | 100,903 | (15,320) | 35,249 | 37,176 | (1,927) |
(c) NDA provisions
NDA manage the clean-up and decommissioning of 17 nuclear licensed sites across the UK – such as former nuclear power stations and research centres. Some of these sites date from the earliest days of nuclear power. Unlike modern nuclear facilities, decommissioning of these sites was not built into plans or designs.
Decommissioning of sites will take many decades. In part, this is because plans often include periods of ‘care and maintenance’, where sites are made safe and put into an interim state, allowing residual amounts of radioactive material to decay over time. By doing this, the final stages of decommissioning will be easier and safer to complete.
NDA’s best estimate of the future costs of the estate over the next 100+ years on an undiscounted basis is £132 billion. This figure is based on dealing with an assumed inventory of materials with varied radiological characteristics and using the extant strategy for retrieval and disposal of the resulting materials over several decades. Each of these elements is uncertain in its own right – the cost of developing the necessary technology and plants to deal with these activities is also uncertain. The quality of the forecast becomes less certain the longer the projection.
NDA has reviewed the methodologies used in the calculation, taking into account HM Treasury Green Book guidance and the need to remove optimism bias. Projects like these could typically have a range of estimates from -50% to +300%. In light of uncertainties in the estimate, NDA considers it prudent to present a credible range of outcomes. The range presented for the current year is for undiscounted costs of £115 billion to £246 billion.
(d) COVID-19 business support grant provision
As detailed in note 1.26 the government’s COVID-19 business support grants have been recognised in 2019-20, resulting in a provision for £10.8 billion being recognised in note 18.2. These grants have been paid out in 2020-21, clearing the liability. Sustainability report
Introduction We are committed to sustainability in the way we make policy, procure goods and services and impact the environment.
As part of our commitments to environmental sustainability, we take part in the Greening Government Commitments (GGC). In line with GGC, we report on our greenhouse gas emissions, waste arising, and water and paper use in this report.
Sustainability in policy development
Rural proofing Rural proofing is about recognising the impact of our policies in rural areas, to ensure policy outcomes are fair and reasonable in these areas.
The Cities and Local Growth Unit (CLGU) works to encourage economic growth and productivity in all parts of England, Towns in rural areas, such as Bloxwich and Todmorden are being supported to develop Town Deals. Rural coastal towns have received the Coastal Communities Fund.
Climate change adaptation Climate change adaptation refers to adapting to the consequences of climate change. We contribute to the cross-government National Adaptation Plan, published every 5 years. It sets out how risks of extreme weather events will be managed (e.g. flood resilience measures) for communities, the built environment, businesses and local government.
Sustainable procurement
Suppliers We use Crown Commercial Service frameworks to procure our goods and services. The procurement service works with its partners to ensure sustainability goals are achieved.
Engagement with small and medium enterprises We have achieved the government target of 33% direct procurement and through the supply chain two years ahead of schedule. We continue to promote opportunities with SMEs through open competition, early market engagement and use of government frameworks wherever we can.
Prompt payments It is government policy to pay 90% of undisputed invoices within 5 days, with the remainder paid in 30 days. In 2019-20, the Core Department paid 94.3% of undisputed invoices within 5 days and 99.1% within 30 days.
The most common reasons for invoices to be unpaid within 30 days are due to: amounts on the purchase order not matching the receipt, or a supplier has used a different address or bank details, which does not match the invoice. These issues need to be resolved before payments are made.
Environmental sustainability
Green Guardians Our Green Guardians network, a group of staff volunteers, supports BEIS in achieving its environmental sustainability targets through being a strong staff engagement channel on initiatives that support our GGC targets.
Greenhouse gas emissions We continue to make significant progress in reducing our greenhouse gas emissions, in line with the targets set by the GGC, through consolidation of our estate and energy efficiency improvements.
Waste We have fully segregated our waste streams by installing bins for recycling a variety of materials. We have also eradicated the majority of consumer single use plastics throughout the Department. Water & paper We are accredited to ISO 50001 (energy efficiency) and ISO1400 (waste management). We are reviewed annually against these standards and we will seek continuous improvement in both. We have a closed paper cycle whereby all paper is recycled for reuse.
Food and catering We are committed to sustainable, and where possible, British food products, and have eliminated single use plastics from our catering provision.
Sustainable construction We have had no new builds in the last year. We work with the Government Property Agency who hold our leases to ensure any construction work prioritises sustainability and reaches the government’s buying standard.
Biodiversity & the natural environment We have no significant impact on biodiversity. HMLR continues to work with FM providers on a phased plan to improve the biodiversity at all sites appropriate for such activity; in the past year this has been achieved at Hull and Fylde with plans for Durham and Plymouth progressing.
At Hull and Fylde, HMLR have built on the existing landscape and vegetation to increase the sites’ biodiversity value. Vegetation and habitats that support native species of plants and invertebrates have been prioritised and nurtured, whilst new plants and bug houses have been added to support the habitats.
Summary of progress on Greening Government Commitments
| | Targets by 2019-20 compared to the 2009-10 Baseline | Progress in 2019-20 | |--------------------------------|---------------------------------------------------|---------------------| | Total GHG Emissions | reduce by 66% | 71% reduction | | Number of domestic flights | reduce by 30% | 71% reduction | | Total non-hazardous waste arising | reduce generally | 73.68% increase | | Waste to landfill | reduce proportion to 10% | reduced to 4.57% in 2019-20 | | Waste recycled, reused, composted | increase generally | 68.27% increase | | Volume of water used | reduce generally | 55.63% reduction | | Reams of paper procured | reduce by 50% | 83.29% reduction |
Notes 1 66% is the new 2020 target for BEIS. The original target of 40% has been exceeded; in 2016-17, we had achieved 51% reduction. Further information is available at the GGC page on gov.uk.
## Reporting on Greening Government Commitments
### Greenhouse gas emissions
| Emissions, tonnes CO₂e | 2019-2020 | 2018-2019 | 2017-18 | 2016-17 | Baseline 2009-10 | |------------------------|-----------|-----------|---------|---------|------------------| | Scope 1¹ | 4,730 | 6,644 | 8,007 | 6,109 | 17,837 | | Scope 2² and 3³ | 13,905 | 16,037 | 22,325 | 25,480 | 46,507 | | **Total** | **18,634**| **22,681**| **30,332**| **31,589**| **64,344** |
### Related energy consumption, MWh
| Energy type | 2019-2020 | 2018-2019 | 2017-18 | 2016-17 | Baseline 2009-10 | |-------------|-----------|-----------|---------|---------|------------------| | Electricity: non-renewable | 14,242 | 28,661 | 29,221 | 30,360 | 45,324 | | Electricity: renewable | 15,968 | 15,596 | 17,429 | 19,541 | 38,676 | | Gas | 11,282 | 20,347 | 36,186 | 29,071 | 62,905 | | District heating | 24 | 114 | 149 | 125 | – | | Other heat | 802 | 9,210 | 6,824 | 2,664 | 9,865 | | **Total** | **42,318**| **73,928**| **89,809**| **81,761**| **156,770** |
### Related expenditure, £’000
| Expenditure type | 2019-2020 | 2018-2019 | 2017-18 | 2016-17 | Baseline 2009-10 | |------------------|-----------|-----------|---------|---------|------------------| | Energy | 7,349 | 7,460 | 6,755 | 6,467 | n/a | | CRC licence⁴ | n/a | 298 | 598 | 497 | n/a | | Official business travel⁵, ⁶ | 13,035 | 16,907 | 7,559 | 11,660 | n/a | | **Total** | **20,384**| **21,015**| **14,912**| **18,624**| **n/a** |
### Domestic business flights
| Year | 2019-2020 | 2018-2019 | 2017-18 | 2016-17 | Baseline 2009-10 | |------|-----------|-----------|---------|---------|------------------| | Total number of domestic flights⁷ | 3,860 | 4,503 | 2,689 | 5,125 | 8,078 |
### Waste
| Waste type | 2019-2020 | 2018-2019 | 2017-18 | 2016-17 | Baseline 2009-10 | |------------|-----------|-----------|---------|---------|------------------| | Total waste generated, tonnes | 1,971 | 2,137 | 2,468 | 2,159 | 7,541 | | Non-hazardous: to landfill | 90 | 300 | 289 | 197 | 2,986 | | Non-hazardous: reused/ recycled | 1,248 | 1,293 | 1,779 | 1,775 | 4,107 | | Non-hazardous: composted/ bio-digestion | 63 | 79 | 49 | 60 | 25 | | ICT waste: reused | 2 | – | – | – | 7 | | ICT waste: recycled | 36 | 30 | 11 | 51 | 2 | | Incinerated: e.g. food waste | 532 | 536 | 389 | 181 | 448 | | **Total disposal cost, £’000** | **553** | **404** | **468** | **432** | **n/a** |
### Water and paper
| Year | 2019-2020 | 2018-2019 | 2017-18 | 2016-17 | Baseline 2009-10 | |------|-----------|-----------|---------|---------|------------------| | Water consumption, m³ | 125,774 | 115,907 | 110,457 | 126,468 | 283,495 | | Water supply and sewage costs, £’000 | 461 | 489 | 325 | 329 | n/a | | Paper procured, reams | 47,509 | 71,335 | 61,825 | 97,893 | 441,134 |
### Notes
Entities include: i. BEIS Core Department, ii. Companies House, iii. Intellectual Property Office, iv. Land Registry, v. Natural Environment Research Council, vi. Nuclear Decommissioning Authority, and vii. Ordnance Survey
1. Scope 1: direct emissions from sources owned or controlled
2. Scope 2: indirect emissions from consumption of purchased electricity or sources of energy generated upstream
3. Scope 3: other indirect emissions occurring as a consequence of BEIS’ operations, but not directly owned or controlled by BEIS
4. CRC ended in 2018-19
5. 2018/19 expenditure on official business travel data has been updated to include Land Registry and some data for IPO not previously captured.
6. Expenditure on official business travel for NERC does not include international flights
7. Domestic flight figures for 2018-19 and 2019-20 now count each part of a return journey as one flight, in line with the GGC reporting requirement. In previous years, a return journey counted as one flight.
8. Some data for March 2020 has been estimated (in line with reporting guidance methodologies) due to issues posed by COVID-19 Other performance reporting
Anti-bribery and anti-corruption
No cases of bribery or corruption were identified within BEIS this year.
We have continued to work with other departments and organisations to maintain standards and implement best practice. Our policy on gifts, hospitality and bribery and corruption has been refreshed and updated. A standard template Gifts and Hospitality register has been produced for each directorate to record gifts and hospitality over a value of £15 and any reciprocal gifts given. These registers are reviewed by the BEIS Counter Fraud team.
We have ongoing collaboration with other government departments on high risk areas such as overseas funding, and we have continued to manage risks with an internal dimension and those involving overseas delivery partners.
Fraud, anti-bribery and corruption awareness continues to be promoted by the BEIS Counter Fraud team, through workshops, network meetings and the availability of training. This includes mandatory training for front-line staff and managers in high risk areas. We have seen an increase of nearly 20% in training uptake. Communications activity is ongoing – the national “Take Five – To Stop Fraud” campaign messaging has been adopted both internally and with BEIS partner organisations.
Public correspondence
We aim to respond to 80% of our correspondence within 15 working days.
In 2019-20, we received 5,099 written enquiries from members of the public, and responded to 87% of cases within 15 working days. The graph shows our monthly performance. Advertising campaigns
Our communications directorate contributes to the successful delivery of major policy areas. We communicate through a range of marketing, press and public relations, digital and internal channels and partnership activities that are insight driven and robustly evaluated. We do, where necessary, engage in publicity and advertising to draw attention to important campaigns with the right audiences.
In 2019-20 we ran advertising campaigns to support business growth including advertising to support businesses to prepare for Brexit as part of the Cabinet Office ‘Get Ready’ campaign, workers on national and living wage and to help future proof skills relevant to the engineering industry.
Complaints to the Parliamentary Ombudsman
| No. complaints accepted for investigation | 6 | |------------------------------------------|---| | (a) Investigations fully upheld | 0 | | (b) Investigations partly upheld | 3 | | (c) Investigations not upheld | 4 |
Note
Figures for (b) and (c) may include complaints accepted in earlier years.
These figures have been obtained directly from the Parliamentary and Health Service Ombudsman for the period 2018-19, and provide the most recent data available. Neither the 2018-19 nor the 2019-20 Parliamentary Complaints Statistics reports have been published.
The Ombudsman only accepts complaints that have been through the BEIS internal complaints process. We aim to answer all formal complaints via [email protected] within 20 working days. Only a small percentage of complaints we receive are escalated to the Ombudsman.
Sarah Munby Permanent Secretary and Principal Accounting Officer 11 September 2020 Page intentionally left blank Accountability report Corporate governance report
Statement of Accounting Officer’s responsibilities
Under the Government Resources and Accounts Act 2000 (the GRAA), HM Treasury has directed the Department for Business, Energy and Industrial Strategy to prepare, for each financial year, consolidated resource accounts detailing resources acquired, held or disposed of, and the use of resources, during the year by the Department (inclusive of its Agencies) and its sponsored non-departmental public bodies and other arm’s-length public bodies designated by order made under the GRAA by Statutory Instrument 2020 no 17 (together known as the ‘Departmental Group’, consisting of the Core Department and sponsored bodies listed at note 28 to the accounts). The accounts are prepared on an accruals basis and must give a true and fair view of the state of affairs of the Department and Departmental Group, and of the income and expenditure, Statement of Financial Position and cash flows of the Departmental Group for the financial year.
In preparing the accounts, the Accounting Officer of the Department is required to comply with the requirements of Government Financial Reporting Manual and in particular to:
- observe the Accounts Direction issued by the Treasury, including the relevant accounting and disclosure requirements, and apply suitable accounting policies on a consistent basis;
- ensure that the Department has in place appropriate and reliable systems and procedures to carry out the consolidation process;
- make judgements and estimates on a reasonable basis, including those judgements involved in consolidating the accounting information provided by non-departmental and other arm’s-length public bodies;
- state whether applicable accounting standards as set out in the Government Financial Reporting Manual have been followed, and disclose and explain any material departures in the accounts;
- prepare the accounts on a going concern basis;
- confirm that the Annual Report and Accounts as a whole is fair, balanced and understandable and take personal responsibility for the Annual Report and Accounts and the judgements required for determining that it is fair, balanced and understandable.
HM Treasury has appointed the Permanent Head of the Department as Accounting Officer of the Department for Business, Energy and Industrial Strategy.
The Accounting Officer of the Department has also appointed the Chief Executives (or equivalents) of its sponsored non-departmental and other arm’s length public bodies as Accounting Officers of those bodies.
The Accounting Officer of the Department is responsible for ensuring appropriate systems and controls are in place to ensure any grants the Department makes to its sponsored bodies are applied for the purposes intended and that such expenditure and the other income and expenditure of the sponsored bodies are properly accounted for, for the purposes of consolidation within the resource accounts. Under their terms of appointment, the Accounting Officers of the sponsored bodies are accountable for the use, including the regularity and propriety, of the grants received and the other income and expenditure of the sponsored bodies. The responsibilities of an Accounting Officer, including responsibility for the propriety and regularity of the public finances for which the Accounting Officer is answerable, for keeping proper records and for safeguarding the assets of the Department or non-departmental or other arm’s length public body for which the Accounting Officer is responsible, are set out in *Managing Public Money* published by HM Treasury.
**Accounting Officer’s confirmation**
As Accounting Officer, I have taken all the steps I ought to have taken to make myself aware of any relevant audit information and to establish that the Department’s auditors are aware of that information. So far as I am aware, there is no relevant audit information of which the auditors are unaware.
**Sarah Munby**\
Permanent Secretary and Principal Accounting Officer\
11 September 2020 Directors’ report
The directors’ report includes individuals who have had responsibility for BEIS during the year, and up to the reporting date. Senior officials comprise members of the Executive Committee.
Ministers
Rt Hon Nadhim Zahawi MP from 26 Jul 2019 Parliamentary Under Secretary of State (Minister for Business and Industry)
Rt Hon Kwasi Kwarteng MP from 24 Jul 2019 Minister of State (Minister for Business, Energy and Clean Growth)
Alok Sharma MP from 14 Feb 2020 Minister of State (Minister for Business, Energy and Clean Growth)
Kwasi Kwarteng MP from 24 Jul 2019 Parliamentary Under Secretary of State (Minister for Business and Industry)
Amanda Solloway MP from 14 Feb 2020 Parliamentary Under Secretary of State (Minister for Science, Research, and Innovation)
Paul Scully MP from 14 Feb 2020 Parliamentary Under Secretary of State (Minister for Small Business, Consumers and Labour Markets)
Lord Callanan from 14 Feb 2020 Parliamentary Under Secretary of State (Minister for Climate Change and Corporate Responsibility)
Lord Grimstone from 18 Mar 2020 Minister for Investment (jointly with the Department for International Trade)
Senior officials
Sarah Munby from 20 Jul 2020 Permanent Secretary
Julian Critchlow Director General
Joanna Whittington Director General
Jo Shanmugalingam Director General
Jae Samant Director General
Professor John Loughhead Director General
Tom Taylor Chief Financial Officer; Director
Craig Woodhouse from 15 Jul 2019 Director
Ashley Ibbett from 14 Apr 2020 Director General (interim)
Mike Keogh from 14 Apr 2020 Director
Chris Thompson from 14 Apr 2020 Director
Doug Watkins from 13 Jul 2020 Acting Director General (interim)
1 Sarah Munby was a Director General from 15 July 2019 to 20 July 2020, when she was appointed the Permanent Secretary taking over from Sam Beckett who was the Acting Permanent Secretary from 14 April 2020 to 19 July 2020. Non-executive directors
Archie Norman DB, Lead non-executive
Nigel Boardman DB, ARAC Chair
Leena Nair DB, NOMS Chair
Stephen A. Carter DB
Carolyn McCall DB
Kathryn Parsons DB
Stuart Quickenden DB
ARAC
Elaine Clements from 10 Apr 2019 ARAC
Louise Fisher NOMS
Bryan Ingleby ARAC
Adrian Kamellard from 10 Apr 2019 ARAC
Catherine Pridham PIC
Leavers
Those who left ministerial, executive, and non-executive positions during the year
Ministers
Rt Hon Greg Clark MP To 24 Jul 2019 Secretary of State for Business, Energy, and Industrial Strategy
Rt Hon Claire Perry MP To 24 Jul 2019 Minister of State for Energy and Clean Growth
Rt Hon Chris Skidmore MP To 25 Jul 2019; then from 10 Sep 2019 to 13 Feb 2020 Minister of State for Universities, Research, and Innovation
Andrew Stephenson MP From 04 Apr to 25 Jul 2019 Parliamentary Under Secretary of State, Minister for Business, and Industry
Rt Hon Jake Berry MP From 07 Jun to 25 Jul 2019 Parliamentary Under Secretary of State, Minister for Northern, Powerhouse and Local Growth
Rt Hon Lord Henley To 26 Jul 2019 Parliamentary Under Secretary of State
Rt Hon Jo Johnson MP From 24 Jul to 05 Sep 2019 Minister of State for Universities, Science, Research and Innovation
Kelly Tolhurst MP To 13 Feb 2020 Parliamentary Under Secretary of State, Minister for Small Business, Consumers and Corporate Responsibility
Rt Hon Andrea Leadsom MP From 24 Jul 2019 to 13 Feb 2020 Secretary of State for Business, Energy, and Industrial Strategy
Lord Duncan From 26 Jul 2019 to 13 Feb 2020 Parliamentary Under Secretary of State Senior officials
Senior officials
Gareth Davies To 03 May 2019
Gavin Lambert Interim from 15 Apr to 12 Jul 2019
Sam Lister Interim from 15 Apr to 12 Jul 2019
Nick Chism To 05 Feb 2020
Alex Chisholm To 09 Apr 2020
Caleb Deeks To 09 Apr 2020
Sarah Harrison To 10 Jul 2020
Sam Beckett To 24 August 2020
Non-executive directors
Claire Davies To 1 Jun 2019 ARAC
Myriam Madden To 30 Jan 2020 ARAC The last 12 months have seen a great deal of change. Most of this reporting period has been largely dominated by preparing for EU Exit, with or without a deal, and on moving into the transition period. The end of the reporting period has, of course, been dominated by the COVID-19 pandemic and the Government’s response to that. In both of these events, BEIS has played a central role in preparing and planning for the UK’s economic future.
The Board has also seen a period of change, as it has been led by three different Secretaries of State, with largely different Ministerial teams, and there have also been significant changes in the Department’s senior team. The membership of the Non-Executive Board Members has not changed since last year and providing continuity and support to the Department. The Department’s Non-Executive Board Members continue to be engaged in Departmental business, providing challenge, valuable expertise and an independent voice across a range of areas. The Board has come together in both formal and informal settings to help drive the Departmental agenda and, more recently, provide advice and support as the Department responds to the COVID-19 pandemic. Throughout the reporting period, the Department’s Audit and Risk Assurance Committee, led by Nigel Boardman, has been very active and has continued to provide independent challenge and scrutiny. It has helped to improve the way that the Department approaches risk, as well as the assurance and compliance environment, and has actively fostered links with the ARAC committees in the Department’s Partner Organisations.
Looking at the year ahead, this year will continue to be challenging for BEIS as the Department’s delivery agenda has grown substantially. I, and my non-executive colleagues, will endeavour to continue to support and advise the Department as the country moves towards the recovery phase of the pandemic, to EU Exit and beyond. I wish to thank the dedicated and excellent staff for their vital work and look forward to continuing to support them as they work to deliver the government’s objectives, which are vital on both the national and international stage. Governance statement
Overview The governance statement sets out how the Department is governed and how decisions are made at the top executive level, and summarises the topics discussed by the Board, the Executive Committee and their delegated committees. It sets out the governance of the Department’s partner organisations (POs) and considers the risk management of the Department and its internal controls.
Our board structure
- **Nominations and governance committee**
- Role: senior level remuneration and succession planning
- **Departmental board**
- Role: directs strategy, performance management and risk management
- **Audit and risk assurance committee**
- Role: assurance of audit and risk control functions.
- **Executive Committee**
- Role: manages the day-to-day running of BEIS – resource, policies and programmes, including Brexit programme
- **People and operations committee**
- Role: manages human resources, estates and digital
- **Performance and risk committee**
- Role: monitors frameworks for performance against targets, budgets and risks
- **Projects and investment committee**
- Role: approvals of key investment proposals and projects
- **Shadow people and operations committee**
- Role: staff advisory body
- **Challenge function for performance and risk committee**
- Role: to support P&R committee in its’ assessment of Performance and Risk report
- **Keyholder panel for the projects and investments committee**
- Role: assurance of investment proposals
## Board and committee attendance
The table below shows board attendance from 1 April 2019 to 31 March 2020, where scheduled meetings were held. Where members were unable to attend meetings in person, they were able to share their views in advance with the chair.
| Departmental Board | Nominations and governance committee | Audit and risk assurance committee | Executive committee | |--------------------|--------------------------------------|-----------------------------------|---------------------| | **Total number of meetings held** | 4 | 1 | 6 | 25 | | **x /x = number attended /number eligible to attend** | | | | |
### Ministers
- **Rt Hon Greg Clark MP (to 24 Jul 2019)**: 1 / 2
- **Rt Hon Andrea Leadsom MP (from 24 Jul 2019 to 13 Feb 2020)**: 2 / 2
- **Rt Hon Alok Sharma MP (from 13 Feb 2020)**: 1 / 1
- **Rt Hon Kwasi Kwarteng MP (from 24 Jul 2019)**: 1 / 2
- **Rt Hon Chris Skidmore MP (until 24 Jul 2019; then from 10 Sep 2019 to 13 Feb 2020)**: 2 / 2
- **Rt Hon Claire Perry MP (to 24 Jul 2019)**: 1 / 2
- **Rt Hon Jo Johnson MP (from 24 Jul to 5 Sep 2019)**: 1 / 1
- **Nadim Zahawi MP (from 26 Jul 2019)**: 2 / 2
- **Kelly Tolhurst MP (to 13 Feb 2020)**: 1 / 4
- **Lord Duncan (from 26 Jul 2019 to 13 Feb 2020)**: 1 / 2
- **Lord Callanan (from 14 Feb 2020)**: 0 / 1
- **Paul Scully MP (from 13 Feb 2020)**: 1 / 1
- **Amanda Solloway MP (from 14 Feb 2020)**: 1 / 1
### Senior officials/executive directors
- **Alex Chisholm**: 4 / 4, 1 / 1, 1 / 6, 23 / 25
- **Sam Beckett**: 1 / 1, 20 / 25
- **Nick Chism (to 5 Feb 2020)**: 12 / 21
- **Julian Critchlow**: 1 / 1, 23 / 25
- **Sarah Harrison**: 3 / 4, 4 / 6, 18 / 25
- **John Loughhead**: 17 / 25
- **Sarah Munby (from 15 Jul 2019)**: 1 / 1, 15 / 19
- **Jaee Samant**: 4 / 4, 21 / 25
- **Jo Shannmugalingam (from 15 Jul 2019)**: 1 / 1, 13 / 19
- **Joanna Whittington**: 1 / 1, 22 / 25
- **Gavin Lambert (interim DG from 30 Apr to 18 Jul 2019)**: 4 / 7
- **Sam Lister (interim DG from 30 Apr to 18 Jul 2019)**: 5 / 7
- **Tom Taylor**: 3 / 4, 6 / 6, 20 / 25
- **Caleb Deeks**: 1 / 1, 23 / 25
- **Doug Watkins**: 20 / 25
- **Craig Woodhouse (from 15 Jul 2019)**: 17 / 19
### Non-executive directors
- **Archie Norman**: 4 / 4
- **Nigel Boardman**: 4 / 4, 6 / 6
- **Leena Nair**: 3 / 4, 0 / 1
- **Stephen A. Carter**: 3 / 4
- **Carolyn McCall**: 3 / 4
- **Kathryn Parsons**: 4 / 4
- **Stuart Quickenden**: 4 / 4, 6 / 6
- **Elaine Clements**: 6 / 6
- **Claire Davies (to 1 Jun 2019)**: 2 / 2
- **Louise Fisher**: 1 / 1
- **Bryan Ingleby**: 6 / 6
- **Adrian Kamellard**: 6 / 6
- **Myriam Madden (to 30 Jan 2020)**: 4 / 6
## Coverage of Departmental Board discussions
| Strategy | Discussion | Action | Progress | |----------|------------|--------|----------| | Strategy | Future economy | The board discussed support to UK businesses and economy if World Trade Organisation (WTO) rules were in effect. | BEIS revised its policy, developing sector analysis under WTO rules scenario | | Brexit | The Board continued discussions on departmental preparations for Brexit – focused on communications plans, trade and negotiation options facing the UK. | The Board commissioned business-related sector analysis to discuss at future board meetings. | | Project Kingfisher and Sectoral and Regional Competitiveness | Project Kingfisher refers to cross-government preparations to respond to potential economic impacts of Brexit. The Board discussed BEIS’ approach to using business intelligence to monitor, anticipate and coordinate responses to economic impacts on business. | The Board’s suggestions were incorporated into policy development | | New Work Agenda | Non-executive directors (NEDs) led the discussion on the New work agenda (NWA) from a business perspective, challenged the thinking and assumptions | The Board identified apprenticeships need to be part of NWA; joint working with DfE continued. | | UKRI | The Board discussed UKRI’s operating context, related challenges and support required to enable it to develop its leadership capabilities and grow as an organization. | BEIS offered advice and the next phase of UKRI’s growth | | Net Zero carbon emissions | The Board discussed the challenges of climate change and meeting net zero targets; provided guidance on next steps for reducing the Department’s emissions. | Endorsed plans for cross Whitehall policy cooperation, and CoP 26 Bid | | Competition and Consumers | The Board welcomed need for policy reform, while challenging the early stage policy assumptions, definitions and purpose | The policy was revised to reflect the board suggestions on purpose, clarity and focus. | | Governance and risk | BEIS’ objectives and priorities | The Board provided challenge on BEIS’ forward work programme for 2019; continued setting priorities to strengthen governance overall. | The work programme has been amended based on the steer from the Board. | | Single Departmental Plan | The Board’s discussion on BEIS objectives and priorities supported the development of the Single Departmental Plan (SDP). | The lead non-executive board member contributed to the development of the SDP. | | Risk appetite and risk management | The Board endorsed the Risk Appetite Statement; encouraged ARAC members to observe board meetings; endorsed the programme for ARAC NEDs to attend POs ARAC meetings. | We embedded the risk appetite statement throughout BEIS. The online reporting tool was enhanced to allow POs to record and report against risks. This provides assurance that risks are correctly managed and recorded. | | Operations | People Survey | The Board considered results from the 2019 People Survey; discussed plans to raise engagement scores and develop leadership initiatives. | The work-place transformation programme has been reshaped as result of board input. | | The 21st Century Workplace: Progressive, Modern and Innovative | The Board critically evaluated how to set the foundations for transforming the workplace, while building capability to maximise the use of technology. | Shaping our Future objectives were revised to reflect the Board’s suggestions on ambition and boldness. | Board’s evaluation of its effectiveness
All departments are requested by the Cabinet Office to carry out an annual board effectiveness evaluation. The Board completed a light touch assessment for 2019-2020, as a more in-depth board evaluation assessment is expected in 2020-2021 in line with Cabinet Office guidance.
Overall, the Board’s evaluation of its effectiveness indicated that the composition of the Board is sound and effective. However, more work needs to be done to ensure better communication and visibility between the Board and delegated Committees to improve governance.
In addition to formal board meetings, Board members met for introductory meetings with the newly appointed Secretaries of State in September 2019 and March 2020. Non-Executive Board members have also been active in supporting the executive team throughout the year by providing guidance and advice on a range of issues.
Highlights of Nominations and governance committee
The success of any organisation is based on valuing its people. This involves having a good strategy for personal and career development. The Nominations and governance committee (NGC) only met once in 2019-2020, but instead considered issues by correspondence. During 2019-2020, NGC has focused on:
- senior level talent in BEIS; and
- the implementation of the staff performance management systems.
Highlights of Audit and risk assurance committee
Audit and risk assurance committee (ARAC) plays a crucial role in supporting the effective governance in BEIS. During 2019-20 ARAC has worked to:
- improve the risk management procedures through critical challenge and reviewing the risk registers and risk framework;
- build a relationship with POs that is strong and transparent;
- examine financial management and financial reporting;
- oversee the process to ensure the appropriate recognition of Hinkley Point C in the accounts;
- working with NAO & GIAA to test and monitor the delivery of their audit plans;
- improve the internal assurance structure and processes by providing guidance;
- monitor BEIS’ application of the Business Appointment Rules – rules to prevent former civil servants and ministers being able to profit from their knowledge within Whitehall;
- introduce an exchange programme for ARAC members and PO ARAC members;
- consider how legal risks should be better identified, reported and managed throughout the group- this work will be ongoing through the next reporting year;
- ensure the Department’s implementation of recommendations from NAO, GIAA and Public Accounts Committee (PAC);
- support the launch of the Controls and Assurance Tool (CAT) for teams to log and self-assess the first and second lines of defense;
- oversee the development and rollout of the new departmental risk management framework; and;
- start a rolling programme to seek governance assurance from individual DGs at ARAC meetings.
Highlights of Executive committee
Executive committee (ExCo) is the key body to which the Departmental Board delegates the day-to-day management of BEIS. Over the last year, ExCo has focused on:
- the Industrial Strategy and Grand Challenges;
- monitoring the performance of the Department’s major programmes;
- delivering Net Zero;
- business planning and the SDP; • the delivery capacity and target operating model of the department; • the diversity and inclusion strategy; and • the refresh of the departmental risk register, including risk horizon scanning.
Brexit programme In addition, the committee holds fortnightly meetings on the Brexit programme to manage identified Brexit related issues. Following Brexit, the committee meetings now have an additional focus on free trade agreements and progress on EU engagement.
Highlights of ExCo subcommittees
People and operations committee People and operations committee (POPCo) considers matters relating to human resources, accommodation, security and IT. In the last 12 months to March 2020, POPCo has worked to: • establish the BEIS graduate and experienced entrant programme; • monitor the success of the performance management system; • promote diversity and inclusion policy; • review the health and safety policy; • oversee the works of the estate and security team; and • oversee the works of the estate and security team.
Performance and risk committee Performance and risk committee (P&R) reviews matters relating to performance and risks. In 2019, it underwent a thorough review which led to a renewed mandate to: • provide assurance on the performance and delivery of major programmes including those delivered by our POs; • provide assurance on the departmental Risk Framework; • review departmental risk and risks associated with delivery programme – especially where this was operating outside the BEIS Risk Appetite Statement; • review performance against agreed milestones and outcomes and provided assurance on the use of the BEIS monitoring and evaluation framework; and • assess performance against the Department’s internal control and assurance framework.
Projects and investments committee The Project and investment committee (PIC) reviews investment proposals over £20 million or those considered risky, novel or contentious. During 2019-20, PIC: • initiated the fast-track process so no-deal Brexit contingency investments could be reviewed in a timely manner; • maintained high standards and supported the development of business cases; and • ensured the approvals processes are well aligned to promote a streamlined approach.
COVID-19 adjustments At the very end of the reporting period, a specific COVID-19 ExCo was set up to respond to the Coronavirus pandemic. This had a larger composition than the Departmental ExCo, and met frequently during the first stage of the pandemic to steer the Department’s response to the pandemic and to consider the effects on our staff. The governance relating to Coronavirus will be reported fully in next year’s annual report and accounts.
Additionally, all committee meetings have been held remotely since the 18 March 2020. These meetings have been successful and productive, largely down to the flexibility of committee members. All meetings have been set up and supported by the Governance Secretariat. Register of interests
Board Members are required to declare any personal or business interests which may influence their judgement, or be perceived to, when performing their duties. BEIS has an established procedure for considering, approving and recording conflicts of interest. In addition to this at the commencement of each Board meeting, members of the Board are required to declare any interests they may have. In 2019-20 there was only one conflict of interests registered during the meeting and it was addressed accordingly.
Biographies of our leadership team
Biographies of our Board members are available at https://www.gov.uk/government/organisations/department-for-business-energy-and-industrial-strategy/about/our-governance
Board appointments
There have been changes in both Ministerial and executive appointments to the board. The board composition has reflected changes to the Ministerial leadership of the Department in 2019-2020 as all members of the Ministerial team have been appointed to the board. There have also been changes to the executive team on the board. Please refer to the table on committee and board attendance for further detail.
Compliance with the corporate governance code
Our approach to governance is in line with ‘the code’ – Corporate Governance in Central Government Departments: Code of Good Practice without exception.
Since BEIS is responsible for corporate governance and champions women on boards, BEIS seeks to be a leader in this area too. There are two targets for Board membership: Lord Davies’ target for 33% female Board membership and Sir John Parker’s target of one BAME Board member. By March 2020, BEIS Board’s gender diversity was at 35% and included four BAME members.
Quality of data used by the Board
Departmental Board meetings covered a variety of topics. Board papers were of high quality. The meetings were efficient, and challenge was encouraged. BEIS’s governance team provides a comprehensive secretariat service to the Board and committees to ensure the effective and efficient administration of the Board and its activities.
Governance of our POs
In 2019-20, BEIS had 40 POs with a wide span of policy and operational responsibilities. We receive assurance on risks and delivery through; the BEIS corporate reporting system; day to day relationship through sponsors and DG accountability for the organisations; PO governance statements; and our ARAC members engaging with individual PO ARACs. Significant issues arising within POs are covered in their respective governance statements. BEIS has over-sight of its POs throughout the year and considers any significant issues presented in their governance statements.
Grants to local government
In 2019-20, the Department provided £189.46 million as grants to local authorities under section 31 of the Local Government act 2003. £151 million of this was in relation to the COVID-19 response grants.
Quality assurance of analytical models
BEIS has had a single modelling quality assurance (QA) process since April 2017, which complies with the AQuA book. Our modelling integrity team co-ordinates independent assurance for models and plans. This ensures our models are based on appropriate understanding of evidence and risks.
We have identified 80 analytical models in use across BEIS with 90% of these having the required level of assurance. Those models that are non-compliant have plans to reach compliance targets in 2020-21. We ensure our contacts in POs undertaking modelling are aware of BEIS QA guidelines. Effectiveness of our risk management and internal controls
The Government Internal Audit Agency (GIAA) provides the internal audit service for BEIS. For 2019-20, the Group Chief Internal Auditor provided a “moderate” opinion.
The GIAA concluded that BEIS has continued with the positive trend in internal control, while committing resources to Brexit preparations and implementing complex policy programmes, such as the Industrial Strategy and the Clean Growth Strategy.
GIAA has acknowledged the implications that BEIS’ response to the COVID-19 pandemic will have in 2020, but this has not detracted from their conclusions for 2019-20.
The audit of our risk management framework and practice positioned BEIS as a top performing department and a catalogue of good practice is being drawn from across BEIS.
No audits received an unsatisfactory opinion, and only two a limited opinion, for which actions are in hand to address the recommendations made by internal auditors.
Progress made on risk management
In 2019-2020, BEIS delivered several risk management initiatives that have been recognised across government and have been replicated in other departments. We refreshed our risk management framework and continued to embed it, working with our network of deputy director risk champions.
We developed and introduced a risk appetite statement, working with the Audit and Risk Assurance Committee and seeking views from key colleagues across government. We fed into a review of the Performance and Risk Committee, resulting in a revised term of reference with a sharper focus on risk. We continued to develop our online risk management tool and ensured directorate and group level risks were being reported on regularly to enable better oversight of the risk landscape of the Department and to facilitate a more robust process for risk escalation.
We opened our reporting tool to our POs, who report quarterly to BEIS, to submit their reports. We introduced league tables of compliance to support this work and to assess the quality of the content uploaded. Finally, we refreshed the Departmental risk register through a horizon scanning session with our Executive Committee, to ensure these remained relevant given the changing environment.
While a huge amount of work was done over the year, it is recognised that most of the focus has been on getting the right processes and tools in place. There is more work to do to embed a risk management culture across the Department and to improve open and transparent risk management between BEIS and its POs.
Internal controls environment
BEIS aims to continuously improve the efficiency and effectiveness of the internal control environment within the Department. During the course of 2019-20 actions have been taken to communicate expectations around compliance to staff, improve our processes to make it easier for staff to comply with controls, and provide Management Information (MI) to help senior managers understand how effectively they are operating.
Work completed includes:
- continuing to ensure that audit actions are implemented in a timely fashion with 78% of internal audit actions due in 2019/20 completed;
- launching a line manager hub and surgery to help line managers understand their key responsibilities and improving access to guidance and support;
- launching an improved Oracle interface to help staff do things more easily and accurately across Finance, HR and the Procurement processes;
- providing new sources of MI to help SCS understand the quality of our data and improve compliance with HR processes; and • successfully piloted an online Controls and Assurance Tool (CAT) during 2019-20, which is providing a means of systematically assessing how effectively the Department’s controls are being implemented.
Although BEIS has made progress throughout 2019-20, the Department recognises there is still further work to be done around culture of compliance. Traditionally weak areas such as recording starters and leavers remains an area for continued focus, with the implications this has for overpayments and return of IT equipment and security passes. Process and compliance improvement work within the Department will aim to make further progress in these key areas, which GIAA through their audit work in FY2020-21 will help to assess. While 78% of actions due in 2019/20 have been completed, there were 37 overdue actions. To address this, we are improving our tracking and reporting of actions, to make it easier to assess how the Department is performing in addressing audit recommendations.
Work will also continue to improve the functionality of the new Oracle interface, including by linking processes such as expenses to enable a more accurate and timely reimbursement of claims. The approach to MI is being expanded, including prompt payment, finances and expenses, which will help improve our insight to how effectively controls are operating. Following the initial rollout, the CAT is also being developed further to better align with the Department’s risk framework, make better use of new sources of MI, and reflect work to map the Departments controls and assurance processes.’
**Information security**
No significant cyber breaches were reported in 2019-20. Malicious content on the web continues to be a significant risk to the Department. We have seen a growth in the volume of generic Phishing emails as well as increases in whaling (phishing targeted at specific high value targets). We continue to work to ensure all our services meet ISO27001 standards, recently completing a significant cyber security assessment under the GBEST scheme and adding a Security Operations Centre.
**Counter-fraud and error**
During 2019-20, levels of fraud detected across the BEIS group of organisations were similar to previous years. We continue to be successful in preventing fraud. We are also starting to recover funds following successful prosecutions of frauds committed in previous years. There was a continued increase of attempted frauds against the public imitating BEIS and its POs.
We achieved an overall ‘green’ rating from the Cabinet Office in taking forward our action plan and worked with them to implement improvements. The level of staff in key roles who have completed counter fraud training has increased following successful awareness campaigns, which were well received.
Towards the end of 2019-20, our focus was on the enhanced risks of fraud and error associated with the COVID-19 business support and loan guarantee schemes. These will inevitably dominate much of what we do in the next reporting period.
**Ministerial directions**
Ministerial directions are formal, technical instructions from the Secretary of State which allow the Department to proceed with a spending proposal in a situation where the Accounting Officer has raised an objection. The Accounting Officer is accountable to parliament for ensuring that all expenditure meets the standards under Managing Public Money (MPM) and has a duty to seek a direction if they believe one of the four criteria (regularity, propriety, value for money or feasibility) will not be met. If a direction is given, the Accounting Officer will no longer be challenged by the Public Accounts Committee on why they took forward the policy. However, they might still need to explain the course of the action and the minister’s reasoning.
During the 2019-20 financial year, and up to the date of this report, ten ministerial directions were issued.
**British Steel Limited**
A Ministerial Direction was given for the continuation of the Official Receiver’s (OR) indemnity to pursue a sale of British Steel Limited (BSL).
When BSL entered compulsory liquidation on 22 May 2019, the OR issued a deadline of 10 November 2019 for bidders to give the OR suitable confidence that a sale could complete shortly. Without this, the OR would commence a shutdown process of the BSL site. By the deadline date, significant progress had been made with a potential buyer, but the Department was yet to see a rigorous business plan.
HMG support to continue the sales process would not satisfy the minimum value for money consideration. However, the justification for site sale were the wider benefits – the closure of the site would result in job losses, impacting the local economy and would also have a significant strategic impact on the UK steel sector with key sectors such as construction and rail being disrupted.
The Ministerial Direction was given on 11 November 2019 authorising the continuation of support to British Steel.
On 9 March 2020, the sale of BSL was completed by the OR.
**Coronavirus Business Interruption Loan Scheme**
A second Ministerial direction was given, authorising the Coronavirus Business Interruption Loan Scheme (CBILS) to temporarily replace the Enterprise Finance Guarantee (EFG) Scheme, increasing the loan value available to £5 million and to introduce a twelve-month interest free period.
Given the speed at which the scheme was developed, there was little robust data available to conclude that they met the value for money requirements of MPM. At the time of introducing the scheme, there were also that were subject to State Aid approval. Discussions with the Commission had provided comfort that they expected the Schemes to be approved, but formal notification had not been received.
The Ministerial Direction was given on 22 March 2020 proceed with the introduction of the scheme.
**Support fund for retail, hospitality and leisure businesses**
A third Ministerial Direction was given authorising a grant fund to help protect businesses in the retail, hospitality and leisure sectors from the impact of COVID-19.
Any assessment carried out by the Department in relation to the fund would have been comparing immeasurable and unknown benefits against significant and known costs. It was not possible for the Department to reliably demonstrate the economic impact of the proposal and provide the necessary assurance that is represented value for money in line with the requirements of MPM.
The Ministerial Direction was given on 23 March 2020 to proceed with the implementation of the fund.
**Small Businesses Grant Fund**
A fourth Ministerial Direction was given authorising a grant fund to help protect small businesses from the impact of COVID-19.
The absence of available evidence meant that the Department was unable to provide a reliable value for money measurement by weighing the possible benefits against costs. There were also concerns around the feasibility of the scheme due to the speed local authorities were expected to make payments and the related operational difficulties to administer the fund efficiently.
The Ministerial Direction was given on 23 March 2020 to proceed with the delivery of the scheme. Coronavirus Business Interruption Loan – Changes to Scheme
A fifth Ministerial Direction was given authorising changes to the Coronavirus Business Interruption Loan Scheme (CBILS), including removing the requirement for a personal guarantee for loans under £250,000, and removing the requirement for borrowers to show that they would have been unable to secure finance outside of a government backed loan.
The speed at which events unfolded did not allow sufficient time for a full value for money assessment to be undertaken and there remained risks around the ability to deliver at this volume. Uncertainties over likely demand and future costs of the scheme, and provision of budget cover were highlighted.
The Ministerial Direction was given on 2 April 2020 to proceed with the changes to the scheme.
Coronavirus Large Business Interruption Loan Scheme
A sixth Ministerial Direction was given authorising the introduction a new scheme to support firms that have a turnover of more than £45 million per annum, to be known as the Coronavirus Large Business Interruption Loan Scheme (CLBILS).
Due to the speed at which the intervention was developed, it was difficult to assess ex-ante whether value for money was likely to be achieved meaning a wide range of outcomes are possible.
The Ministerial Direction was given on 16 April 2020 to proceed with the introduction of the scheme.
Local Authority Discretionary Grants
A seventh Ministerial Direction was given authorising the introduction of the COVID-19 Local Authority Discretionary Grants Fund. This fund provides local authorities with discretion to administer a grant scheme to help support small businesses in their localities who are not in scope of either of the existing grant schemes.
As with the previous two COVID-19 business grant schemes there were uncertainties around the value for money of the scheme. And on the basis of available information at the time, it was not possible to construct a business case to clearly demonstrate that the funding represented value for money to the standards expected by MPM.
The Ministerial Direction was given on 1 May 2020 to proceed with the introduction of the scheme.
Bounce Back Loan Scheme
An eighth Ministerial Direction was given authorising the introduction of the ‘Bounce Back’ Loan (BBL) Scheme which enables businesses to access loans of up to £50,000, capped at 25% of turnover, with 100% of the lending risk assumed by government.
The direction was required because of uncertainty around the value for money case and risk to regularity and propriety of the scheme from fraud and error. Whilst steps were planned to tackle fraud, the eventual level could not be reliably estimated in advance.
The Ministerial Direction was given on 1 May 2020 to proceed with the introduction of the scheme.
Future Fund
A ninth Ministerial Direction was given to implement the Future Fund, which aims to provide an incentive for equity funds and angel investors to continue to support the development trajectory of innovative, high-growth businesses. It is designed to encourage investors to continue to back companies that would have received investment in the absence of the pandemic and are now struggling to raise their next funding round.
The view of Accounting Officer was that whilst standards around feasibility, regularity and propriety had been met, based on the limited information and the range of analysis that had been conducted, it was not possible to conclude that the scheme represented value for money at the time. The Ministerial Direction was given on 19 May 2020 to proceed with the introduction of the Future Fund.
OneWeb
A tenth Ministerial Direction was given authorising the purchase, via a consortium, of OneWeb, a satellite technology company with the ambition to provide global broadband. A UK based company, representing an opportunity for UK interests globally.
Professional financial advice on OneWeb’s prospects was sought, which determined that a positive return on the investment might be achieved. However, it was also noted that a broad range of uncertainties and possible outcomes around the case remained, making it hard to be confident in the underlying assumptions or the likely returns.
Due to the time and data available, HM Treasury had not subjected the investment to the scrutiny of a full Green Book compliant business case, including considering whether alternative options for investment might provide a better return.
UK Space Agency were consulted for an independent technical assessment and highlighted a high likelihood of further investment being required, increasing the risk that further HMG investment would be required in order to realise the potential benefits.
The view of the Accounting Officer was that whilst risks around regularity, propriety and feasibility were manageable, value for money required a direction.
The Ministerial Direction was given on 26 June 2020 to proceed with the purchase of OneWeb.
Effectiveness of our whistle blowing arrangements
Internal whistle blowing
Our procedures are accessible to all employees and offer six different routes for employees to raise concerns, including via an external whistleblowing hotline. In 2019-20 we had a low number of whistleblowing concerns raised, which is consistent with previous years. In our 2019 People Survey we had an increased majority of staff reporting that they had confidence that any concerns raised under the Civil Service Code would be properly investigated.
External whistle blowing
A small number of whistle blowers reported concerns during 2019-20. We have discussed internally and with POs, ways in which we can help staff come forward. We are looking to extend our awareness campaign in this area and offer workshops to cover the topic. Some of our Agencies have also chosen to access our external whistleblowing hotline. The volume of calls to this line is low. Cases have predominantly been referred to us through HR and the National Audit Office. Accounting Officer’s conclusion
I have considered the evidence provided regarding the annual governance statement and the independent assurance provided by ARAC. BEIS received a “moderate” opinion on the framework of governance, risk management and control within the Department for 2019-20. Even though the opinion remained the same as last year, the Department has continued to make improvements to our governance, risk management and control environment throughout the past year.
Last year BEIS successfully delivered a significant amount of policy work and progressed its major programmes such as the Industrial Strategy and the move to a Net Zero, whilst planning and preparing for Brexit. At the same time the Department faces challenges in aligning the work and priorities of other government bodies in order to achieve its objectives in 2020-2021.
During 2020-21, our top priority will be on delivering the COVID-19 response and steering the economic recovery. We will also focus on:
- working on Brexit negotiations and delivering Net Zero;
- implementing a proportionate assurance regime over the third parties delivering the grant, loan and guarantee schemes;
- embedding a culture of compliance and improving internal assurance mapping processes;
- enhancing the departmental Knowledge Management capability;
- BEIS’s litigation and cyber security risks and reporting on these; and
- further developing the POs governance framework, with strong links between BEIS and UKGI.
Sarah Munby Permanent Secretary and Principal Accounting Officer 11 September 2020 Staff report
Overview The staff report highlights employee matters in the year. It also provides required disclosures on staff activity, staff numbers and expenditure in 2019-20.
Introduction This year we have continued to make BEIS a great place to work in what has been a challenging and positive year for the Department. We continue to make improvements in staff engagement and launched our new Diversity & Inclusion Strategy. We supported the Department’s work on exiting the EU through a largescale mobilisation of people across the Department to meet new priorities. This helped us learn how to be agile and responsive to new challenges, which has proved vital now that we are supporting the Department’s response to COVID-19.
Employee matters
Health, safety, and well-being We consider the wellbeing of our people very important and we have an exceptionally good well-being offer.
We offer events covering all areas of wellbeing, such as training in resilience, stress management, mental health talks, disability awareness, and an annual sports day.
We have over 200 staff trained as Mental Health First Aiders based throughout our offices. The mental health first aider role gives first support to those who seek help due to a mental health concern.
We also offer the Employee Assistance Programme – phone-based counselling, on work and life issues, free, confidential, and available to all employees.
In 2019, we published the BEIS Voluntary reporting on disability, mental health, and wellbeing’. This framework shows what we have achieved in supporting staff and building resilience for good mental health.
We have a strong record in providing a safe and supportive work environment. In 2019-20, there were three reported injuries within ‘reporting of injuries, diseases and dangerous occurrences Regulations 2013’. We encourage staff to ask for reasonable adjustments as part of our workstation assessment programme.
COVID-19 adjustments The Department has played and continues to play a vital role in the UK’s response to the COVID-19 incident, supporting businesses, workers and the economy. As a department we moved from being predominantly office-based, to working almost entirely remotely in a matter of days, in accordance with public health advice. The success of our organisation’s response has been as much about people’s agility and flexibility as the technology. We have placed a strong emphasis on health, safety and wellbeing, ensuring that people are well supported to work from home. We work closely with Civil Service HR on the short and long-term implications of COVID-19.
Diversity and inclusion We focus heavily on diversity and inclusion. We are all different in some way. We each experience the world differently and have stories to tell about it. We make the most of these differences to solve important and complex policy issues facing the country, business and the environment. In doing so, we continue to make BEIS a great place to work.
1 https://www.gov.uk/government/publications/disability-mental-health-and-wellbeing-support-in-our-workplace-beis-voluntary-report-2019 During the year we have:
- increased the diversity of our workforce;
- rolled out micro behaviours training to over 700 staff;
- undergone the Stonewall Workplace Equality Index 2020. We were ranked 137 out of 503 employers, up from 270 out of 445 employers last year; and
- in the 2019 people survey, maintained a score of 83% for ‘inclusion and fair treatment’, up from 80% in 2017.
**Employee engagement**
In the 2019 BEIS people survey; we achieved a response rate of 92%. Overall, our results have remained stable when compared with 2018. The outcomes for eight of the nine survey themes have either stayed the same or improved.
This is a positive result given this had been a year with additional pressure and change for all. It is also within the context of the significant progress we have made in the Engagement Index and other key areas since 2016.
Our former Transformation programme, which launched in 2017, delivered several critical improvements, such as a new pay deal which takes BEIS into the top 50% across Whitehall, a new performance management system (PMS), an overhaul of technology, launch of the BEIS intranet and extensive business skills training.
**Shared parental leave**
During 2019-2020, 35 of our employees took advantage of BEIS’ policy on shared parental leave (SPL) and pay (ShPP).
It is a statutory entitlement to parents and adopters. It gives parents the choice to shorten the mother’s maternity leave and pay and share the balance as SPL and ShPP. We continue to promote this flexibility to our employees.
**Gender pay gap**
The trend in reducing the gender pay gap has been positive for BEIS and its Agencies; measures show the gaps are either reducing or remaining relatively static.
The mean pay of male employees vs mean pay of female employees had a difference of 10.1%. The median gender pay gap was 10.2%. This continues the trend in narrowing the gap, and are the lowest figures since reporting was introduced in 2017.
**Bonus gap**
The mean bonus pay to relevant male employees vs mean bonus pay to relevant female employees had a difference of 12.7%. The median bonus gap was 17.9%. Although figures have fluctuated in previous years, these remain in line with previous years.
**Bonus proportions**
As in 2018, the proportion of men who received a bonus was 83.4%; the proportion of women who received a bonus was 83.7%.
**Quartile pay bands**
The proportions of male and female employees in the bottom quartile was 60/40 split in favour of women. The proportions of male and female employees in the top quartile was 60/40 split in favour of men. Figures are in line with 2017.
**Closing the gender pay gap**
To close the gender pay gap, one of our main priorities is to increase representation of women at senior levels. To do this, we aim to retain a workforce that is diverse, talented, and supported to achieve its potential.
On recruitment, we have introduced initiatives to produce job adverts that are more inclusive and to ensure interview panels are more diverse. We also overhauled our approach to performance management in 2018-19. We moved us away from lengthy processes, to conversations with a real focus on development. This will allow us monitor diversity of outcomes on performance more easily.
The full Gender Pay Gap report for 2019 can be found at [https://www.gov.uk/government/publications/beis-gender-pay-gap-report-and-data-2019](https://www.gov.uk/government/publications/beis-gender-pay-gap-report-and-data-2019) Executive pay gap This is disclosed under ‘fair pay’ as part of the remuneration report on page 87.
Staff policies applied for disabled staff We are committed to ensuring equality for all our people, including those with disabilities. We make clear in our job application process – candidates with a disability who apply for a post under the guaranteed interview scheme, automatically go forward to the interview stage, provided they meet the minimum criteria. We also promote external vacancies in a range of diversity media. Where staff are identified as needing reasonable adjustments, these will be provided.
We have an active staff network – Capability Action Network (CAN) – which champion the needs of people with disabilities and long-term health conditions. They work with HR and other areas of the Department to create positive change. As a result of feedback from CAN new line managers will now undertake an e-learning course on ‘disability inclusive management’ as part of their induction.
Sickness absence data Average working days lost to sickness absence in 2019-20 for the Core Department, UKSA and INSS were 3.5, 9.3 and 6.6, respectively. Staff composition
Figures represent full-time equivalent (FTE) persons on payroll as at 31 March 2020.
| Gender | Men | Women | Total | |--------|-----|-------|-------| | All employees | 2,269 | 2,040 | 4,309 | | All employees % | 53% | 47% | 100% | | All senior civil servants | 133 | 109 | 242 | | Executive committee | 10 | 6 | 16 |
Disability
Declaration rate: 75%. Representation for staff who have declared:
- No: 84%
- Yes: 10%
- Prefer not to say: 6%
Ethnicity
Declaration rate: 79%. Representation for staff who have declared:
- White: 78%
- BAME: 18%
- Prefer not to say: 4%
Sexual orientation
Declaration rate: 80%. Representation for staff who have declared:
- Straight: 84%
- LGBT+: 8%
- Prefer not to say: 8%
## Trade union facility time
| Union officials | Core Department and Agencies | Other agencies not consolidated in the accounts¹ | Total | |-----------------|-----------------------------|-----------------------------------------------|-------| | Number of employees who were relevant union officials | 42 | 44 | 86 | | Full-time equivalent persons | 38.80 | 41.85 | 80.65 |
### Number of employees by working hours spent on facility time
| | Core Department and Agencies | Other agencies not consolidated in the accounts¹ | Total | |----------------------|-----------------------------|-----------------------------------------------|-------| | 0% of working hours | 4 | 6 | 10 | | 1 - 50% of working hours | 38 | 38 | 76 |
### Facility time as a % of pay bill
| | Core Department and Agencies | Other agencies not consolidated in the accounts¹ | Total | |----------------------|-----------------------------|-----------------------------------------------|-------| | Total cost of facility time (£) | 101,858 | 108,116 | 209,974 | | Total pay bill (£) | 365,640,202 | 208,105,626 | 573,745,828 | | Facility time as a % of pay bill | 0.03% | 0.05% | 0.08% |
### Paid trade union activities
| | Core Department and Agencies | Other agencies not consolidated in the accounts¹ | Total | |----------------------|-----------------------------|-----------------------------------------------|-------| | (Hours spent on paid trade union activities ÷ total paid facility time hours) * 100 | 0.00% | 7.37% | 7.37% |
### Notes
1 agencies not consolidated in Departmental Group accounts: CH, IPO, Met Office Number of senior civil servants by salary band
The table below shows the number of full-time equivalent (FTE) senior civil servants (SCS) by salary bands, in the Core Department. It includes those on open-ended contracts and fixed term contracts. Salary ranges represent actual salary rates; bonuses are not included.
| Salary range | Number of SCS staff as at 31 March 2020 | Number of SCS staff as at 31 March 2019 | |--------------------|----------------------------------------|----------------------------------------| | £60,000 - £64,999 | – | 3 | | £65,000 - £69,999 | 35 | 74 | | £70,000 - £74,999 | 84 | 54 | | £75,000 - £79,999 | 31 | 21 | | £80,000 - £84,999 | 20 | 13 | | £85,000 - £89,999 | 4 | 9 | | £90,000 - £94,999 | 28 | 26 | | £95,000 - £99,999 | 9 | 6 | | £100,000 - £104,999| 6 | 5 | | £105,000 - £109,999| 2 | 2 | | £110,000 - £114,999| 3 | 3 | | £115,000 - £119,999| 2 | 2 | | £120,000 - £124,999| 1 | 5 | | £125,000 - £129,999| 7 | 5 | | £130,000 - £134,999| 1 | 3 | | £135,000 - £139,999| – | 1 | | £140,000 - £144,999| 2 | 3 | | £145,000 - £149,999| 2 | 1 | | £150,000 - £154,999| 1 | 1 | | £160,000 - £164,999| 1 | 2 | | £170,000 - £174,999| 1 | 1 | | £180,000 - £184,999| 2 | 2 | | **Total** | **242** | **242** |
The remuneration of civil servants is based on performance ratings. The performance ratings are determined by the permanent secretary and directors general in post during the year. Names of those in post are listed in the box below.
Permanent secretary and directors general between 1 April 2019 to 31 March 2020
- **Alex Chisholm** Permanent Secretary
- **Sam Beckett** Director General
- **Nick Chism** Chief Business Adviser (to 5 February 2020)
- **Julian Critchlow** Director General
- **Sarah Harrison** Director General
- **John Loughhead** Chief Scientific Adviser
- **Sarah Munby** Director General (from 15 July 2019)
- **Jae Samant** Director General
- **Jo Shanmugalingam** Director General
- **Joanna Whittington** Director General
- **Gavin Lambert** Director General (interim) (from 15 April 2019 to 12 July 2019)
- **Sam Lister** Director General (interim) (from 15 April 2019 to 12 July 2019)
- **Gareth Davies** Director General (to 3 May 2019) Analysis of staff numbers and costs
Audited information
Staff numbers
The average number of full time equivalent persons employed in 2019-20 is shown in the table below.
| Number of staff by category | Permanent employed staff | Others | Ministers | Special advisers | Total 2019-20 | Total 2018-19 | |-----------------------------|--------------------------|--------|-----------|------------------|---------------|---------------| | Core | 4,345 | 182 | 6 | 3 | 4,536 | 4,062 | | Agency | 1,854 | 57 | – | – | 1,911 | 1,743 | | Non departmental public bodies (NDPBs) | 13,370 | 1,031 | – | – | 14,401 | 14,562 | | Total | 19,569 | 1,270 | 6 | 3 | 20,848 | 20,367 | | Of which: | | | | | | | | Core Department and Agencies | 6,199 | 239 | 6 | 3 | 6,447 | 5,805 | | NDPBs and other designated bodies | 13,370 | 1,031 | – | – | 14,401 | 14,562 | | Total | 19,569 | 1,270 | 6 | 3 | 20,848 | 20,367 |
Staff costs
During the year, £19,608,726 of staff costs were capitalised, (2018-19: £18,519,467) and 354 employees (2018-19: 386 employees) in the Departmental Group were engaged on capital projects during the reporting period.
Staff severance costs for current and prior year are included in wages and salaries. Further detail on exit packages is included on page 71.
| | Permanent employed staff | Others | Total 2019-20 | Total 2018-19 | |--------------------------------|--------------------------|--------|---------------|---------------| | Wages and salaries | 855 | 73 | 928 | 855 | | Social security costs | 95 | – | 95 | 86 | | Other pension costs | 217 | – | 217 | 179 | | Sub total | 1,167 | 73 | 1,240 | 1,120 | | Less recoveries in respect of outward secondments | – | – | – | (1) | | Total net costs | 1,167 | 73 | 1,240 | 1,119 | | Of which: | | | | | | Core Department and Agencies | 372 | 18 | 390 | 330 | | NDPBs and other designated bodies | 795 | 55 | 850 | 789 | | Total net costs | 1,167 | 73 | 1,240 | 1,119 | Pension schemes
Principal Civil Service Pension Scheme
Nuclear site licence companies are not included in these pension schemes. The Principal Civil Service Pension Scheme (PCSPS) and the Civil Servant and Other Pension Scheme (CSOPS), known as “Alpha”, are an unfunded multi-employer defined benefit scheme in which the Department is unable to identify its share of the underlying assets and liabilities. The scheme actuary valued the PCSPS as at 31 March 2016. Further details can be found in the resource accounts of the Cabinet Office Civil Superannuation (www.civilservicepensionscheme.org.uk/about-us/resource-accounts/).
For 2019-20, employer contributions of £100,753,599 were payable to the PCSPS (2018-19: £65,627,469) at one of four rates in the range 26.6% to 30.3% (2018-19: 20.0% to 24.5%) of pensionable pay, based on salary bands.
The scheme’s actuary reviews employer contributions usually every four years following a full scheme valuation. The contribution rates are set to meet the cost of the benefits accruing during 2019-20 to be paid when the member retires and not the benefits paid during this period to existing pensioners.
Employees can opt to open a partnership pension account, a stakeholder pension with an employer contribution. Employers’ contributions of £ 1,221,237 (2018-19: £1,192,970) were paid to one or more of the panel of three appointed stakeholder pension providers. Employer contributions are age-related and range from 8% to 14.75%. Employers also match employee contributions up to 3% of pensionable earnings. In addition, employer contributions of £17,180 (2018-19: £12,811), 0.5% (2018-19: 0.5%) were payable to the PCSPS to cover the cost of the future provision of lump sum benefits on death in service and ill health retirement of these employees.
Contributions due to the partnership pension providers at 31 March 2020 were £11,448 (2018-19: £38,599). Contributions prepaid at that date were £nil (2018-19: £nil).
In 2019-20, 43 persons (2018-19: 18 persons) across the Departmental Group retired early on ill-health grounds; the total additional accrued pension liabilities in the year amounted to £2,319,227 (2018-19: £1,134,823).
Other pension schemes
Employer contributions to other pension schemes in 31 March 2020, amounted to £232,281,655 (2018-19: £261,129,179). Employer contributions include employers’ contributions, current service costs and where appropriate past service costs of funded pension schemes. Further details can be found in the accounts of the Department’s NDPBs and other designated bodies. A list of these bodies is provided in note 27.
Nuclear site licence companies: staff numbers and costs
Staff costs for nuclear site licence companies (SLCs) are disclosed separately, as they are included in the amounts shown for utilisation in the NDA’s nuclear decommissioning provision in note 18 rather than being reported as staff costs in the Statement of Comprehensive Net Expenditure.
| Permanently employed staff | Others | Total | Total | |----------------------------|--------|-------|-------| | Number of staff (full time equivalent) | 14,324 | 1,104 | 15,428 | 15,869 | | Wages and salaries (£m) | 797 | 67 | 864 | 826 | | Social security costs (£m) | 90 | – | 90 | 88 | | Other pension costs (£m) | 144 | – | 144 | 148 | | Total costs (£m) | 1,031 | 67 | 1,098 | 1,062 | Exit packages
Audited information
Redundancy and other departure costs have been paid in accordance with the provisions of the Civil Service Compensation Scheme, a statutory scheme made under the Superannuation Act 1972. The table below shows the total cost of exit packages agreed and accounted for in 2019-20 (2018-19 comparative figures are also given). £19,975,567 exit costs were paid in 2019-20, the year of departure (2018-19: £3,133,979). Where the Department has agreed early retirements, the additional costs are met by the Department and not by the Civil Service pension scheme. Ill-health retirement costs are met by the Pension Scheme and are not included in the table.
| Exit package cost band | Number of compulsory redundancies | Number of other departures agreed | Total number of exit packages by cost band | |------------------------|-----------------------------------|-----------------------------------|------------------------------------------| | | 2019-20 | 2018-19 | 2019-20 | 2018-19 | 2019-20 | 2018-19 | | Less than £10,000 | 2 | 7 | 11 | 23 | 13 | 30 | | £10,000 - £25,000 | 2 | 33 | 25 | 25 | 27 | 58 | | £25,000 - £50,000 | 19 | 13 | 32 | 25 | 51 | 38 | | £50,000 - £100,000 | 16 | – | 70 | 13 | 86 | 13 | | £100,000 - £150,000 | 1 | 1 | 25 | 4 | 26 | 5 | | £150,000 - £200,000 | – | – | 17 | – | 17 | – | | More than £200,000 | 1 | – | 35 | – | 36 | – | | Total number of exit packages | 41 | 54 | 215 | 90 | 256 | 144 |
Of which:
- Core Department and Agencies
- Total number of exit packages: 41
- Total cost (£): 2,175,747
- NDPBs and other designated bodies
- Total number of exit packages: 54
- Total cost (£): 1,092,442
Total cost (£):
- Core Department and Agencies: 2,175,747
- NDPBs and other designated bodies: 1,092,442
- Total: 3,268,189
Of which:
- Core Department and Agencies: 2,175,747
- NDPBs and other designated bodies: 1,092,442
- Total: 3,268,189 Staff on loan
As at 31 March 2020, 1 member of staff permanently employed by the Core Department was attached on loan to another organisation on a short-term basis (loan duration up to six months) and 114 staff on a long-term basis (loan duration longer than six months). 2 people were attached to the Core Department on loan from other organisations on a short-term basis and 60 on a long-term basis. Costs relating to staff on short-term loans were charged to Administration budgets in cases where the Core Department paid the cost or would have been charged to Administration budgets had the Core Department paid the cost.
| Grade | Outward staff loans | Inward staff loans | |------------------------------|---------------------|--------------------| | | Less than 6 months | More than 6 months | Less than 6 months | More than 6 months | | Administrative assistant | – | – | – | – | | Executive officer | – | 6 | – | – | | Higher executive officer | – | 32 | – | 4 | | Senior executive officer | – | 18 | – | 6 | | Grade 7 | – | 39 | 1 | 31 | | Grade 6 | – | 11 | 1 | 12 | | Senior civil service | 1 | 8 | – | 7 | | **Total** | **1** | **114** | **2** | **60** |
EU Exit
An average of approximately 1,130 full-time equivalent staff were engaged on activities relating to EU Exit during 2019-20 (2018-19: 1,030).
Consultancy and Temporary staff expenditure
The Departmental Group’s expenditure on consultancy in 2019-20 was £55.6 million (2018-19: £61.9 million). The consultancy expenditure of executive agencies was £2.5 million (2018-19: nil) and the consultancy expenditure relating to arm’s length bodies was £41.7 million (2018-19: £51.9 million) of which £27.7 million (2018-19: £30.8 million) was related to Site Licence Companies. Consultants are hired to work on projects in a number of specific situations: where the Department does not have the skills set required; where the particular requirement falls outside the core business of civil servants; or where an external, independent perspective is required. When used appropriately, consultancy can be a cost effective and efficient way of getting the temporary and skilled external input that the Department needs. The Departmental Group’s expenditure on temporary staff in 2019-20 was £73 million (2018-19: £70 million), as detailed in the Staff costs note above. The increase year-on-year relates mainly to temporary staff recruited to support work associated with EU Exit preparations. We are committed to the consistent application of the Cabinet Office’s 2010 controls on consultancy and other spending. Off-payroll engagements
The tables below present data on our off-payroll engagements. Off-payroll engagements refer to workers who are paid off-payroll, without deducting tax and national insurance at source, typically contractors.
Table 1a: Off-payroll engagements as of 31 March 2020, for more than £245 per day and that last longer than 6 months
| At time of reporting, number that have existed for: | Total number | Less than 1 year | 1 to 2 years | 2 to 3 years | 3 to 4 years | 4 years or more | |---------------------------------------------------|--------------|-----------------|--------------|--------------|--------------|----------------| | **Core Department and Agencies** | | | | | | | | Core Department | 26 | 12 | 11 | 2 | 1 | 0 | | Insolvency Service | 4 | 1 | 3 | 0 | 0 | 0 | | UK Space Agency | 9 | 6 | 3 | 0 | 0 | 0 | | **Consolidated in the Departmental Group accounts, (excluding nuclear site licence companies)** | | | | | | | | Advisory, Conciliation and Arbitration Service | 1 | 0 | 0 | 1 | 0 | 0 | | Civil Nuclear Police Authority | 8 | 4 | 1 | 3 | 0 | 0 | | Coal Authority | 1 | 1 | 0 | 0 | 0 | 0 | | Competition Appeal Tribunal and Competition Service | 2 | 0 | 1 | 0 | 0 | 1 | | Diamond Light Source Ltd | 6 | 3 | 0 | 1 | 0 | 2 | | The Financial Reporting Council Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | Low Carbon Contracts Company Ltd | 1 | 1 | 0 | 0 | 0 | 0 | | Nuclear Decommissioning Authority | 36 | 15 | 13 | 4 | 3 | 1 | | Nuclear Decommissioning Authority Archives Ltd | 1 | 0 | 1 | 0 | 0 | 0 | | Radioactive Waste Management Ltd | 20 | 12 | 4 | 0 | 0 | 4 | | Oil and Gas Authority | 2 | 0 | 1 | 1 | 0 | 0 | | South Tees Site Company Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | UK Atomic Energy Authority | 110 | 29 | 37 | 15 | 7 | 22 | | UK Research and Innovation | 31 | 14 | 10 | 3 | 0 | 4 | | Innovate UK Loans Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | STFC Innovations Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | UK Shared Business Services Ltd | 13 | 0 | 8 | 4 | 1 | 0 | | **Not consolidated in the Departmental Group accounts** | | | | | | | | Groceries Code Adjudicator | 1 | 0 | 1 | 0 | 0 | 0 | | Pubs Code Adjudicator | 2 | 0 | 0 | 1 | 1 | 0 | | Small Business Commissioner | 2 | 2 | 0 | 0 | 0 | 0 | | **Total** | 276 | 100 | 94 | 35 | 13 | 34 | Table 2a: New off-payroll engagements, or those that reached 6 months in duration, between 1 April 2019 and 31 March 2020, for more than £245 per day and that last longer than 6 months
| Core Department and Agencies | Total number | Number assessed as in scope of IR35 assessment | Number assessed as outside scope of IR35 assessment | Number engaged directly (via PSC contracted to the Department) and are on the Departmental payroll | Number reassessed for consistency assurance purposes during the year | Number that saw change to IR35 status following the consistency review | |-----------------------------|--------------|-----------------------------------------------|---------------------------------------------------|---------------------------------------------------------------------------------|---------------------------------------------------------------|---------------------------------------------------------------| | Core Department | 19 | 5 | 14 | 0 | 0 | 0 | | Insolvency Service | 20 | 16 | 4 | 0 | 20 | 0 | | UK Space Agency | 23 | 9 | 14 | 0 | 0 | 0 | | Consolidated in the Departmental Group accounts, (excluding nuclear site licence companies) | | | | | | | | Advisory, Conciliation and Arbitration Service | 2 | 0 | 2 | 0 | 0 | 0 | | Central Arbitration Committee | 0 | 0 | 0 | 0 | 0 | 0 | | Civil Nuclear Police Authority | 8 | 0 | 8 | 0 | 8 | 0 | | Coal Authority | 1 | 0 | 1 | 0 | 0 | 0 | | Committee on Climate Change | 0 | 0 | 0 | 0 | 0 | 0 | | Competition Appeal Tribunal and Competition Service | 0 | 0 | 0 | 0 | 0 | 0 | | Diamond Light Source Ltd | 6 | 0 | 6 | 0 | 6 | 0 | | The Financial Reporting Council Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | Low Carbon Contracts Company Ltd | 3 | 2 | 1 | 0 | 1 | 0 | | Nuclear Decommissioning Authority | 15 | 4 | 11 | 0 | 0 | 0 | | Nuclear Decommissioning Authority Archives Ltd | 1 | 1 | 0 | 0 | 0 | 0 | | Radioactive Waste Management Ltd | 15 | 15 | 0 | 0 | 0 | 0 | | Oil and Gas Authority | 3 | 0 | 3 | 0 | 0 | 0 | | South Tees Site Company Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | UK Atomic Energy Authority | 56 | 56 | 0 | 0 | 0 | 0 | | AEA Insurance Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | UK Research and Innovation | 33 | 13 | 20 | 0 | 0 | 0 | | Innovate UK Loans Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | STFC Innovations Ltd | 0 | 0 | 0 | 0 | 0 | 0 | | UK Shared Business Services Ltd | 13 | 0 | 13 | 0 | 11 | 0 | | Not consolidated in the Departmental Group accounts | | | | | | | | Pubs Code Adjudicator | 0 | 0 | 0 | 0 | 0 | 0 | | Small Business Commissioner | 2 | 2 | 0 | 0 | 0 | 0 | | Total | 220 | 123 | 97 | 0 | 46 | 0 | Table 3a: Off-payroll engagements of board members, and/or, senior officials with significant financial responsibility, between 1 April 2019 and 31 March 2020
| Core Department and Agencies | Number of off-payroll engagements of board members, and/or senior officials with significant financial responsibility | Total number of individuals on payroll and off-payroll that have been deemed ‘board members and/or senior officials with significant financial responsibility’ during the financial year | |-----------------------------|-------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------| | Core Department | 0 | 31 | | Insolvency Service | 0 | 11 | | UK Space Agency | 0 | 9 | | **Consolidated in the Departmental Group accounts, (excluding nuclear site licence companies)** | | | | Advisory, Conciliation and Arbitration Service | 0 | 6 | | Central Arbitration Committee | 0 | 0 | | Certification Office for Trade Union and Employers’ Associations | 0 | 0 | | British Business Bank plc | 0 | 10 | | British Business Aspire Holdco Ltd | 0 | 2 | | British Business Finance Ltd | 0 | 10 | | British Business Financial Services Ltd | 0 | 4 | | British Business Investments Ltd | 0 | 4 | | British Patient Capital Limited | 0 | 3 | | BBB Patient Capital Holdings Ltd | 0 | 3 | | Capital for Enterprise Fund Managers Ltd | 0 | 3 | | Capital for Enterprise (GP) Ltd | 0 | 2 | | Capital for Enterprise Limited | 0 | 2 | | The Start-Up Loans Company | 0 | 2 | | Civil Nuclear Police Authority | 0 | 7 | | Coal Authority | 0 | 11 | | Committee on Climate Change | 0 | 14 | | Competition Appeal Tribunal and Competition Service | 2 | 6 | | Diamond Light Source Ltd | 0 | 6 | | The Financial Reporting Council Ltd | 0 | 2 | | Low Carbon Contracts Company Ltd | 0 | 8 | | Nuclear Decommissioning Authority | 0 | 17 | | Nuclear Decommissioning Authority Archives Ltd | 0 | 0 | | Radioactive Waste Management Ltd | 1 | 8 | | Oil and Gas Authority | 0 | 1 | | South Tees Site Company Ltd | 0 | 2 | | UK Atomic Energy Authority | 2 | 14 | | AEA Insurance Ltd | 2 | 2 | | UK Research and Innovation | 1 | 26 | | Innovate UK Loans Ltd | 0 | 0 | | STFC Innovations Ltd | 0 | 0 | | UK Shared Business Services Ltd | 0 | 2 | Number of off-payroll engagements of board members, and/or senior officials with significant financial responsibility
| Not consolidated in the Departmental Group accounts | Total number of individuals on payroll and off-payroll that have been deemed ‘board members and/or senior officials with significant financial responsibility’ during the financial year | |-----------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | British Hallmarking Council | 0 | 1 | | Groceries Code Adjudicator | 0 | 1 | | Pubs Code Adjudicator | 1 | 3 | | Small Business Commissioner | 2 | 4 | | **Total** | **11** | **237** |
Notes to table 3a: details of the exceptional circumstances that led to the engagements and duration of engagements
**Competition Appeal Tribunal and Competition Service**
One off-payroll member was appointed as a training provider, as the President of the Tribunal has a statutory duty to provide training to members of the Tribunal. They have been a member of the Tribunal since its inception in 2000 and have knowledge of its processes and case histories. They are a fellow of the Higher Education Academy among other qualifications. The President and the Registrar of the Tribunal view it as very important that the training provider continues to develop and deliver training, as well as support other engagements.
Duration: appointed in 2013, and the contract was renewed in 2015 and 2017.
The other off-payroll member also had been a member of the Tribunal sitting on cases with new legislation was appointed to the training committee. The second member assists the first member to prepare training materials, and they also provide the training along with the first member. They are gaining understanding of the training activities to provide training in the absence of the first member.
Duration: appointed in January 2019.
**Radioactive Waste Management**
The off-payroll person is a Swedish national with unique experience in successfully leading the delivery of the GDF programme in Sweden.
Duration: contract ended 31 March 2020, and in process of being renewed on-payroll
**UKAEA**
The two off-payroll appointments were of non-Exec Board members who reached the end of their appointment during the year, but were retained on a short term basis pending the appointment of new non-Exec Board members.
**AEAIL**
AEAIL does not employ anyone. AEAIL is a captive insurance company registered in the Isle of Man and subject to their tax and NI legislation. The two AEAIL directors are off-payroll by default and are paid a small fee by AEAIL.
Duration: From 2002 and 2005 respectively. UKRI The off-payroll person is the Chief Financial Officer. The appointment was due to the importance of the post and the need to fill swiftly on an interim basis. Duration: From 14 July 2019, and their appointment ran until 30 June 2020. From 1 July 2020 their appointment was extended as Chief Operating Officer.
Pubs Code Adjudicator The off-payroll person was extensively involved in developing the Pubs Code and has sound knowledge of a highly complex area of policy. Duration: From April 2017.
The Small Business Commissioner The two, off-payroll persons are non-executive directors for the Advisory Board and Audit, Risk & Assurance Board. These members have T&C to work with the SBC for 4 years. Duration: From 7 January 2019. SLCs: off-payroll engagements
SLCs deliver work for NDA, and fall within the Departmental accounting boundary; however, they operate with a high degree of autonomy.
Although SLCs have a higher number of off-payroll workers, they represent a small proportion of the overall workforce. Due to the specialised and project driven nature of their work, there is a need to bring in unique skills and experience which cannot be found in house.
Table 1b: Off-payroll engagements as of 31 March 2020, for more than £245 per day and that last longer than 6 months
| Total number | Less than 1 year | 1 to 2 years | 2 to 3 years | 3 to 4 years | 4 years or more | |--------------|-----------------|--------------|--------------|--------------|----------------| | Dounreay Site Restoration Ltd | 29 | 2 | 7 | 2 | 1 | 17 | | LLW Repository Ltd | 32 | 16 | 10 | 2 | 2 | 2 | | Magnox Ltd | 111 | 5 | 18 | 33 | 16 | 39 | | Sellafield Ltd | 197 | 38 | 38 | 27 | 12 | 82 | | Total | 369 | 61 | 73 | 64 | 31 | 140 |
Table 2b: New off-payroll engagements or those that reached 6 months in duration, between 1 April 2019 and 31 March 2020, for more than £245 per day and that last longer than 6 months
| Total number | Number assessed as in scope of IR35 assessment | Number assessed as outside scope of IR35 assessment | Number engaged directly (via PSC contracted to the Department) and are on the Departmental payroll | Number reassessed for consistency/assurance purposes during the year | Number that saw change to IR35 status following the consistency review | |--------------|-----------------------------------------------|---------------------------------------------------|-------------------------------------------------|-------------------------------------------------|-------------------------------------------------| | Dounreay Site Restoration Ltd | 5 | 5 | 0 | 0 | 0 | 0 | | LLW Repository Ltd | 7 | 0 | 7 | 0 | 0 | 0 | | Magnox Ltd | 8 | 2 | 6 | 0 | 8 | 0 | | Sellafield Ltd | 46 | 19 | 27 | 0 | 19 | 12 | | Total | 66 | 26 | 40 | 0 | 27 | 12 | Table 3b: Off-payroll engagements of board members, and/or, senior officials with significant financial responsibility, between 1 April 2019 and 31 March 2020
| Company | Number of off-payroll engagements of board members, and /or senior officials with significant financial responsibility | Total number of individuals on payroll and off-payroll that have been deemed ‘board members and /or senior officials with significant financial responsibility’ during the financial year | |--------------------------------|------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------| | Dounreay Site Restoration Ltd | 8 | 11 | | LLW Repository Ltd | 1 | 9 | | Magnox Ltd | 0 | 9 | | Sellafield Ltd | 0 | 1 | | **Total** | **9** | **30** |
Notes to table 3b: details of the exceptional circumstances that led to the engagements, and duration of engagements
**Dounreay Site Restoration Ltd**
All 8 persons have been seconded from the PBO, and Dounreay incur their costs.
Duration of engagements is as follows:
- i) from 07 Jan 2020,
- ii) from 20 Nov 2019,
- iii) from 25 Nov 2019,
- iv) from 23 Sep 2019,
- v) from 16 Nov 2018,
- vi) from 01 June 2018,
- vii) from 16 May 2017,
- viii) from 02 Sep 2015.
**LLW Repository Ltd**
The 1 off-payroll post holder was supplied by the parent body organisation as required by contractual arrangements with NDA.
Duration: From 1 Dec 2015. Remuneration report
Remuneration policy
Ministers Remuneration of ministers is determined in accordance with the provisions of the Ministerial and other Salaries Act 1975 (as amended by The Ministerial and other Salaries Order 1996) and the Ministerial and other Pensions and Salaries Act 1991.
Senior civil servants The Senior Salaries Review Body provides independent advice to the Prime Minister on the remuneration of senior civil servants. The review body considers economic considerations such as local variations in labour markets and funds available to departments. Further information about the work of the review body can be found at https://www.gov.uk/government/organisations/review-body-on-senior-salaries.
Service contracts The Constitutional Reform and Governance Act 2010 requires Civil Service appointments to be made on merit on the basis of fair and open competition. The Recruitment Principles published by the Civil Service Commission specify the circumstances when appointments may be made otherwise. Unless otherwise stated below, the officials covered by this report hold appointments which are open-ended. Early termination, other than for misconduct, would result in the individual receiving compensation as set out in the Civil Service Compensation Scheme. Further information about the work of the Civil Service Commission can be found at https://civilservicecommission.independent.gov.uk.
Ministers’ remuneration Salary and pension entitlements of ministers of the Department for the year ending 31 March 2020 are set out in the tables below.
Ministers – single total figure of remuneration
Audited information Where ministers have moved to or from another department during the year, details of any remuneration relating to their subsequent or prior roles will be in that department’s remuneration report. Ministers who transfer from another department continue being paid at the appropriate rate of pay with effect from the first day of the month following the date of appointment. Former ministers who transfer to other departments are paid at their current rate of pay up to the end of the month. Any increase in ministers’ salaries on transfer from the date of appointment is paid by their new department. | Name and Position | 2019-20 | 2018-19 | |-------------------|---------|---------| | **Secretary of State** | | | | Rt Hon Alok Sharma MP (from 13 February 2020) | 8,729 | 12,000 | | Rt Hon Andrea Leadsom MP (from 24 July 2019 to 13 February 2020) | 54,421 | 62,000 | | Rt Hon Greg Clark MP (to 24 July 2019) | 38,107 | 44,000 | | **Ministers of State** | | | | Rt Hon Kwasi Kwarteng MP (from 24 July 2019) | 21,320 | 27,000 | | Lord Grimstone (from 18 March 2020) | – | – | | Rt Hon Chris Skidmore MP (from 5 December 2018 to 25 July 2019 and from 10 September 2019 to 13 February 2020) | 30,223 | 33,000 | | Rt Hon Jo Johnson MP (from 24 July 2019 to 5 September 2019) | 11,511 | 12,000 | | Rt Hon Claire Perry MP (to 24 July 2019) | 17,884 | 21,000 | | **Parliamentary Under-Secretaries of State** | | | | Nadhim Zahawi MP (from 26 July 2019) | – | – | | Lord Callanan (from 13 February 2020) | 13,880 | 18,000 | | Paul Scully MP (from 13 February 2020) | 2,893 | 4,000 | | Amanda Solloway MP (from 13 February 2020) | 2,893 | 4,000 | | Lord Duncan (from 26 July 2019 to 13 February 2020) | 75,419 | 84,000 | | Kelly Tolhurst MP (from 19 July 2018 to 13 February 2020) | 20,510 | 25,000 | | Rt Hon Lord Henley (to 26 July 2019) | 34,336 | 34,000 | | Rt Hon Jake Berry MP (from 7 June 2019 to 24 July 2019) | – | – | | Andrew Stephenson MP (from 4 April 2019 to 25 July 2019) | 7,272 | 9,000 | Notes
1 Salary information excludes employers’ national insurance contributions. None of the ministers of the Department received benefits in kind during the year. Ministers in the House of Commons are remunerated on a different basis to those in the House of Lords as explained in Notes to the Remuneration report.
2 The value of pension benefits accrued during the year is calculated as (real increase in pension multiplied by 20) less (contributions made by the individual). Real increase excludes increases due to inflation or any increase or decrease due to transfer of pension rights.
3 Previously Secretary of State for International Development.
4 Salary includes £16,876 statutory payment on cessation of Ministerial office.
5 Salary for 2019-20 includes £16,876 statutory payment on cessation of Ministerial office.
6 Previously Parliamentary Under-Secretary of State at Department for Exiting the European Union.
7 Minister of State jointly at Department for International Trade; does not draw salary or pension benefits.
8 Minister of State jointly at Department for Education but paid by Department for Business, Energy and Industrial Strategy; salary for 2019-20 includes £7,920 statutory payment on cessation of Ministerial office; Minister of State at Department of Health and Social Care between 25 July 2019 and 10 September 2019.
9 Minister of State jointly at Department for Education but paid by Department for Business, Energy and Industrial Strategy; salary includes £7,920 statutory payment on cessation of Ministerial office.
10 Salary for 2019-20 includes £7,920 statutory payment on cessation of Ministerial office.
11 Does not draw salary or pension benefits; previously Parliamentary Under-Secretary of State at Department for Education.
12 Full year equivalent salary includes £36,366 Lords Office Holders Allowance.
13 Jointly Parliamentary Under-Secretary of State at Northern Ireland Office but paid by Department for Business, Energy and Industrial Strategy; salary includes £17,742 statutory payment on cessation of Ministerial office; full year equivalent salary includes £36,366 Lords Office Holders Allowance; previously Parliamentary Under-Secretary of State at Scotland Office.
14 Subsequently Parliamentary Under-Secretary of State at Department for Transport
15 Full year equivalent salary includes £36,366 Lords Office Holders Allowance.
16 Parliamentary Under-Secretary of State jointly at Ministry of Housing, Communities and Local Government and paid by that Department; subsequently Minister of State jointly at Cabinet Office and Ministry of Housing, Communities and Local Government.
17 Previously Government Whip, Lord Commissioner of HM Treasury; subsequently Minister of State jointly at Foreign and Commonwealth Office and Department for International Development.
## Ministers – pension benefits
### Audited information
| | Pension benefits at age 65 as at 31 March 2020 | Real increase in pension at age 65 | CETV at 31 March 2020 | CETV at 31 March 2019 | Real increase in CETV | |--------------------------|-----------------------------------------------|-----------------------------------|-----------------------|-----------------------|-----------------------| | | £’000 | £’000 | £’000 | £’000 | £’000 | | **Secretary of State** | | | | | | | Rt Hon Alok Sharma MP (from 13 February 2020) | 0–5 | 0–2.5 | 33 | 31 | 2 | | Rt Hon Andrea Leadsom MP (from 24 July 2019 to 13 February 2020) | 0–5 | 0–2.5 | 64 | 54 | 5 | | Rt Hon Greg Clark MP (to 24 July 2019) | 10–15 | 0–2.5 | 148 | 142 | 3 | | **Ministers of State** | | | | | | | Rt Hon Kwasi Kwarteng MP (from 24 July 2019) | 0–5 | 0–2.5 | 8 | 3 | 2 | | Lord Grimstone (from 18 March 2020) | – | – | – | – | – | | Rt Hon Chris Skidmore MP (from 5 December 2018 to 25 July 2019 and from 10 September 2019 to 13 February 2020) | 0–5 | 0–2.5 | 12 | 7 | – | | Rt Hon Jo Johnson MP (from 24 July 2019 to 5 September 2019) | 0–5 | 0–2.5 | 51 | 50 | – | | Rt Hon Claire Perry MP (to 24 July 2019) | 0–5 | 0–2.5 | 39 | 35 | 2 | | **Parliamentary Under-Secretaries of State** | | | | | | | Nadhim Zahawi MP (from 26 July 2019) | – | – | – | – | – | | Lord Callanan (from 13 February 2020) | 0–5 | 0–2.5 | 62 | 59 | 3 | | Paul Scully MP (from 13 February 2020) | 0–5 | 0–2.5 | 1 | – | 1 | | Amanda Solloway MP (from 13 February 2020) | 0–5 | 0–2.5 | 1 | – | 1 | | Lord Duncan (from 26 July 2019 to 13 February 2020) | 0–5 | 0–2.5 | 40 | 31 | 3 | | Kelly Tolhurst MP (from 19 July 2018 to 13 February 2020) | 0–5 | 0–2.5 | 8 | 5 | 1 | | Rt Hon Lord Henley (to 26 July 2019) | 0–5 | – | 46 | 45 | – | | Rt Hon Jake Berry MP (from 7 June 2019 to 24 July 2019) | – | – | – | – | – | | Andrew Stephenson MP (from 4 April 2019 to 25 July 2019) | 0–5 | 0–2.5 | 7 | 6 | – |
### Notes
1. Where ministers joined or left during the year, their CETV opening or closing amounts are as at their joining or leaving dates. See Notes to the Remuneration report for explanation of CETV.
2. Does not draw salary or pension benefits.
3. Does not draw salary or pension benefits. Senior officials’ remuneration
Salary and pension entitlements of officials of the Core Department who were members of the Departmental Board or Executive Committee during the year ending 31 March 2020 are set out in the tables below.
### Senior officials – single total figure of remuneration
**Audited information**
Where officials have moved to or from a similar senior role in another department during the year, details of any remuneration relating to their subsequent or prior roles will be in that department’s remuneration report.
| Name | 2019-20 Salary | 2019-20 Bonus | 2019-20 Pension | 2019-20 Total | 2018-19 Salary | 2018-19 Bonus | 2018-19 Pension | 2018-19 Total | |-----------------------------|----------------|---------------|-----------------|---------------|----------------|---------------|-----------------|---------------| | Alex Chisholm | 180-185 | – | 70 | 270-275 | 180-185 | – | 70 | 255-260 | | Sam Beckett | 130-135 | – | 68 | 210-215 | 125-130 | – | 38 | 175-180 | | Nick Chism (from 1 June 2018 to 5 February 2020) | 115-120 | 140-145 | – | 47 | 165-170 | 115-120 | 140-145 | 46 | 160-165 | | Julian Critchlow (from 14 May 2018) | 140-145 | – | – | 140-145 | 120-125 | 140-145 | – | 120-125 | | Sarah Harrison | 140-145 | – | 67 | 220-225 | 140-145 | – | 71 | 210-215 | | John Loughhead | 130-135 | – | 67 | 200-205 | 130-135 | – | 62 | 190-195 | | Sarah Munby (from 15 July 2019) | 75-80 | 110-115 | – | 31 | 105-110 | – | – | – | | Jo Samant | 125-130 | – | 45 | 170-175 | 125-130 | – | 99 | 220-225 | | Jo Shannmugalingam (from 15 July 2019) | 65-70 | 95-100 | – | 82 | 150-155 | – | – | – | | Joanna Whittington (from 8 October 2018) | 155-160 | – | – | 57 | 215-220 | 75-80 | 155-160 | 23 | 95-100 | | Gavin Lambert (interim, from 15 April 2019 to 12 July 2019) | 25-30 | 100-105 | – | 9 | 30-35 | – | – | – | | Sam Lister (interim, from 15 April 2019 to 12 July 2019) | 30-35 | 130-135 | – | 13 | 45-50 | – | – | – | | Gareth Davies (to 3 May 2019) | 10-15 | 130-135 | – | 19 | 30-35 | 130-135 | – | 10-15 | 49 | 190-195 | | Tom Taylor | 125-130 | – | 41 | 180-185 | 125-130 | – | 76 | 210-215 | | Caleb Deeks | 100-105 | – | 60 | 170-175 | 100-105 | – | 61 | 165-170 | | Doug Watkins (from 1 September 2018) | 125-130 | – | 0-5 | 69 | 195-200 | 70-75 | 120-125 | 10-15 | 57 | 135-140 | | Craig Woodhouse (from 15 July 2019) | 90-95 | 125-130 | – | 36 | 125-130 | – | – | – | Notes
1 Salary information excludes employers’ national insurance contributions. No benefits in kind or compensation for loss of office were received by any senior officials during the year. Where officials have moved to or from a similar senior role in another department during the year, details of any remuneration relating to their subsequent or prior roles will be in that department’s remuneration report.
2 The value of pension benefits accrued during the year is calculated as (real increase in pension multiplied by 20) plus (real increase in any lump sum) less (contributions made by the individual). Real increase excludes increases due to inflation or any increase or decrease due to transfer of pension rights.
3 Contracted and remunerated as 90% of full time equivalent; full time equivalent of salary is 145-150 (2018-19: 145-150).
4 Contracted and remunerated as 85% of full time equivalent; full time equivalent of full year equivalent salary is 130-135.
5 Contracted and remunerated as 85% of full time equivalent; full time equivalent of full year equivalent salary is 115-120.
6 Subsequently Director General at Department for Digital, Culture, Media and Sport.
7 Subsequently Director General at Department for Transport.
8 Pension figure for 2018-19 increased from 47 to 76 as result of retrospective update to salary data and consequently total from 180-185 to 210-215.
## Senior officials – pension benefits
### Audited information
| Name | Accrued pension at pension age as at 31 March 2020 and related lump sum | Real increase in pension and related lump sum at pension age | CETV at 31 March 2020 | CETV at 31 March 2019 restated | Real increase in CETV | Employer contribution to partnership pension account | Nearest £100 | |-------------------------------------------|------------------------------------------------------------------------|-------------------------------------------------------------|-----------------------|---------------------------------|-----------------------|------------------------------------------------------|-------------| | Alex Chisholm | 30-35 | 2.5-5 | 402 | 332 | 39 | – | – | | Sam Beckett | 55-60 plus lump sum of 120-125 | 2.5-5 plus lump sum of 0-2.5 | 1,040 | 947 | 44 | – | – | | Nick Chism (from 1 June 2018 to 5 February 2020) | 5-10 | 2.5-5 | 68 | 32 | 25 | – | – | | Julian Critchlow (from 14 May 2018) | – | – | – | – | – | – | – | | Sarah Harrison | 55-60 | 2.5-5 | 1,007 | 914 | 45 | – | – | | John Loughhead | 15-20 | 2.5-5 | 277 | 224 | 46 | – | – | | Sarah Munby (from 15 July 2019) | 0-5 | 0-2.5 | 16 | - | 10 | – | – | | Jaae Samant | 50-55 plus lump sum of 110-115 | 2.5-5 plus lump sum of (2.5)-0 | 956 | 886 | 24 | – | – | | Jo Shannmugalingam (from 15 July 2019) | 20-25 plus lump sum of 50-55 | 2.5-5 plus lump sum of 5-7.5 | 340 | 284 | 48 | – | – | | Joanna Whittington (from 8 October 2018) | 40-45 plus lump sum of 75-80 | 2.5-5 plus lump sum of (2.5)-0 | 745 | 674 | 31 | – | – | | Gavin Lambert (interim, from 15 April 2019 to 12 July 2019) | 25-30 plus lump sum of 50-55 | 0-2.5 plus lump sum of (2.5)-0 | 380 | 374 | 3 | – | – | | Sam Lister (interim, from 15 April 2019 to 12 July 2019) | 20-25 | 0-2.5 | 240 | 233 | 5 | – | – | | Gareth Davies (to 3 May 2019) | 45-50 | 0-2.5 | 629 | 614 | 13 | – | – | | Tom Taylor 3 | 45-50 plus lump sum of 100-105 | 2.5-5 plus lump sum of (2.5)-0 | 801 | 743 | 18 | – | – | | Caleb Deeks | 30-35 | 2.5-5 | 366 | 319 | 27 | – | – | | Doug Watkins (from 1 September 2018) | 60-65 plus lump sum of 155-160 | 2.5-5 plus lump sum of 2.5-5 | 1,244 | 1,139 | 49 | – | – | | Craig Woodhouse (from 15 July 2019) | 0-5 | 0-2.5 | 18 | – | 11 | – | – |
### Notes
1. Where senior officials joined or left during the year, their CETV opening or closing amounts are as at their joining or leaving dates. See Notes to the Remuneration report for explanation of CETV.
2. Not a member of Civil Service pension arrangements during the year.
3. CETV as at 31 March 2019 increased from 720 to 743 as result of retrospective update to salary data. Fee entitlements for non-executive board members
Audited information
The table below shows fee entitlements for non-executive directors who were members of the Departmental Board during the year ending 31 March 2020.
| Name | 2019-20 Fee entitlement | 2019-20 Full year equivalent if different | 2018-19 Fee entitlement | 2018-19 Full year equivalent if different | |-----------------------------|--------------------------|------------------------------------------|--------------------------|------------------------------------------| | Archie Norman | 20-25 | | 20-25 | | | Nigel Boardman (from 25 June 2018) | 20-25 | | 15-20 | 20-25 | | Leena Nair (from 25 June 2018) | 20-25 | | 15-20 | 20-25 | | Stephen Carter¹ | 15-20 | | 15-20 | | | Dame Carolyn McCall | 15-20 | | 15-20 | | | Kathryn Parsons | 15-20 | | 15-20 | | | Stuart Quickenden¹ | 15-20 | | 15-20 | |
Notes 1 Fee entitlement waived.
Fair pay disclosure
Audited information
The table below shows the relationship during the year ending 31 March 2020 between the remuneration of the highest-paid director and the median remuneration of the workforce across the Core Department and two agencies, Insolvency Service and UK Space Agency. Remuneration figures include salary, non-consolidated performance-related pay and benefits-in-kind. They do not include severance payments, employer pension contributions and the cash equivalent transfer value of pensions.
| | 2019-20 | 2018-19 | |--------------------------------|---------|---------| | Remuneration band of highest paid director | £200,000-£205,000 | £185,000-£190,000 | | Median remuneration of workforce | £40,464 | £38,971 | | Ratio of highest paid director to median | 5.00 | 4.81 | | Remuneration range of workforce including directors | £17,031 to £218,484 | £18,200 to £194,747 | | Number of people remunerated in excess of highest paid director | 1 | 1 | Notes to the Remuneration report
The information in the Remuneration report relates solely to the Core Department with the exception of the Fair pay disclosure which relates to the Core Department and two of its Agencies. Similar information relating to chief executives and most senior managers of the Agencies and other bodies of the Departmental family is given in the separate annual reports and accounts of the relevant bodies.
Salary
‘Salary’ includes gross salary; overtime; reserved rights to London weighting or London allowances; recruitment and retention allowances; private office allowances and any other allowance to the extent that it is subject to UK taxation. This report is based on accrued payments made by the Department and thus recorded in these accounts. In respect of ministers in the House of Commons, departments bear only the cost of the additional ministerial remuneration; the salary for their services as an MP (£79,468 from 1 April 2019) and various allowances to which they are entitled are borne centrally. However, the arrangement for ministers in the House of Lords is different in that they do not receive a salary but rather an additional remuneration which cannot be quantified separately from their ministerial salaries. This total remuneration, as well as the allowances to which they are entitled, is paid by the Department and is therefore shown in full in the figures above.
Bonuses
Bonuses are based on performance levels attained and are made as part of the appraisal process. Bonuses relate to the performance in the year in which they become payable to the individual. The bonuses reported in 2019-20 relate to performance in 2018-19 and the comparative bonuses reported for 2018-19 relate to performance in 2017-18.
Ministerial pensions
Pension benefits for ministers are provided by the Parliamentary Contributory Pension Fund (PCPF). The scheme is made under statute and the rules are set out in the Ministers’ etc Pension Scheme 2015, available at http://qna.files.parliament.uk/ws-attachments/170890/original/PCPF_MINISTERIAL_SCHEME_FINAL_RULES.doc. Those ministers who are Members of Parliament may also accrue an MP’s pension under the PCPF, details of which are not included in this report. A new MP’s pension scheme was introduced from May 2015 although members who were MPs and aged 55 or older on 1 April 2013 have transitional protection to remain in the previous MPs’ final salary pension scheme. Benefits for ministers are payable from State Pension age under the 2015 scheme. Pensions are re-valued annually in line with Pensions Increase legislation both before and after retirement. The contribution rate from May 2015 is 11.1% and the accrual rate is 1.775% of pensionable earnings. The figure shown for pension value includes the total pension payable to the member under both the pre- and post-2015 ministerial pension schemes.
Ministerial pensions: Cash Equivalent Transfer Value
The Cash Equivalent Transfer Value (CETV) is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member’s accrued benefits and any contingent spouse’s pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the pension benefits they have accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total ministerial service, not just their current appointment as am minister. CETVs are calculated in accordance with The Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 and do not take account of any actual or potential reduction to benefits. resulting from Lifetime Allowance Tax which may be due when pension benefits are taken.
**Ministerial pensions: Real increase in the value of the CETV**
This is the element of the increase in accrued pension funded by the Exchequer. It excludes increases due to inflation and contributions paid by the minister. It is worked out using common market valuation factors for the start and end of the period.
**Civil Service pensions**
Pension benefits are provided through the Civil Service pension arrangements. From 1 April 2015 a new pension scheme for civil servants was introduced – the Civil Servants and Others Pension Scheme or alpha, which provides benefits on a career average basis with a normal pension age equal to the member’s State Pension Age (or 65 if higher). From that date all newly appointed civil servants and the majority of those already in service joined alpha. Prior to that date, civil servants participated in the Principal Civil Service Pension Scheme (PCSPS). The PCSPS has four sections: three providing benefits on a final salary basis (classic, premium or classic plus) with a normal pension age of 60; and one providing benefits on a whole career basis (nuvos) with a normal pension age of 65.
These statutory arrangements are unfunded with the cost of benefits met by monies voted by Parliament each year. Pensions payable under classic, premium, classic plus, nuvos and alpha are increased annually in line with Pensions Increase legislation. Existing members of the PCSPS who were within 10 years of their normal pension age on 1 April 2012 remained in the PCSPS after 1 April 2015. Those who were between 10 years and 13 years and 5 months from their normal pension age on 1 April 2012 will switch into alpha sometime between 1 June 2015 and 1 February 2022. All members who switch to alpha have their PCSPS benefits ‘banked’, with those with earlier benefits in one of the final salary sections of the PCSPS having those benefits based on their final salary when they leave alpha. (The pension figures quoted for officials show pension earned in PCSPS or alpha – as appropriate. Where the official has benefits in both the PCSPS and alpha the figure quoted is the combined value of their benefits in the two schemes.) Members joining from October 2002 may opt for either the appropriate defined benefit arrangement or a ‘money purchase’ stakeholder pension with an employer contribution (partnership pension account).
Employee contributions are salary-related and range between 4.6% and 8.05% for members of classic, premium, classic plus, nuvos and alpha. Benefits in classic accrue at the rate of 1/80th of final pensionable earnings for each year of service. In addition, a lump sum equivalent to three years’ initial pension is payable on retirement. For premium, benefits accrue at the rate of 1/60th of final pensionable earnings for each year of service. Unlike classic, there is no automatic lump sum, classic plus is essentially a hybrid with benefits for service before 1 October 2002 calculated broadly as per classic and benefits for service from October 2002 worked out as in premium. In nuvos a member builds up a pension based on their pensionable earnings during their period of scheme membership. At the end of the scheme year (31 March) the member’s earned pension account is credited with 2.3% of their pensionable earnings in that scheme year and the accrued pension is uprated in line with Pensions Increase legislation. Benefits in alpha build up in a similar way to nuvos, except that the accrual rate is 2.32%. In all cases members may opt to give up (commute) pension for a lump sum up to the limits set by the Finance Act 2004.
The partnership pension account is a stakeholder pension arrangement. The employer makes a basic contribution of between 8% and 14.75% (depending on the age of the member) into a stakeholder pension product chosen by the employee from a panel of providers. The employee does not have to contribute, but where they do make contributions, the employer will match these up to a limit of 3% of pensionable salary (in addition to the employer’s basic contribution). Employers also contribute a further 0.5% of pensionable salary to cover the cost of centrally-provided risk benefit cover (death in service and ill health retirement).
The accrued pension quoted is the pension the member is entitled to receive when they reach pension age, or immediately on ceasing to be an active member of the scheme if they are already at or over pension age. Pension age is 60 for members of classic, premium and classic plus, 65 for members of nuvos, and the higher of 65 or State Pension Age for members of alpha. (The pension figures quoted for officials show pension earned in PCSPS or alpha – as appropriate. Where the official has benefits in both the PCSPS and alpha the figure quoted is the combined value of their benefits in the two schemes but note that part of that pension may be payable from different ages.)
Further details about the Civil Service pension arrangements can be found at the website https://www.civilservicepensionscheme.org.uk/.
Civil Service pensions: Cash Equivalent Transfer Value
The Cash Equivalent Transfer Value (CETV) is the actuarially assessed capitalised value of the pension scheme benefits accrued by a member at a particular point in time. The benefits valued are the member’s accrued benefits and any contingent spouse’s pension payable from the scheme. A CETV is a payment made by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the benefits accrued in their former scheme. The pension figures shown relate to the benefits that the individual has accrued as a consequence of their total membership of the pension scheme, not just their service in a senior capacity to which disclosure applies.
The figures include the value of any pension benefit in another scheme or arrangement which the member has transferred to the Civil Service pension arrangements. They also include any additional pension benefit accrued to the member as a result of their buying additional pension benefits at their own cost. CETVs are worked out in accordance with The Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 and do not take account of any actual or potential reduction to benefits resulting from Lifetime Allowance Tax which may be due when pension benefits are taken.
Civil Service pensions: Real increase in CETV
This reflects the increase in CETV that is funded by the employer. It does not include the increase in accrued pension due to inflation, contributions paid by the employee (including the value of any benefits transferred from another pension scheme or arrangement) and uses common market valuation factors for the start and end of the period. Statement of Parliamentary Supply
Audited information
Overview
In addition to the primary statements prepared under IFRS, the Government Financial Reporting Manual (FReM) requires the Department for Business, Energy and Industrial Strategy to prepare a Statement of Parliamentary Supply (SoPS) and supporting notes.
The SoPS and related notes are subject to audit, as detailed in the Certificate and Report of the Comptroller and Auditor General to the House of Commons.
The SoPS is a key accountability statement that shows, in detail, how an entity has spent against their Supply Estimate. Supply is the monetary provision (for resource and capital purposes) and cash (drawn primarily from the Consolidated Fund), that Parliament gives statutory authority for entities to utilise. The Estimate details supply and is voted on by Parliament at the start of the financial year.
Should an entity exceed the limits set by their Supply Estimate, called control limits, their accounts will receive a qualified opinion.
The format of the SoPS mirrors the Supply Estimates, published on gov.uk, to enable comparability between what Parliament approves and the final outturn.
The SoPS contain a summary table, detailing performance against the control limits that Parliament have voted on, cash spent (budgets are compiled on an accruals basis and so outturn will not tie directly to cash spent) and administration.
Non-voted Budgets generally comprise CFERs (Consolidated Fund Extra Receipts) that represent operating income or expenditure financed directly from the Consolidated Fund as a standing service or from the National Insurance Fund. Non-voted expenditure does not require Parliamentary authority, but is included within budgets set by HMT for completeness.
Estimates and Outturn spend are disclosed gross (gross expenditure and income) for activities of the Core Department and net for the activities of the Departmental Group’s arm’s length bodies.
The supporting notes on pages 94 to 101 detail the following: Outturn by Estimate line, providing a more detailed breakdown (note 1); a reconciliation of Outturn to Net operating expenditure in the SoCNE, to tie the SoPS to the financial statements (note 2); a reconciliation of Outturn to Net cash requirement (note 3); and, an analysis of income payable to the Consolidated Fund (note 4).
### Summary table 2019-20
| SoPS note | Outturn | Estimate | 2019-20 Outturn vs Estimate: saving/ (excess) | 2018-19 Outturn total | |-----------|---------|----------|---------------------------------------------|----------------------| | | Voted | Non-voted| Total | Voted | Non-voted | Total | Voted | Total | Outturn total | | | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | | Departmental Expenditure Limit | | | | | | | | | | | Resource | 1.1 | 3,586,479| (748,104) | 2,838,375 | 4,402,890 | (848,000) | 3,554,890 | 816,411 | 716,515 | 1,246,489 | | Capital | 1.2 | 11,227,917| - | 11,227,917 | 11,842,191 | (7,000) | 11,835,219 | 614,302 | 607,302 | 10,813,932 | | Total DEL | 14,814,396 | (748,104) | 14,066,292 | 16,245,109 | (855,000) | 15,390,109 | 1,430,713 | 1,323,817 | 12,060,421 | | Annually Managed Expenditure | | | | | | | | | | | Resource | 1.1 | 19,483,001 | 431,123 | 19,914,124 | 14,588,019 | 467,000 | 15,055,019 | (4,894,982) | (4,859,105) | (105,864,889) | | Capital | 1.2 | 5,500 | (142,400) | (136,900) | 865,249 | (142,400) | 722,849 | 859,749 | 859,749 | (416,665) | | Total AME | 19,488,501 | 288,723 | 19,777,224 | 15,453,268 | 324,600 | 15,777,868 | (4,035,233) | (3,999,356) | (106,281,554) | | Total Budget | 34,302,897 | (459,381) | 33,843,516 | 31,698,377 | (530,400) | 31,167,977 | (2,604,520) | (2,675,539) | (94,221,133) | | Resource | 1.1 | 23,069,480 | (316,981) | 22,752,499 | 18,990,909 | (381,000) | 18,609,909 | (4,078,571) | (4,142,590) | (104,618,400) | | Capital | 1.2 | 11,233,417 | (142,400) | 11,091,017 | 12,707,468 | (149,400) | 12,558,068 | 1,474,051 | 1,467,051 | 10,397,267 | | Total Budget | 34,302,897 | (459,381) | 33,843,516 | 31,698,377 | (530,400) | 31,167,977 | (2,604,520) | (2,675,539) | (94,221,133) | | Non-budget expenditure | 299,766 | - | 299,766 | 340,682 | - | 340,682 | 40,916 | 40,916 | - | | Total Budget and non-budget | 34,602,663 | (459,381) | 34,143,282 | 32,039,059 | (530,400) | 31,508,659 | (2,563,604) | (2,634,623) | (94,221,133) |
Figures in the areas outlined in a thick line cover the voted control limits voted by Parliament. Refer to the Supply Estimates guidance manual, available on gov.uk, for detail on the control limit voted by Parliament.
Significant variances between Outturn and the Estimate are explained in the financial review on pages 29 to 38.
The Department has incurred an Excess of £9.7 billion in relation to voted Resource Annually Managed Expenditure for the Estimate Line: Deliver an ambitious industrial strategy in SoPS 1.1 due to COVID-19 emergency interventions by the Government, namely the Small Business Grant Fund and the Retail, Hospitality and Leisure Grant Fund. Due to the timing of the COVID-19 response in March 2020, this expenditure was incurred without the necessary parliamentary approval by way of a Supplementary Estimate. Further information in relation to these schemes can be seen on note 18 and note 28 of the accounts. This has led to a total Excess of Resource AME of £4.9 billion. The Department will seek parliamentary approval by way of an Excess Vote in the next Supply and Appropriation Act.
### Net cash requirement 2019-20
| SoPS note | Outturn | Estimate | Outturn vs Estimate: saving/(excess) | Outturn total | |-----------|---------|----------|-------------------------------------|---------------| | | £'000 | £'000 | £'000 | £'000 | | Net cash requirements | 3 | 15,708,936 | 18,171,944 | 2,463,008 | 13,787,150 |
### Administration costs 2019-20
| SoPS note | Outturn | Estimate | Outturn vs Estimate: saving/(excess) | Outturn total | |-----------|---------|----------|-------------------------------------|---------------| | | £'000 | £'000 | £'000 | £'000 | | Administration costs | 1.1 | 502,428 | 538,798 | 36,370 | 460,580 |
Although not a separate voted limit, any breach of the administration budget, will also result in an excess vote.
### SOPS note 1. Outturn detail, by Estimate Line
#### SoPS 1.1 Analysis of Resource Outturn by Estimate Line
| Resource spending in DEL: voted expenditure | Administration | Programme | Estimate | 2019-20 | 2018-19 | |--------------------------------------------|----------------|-----------|----------|---------|---------| | | Gross | Income | Net | Gross | Income | Net | Total | Virements | Total inc. virements | saving/ (excess) | Total | | | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | | A Deliver an ambitious industrial strategy | – | – | – | 924,328 | (15,803) | 908,525 | 908,525 | 1,464,590 | – | 1,464,590 | 556,065 | 182,286 | | B Maximise investment opportunities and bolster UK interests | – | – | – | 73,644 | (419) | 73,225 | 73,225 | 65,206 | 8,019 | 73,225 | – | 70,705 | | C Promote competitive markets and responsible business practices | 784 | – | 784 | 121,242 | (18,038) | 103,204 | 103,204 | 103,801 | 187 | 103,988 | – | 94,443 | | D Delivering affordable energy for households and businesses | – | – | – | 38,976 | (2) | 38,974 | 38,974 | 39,532 | – | 39,532 | 558 | 44,155 | | E Ensuring that our energy system is reliable and secure | – | – | – | 12,554 | (7,831) | 4,723 | 4,723 | 11,586 | – | 11,586 | 6,863 | 4,756 | | F Taking action on climate change and decarbonisation | – | – | – | 32,664 | (146) | 32,518 | 32,518 | 29,693 | 2,825 | 32,518 | – | 24,829 | | G Managing our energy legacy safely and responsibly | – | – | – | 234,205 | (19) | 234,186 | 234,186 | 236,758 | (2,572) | 234,186 | – | 251,870 | | H Science and Research | (2) | – | (2) | 6,177 | (16) | 6,161 | 6,159 | 34 | 6,125 | 6,159 | – | 4,608 | | I Capability | 404,986 | (20,752) | 384,234 | 31,542 | (185) | 31,357 | 415,591 | 496,254 | (60,120) | 436,134 | 20,543 | 393,848 | | J Government as Shareholder | 4,326 | (17) | 4,309 | 133,303 | (123,994) | 9,309 | 13,618 | 101,237 | – | 101,237 | 87,619 | 62,819 | | K Deliver an ambitious industrial strategy (ALB net) | – | – | – | 21,077 | – | 21,077 | 21,077 | 22,000 | – | 22,000 | 923 | 15,147 | | L Promote competitive markets and responsible business practices (ALB net) | 7,779 | – | 7,779 | 46,964 | – | 46,964 | 54,743 | 54,978 | – | 54,978 | 235 | 54,635 | | M Ensuring that our energy system is reliable and secure (ALB net) | – | – | – | (2,756) | – | (2,756) | (2,756) | 1 | – | 1 | 2,757 | (2,667) | | N Taking action on climate change and decarbonisation (ALB net) | 5,354 | – | 5,354 | 2,906 | – | 2,906 | 8,260 | 5,055 | 3,205 | 8,260 | – | 6,069 | | Administration | Resource Outturn | Programme | Estimate | Outturn vs Estimate: saving/(excess) | Resource Outturn | |----------------|------------------|-----------|----------|-------------------------------------|-----------------| | | Gross | Income | Net | Gross | Income | Net | Total | Virements | Total inc. virements | Total | | | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | | O Managing our energy legacy safely and responsibly (ALB) net | 4,833 | – | 4,833 | 23,886 | – | 23,886 | 28,719 | 23,857 | 4,862 | 28,719 | – | 32,075 | | P Science and Research (ALB) net | 7,410 | – | 7,410 | 223,755 | – | 223,755 | 231,165 | 274,998 | (6,125) | 268,873 | 37,708 | 276,226 | | Q Capability (ALB) net | 34,693 | – | 34,693 | – | – | – | 34,693 | 1,500 | – | 33,193 | – | 30,475 | | R Government as Shareholder (ALB) net | 105 | – | 105 | 48,748 | – | 48,748 | 48,853 | 38,452 | 10,401 | 48,853 | – | (19,479) | | S NDA and SLC expenditure (ALB) net | 52,929 | – | 52,929 | 1,277,289 | – | 1,277,289 | 1,330,218 | 1,433,358 | – | 1,433,358 | 103,140 | 1,175,337 | | Total voted DEL | 523,197 | (20,769) | 502,428 | 3,250,504 | (166,453) | 3,084,051 | 3,586,479 | 816,411 | 2,702,137 | | Resource spending in DEL: non-voted expenditure | | | | | | | | | | | | | | T Nuclear Decommissioning Authority Income (CFER) | – | – | – | – | (748,104) | (748,104) | (748,104) | (848,000) | – | (848,000) | (99,896) | (978,373) | | Nuclear Safeguards Development | – | – | – | – | – | – | – | – | – | – | – | (2,275) | | Managing our energy legacy safely and responsibly (CFER) | – | – | – | – | – | – | – | – | – | – | – | (475,000) | | Total non-voted DEL | – | – | – | – | (748,104) | (748,104) | (748,104) | (848,000) | – | (848,000) | (99,896) | (1,455,648) | | Total resource spending in DEL | 523,197 | (20,769) | 502,428 | 3,250,504 | (166,453) | 3,084,051 | 3,586,479 | 816,411 | 2,702,137 | | Resource spending in AME: voted expenditure | | | | | | | | | | | | | | U Deliver an ambitious industrial strategy | – | – | – | 10,758,343 | (25,154) | 10,733,189 | 10,733,189 | 1,048,811 | (17,702) | 1,031,109 | 9,702,080 | (312,599) | | V Maximise investment opportunities and bolster UK interests | – | – | – | 701 | – | 701 | 701 | 5,000 | – | 5,000 | 4,299 | 6,044 | | W Promote competitive markets and responsible business practices | – | – | – | 72,052 | – | 72,052 | 72,052 | 72,000 | 52 | 72,052 | – | 79,000 | | X Ensuring that our energy system is reliable and secure | – | – | – | – | 478 | 478 | 478 | 1 | 477 | 478 | – | (295) | | Y Managing our energy legacy safely and responsibly | – | – | – | (173,978) | (29,419) | (203,397) | (203,397) | (67,956) | (78,370) | (146,326) | 57,071 | (297,497) | | Z Science and Research | – | – | – | 54,912 | – | 54,912 | 54,912 | 91,252 | – | 91,252 | 36,340 | 205,985 | | AA Capability | – | – | – | (55,895) | – | (55,895) | (55,895) | (50,581) | – | (50,581) | 5,314 | (12,990) | | AB Government as Shareholder | – | – | – | 17,149 | (6,913) | 10,236 | 10,236 | (5,874) | 16,110 | 10,236 | – | 1,035 | | AC Renewable Heat Incentive | – | – | – | 846,092 | – | 846,092 | 846,092 | 1,010,000 | – | 1,010,000 | 163,908 | 817,898 | | AD Deliver an ambitious industrial strategy (ALB) net | – | – | – | 36,202 | – | 36,202 | 36,202 | 18,500 | 17,702 | 36,202 | – | (21,100) | | Programme | Administration | Resource Outturn | Estimate | Outturn vs Estimate: saving/(excess) | Resource Outturn | |-----------|----------------|------------------|----------|-------------------------------------|-----------------| | | Gross | Income | Net | Gross | Income | Net | Total | Virements | Total inc. virements | Total | | AE | Promote competitive markets and responsible business practices (ALB) net | – | – | – | 973 | – | 973 | 811 | 162 | 973 | – | 57 | | AF | Taking action on climate change and decarbonisation (ALB) net | – | – | – | 3,543,428 | – | 3,543,428 | 6,599,928 | (1,230) | 6,598,698 | 3,055,270 | (2,971,284) | | AG | Managing our energy legacy safely and responsibly (ALB) net | – | – | – | 22,826 | – | 22,826 | 17,616 | 5,210 | 22,826 | – | (2,022,249) | | AH | Science and Research (ALB) net | – | – | – | 149,372 | – | 149,372 | 76,212 | 73,160 | 149,372 | – | 41,299 | | AI | Capability (ALB) net | – | – | – | 4 | – | 4 | (535) | 539 | 4 | – | 1 | | AJ | Government as Shareholder (ALB) net | – | – | – | (99,851) | – | (99,851) | 23,834 | (16,110) | 7,724 | 107,575 | 93,768 | | AK | Nuclear Decommissioning Authority (ALB) net | – | – | – | 4,371,679 | – | 4,371,679 | 5,749,000 | – | 5,749,000 | 1,377,321 | (101,791,292) | | Total voted AME | – | – | – | 19,544,009 | (61,008) | 19,483,001 | 19,483,001 | 14,588,019 | – | 14,588,019 | (4,894,982) | (106,184,219) | | Resource spending in AME: non-voted expenditure | | | | | | | | | | | | | | AM | Government as Shareholder | – | – | – | 438,858 | (7,735) | 431,123 | 431,123 | 467,000 | – | 467,000 | 35,877 | 319,330 | | Total non-voted AME | – | – | – | 438,858 | (7,735) | 431,123 | 431,123 | 467,000 | – | 467,000 | 35,877 | 319,330 | | Total resource spending in AME | – | – | – | 19,982,867 | (68,743) | 19,914,124 | 19,914,124 | 15,055,019 | – | 15,055,019 | (4,859,105) | (105,864,889) | | Total resource spending | 523,197 | (20,769) | 502,428 | 23,233,371 | (983,300) | 22,250,071 | 22,752,499 | 18,609,909 | – | 18,609,909 | (4,142,590) | (104,618,400) | | Non-budget: voted | | | | | | | | | | | | | | Prior Period Adjustments | – | – | – | 299,766 | – | 299,766 | 299,766 | 340,682 | – | 340,682 | 40,916 | – | | Total resource and non-budget spending | 523,197 | (20,769) | 502,428 | 23,533,137 | (983,300) | 22,549,837 | 23,052,265 | 18,950,591 | – | 18,950,591 | (4,101,674) | (104,618,400) |
The total Estimate columns include virements. Virements are the allocation of provision in the Estimates that do not require parliamentary authority (because Parliament does not vote to that level of detail and delegates to HM Treasury). Further information on virements are provided in the Supply Estimates manual, available on gov.uk.
Significant variances between Outturn and Estimate are explained in the financial review on pages 29 to 38.
The Outturn vs Estimate column is based on the total including virements. The estimate total before virements have been made is included so that users can tie the estimate back to the Estimates laid before Parliament.
2019-20 Outturn figures differ slightly from those shown in the Statement of Parliamentary Supply as this table includes a prior period adjustment for Fleetbank Funding and BIS (Postal Services Act 2011) Company Limited as a non-budget item due to an update in the classification of transactions. Further details are given in note 26.
The Department has Prior Period Adjustments (PPAs) as a result of recognising the capital spend in an arm’s length body following its consolidation into the Departmental boundary. It is proper for the department to seek parliamentary authority for the provision that should have been sought previously. In 2019-20, the following such PPAs have been made, which have been included within voted Supply in the Estimate.
### SoPS 1.2. Analysis of capital Outturn by Estimate line
| Capital spending in DEL: voted expenditure | 2019-20 | 2018-19 | |-------------------------------------------|---------|---------| | **Capital Outturn** | **Estimate outturn vs Estimate, savings/(excess)** | **Capital Outturn** | | **Gross** | **Income** | **Net total** | **Total** | **Virements** | **Total inc. virements** | **Total** | | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | | A Deliver an ambitious industrial strategy | 340,134 | (354,574) | (14,440) | 24,046 | – | 24,046 | 38,486 | (54,606) | | B Maximise investment opportunities and bolster UK interests | 276,255 | (10,383) | 265,872 | 271,640 | – | 271,640 | 5,768 | 243,957 | | C Promote competitive markets and responsible business practices | 3,861 | – | 3,861 | 4,666 | – | 4,666 | 805 | 2,682 | | D Delivering affordable energy for households and businesses | 44,702 | (200) | 44,502 | 39,988 | 4,514 | 44,502 | – | 32,718 | | E Ensuring that our energy system is reliable and secure | 291 | – | 291 | 430 | – | 430 | 139 | (626) | | F Taking action on climate change and decarbonisation | 156,962 | (2,735) | 154,227 | 251,585 | – | 251,585 | 97,358 | 73,121 | | G Managing our energy legacy safely and responsibly | 3,600 | (139) | 3,461 | 4,102 | – | 4,102 | 641 | 4,278 | | H Science and Research | 754,310 | (62,516) | 691,794 | 727,786 | – | 727,786 | 35,992 | 563,177 | | I Capability | 19,703 | – | 19,703 | 121,340 | (4,577) | 116,763 | 97,060 | 30,305 | | J Government as Shareholder | 111,431 | (47,204) | 64,227 | 13,797 | 50,430 | 64,227 | – | 175,871 | | L Promote competitive markets and responsible business practices (ALB net) | 1,193 | – | 1,193 | 1,160 | 33 | 1,193 | – | 1,059 | | N Taking action on climate change and decarbonisation (ALB) net | 27 | – | 27 | 399 | – | 399 | 372 | 255 | | O Managing our energy legacy safely and responsibly (ALB net) | 12,919 | – | 12,919 | 14,650 | – | 14,650 | 1,731 | 9,503 | | P Science and Research (ALB) net | 7,786,590 | – | 7,786,590 | 7,859,518 | – | 7,859,518 | 72,928 | 7,530,042 | | Q Capability (ALB) net | 30 | – | 30 | – | 30 | 30 | – | 2,482 | | R Government as Shareholder (ALB) net | 396,476 | – | 396,476 | 697,112 | (50,430) | 646,682 | 250,206 | 197,015 | | S NDA and SLC expenditure (ALB net) | 1,797,184 | – | 1,797,184 | 1,810,000 | – | 1,810,000 | 12,816 | 2,002,699 | | **Total voted DEL** | **11,705,668** | **(477,751)** | **11,227,917** | **11,842,219** | – | **11,842,219** | **614,302** | **10,813,932** |
### Capital spending in DEL: non-voted expenditure
| Nuclear Decommissioning Authority Income (CFER) | – | – | – | (7,000) | – | (7,000) | (7,000) | – |
### Capital Outturn
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | | Gross | Income | Net total | Total | Virements | Total inc. virements | outturn vs Estimate, savings/ (excess) | Capital Outturn | | | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | | Total non-voted DEL | – | – | – | (7,000)| – | (7,000) | (7,000) | – | | Total capital spending in DEL | 11,705,668 | (477,751) | 11,227,917 | 11,835,219 | – | 11,835,219 | 607,302 | 10,813,932 |
### Capital spending in AME: voted expenditure
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | | Managing our energy legacy safely and responsibly | 29,419 | – | 29,419 | 29,419 | – | 29,419 | – | 35,412 | | Science and Research | 1,263 | – | 1,263 | – | 1,263 | – | – | 1,212 | | Government as Shareholder | 5,379,000 | (5,342,000) | 37,000 | 800,000 | – | 800,000 | 763,000 | (120,000) | | Deliver an ambitious industrial strategy (ALB) net | 365 | – | 365 | 32,900 | – | 32,900 | 32,535 | (16,387) | | Science and Research (ALB) net | (59,496) | – | (59,496) | 4,000 | (1,263) | 2,737 | 62,233 | (59,692) | | Government as Shareholder (ALB) net | (3,051) | – | (3,051) | (1,070) | – | (1,070) | 1,981 | (115,399) | | Total voted AME | 5,347,500 | (5,342,000) | 5,500 | 865,249 | – | 865,249 | 859,749 | (274,854) |
### Capital spending in AME: non-voted expenditure
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | | Managing our energy legacy safely and responsibly (CFER) | – | (142,400) | (142,400) | (142,400) | – | (142,400) | – | (141,811) | | Total non-voted AME | – | (142,400) | (142,400) | (142,400) | – | (142,400) | – | (141,811) | | Total capital spending in AME | 5,347,500 | (5,484,400) | (136,900) | 722,849 | – | 722,849 | 859,749 | (416,665) |
### Non-budget
| | 2019-20 | 2018-19 | |----------------------|---------|---------| | | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | | Prior period adjustments | – | – | – | – | – | – | – | – | | Total capital and non-budget spending | 17,053,168 | (5,962,151) | 11,091,017 | 12,558,068 | – | 12,558,068 | 1,467,051 | 10,397,267 |
The total Estimate columns include virements. Virements are the allocation of provision in the Estimates that do not require parliamentary authority (because Parliament does not vote to that level of detail and delegates to HM Treasury).
Further information on virements are provided in the Supply Estimates manual, available on gov.uk.
Significant variances between Outturn and Estimate are explained in the financial review on pages 29 to 38. SoPS note 2. Reconciliation of outturn to net operating expenditure
As noted in the overview to the SoPS, Outturn and the Estimates are compiled against the budgeting framework – which is similar to, but different from IFRS. Therefore, this reconciliation bridges the resource Outturn to Net operating expenditure, linking the SoPS to the financial statements.
The prior year comparatives present the Net operating expenditure as reported at 31 March 2019.
| Description | 2019-20 £’000 | 2018-19 £’000 | |------------------------------------------------------------------------------|----------------|----------------| | **Total resource Outturn in Statement of Parliamentary Supply** | SoPS note 1.1 | | | Outturn total | 23,052,265 | (104,618,400) |
**Add:**
- NDA remedial decommissioning costs which are capital in budgets but taken through the SoCNE: 1,797,204
- Capital Grants: 1,411,680
- Share of profit/loss of joint ventures and associates: 5,763
- Other non-budget: 176,418
- Research and Development costs: 7,800,260
**Total:** 34,243,590
**Less:**
- Non-budgetary income: (4,032)
- Non-budget, non voted items in respect of BIS (Postal Services Act 2011) Company Limited and B Company Limited: (23)
- Expected return on pension scheme assets: (39,265)
- NDA income scored in SoPS only: 30,243
- Capital Income in SoCNE: (32,758)
- Research and Development income: (467,966)
- CFER: other income: –
- Prior period adjustments: (299,766)
- Other:
- Impact of intra group transactions: 23,060
- Other differences: 39,284
**Total:** (751,223)
**Net Expenditure for the period in Consolidated Statement of Comprehensive Net Expenditure**
| SoCNE | 33,492,367 | (94,360,261) | SoPS note 3. Reconciliation of Net resource Outturn to Net cash requirement
As noted in the overview to the SoPS, Outturn and the Estimates are compiled against the budgeting framework – not on a cash basis. Therefore, this reconciliation bridges the resource and capital Outturn to the Net cash requirement.
| SoPS note | Outturn £’000 | Estimate £’000 | 2019-20 Outturn vs Estimate: saving/(excess) £’000 | |-----------|---------------|----------------|-----------------------------------------------| | Total resource Outturn | 23,052,265 | 18,950,591 | (4,101,674) | | Total capital Outturn | 11,091,017 | 12,558,068 | 1,467,051 |
Adjustments for ALBs
- Remove voted resource and capital: (19,711,841) (24,758,234) (5,046,393)
- Removal of intra-group transactions: 57,322 (57,322)
- Add cash in grant-in-aid: 11,307,613 12,000,006 692,393
- Add share purchase and loans: 67,506 – (67,506)
- Less share capital repayment: (8,534) – 8,534
Adjustments to remove non-cash items
- Depreciation: 39,540 (32,146) (71,686)
- New provisions and adjustments to previous provisions: (10,767,459) (1,274,604) 9,492,855
- Prior Period Adjustments: (299,766) (340,682) (40,916)
- Other non-cash items: (69,322) 74,932 144,254
Adjustments to reflect movements in working balances
- Increase/(decrease) in receivables: (82,758) 50,000 132,758
- (Increase)/decrease in payables: 311,841 147,770 (164,071)
- Use of provisions: 248,501 265,843 17,342
- Financial guarantees called in: 13,630 – (13,630)
Total: (18,893,727) (13,867,115) 5,026,612
Removal of non-voted budget items
- Other non-voted budget items: 459,381 530,400 71,019
Total: 459,381 530,400 71,019
Net cash requirement: 15,708,936 18,171,944 2,463,008 SoPS note 4. Amounts of income to the Consolidated Fund
SopS 4.1 Analysis of income payable to the Consolidated Fund
In addition to the cash retained by the Department, the following income is payable to the consolidated fund (cash receipts being shown in italics).
The type of income allowed to be retained by the Department is set out in the ambit of the Supply Estimate. Income of a type not included in the Estimate, or in excess of amounts agreed with HM Treasury, is required to be surrendered to the Consolidated Fund. This includes the commercial income of the Nuclear Decommissioning Authority, Coal Pension surpluses and income generated by the BIS (Postal Services Act 2011) Company, which forms the bulk of the amounts shown above, together with other miscellaneous receipts.
| Description | 2019-20 Outturn total | 2018-19 Outturn total | |--------------------------------------------------|-----------------------|-----------------------| | Operating income of the NDA within the Ambit | accruals £'000 | cash basis £'000 | accruals £'000 | cash basis £'000 | | | 623,962 | 556,000 | 654,497 | 654,497 | | Income outside the ambit of the Estimate | 142,945 | 142,945 | 193,362 | 193,362 | | [Excess] cash surrenderable to the Consolidated Fund | 142,400 | 142,400 | 617,400 | 617,400 | | Total amount payable to the Consolidated Fund | 909,307 | 841,345 | 1,465,259 | 1,465,259 |
SoPS 4.2: Consolidated Fund income
BEIS also collects income as an agent for the consolidated fund. This income is disclosed separately in the Trust Statement, pages 231 to 241, and is not included in SoPS 4.1 – income payable to the consolidated fund.
Details are also provided in the individual accounts of the Insolvency Service for items which are not included in note 4.1. Parliamentary accountability disclosures
Losses and special payments
Audited information
The disclosures in this note are in accordance with Managing Public Money, the official guidance on handling public funds.
Losses statement
| | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |------------------------------|------------------------------|--------------------|------------------------------|--------------------| | Total number of losses | 11,986 | 12,300 | 8,955 | 9,719 | | RPS receivable impairment (£m)| 446 | 446 | 358 | 358 | | Other losses (£m) | 30 | 35 | 27 | 28 | | Total value of losses (£m) | 476 | 481 | 385 | 386 |
Details of cases over £300,000: constructive losses: Core Department
The Core Department holds onerous leases for properties on the Department’s estate for which £54 million has been provided as at 31 March 2020 (31 March 2019: £113 million); payments in 2019-20 totalled £16.8 million (2018-19: £26.6 million).
Details of cases over £300,000: claims written-off due to insolvency: Core Department
In April 2019 HMG entered into a commercial agreement with British Steel to allow it to meet its EU ETS obligations. Under a Deed of Forfeiture HMG bought £119 million of EU ETS allowances to meet British Steel’s 2018 EU ETS liability. The Deed of Forfeiture stipulated transaction and arrangement fees of £12 million to be paid by British Steel Limited to the Department. As British Steel filed for compulsory liquidation on 22 May 2019, the £12 million in fees are unlikely to be recoverable and have therefore been written-off.
Details of cases over £300,000: claims abandoned: Agencies
Redundancy Payment Service (RPS) receivable impairment: most of the redundancy payments made from the National Insurance Fund (NIF) are in respect of employees of insolvent companies. Repayment of debt is recovered from the sale of the assets of the insolvent company. A small proportion of the debt (11%) is preferential, and as such has a higher recovery rate. HMRC record the impairment of the RPS receivable in NIF accounts. The RPS receivable impairment for 2019-20 is £446 million (2018-19: £358 million). Special payments
Special payments include extra-contractual, ex gratia, compensation and special severance payments.
| | 2019-20 | 2018-19 | |--------------------------------|---------|---------| | Core Department and Agencies | 410 | 417 | | Departmental Group | | | | Total number of special payments | 410 | 417 | | Total value of special payments (£m) | 1 | 1 |
Details of cases over £300,000
In connection with the withdrawal of a court action, the Core Department agreed to meet £600,000 of the claimant’s legal costs.
Gifts and hospitality
Managing Public Money states that annual reports should include a note on gifts made by departments if their total value exceeds £300,000. Gifts with a value of more than £300,000 should be noted individually. During 2019-20, the Core Department did not give, nor did it receive, any reportable gifts above £300,000.
The Core Department’s gifts and hospitality policy expects the highest level of standards of behaviour from civil servants when deciding whether to accept or decline gifts and hospitality offered, as set out within the Civil Service Code and Managing Public Money. There are also constraints in giving hospitality to ensure that claims are proportionate, necessary, justifiable, modest, and defensible under public scrutiny and delivering value for money from the use of public funds.
The policy applies to BEIS’s Civil Service staff, contractors, agents, and non-executive directors who are bound by the Civil Service Code. This policy does not apply to Ministers and special advisers who are covered under the Ministerial Code and Cabinet Office Code of Conduct for Special Advisers respectively. Additionally, Special Advisors gifts and hospitality registers are published on a quarterly basis, including nil returns.
Fees and charges
Audited information
The Core Department provides a limited number of services for which it charges fees. Any such fees are set to comply with the cost allocation and charging requirements set out in HM Treasury and Office of Public Sector Information guidance.
The Insolvency Service sets its fees to recover costs; it has a range of fees covering four areas:
- case administration: the average costs of administering bankruptcy cases, compulsory company liquidation cases and completing debt relief orders;
- insolvency practitioner regulations: the cost of authorising and monitoring insolvency practitioners and registering individual voluntary arrangements;
- estate accounting: the cost of financial transactions on insolvency cases using the Insolvency Service account; and
- debt relief orders: the cost of considering an application for a debt relief order by the Official Receiver.
Details of charging polices relating to partner organisations may be found in their respective published accounts. Remote contingent liabilities
Audited information
The Departmental Group has entered into the following contingent liabilities by offering guarantees, indemnities or letters of comfort. None of these is a contingent liability within the meaning of IAS 37, as the likelihood of a transfer of economic benefit in settlement is too remote. However, they are required to be disclosed under the requirements of the Government Financial Reporting Manual and Managing Public Money.
Detail of quantifiable and unquantifiable remote contingent liabilities is presented in the sections below.
Quantifiable
Measurement of quantifiable contingent liabilities is carried out following the requirements of IAS 37, given the reporting requirements of Managing Public Money. Managing Public Money requires that the full potential costs of such contracts be reported to Parliament.
| 1 April 2019 | Increase / (Decrease) in year | Liabilities crystallised in year | Obligations expired in year | 31 March 2020 | Amount reported to Parliament by Departmental Minute | |--------------|-------------------------------|---------------------------------|-----------------------------|---------------|-----------------------------------------------------| | £m | £m | £m | £m | £m | £m | | The Core Department has indemnified Cornwall Council for any liability relating to the European Regional Development Fund (ERDF) that might arise from the transfer of Wave Hub due to (a) any breach of the ERDF Funding Agreements which occurred on or before the transfer date of 31 March 2017 and (b) any action or omission by the Core Department or Wave Hub in relation to the ERDF Funding Agreements prior to the transfer which leads to finding of an Irregularity by any competent authority. | 18 | – | – | – | 18 | 18 | | The Core Department has indemnified the Coal Authority against potential claims arising from remunerated advisory work undertaken for other public sector bodies where settlement exceeds the Authority’s professional indemnity insurance. | 3 | – | – | – | 3 | – | | Total | 21 | – | – | – | 21 | 18 | Unquantifiable remote contingent liabilities: Core Department
Statutory guarantees
- Under section 9 of the British Aerospace Act 1980, the government is liable to discharge any outstanding liability of BAE Systems plc which vested in the company on 1 January 1981 in the event of its being wound up other than for the purpose of reconstruction or amalgamation.
Statutory indemnities
- Indemnities have been given to UK Atomic Energy Authority to cover certain indemnities provided by the Authority to carriers and British Nuclear Fuels plc against certain claims for damage caused by nuclear matter in the course of carriage.
- Indemnities have been given to bankers of the Insolvency Service against certain liabilities arising in respect of non-transferable “account payee” cheques due to insolvent estates and paid into the Insolvency Service's account.
- Indemnity has been given to National Grid’s liabilities with regards to the interconnector linking the UK and France.
Intellectual property
- A liability to the European Patent Office could arise under Article 40 of the European Patent Convention of 1973 as the UK is one of the contracting states.
- A liability to the World Intellectual Property Organisation could arise under Article 57 of the Patent Cooperation Treaty as the UK is one of the contracting states.
Data usage indemnities
- An indemnity has been provided to Pöyry PLC relating to the use of their yield curve data for the sale of Green Investment Bank. The Core Department has indemnified Pöyry PLC for any liability that occurs as a result of using their information in the sale process that may be brought by bidders in relation to the transaction.
Legal costs
- A contingent liability exists in relation to various ongoing legal cases. The cost is dependent on the outcome of cases which currently cannot be reliably estimated.
- Under an agreement with the Financial Reporting Council, if the amount held in the Council's legal costs fund falls below £1 million in any year, an additional grant will be made to cover legal costs subsequently incurred in that year.
Indemnities against personal liability
- Indemnities have been given to the directors appointed by the Core Department to wholly owned subsidiaries. These indemnities are against personal liability following any legal action against the companies.
- Indemnities have been provided to directors appointed to the Low Carbon Contracts Company Limited and Electricity Settlements Company Limited against personal liability following any legal action against the companies, to be triggered only after all other means have been exhausted i.e. company and directors’ insurance and recovery of costs through their levies.
- Indemnities have been provided to the Low Carbon Contracts Company Limited and Electricity Settlements Company Limited in respect of their officers, to be triggered only after all other means have been exhausted i.e. company and directors’ insurance and recovery of costs through their levies.
- Indemnities have been provided to trustees of the Nuclear Liabilities Fund appointed by the Secretary of State against personal liability in the event of legal action against the Fund.
- Indemnities have been provided to trustees of the Nuclear Liabilities Fund appointed by British Energy (now EDF Energy) against personal liability in the event of legal action against the Fund, to be triggered only in the event of failed recourse to indemnities from EDF Energy. • Indemnities have been provided to the Official Receiver relating to their actions as administrator of SSI Redcar with respect to administration of the site.
• An indemnity has been provided to the Official Receiver as liquidator of British Steel Limited for actions undertaken as Receiver in respect of any claims and proceedings that are made against the Receiver personally.
• Indemnities have been provided to the Oil and Gas Authority in respect of certain liabilities that could arise from the actions or omissions of its directors and otherwise arising from a director holding or having held office in the company.
• Indemnities have been provided to the MCS Service Company Limited and trustees of the MCS Charitable Foundation for any liability that might arise as a result of actions taken and decisions made for which the Core Department was ultimately responsible prior to transfer to the Company and Charitable Foundation of responsibility for the Microgeneration Certification Scheme (MCS) in April 2018.
Insurance claims
• A statutory liability will arise under the Nuclear Installations Act 1965 for third-party claims in excess of the operator's liability in the event of a nuclear accident in the UK.
• A contingent liability exists in relation to Incidents/Accidents Insurance claims for exposure to ionising radiation pursued outside the existing UK Atomic Energy Authority insurance scheme.
• The Core Department has indemnified Elexon Limited against third party claims relating to the design and/or implementation of the Contracts for Difference and Capacity Markets settlement systems which are not covered by insurance and/or guarantees by their sub-contractors.
Losses or damages under agreements
• An indemnity has been provided for any losses or damages caused to other parties to the Energy Research Partnership consortium agreement.
Environmental clean-up
• A contingent liability exists in relation to the costs of retrieving and disposing of sealed radioactive sources under the Environmental Permitting (England and Wales) Regulations 2016 in the event that a company keeping such sources becomes insolvent.
• A contingent liability arises in relation to the remediation of land contaminated by a nuclear occurrence as the Secretary of State is deemed to be the appropriate person to bear responsibility under section 9 of The Radioactive Contaminated Land (Modification of Enactments) (England) (Amendment) Regulations 2007 SI 2007/3245.
• Under the United Nations Convention on the Law of the Sea (UNCLOS) 1982, OSPAR decision 98/3, the Energy Act 2004 and the Petroleum Act 1998, the department would become responsible for decommissioning most oil, gas and renewable energy installations in the event that operators are unable to fulfil their decommissioning commitments.
Others
• A liability could arise through non-compliance with the Cogeneration Directive (2004/8/EC) in the event of incorrect certification of combined heat and power plants by contractors of the Department.
• A contingent liability exists in respect of the risks associated with the Core Department assuming responsibility for uplifts in pension contributions for the UK Atomic Energy Authority's non-active pension scheme members.
• The Secretary of State Investor Agreement (SOSIA) provides protections in certain scenarios where the Hinkley Point C nuclear plant is shut down for reasons that are political or due to certain changes in insurance arrangements or certain changes in law. Payments under the SOSIA would be expected in the first instance to be made using funds from the Supplier Obligation but in certain circumstances they could also come direct from the Secretary of State, relying on spending powers granted under the relevant Appropriation Act or, if payments were to be made over a period longer than two years, seeking a new spending power at the time. The payments could be up to around £22 billion excluding non-decommissioning operational costs that may be incurred after any shutdown. However, the liability to make payments under the SOSIA is almost entirely within the control of HM Government.
Unquantifiable remote contingent liabilities: Agencies and departmental ALBs in Departmental Group
- UKSA has an unquantifiable contingent liability arising from the international (UN) convention, which requires the UK Government to be ultimately liable for third party costs from accidental damage arising from UK space activities. To manage the risk to the Government, the Outer Space Act 1986 requires licensees to indemnify HMG against any proven third party costs. In March 2015 the Outer Space Act 1986 was amended to cap the previously unlimited liability for licensed activities. The cap is set at €60 million for the majority of missions. This amendment came into force from 1 October 2015 and was designed to adequately balance the risk to the UK Government whilst ensuring UK space operators remain competitive internationally. There is a requirement on licensees to obtain third party liability insurance (set at €60 million for the majority of missions) for the duration of the licensed activity, with the UK Government a named beneficiary. The UK government is therefore exposed to a potential liability for third party costs which are not recoverable from the licensee. The liability is unidentifiable at the time of reporting.
- UKRI collaborates with a number of other international partners in the funding, management and operation of technical facilities which are not owned by UKRI. In the event of a decision to withdraw from any of these arrangements, it is likely that UKRI would assist in the search for a replacement partner to ensure that technical commitments were met. The most significant international collaborations are in respect of CERN and ESO. For both of these facilities there is the possibility that UKRI would be obliged to contribute to decommissioning costs arising from a decision taken to discontinue operations. The decisions to decommission are not wholly within UKRI’s control.
- The NDA has non-quantifiable contingent liabilities arising from indemnities given as part of the contracts for the management of the nuclear site license companies. These indemnities are in respect of the uninsurable residual risk that courts in a country which is not party to the Paris and Brussels Conventions on third party liability in the field of nuclear energy may accept jurisdiction to determine liability in the event of a nuclear incident. Indemnities are in place in respect of LLWR and Dounreay as set out in the relevant Parent Body Agreements. In addition, indemnities are provided to the previous Parent Body Organisations (PBOs) of Magnox and Sellafield covering the periods of their ownership. Other potential or expected liabilities
The Department has entered into the following arrangements, details of which are provided in the interests of transparency. Neither of them is a contingent liability requiring disclosure under IAS 37, the Government Financial Reporting Manual or Managing Public Money as the obligating events did not exist at the reporting date.
Hinkley Point C Funded Decommissioning Programme (FDP) and Waste Transfer Contracts (WTCs)
The contract with NNB Generation Company Limited (NNB) to build Hinkley Point C (HPC) nuclear power plant includes a Contract for Difference between NNB and the Low Carbon Contracts Company Ltd, an FDP and associated FDP documents including WTCs between NNB and the Core Department.
The FDP and related documents including WTCs require NNB to make prudent provision for their waste and decommissioning liabilities. To meet their liabilities, the operator must set up a fund with an independent governance framework and will pay into it so that it is on track to fund the liabilities that arise from decommissioning and waste management. The fund will report annually to the Secretary of State and a full review will be conducted every five years to ensure that the fund is on track to meet all its liabilities. If it is off track, the operator will be required to take corrective action. These liabilities are strictly the operator’s responsibility and the probability of taxpayers picking up these liabilities is remote.
Alongside the FDP, the government has entered into two WTCs. These set out terms on which the government will take title to and liability for the spent fuel and intermediate level waste (ILW) from the site after decommissioning in order to dispose of the waste safely. The WTCs have generally been prepared in line with the government’s published waste transfer pricing methodology. Although the WTCs provide a default price based on today’s best estimate, they allow the waste transfer price to be set after a specified later date. The final price agreed is subject to a cap, but the likelihood of the future costs exceeding the agreed cap is considered remote.
Capacity agreements
These are statutory arrangements between National Grid, as system operator, and capacity providers. They require the capacity provider to be able to provide a given level of capacity in relevant delivery years when called upon to do so by National Grid.
The European Court of Justice (ECJ) ruling on 15 November 2018 resulted in a ‘Standstill Period’ for the Capacity Market during which no State Aid (in the form of capacity payments) was paid to capacity providers in relation to the annulled Main Scheme Approval. The European Commission (EC) appealed the ECJ’s decision and on 24 October 2019, the Department was informed by the EC that it had completed its State Aid investigation into the Capacity Market and that the Capacity Market scheme complies with EU State Aid rules. On 25 October 2019, the Department notified ESC and National Grid to restart their respective Capacity Market activities.
At a capacity auction, applicants who offer the lowest bid can win a capacity agreement. A capacity auction relates to delivery of capacity approximately 4 years ahead (T-4). Most recently, the capacity agreements resulting from the 2019 T-3 and T-4 capacity auction held in February and March 2020, are for the Delivery Year commencing in 2022/23 and 2023/24. Also, the capacity agreements resulting from the 2019 T-1 capacity auction, held in January 2020, are for the delivery year commencing in 2020/21. In addition to T-1, T-3 and T-4, the interim periods are covered by Transitional arrangements. There are currently 8 live capacity auctions out of a total of 13, which have been awarded from the start of the scheme in 2014 for the delivery year commencing 2016/17.
2 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/42629/3798-waste-transfer-pricing-methodology.pdf The Department has responsibility for administering the settlement process. This role is undertaken by the Electricity Settlements Company (ESC). The obligation for ESC to make capacity payments only arises when the respective levy is received from licensed suppliers and the generator provides the agreed level of capacity. The potential income and payments arising from these arrangements are outlined in the following table:
| | As at 31 March 2020 | As at 31 March 2019 | |--------------------------------|---------------------|---------------------| | | £m | £m | | Capacity Market – ESC | 1,236 | 2,699 | | Income from levy – ESC | (1,236) | (2,699) | | **Total Departmental Group** | **5,696** | **5,696** |
**Regularity of Expenditure**
**Audited information**
The Department ensures that the concept of regularity is understood and complied with in all its operational activities. It ensures compliance with HM Treasury’s Managing Public Money. The Comptroller & Auditor General has qualified his regularity opinion on these accounts (see page 110). This is due to an Excess Vote in the Department’s Resource Annually Managed Expenditure (AME) budget as a result of the COVID-19 emergency interventions by the Government, namely the Small Business Grant Fund and the Retail, Hospitality and Leisure Grant Fund. Due to the timing of the COVID-19 response in March 2020, this expenditure was incurred without the necessary parliamentary approval by way of a Supplementary Estimate. Further information in relation to these schemes can be seen on note 18 and note 28 of the accounts. This has led to a total Excess of Resource AME of £4.9 billion. The Department will seek parliamentary approval by way of an Excess Vote in the next Supply and Appropriation Act.
Sarah Munby Permanent Secretary and Principal Accounting Officer 11 September 2020 The Certificate of the Comptroller and Auditor General to the House of Commons
Opinion on financial statements I certify that I have audited the financial statements of the Department for Business, Energy and Industrial Strategy (“the Department”) and of its Departmental Group for the year ended 31 March 2020 under the Government Resources and Accounts Act 2000. The Department comprises the Core Department and its Agencies. The Departmental Group consists of the Department and the bodies designated for inclusion under the Government Resources and Accounts Act 2000 (Estimates and Accounts) Order 2019. The financial statements comprise: the Department’s and Departmental Group’s Statements of Comprehensive Net Expenditure, Financial Position, Cash Flows, Changes in Taxpayers’ Equity; and the related notes, including the significant accounting policies. These financial statements have been prepared under the accounting policies set out within them.
I have also audited the Statement of Parliamentary Supply and the related notes, and the information in the Accountability Report that is described in that report as having been audited.
In my opinion:
- the financial statements give a true and fair view of the state of the Department’s and the Departmental Group’s affairs as at 31 March 2020 and of the Department’s net expenditure and Departmental Group’s net expenditure for the year then ended; and
- the financial statements have been properly prepared in accordance with the Government Resources and Accounts Act 2000 and HM Treasury directions issued thereunder.
Emphasis of matter – Provision for nuclear decommissioning and Contracts for Difference (CfDs) derivative. Without qualifying my opinion, I draw attention to the disclosures made in notes 1.26 and 18.1 to the financial statements concerning the uncertainties inherent in the nuclear decommissioning provisions. As set out in these notes, given the very long timescales involved and the complexity of the plants and materials being handled, a considerable degree of uncertainty remains over the value of the liability for decommissioning nuclear sites designated by the Secretary of State. Significant changes to the liability could occur as a result of subsequent information and events which are different from the current assumptions adopted.
Finally, I also draw attention to the disclosures made in notes 1.26 and 9 to the financial statements concerning the measurement of liabilities relating to CfDs. As set out in these notes, there is a high degree of estimation uncertainty inherent in forecasting electricity generation volumes and wholesale electricity prices into the late 2030s (and 2060s for the purposes of the Hinkley Point C CFD) and there is a great deal of subjectivity involved in selecting a wholesale electricity price forecast input that conforms to the principles of fair value. Significant changes to the liability could occur as a result of subsequent information and events which are different from the current assumptions adopted. Qualified Opinion on regularity
In my opinion, except for the excess described in the basis for qualified opinion paragraph, in all material respects:
- the Statement of Parliamentary Supply properly presents the outturn against voted Parliamentary control totals for the year ended 31 March 2020 and shows that those totals have not been exceeded; and
- the income and expenditure recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.
Basis for Qualified opinion on regularity
Parliament authorised a Resource Annually Managed Expenditure limit for the Departmental Group of £14,588 million. Against this limit, the Departmental Group incurred actual outturn of £19,483 million, breaching the authorised limit by £4,895 million, due to the recognition of a provision, as shown in the Statement of Parliamentary Supply.
Basis of opinions
I conducted my audit in accordance with International Standards on Auditing (ISAs) (UK) and Practice Note 10 ‘Audit of Financial Statements of Public Sector Entities in the United Kingdom’. My responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of my certificate. Those standards require me and my staff to comply with the Financial Reporting Council’s Revised Ethical Standard 2016. I am independent of the Department in accordance with the ethical requirements that are relevant to my audit and the financial statements in the UK. My staff and I have fulfilled our other ethical responsibilities in accordance with these requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.
Conclusions relating to going concern
I have nothing to report in respect of the following matters in relation to which the ISAs (UK) require me to report to you where:
- the Department’s use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
- the Department have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Department’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Responsibilities of the Accounting Officer for the financial statements
As explained more fully in the Statement of Accounting Officer’s Responsibilities, the Accounting Officer is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Auditor’s responsibilities for the audit of the financial statements
My responsibility is to audit, certify and report on the financial statements in accordance with the Government Resources and Accounts Act 2000. An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs (UK), I exercise professional judgment and maintain professional scepticism throughout the audit. I also:
- identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Department’s internal control.
- evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the group financial statements. I am responsible for the direction, supervision and performance of the group audit. I remain solely responsible for my audit opinion.
- Conclude on the appropriateness of the Department’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my report. However, future events or conditions may cause the group to cease to continue as a going concern.
I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.
I am required to obtain evidence sufficient to give reasonable assurance that the Statement of Parliamentary Supply properly presents the outturn against voted Parliamentary control totals and that those totals have not been exceeded. The voted Parliamentary control totals are Departmental Expenditure Limits (Resource and Capital), Annually Managed Expenditure (Resource and Capital), Non-Budget (Resource) and Net Cash Requirement. I am also required to obtain evidence sufficient to give reasonable assurance that the expenditure and income recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.
**Other Information**
The Accounting Officer is responsible for the other information. The other information comprises information included in the annual report, but does not include the parts of the Accountability Report described in that report as having been audited, the financial statements and my auditor’s report thereon. My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon. In connection with my audit of the financial statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard.
Opinion on other matters
In my opinion:
• the parts of the Accountability Report to be audited have been properly prepared in accordance with HM Treasury directions made under the Government Resources and Accounts Act 2000;
• in the light of the knowledge and understanding of the group and the parent and its environment obtained in the course of the audit, I have not identified any material misstatements in the Performance Report or the Accountability Report; and
• the information given in the Performance and Accountability Reports for the financial year for which the financial statements are prepared is consistent with the financial statements.
Matters on which I report by exception
I have nothing to report in respect of the following matters which I report to you if, in my opinion:
• adequate accounting records have not been kept or returns adequate for my audit have not been received from branches not visited by my staff; or
• the financial statements and the parts of the Accountability Report to be audited are not in agreement with the accounting records and returns; or
• I have not received all of the information and explanations I require for my audit; or
• the Governance Statement does not reflect compliance with HM Treasury’s guidance.
Report
My report on the qualification in respect of the excess vote is at page 114.
Gareth Davies Comptroller and Auditor General
15 September 2020 National Audit Office 157-197 Buckingham Palace Road Victoria London SW1W 9SP The Report of the Comptroller and Auditor General to the House of Commons
Introduction The Department for Business, Energy and Industrial Strategy (“the Department”) is the government department responsible for building an economy which is fairer, cleaner, more innovative, and attracts investment from all over the world. Its priorities include promoting competitive markets and ensuring that the UK has a reliable, low cost and clean energy system.
The net expenditure of government departments is authorised by the annual Supply and Appropriation Acts of Parliament and their associated Supply Estimates. These Acts set a series of expenditure limits on each department’s spending, and net cash requirement. Expenditure beyond any of these limits is considered a breach of a control total and results in an ‘Excess Vote’. Such expenditure potentially undermines parliamentary control over public spending. Where these limits are breached, I qualify my regularity opinion on the financial statements.
Parliament authorised a Resource Annually Managed Expenditure (RAME) limit of £14,588 million for the Department in 2019-20. This limit means that the Department was required to incur RAME expenditure of less than £14,588 million. However, the outturn against the RAME limit was £19,483 million, and the authorised limit was therefore breached by £4,895 million. I have therefore qualified my regularity opinion on the Department’s financial statements in this respect.
Grants to businesses (in relation to COVID-19) The government announced in March 2020 that qualifying businesses could expect to receive support in the form of grants to help counteract the adverse financial effects bought about by the coronavirus pandemic. Businesses eligible for either Small Business Rate Relief or Rural Rate Relief received a grant of £10,000 each, and those with a rateable value between £15,000 and £51,000 received a grant of £25,000 each. The Department has the responsibility of managing the schemes and payments are being administered to businesses by local authorities.
The announcements and actions taken prior to 31 March 2020 to ensure that cash was paid out to businesses as soon as possible created a constructive obligation under IAS 37. As a result, the Department has recognised a provision of £10,824 million representing the Department’s estimate of total payments to be made under the schemes.
Government departments prepare and agree two Supply Estimates during the year, the Main Estimate in or around May each year and the Supplementary Estimate before the year-end in or around February each year. At the time of submitting the Supplementary Estimate, the Department could not anticipate the impact of the COVID-19 pandemic or the urgent action that it would require to support the economy. However, as the Department could not allow for these grant schemes in its Supplementary Estimate, the recognition of the £10,824 million provision meant that the Department exceeded their control total, as detailed on page 109 of the Annual Report. This breach requires an Excess Vote from HM Treasury and leads to a regularity qualification in the audit opinion.
Gareth Davies Comptroller and Auditor General
15 September 2020 National Audit Office 157-197 Buckingham Palace Road Victoria London SW1W 9SP Financial Statements
## Consolidated Statement of Comprehensive Net Expenditure
for the period ended 31 March 2020
| Note | Core Department and Agencies | 31 March 2020 | Core Department and Agencies | 31 March 2019 restated | |------|-----------------------------|---------------|-----------------------------|------------------------| | | £m | £m | £m | £m | | Income from sale of goods and services | 6.1 | (257) | (4,798) | (749) | (3,260) | | Total operating income | | (257) | (4,798) | (749) | (3,260) | | Staff costs | 3 | 390 | 1,240 | 330 | 1,119 | | Purchase of goods and services | 4.1 | 1,597 | 4,301 | 1,424 | 2,942 | | Depreciation and impairment charges | 4.2 | 18 | 440 | 48 | 600 | | Provision expense | 4.3 | 10,869 | 17,873 | 59 | (97,721) | | Grants | 4.4 | 14,006 | 9,410 | 12,907 | 8,280 | | Other operating expenditure | | 33 | 27 | 3 | (5) | | Total operating expenditure | | 26,913 | 33,291 | 14,771 | (84,785) | | Net operating expenditure | | 26,656 | 28,493 | 14,022 | (88,045) | | Finance income | 6.2 | (212) | (334) | (214) | (370) | | Finance expense | 5 | (125) | (18) | (249) | (3,775) | | Contracts for difference derivatives | 9 | – | 5,346 | – | (1,991) | | Share of post-tax loss/(profits) of associates and joint ventures | 13 | – | 5 | – | (186) | | Net expenditure for the year from operations | | 26,319 | 33,492 | 13,559 | (94,367) | | Net expenditure for the year | | 26,319 | 33,492 | 13,559 | (94,367) |
### Other Comprehensive Income and Expenditure
Net (gain)/loss on:
- Items that will not be reclassified to net operating expenditure:
- revaluation of property, plant and equipment: – (57) – (145)
- revaluation of intangible assets: – (13) – (19)
- Items that may be reclassified subsequently to net operating costs:
- revaluation of investments: 166 116 (35) (63)
- other revaluation movements: 12 (2) 56 2
- actuarial (gains)/losses: – (88) – 69
- joint venture and associate other movements: – – – (35)
Total other comprehensive net income and expenditure: 178 (44) 21 (191)
Comprehensive net expenditure for the year: 26,497 33,448 13,580 (94,558)
All operations are continuing.
Further analysis of staff costs can be found in the Staff note in the Accountability Report on page 69.
The notes on pages 123 to 223 form part of these Accounts.
## Consolidated Statement of Financial Position
**as at 31 March 2020**
| Note | Non-current assets: | 31 March 2020 | 31 March 2019 restated | 1 April 2018 | |------|---------------------|---------------|------------------------|--------------| | | Property, plant and equipment | £m | £m | £m | £m | | 7 | | 306 | 3,605 | 294 | 3,533 | 276 | 3,414 | | | Investment properties | 2 | 121 | – | 117 | 23 | 145 | | 8 | Intangible assets | 101 | 230 | 14 | 167 | 9 | 145 | | | Investment and loans in public bodies | 3,392 | 1,706 | 3,348 | 1,758 | 2,996 | 1,630 | | 10 | Other financial assets | 967 | 4,120 | 1,196 | 4,118 | 1,028 | 4,194 | | | Recoverable contract costs | – | 1,425 | – | 1,620 | – | 3,346 | | 12 | Derivative financial instruments | – | – | 7 | 7 | 47 | 78 | | | Investment in joint ventures and associates | – | 967 | – | 1,039 | – | 367 | | 13 | Trade and other receivables | 740 | 848 | 813 | 938 | 932 | 1,090 | | | Total non-current assets | 5,508 | 13,022 | 5,672 | 13,297 | 5,311 | 14,409 | | | Current assets: | | | | | | | Inventories | – | 51 | – | 37 | – | 31 | | | Non-current assets held for sale | – | 6 | – | 20 | – | 15 | | | Trade and other receivables | 538 | 2,258 | 447 | 1,565 | 544 | 1,343 | | 14 | Investments and loans in public bodies | 687 | 672 | 666 | 620 | 732 | 732 | | | Other financial assets | – | – | – | – | 142 | 142 | | 11 | Derivative financial instruments | 9 | 9 | 17 | 17 | 31 | 31 | | | Cash and cash equivalents | 1,039 | 2,158 | 1,283 | 2,078 | 1,246 | 2,034 | | 16 | Total current assets | 2,273 | 5,154 | 2,413 | 4,337 | 2,695 | 4,328 | | | Total assets | 7,781 | 18,176 | 8,085 | 17,634 | 8,006 | 18,737 | | | Current liabilities: | | | | | | | Trade payables and other liabilities | (2,782) | (6,484) | (2,908) | (5,652) | (2,283) | (4,954) | | 17 | Provisions for liabilities and charges | (11,047) | (14,065) | (260) | (3,050) | (278) | (3,332) | | 18 | Financial guarantees and loan commitment liabilities | (17) | (17) | (11) | (11) | (16) | (16) | | | Derivative financial instruments | – | – | (1) | (13) | – | (11) | | Note | 31 March 2020 | 31 March 2019 restated | 1 April 2018 | |------|---------------|------------------------|--------------| | | Core Department and Agencies £m | Departmental Group £m | Core Department and Agencies £m | Departmental Group £m | Core Department and Agencies £m | Departmental Group £m | | Total current liabilities | (13,846) | (20,566) | (3,180) | (8,726) | (2,577) | (8,313) | | Non-current assets plus/less net current assets/ liabilities | (6,065) | (2,390) | 4,905 | 8,908 | 5,429 | 10,424 | | Non-current liabilities: | | | | | | | | Trade payables and other liabilities | 17 | (883) | (2,467) | (1,141) | (2,901) | (1,203) | (2,901) | | Provisions for liabilities and charges | 18 | (1,702) | (136,034) | (1,920) | (131,416) | (2,176) | (237,603) | | Financial guarantees and loan commitment liabilities | 19 | (74) | (221) | (43) | (219) | (45) | (45) | | Derivative financial instruments | 9, 22 | – | (16,464) | (2) | (12,923) | – | (15,904) | | Retirement benefit obligations | 20 | – | (87) | – | (921) | – | (686) | | Total non-current liabilities | (2,659) | (155,273) | (3,106) | (148,380) | (3,424) | (257,139) | | Total assets less liabilities | (8,724) | (157,663) | 1,799 | (139,472) | 2,005 | (246,715) | | Taxpayers’ equity and other reserves: | | | | | | | | General fund | (9,266) | (160,292) | 1,077 | (142,297) | 995 | (250,098) | | Revaluation reserve | 542 | 1,998 | 722 | 2,155 | 1,010 | 2,915 | | Charitable funds | – | 402 | – | 438 | – | 314 | | Non-controlling interests | – | 229 | – | 232 | – | 154 | | Total equity | (8,724) | (157,663) | 1,799 | (139,472) | 2,005 | (246,715) |
Core Department and Agencies comprise the Core Department and the UK Space Agency and Insolvency Service.
The notes on pages 123 to 223 form part of these Accounts.
Sarah Munby Permanent Secretary and Principal Accounting Officer 11 September 2020
## Consolidated Statement of Cash Flows
for the period ended 31 March 2020
| Note | Core Department and Agencies | 2019-20 | Core Department and Agencies | 2018-19 restated | |------|-----------------------------|---------|-----------------------------|------------------| | | £m | £m | £m | £m | | **Cash flows from operating activities** | | | | | | Net operating cost | (26,319) | (33,492) | (13,559) | 94,367 | | Adjustment for non-cash expenditure | 10,735 | 23,584 | (151) | (103,003) | | (Increase)/decrease in inventories | – | (14) | – | (6) | | (Increase)/decrease in trade and other receivables | 14 | (18) | (603) | 216 | | Less movements in receivables relating to items not passing through the Consolidated Statement of Comprehensive Net Expenditure | 101 | 227 | (71) | (71) | | Increase/(decrease) in trade payables and other liabilities | 17 | (384) | 398 | 563 | | Less movements in payables relating to items not passing through the Consolidated Statement of Comprehensive Net Expenditure | 73 | (470) | (730) | (1,531) | | Use of provisions | 18 | (249) | (3,039) | (284) | | Financial guarantees called in | 19 | (13) | (13) | (11) | | Expenditure funded by the National Insurance Fund (RPS) | 4.1 | 430 | 430 | 320 | | Payments to retirement benefit obligations | – | (106) | – | (144) | | **Net cash outflow from operating activities** | (15,644) | (13,098) | (13,707) | (12,535) | | **Cash flows from investing activities** | | | | | | Purchase of property, plant and equipment | (38) | (295) | (46) | (312) | | Purchase of intangible assets | (123) | (150) | (8) | (36) | | Proceeds of disposal of property, plant and equipment | – | 31 | – | 3 | | Proceeds of disposal of investment property | – | – | 20 | 20 | | Proceeds of disposal of intangible assets | – | 2 | – | – | | Proceeds of disposal of assets held for sale | – | 5 | – | – | | Loan redeemed from Post Office Limited | 15 | 5,342 | 5,342 | 6,360 | | Loans made to Post Office Limited | 15 | (5,379) | (5,379) | (6,240) | | Repayments of loans and investments | 32 | 745 | 33 | 754 | | Payments to the Contracts for Difference generators | 9 | – | (1,803) | – | | Other investments and loans made | (242) | (1,091) | (330) | (1,004) | | Repayments of Public Dividend Capital | 16 | – | – | – | | Launch investment receipts | 340 | 340 | 230 | 230 | | Venture capital fund redemptions | 7 | 106 | 7 | 121 | | Venture capital fund investments | – | (255) | – | (235) | | Dividends from Joint ventures and associates | 13 | – | 94 | – | | Disposal of Joint venture and associates | – | 2 | – | – | | Investment in Joint ventures and associates | 13 | – | (30) | – | | Investment in shares | (19) | (19) | (125) | – | | **Net cash outflow from investing activities** | (64) | (2,355) | (99) | (1,269) | | Note | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |------|-----------------------------|--------------------|-----------------------------|--------------------| | | 2019-20 | 2018-19 restated | 2019-20 | 2018-19 restated | | | £m | £m | £m | £m | | Cash flows from financing activities | | | | | | From Consolidated Fund (supply) – current year | 15,465 | 15,465 | 14,139 | 14,139 | | Advances from the Contingencies Fund | – | – | 5 | 5 | | Repayments to the Contingencies Fund | – | – | (7) | (7) | | From the National Insurance Fund | 430 | 436 | 320 | 320 | | Payments in respect of the National Insurance Fund | 4.1 | (430) | (436) | (320) | (320) | | Other adjustments relating to financing activities | – | 3 | – | – | | Disposal of shares | – | – | – | 3 | | **Net financing** | 15,465 | 15,468 | 14,137 | 14,140 | | Net increase/(decrease) in cash and cash equivalents in the period before adjustment for receipts and payments to the Consolidated Fund | (243) | 15 | 331 | 336 | | Receipts due to the Consolidated Fund which are outside the scope of the Department’s activities | 841 | 907 | 1,463 | 1,465 | | Payments of amounts due to the Consolidated Fund | (842) | (842) | (1,757) | (1,757) | | **Net increase/(decrease) in cash and cash equivalents in the period after adjustment for receipts and payments to the Consolidated Fund** | (244) | 80 | 37 | 44 | | Cash and cash equivalents opening balance | 1,283 | 2,078 | 1,246 | 2,034 | | Cash and cash equivalents at the end of the period | 16 | 1,039 | 2,158 | 1,283 | 2,078 | Statement of Changes in Taxpayers’ Equity (Core Department and Agencies)
for the period ended 31 March 2020
| Note | General Fund £m | Revaluation Reserve £m | Taxpayers’ equity £m | Total Reserves £m | |------|-----------------|-------------------------|----------------------|------------------| | | | | | | | **Balance at 1 April 2018** | 995 | 1,010 | 2,005 | 2,005 | | IFRS 9 opening balance adjustments | 277 | (263) | 14 | 14 | | **Revised balance at 1 April 2018** | 1,272 | 747 | 2,019 | 2,019 | | Net parliamentary funding – drawn down | 14,139 | – | 14,139 | 14,139 | | Net parliamentary funding – deemed | 928 | – | 928 | 928 | | National Insurance Fund – RPS | 4.1 | 320 | – | 320 | | Supply (payable)/receivable adjustment | 17 | (1,280) | – | (1,280) | | Income payable to the Consolidated Fund | (675) | – | (675) | (675) | | Decrease in RPS receivables | 14 | (71) | – | (71) | | Net expenditure for the year | (13,559) | – | (13,559) | (13,559) | | **Non-Cash Adjustments:** | | | | | | Auditors’ remuneration | 4.1 | 1 | – | 1 | | **Movements in Reserves:** | | | | | | Other comprehensive net expenditure for the year | – | (21) | (21) | (21) | | Transfers between reserves | 1 | (1) | – | – | | Other movements | 1 | (3) | (2) | (2) | | **Balance at 31 March 2019** | 1,077 | 722 | 1,799 | 1,799 | | **Balance at 1 April 2019** | 1,077 | 722 | 1,799 | 1,799 | | Net parliamentary funding – drawn down | 15,465 | – | 15,465 | 15,465 | | Net parliamentary funding – deemed | 1,280 | – | 1,280 | 1,280 | | National Insurance Fund – RPS | 436 | – | 436 | 436 | | Supply (payable)/receivable adjustment | 17 | (1,036) | – | (1,036) | | Income payable to the Consolidated Fund | (169) | – | (169) | (169) | | Net expenditure for the year | (26,319) | – | (26,319) | (26,319) | | **Non-Cash Adjustments:** | | | | | | Auditors’ remuneration | 4.1 | 1 | – | 1 | | **Movements in Reserves:** | | | | | | Other comprehensive net income for the year | – | (178) | (178) | (178) | | Transfers between reserves | 2 | (2) | – | – | | Other movements | (3) | – | (3) | (3) | | **Balance at 31 March 2020** | (9,266) | 542 | (8,724) | (8,724) |
## Consolidated Statement of Changes in Taxpayers’ Equity (Departmental Group)
for the period ended 31 March 2020
| Note | General Fund restated | Revaluation Reserve | Taxpayers’ Equity restated | Charitable Funds – Unrestricted/Restricted | Non controlling interest | Total Reserves restated | |------|-----------------------|---------------------|---------------------------|------------------------------------------|-------------------------|------------------------| | | £m | £m | £m | £m | £m | £m | | **Balance at 31 March 2018** | (250,098) | 2,915 | (247,183) | 314 | 154 | (246,715) | | IFRS 9 opening balance adjustment | 941 | (926) | 15 | – | – | 15 | | **Balance at 1 April 2018** | (249,157) | 1,989 | (247,168) | 314 | 154 | (246,700) | | Net parliamentary funding – drawn down | 14,139 | – | 14,139 | – | – | 14,139 | | Net parliamentary funding – deemed | 928 | – | 928 | – | – | 928 | | National Insurance Fund – RPS | 4.1 | 320 | – | 320 | – | 320 | | Supply (payable)/receivable adjustment | 14,17 | (1,280) | – | – | – | (1,280) | | Income payable to the Consolidated Fund | (1,331) | – | (1,331) | – | – | (1,331) | | Decrease in RPS receivables | 14 | (71) | – | (71) | – | (71) | | Net expenditure for the year | 94,367 | – | 94,367 | – | – | 94,367 | | Amounts paid from distributable reserves | (131) | – | (131) | – | – | (131) | | **Non-Cash Adjustments:** | | | | | | | | Auditors’ remuneration | 4.1 | 1 | – | 1 | – | 1 | | **Movements in Reserves:** | | | | | | | | Other Comprehensive net (expenditure)/ income for the year | (34) | 225 | 191 | – | – | 191 | | Transfers between reserves | (55) | (60) | (115) | 124 | (9) | – | | Minority interest | – | – | – | – | 87 | 87 | | Other movements | 7 | 1 | 8 | – | – | 8 | | **Balance at 31 March 2019** | (142,297) | 2,155 | (140,142) | 438 | 232 | (139,472) | | **Balance at 1 April 2019** | (142,297) | 2,155 | (140,142) | 438 | 232 | (139,472) | | Net parliamentary funding – drawn down | 15,465 | – | 15,465 | – | – | 15,465 | | Net parliamentary funding – deemed | 1,280 | – | 1,280 | – | – | 1,280 | | National Insurance Fund – RPS | 436 | – | 436 | – | – | 436 | | Supply (payable)/receivable adjustment | 17 | (1,036) | – | – | – | (1,036) | | Income payable to the Consolidated Fund | (791) | – | (791) | – | – | (791) | | Net expenditure for the year | (33,492) | – | (33,492) | – | – | (33,492) | | Amounts paid from distributable reserves | (108) | – | (108) | – | – | (108) | | **Non-Cash Adjustments:** | | | | | | | | Auditors’ remuneration | 4.1 | 1 | – | 1 | – | 1 | | **Movements in Reserves:** | | | | | | | | Other comprehensive net (expenditure)/ income for the year | 88 | (44) | 44 | – | – | 44 | | Transfers between reserves | 166 | (112) | 54 | (36) | (18) | – | | Minority interest | – | – | – | – | 15 | 15 | | Other movements | (4) | (1) | (5) | – | – | (5) | | **Balance at 31 March 2020** | (160,292) | 1,998 | (158,294) | 402 | 229 | (157,663) |
The notes on pages 123 to 223 form part of these accounts. Notes to the Accounts
1. Accounting policies, judgements and estimates
1.1 Basis of accounting
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adapted and interpreted by the HM Treasury 2019-20 Government Financial Reporting Manual (FReM) and as set out in the Accounts Direction to the Department pursuant to section 5(2) of the Government Resources and Accounts Act 2000 (GRAA) except as described at 1.2 below. Where the FReM permits a choice of accounting policy, the policy selected is that judged to be most appropriate to the particular circumstances of the Department and its consolidated entities (the Departmental Group) for the purpose of giving a true and fair view. The policies adopted by the Departmental Group are described below; they have been applied consistently to items considered material to the accounts.
The Consolidated Statement of Financial Position (SoFP) shows significant net liabilities, primarily relating to Contracts for Difference derivatives and provisions for nuclear decommissioning which will be settled over many years. Liabilities in excess of those to be funded by the Departmental Group will be met by future funding voted by Parliament annually in Supply and Appropriation Acts. There is no reason to believe the resources to settle these liabilities will not be forthcoming. It has accordingly been considered appropriate to adopt a going concern basis for the preparation of these financial statements.
1.2 Accounting convention
These accounts have been prepared under the historical cost convention modified to measure Property, plant and equipment (except specific waste management assets), Intangibles, Investment properties and Financial instruments at fair value to the extent required or permitted under IFRS as set out in these accounting policies.
The Department has agreed with HM Treasury that specific nuclear waste management assets should be measured at historical cost less any impairment losses where there is no reliable and cost effective valuation methodology; this is a departure from the FReM requirement to report Property, plant and equipment at fair value. Public Dividend Capital and shares in consolidated bodies held by the Core Department are carried at historical cost less any impairment in accordance with the FReM.
1.3 Presentational currency
The financial statements are presented in pounds sterling, the functional currency of the Departmental Group. Transactions denominated in a foreign currency are translated into sterling at the rate of exchange on the date of each transaction. In preparing the financial statements, monetary assets and liabilities denominated in foreign currencies are translated at the rates prevailing at the reporting date. All translation differences of monetary assets and liabilities are included in Net expenditure for the year. Values are rounded to the nearest million pounds (£m) unless the FReM requires a lower threshold.
1.4 Basis of consolidation
The Departmental Group accounts consolidate the balances of the Core Department and designated bodies listed in note 27, which fall within the departmental boundary as defined in the FReM and make up the ‘Departmental Group’, excluding transactions and balances between them. Where the Office for National Statistics (ONS) designates a body retrospectively such that the body should have been designated for consolidation in a prior period, the accounts are voluntarily restated to reflect the position from the effective date of classification. The consolidated bodies prepare accounts in accordance with either the FReM, the Charities’ Statement of Recommended Practice (for charities), or the Companies Act 2006 (for limited companies). For those bodies that do not prepare accounts in accordance with the FReM, adjustments are made at consolidation if necessary where differences would have a significant effect on the accounts. The Core Department and its designated bodies are all domiciled in the UK.
1.5 Changes in accounting policies
Accounting policies are unchanged compared to those in the 2018-19 Departmental Group financial statements.
1.6 New accounting standards adopted in the year and FReM changes
No new accounting standards have been adopted in these financial statements. The FReM 2019-20 has been updated to include details concerning the adaptations and interpretations related to IFRS 16 ‘Leases’. Further details are provided in note 1.7 below.
1.7 Applicable accounting standards issued but not yet adopted
The revised Conceptual Framework for Financial Reporting
The International Accounting Standards Board (IASB) issued the revised Conceptual Framework for Financial Reporting in March 2018. It replaces the Conceptual Framework issued in September 2010. The revised Conceptual Framework is effective for annual reporting period beginning on or after 1 January 2020. It will be adopted by the FReM from 1 April 2020. The Conceptual Framework sets out the fundamental concepts for financial reporting. It helps ensure that the Standards are conceptually consistent and that similar transactions are treated in the same way.
One of the main updates in the revised Conceptual Framework was new guidance in recognising liabilities and assets when there is significant uncertainty. This would have affected the Departmental Group’s key judgement that the Contract for Difference (CfD) for Hinkley Point C (HPC) was unable to be recognised in the Departmental Group’s Statement of Financial Position (SoFP) due to the significant uncertainty of the HPC’s CfD valuation. Under the revised Conceptual Framework, HPC’s CfD would be recognised. However, the expected impact of adopting the revised Conceptual Framework will be negligible due to the CfD for HPC being recognised in these financial statements (see note 1.26).
IFRS 16 ‘Leases’
IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ and will now be adopted by the public sector in 2021-22. The Financial Reporting Advisory Board (FRAB) agreed in March 2020 to a further year’s deferral from 2020-21 to 2021-22. The Departmental Group will adopt IFRS 16 from 1 April 2021. Entities in the Departmental Group who report under IFRS and the Companies Act, have adopted IFRS 16 from 1 April 2019, in line with their Companies Act reporting requirements. These adjustments have been reversed in the preparation of the Departmental Group accounts and the Departmental Group has continued to apply IAS 17 for the 2019-20 financial year.
IFRS 16 represents a significant change in lessee accounting by removing the distinction between operating leases (off-statement of financial position financing) and finance leases (on-statement of financial position financing) and introducing a single lessee accounting model. IFRS 16 requires the recognition of all leases as on-statement of financial position financing with exemption given to low value leases and short-term leases, i.e. leases with a lease term of less than 12 months as mandated by the FReM. This will result in the recognition of a right-to-use asset, measured at the present value of future lease payments, and a matching liability in the SoFP. Upon transition, the FReM has mandated the use of practical expedient in IFRS 16, which means the Department, only applies the standard to contracts which were previously identified as leases under IAS 17 and IFRIC 4. In addition, the FReM has also mandated that upon transition, the prior year comparatives will not be restated and a cumulative catch up will be recognised in the Statement of Change in Taxpayers Equity along with opening balance transition adjustments in the SoFP to recognise the right of use assets and right of use liabilities. The overall impact of the new accounting standard on the Statement of Comprehensive Net Expenditure (SoCNE) is expected to be immaterial, whilst there is expected to be material right-to-use assets of circa £355 million and a corresponding right of use lease liabilities recognised in the SoFP, if the standard was adopted on 1 April 2021. The expected impact is based on the value of operating lease and finance lease commitments the Departmental Group has in place at 31 March 2020 that are expected to be in place at 1 April 2021 per note 21 and 21.2.1. The overall impact on net assets of the Departmental Group is expected to be immaterial.
**IFRS 17 ‘Insurance Contracts’**
IFRS 17 ‘Insurance Contracts’ replaces IFRS 4 ‘Insurance Contracts’, which requires reporters to identify insurance contracts, and for those contracts recognise an insurance contract liability. The insurance contract liability is calculated as the present value of future insurance cashflows (the fulfilment cash flows) plus a subsequent risk adjustment. The IASB announced the deferral of IFRS 17 by two years until 1 January 2023 and therefore, the implementation timetable in the public sector is being extended to at least 1 April 2023. The Departmental Group is currently assessing the impact of the IFRS 17 adoption.
**1.8 Operating income**
Operating income relates directly to the operating activities of the Departmental Group and includes income from contracts with customers, levies, grants and income from the Mineworkers’ Pension Scheme.
The Departmental Group is required to identify receipts which it collects on behalf of the Consolidated Fund; these are not recognised as income but instead are disclosed in a separate Trust Statement published alongside these accounts and in note 4 in the Statement of Parliamentary Supply (SoPS) in the Accountability Report.
**Operating income from contracts with customers**
Income from contracts with customers are allocated to individual promises, or performance obligations, on a stand-alone selling price basis, and is recognised when the related performance obligation is satisfied, either over time or at a point in time.
The performance obligations are typically satisfied upon delivery of goods and services in accordance with the contractually defined timescales. The payment terms for the invoices are typically 30 days. Where the Departmental Group receives consideration prior to the transfer of goods and services, the amount is recorded as contract liabilities. Where the Departmental Group has transferred goods and services to a customer and the right to consideration is conditioned on something other than the passage of time, the amount is recorded as contract assets.
The measurement of income takes account of significant financing components, variable consideration, and any discounts or rebates.
**Levies**
Levy income is recognised in the Departmental Group accounts when an event has occurred that creates an obligation on a counterparty to pay the levy, the amount can be reliably measured, and it is probable that the assisted economic benefits from the taxable event will flow to the Departmental Group. Levies are typically set on an annual basis, invoiced monthly, quarterly or bi-annually, and accounted for in the period to which the invoices are related to and performance obligations are satisfied.
The Low Carbon Contracts Company Ltd (LCCC) and Electricity Supply Company Ltd (ESC) are permitted to retain levies collected under statute and classified as taxes in the National accounts. This income is recognised by LCCC and ESC in the same period as the related expenditure. LCCC and ESC do not prepare their individual accounts under FReM and have judged that IFRS 15 does not apply to income from electricity suppliers. IFRS 15 is applicable to the Departmental Group’s remaining levy income under FReM guidance. The Departmental Group is not permitted by the FReM to recognise tax income relating to future years, whereas LCCC, which does not apply the FReM, is able to. Adjustments are made on consolidation to ensure compliance with the Departmental Group accounting policy. There are no changes in the recognition and measurement of levy income under IFRS 15.
**Grant income**
Grant income including European funding is recognised when there is reasonable assurance that there are no conditions attached, or that any such conditions have been complied with and it is certain the grant will be received. Research grants and fellowships are recognised in line with a schedule of pre-agreed payment profiles, which include matching considerations over the period of the grant duration and to the period which they relate. Where the terms and conditions do not specify a pre-agreed payment profile or other matching considerations, obligations are recognised in full. Where the profile indicates an unclaimed and/or unpaid amount exists at the reporting date, such sums are accrued.
**Income from the Mineworkers’ Pension Scheme**
Income arising from the Government guarantee of certain benefits payable to members and beneficiaries of the Mineworkers’ Pension Scheme is recognised when the Core Department becomes entitled to the income and the value can be reliably measured.
**In 2018-19 the Departmental Group adopted IFRS 15 ‘Revenue from Contracts with Customers’**
IFRS 15 ‘Revenue from Contracts with Customers’ replaced IAS 18 ‘Revenue’ and IAS 11 ‘Construction Contracts’ and was adopted by the public sector from 1 April 2018. IFRS 15 requires the Departmental Group to apportion revenue earned from contracts to individual promises, or performance obligations, on a stand-alone selling price basis, based on a five-step model. The FReM removed the option to adopt IFRS 15 retrospectively, and therefore any difference between the previous carrying amount and the carrying amount under IFRS 15 was recognised as adjustments to opening balances on 1 April 2018.
The impacts on significant income streams of adopting IFRS 15 in 2018-19 are set out below:
**Sales of goods and services**
Within the scope of IFRS 15, the stream of income that has been significantly affected was £850 million from the service contracts held by Nuclear Decommissioning Authority (NDA) for fuel reprocessing, waste and product storage, and the transportation of spent fuel, waste and products. Due to the limited availability of consistent historical data relating to the contracts and the extent to which the contracts and associated assumptions have changed over time, NDA obtained a derogation from HM Treasury to apply IFRS 15 on first-time adoption in 2018-19 on a prospective basis, and therefore, was not required to report any retrospective adjustments for prior years. A derogation was granted to the Departmental Group to this effect.
In order to produce a consistent measurement of fulfilment of the remaining performance obligations under the waste treatment elements of the respective spent fuel reprocessing contracts, NDA has determined that the remaining revenue on overseas reprocessing contracts would be recognised over the remainder of the period in which waste treatment services for all wastes produced by the Thorp reprocessing plant would be completed (currently expected to conclude in 2025). This meant that the completion of the programme will be treated as a single performance obligation under a single contract and as a result there was a non-recurring adjustment to the contract loss provision in NDA’s and the Departmental Group’s SoFP.
**Levy income**
IFRS 15 is applicable to the Departmental Group’s levy income under the FReM guidance. There were no changes in the recognition and measurement of levy income under the adoption of IFRS 15. Fees, charges and recharges
The Departmental Group’s income from fees, charges and recharges was reassessed under the adoption of IFRS 15. However, there were no changes in the recognition or measurement of fees, charges and recharges on the adoption of IFRS 15.
Grant income
Under the FReM, grants and grants-in-aid should be accounted for in accordance with IAS 20 ‘Accounting for Government Grants and Disclosure of Government Assistance’ as interpreted by the FReM. The grant income is and continues to be out of the scope of IFRS 15.
Income from Mineworkers’ Pension Scheme
Income of £474 million was recognised during 2018-19 (£nil in 2019-20) relating to the Government guarantee of certain benefits payable to members and beneficiaries of the Mineworkers’ Pension Scheme. The Government is entitled to a portion of any periodic valuation surpluses determined by the Government Actuary following triennial valuations. The cash amounts are to be received annually up to 2027. The Coal Pension receivables have been classified as held at amortised cost under IFRS 9 ‘Financial Instruments’. The associated income, therefore, is out of scope of IFRS 15.
1.9 Staff costs
Staff costs are recognised as expenses when the Departmental Group becomes obligated to pay them, including the cost of any untaken leave entitlement.
1.10 Grants payable
Grants payable are recognised when the grant recipient has performed the activity that creates an entitlement to the grant under the terms of the scheme and include estimates for claims not yet received. Grant contributions to international organisations in the form of promissory notes are recognised as expenses when they become payable on demand with the Department exercising no further control over disbursement.
1.11 Taxation
The Core Department and its Agencies are exempt from corporation tax by way of Crown exemption. Some consolidated bodies are subject to corporation tax on taxable profits. Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to HM Revenue and Customs, based on tax rates and laws that are enacted or substantively enacted by the reporting date.
Value Added Tax (VAT) is accounted for in the accounts, in that the amounts are shown net of VAT except for irrecoverable VAT, which is aggregated with the cost of purchased items.
Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets are recognised for all tax-deductible temporary differences, carry forward of unused tax credits and unused tax losses to the extent that it is probable that taxable profit will be available in future years against which they can be utilised.
1.12 Property, plant and equipment (PPE)
Assets are capitalised as PPE if they are intended for use on a continuing basis and their original carrying value, on an individual or asset pool basis, exceeds the relevant capitalisation threshold which ranges from £1,000 to £10,000 across the Departmental Group. Exceptions are: a) assets held by the NDA on designated nuclear sites are only recognised where the economic element of their value at the reporting date exceeds £100,000 and the proportion of asset value relating to commercial activity exceeds 10%; and b) operational mine water schemes and subsidence pumping stations are held by the Coal Authority at £nil value because they are used to address pollution caused by past mining activities where the economic benefits have already been received. To the extent that it has been recognised as a provision under IAS 37, the estimated cost of decommissioning facilities is recognised as part of the carrying value of the asset at initial recognition and depreciated over its useful life.
**Valuation of PPE**
PPE is carried at fair value except for nuclear waste management assets held at historical cost (see note 1.2) and assets under construction which are held at cost. In accordance with the FReM, assets that have short useful lives or are of low value are carried at depreciated historical cost less impairment as a proxy for fair value.
Non-specialist land and buildings are measured at current value in existing use using professional valuations. Specialist land and buildings are measured at depreciated replacement cost which represents the present value of the asset’s remaining service potential.
**Revaluation of PPE**
Any accumulated depreciation at the date of revaluation is eliminated and the resulting net book value restated to equal the revalued amount. Any revaluation increase arising is credited to the revaluation reserve except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense in which case the increase is credited to net expenditure for the year to the extent of the decrease previously charged. A decrease in carrying amount arising on revaluation is charged as an expense to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset. On de-recognition, any revaluation surplus remaining in the Revaluation reserve attributable to the asset is transferred directly to the General Fund.
**Depreciation of PPE**
Apart from freehold and long leasehold land which are not depreciated, PPE assets are depreciated to estimated residual values on a straight-line basis over the following estimated useful lives:
| Asset Type | Useful Life | |------------------------------------------------|----------------------| | Freehold buildings | 10 – 60 years | | Leasehold land and buildings | 10 – 60 years or remaining life of lease | | Agricultural buildings | Up to 60 years | | Dwellings | Up to 60 years | | Leasehold improvements | Shorter of estimated remaining useful life or outstanding term of lease | | Computer equipment | 2 – 10 years | | Plant and machinery | 3 – 50 years or remaining life of lease | | Office machinery (included in plant and machinery), furniture, fixtures and fittings | 2 – 11 years or remaining life of lease | | Transport equipment | 2 – 14 years | | Ships (included in transport equipment) | Minimum of 20 years | | Aircraft (included in transport equipment) | Minimum of 15 years | | Assets under construction | Not depreciated until available for use as intended by management |
Residual values and useful lives are reviewed and adjusted if appropriate at each reporting date.
**1.13 Investment property**
The Departmental Group holds a number of properties which have been classified as investment properties and are measured using the fair value model specified in IAS 40. Gains and losses arising from changes in fair value are recognised in net expenditure for the year. 1.14 Intangible non-current assets
Intangible non-current assets are capitalised if they are intended for use on a continuing basis and their original carrying value, on an individual or asset pool basis, exceeds the relevant capitalisation threshold which ranges from £1,000 to £10,000 across the Departmental Group. There are no active markets for the majority of the Departmental Group’s intangible non-current assets which are valued at the lower of depreciated replacement cost and value in use using a valuation technique (for example for income-generating assets); where there is no value in use, depreciated replacement cost is used. Where there is an active market, the valuation is derived from the active market. Assets of low value or with short useful lives are carried at cost less accumulated amortisation and impairment losses as a proxy for fair value. They are amortised on a straight-line basis over the following periods:
| Asset Type | Amortisation Period | |-----------------------------------|---------------------| | Software licenses | 3 – 10 years | | Internally developed software | Up to 10 years | | Website development costs | 2 – 5 years | | Patents, licenses and royalties | 7 – 15 years |
1.15 Impairment of PPE and intangible non-current assets
The Departmental Group reviews carrying amounts at each reporting date. If an indicator for impairment occurs then the recoverable amount of the asset (the higher of fair value less costs to sell and value in use) is estimated and an impairment loss recognised to the extent that it is lower than the carrying amount. Losses arising from a clear consumption of economic benefit are charged to net expenditure for the year. Losses that do not result from a loss of economic value or service potential are taken to the revaluation reserve to the extent that a revaluation reserve exists for the impaired asset; otherwise to Net expenditure for the year.
1.16 Assets held for sale
Assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable, the asset is available for immediate sale in its present condition and the asset is actively marketed for sale. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Assets held for sale are measured at the lower of a) carrying amount and b) fair value less costs to sell.
1.17 Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and other short term highly liquid investments which are readily convertible to known amounts of cash are subject to insignificant risk of changes in value and have an original maturity of three months or less. Any bank overdraft amounts are included within trade payables and other liabilities.
1.18 Leases
The Departmental Group continues to apply IAS 17 ‘Leases’ for 2019-20, recognising leases assets as either operating or finance leases. Leases are classified as finance leases when the risks and rewards of ownership are transferred substantially to the lessee; all other leases are classified as operating leases.
Finance leases
Departmental Group as lessor
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Departmental Group’s net investment in the lease. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Departmental Group’s net investment outstanding in respect of the leases. Departmental Group as lessee
Assets subject to finance leases and the associated liabilities for future payments (if any) are recognised in the SoFP.
Operating leases
Departmental Group as lessor
Assets subject to operating leases are recognised in the SoFP with rental income plus initial direct costs incurred in arranging the lease, including incentives to the lessee to enter into the lease, recognised on a straight-line basis over the lease term.
Departmental Group as lessee
Rentals payable under operating leases, including benefits received and receivable as incentives to enter into leases, are expensed on a straight-line basis over the term of the lease.
1.19 Subsidiaries, associates and joint ventures
Subsidiaries and public sector joint ventures are consolidated where designated within the Departmental Group boundary (note 27); those outside the Departmental Group boundary are measured in accordance with IFRS 9. Equity investments in associates or joint ventures outside the public sector are initially recorded at cost and subsequently adjusted to reflect the Departmental Group’s share of net profit or loss of the associate or joint venture.
1.20 Financial instruments
Financial assets and liabilities are measured initially at fair value plus transaction costs unless carried at fair value through profit or loss in which case transaction costs are charged to Net expenditure for the year. Fair value is determined by reference to quoted prices where an active market exists for the instrument; otherwise it is determined using generally accepted valuation techniques including discounted estimated cash flows. A regular way purchase or sale of financial assets shall be recognised and derecognised, as applicable, using settlement date accounting.
Financial assets
Financial assets are derecognised when the rights to receive future cash flows have expired or are transferred and the risks and rewards of ownership have been substantially transferred.
Categories of financial asset
Financial assets are categorised as one of the following:
- **Amortised cost** are financial assets whose cash flows are the solely payments of principal and interests and the business model of which is to hold for collecting contractual cash flows only. They are initially recognised at fair value and thereafter at amortised cost using the effective interest method less any impairment. The effective interest rate method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period.
- **Fair value through Other Comprehensive Income (FVOCI)** are either:
(i) debt instruments whose cash flows are the solely payments of principal and interests and the business model of which is to hold for both collecting contractual cash flows and selling.
(ii) equity instruments that are neither held for trading nor contingent consideration recognised in a business combination, as the Departmental Group has made an irrevocable election at initial recognition.
After initial recognition, these assets are subsequently carried at fair value. Gains and losses in fair value are recognised directly in equity. On de-recognition, the cumulative gain or loss previously recognised in equity is recognised in Net expenditure for the year for debt instruments and transferred to General Fund for equity instruments. • **Fair value through profit or loss (FVTPL)** are any financial assets that are not measured at amortised cost or FVOCI. Transaction costs and any subsequent movements in the valuation of the asset are recognised in net expenditure for the year.
**Impairment of financial assets**
Financial assets other than equity instruments and those at FVTPL are assessed for impairment at each reporting date using the expected credit loss (ECL) model. The three-stage model based on the level of credit risk is applied to any financial assets other than long term trade receivables, contract assets which do contain a significant financing component and lease receivables within the scope of IAS 17 as follows:
- For financial assets with low credit risk or assets that have not had a significant increase in credit risk since initial recognition, 12-month ECL are recognised and interest revenue is calculated on the gross carrying amount of the asset without the reduction of credit allowance.
- For financial assets that have had a significant increase in credit risk since initial recognition but that do not have objective evidence of impairment, lifetime ECL are recognised and interest revenue is calculated on the gross carrying amount of the asset.
- For financial assets that have objective evidence of impairment at the reporting date, lifetime ECL are recognised and interest revenue is calculated on the net carrying amount net of credit allowance.
Impairment gains or losses, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised in accordance with the Standard, are recognised in profit or loss.
For long term trade receivables, contract assets which do not contain a significant financing component and lease receivables within the scope of IAS 17 ‘Leases’, the simplified approach is applied and lifetime ECL are recognised as dictated by the FReM.
**Financial liabilities**
Financial liabilities are derecognised when the obligation is discharged, cancelled or expires. The Departmental Group’s financial liabilities excluding derivatives are initially recognised at fair value including directly attributable transaction costs, and subsequently at amortised cost using the effective interest rate method.
**Derivative financial instruments**
Derivatives are initially recognised at fair value and subsequently at fair value. Gains/losses in fair value are recognised in net expenditure for the year unless hedge accounting is applied.
The Departmental Group has two classes of derivative financial instrument, foreign exchange contracts to which hedge accounting is applied and CfDs to which hedge accounting is not applied.
**Forward foreign exchange contracts**
Forward contracts are held as cash flow hedges to reduce exposure to foreign currency risk. The effective portions of changes in their fair values are recognised in equity. Gains and losses relating to ineffective portions are recognised immediately in Net expenditure for the year. Amounts accumulated in equity are recycled to Net expenditure for the year in the same period as the hedged item.
**Contracts for Difference (CfDs)**
CfDs are held to incentivise investment in low carbon electricity generation by agreeing strike prices with electricity generators which are counterparties to the contracts. The counterparty pays, or is paid, the difference between the strike price and the reference price (a measure of the average market price of electricity) at the time of electricity supply. CfDs are measured at FVTPL, initially at their transaction price (£nil) with subsequent changes in fair value (as measured by a valuation model) recognised in Net expenditure for the year. Where the valuation model estimate of fair value at initial recognition is different from the transaction price, the difference is deferred and amortised to Net expenditure for the year over the contract settlement period (note 9).
**In 2018-19 the Departmental Group adopted IFRS 9 ‘Financial Instruments’**
IFRS 9 ‘Financial Instruments’ replaced IAS 39 ‘Financial Instruments: Recognition and Measurement’ and was adopted by the public sector from 1 April 2018. The FReM removed the option to adopt IFRS 9 retrospectively, and therefore the Departmental Group recognised any adjustments to the carrying amounts of financial assets and liabilities at the date of transition in the opening retained earnings and other reserves of the previous period. Consequently, amendments to IFRS 7 ‘Financial Instruments: Disclosures’ were also applied to the previous period only. The adoption of IFRS 9 resulted in changes to the accounting policies for classification, measurement and impairment of financial assets in the 2018-19 financial statements. These accounting policies are unchanged in the 2019-20 financial statements.
**Classification and measurement of financial assets**
IFRS 9 contains three principal classification categories for financial assets: amortised cost, fair value through other comprehensive income (FVOCI), and fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is based on the business model in which a financial asset is managed and its contractual cash flow characteristics. IFRS 9 removes the previous IAS 39 categories of held to maturity, loans and receivables and available for sale. Derivatives embedded in contracts where the host is a financial asset in scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.
Under IFRS 9, the requirement for classifying and measuring financial assets is that:
- Loans and other debt instruments are classified as either amortised cost, FVOCI or FVTPL, dependent on the business model and cash flow characteristics of the financial assets
- Investments in equity instruments are classified as FVTPL, unless an irrevocable election is made on initial recognition to recognise subsequent changes in fair value in Other Comprehensive Income (OCI). The election is only available to equity instruments that are not held for trading.
- Derivatives are classified as FVTPL
**Classification and measurement of financial liabilities**
Financial liabilities are classified and subsequently measured at amortised cost, except for:
- Financial liabilities at fair value through profit or loss, which is applied to derivatives and other financial liabilities designated as such at initial recognition
- Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the consideration received for the transfer
- Financial guarantee contracts and loan commitments
**Impairment**
IFRS 9 replaced the ‘incurred loss model’ in IAS 39 with a forward looking ‘expected credit loss’ (ECL) model. The ECL model applies to financial assets measured at amortised cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments and FVTPL financial assets. The impairment methodology is detailed in the financial instruments note 22.
(a) **Reconciliation of carrying amounts of financial assets under IAS 39 and IFRS 9**
The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 on 1 April 2018: The Investment fund and Receivables reconciliation in table below has been restated to include the restatement relating to BIS Postal Service Company (see note 26) for more information. The application of IFRS 9 in 2018-19 resulted in the reclassifications set out in the table above and explained below:
- Cash and cash equivalents, receivables, loans to public sector bodies, and term deposits that were classified as ‘loans and receivables’ and ‘held to maturity’ were measured at ‘amortised cost’. There were no changes in terms of measurement for these assets upon transition.
- Loans to private sector entities that were classified as ‘loans and receivables’ under IAS 39 meet the solely payments of principal and interest test for cash flows characteristics. The objective of the business model is achieved by collecting the contractual cash flows only and therefore, they were classified as ‘amortised cost’ under IFRS 9. An adjustment for the impairment allowance of £2 million calculated under the ECL model was recognised in retained earnings at 1 April 2018.
- Bonds were classified as ‘available for sale’ and were measured at ‘amortised cost’ under IFRS 9 in 2018-19. The Departmental Group’s intention is to hold these bonds for collecting contractual cash flows only. Sale of the bonds only happens infrequently when there is an increase in the assets’ credit risk. Their cash flows are solely payments of principal and interest. Upon transition, the cumulative gain previously recognised in OCI was removed from equity and applied against the fair value of the financial asset at the reclassification date resulting in an adjustment of £1 million to retained earnings and carrying amount of the asset at 1 April 2018. From available for sale (IAS 39) to Amortised Cost
| £m | |----------| | Fair value as at 31 March 2018 | 59 | | Fair value gain/ (loss) that would have been recognised during the year if the financial asset had not been reclassified. | (1) |
- Repayable launch investments were classified as ‘available for sale’ with the revaluation movements previously going through OCI. As the repayments are contingent on the sales of the products, they do not meet the solely payments of principal and interest test and are measured at ‘FVTPL’. On adoption, the cumulative gain or loss previously recognised in Revaluation Reserve of £235m as at 31 March 2018 was transferred to the Taxpayer’s Equity.
- Ordinary shares in consolidated public sector entities were held at Cost under IAS 39/IAS 27; this continues to be permitted under IFRS 9/IAS 27.
- Ordinary shares in non-consolidated public sector entities in accordance with the FReM were classified as ‘available for sale’. The Departmental Group intends to hold these, for long-term strategic purposes, and as permitted by IFRS 9, designated these investments at the date of initial application as measured at ‘FVOCI’.
- Ordinary shares in private sector entities were classified as ‘available for sale’ under IAS 39. The Departmental Group intends to hold these for long term strategic purposes, and as permitted by IFRS 9, designated these investments at the date of initial application as measured at ‘FVOCI’.
- Investment funds were classified as ‘available for sale’. The holdings are standard investment funds with either a limited life or redeemable units, and measured at ‘FVTPL’ as they are debt instruments that do not meet the solely payments of principal and interest test.
- On adoption, the cumulative gain or loss previously recognised in Revaluation Reserve of £926 million as at 31 March 2018 was transferred to the Taxpayer’s Equity.
- The category transfer of £31 million from investment funds to ordinary shares in non-public sector entities was related to the ordinary share holding in the Global Climate Partners Fund, which is an investment company rather than a standard limited partnership fund with a limited life.
- Loans that were previously classified as ‘available for sale’ within the Other Investments category are those held by UKGIP. As they are held to sell, not to collect contractual cash flows, they fail the business model test and were classified as ‘FVTPL’ under IFRS 9.
- Derivatives were classified as ‘fair value through profit and loss’ under IAS 39 and remain measured at ‘FVTPL’ under IFRS 9. However, embedded derivatives are no longer assessed separately from the host financial asset which lead to a category transfer of £31 million from derivatives to investment funds. (b) Reconciliation of carrying amounts of financial liabilities under IAS 39 and IFRS 9
The following table reconciles the carrying amounts of financial liabilities under IAS 39 to the carrying amounts under IFRS 9 on 1 April 2018:
| | Restated Carrying amount under IAS 39 at 31 March 2018 £m | Reconciliation | Carrying amount under IFRS 9 at 1 April 2018 £m | Amortised cost £m | FVTPL designated £m | FVTPL mandatory £m | Other £m | |--------------------------|------------------------------------------------------------|----------------|-----------------------------------------------|-------------------|---------------------|---------------------|---------| | **Fair value through profit or loss** | | | | | | | | | Derivatives | (15,915) | – | (15,915) | – | – | – | – | | **Other liabilities** | | | | | | | | | Payables | (2,175) | – | (2,175) | (2,175) | – | – | – | | Financial guarantee liabilities | (61) | – | 16 | (45) | – | – | – | | Loan commitment liabilities | – | (184) | – | (184) | – | – | – | | **Total financial liabilities** | (18,151) | (184) | 16 | (18,319) | (2,175) | (184) | (15,915) |
The explanations of changes to financial liabilities under IFRS 9 are set out below:
- The Core Department’s financial guarantee liabilities were remeasured under IFRS 9, leading to £16 million decrease in the carrying amount, which was recognised in the adjustment to the general fund opening balances.
- The British Business Bank (BBB)’s Enterprise Capital Fund commitments to provide loans under market rates were designated under IFRS 9 to be measured at fair value through profit or loss because the Departmental Group of financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented investment strategy and information is provided internally on that basis to the key management personnel. For clarity, the loan commitment liabilities were transferred out from provisions to be disclosed together with financial guarantee liabilities. (c) Impacts of transition to financial statement line items
The following table summarises the impact of transition to IFRS 9 on assets, revaluation reserve and general fund at 31 March 2018. The Receivables and Other financial assets reconciliation in the table below has been restated to include the restatement relating to BIS Postal Service Company (see note 26 for more information).
| Restated | Closing balance under IAS 39 at 31 March 2018 | Gross carrying amount remeasurement under IFRS 9 | Expected credit loss remeasurement under IFRS 9 | Remeasurement under IFRS 9 | Opening balance under IFRS 9 at 1 April 2018 | |----------|---------------------------------------------|-----------------------------------------------|-----------------------------------------------|--------------------------|---------------------------------------------| | | £m | £m | £m | £m | £m | | Receivables | 2,001 | – | – | (2) | (6) | 1,993 | | Total impact on current assets | n/a | – | – | (2) | (6) | n/a | | Other financial assets | 4,336 | (430) | 27 | (25) | 5 | 3,913 | | Investments in joint ventures and associates | 367 | 461 | – | – | – | 828 | | Total impacts on non-current assets | n/a | 31 | 27 | (25) | 5 | n/a | | Derivatives | (15,806) | (31) | – | – | – | (15,837) | | Provisions | (240,935) | 184 | – | – | – | (240,751) | | Financial guarantee and loan commitment liabilities | (61) | (184) | 16 | – | – | (229) | | Total impacts on non-current liabilities | n/a | (31) | 16 | – | – | n/a | | General fund | 250,098 | (926) | (43) | 27 | 1 | 249,157 | | Revaluation reserve | (2,915) | 926 | – | – | – | (1,989) | | Total impacts on reserves | n/a | – | (43) | 27 | 1 | n/a |
1.21 Financial guarantees and loan commitments
Financial guarantee contract liabilities
Financial guarantees are initially recognised at fair value on the date the guarantee was given and subsequently remeasured at the higher of a) the amount of loss allowance determined in accordance with IFRS 9 ‘Financial Instruments’ and b) the amount initially recognised less when appropriate, cumulative amortisation in accordance with IFRS 15 ‘Revenue from Contracts with Customers’.
Loan commitments at below market rate
The Departmental Group accepts a lower than market rate of return from Enterprise Capital Fund investments in order to encourage private sector investors to invest alongside. Although the Departmental Group expects to make a positive return from these investments, this return is less than that required by the private sector. The Departmental Group has, at initial recognition, elected to irrevocably designate the liability related to these loan commitments as measured at fair value through profit or loss because the group of financial assets and financial liabilities is managed, and its performance is evaluated on a fair value basis, in accordance with a documented investment strategy, and information is provided internally on that basis to the key management personnel.
1.22 Pensions
The accounting for each of the Departmental Group’s pension plans is dependent on its nature.
Funded defined-benefit pension schemes
The Departmental Group has nine funded defined-benefit pension schemes, the Medical Research Council Pension Scheme (MRCPS), two schemes through the NDA and six others through the nuclear site licence companies. The net liabilities recognised in the SoFP for funded defined benefit schemes are calculated by independent actuaries by deducting the fair value of scheme assets (at bid prices) from the present value of defined benefit obligations (estimated using the projected unit credit method, less any amounts receivable from third parties). Where the scheme is in surplus, the asset recognised in these statements is limited to the present value of benefits available from future refunds from the plan, reductions in future contributions to the plan or on settlement of the plan and takes into account the adverse effect of any minimum funding requirements. Actuarial gains and losses are recognised as Other Comprehensive Income and Expenditure except for site licence companies where they are included in provision expense relating to the Nuclear Decommissioning provision.
**Unfunded defined benefit pension schemes**
The Departmental Group contributes towards a number of unfunded defined benefit pension schemes of which employees are members: these include the Principal Civil Service Pension Scheme (PCSPS), the Civil Servant and Other Pension Scheme (CSOPS) and the Combined Pension Scheme of the UKAEA. The participating employers in these schemes are unable to identify their share of the underlying net liability; as such these schemes are accounted for as defined contribution pension schemes, with employers contributions charged to the SoCNE in the period to which they relate. Further information regarding PCSPS and CSOPS is presented in the Staff Report.
**Defined contribution pension schemes**
Contributions are charged to the SoCNE when they become payable. The Departmental Group has no further liabilities in respect of benefits to be paid to members.
More information about the Departmental Group’s pension schemes can be found in the accounts of the consolidated entities, including in note 3 for the Core Department, and of the pension schemes themselves.
### 1.23 Provisions
A provision is recognised when it is probable that an outflow of economic benefits will be required to settle a present obligation (legal or constructive) that can be reliably measured and which results from a past event. Where the time value of money is material the provision is measured at present value using discount rates prescribed by HM Treasury. HM Treasury issues nominal rates that do not take account of inflation, unlike real rates. Using these nominal rates, the cash flows are inflated using the following inflation rates provided by HM Treasury except where a more appropriate forecast has been identified for specific provisions.
| Cash outflows expected within two years | Nominal discount rate | Inflation rate | Equivalent real discount rate | Nominal discount rate | Inflation rate | Equivalent real discount rate | |----------------------------------------|-----------------------|----------------|-------------------------------|-----------------------|----------------|-------------------------------| | Cash outflows expected between two and five years | 0.51% | 1.9% | (1.36%) | 0.76% | 2.0% | (1.22%) | | Cash outflows expected between five and ten years | 0.55% | 2.0% | (1.42%) | 1.14% | 2.1% | (0.94%) | | Cash outflows expected after ten years | 1.99% | 2.0% | (0.01%) | 1.99% | 2.1% | (0.11%) |
**Nuclear decommissioning provisions**
Where expenditure in settlement of a provision is expected to be recovered from a third party, the recoverable amount is treated as a separate asset (note 12). Provision charges in the SoCNE are shown net of changes in these recoverable amounts. 1.24 Contingent assets and liabilities
Where an outflow of economic benefits from a past event is possible but not probable, the Departmental Group discloses a contingent liability. In addition to contingent liabilities disclosed in these financial statements in accordance with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’, certain statutory and non-statutory contingent liabilities where the likelihood of a transfer of economic benefit is remote are disclosed in the Accountability Report for Parliamentary reporting and accountability purposes.
Where an inflow of economic benefits from a past event is probable, the Departmental Group discloses a contingent asset. Estimates of the financial effects are disclosed where practicable; where the time value of money is material, contingent liabilities and assets are stated at discounted amounts and the amount reported to Parliament separately noted. Remote contingent liabilities reported in the Accountability Report are stated at the amounts reported to Parliament.
1.25 Third party assets
The Departmental Group holds, as custodian or trustee, certain cash balances belonging to third parties. These balances are not recognised in the financial statements since neither the Departmental Group nor Government more generally has a direct beneficial interest in them.
1.26 Judgements, estimates and assumptions
Preparation of financial statements requires management to make judgements, estimates and assumptions based on experience and expected events that affect the reported amounts of assets and liabilities, income and expenditure. Key accounting judgements applied in these statements are described below.
Judgements
Recognition of Hinkley Point C CfD (note 9)
The Department (through LCCC) entered into HPC CfD on 29 September 2016. This project has a maximum lifetime generation cap of 910,000,000MWh. The contract will expire at the earlier of 35 years after the start date of the second reactor or when the total CfD payments made have reached the generation cap.
Under IFRS, the Conceptual Framework sets out the concepts which underlie the preparation and presentation of financial statements. The Conceptual Framework deals with, amongst other things, the definition, recognition and measurement of the elements from which financial statements are constructed. Paragraph 4.38 of the Conceptual Framework states that an element should be recognised in the accounts if:
a) it is probable that any future economic benefit associated with the item will flow to or from the entity; and
b) the item has a cost or value that can be measured with reliability (defined as using information that is complete, neutral and free from error).
The HPC CfD duration is more than double (35 years) the length of other CfDs (15 years) entered into by the Department (through LCCC). This has made it considerably more challenging for management to provide a reliable single point fair value estimate for HPC CfD. In order to perform a reliable estimate of the valuation one of the required key inputs is wholesale electricity prices in each year out to 2060. Historically the Department (through LCCC) had not been able to obtain wholesale electricity price forecasts which cover the unusually long period of the contract, thereby preventing a reliable estimate being made. As a result of this the Department has previously been unable to recognise HPC CfD in the financial statements. Update on the recognition of Hinkley Point C CfD during 2019-20
During the year the Department using the Dynamic Dispatch Model (DDM), has been able to estimate reliably wholesale electricity prices out to 2060. The Department’s DDM model forecasts wholesale electricity prices out to 2050. However, in the current year, the Department has deemed it possible to ‘freeze’ the 2050 model forecasts for all subsequent years out to 2060. The main driver facilitating the Department’s ability to do this has been the government’s commitment in 2019-20 to bring all greenhouse gas emissions to Net Zero by 2050, therefore giving more certainty over potential generation mixes into the future. Legislation now commits the UK to an economy wide target of Net Zero carbon emissions. The Department’s modelling strategy is designed to optimise the costs of decarbonisation across the economy, which determines the power sector demand, and the maximum level of emissions. The Department have picked generation mixes which optimise the cost of the power sector. In the absence of any exogenous change, the Department anticipate that the UK would maintain an optimised system ad-infinitum. As a result of this, the Department has been effectively able to ‘freeze’ the 2050 model for all subsequent years. Therefore, the generation mix and associated system costs and wholesale price of electricity that the Department project for 2050, remains constant for the remaining period of the forecast.
In addition to the availability of the DDM forecast, the Department (through LCCC) was able to commission an independent third party to provide a forecast for the power market in Great Britain to 2065. The forecast received from the third party has been used as reference to support the reasonableness of the internally generated price series.
As a result, the reasonableness of the underlying assumptions of the forecast to 2060, management deem the valuation of the HPC CfD as a reliable estimate that is complete, neutral and free from error. Therefore, in line with the recognition criteria for the other CfDs, the recognition criteria for HPC CfD is considered to have been met. As HPC CfD’s fair value calculation is based on the data from the same model, the same valuation technique is used across the whole portfolio.
Accounting treatment of Hinkley Point C CfD
The date of initial recognition of the Hinkley Point C CfD is the date it becomes capable of reliable measurement in accordance with the requirements of IFRS 13 and the Conceptual Framework. The Department (through LCCC) has determined that the estimated fair value of the instrument at the reporting date is a reasonable proxy for its fair value at the date of initial recognition. This judgement is not sensitive to the specific date of initial recognition during the financial year, which is a matter of professional judgement.
On recognition the HPC CfD has followed the same accounting treatment as that adopted for the other CfDs recognised in the financial statements. The accounting of the fair value of the HPC CfD, the impact of its recognition within the portfolio, and relevant sensitivity analysis are shown in note 9.
As there were no wholesale price forecasts available prior to the authorisation of the prior year financial statements to reliably estimate the value of Hinkley Point C CfD and considering the reliable estimate of the wholesale price forecast to 2060 has only become available in the current financial year therefore, management believes no prior period adjustment is required.
Small Business Grant Fund and Retail, Hospitality and Leisure Grant Fund recognition point (note 4.4 and note 28)
The Small Business Grant Fund was announced by the Chancellor during his Budget speech on 11 March 2020 and subsequently extended during the Chancellor’s speech on 17 March 2020 setting out the government’s economic response to COVID-19. The Retail, Hospitality and Leisure Grant Fund was also announced during the Chancellors speech on 17 March 2020. The Guidance to Local Authorities (LAs) setting out how LAs would manage the grants on behalf of the Department was issued on 24 March 2020. The Guidance to Businesses the ultimate grant recipients was issued on 1 April 2020, the same day as funding was provided from the Departments to LAs to make grant payments. Due to the impact of COVID-19, LAs were encouraged to make early payments to eligible grant recipients from their own funds. The Department under the Guidance to LAs and Section 31 grant notification are legally obligated to reimburse the LAs. Therefore the Core Department has recognised a grant accrual of £151 million in note 4.4, for grants paid out by the LAs before the 1 April 2020.
The Core Department has recognised a provision of £10.8 billion, in addition to the £151 million recognised as a grant accrual. This is because the announcements and payments made prior to 31 March 2020 created a constructive obligation under IAS 37. This amount is based on eligibility and payments information received from LAs after 31 March 2020 and has been limited by the closure of the scheme which is disclosed as an Adjusting Event in note 28. As a result of recognising this constructive obligation, the Department’s expenditure has increased by £10.8 billion. This has resulted in a breach of the control limited voted by Parliament and a regularity qualification.
**Capacity Market restart (note 4.1 and note 6.1)**
On 15 November 2018, the European Court of Justice (ECJ) annulled the European Commission (EC) decision of July 2014 to grant State Aid clearance to the Capacity Market. The ruling resulted in a ‘Standstill Period’ for the Capacity Market in which no State Aid could be paid out pending the EC’s redetermination. As a result of this the ESC was not able to make any Capacity Market payments during the ‘Standstill Period’ and, additionally, no supplier charge was collected.
The EC appealed the ECJ’s decision and, separately, also undertook a formal investigation into the UK’s notification of the Capacity Market scheme in order to inform its ‘re-decision’ on whether to grant State Aid clearance. On 24 October 2019, the Department was informed by the EC that it had completed its State Aid investigation into the Capacity Market and that the Capacity Market scheme complies with EU State Aid rules. On 25 October 2019, the Department notified ESC and National Grid to restart their respective Capacity Market activities.
Following the successful restart of the Capacity Market, circa £1.17 billion of invoices were raised to suppliers in November 2019 relating to the Standstill Period. This in turn enabled payment of the required £1.15 billion to Capacity Providers (that had been deferred as a result of the Standstill Period).
No Capacity Market supplier charge income or respective capacity payment expense was recognised in 2018-19 for the 2018/19 Delivery Year (1 October to 30 September) due to the suspension of the Capacity Market. Out of the £1.15 billion capacity payment made for the Standstill Period, £0.99 billion related to the 2018/19 Delivery Year of which £0.54 billion would have been recognised in the financial year ending 31 March 2019 had there been no standstill. The collection of retrospective supplier charge and capacity payment made for the 2018/19 Delivery Year is recognised as income and expense, respectively, in the current financial year.
**Estimates**
In accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, revisions to accounting estimates are recognised prospectively. Revisions of the estimates and assumptions below could cause material adjustment to the carrying amounts of assets and liabilities within the next financial year.
**Income recognition (note 6.1)**
A number of significant accounting judgements have been performed to apply IFRS 15 to the recognition of revenue and costs from contracts with customers held by the NDA, including the determination of transaction price of each contract, the allocation of transaction price to each performance obligation, the timing of satisfaction of performance obligations, and the accounting treatment of contract costs. Detail is included in NDA’s financial statements.
**Useful lives of non-current assets**
There is uncertainty in relation to estimated useful lives of non-current assets; these are reviewed as at the reporting date and updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence or legal or other limits on their use. Impairment of assets (note 4.2, 7, 8, 10, 11, 13, 14, 15, and 22)
Impairment of non-financial assets is measured by comparing the carrying value of the asset or cash generating unit with management’s estimate of its recoverable amount. Impairment of financial assets is measured using the expected credit loss model (note 1.20).
Fair value of Repayable Launch Investments (note 11.1)
The econometric model used to estimate future cash flows from Repayable Launch Investments includes a number of assumptions including on future economic growth.
Fair value of private equity investments (note 11.2)
A range of valuation techniques are used for private equity investments, including discounted cash flows and net asset values.
Redundancy Payments Service receivable (note 14)
There is uncertainty in the estimate of the amount to be realised by the Insolvency Service from sale of assets of insolvent employers.
CfD contracts (note 9)
The significant uncertainties affecting measurement of Financial Investment Decision Enabling for Renewables (FIDeR) and CfD contracts, which facilitate investment in low-carbon electricity generation, are described in the note.
Fair value of financial guarantees (note 19)
Fluctuations in the fair value of financial guarantees measured using modelling techniques.
Provisions (note 18)
Provision discount rates set by HM Treasury are updated annually and have a material effect on liabilities. There are other significant uncertainties in relation to measurement of the liabilities reported in note 18, in particular in relation to future decommissioning costs to be incurred by the NDA, UKAEA and Coal Authority, which are described in the note.
1.27 Prior Period Adjustments
In accordance with the FReM, where a prior period adjustment is identified as a result of an error, the Departmental Group will correct all material prior period errors retrospectively in the first set of financial statements authorised for issued after their discovery by:
- Restating the comparative amounts for the prior periods presented in which the error occurred;
- If the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.
However, if it is impracticable to determine the period-specific effects of an error on comparative information for one or more prior periods presented, the Departmental Group will restate the opening balances of assets, liabilities and equity for the earliest period for which retrospective restatement is practicable.
The option to adopt retrospectively has been removed by the FReM for IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue from Contracts with Customers’, therefore, there was no restatement of 31 March 2018 comparatives made for the adoption of the new accounting standards in 2018-19.
There is a restatement in 2019-20 in relation to adjustments to the adoption of IFRS 9 and adjustments to the Departmental Group’s prior period Outturn. The prior period adjustments and their impact on the comparative amounts for the prior periods represented in which the error occurred are detailed in note 26. 2. Reporting by operating segment
In accordance with the relevant reporting requirements, including IFRS 8 – Operating Segments, the Statement of Parliamentary Supply (SoPS) and supporting notes reflect net resource and capital Outturn in line with the control totals voted by Parliament. The figures within SoPS 1.1 provide the income and expenditure totals associated with key business activities within the Departmental Group and therefore reflect the management information reporting to the Board during the period.
3. Staff costs
Staff costs comprise:
| Permanently employed staff | 2019-20 | 2018-19 | |----------------------------|---------|---------| | Wages and salaries | £m | £m | £m | £m | | Permanently employed staff| 855 | 73 | 928 | 855 | | Social security costs | 95 | – | 95 | 86 | | Other pension costs | 217 | – | 217 | 179 | | **Sub total** | **1,167**| **73** | **1,240**| **1,120**| | Less recoveries in respect of outward secondments | – | – | – | (1) | | **Total net costs** | **1,167**| **73** | **1,240**| **1,119**|
Of which:
| Core Department and Agencies | 2019-20 | 2018-19 | |------------------------------|---------|---------| | Wages and salaries | £m | £m | £m | £m | | Permanently employed staff | 372 | 18 | 390 | 330 | | Social security costs | 795 | 55 | 850 | 789 | | **Total net costs** | **1,167**| **73** | **1,240**| **1,119**|
For further information on staff costs and numbers, please see the Staff Report and the Remuneration Report which includes staff costs for nuclear site licence companies (SLC’s) which are not included in the table above. SLC’s staff costs are not included in the table above as they are included in the amount shown for utilisation in the NDA’s nuclear decommissioning provision in note 18. 4. Operating expenditure
4.1 Purchase of goods and services
| | Core Department and Agencies | 2019-20 | 2018-19 restated | |--------------------------------------|-----------------------------|---------|------------------| | | £m | £m | £m | | Rentals under operating leases | 44 | 57 | 30 | | Accommodation and office equipment costs | 16 | 212 | 42 | | Legal, professional and consultancy costs | 150 | 342 | 142 | | Finance, HR, IT and support costs | 151 | 170 | 110 | | Training and other staff costs | 8 | 23 | 10 | | Travel and subsistence costs | 11 | 52 | 11 | | Advertising and publicity | 6 | 16 | 3 | | Programme management and administration of grants and awards | 39 | 179 | 40 | | Capacity Market payments | – | 1,483 | – | | Professional and international subscriptions | 365 | 612 | 283 | | Enforcement costs of employment related policies | 30 | 30 | 30 | | Donations | – | 21 | – | | Funding Paternity, Adoption and Shared Parental Leave policy | 72 | 72 | 79 | | Purchase of geographical and scientific equipment | – | 40 | – | | Purchase of weather information and weather related services | 101 | 101 | 108 | | Redundancy payments service | 430 | 430 | 320 | | Sponsorship costs | – | – | 2 | | Payment of taxes and levies | – | 2 | – | | Subsidy to Post Office Limited | 50 | 50 | 62 | | Energy intensive industries subsidies | 105 | 105 | 141 | | Other purchase of goods and services cost | 10 | 304 | 11 | | **Total** | **1,597** | **4,301** | **1,424** |
**Purchase of goods and services**
Purchase of goods and services – Legal, professional and consultancy services has been restated, see note 26 for further details.
**Audit fees**
Audit fees are included under the heading ‘Legal, professional and consultancy costs’.
**Core Department**
During the year the Core Department did not purchase any non-audit services from its auditor, the National Audit Office. The non-cash auditors’ remuneration of £700,000 (2018-19: £625,570) comprises £640,000 (2018-19: £570,000) for the cost of the audit of the Departmental Group, £20,000 (2018-19: £20,000) for the Trust Statement, and £40,000 (2018-19: £35,750) for the audit of the UK Atomic Energy Authority Pension Scheme Accounts.
**Agencies**
During the year the Agencies did not purchase any non-audit services from their auditor, the National Audit Office. Details of the non-cash auditors’ remuneration of £167,000 (2018-19: £152,000) can be found in the accounts of the individual Agencies. NDPBs and other designated bodies
The cash remuneration of £2,787,121 (2018-19: £2,287,880) relates to the statutory audit of NDPBs and other designated bodies and includes fees of £191,000 relating to the 2018-19 audits. Of this amount, £2,299,250 (2018-19: £1,955,291) was payable to the NAO and £487,871 (2018-19: £332,589) was payable to auditors other than the NAO.
In 2019-20, £nil was payable to the NAO (2018-19: £nil) and £240,267 was payable to auditors other than the NAO (2018-19: £127,546) for non-audit services. Further details can be obtained from the accounts of the NDPBs and other designated bodies.
Redundancy Payments Service
INSS, an Agency of the Department, is responsible for the approval and processing of claims under the Redundancy Payment Service (RPS), which is financed from the National Insurance Fund. Redundancy payments are made from the National Insurance Fund to employees whose employers have failed to make payments due or who were insolvent.
The Insolvency Service has a service level agreement with HM Revenue and Customs. Claims processed fall into two categories:
- RP1 (which covers redundancy pay, holiday pay and arrears of pay).
- RP2 (pay in lieu of notice).
There is associated income arising from two sources:
- Solvent Recovery – where money is recovered from solvent employers to meet the costs of redundancy payments made by the RPS.
- Insolvent Recovery – INSS becomes a creditor receiving a dividend if there are sufficient funds in the insolvency of the employer.
Expenditure in respect of RPS in 2019-20 totalled £496 million (2018-19: £320 million) against income of £66 million (2018-19: £nil million). The net amount totalled £430 million (2018-19: £320 million).
Payments of taxes and levies
During 2018-19, UK Research and Innovation (UKRI) was required to pay corporation tax on the chargeable gain arising on the transfer of assets from the predecessor Research Councils into UKRI. The total value of this payment was £143 million. This was a one-off transaction in 2018-19.
Capacity market payments
Capacity payment expenses for the 2018/19 Delivery Year have been recognised in 2019-20 due to the suspension of the Capacity Market in 2018-19 (see note 1.26).
4.2 Depreciation and impairment charges
| | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |--------------------------------|------------------------------|--------------------|------------------------------|--------------------| | Amortisation of recoverable contract costs | – | 101 | – | 166 | | Depreciation | 21 | 231 | 18 | 256 | | Amortisation | 3 | 65 | 2 | 45 | | Impairment of property, plant and equipment | 4 | 26 | 2 | 59 | | Impairment of investments and remeasurement of expected credit losses | (10) | 17 | 26 | 74 | | Total | 18 | 440 | 48 | 600 |
### 4.3 Provision expense
| Increase/(decrease) in nuclear provisions due to changes in discount rate | Core Department and Agencies £m | 2019-20 | Core Department and Agencies £m | 2018-19 | |---|---|---|---|---| | | | 20 | 247 | (37) | (95,984) | | Increase/(decrease) in other provisions due to changes in discount rate | | 7 | (20) | (127) | (2,799) | | Other provision movements relating to Small Business Grant Fund and Retail, Hospitality and Leisure Grant Fund | | 10,824 | 10,824 | – | – | | Other provision movements excluding bad debt provisions and financial guarantee liabilities | | (21) | 6,812 | 210 | 1,057 | | **Total increase/(decrease) in provisions excluding bad debt provisions and financial guarantee liabilities** | | 10,830 | 17,863 | 46 | (97,726) | | Total increase/(decrease) in bad debt provisions | | – | – | 1 | 1 | | Total increase/(decrease) in financial guarantee liabilities and loan commitment liabilities | | 39 | 10 | 12 | 4 | | **Total** | | 10,869 | 17,873 | 59 | (97,721) |
Included in the table above is a provision relating to COVID-19 Grant Funding. The Core Department has recognised a provision relating to the Small Business Grant Fund and the Retail, Hospitality and Leisure Grant Fund which was announced by the Chancellor on 11 March 2020 due to the COVID-19 pandemic. The provision has been recognised for claims that were not paid by local authorities to eligible businesses at 31 March 2020, but which are reasonably expected to be claimed during 2020-21.
The provision expense in 2019-20 was primarily driven by cost estimate changes of the NDA’s nuclear decommissioning provision which increased the nuclear decommission liability estimate by £6.9 billion. The significant provision expense in 2018-19 was primarily driven by the reduction in discount rates for cash outflows expected after ten year from an equivalent real discount rate of prescribed by HM Treasury applied in 2017-18 of (1.56%) to an equivalent real discount rate prescribed by HM Treasury applied in 2018-19 of (0.11%). In 2019-20, the equivalent real discount rate for cash outflows expected after ten prescribed by HM Treasury has reduced to (0.01%), which had a less significant impact on the 2019-20 provision expense. Further detail of the movements in provisions can be found in note 18.1 for Nuclear provisions and note 18.2 for Other provisions. 4.4 Grants
| Grant in aid | Core Department and Agencies £m | 2019-20 | Core Department and Agencies £m | 2018-19 represented | |-------------|---------------------------------|---------|---------------------------------|---------------------| | Grant in aid | 11,308 | – | 10,978 | – | | Post Office network reform | 42 | 42 | 168 | 168 | | Market frameworks | 67 | 67 | 66 | 66 | | Science and research | 521 | 6,730 | 486 | 6,342 | | International Climate Fund | 291 | 297 | 244 | 247 | | Renewable Heat Incentive | 846 | 846 | 818 | 818 | | Innovation programmes | 125 | 610 | 113 | 596 | | Heat Infrastructure Team | 29 | 29 | 2 | 2 | | Small Business Grant Fund and Retail, Hospitality and Leisure Grant Fund | 151 | 151 | – | – | | Resource grants to central government bodies | 588 | 588 | – | – | | Other grants | 38 | 50 | 32 | 41 | | **Total** | **14,006** | **9,410** | **12,907** | **8,280** |
The allocation of grants between categories in the table above has been represented for 2018-19 based on the revised disclosure for 2019-20. This is solely a disclosure adjustment as the total grants were correctly reported in the BEIS 2018-19 Annual Report and Accounts.
Core Department
On 22 May 2019, British Steel Limited filed for compulsory liquidation. The court appointed Official Receiver took control of the company and, with the assistance of the EY Special Managers, was responsible for running an independent sales process. Owing to the difficulty and expense of the liquidation of a steel manufacturer, and the risk of personal liability arising from the operation of an insolvency involving a steel installation, the Official Receiver requested and was granted an indemnity from the Government.
The indemnity was given in respect of claims, proceedings, costs and expenses arising in the ordinary course of the Official Receiver’s statutory functions as liquidator of the company. In providing the Official Receiver with an indemnity the Government enabled the Official Receiver to discharge his statutory duties through continuing to trade the business while undertaking an independent sales process during which a buyer was ultimately secured.
The total funding paid to the Official Receiver in the year to 31 March 2020 was £588 million and is shown in the above note. The funding was voted through the Supplementary Estimates laid before Parliament on 12 February 2020. On 9 March 2020, the sale of British Steel Limited to the Chinese Steelmaker Jingye Group was completed by the Official Receiver. During the financial year 2020-21 there will continue to be funding provided to the Official Receiver to complete the wind up of British Steel Ltd including assets not purchased by Jingye. The total cost of the liquidation will fluctuate until the liquidation accounts are finalised.
In April 2019 HMG entered into a commercial agreement with British Steel to allow it to meet its EU ETS obligations. Under a Deed of Forfeiture HMG bought £119 million of EU ETS allowances to meet British Steel’s 2018 EU ETS liability. In return, the Core Department received all 5.6 million of British Steel’s 2019 free allocation of ETS allowances when allocated in February 2020, which are included within intangible assets in note 8. 5. Finance expense
| | Core Department and Agencies | 2019-20 | Core Department and Agencies | 2018-19 restated | |--------------------------------|------------------------------|---------|------------------------------|------------------| | | £m | £m | £m | £m | | Change in fair value – financial assets | (113) | 50 | (214) | (150) | | Net loss/(gain) on foreign exchange | – | (1) | – | 2 | | Unrealised foreign exchange rate losses | 1 | 1 | 2 | 2 | | Bank charges | – | – | – | 1 | | Interest payable | – | 36 | – | 33 | | Expected return on funded pension scheme assets | – | (39) | – | (41) | | Interest on pension liabilities | – | 38 | – | 38 | | Borrowing costs on provisions | (13) | (103) | (37) | (3,660) | | **Total** | (125) | (18) | (249) | (3,775) |
Finance expense – Changes in fair value – financial assets and Unrealised foreign exchange rate losses have been restated, see note 26 for further details.
In 2018-19 and 2019-20, the HM Treasury prescribed nominal and inflation rates were positive. However, the resulting real discount rates remained negative in 2018-19 and 2019-20, leading to a negative expense for borrowing costs on provisions. The borrowing costs on provision negative expense is primarily driven by the unwind of the discount on the NDA’s nuclear decommissioning provision. The 2019-20 equivalent real discount rate for cash outflows expected after ten prescribed by HM Treasury has reduced to (0.01%) from (0.11%) in 2018-19, this has resulted in a reduction in the borrowing cost negative expense on the nuclear decommissioning provision. Further detail of the movements in provisions can be found in note 18.1 for Nuclear provisions and note 18.2 for Other provisions.
6. Income
6.1 Operating income
| | Core Department and Agencies | 2019-20 | Core Department and Agencies | 2018-19 | |--------------------------------|------------------------------|---------|------------------------------|---------| | | £m | £m | £m | £m | | **Income from sales of goods and services:** | | | | | | Income from contracts with customers | | | | | | Fees, charges and recharges to/from external customers and central Government organisations | 148 | 317 | 139 | 250 | | Levy income | 11 | 3,347 | 10 | 1,212 | | Sales of goods and services | 10 | 804 | 11 | 936 | | Miscellaneous income | 6 | 82 | 8 | 99 | | **Other income** | | | | | | European Union funding | 1 | 20 | 4 | 26 | | Current grants and capital grants | 81 | 228 | 102 | 262 | | Coal pension receipts | – | – | 475 | 475 | | **Total** | 257 | 4,798 | 749 | 3,260 |
In 2018-19, income of £475 million in relation to the final sum receivable from the September 2017 valuation of the Mineworkers’ Pension Scheme was recognised. Further cash was received in 2019-20 which is reducing the Coal Pension receivables disclosed in note 14. Capacity Market supplier charge income relating to the 2018/19 Delivery Year has been recognised in Levy Income in 2019-20 due to the suspension of the Capacity Market in 2018-19. £1,483 million of Capacity Market supplier charge income has been recognised in 2019-20 (2018-19: £176 million) (see note 1.26).
Included in the sales of goods and services line above is £703 million of income from the NDA (2018-19: £828 million) relating to contract income under IFRS 15. The most significant contracts of the Departmental Group are held by the NDA. The table below shows the main types of contract, the main areas of performance obligations therein, and for each category:
- the revenue recognised in the reporting period [A]
- the revenue expected to be recognised in future reporting periods (being the aggregate amount allocation to performance obligations that are wholly or partially unsatisfied at the reporting date) [B]
- an indication of when NDA expects to recognise the remaining contract price
| Contract type | Categories of performance obligation | [A] £m | [B] £m | 2020-2025 | 2026-2038 | 2039-2087 | |---------------------------------------------------|--------------------------------------|--------|--------|-----------|-----------|-----------| | Spent fuel reprocessing and associated waste management | Spent fuel storage | 12 | 710 | 53 | 138 | 519 | | | Interim storage wastes | 85 | 419 | 419 | 0 | 0 | | | Treatment of wastes | 64 | 314 | 314 | 0 | 0 | | | Storage of treated wastes | 4 | 172 | 20 | 52 | 100 | | | Storage of products | 19 | 840 | 84 | 219 | 537 | | Spent fuel receipts | Receipt of spent fuel | 215 | 4,076 | 1,644 | 2,432 | 0 | | Other storage contracts | Storage of materials | 67 | 1,087 | 299 | 579 | 209 | | Storage and destorage of residues | Storage | 4 | 10 | 10 | 0 | 0 | | | Destorage | 1 | 24 | 21 | 3 | 0 | | Waste substitution | Destorage | 0 | 72 | 47 | 25 | 0 | | Legacy waste management | Waste management | 6 | 171 | 171 | 0 | 0 | | Transfer of ownership of materials and flasks | | 166 | 0 | 0 | 0 | 0 | | Total | | 643 | 7,895 | 3,082 | 3,448 | 1,365 |
The remaining revenue to be recognised in future reporting periods comprises:
- Payments from customers made on account
- Expected remaining future payments from customers
### 6.2 Finance income
| | Core Department and Agencies | 2019-20 | Core Department and Agencies | 2018-19 restated | |--------------------------------|-----------------------------|---------|-------------------------------|------------------| | | £m | £m | £m | £m | | Effective Interest for FVTPL assets | 25 | 25 | 30 | 30 | | Effective Interest for amortised cost assets | 29 | 29 | 36 | 36 | | Interest income for amortised cost assets | 10 | 84 | 10 | 74 | | Interest income for FVTPL assets | 10 | 54 | 7 | 63 | | Dividend income for FVTPL assets held at the period end | – | 97 | – | 122 | | Dividend income from investments in joint ventures, associates and public dividend capital | 138 | 45 | 131 | 45 | | Total | 212 | 334 | 214 | 370 | Core Department
In 2019-20 the Core Department recognised dividend income of £138 million (2018-19: £131 million). This includes a dividend of £94 million from Enrichment Holdings Limited (EHL) (2018-19: £87 million), which is eliminated on consolidation. In the Departmental Group accounts, EHL is consolidated and its investment in URENCO is recognised as an associate. The Department recognises its share of URENCO’s profit for the year in Other operating expenditure and a fair value movement in Other Comprehensive Income.
Departmental Group
In 2019-20 the Departmental Group received dividend income of £142 million (2018-19: £168 million restated), comprising distributions from investment funds and dividend income of £90 million (2018-19: £119 million restated) recognised from BIS (Postal Services Act 2011) Company. See note 26 for further details.
### 7. Property, plant and equipment
| Departmental Group 2019-20 | Land £m | Buildings £m | Dwellings £m | Leasehold Improvements £m | Information Technology £m | Plant and Machinery £m | Furniture, Fixtures and Fittings £m | Transport Equipment £m | Assets under Construction £m | Total £m | |---------------------------|---------|--------------|--------------|---------------------------|---------------------------|------------------------|-----------------------------|------------------------|-----------------------------|---------| | **Cost or valuation** | | | | | | | | | | | | Balance at 1 April 2019 | 243 | 2,471 | 41 | 56 | 257 | 6,204 | 22 | 328 | 582 | 10,204 | | Additions | – | 7 | – | 1 | 11 | 43 | 3 | 4 | 226 | 295 | | Disposals | – | (3) | – | (1) | (53) | (127) | (1) | (65) | (7) | (257) | | Impairments | – | – | – | – | – | – | – | – | (9) | (23) | | Transfers in/(out) of boundary | 10 | – | – | – | – | – | – | – | (2) | 8 | | Reclassifications | 4 | 87 | – | 15 | 19 | 36 | 2 | 10 | (173) | – | | Revaluations | 14 | 18 | 1 | – | – | 19 | – | 9 | 19 | 80 | | **At 31 March 2020** | 271 | 2,580 | 42 | 71 | 234 | 6,161 | 26 | 286 | 636 | 10,307 | | **Depreciation** | | | | | | | | | | | | Balance at 1 April 2019 | (7) | (1,000) | – | (32) | (191) | (5,207) | (13) | (221) | – | (6,671) | | Charged in year | (1) | (49) | (1) | (5) | (29) | (132) | (2) | (12) | – | (231) | | Disposals | – | 2 | – | 1 | 51 | 107 | 1 | 64 | – | 226 | | Impairments | – | – | – | – | – | – | – | – | – | (3) | | Reclassifications | (22) | 22 | – | – | – | 3 | – | (3) | – | – | | Revaluations | 2 | (10) | 1 | – | – | (11) | – | (5) | – | (23) | | **At 31 March 2020** | (28) | (1,035) | – | (36) | (172) | (5,240) | (14) | (177) | – | (6,702) | | Carrying amount at 31 March 2020 | 243 | 1,545 | 42 | 35 | 62 | 921 | 12 | 109 | 636 | 3,605 | | Carrying amount at 1 April 2019 | 236 | 1,471 | 41 | 24 | 66 | 997 | 9 | 107 | 582 | 3,533 | | **Asset financing:** | | | | | | | | | | | | Owned | 190 | 1,527 | 42 | 35 | 61 | 921 | 12 | 109 | 636 | 3,533 | | Finance leased | 53 | 18 | – | – | – | – | – | – | – | 71 | | On balance sheet (SoFP) PFI and other service concession arrangements | – | – | – | – | 1 | – | – | – | – | 1 | | **Carrying amount at 31 March 2020** | 243 | 1,545 | 42 | 35 | 62 | 921 | 12 | 109 | 636 | 3,605 | | **Of the total:** | | | | | | | | | | | | Core Department and Agencies | 18 | 110 | – | 30 | 9 | 78 | 5 | – | 56 | 306 | | NDPBs and other designated bodies | 225 | 1,435 | 42 | 5 | 53 | 843 | 7 | 109 | 580 | 3,299 | | **Carrying amount at 31 March 2020** | 243 | 1,545 | 42 | 35 | 62 | 921 | 12 | 109 | 636 | 3,605 | | Departmental Group 2018-19 | Land £m | Buildings £m | Dwellings £m | Leasehold Improvements £m | Information Technology £m | Plant and Machinery £m | Furniture, Fixtures and Fittings £m | Transport Equipment £m | Assets under Construction £m | Total £m | |--------------------------|---------|--------------|--------------|---------------------------|---------------------------|------------------------|-----------------------------|------------------------|-----------------------------|---------| | **Cost or valuation** | | | | | | | | | | | | Balance at 1 April 2018 | 303 | 4,055 | 40 | 74 | 232 | 6,208 | 18 | 324 | 506 | 11,760 | | Additions | 4 | 2 | – | 2 | 6 | 32 | 4 | 4 | 258 | 312 | | Disposals | – | (1,842) | – | (13) | (8) | (122) | (1) | (2) | – | (1,988) | | Impairments | (41) | (7) | – | – | – | 3 | – | (6) | – | (51) | | Transfers in/out of boundary | – | (4) | – | (12) | (2) | – | – | – | 3 | (15) | | Reclassifications | – | 71 | – | 5 | 28 | 73 | 1 | 5 | (195) | (12) | | Revaluations | (23) | 196 | 1 | – | 1 | 10 | – | 3 | 10 | 198 | | **At 31 March 2019** | 243 | 2,471 | 41 | 56 | 257 | 6,204 | 22 | 328 | 582 | 10,204 | | **Depreciation** | | | | | | | | | | | | Balance at 1 April 2018 | – | (2,749) | – | (42) | (171) | (5,177) | (12) | (195) | – | (8,346) | | Charged in year | – | (56) | (1) | (7) | (29) | (142) | (2) | (19) | – | (256) | | Disposals | – | 1,839 | – | 13 | 8 | 121 | 1 | 2 | – | 1,984 | | Impairments | – | – | – | (1) | – | (7) | – | – | – | (8) | | Transfers in/out of the boundary | – | – | – | 5 | 1 | – | – | – | – | 6 | | Reclassifications | – | – | – | – | 1 | – | (1) | – | – | – | | Revaluations | (7) | (34) | 1 | – | – | (3) | – | (8) | – | (51) | | **At 31 March 2019** | (7) | (1,000) | – | (32) | (191) | (5,207) | (13) | (221) | – | (6,671) | | Carrying amount at 31 March 2019 | 236 | 1,471 | 41 | 24 | 66 | 997 | 9 | 107 | 582 | 3,533 | | Carrying amount at 1 April 2018 | 303 | 1,306 | 40 | 32 | 61 | 1,031 | 6 | 129 | 506 | 3,414 | | **Asset financing:** | | | | | | | | | | | | Owned | 211 | 1,471 | 41 | 24 | 64 | 997 | 9 | 107 | 582 | 3,506 | | Finance leased | 25 | – | – | – | – | – | – | – | – | 25 | | On balance sheet (SoFP) PFI and other service concession arrangements | – | – | – | – | 2 | – | – | – | – | 2 | | **Carrying amount at 31 March 2019** | 236 | 1,471 | 41 | 24 | 66 | 997 | 9 | 107 | 582 | 3,533 | | **Of the total:** | | | | | | | | | | | | Core Department and Agencies | 18 | 98 | – | 20 | 5 | 81 | 2 | – | 70 | 294 | | NDPBs and other designated bodies | 218 | 1,373 | 41 | 4 | 61 | 916 | 7 | 107 | 512 | 3,239 | | **Carrying amount at 31 March 2019** | 236 | 1,471 | 41 | 24 | 66 | 997 | 9 | 107 | 582 | 3,533 | Property, plant, and equipment (PPE) held by the Departmental Group
The professional valuations of land and buildings undertaken within the Departmental Group were prepared in accordance with the Royal Institute of Chartered Surveyors (RICS) Valuation Standards (6th Edition), the ‘Red Book’. Unless otherwise stated, land and buildings are professionally revalued every five years and where appropriate in the intervening period, relevant indices are used. The most significant land and buildings at 31 March 2020 were held by Nuclear Decommissioning Authority (NDA) and UK Research and Innovation (UKRI).
In accordance with the FReM the majority of Leasehold improvements, Information Technology, Furniture, Fixtures and Fittings and Plant and Machinery are held at depreciated historic cost as a proxy for fair value as the assets have short useful lives or low values. Land, Freehold Buildings, Dwellings, Transport Equipment and the remainder of Plant and Machinery are held at fair value based on professional valuations.
Within the Departmental Group, a variety of valuation techniques are used depending upon whether the PPE asset is a specialised asset or a non-specialised asset. Where the PPE asset is a specialised asset, then a depreciated replacement cost valuation is used, for example by scientific institutes. Where the PPE asset is a non-specialised asset, then an existing-use valuation is used, for example for land and office buildings. Depreciated replacement cost (DRC) valuations are based on a number of unobservable inputs; these would be classified as level 3 in accordance with IFRS 13. Existing-use value (EUV) valuations are based on a number of market corroborated but unobservable inputs e.g. land valuations are based on similar prices per hectare adjusted for the specific location of the land, whilst other EUV valuations use specific unobservable inputs, e.g. rental yields. The EUV valuations inputs are classified as level 2 and level 3 in accordance with IFRS 13.
The Departmental Group does not hold any material individual PPE assets. Therefore there are no individually material level 3 assumptions included in the overall Departmental Group fair value of PPE. For there to be a material movement in the fair value of PPE, this would require a significant increase in a number of level 3 valuation assumptions across the Departmental Group.
The most significant valuations in the Departmental Group relate to land and buildings held by UKRI. Due to the COVID-19 pandemic and resulting lockdown, with consequential impacts on the economy, it is anticipated that there will be an effect on the indices used by UKRI to revalue their land and buildings in between professional valuations.
UKRI have estimated the potential financial impact of changes to those indices that are available as close to the year end as possible. The results all indicate some reduction in asset value ranging from 1.5% to the extreme case removing all upward revaluations recognised by UKRI in the year. This results in a potential movement of between £19.5 million and £52.4 million. Due to the unclear reliability of indices over the period and the coming months, and UKRI management’s view that any fall in values for their land and buildings is likely to be temporary, current valuations have been maintained and not adjusted for any uncertain potential reduction.
Further information can be found in the financial statements of the individual bodies’ accounts.
## 8. Intangible assets
| Departmental Group 2019-20 | Information Technology | Software Licences | Websites | Patents | Licences & Others | Assets under Construction | Total | |---------------------------|------------------------|-------------------|---------|---------|-------------------|---------------------------|-------| | | £m | £m | £m | £m | £m | £m | £m | | **Cost or Valuation** | | | | | | | | | Balance at 1 April 2019 | 157 | 97 | 1 | 318 | – | 24 | 597 | | Additions | 5 | 19 | – | – | 119 | 7 | 150 | | Disposals | (10) | (7) | – | – | – | (2) | (19) | | Impairments | – | (1) | – | – | – | – | (1) | | Reclassifications | (51) | 61 | – | – | – | (10) | – | | Transfers in/(out) | 4 | – | – | – | – | (4) | – | | Revaluations | – | – | – | 13 | (32) | – | (19) | | **At 31 March 2020** | 105 | 169 | 1 | 331 | 87 | 15 | 708 | | **Amortisation** | | | | | | | | | Balance at 1 April 2019 | (127) | (54) | (1) | (248) | – | – | (430) | | Charged in year | (16) | (35) | – | (14) | – | – | (65) | | Disposals | 10 | 7 | – | – | – | – | 17 | | Reclassifications | 59 | (59) | – | – | – | – | – | | **At 31 March 2020** | (74) | (141) | (1) | (262) | – | – | (478) | | Carrying amount at 31 March 2020 | 31 | 28 | – | 69 | 87 | 15 | 230 | | Carrying amount at 1 April 2019 | 30 | 43 | – | 70 | – | 24 | 167 | | **Asset financing:** | | | | | | | | | Owned | 31 | 28 | – | 69 | 87 | 15 | 230 | | Carrying amount at 31 March 2020 | 31 | 28 | – | 69 | 87 | 15 | 230 | | **Of the total:** | | | | | | | | | Core Department and Agencies | 3 | 2 | – | – | 87 | 9 | 101 | | NDPBs and other designated bodies | 28 | 26 | – | 69 | – | 6 | 129 | | Carrying amount at 31 March 2020 | 31 | 28 | – | 69 | 87 | 15 | 230 | | Departmental Group 2018-19 | Information Technology | Software Licences | Websites | Patents | Licences & Others | Assets under Construction | Total | |--------------------------|------------------------|-------------------|---------|---------|------------------|--------------------------|-------| | | £m | £m | £m | £m | £m | £m | £m | | **Cost or Valuation** | | | | | | | | | At 1 April 2018 | 152 | 72 | 1 | 297 | – | 7 | 529 | | Additions | 2 | 1 | – | – | – | 33 | 36 | | Disposals | – | (2) | – | – | – | – | (2) | | Reclassifications | 1 | 24 | – | – | – | (13) | 12 | | Transfers in/(out) | 2 | 2 | – | – | – | (3) | 1 | | Revaluations | – | – | – | 21 | – | – | 21 | | **At 31 March 2019** | 157 | 97 | 1 | 318 | – | 24 | 597 | | **Amortisation** | | | | | | | | | At 1 April 2018 | (114) | (34) | (1) | (235) | – | – | (384) | | Charged in year | (13) | (19) | – | (13) | – | – | (45) | | Disposals | – | 1 | – | – | – | – | 1 | | Transfers in/(out) | – | (2) | – | – | – | – | (2) | | **At 31 March 2019** | (127) | (54) | (1) | (248) | – | – | (430) | | **Carrying amount at** | | | | | | | | | 31 March 2019 | 30 | 43 | – | 70 | – | 24 | 167 | | **Carrying amount at** | | | | | | | | | 1 April 2018 | 38 | 38 | – | 62 | – | 7 | 145 | | **Asset financing:** | | | | | | | | | Owned | 30 | 43 | – | 70 | – | 24 | 167 | | **Carrying amount at** | | | | | | | | | 31 March 2019 | 30 | 43 | – | 70 | – | 24 | 167 | | **Of the total:** | | | | | | | | | Core Department and | 4 | 2 | – | – | – | 8 | 14 | | Agencies | | | | | | | | | NDPBs and other | 26 | 41 | – | 70 | – | 16 | 153 | | designated bodies | | | | | | | | | **Carrying amount at** | | | | | | | | | 31 March 2019 | 30 | 43 | – | 70 | – | 24 | 167 |
All software licenses are acquired separately.
All Information Technology (IT) assets are internally generated. IT assets are initially classified as assets under construction and are not amortised until they are commissioned, at which time they are re-classified as IT.
**Core Department**
In April 2019 HMG entered into a commercial agreement with British Steel to allow it to meet its EU ETS obligations. Under a Deed of Forfeiture HMG bought £119 million of EU ETS allowances to meet British Steel’s 2018 EU ETS liability. In return, the Core Department received all 5.6 million of British Steel’s 2019 free allocation of ETS allowances when allocated in February 2020, which are included within intangible assets.
**Departmental Group**
The Departmental Group holds its intangible assets at valuation. In accordance with the FReM, the Departmental Group adopts cost less amortisation as a proxy for fair value as the intangible assets have short lives. The exception to this is patents which are held at fair value based on a valuation model. The model uses a variety of assumptions to estimate the value of future income streams from the patents to determine the fair value; these include an estimate for future royalty income derived from the consensus forecast data from industry specialists, which are adjusted for expected future USD/GBP exchange rates, the territories in which the patents are applicable and potential threats to future income (such as competitor products and regulatory approval). In accordance with IFRS 13, these assumptions would be classed as level 3 assumptions. The carrying amount of the patents at 31 March 2020 is £69 million (2018-19: £70 million) and there would need to be a substantial increase in expected royalty income to result in a material increase in the fair value of the patents.
9. Derivative financial instruments
The most significant items included within Derivatives on the Consolidated Statement of Financial Position (SoFP) are the Contracts for Difference (CfDs).
CfDs
CfDs are a mechanism used to support investment in UK low carbon generation projects. CfDs have been established as a contract between the ‘Generator’ and the Low Carbon Contracts Company Ltd (LCCC), a company wholly owned by the Government and consolidated within the Department’s accounts.
CfDs have been classified as derivatives in accordance with IFRS 9 ‘Financial Instruments’ and recognised at their ‘fair value’ by deferring the difference between fair value and transaction price at initial recognition. Any subsequent gain or loss in fair value is recognised in the Statement of Comprehensive Net Expenditure.
The fair value of any derivative is assessed by reference to IFRS 13 ‘Fair Value Measurement’, which provides three options for assessment. Fundamentally the value should always reference an open market place but where no market place exists, an option is available for internally generated fair value. The different options are hierarchical and classed as Level 1, 2, or 3 inputs, where Level 1 is based on market prices, Level 2 is based on observable data other than market prices and Level 3 is used where Level 1 or 2 data is unavailable.
The fair value of the Department’s CfDs has been calculated using the income approach based on Level 3 inputs, which reflects the present value (PV) of future cash flows that are expected to occur over the contract term of the CfD. The discount rate which has been used to determine the PV for financial reporting is the Financial Instrument real rate of 0.7% set by HM Treasury Public Expenditure System (PES) Secretariat on 6 December 2019.
By contrast, for investment decisions and project appraisal, the Department is required to use the social discount rate of 3.5% published in HM Treasury’s Green Book. As the cash flows from Hinkley Point C (HPC) CfD are expected to occur over a 35 year period from 2025 to 2060, the valuation for financial reporting based on the 0.7% discount rate will be significantly higher than the economic valuation based on the 3.5% discount rate, even where all other inputs are the same.
The deferred difference between the fair value of the liability on day one and the transaction price is amortised over the contract life of the CfDs, which commences from the earlier of i) the actual start date of generation or ii) the end of the Target Commissioning Window (TCW) identified in the CfD, as this is the point at which the contractual liability will start to unwind (i.e. it is the point at which the potential payment period under the CfD commences).
The significance of these two dates is that they are the part of the contractual provisions which determine when the right to potential CfD payments starts. The contract payment period is typically for 15 years, but specific exceptions exist:
- for contracts relating to biomass conversion which have an expiration date in 2027;
- the contract for HPC nuclear generating plant which will expire at the earlier of 35 years after the start date of the second reactor or when the total CfD payments made have reached the Generation Cap (i.e. 910,000,000 MWh). CfDs may be signed many years in advance of actual generation. The main benefit to generators is the fact that they can derive economic benefit from these contracts across the payment period life of the contract and the added certainty which the CfD contract provides helps them to finance the project.
Under the legislation, there is an obligation placed on licensed electricity suppliers to fund the CfD liabilities as they crystallise through the Supplier Obligation Levy. The future levy amounts which will be received from the licensed suppliers will be accounted for within LCCC and will be triggered by the generation and supply of low carbon electricity.
As at 31 March 2020 LCCC was counterparty to 73 contracts recognised in the accounts, including HPC and 22 CfD contracts signed in the year after the Allocation Round 3 (AR3) (at 31 March 2019: 53 contracts). During the year LCCC recognised the HPC CfD in the financial statements, as historically it was not recognised in the Statement of Financial Position.
**Measurement differences relating to day one recognition**
All CfDs (including Hinkley Point C) are issued for £nil consideration through the CfD auction process, this being deemed the transaction price. The transaction price for CfDs differs from the fair value at initial recognition measured using a valuation model, mainly because the transaction price is not established in an active market. If there are significant unobservable inputs used in the valuation technique (Level 3), the financial instrument is recognised at the transaction price and any difference between the transaction price and fair value at initial recognition measured using a valuation model is deferred.
A single point valuation has been used for the recognition of HPC and AR3 CfDs, as the valuation as at 31 March 2020 is considered a reasonable proxy for the day one recognition. Therefore, in line with other CfDs, the measurement difference, being the difference between the transaction price and fair value of HPC and AR3 CfDs as at 31 March 2020, has been deferred.
The following table represents the difference between the CfD liability at initial recognition and at the reporting date:
| Core Department and Agencies | LCCC CfDs (exc. HPC) | LCCC HPC | Departmental Group Total | |------------------------------|----------------------|----------|--------------------------| | **CfD liability as at 31 March 2018 recognised on the Consolidated Statement of Financial Position** | – | 15,892 | – | 15,892 | | Re-measurement of the CfD liability | – | (2,743) | – | (2,743) | | Release of liability relating to terminated contracts | – | 39 | – | 39 | | Payments to the CfD generators | – | (980) | – | (980) | | Deferred difference recognised during the year | – | 713 | – | 713 | | **CfD liability as at 31 March 2019 recognised on the Consolidated Statement of Financial Position** | – | 12,921 | – | 12,921 | | Other non-CfD liabilities as at 31 March 2019 | 2 | – | – | 2 | | **Carrying value of non-current derivative liabilities as at 31 March 2019** | 2 | 12,921 | – | 12,923 | | Remeasurement of the CfD liability | – | 4,406 | – | 4,406 | | Payments to the CfD generators | – | (1,803) | – | (1,803) | | Deferred difference recognised during the year | – | 940 | – | 940 | | **CfD liability as at 31 March 2020 recognised on the Consolidated Statement of Financial Position** | – | 16,464 | – | 16,464 | | Other non-CfD liabilities as at 31 March 2020 | – | – | – | – | | **Carrying value of non-current derivative liabilities as at 31 March 2020** | – | 16,464 | – | 16,464 |
During the year, the net movement of £5,346 million (2018-19: (£1,991 million)) in the fair value of CfDs is recognised in the Statement of Comprehensive Net Expenditure. Movement in deferred measurement differences
The following table shows the movement in deferred day one loss.
| | Core Department and Agencies £m | LCCC CfDs exc. HPC £m | LCCC HPC £m | Departmental Group Total £m | |--------------------------------|---------------------------------|------------------------|-------------|-----------------------------| | Deferred measurement differences as at 31 March 2018 | – | 23,309 | – | 23,309 | | Measurement differences recognised in respect of terminated CfDs | – | (268) | – | (268) | | Deferred measurement differences recognised during the year | – | (713) | – | (713) | | Deferred measurement differences as at 31 March 2019 | – | 22,328 | – | 22,328 | | Measurement differences deferred during the year | – | 905 | 50,826 | 51,731 | | Deferred measurement differences recognised during the year | – | (940) | – | (940) | | Deferred measurement differences as at 31 March 2020 | – | 22,293 | 50,826 | 73,119 |
Fair value measurement of CfDs
The fair value of CfDs represents the LCCC’s best estimate of the payments which the LCCC will be committed to make, if and when the generators supply low carbon electricity in accordance with their contractual terms. They are based upon the estimates of future electricity prices to forecast the potential liabilities using the Dynamic Dispatch Model (DDM) owned by the Department.
Should no low carbon electricity be supplied in accordance with the contractual terms, then the LCCC is not under any obligation to make these payments.
Fair value of CfDs (financial liabilities at fair value through profit and loss)
The following table provides an analysis of financial instruments which are measured subsequent to initial recognition at fair value and grouped into input levels 1 to 3 within the fair value hierarchy based on the degree to which the fair value is observable:
| | Level 1 £m | Level 2 £m | Level 3 £m | Total £m | |--------------------------------|------------|------------|------------|----------| | Balance at 31 March 2019 | – | – | 35,249 | 35,249 | | Balance at 31 March 2020 | – | – | 89,583 | 89,583 |
Comparative values in the table above exclude the liability for Hinkley Point C CfD as this CfD was recognised in the current year. In the current year the fair value attributable to Hinkley Point C CfD is £50.8 billion.
Reconciliation of CfDs
The following table shows the impact of the fair value of all CfDs which have been recognised in these accounts, classified under level 3, by using the assumptions described below (all held by LCCC): Key inputs and underlying assumptions for CfDs
For the key inputs into the model, the underlying assumptions are set out below.
Estimated future forecast wholesale electricity prices
Forecast wholesale electricity prices used to estimate the fair value of CfDs are derived from the DDM which has been developed by the Department to facilitate/inform policy decisions by modelling investor behaviour in response to fuel and carbon prices and policy environment. The DDM estimates the wholesale price by:
- calculating the short run marginal cost (SRMC) of each plant (including a representation of plants in interconnected markets), taking account of start-up and shut-down costs
- calculating the available output of intermittent renewables
- calculating the half hourly demand for electricity by taking into account demand side response
- determining the marginal plant required to meet demand
Economic, climate, policy, generation and demand assumptions are external inputs to the model including demand load curves for both business and non-business days and seasonal impacts. Specific assumptions can also be modelled for domestic and non-domestic sectors and smart meter usage.
The forecast trajectory of electricity prices is uncertain. In the valuation, LCCC’s management has used the DDM reference case to calculate the fair value and the impact of low and high cases have been disclosed within sensitivities. Low and high cases have also been published by the Department and are based on the Department’s fossil fuel price assumptions for 2019, which presents low and high assumptions for the wholesale prices of oil, gas and coal.
In the valuation, the wholesale price has been reduced to reflect the price the wind generator is likely to receive. Additionally, wholesale electricity forward prices have been used for the liquid trading horizon (covering the nearest 2 years period). On windy days, the price that wind generators receive is likely to be reduced. The effect of reduced prices for wind generation adds approximately £2.3 billion to the valuation.
Estimated future wholesale electricity generation
a. Transmission Loss Multiplier (TLM)
TLM reflects the fact that electricity is lost as it passes through the transmission system from generators to suppliers. If the TLM is incorrect, this will have implications for the volume of electricity subject to CfD payments. Any change in TLM will be corrected through adjustments in strike prices although the change in TLM is expected to be immaterial. b. Start date
Generators nominate a Target Commissioning Date (TCD) in their binding application form for a CfD, and this date is specified in their CfD following contract award. However, the generator is free to commission at any time within their Target Commissioning Window (TCW), a period of one year from the start of the TCW for most technologies, with no penalty, or after the end of the TCW and up to their ‘Longstop Date’ (one to two years after the end of the TCW depending on technology) with a penalty in the form of reduction of contract length for each day they are late in commissioning after the end of the TCW. The contract can be terminated if the generator has not commissioned 95% (or 85% for Investment Contracts and offshore wind) of their revised installed capacity estimate by the end of the Longstop Date. The valuation uses the latest estimate from generators on the start date.
The Target Commissioning Dates for reactor one and reactor two of the Hinkley Point C project are 1 December 2025 and 1 June 2026 respectively. The TCW for reactor one is 1 May 2025 to 30 April 2029. The TCW for reactor two is 1 November 2025 to 31 October 2029. Any change to the start date will change the timing of future cash flows and impact on the discounted fair value.
c. Installed capacity
The figure for the maximum installed capacity was provided by the generator in its application for a CfD and specified in its CfD contract following allocation. Thereafter the installed capacity figure can only be reduced by the generator for a permitted contractual construction event (which is a narrowly defined concept) or by the difference by which the relevant project has an installed capacity of 95% (or 85% in the case of offshore wind) of its current contractual installed capacity figure and 100%. The actual output of the generator will depend on the load factor.
The Hinkley Point C CfD does not have an installed capacity cap and is only entitled to CfD payment support up to a generation cap of 910,000,000 MWh.
d. Load factor
Load factor is defined as the actual power output of a project as a proportion of its rated installed capacity. It is a percentage figure which is used to transform installed capacity into actual power output (generation). Load factor assumptions are based on reference factors published by the Department for given technology types; however, actual power outputs are sensitive to technological and environmental factors which may impact actual cash flows. Plant specific load factors (where a minimum of 6 months’ generation data is available) is also available for consideration when valuing the CfDs.
Strike price
The strike price is an agreed price which determines the payments made to the generator under the contract with reference to its low carbon output and the market reference price. The relevant strike price is specified in each CfD and is not intended to change for the duration of the project other than through indexation to CPI and certain network charges or in the event of certain qualifying change in law. The strike price used in the valuation of the CfDs is the 2020-21 strike price and reflects the CPI rate for January 2020 in-line with the requirements of the CfD contract.
The relevant strike price for the Hinkley Point C CfD is specified at £92.50/MWh in real 2012 terms and is not intended to change for the 35 year contract duration, other than through indexation to CPI and certain network and balance charges, the event of certain qualifying changes in law, or the additional factors discussed below. If a CfD in relation to Sizewell C is entered into before the reactor one start date, then the applicable strike price shall be reduced with effect from the date of satisfaction of the Sizewell C condition by £3/MWh. The LCCC’s management’s assumption with regards to Sizewell C has not changed since last year hence the use of £92.50/MWh in calculating the fair value of Hinkley Point C CfD.
Equity gain share for Hinkley Point C
The equity gain share mechanism consists of two separate components: (i) a mechanism to capture gains above specified levels where the Hinkley Point C project outperforms relative to the original base case assumptions; and (ii) a mechanism to capture gains above specified levels arising from the sale of equity and economic interests (direct or indirect) in the Hinkley Point C project.
In each case, as and when the Internal Rate of Return (IRR) thresholds are reached:
- If the relevant IRR is more than 11.4%, the LCCC will receive 30% of any gain above this level.
- If the relevant IRR is more than 13.5%, the LCCC will receive 60% of any gain above this level.
No adjustment to the valuation has been made for equity gain share on the grounds that none of the conditions outlined have been met.
**Construction gain share for Hinkley Point C**
If the construction costs of Hinkley Point C come in under budget, the strike price will be adjusted downwards so that the gain (or saving) is shared with the LCCC. The gain share is 50/50 for the first billion pounds, with savings in excess of this figure being shared 75% to the LCCC and 25% to the generator, NNB Generation Company (HPC) Limited (NNBG).
If the outturn cost of construction is less than assumed then by reducing the strike price, the amounts paid out to NNBG under the CfD will reduce and hence the benefit of the lower construction costs is shared between NNBG and ultimately consumers. There is, however, no similar upward adjustment if the construction cost of Hinkley Point C is over budget.
No adjustment to the valuation has been made for construction gain share on the grounds that there has not been any construction gain during the year.
**OPEX reopener for Hinkley Point C**
The strike price may be adjusted upwards if the operational expenditure costs are more than assumed and downwards if they are less. There are two operational expenditure reopener dates, at 15 years and 25 years after the first reactor start date. The rationale behind the reopener is that the strike price is based on long-term assumptions on operational expenditure costs. The reopener provides a way of mitigating long-term cost risks for both parties.
No adjustment to the valuation has been made for OPEX reopener on the grounds that the OPEX reopener dates have not yet been reached.
**Sensitivity Analysis**
Long term system forecasts are not generally seen as a single most likely outcome with degrees of uncertainty either side. Rather there are multiple sets of inputs that are internally consistent and credible. A set of these inputs is usually used as a ‘scenario’ and multiple deliberately different scenarios are used to illustrate different possible futures when undertaking long term forecasting. Therefore, individual forecasts may use a very different set of assumptions such as generation mix, carbon and fuel costs, electricity demand and interconnector capacity, but still be within what we would describe as the ‘universe of reasonableness’.
In order to value the CfD liabilities LCCC’s management have used future wholesale electricity prices derived from the selected DDM reference case scenario. The Department has been able to estimate wholesale electricity prices out to 2060 by effectively ‘freezing’ the 2050 model for all subsequent years. The main driver facilitating the Department’s ability to do this has been the government’s commitment in the year to bring all greenhouse gas emissions to Net Zero by 2050 (this giving more certainty over potential generation mixes into the future).
The two reference case scenarios provided (with alternative levels of demand) represents the Department’s view of the optimal generation mix (from the perspective of whole system costs) to achieve net zero by 2050. The reference case scenario that was deemed the most reasonable estimate of the two by management and used for the valuation produces a forecast price of £39.81 per MWh in 2040 and £37.55 per MWh in 2050 (and 2060). These represent the Department’s view of the optimal generation mix from the perspective of whole system cost to achieve net zero by 2050 based on low and high assumptions for future wholesale prices of oil, gas and coal. Under these high/low fossil fuel prices scenarios the forecast price is £42.41/£33.53 per MWh in 2040 and £42.04/£33.35 per MWh in 2050 (and 2060). The impact on the CfD valuation of using these alternative scenarios is shown in the table below.
It should be noted that independent third-party forecasters may use a very different set of assumptions for their net zero by 2050 scenarios (e.g. different generation mix, commodity prices, carbon prices, electricity demand and/or interconnector capacity) and that these different assumptions may produce a future electricity price outside of the bounds of the range implied by the DDM high and low demand cases. Independent third-party forecasters with a more pessimistic view on decarbonisation may also use scenarios under which net zero is achieved at a later date. These scenarios will also use different generation mix, commodity price and electricity demand assumptions and may produce electricity prices further outside the bounds of the range implied by the DDM high and low cases.
Having undertaken appropriate due diligence management is satisfied that, whilst significant, the estimation uncertainty associated with future wholesale electricity prices is not fundamental as to prevent recognition. Available independent third-party price forecasts that management have reviewed indicate a forecasting range of £16.20-£64.87 per MWh at 2040 and £14.72-£64.82 per MWh at 2050. It should be noted however that this range may not represent the full range of market views.
An additional element in the calculation of the CfD liability is the discount rate that is applied. Uncertainty increases with time and so the choice of discount rate plays a significant part in determining how much uncertainty is weighted into a present value calculation; a higher discount rate places less weight on increasingly more uncertain years of a present value calculation. As in the previous year the LCCC has used the HM Treasury discount rate of 0.7% for valuing financial instruments such as CfDs. In the table below we have illustrated the impact of using a different rate (the social discount rate of 3.5%, as published in the HM Treasury Green Book).
The following table shows the impact on the fair value of CfDs, classified under level 3, by applying reasonably possible alternative assumptions to the valuation obtained using DDM. Due to the significance and uniqueness of Hinkley Point C CfD the impact (and certain assumptions) have been shown separately.
| Change in fair value of CfDs if: | Favourable/ (Unfavourable) changes | Favourable/ (Unfavourable) changes | Favourable/ (Unfavourable) changes | |---------------------------------|-----------------------------------|-----------------------------------|-----------------------------------| | | HPC CfD | Other CfDs | Total Impact | | DDM High Case | 4,083 | 8,815 | 12,898 | | DDM Low Case | (4,552) | (5,866) | (10,418) | | Discount rate of 3.5% | 23,109 | 7,081 | 30,190 |
**Specific to CfDs exc. HPC:**
| | Favourable/ (Unfavourable) changes | Favourable/ (Unfavourable) changes | Favourable/ (Unfavourable) changes | |--------------------------------|-----------------------------------|-----------------------------------|-----------------------------------| | 10% more load factor | – | (3,876) | (3,876) | | 10% less load factor | – | 3,876 | 3,876 | | Estimated Commissioning Date moves backward by one year | – | (414) | (414) | | Generation starts at the earliest possible date | – | 90 | 90 |
**Specific to HPC CfD:**
| | Favourable/ (Unfavourable) changes | Favourable/ (Unfavourable) changes | Favourable/ (Unfavourable) changes | |--------------------------------|-----------------------------------|-----------------------------------|-----------------------------------| | At generation cap | (28) | – | (28) | | 10% less load factor | 5,083 | – | 5,083 | | Generation starts at the earliest possible date | 55 | – | 55 | | Generation start date delayed by 15 months | (65) | – | (65) | | Sizewell C strike price adjustment | 2,709 | – | 2,709 | The fair value is highly dependent upon the actual capacity generated once the plant is built and the electricity prices which will prevail at the time of generation. The favourable and unfavourable changes show how the impact of changes in capacity and prevailing electricity prices will affect the fair value of the CfDs due to the change in the level of cash flows. As the sensitivity analysis illustrates, the overall fair value movements are subject to material uncertainty.
**Significant unobservable inputs**
The following table discloses the valuation techniques and significant unobservable inputs for CfDs recognised at fair value and classified as Level 3 along with the range of values used for these significant unobservable inputs. Comparative values in the table below exclude the liability for HPC as the HPC CfD was recognised in the current year.
| Year | Fair value of CfDs £m | Valuation technique | Significant unobservable input | Range Min – Max £/MWh | |------|-----------------------|---------------------|-------------------------------|------------------------| | 2019 | 35,249 | DCF | Electricity prices | 44.55 – 67.73 | | 2020 | 89,583 | DCF | Electricity prices | 32.69 – 60.46 |
**10. Investments and loans in other public sector bodies**
| | Ordinary shares £m | Public Dividend Capital £m | Other investments and loans £m | Core Department and Agencies Total £m | Elimination of shares and other investments and loans held in NDPBs £m | NDPBs Ordinary Shares £m | Departmental Group Total £m | |------------------|--------------------|---------------------------|-------------------------------|--------------------------------------|-------------------------------------------------|--------------------------|-----------------------------| | **Balance at 1 April 2018** | 2,346 | 81 | 569 | 2,996 | (1,826) | 460 | 1,630 | | Additions | 125 | – | 305 | 430 | (352) | – | 78 | | Redemptions | – | – | (24) | (24) | 24 | – | – | | (Impairments)/Impairment reversal | (30) | – | – | (30) | 30 | – | – | | Revaluations | 38 | – | – | 38 | – | 29 | 67 | | Unwinding of discount | – | – | 1 | 1 | (1) | – | – | | Loans repayable within 12 months transferred to current assets | – | – | (63) | (63) | 46 | – | (17) | | **Balance at 31 March 2019** | 2,479 | 81 | 788 | 3,348 | (2,079) | 489 | 1,758 | | Additions | 19 | – | 238 | 257 | (148) | – | 109 | | Redemptions | – | (16) | (1) | (17) | – | – | (17) | | (Impairments)/Impairment reversal | (39) | – | – | (39) | 39 | – | – | | Revaluations | (162) | – | 20 | (142) | (20) | 44 | (118) | | Loans repayable within 12 months transferred to current assets | – | – | (15) | (15) | (11) | – | (26) | | **Balance at 31 March 2020** | 2,297 | 65 | 1,030 | 3,392 | (2,219) | 533 | 1,706 | 10.1 Ordinary Shares in other public sector bodies
| | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |--------------------------------|------------------------------|--------------------|------------------------------|--------------------| | **Balance at 1 April** | 2,479 | 1,404 | 2,346 | 1,337 | | **Additions** | 19 | 19 | 125 | – | | (Impairments)/Impairment reversal | (39) | – | (30) | – | | **Revaluations** | (162) | (118) | 38 | 67 | | **Balance at 31 March** | 2,297 | 1,305 | 2,479 | 1,404 |
Comprising
Ordinary Shares held within the Departmental boundary – held at cost
Ordinary Shares held outside the Departmental boundary – held at fair value
**Balance at 31 March**
Core Department
Ordinary Shares in other public sector bodies held within the Departmental boundary
In accordance with the FReM, ordinary shares held within the Departmental boundary are carried at historical cost less any provision for impairment. They are eliminated on consolidation.
**British Business Bank Plc (BBB)**
The Core Department through the Secretary of State (SoS) holds 1,496,407,933 ordinary shares (31 March 2019: 1,496,407,933), each with a nominal value of £1. The Core Department made £nil (31 March 2019: £125 million) of share capital additions in BBB during the year. The Core Department’s holding had a cost of £1,496 million at 31 March 2020 (31 March 2019: £1,496 million).
The principal objective of the company is to address long-standing, structural gaps in the supply of finance and bring together in one place Government finance support for small and mid-sized businesses.
**UK Green Infrastructure Platform (UKGIP)**
The Core Department through the SoS holds 90% of the share capital of UK Green Infrastructure Platform Limited in the form of 900 ordinary shares (31 March 2019: 900), each with a nominal value of £1.
UKGIP’s share capital was acquired for £93 million and the recognition of a shareholder loan of £40 million. The Core Department’s holding had a cost less provision for impairment of £25 million at 31 March 2020 (31 March 2019: £65 million). The total loan outstanding at 31 March 2020 was £nil (31 March 2019: £8 million) which is included within the Loans and investments in public sector bodies note.
UKGIP was established to enable Government to retain an interest in five existing GIB investments. The Green Investment Group is the remaining 10% shareholder. The primary activity of UK GIP is to hold green investments and identify opportunities to realise them in a way which returns best value for taxpayers’ money.
**UK Shared Business Services Limited (UKSBS)**
The Core Department though the SoS holds 62,016,358 non-voting shares and one voting share in UKSBS, held at cost less provision for impairment of £3 million at 31 March 2020 (31 March 2019: £3 million). The company is a specialist business services organisation that provides finance, procurement, grants, information systems and HR and payroll services to the public sector. Its main objective is to improve the economy, efficiency and effectiveness of corporate services to BEIS bodies.
**Low Carbon Contracts Company Limited (LCCC)** The Core Department through the SoS holds one ordinary share in LCCC with a nominal value of £1. The principal objective of the company is to be the counterparty to and manage Contracts for Difference (CfDs) throughout their lifetime.
**Electricity Settlements Company Limited (ESC)** The Core Department through the SoS holds one ordinary share in ESC with a nominal value of £1. The principal objective of the company is to oversee settlement of the Capacity Market agreements.
**Enrichment Holdings Limited (EHL)** The Core Department through the SoS holds two shares of £1 each in EHL with a nominal value of £2.
EHL has been set up as a holding company, along with a subsidiary company, Enrichment Investments Limited (EIL), solely to hold the Government’s one third share in Urenco Limited, an entity operating in the civil uranium enrichment sector.
**BIS (Postal Services Act 2011) Company Limited** The Core Department through the SoS holds one ordinary share in BIS (Postal Services Act 2011) Company Limited with a nominal value of £1.
The principal objective of the company is to dispose of the assets transferred to it from the Royal Mail Pension Plan (RMPP).
**South Tees Site Company Limited (STSC)** The Core Department through the SoS holds one ordinary share in STSC with a nominal value of £1. The principal objective of the company is to secure and manage the South Tees Site.
**Postal Services Holding Company Limited (PSH)** The Core Department through the SoS holds 50,005 ordinary shares in PSH which is 100% of the issued share capital at a historic cost of £430 million at 31 March 2020 (31 March 2019: £430 million). The Core Department through the SoS also owns one special share in PSH, relating to certain areas for which Special Shareholder’s consent is required.
The Core Department’s holding had a cost less provision for impairment of £nil at 31 March 2020 (31 March 2019: £nil). PSH is currently in the process of liquidation due to the cessation of its primary activities.
The principal objective of the company prior to cessation was to hold and manage its shares in Post Office Limited (POL), which prior to cessation were transferred to the Core Department.
**Ordinary Shares held outside of the Departmental boundary** Shares held outside of the Departmental boundary are carried at fair value.
**Post Office Limited (POL)** The Core Department through the SoS holds 50,003 ordinary shares in POL at a nominal value of £1 each which is 100% of the issued share capital. There is a special share in POL (nominal value of £1) which is held directly by the Secretary of State for BEIS. This shareholding is held at fair value, but as there is no active market for these shares the net asset value of POL is considered to be a reasonable approximation for fair value. The fair value of the investments, held by the Core Department, as at 31 March 2020 was £145 million (31 March 2019: £256 million).
The principal objective of POL is to provide retail post office services through its national network of branches.
**British Nuclear Fuels Limited (BNFL)**
The Core Department holds 50,000 ordinary shares in BNFL at a nominal value of £1 each. The Secretary of State for BEIS holds 49,999 ordinary shares and the Treasury Solicitor holds one ordinary share.
The Core Department’s shareholding is held at fair value, but because there is no active market for these shares the net asset value of BNFL is considered to be a reasonable approximation of fair value. The fair value as at 31 March 2020 was £325 million (31 March 2019: £324 million).
**Ordnance Survey Limited (OSL)**
The Core Department through the SoS holds 34,000,002 ordinary shares in OSL at a nominal value of £1 each which is 100% of the issued share capital.
The shareholding is held at fair value, but as there is no active market for these shares the net asset value of OSL is considered to be a reasonable approximation for fair value. The fair value as at 31 March 2020 was £151 million (31 March 2019: £179 million).
The principal objective of OSL is to produce mapping products and mapping data information.
**NPL Management Limited (NPLML)**
The Core Department through the SoS holds 76 ordinary shares in NPLML which is 100% of the issued share capital.
NPLML has been set up to manage and operate the National physical laboratory.
The shareholding is held at fair value, but as there is no active market for these shares the net asset value of NPLML is considered to be a reasonable approximation for fair value. The fair value as at 31 March 2020 was £70 million (31 March 2019: £78 million).
**NNL Holdings Limited (NNLH)**
The Core Department through the SoS holds two shares of £1 each in NNLH with a nominal value of £1 each.
NNLH has been set up as a holding company, to hold all the shares in the National Nuclear Laboratory Limited.
The shareholding is held at fair value but because there is no active market for these shares the net asset value of NNLH is considered to be a reasonable approximation of fair value. The fair value as at 31 March 2020 was £81 million (31 March 2019: £79 million).
**NDPBs and other designated bodies**
**NDA subsidiaries**
The NDA controls the following subsidiaries, all of which are outside the Departmental Group boundary and not consolidated into these accounts. The holdings are valued at fair value. As there is no active market, the net assets of the entities are considered the most appropriate approximation of fair value and amounted to £533 million as at 31 March 2020 (31 March 2019: £489 million).
### 10.2 Public Dividend Capital (PDC)
| Name | Country of incorporation | Nature of business | Holding entity | Proportion of ordinary shares held | |-------------------------------------------|--------------------------|--------------------------------------------------------|----------------|-----------------------------------| | Direct Rail Services Limited | UK | Rail transport services within the UK | NDA | 100% | | International Nuclear Services France SAS (i) | France | Transportation of spent fuel | NDA | 100% | | International Nuclear Services Japan KK (i) | Japan | Transportation of spent fuel | NDA | 100% | | International Nuclear Services Limited | UK | Contract management and the transportation of spent fuel, reprocessing products and waste | NDA | 100% | | NDA Properties Limited | UK | Property management | NDA | 100% | | Pacific Nuclear Transport Limited (i) | UK | Transportation of spent fuel, reprocessing products and waste | NDA | 68.75% | | Rutherford Indemnity Limited | Guernsey | Nuclear insurance | NDA | 100% |
(i) Ownership through International Nuclear Services Limited.
PDC is held by the Core Department. In accordance with the FReM, PDC is carried at historical cost less any impairment.
The Office of National Statistics (ONS) determines whether an entity is classified to the public sector and if classified to the public sector, whether an entity is included in the consolidation boundary for a department, in 2018-19 the ONS reclassified Companies House from a public corporation (a non-consolidated public body) to a central government body (a consolidated body). This will result in Companies House being consolidated into the Departmental Group accounts, this will occur, once Companies House’s legal trading fund status has been revoked. The Revocation Order Statutory Instrument (SI) 2019: No.1337, was laid on 15 October 2019 and comes into force on 1 April 2020. Therefore, Companies House will be consolidated in the 2020-21 Departmental Group accounts. See note 27 for further details.
#### 10.2.1 Share of net assets and results for Public Dividend Capital holdings outside the Departmental consolidation boundary
The Department is required to disclose its share of the net assets and the results for the year of other public sector bodies, which are outside of the Departmental boundary. The following disclosures relate to the Department’s trading funds. For all bodies, information for 2019-20 was derived from their draft unaudited accounts. The information for 2018-19 was derived from their audited accounts. The accounts were prepared on an IFRS basis, in accordance with the requirements of the FReM.
### 10.3 Loans in public sector bodies
| Core Department and Agencies | 31 March 2020 | 31 March 2019 | |-----------------------------|--------------|--------------| | Balance at 1 April | £m | £m | | Core Department | 788 | 569 | | Departmental Group | 273 | 211 | | Additions | 238 | 305 | | Repayments | (1) | (24) | | Unwind of discount | -- | 1 | | Revaluations | 20 | -- | | Loans repayable within 12 months transferred to current assets | (15) | (63) | | Balance at 31 March | 1,030 | 788 | | Core Department | | | | Departmental Group | | | | Loans in other public sector bodies
The balance comprises a number of loans to public sector bodies, the most significant loans making up the balance are detailed below:
**Energy Efficiency Loans**
The Core Department’s energy efficiency loans scheme was set up under the Environmental Protection Act 1990 to help businesses and public sector organisations reduce their energy costs by providing interest free loans for the implementation of energy efficiency projects.
The total carrying amount with public sector bodies is £255 million at 31 March 2020 (31 March 2019: £212 million). The non-current element of the loans is £202 million at 31 March 2020 (31 March 2019: £169 million) included in the table above; the current element of these loans is £53 million at 31 March 2020 (31 March 2019: £43 million), which is included in note 15. The loans are accounted for at amortised cost under IFRS 9.
These loans are to non-consolidated public sector entities and are not eliminated on consolidation.
**Fleetbank Funding Limited Loan (Enable Funding programme)**
The Core Department’s loan to Fleetbank Funding Limited is to provide funding to support the Enable Funding programme, managed by the British Business Bank. This was launched in November 2014 and aimed at improving the provision of asset and lease finance to smaller UK businesses.
The total carrying amount of the Fleetbank Funding Limited loan is £410 million at 31 March 2020 (31 March 2019: £339 million). The non-current element of the loans is £410 million at 31 March 2020 (31 March 2019: £303 million) included in the table above; the current element of these loans is £nil at 31 March 2020 (31 March 2019: £36 million), which is included in note 15. The loans are accounted for at amortised cost under IFRS 9.
This loan is to an entity that is consolidated within these financial statements and the loan is eliminated on consolidation.
**Northern Powerhouse Investment Limited and Midlands Engine Investment Limited Loans**
The Core Department has loans with Northern Powerhouse Investment Fund and Midlands Engine Investment Fund. The funds are matched by funding from the European Investment Bank. The funds are set up to provide commercially-focused finance to help small and medium sized enterprises start up and grow.
The carrying amount of the loan investments in these entities is £140 million at 31 March 2020 (31 March 2019: £109 million). The loans are accounted for at cost under IAS 27.
These loans are to consolidated bodies and are eliminated on consolidation.
**Met Office Loans**
The Core Department’s loan with the Met Office funds UK membership of EUMETSAT. EUMETSAT is a non-EU international organisation set up to develop, launch and monitor meteorological satellites which provide global data for weather forecasting.
The total carrying amount of the Met Office loan is £118 million at 31 March 2020 (31 March 2019: £91 million). The non-current element of the loans is £104 million at 31 March 2020 (31 March 2019: £81 million) included in the table above; the current element of these loans is £14 million at 31 March 2020 (31 March 2019: £10 million), which is included in note 15. The loans are accounted for at amortised cost under IFRS 9.
These loans are to non-consolidated bodies and are not eliminated on consolidation.
### 10.4 Special Shares
The Secretary of State holds one Special Share in each of the entities listed below. The list is a summary and not a comprehensive record of the terms of each respective shareholding. Further details can be obtained from the annual report and financial statements of each body or their Articles of Association.
The Core Department does not recognise the special or ‘golden’ shares on its Statement of Financial Position.
| Body in which Share is held and type and value of Share | Significant terms of Shareholding | |--------------------------------------------------------|----------------------------------| | Postal Services Holding Company Limited. £1 Special Rights Preference Share | • Created in January 2001 (formerly called Royal Mail Holdings plc)\
• It may be redeemed at any time by the shareholder\
• The consent of the special shareholder is required for a number of decisions, including:\
− Appointments to the Board (the special shareholder can also make appointments to the Board)\
− Setting (and approving any material changes in) the remuneration packages of the Directors\
− Borrowing\
− Disposing of substantial assets of the business and shareholdings\
− Voluntary winding-up of the company\
− Varying certain of the company’s Articles of Association, including the rights of the special shareholder.\
Note: The company is now in members’ voluntary liquidation and control of its affairs has been passed to the Joint Liquidators. | | Body in which Share is held and type and value of Share | Significant terms of Shareholding | |--------------------------------------------------------|----------------------------------| | **Post Office Limited ("POL")**<br>£1 Special Rights Redeemable Preference Share | • Created in April 2012\
• Special Shareholder is entitled to attend and speak at any general meeting or any meeting of any other class of shareholders of POL, but the Special Share does not carry voting rights or any other rights at any such meeting.\
• It may be redeemed at any time by the Special Shareholder, POL cannot redeem the Special Share without prior consent of the Special Shareholder.\
• The consent of the special shareholder is required for a number of decisions, including:\
– Varying POL’s Articles of Association, including the rights of the special shareholder;\
– Appointment or removal from office of any Director of POL;\
– Approval of (including material variations) Directors’ remuneration and terms of employment;\
– Adoption of (and any material variation in) POL’s strategic plan;\
– Substantial alterations in the nature of the business carried on by POL;\
– Sale of material assets in the absence of which POL would not be able to deliver its strategic plan;\
– Incurring of any borrowing exceeding pre-set limits as agreed with HM Treasury;\
– Issuing or allotment of shares or granting of share rights in the company; and\
– Voluntary winding-up of the company or member of the group.\
– Any transaction which will result in a commitment or liability – either individually or when taken together with related relevant transactions – of an amount in excess of £50m. | | **BAE Systems plc**<br>£1 Special Rights Preference Share | • Created in 1985 (but subsequently amended).\
• No time limit.\
• Provides for a 15% limit on any individual foreign shareholding, or group of foreign shareholders acting in concert, in the company.\
• Requires a simple majority of the Board and the Chief Executive to be British.\
• Requires any Executive Chairman to be British and, if both the Chairman and Deputy Chairman are non-executives, requires at least one of them to be British. | | **Rolls Royce Holdings plc**<br>£1 Special Rights Non-Voting Share | • Created in 1987 (but subsequently amended and transferred to Rolls-Royce Holdings plc).\
• No time limit.\
• Provides for a 15% limit on any individual foreign shareholding, or group of foreign shareholders acting in concert, in the company.\
• Requires a simple majority of the Board to be British.\
• Allows either the Chairman or the Chief Executive to be either an EU or US citizen provided that the other is a British citizen.\
• Provides for a veto over the material disposal of assets of the group.\
• Provides for a veto for a proposed voluntary winding up. | | **EDF Energy Nuclear Generation Group Limited**<br>(formerly British Energy Group plc)<br>£1 Special Share | • British Energy Group plc Special Share created on 13 January 2005 and held jointly by the Secretary of State for Business, Energy and Industrial Strategy and the Secretary of State for Scotland.\
• The consent of the Special Shareholder, which can only be refused on grounds of national security (except in relation to an amendment to the company’s Articles of Association), is required in respect of:\
– various amendments to the company’s Articles of Association;\
– any purchase of more than 15% of the company’s shares;\
– the issue of shares carrying voting rights of 15% or more in the company;\
– variations to the voting rights attaching to the company’s shares; and\
– the giving of consent in respect of the issue of shares by, the sale of shares in or amendments to the Articles of Association of various subsidiaries in certain cases. | | Body in which Share is held and type and value of Share | Significant terms of Shareholding | |--------------------------------------------------------|----------------------------------| | **British Energy Bond Finance Limited (formerly British Energy Holdings plc)**<br>£1 Special Share | • British Energy Holdings plc Special Share created on 13 January 2005 and held jointly by the Secretary of State for Business, Energy and Industrial Strategy and the Secretary of State for Scotland.<br>• The consent of the Special Shareholder, which can only be refused on grounds of national security (except in relation to an amendment to the company’s Articles of Association), is required in respect of:<br> – various amendments to the company’s Articles of Association; and<br> – the giving of consent in respect of the issue of shares by, the sale of shares in or amendments to the Articles of Association of various subsidiaries in certain cases. | | **EDF Energy Nuclear Generation Limited (formerly British Energy Generation Ltd)**<br>£1 Special Share | • British Energy Generation Ltd Special Share created in 1996 is held solely by the Secretary of State for Business, Energy and Industrial Strategy.<br>• The consent of the Special Shareholder, which can only be refused on grounds of national security (except in relation to an amendment to the company’s Articles of Association), is required in respect of:<br> – various amendments to the company’s Articles of Association;<br> – the disposal of any of the nuclear power stations owned by the company; and<br> – prior to the permanent closure of such a station, the disposal of any asset which is necessary for the station to generate electricity. | | **British Energy Ltd (formerly British Energy plc)**<br>£1 Special Share | • British Energy plc Special Share created in 1996 is held solely by the Secretary of State for Business, Energy and Industrial Strategy.<br>• The consent of the Special Shareholder, which can only be refused on grounds of national security (except in relation to an amendment to the company’s Articles of Association), is required in respect of:<br> – various amendments to the company’s Articles of Association; and<br> – the giving of consent in respect of the issue of shares by, the sale of shares in or amendments to the Articles of Association of various subsidiaries in certain cases.<br>• The company has no significant assets or liabilities as a result of the restructuring scheme, which came into effect on 14 January 2005. | | **Nuclear Liabilities Fund Ltd**<br>£1 Special Rights Redeemable Preference Share | • Created in 1996.<br>• The Secretary of State for Business, Energy and Industrial Strategy has a Special ‘A’ Share (there is also a ‘B’ Share held by British Energy).<br>• The consent of the Special Shareholder is required for any of the following:<br> – to change any of the provisions in the Memorandum of Association or Articles of Association;<br> – to alter the share capital or the rights attached thereto;<br> – the company to create or issue share options;<br> – the ‘B’ Special Shareholder or any of the Ordinary shareholders to dispose or transfer any of their rights in their shares;<br> – the company to pass a members voluntary winding-up resolution;<br> – the company to recommend, declare or pay a dividend;<br> – the company to create, issue or commit to give any loan capital;<br> – the company to issue a debenture; or<br> – the company to change its accounting reference date. |
### 10.5 Membership Fund
The Secretary of State for Business, Energy and Industrial Strategy has a share in the membership fund of the Carbon Trust. The members’ fund at 31 March 2020 was £nil (31 March 2019: £nil). 11. Other financial assets
| Note | 31 March 2020 | 31 March 2019 restated | |------|---------------|------------------------| | | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | | Balance at 1 April | £m | £m | £m | £m | | IFRS 9 adjustments | – | – | – | (423) | | Revised balance at 1 April | 1,196 | 4,118 | 1,170 | 3,913 | | Additions | 3 | 1,246 | 25 | 1,171 | | Repayments | (346) | (1,172) | (236) | (1,051) | | Effective interest | 25 | 25 | 29 | 29 | | Unwinding of discount | – | – | – | 2 | | Revaluations | 89 | (37) | 212 | 100 | | Impairments | – | (60) | (4) | (69) | | Impairment reversals | – | – | – | 23 | | Balance at 31 March | 967 | 4,120 | 1,196 | 4,118 |
Comprising:
- Repayable launch investments 11.1
- Other loans and investments 11.2
| Note | 31 March 2020 | 31 March 2019 | |------|---------------|---------------| | | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | | Balance at 1 April | £m | £m | £m | £m | | Repayments | (340) | (340) | (230) | (230) | | Effective interest | 25 | 25 | 29 | 29 | | Revaluations | 90 | 90 | 212 | 212 | | Balance at 31 March | 833 | 833 | 1,058 | 1,058 |
Other financial assets – Other loans and investments have been restated, see note 26 for further details.
Other financial assets analysed between current and non-current assets:
| | 31 March 2020 | 31 March 2019 | |------|---------------|---------------| | | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | | Due within twelve months | – | – | – | – | | Due after twelve months | 967 | 4,120 | 1,196 | 4,118 | | Total | 967 | 4,120 | 1,196 | 4,118 |
11.1 Repayable launch investments
Repayable Launch Investments (RLI) are held by the Core Department.
The Core Department has determined that RLI are classified as ‘fair value through profit or loss financial assets’ in accordance with IFRS 9. Fair value gains and losses are therefore recognised directly in the SoCNE.
The Core Department, under the provisions of the 1982 Civil Aviation Act, provides repayable launch investment to companies to fund a proportion of the non-recurring eligible design and development capital costs on civil aerospace development products. Each product supported is covered by separate contractual terms and conditions. Under these contracts, periodic repayments become due when products are delivered or at other specific points. The portfolio of investments is valued twice annually and the valuations are based on forecast annual income arising under each contract.
**Measurement and carrying values**
RLI contracts are initially recognised at fair value which is the transaction price. After initial recognition, the value is the discounted forecast value of future income streams, excluding accrued income which is included in receivables when products are delivered. The value of future income streams is predominantly driven by the Core Department’s view of the applicable programme’s performance in the global market over the period of the contract’s life; a number of activities inform this view and some are described below.
The Core Department uses a variety of sources to inform a forecast of deliveries for individual programmes. This can include using: an internal delivery forecast model and market share model, forecast delivery schedules and other data directly provided from the RLI recipient companies, publicly available aircraft delivery forecasts, specifically commissioned consultant programme forecasts as well as commentary and views from industry experts.
The approach taken is entirely dependent on the programme in question.
Other valuation variables include inflation measures – or proxies (such as RPI, RPIX, gilt rates and GDP deflators). Some contracts entitle the Core Department to a share of aircraft or engine spare part and support income, and the valuation of these contracts is based on analysis of past income streams and forecasts of future demand. The forecast income streams are adjusted by inflation of 2.35% and then are discounted to present value using a constant discount rate of 3.5% representing the effective rate of return of the investment portfolio.
The carrying value of RLI is influenced by the interaction of key drivers such as aircraft or engine deliveries and economic variables. The Core Department uses Monte-Carlo simulation to understand the effect of different scenarios for these drivers on the valuation of each contract. The Core Department considers that the carrying value is a reasonable approximation of the fair value of RLI.
The carrying value of the investments derived from the discounted cash flow model at 31 March 2020 was £833 million (31 March 2019: £1,058 million). The historic cost, including repayments to date and excluding accrued income, of the portfolio at 31 March 2020 was £279 million (31 March 2019: £389 million).
**Sensitivity analysis**
The Core Department has developed a Monte-Carlo based approach which uses the software package @Risk to assess the impact of uncertainty on forecast income, overall contract values, and enhance the robustness of the valuation process. Uncertainties are addressed by constructing different scenarios for the key drivers and then assigning probabilities to these scenarios to implement a Monte-Carlo simulation of the contracts on a contract-by-contract basis. The key variables include: programme development delays, changes to entry into service and out of service dates, production levels, market shares and economic variables used as inflation measures.
The contracts are highly complex and generally distinct from each other in their terms and structure, yet there are cases of significant interdependencies between contracts and correlations between variables.
The model is iterated ten thousand times to produce distributions of income for each contract and thus the overall portfolio. Each iteration of the model produces an income forecast. These are collated and used to form an income distribution. It is from this distribution that the value of the portfolio is calculated.
In order to give an assessment of potential volatility for the portfolio, we calculate the 5th and 95th percentiles from the income distribution – 90% of all the iterations outputted from the Monte-Carlo simulation lie between these particular percentile points. The lower (5th) and upper (95th) points which define this interval were £772 million and £866 million respectively, at 31 March 2020 (2018-19: £999 million and £1,076 million). Risk
Market risk This constitutes the largest area of potential risk in the portfolio as the primary method of the calculation of income streams is based on the forecasts of aircraft or engine deliveries. The Core Department uses internal analysis, company information and third-party information to forecast deliveries and ultimately future income on each investment over the life of the investment period. Deliveries in the short term are driven by variables which include manufacturer production plans, market cycles, customer demand and availability of financing. Medium and longer-term deliveries will be affected by overall market growth and the market attractiveness of an aircraft programme. A negative shift in outlook may result in the Core Department not being able to recover its investment in whole or in part, although once deliveries have commenced some level of income is usually due to the Core Department. The valuation has sought to take account of the economic downturn as a result of COVID-19 and this has been reflected in updated forecasts. The Core Department aims to minimise risk of under-recovery of investments by carrying out a full evaluation of each business case submitted for launch investment support, and by ongoing monitoring programmes for the substantive life of the contracts to allow it to assess exposure to risks (including project risk, market risk and technical risk). Some contacts have fixed payment terms rather than payments on delivery of aircrafts, mitigating the market risk further.
Interest rate risk A number of the contracts use retail price indexes (such as RPI and RPIX) or other surrogates as a tool to inflate the value of income due to the Core Department over time. As such there is a risk relating to the forecasting of these indexes and surrogates within the valuation, although we estimate that the risk is relatively low and the overall impact relatively minor.
Foreign exchange risk The Core Department has a small number of contracts which may deliver a US Dollar denominated income in their later stages which would be translated into pounds sterling. We assess these income streams as relatively low value, thus exchange rate risk exists but is minimal in the context of the overall portfolio.
Credit risk Company failure could result in the Core Department’s investment not being recovered in whole or in part. The Core Department seeks to offset this low probability risk by analysing the financial health of any applicant at the time of application for launch investment and reviewing financial health as part of the programme monitoring activity. In addition, contracts aim to contain provisions which will (as a minimum) not disadvantage the Core Department compared to other creditors in the event of a corporate failure. The Core Department takes steps to monitor the payments that become due to companies under launch investment contracts to ensure they comply with the terms of the contracts. Finally, the contracts also require the company’s auditors to confirm that all payments have been made correctly and to identify any errors made.
Other risk The Core Department’s investments are exposed to wider risks such as economic downturns or market shocks from natural or non-natural events. These risks may adversely impact the value and timing of the income received by the Core Department. The Core Department seeks to manage this risk by actively monitoring such events when they arise to assess any potential impact.
### 11.2 Other loans and investments
| | Gilts and bonds | Term deposits | Private sector loans | Property related holdings | Private sector shares | Equities (listed securities) | Private equities | Investment funds | Other investments | Total | |----------------------|-----------------|---------------|----------------------|---------------------------|-----------------------|-------------------------------|-----------------|-----------------|------------------|-------| | **Balance at 31 March 2018** | 59 | 14 | 598 | 42 | – | 269 | 317 | 1,321 | 669 | 3,289 | | IFRS 9 adjustment – transfers between categories | – | – | 61 | (42) | 99 | (269) | (317) | 544 | (76) | – | | IFRS 9 adjustment – Other | (1) | – | 2 | – | – | – | – | 37 | (461) | (423) | | **Balance at 1 April 2018 restated** | 58 | 14 | 661 | – | 99 | – | – | 1,902 | 132 | 2,866 | | Additions | 8 | – | 391 | – | 108 | – | – | 655 | 7 | 1,169 | | Redemptions | (25) | (1) | (228) | – | (24) | – | – | (515) | (28) | (821) | | Revaluations | – | – | – | (16) | – | – | – | (54) | (43) | (113) | | Unwinding of discount| 2 | – | – | – | – | – | – | – | – | 2 | | Impairments | – | – | (63) | – | (3) | – | – | – | – | (66) | | Impairment reversal | – | – | 23 | – | – | – | – | – | – | 23 | | **Balance at 31 March 2019 restated** | 43 | 13 | 784 | – | 164 | – | – | 1,988 | 68 | 3,060 | | Additions | 6 | – | 604 | – | 22 | – | – | 608 | 6 | 1,246 | | Repayments | (8) | (7) | (450) | – | (17) | – | – | (320) | (30) | (832) | | Revaluations | – | – | – | (8) | – | – | – | (75) | (44) | (127) | | Impairments | – | – | (61) | – | – | – | – | 1 | – | (60) | | **Balance at 31 March 2020** | 41 | 6 | 877 | – | 161 | – | – | 2,202 | – | 3,287 | | Of the total: | | | | | | | | | | | | Core Department and Agencies | – | – | 2 | – | 44 | – | – | 88 | – | 134 | | NDPBs and other designated bodies | 41 | 6 | 875 | – | 117 | – | – | 2,114 | – | 3,153 | | **Balance at 31 March 2020** | 41 | 6 | 877 | – | 161 | – | – | 2,202 | – | 3,287 |
Other financial assets – Other loans and investments – Investment Funds have been restated, see note 26 for further details. **NDPBs and other designated bodies**
**Private sector loans**
British Business Bank (BBB), Fleetbank Funding Ltd (FFL) and UK Research and Innovation (UKRI) have entered into loan agreements with parties within the private sector. The loans within the Departmental Group are carried at historic cost as a proxy for amortised cost because the NDPBs and other designated bodies have determined that there is no material difference between historical cost and amortised cost.
As at 31 March 2020, £877 million of loans were held by NDPBs and other designated bodies (31 March 2019: £784 million).
The value of loans held by BBB as at 31 March 2020 was £500 million (31 March 2019: £432 million). The conditions attached to each loan vary depending on the details of the arrangement. Repayment schedules have been agreed and all loans are expected to be repaid at the end of the loan term. During the reporting period BBB made loans of £50 million (31 March 2019: £26 million) to private companies through the BFP Small Business scheme. BBB provides invoice discount finance and peer to peer lending through the Investment Programme funds which were valued at £257 million at 31 March 2020 (31 March 2019: £233 million). BBB provides loans to start ups and small businesses via The Start Up Loans Company which were valued at £110 million at 31 March 2020 (31 March 2019: £137 million). The amortised cost valuations include Expected credit loss (ECL) provisions taking account of the impacts of Covid-19 based on the available information at the reporting date. Further information on the ECL provisions are given in note 22.
During 2019-20, FFL made loans of £288 million (31 March 2019: £141 million) to private companies through the Enable Loan Programme scheme. The value of loans held by FFL as at 31 March 2020 was £366 million (31 March 2019: £330 million).
As part of the review undertaken on financial instruments on transition to IFRS 9 on 1 April 2018, it was identified that £61 million of financial instruments held by BBB that were disclosed as Investment funds, and would be more appropriately disclosed as a private sector loan. The balance at 31 March 2018 was transferred to the Private sector loan category. Remeasurement of the loan value including related expected credit losses led to an adjustment on adoption of IFRS 9 of £2 million to BBB's private sector loans.
**Private sector shares, Equities (listed securities) and Private equities**
At 31 March 2020 the Departmental Group held £161 million of private sector shares (31 March 2019: £164 million). These were held by BIS (Postal Services Act 2011) Company Ltd, Nesta Trust, and UKRI. These are measured at ‘fair value through profit or loss’, with fair value movements going directly to the SoCNE.
The fair values are estimated based on a variety of valuation techniques, adopted by the investment managers that comply with the International Private Equity and Venture Capital Valuation (IPEV) Guidelines or the valuation guidelines produced by the British Venture Capital Association (BVCA). Valuation techniques used include the use of earnings multiples, discounted cash flows analysis, and net asset values.
Nesta Trust holds the majority of private sector shares – they include holdings in a range of large companies and smaller early stage investments with a total value at 31 March 2020 of £98 million (31 March 2019: £104 million).
Private sector shares were split between listed securities and private equities as at 31 March 2018. Following the IFRS 9 review, reclassification between categories was made to ensure a consistent disclosure in 2018-19. In particular, £39 million of listed securities and £3 million of private equities were transferred into private sector shares, with the remainder £544 million (made up of £230 million Equities (listed securities) and £314 million Private equities) being transferred to investment funds. In addition, £25 million was reclassified from Other investments to Private sector shares and £32 million was reclassified from Investment funds, relating to holdings in Private sector shares. Investment funds
BBB, Nesta Trust, BIS (Postal Services Act 2011) Company Limited, Northern Powerhouse Investment Limited and Midlands Engine Investments Limited hold investment funds. The value invested at 31 March 2020 was £2,202 million (31 March 2019: £1,988 million restated). In accordance with IFRS 9, the investments are measured at ‘fair value through profit or loss’ with fair value movements going directly to the SoCNE.
BBB held investment funds valued at £1,495 million at 31 March 2020 (31 March 2019: £1,281 million). The most significant investment is in the Business Finance Partnership (BFP) for medium sized businesses at 31 March 2020, this was valued at £408 million (31 March 2019: £435 million). The BFP aims to increase the supply of capital through non-bank lending channels and, in the longer term, to help to diversify the sources of finance available to businesses. BBB also has an investment fund in Enterprise Capital Funds which were valued at £252 million at 31 March 2020 (31 March 2019: £222 million), and a long-term venture and growth capital investment fund in British Patient Capital valued £316 million at 31 March 2020 (31 March 2019: £198 million). The fair values of the Investment Funds held by BBB are based on valuations at 31 December 2019 updated for cash movements. They do not include any valuation adjustment calculated by the fund managers to take account of the impact of Covid-19 on the valuations at 31 March 2020. The expected fair value adjustment based on draft fund managers reports of between -2% to -6% of the fair value of the Investment funds held by BBB has not been included in the BBB valuations at 31 March 2020 as it would be an immaterial adjustment.
The fair value of the investments in BPSA as at 31 March 2020 was £215 million (31 March 2019 restated: £274 million). These investments primarily comprised investments in European and North American unquoted shares. The fair value of the Investment Funds held by BPSA include a valuation adjustment of circa -8% calculated by the fund managers to take account of the impact of Covid-19 on the valuations at 31 March 2020.
In 2017-18, prior to the adoption of IFRS 9, under IAS 39 Investment Funds were classified as ‘available-for-sale financial assets’ with fair value movements recognised in Other comprehensive income. As part of the implementation review for IFRS 9, it was identified that financial investments of £42 million previously disclosed as Property related holdings, £230 million previously disclosed as Equities (listed securities), £314 million previously disclosed as Private equites and £50 million previously disclosed as Other investments, were reclassified as Investments funds which better represent their nature. £61 million was transferred out of investment funds to private sector loans, and £31 million was transferred out into private sector shares.
Under IFRS 9, embedded derivatives are no longer assessed separately from the host instrument, leading to the transfer of BBB’s £31 million of embedded derivatives to the investment fund category, prior to the adoption of IFRS 9, under IAS 39 this was disclosed as a Derivative.
In addition, the IFRS 9 adjustment – other has been restated by £6 million due to the BPSA restatement along with the prior year in-year movements as explained in note 26. 12. Recoverable contract costs
The Departmental Group has commercial agreements in place under which some or all of the expenditure required to settle nuclear provisions will be recovered from third parties. Net recoverable costs at 31 March 2020 were £1,425 million (31 March 2019: £1,620 million).
| Recoverable contract costs relating to nuclear provisions | Departmental Group 31 March 2020 £m | Departmental Group 31 March 2019 £m | |----------------------------------------------------------|-------------------------------------|-------------------------------------| | Gross recoverable contract costs | 5,087 | 5,046 | | Less applicable payments received on account | (3,304) | (3,092) | | Less associated contract loss provisions | (358) | (334) | | Balance at 31 March | 1,425 | 1,620 |
The above balances relate to the Nuclear Decommissioning Authority. The movements in gross recoverable contract costs during the year were:
| Movements in gross recoverable contract costs | Departmental Group 31 March 2020 £m | Departmental Group 31 March 2019 £m | |---------------------------------------------|-------------------------------------|-------------------------------------| | Gross recoverable contract costs at 1 April | 5,046 | 7,081 | | Increase/(decrease) in year | 334 | (1,510) | | Unwinding of discount | (7) | (83) | | Release in year – continuing operations | (185) | (276) | | Amortisation of recoverable contract costs | (101) | (166) | | Balance at 31 March | 5,087 | 5,046 |
The gross balance of recoverable contract costs of £5,087 million (31 March 2019: £5,046 million) comprises £1,516 million (31 March 2019: £1,617 million) of past costs which were incurred before the revenue recognition period of the related contracts and will be amortised in future years in line with revenue and £3,571 million (31 March 2019: £3,429 million) of probable future costs which form part of the nuclear decommissioning provision (note 18.1) and will be released as they are incurred. Further details are published in the NDA’s accounts.
The movement in the gross recoverable contract costs during the year broken down by the type of costs are detailed in the table below:
| Historic costs | Future costs | Total costs | Historic costs | Future costs | Total costs | |----------------|--------------|-------------|----------------|--------------|-------------| | £m | £m | £m | £m | £m | £m | | Balance at 1 April | 1,617 | 3,429 | 5,046 | 1,783 | 5,298 | 7,081 | | Increase/(decrease) in the year | – | 334 | 334 | – | (1,510) | (1,510) | | Unwinding of discount | – | (7) | (7) | – | (83) | (83) | | Amortisation | (101) | – | (101) | (166) | – | (166) | | Release in year | – | (185) | (185) | – | (276) | (276) | | Balance at 31 March | 1,516 | 3,571 | 5,087 | 1,617 | 3,429 | 5,046 | The historic costs within the above are deemed contract assets under IFRS 15 ‘Revenue from Contracts with Customers’. The opening balances, amortisation in period and closing balances for each main contract type are:
| Departmental Group | Spent fuel reprocessing and associated waste management | Spent fuel receipt and management | Total | Spent fuel reprocessing and associated waste management | Spent fuel receipt and management | Total | |--------------------|--------------------------------------------------------|---------------------------------|-------|--------------------------------------------------------|---------------------------------|-------| | 2019-20 | £m | £m | £m | £m | £m | £m | | Balance at 1 April | 1,026 | 591 | 1,617 | 1,162 | 621 | 1,783 | | Amortisation | (71) | (30) | (101) | (136) | (30) | (166) | | Balance at 31 March| 955 | 561 | 1,516 | 1,026 | 591 | 1,617 |
Contract assets under IFRS 15 are deemed financial instruments for the purposes of IFRS 9 ‘Financial Instruments’ and, therefore, are ordinarily required to be reviewed for expected credit loss impairment. The above contract asset balances comprise costs which have been previously incurred and are now being amortised in each reporting period. They are matched in full by payments on account and, therefore, a credit loss impairment is not required.
13. Investments in joint ventures and associates
| Core Department and Agencies | Departmental Group | 31 March 2020 | £m | 31 March 2019 | £m | |------------------------------|--------------------|--------------|----|--------------|----| | Balance at 1 April | – | 1,039 | – | 367 | – | | Opening balance transfer of investments | – | – | – | 461 | – | | Revised balance at 1 April | – | 1,039 | – | 828 | – | | Additions | – | 30 | – | 37 | – | | Dividends | – | (94) | – | (87) | – | | Disposals | – | (2) | – | – | – | | Profit/(Loss) | – | (5) | – | 186 | – | | Impairments | – | – | – | (1) | – | | Revaluations | – | (1) | – | 76 | – | | Balance at 31 March | – | 967 | – | 1,039 | – |
NDPBs and other designated bodies
The Francis Crick Institute Limited (the “Crick”)
The Crick was established in 2010 to deliver a world class interdisciplinary biomedical research centre. UKRI holds 42% (31 March 2019: 42%) of the ordinary shares in the Crick. The remaining shares are held by Cancer Research UK, University College London, the Wellcome Trust, Kings College London and Imperial College of Science, Technology and Medicine. The Crick became fully operational in 2016-17 following the completion of the Crick building. The value of the Departmental Group’s investment at 31 March 2020 is £299 million (31 March 2019: £304 million), reflecting Departmental Group’s share of net assets. This includes a £8 million upwards revaluation adjustment in 2019-20 (2018-19: £48 million) which aligns the Crick’s property, plant and equipment accounted for under the ‘historic cost’ model to the Departmental Group’s revaluation model.
The principal place of business is Midland Road, London. The results of the Crick are summarised below:
| Summarised financial information | 2019-20 | 2018-19 | |----------------------------------|---------|---------| | Current assets | 56 | 85 | | Non-current assets | 561 | 559 | | Current liabilities | (35) | (34) | | Revenue | 162 | 153 | | Profit/(loss) from continuing activities | (29) | 4 |
| Other financial information | 2019-20 | 2018-19 | |----------------------------------|---------|---------| | Cash and cash equivalents | 30 | 34 | | Depreciation and amortisation | (39) | (39) | | Capital commitments | 3 | 4 |
**URENCO**
URENCO is an international supplier of enrichment services. The Department holds 33% (31 March 2019: 33%) of the ordinary share capital through Enrichment Holdings Limited. From the adoption of IFRS 9, the Department has accounted for its investment in URENCO as an associate rather than a financial investment. At 31 March 2020, the Department’s holding is valued at £444 million (2018-19: £551 million)
The principal place of business is Bells Hill, Stokes Poges, Buckinghamshire.
| Summarised financial information | 2019-20 | 2018-19 | |----------------------------------|---------|---------| | Current assets | 1,340 | 804 | | Non-current assets | 4,227 | 4,846 | | Current liabilities | (339) | (351) | | Non-current liabilities | (3,614) | (3,646) | | Revenue | 1,582 | 1,732 | | Profit/(loss) from continuing activities | 7 | 452 |
| Other financial information | 2019-20 | 2018-19 | |----------------------------------|---------|---------| | Cash and cash equivalents | 275 | 216 | | Current financial liabilities (excl trade and other payables and provisions) | (31) | (30) | | Non-current financial liabilities (excl trade and other payables and provisions) | (1,561) | (1,848) | | Depreciation and amortisation | (312) | (284) | | Amortisation of intangible assets | – | (7) | | Interest income | 65 | 61 | | Interest expense | (159) | (155) | 14. Trade and other receivables
| Amounts falling due within one year: | 31 March 2020 | 31 March 2019 restated | |-------------------------------------|---------------|------------------------| | Trade receivables | 171 | 109 | | Other receivables: | | | | VAT and other taxation | 21 | 22 | | Staff receivables | 1 | 2 | | RPS receivables | 30 | 57 | | Other | 177 | 143 | | Contract Assets | 12 | 6 | | Prepayments and accrued income | 126 | 108 | | | 538 | 447 |
| Amounts falling due after more than one year: | 31 March 2020 | 31 March 2019 restated | |-----------------------------------------------|---------------|------------------------| | Trade receivables | 9 | 9 | | RPS receivables | 42 | – | | Other receivables | 689 | 804 | | Contract Assets | – | 6 | | Prepayments and accrued income | – | 40 | | | 740 | 813 |
Total receivables at 31 March: 1,278, 3,106, 1,260, 2,503
Trade and other receivables has been restated, see note 26 for further details.
Core Department
Other receivables held by the Core Department include a discounted receivable of £808 million (31 March 2019: £920 million) relating to the Government guarantee of certain benefits payable to members and beneficiaries of the Mineworkers’ Pension Scheme made after privatisation of the British Coal Corporation in 1994. The amount receivable by the Core Department within 1 year is £142 million (31 March 2019: £142 million), with the amount receivable not within 1 year £666 million (31 March 2019: £778 million).
The undiscounted amount is £916 million (31 March 2019: £1,058 million). The agreement relating to the guarantee entitles the Government to a portion of any periodic valuation surpluses, generally determined by the Government Actuary following triennial valuations, the most recent valuation was at 30 September 2017. The receivables have been classified as Amortised Cost assets in accordance with IFRS 9: Financial Instruments. In accordance with IFRS 9 the receivable is initially recognised at fair value which equates to the future cash flows being discounted at HM Treasury’s financial instrument nominal rate of 3.7%. No additional income was recognised in 2019-20 (2018-19: £475 million) in relation to an additional sum receivable from the September 2017 valuation (note 6.1). A contingent asset in relation to a similar financial guarantee for the British Coal Staff Superannuation Scheme is disclosed in note 24. More information about the pension schemes can be found at http://www.mps-pension.org.uk and https://www.bcsss-pension.org.uk.
Agencies
The Redundancy Payment Service (RPS) receivable is shown net of an annual impairment. The impairment is calculated by the Insolvency Service using a model which is approved by HMRC. The model calculates the recoverable debt as £72 million as at 31 March 2020 (31 March 2019: £57 million). In line with IFRS 9, RPS debts have been grouped into similar types, in this case they have been grouped between preferential or non-preferential debts. Analysis of historic trends of recovery of these types of debts has revealed that the best estimate of recovery is 6% for non-preferential and 37.8% for preferential (31 March 2019: 5.5% for non-preferential and 40.7% for preferential). 15. Investments and loans in public sector bodies: current
| | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |--------------------------------|------------------------------|--------------------|------------------------------|--------------------| | | 31 March 2020 | 31 March 2019 | | | | Balance at 1 April | 666 | 620 | 732 | 732 | | Additions | 5,379 | 5,379 | 6,240 | 6,240 | | Repayments | (5,373) | (5,353) | (6,369) | (6,369) | | Loans repayable within 12 months transferred from non-current assets | 15 | 26 | 63 | 17 | | Balance at 31 March | 687 | 672 | 666 | 620 |
**Core Department**
The most significant item included above is a loan facility to Post Office Limited (POL). Since October 2003 the Core Department has made available to POL a revolving loan facility of up to £950 million, which was increased by a further £50m in December 2019 to £1,000 million. This is to help the company fund its daily in-branch working capital requirements to deliver services through the network, such as social benefits payments and access to cash. The facility was due to mature in March 2018 but was extended to run until 31 March 2021. The outstanding balance at 31 March 2020 was £602 million (31 March 2019: £565 million) which is included in the £687 million (31 March 2019: £666 million) above.
16. Cash and cash equivalents
| | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |--------------------------------|------------------------------|--------------------|------------------------------|--------------------| | | 31 March 2020 | 31 March 2019 restated | | | | Balance at 1 April | 1,283 | 2,078 | 1,246 | 2,034 | | Net change in cash and cash equivalent balances | (244) | 80 | 37 | 44 | | Balance at 31 March | 1,039 | 2,158 | 1,283 | 2,078 |
The following balances at 31 March were held at:
- The Government Banking Service (GBS) 1,038 1,881 1,282 1,828
- Commercial banks and cash in hand 1 277 1 250
**Balance at 31 March** 1,039 2,158 1,283 2,078
Cash and cash equivalents has been restated, see note 26 for further details. 17. Trade payables and other liabilities
| Amounts falling due within one year: | 31 March 2020 | 31 March 2019 | |-------------------------------------|---------------|---------------| | VAT, social security and other taxation | 10 | 10 | | Trade payables | 38 | 79 | | Other payables | 348 | 552 | | Contract liabilities (see note 17.1)| 6 | 5 | | Other accruals and deferred income | 1,342 | 979 | | Amounts issued from the Consolidated Fund for supply but not spent at year end | 1,036 | 1,280 | | Consolidated Fund Extra Receipts due to be paid to the Consolidated Fund: | | | | Received | 2 | 3 | | | 70 | 6 | | | 2,782 | 2,908 | | | 6,484 | 5,652 |
| Amounts falling due after more than one year: | 31 March 2020 | 31 March 2019 | |-----------------------------------------------|---------------|---------------| | Trade Payables | – | – | | Contract liabilities (see note 17.1) | – | – | | Other payables, accruals and deferred income | 883 | 1,141 | | | 2,467 | 2,901 | | Total payables at 31 March | 3,665 | 4,049 | | | 8,951 | 8,553 |
17.1 Contract liabilities
| Balance at 1 April | 31 March 2020 | 31 March 2019 | |----------------------------------------------|---------------|---------------| | | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | | | £m | £m | £m | £m | | Balance at 1 April | 5 | 2,165 | – | – | | IFRS 15 Adjustment to opening balances | – | – | – | 2,290 | | Revised balance at 1 April | 5 | 2,165 | – | 2,290 | | Additions | 1 | 297 | 5 | 703 | | Release to SOCNE | – | (469) | – | (828) | | Balance at 31 March | 6 | 1,993 | 5 | 2,165 | | Of the total | | | | | | Due within 1 year | 6 | 514 | 5 | 474 | | Due in over 1 year | – | 1,479 | – | 1,691 | | Balance at 31 March | 6 | 1,993 | 5 | 2,165 | Included under accruals and deferred income are:
**Core Department**
Promissory note liabilities with maturities of less than one year of £380 million (31 March 2019: £284 million) and with maturities greater than one year of £926 million (31 March 2019: £1,140 million) which represent amounts owed for various ODA (Official Development Assistance) programmes to which the Core Department has contributed.
Other payables falling due within one year include £240 million (2018-19; £525 million) payable to the British Business Bank (BBB) relating to the un-invested portion of its loan from the Nuclear Liabilities Fund (NLF). Repayments of £285 million (2018-19; £75 million) were made in year. Since it is an intercompany transaction, it is eliminated from the Departmental Group balance. See more detail on the NLF loan in the narrative for NDPBs and other designated bodies that follows.
**NDPBs and other designated bodies**
The majority of contract liabilities are the sums received on account by the Nuclear Decommissioning Authority relating to income from long term contracts to be recognised within one year of £502 million (31 March 2019: £461 million) and after one year of £1,478 million (31 March 2019: £1,691 million); more details are available in the Nuclear Decommissioning Authority’s accounts.
Included in Other payables due within one year in the table above is a loan to BBB from the NLF. In August 2018 BBB received a loan from the NLF, a non-consolidated central government fund of the Departmental Group. The purpose of this investment by NLF into BBB, is for the NLF to achieve a higher rate of return than the NLF has on its investments in the National Loans Fund (NaLF) in previous years. The carrying amount of the borrowing from NLF as at 31 March 2020 was £532 million (31 March 2019: £604 million).
### 18. Provisions for liabilities and charges
| Note | 31 March 2020 | 31 March 2019 | |------|---------------|---------------| | | Core Department and Agencies £m | Departmental Group £m | Core Department and Agencies £m | Departmental Group £m | | **Current liabilities:** | | | | | | Not later than one year | 11,047 | 14,065 | 260 | 3,050 | | **Total current liabilities** | 11,047 | 14,065 | 260 | 3,050 | | **Non-current liabilities:** | | | | | | Later than one year and not later than five years | 645 | 13,200 | 883 | 12,235 | | Later than five years | 1,057 | 122,834 | 1,037 | 119,181 | | **Total non-current liabilities** | 1,702 | 136,034 | 1,920 | 131,416 | | **Total at 31 March** | 12,749 | 150,099 | 2,180 | 134,466 | | **Total provisions** | | | | | | Nuclear | 18.1 | 1,208 | 135,925 | 1,346 | 131,094 | | Other | 18.2 | 11,541 | 14,174 | 834 | 3,372 | | **Total at 31 March** | 12,749 | 150,099 | 2,180 | 134,466 | The provision liabilities in tables 18.1 and 18.2 below have been discounted to present value using discount rates as provided by HM Treasury. Discounting as at 31 March 2019 and 31 March 2020 has been applied to nominal cash flows which include allowance for future inflation using a forecast of consumer price inflation provided by HM Treasury except where a more appropriate forecast has been identified for specific provisions. HM Treasury required this change in 2018-19, and the same basis applies for 2019-20. The impact of the change in the discounting approach is included in the “Change in discount rate” movement of provisions.
| Cash outflows expected within two years | Nominal discount rate | Inflation rate | Equivalent real discount rate | Nominal discount rate | Inflation rate | Equivalent real discount rate | |----------------------------------------|-----------------------|----------------|-------------------------------|-----------------------|----------------|-------------------------------| | Cash outflows expected between two and five years | 0.51% | 1.9% | (1.36%) | 0.76% | 2.0% | (1.22%) | | Cash outflows expected between five and ten years | 0.55% | 2.0% | (1.42%) | 1.14% | 2.1% | (0.94%) | | Cash outflows expected after ten years | 1.99% | 2.0% | (0.01%) | 1.99% | 2.1% | (0.11%) |
Allowances for future inflation and discounting can impact on reported liabilities significantly; uninflated, undiscounted equivalent values are provided in the descriptions of the provisions below to illustrate the effect.
## 18.1 Nuclear provisions
| | British Energy | UK Atomic Energy Authority Decommissioning | Core Department and Agencies Total | NDA Decommissioning | NDA Contract loss | Departmental Group Total | |--------------------------------|----------------|--------------------------------------------|-----------------------------------|---------------------|------------------|------------------------| | **Balance at 1 April 2018** | £m | £m | £m | £m | £m | £m | | Net amount deducted from recoverable contract costs | – | – | – | – | – | 209 | | Unwinding of discount | (17) | (5) | (22) | (3,615) | (15) | (3,652) | | Change in discount rate | (4) | (33) | (37) | (95,969) | 22 | (95,984) | | Provided in the year | 25 | 146 | 171 | (1,114) | (427) | (1,370) | | Recoverable contract cost release in year | – | – | – | (276) | – | (276) | | Provisions utilised in the year| (178) | – | (178) | (2,599) | (157) | (2,934) | | **Balance at 31 March 2019** | 924 | 422 | 1,346 | 129,709 | 39 | 131,094 | | Net amount deducted from recoverable contract costs | – | – | – | – | (25) | (25) | | Unwinding of discount | (14) | (1) | (15) | (135) | (3) | (153) | | Change in discount rate | 13 | 7 | 20 | 216 | 11 | 247 | | Provided in the year | 22 | – | 22 | 7,667 | 143 | 7,832 | | Provisions not required written back | – | (3) | – | – | – | (3) | | Recoverable contract costs – release in year | – | – | – | (185) | – | (185) | | Provisions utilised in the year| (162) | – | (162) | (2,595) | (125) | (2,882) | | **Balance at 31 March 2020** | 783 | 425 | 1,208 | 134,677 | 40 | 135,925 |
### Estimated forward discounted cash flows as at 31 March 2020
| | £m | £m | £m | £m | £m | £m | |--------------------------------|----------------|--------------------------------------------|-----------------------------------|---------------------|------------------|------------------------| | Not later than one year | 144 | – | 144 | 2,941 | – | 3,085 | | Later than one year and not later than five years | 387 | 9 | 396 | 12,349 | 8 | 12,753 | | Later than five years | 252 | 416 | 668 | 119,387 | 32 | 120,087 | | **Total forward cash flows as at 31 March 2020** | 783 | 425 | 1,208 | 134,677 | 40 | 135,925 | Core Department
British Energy
As a result of the restructuring of British Energy (BE) in January 2005, the Government assists BE (now EDF Energy Nuclear Generation Limited) in meeting its contractual historic fuel liabilities. The provision is based on the forecast payment schedule up to 2029 which is set out in the waste processing contracts agreed between BE, BNFL and the Core Department. The discounted liability at 31 March 2020 is £783 million (31 March 2019: £924 million). Payments are adjusted in line with the Retail Prices Index and the liability includes allowance for future inflation using a forecast for the Index from the Office for Budget Responsibility. The undiscounted liability at 31 March 2020, at prices as at the reporting date so excluding the impact of future inflation, is £726 million (31 March 2019: £956 million).
UK Atomic Energy Authority (UKAEA) Decommissioning
The provision represents the estimated costs of decommissioning the Joint European Torus facility at UKAEA’s Culham site, including the storage, processing and eventual disposal of radioactive wastes. The Core Department retains the liability for these costs. Cost estimates in the detailed Life Time Plan for decommissioning are reviewed annually and include an element of uncertainty given that much of the work will not be undertaken until well into the future; timing of expenditure is dependent on the closure date of the facility. The discounted liability at 31 March 2020 is £425 million (31 March 2019: £422 million); the undiscounted liability at 31 March 2020, at prices as at the reporting date so excluding the impact of future inflation, is £401 million (31 March 2019: £402 million).
NDPBs and other designated bodies
NDA Decommissioning
The NDA’s nuclear decommissioning liability represents NDA’s best estimate of the costs of decommissioning plant and equipment on each of the designated nuclear licensed sites in accordance with the published strategy.
The programme of decommissioning work will take until 2137 but, in preparing the estimate, the NDA has focused in particular on the first 20 years which represent £58 billion out of the total £135 billion provision (31 March 2019: £50 billion out of £130 billion). The estimates are necessarily based on assumptions about the processes and methods likely to be used to discharge the obligations and reflect the latest technical knowledge, existing regulatory requirements, Government policy and commercial agreements. Given the very long timescale and the complexity of the plants and material being handled, considerable uncertainty remains in the cost estimate, particularly in the later years. Discounting of the forward cash flow estimates to present value also has a significant impact on the liability reported in the Statement of Financial Position of £135 billion at 31 March 2020 (31 March 2019: £130 billion). The undiscounted equivalent of this reported liability is £132 billion at 31 March 2020 (31 March 2019: £123 billion). The Departmental Group auditors continue to include an emphasis of matter paragraph in their audit certificate concerning the overall measurement uncertainty.
The NDA has commercial agreements in place under which a portion of the expenditure required to settle certain elements of the decommissioning provision are recoverable from third parties. Changes in future cost estimates of discharging these particular elements are therefore matched by a change in recoverable contract costs. In accordance with IAS 37, these recoverable amounts are not offset against the decommissioning provision but are treated as a separate asset (note 12).
Sensitivity Analysis
An increase of 0.5% in the discount rate would reduce the provision to £116 billion, whilst a decrease in discount rate of 0.5% would increase the provision to £159 billion.
The change in discount rates (see page 184) in the current financial year produced a decrease of £3,818 million (2019: £107,764 million increase). This figure excludes the change relating to inflation plus the recoverable contract costs off-setting balance which otherwise result in a decrease of £169 million. Analysis of expected timing of discounted cash flows for the NDA Nuclear Provision is as follows:
| | Waste £m | Research £m | Sellafield £m | Fuel Manufacturing & Generation £m | Others £m | 2019-20 Total £m | 2018-19 Total £m | |----------------------|----------|-------------|---------------|------------------------------------|-----------|------------------|------------------| | Up to 1 year | 90 | 183 | 2,080 | 475 | 113 | 2,941 | 2,735 | | 2 to 5 years | 497 | 758 | 8,877 | 1,834 | 383 | 12,349 | 11,149 | | 6 to 20 years | 2,802 | 1,592 | 31,869 | 5,681 | 695 | 42,639 | 36,405 | | 21 to 50 years | 3,667 | 117 | 32,596 | 8,712 | 645 | 45,737 | 38,752 | | 50 years + | 4,233 | 55 | 23,110 | 3,440 | 364 | 31,202 | 41,617 | | | | | | | | 11,289 | 2,705 | | | | | | | | 98,532 | 20,142 | | | | | | | | 2,200 | 134,668 | | | | | | | | | 130,658 | | Deduction in respect of Site Licence Companies pension receivable from NDA | (191) | | | | | | (949) | | **Total NDA Decommissioning Provisions** | | | | | | **134,677** | **129,709** |
| Sensitivity | Waste £m | Research £m | Sellafield £m | Fuel M&G £m | Others £m | 2019-20 Total £m | 2018-19 Total £m | |-------------|-----------|-------------|---------------|-------------|-----------|------------------|------------------| | Increase | 25,912 | 173 | 83,558 | 2,014 | 110 | 111,767 | 117,341 | | Reduction | (3,860) | (346) | (13,926) | (2,014) | (220) | (20,366) | (24,333) |
The NDA calculates its provision based on management’s best estimate of the future costs of the decommissioning programme, which is expected to take until 2137 to complete. The NDA also considers credible risks and opportunities which may increase or decrease the cost estimate, but which are deemed less probable than the best estimate. These are the basis of the sensitivities identified above, and the key sensitivities are as follows:
- **Waste activities** cover the Low Level Waste Repository and the Geological Disposal Facility (GDF), with the key sensitivities being in the timing and costs of constructing and operating the GDF. The above range from a reduction of £3,860 million to an increase of £25,912 million and reflect three separate sensitivities:
- The potentially higher costs of constructing and operating the GDF itself, which dependent on the location and construction requirements of the facility, could be up to £22,780 million higher (or £3,797 million lower) than the base case assumption
- The impact of the timing of the facility’s construction and operations. The current planned date for the facility to receive waste is 2045. NDA has identified a risk that the construction and opening of the facility may be delayed beyond 2045 (Further information on this can be found in the Governance Statement of the NDA’s Annual Report and Accounts). A delay to this date may increase the cost of the facility itself, along with the cost of interim storage of waste at sites across the NDA estate. A delay of a small number of years is considered to be within the overall tolerance of the estimate for GDF construction and waste transfer, and is not considered to have a material impact on the provision estimate. A longer delay of say 20 years could materially impact the provision, by approximately £2,100 million.
- A delay of 20 years would not necessarily increase the underlying costs of the facility, but would increase the discounted value of the estimate by approximately £1 billion due to the effect of long term negative discount rates.
- **Activities on the sites primarily used for research (Dounreay, Harwell, and Winfrith)** are concerned with final decommissioning of assets and site clearance. Sites will be cleared by 2080. Options are being explored to accelerate site clearance, which in the case of Dounreay would reduce the provision by £346 million; an increase in the cost and/or a delay of past the latest anticipated Interim State date (2033) would increase the provision by up to £173 million. • Sellafield represents activities associated with operation of the site, reprocessing and eventual decommissioning, and includes all site overheads. Principal sensitivities are around the cost of delivering the plan, particularly the costs of new construction, decommissioning and post operational clean out (POCO) work in the long-term (beyond the next twenty years). The potential costs range from a £13,926 million reduction against the current estimate, to a £83,558 million increase.
• fuel manufacturing and generation (which for this purpose includes Magnox and Springfields) programme of work includes defueling the generating stations and preparing for interim Care and Maintenance (complete by 2030) followed by a final site clearance phase around 2070 to 2107. The main cost risk is in the final site clearance phase, which may increase costs by £2,014 million. Conversely a reduction in the costs associated with this phase may reduce costs by £2,014 million.
Further details are reported in the Financial Review on page 29 of the Annual Report and in the NDA Annual Report and Accounts.
**Contract loss**
Contract loss provisions have been recognised by the Nuclear Decommissioning Authority to cover anticipated shortfalls between total income and total expenditure on relevant long term contracts. The amounts are disclosed net after deduction of amounts relating to recoverable contract costs (note 12). The amount provided in the year for contract losses relates to changes in estimates of the costs of existing contracts. The discounted liability at 31 March 2020 is £40 million (31 March 2019: £39 million). Further detail, including movement on the gross provision, can be found in the accounts of the NDA.
### 18.2 Other provisions
| | Business support grant | Concessionary fuel | British Shipbuilders | Legacy ailments | Other | Core and Agencies total | Coal Authority | Early departure costs and restructuring | Other | Departmental Group total | |--------------------------------|------------------------|--------------------|----------------------|----------------|-------|-------------------------|----------------|------------------------------------------|-------|-------------------------| | **Balance at 1 April 2018** | – | 463 | 201 | 124 | 254 | 1,042 | 4,328 | 85 | 195 | 5,650 | | **Change in discount rate** | – | (42) | (56) | (11) | (18) | (127) | (2,634) | – | (38) | (2,799) | | **Provided in the year** | – | – | – | 8 | 47 | 55 | 776 | 12 | 10 | 853 | | **Provisions not required written back** | – | (11) | (1) | – | (3) | (15) | (74) | (1) | (2) | (92) | | **Provisions utilised in the year** | – | (40) | (7) | (18) | (41) | (106) | (28) | (16) | (4) | (154) | | **Unwinding of discount** | – | (7) | (3) | (2) | (3) | (15) | (69) | (1) | (1) | (86) | | **Balance at 31 March 2019** | – | 363 | 134 | 101 | 236 | 834 | 2,299 | 79 | 160 | 3,372 | | **Reclassifications** | – | – | 6 | 62 | (68) | – | – | – | – | – | | **Change in discount rate** | – | 3 | 1 | 1 | 2 | 7 | (96) | – | 69 | (20) | | **Provided in the year** | 10,824 | 11 | 23 | 5 | 29 | 10,892 | 93 | 34 | 36 | 11,055 | | **Provisions not required written back** | – | – | (27) | (12) | (68) | (107) | (1) | (1) | (16) | (125) | | **Provisions utilised in the year** | – | (37) | (7) | (20) | (23) | (87) | (31) | (22) | (17) | (157) | | **Unwinding of discount** | – | (1) | 3 | (1) | 1 | 2 | 42 | – | 5 | 49 | | **Balance at 31 March 2020** | 10,824 | 339 | 133 | 136 | 109 | 11,541 | 2,306 | 90 | 237 | 14,174 | | **Estimated forward discounted cash flows as at 31 March 2020** | | | | | | | | | | | | **Not later than one year** | 10,824 | 36 | 7 | 17 | 19 | 10,903 | 33 | 20 | 24 | 10,980 | | **Later than one year and not later than five years** | – | 119 | 30 | 46 | 54 | 249 | 148 | 36 | 14 | 447 | | **Later than five years** | – | 184 | 96 | 73 | 36 | 389 | 2,125 | 34 | 199 | 2,747 | | **Total forward cash flows as at 31 March 2020** | 10,824 | 339 | 133 | 136 | 109 | 11,541 | 2,306 | 90 | 237 | 14,174 | Core Department
Business support grant
A constructive obligation was created for the Core Department by Government announcements and other associated actions in March 2020 relating to support grants to be paid to eligible businesses in England to ameliorate the adverse economic consequences of the COVID-19 pandemic. The grant is to be paid to recipients under two schemes, the Small Business Grant Fund and the Retail, Hospitality and Leisure Grant Fund, subject to the recipients meeting eligibility criteria assessed as at 11 March 2020. Subject to meeting these criteria, businesses are entitled to the grant on application while the schemes remain open. The grant is to be paid to businesses by local authorities acting as agents on behalf of the Department and applying the guidance at https://www.gov.uk/government/publications/coronavirus-covid-19-guidance-on-business-support-grant-funding. Local authorities reported total grant paid to recipients of £10,873 million as at 9 August 2020, £151 million of which had been paid over in 2019-20 (note 4.4). The Department estimates a further £102 million will be paid by the schemes’ closure date of 28 August 2020. The provision liability of £10,824 million as at 31 March 2020 (31 March 2019: £nil) is undiscounted and represents the Department’s estimate of total payments to be made under the schemes in 2020-21; there is some uncertainty associated with this estimate but the final outturn is not expected to be significantly different.
Concessionary fuel
The provision covers the cost of the Core Department’s responsibility, arising from government announced guarantees, to provide either solid fuel or a cash alternative to ex-miners formerly employed by British Coal and their dependants and to certain former employees who lost their entitlement as a consequence of the restructuring and run down of UK Coal in 2013 and 2015; it includes administration costs. Of the total of 40,000 current beneficiaries at 31 March 2020, 34,800 have opted for the cash alternative at an average cost per beneficiary of £779 per annum; the average annual cost of solid fuel for the remainder is £1,147 per beneficiary excluding delivery costs and VAT. The provision is based on standard female mortality rates and assumes beneficiaries will continue to switch their entitlement from solid fuel to cash in line with rates observed in the recent past. Costs are expected to be incurred up to 2062. The discounted liability at 31 March 2020 is £339 million (31 March 2019: £363 million); the undiscounted liability at 31 March 2020, at prices as at the reporting date so excluding the impact of future inflation, is £326 million (31 March 2019: £352 million).
British Shipbuilders
The provision covers the cost of personal injury compensation claims by former employees of British Shipbuilders and its subsidiaries arising primarily from exposure to asbestos during the course of their work. The Core Department has taken on full responsibility for the liabilities of the former Corporation which was abolished in March 2013. It is subject to considerable uncertainty. The discounted liability at 31 March 2020 is £133 million (31 March 2019: £134 million (£140 million including £6 million reclassified from Other)) and includes £23 million for administration costs which had not been included in prior years. The estimate for compensation claims is based on an actuarial review as at 31 March 2019 and includes allowance for future inflation judged appropriate by the actuary. Administration costs have been estimated by the Department.
British Coal Corporation Health Liabilities (Legacy ailments)
The provision covers the cost of compensation claims relating to personal injuries suffered by former British Coal mineworkers between 1947 and 1994, responsibility for which transferred to the Core Department on 1 January 1998 by a restructuring scheme under the Coal Industry Act 1994; it includes legal and administrative costs, including the storage and management of former British Coal records. The discounted liability at 31 March 2020 is £136 million (31 March 2019: £101 million (£163 million including £62 million reclassified from Other)). The undiscounted liability, at prices as at the reporting date so excluding the impact of future inflation, is £131 million (31 March 2019: £98 million (£159 million including £61 million reclassified from Other)) and is based on forecasts of settlement of claims, taking account of discussion with the Core Department’s legal advisors and claim handlers and recent actuarial estimates; it is subject to considerable uncertainty. The part of the undiscounted liability which relates to compensation claims is £74 million and comprises estimates at prices as at the reporting date of £9 million (31 March 2019: £11 million) for induced hearing loss, £52 million (31 March 2019: £68 million) for miscellaneous disease claims including phurnacite, mesothelioma, pneumoconiosis, pleural thickening, asbestos related conditions, vibration white finger, chronic obstructive pulmonary disease, cancer, pleural plaques and other minor benefits schemes, £4 million (31 March 2019: £19 million) for litigation by former British Coal Coke Oven Workers and £9 million for litigation by former employees of British Coal’s Coventry Homefire plant (31 March 2019: £nil). The current estimate is that liabilities will extend up to 2050.
**Onerous leases**
The liability of £109 million for ‘Other’ Core and agency provisions at 31 March 2020 includes £54 million of provisions for onerous leases for the Core Department in respect of office accommodation at 151 Buckingham Palace Road, 10-18 Victoria Street and other locations. The leases are held by the Government Property Agency but the obligation to finance their running costs remains with the Core Department. The Department has attempted to mitigate potential losses by subleasing but, has determined that, at the reporting date, neither current nor future potential subleases will recover the full costs incurred. The estimate of future income from subleasing as at 31 March 2020 is higher than at 31 March 2019, leading to a significant write-down of this liability. The discounted liability at 31 March 2020 is £54 million (31 March 2019: £113 million). The liabilities extend to 2026.
**NDPBs and other designated bodies**
**Coal Authority**
The Coal Authority provision relates predominantly to the Coal Authority’s responsibilities for mine water treatment, public safety and subsidence, and subsidence pumping stations. Significant uncertainties are associated with estimation of likely costs in respect of these liabilities. The discounted liability at 31 March 2020 is £2,306 million (31 March 2019: £2,299 million). The undiscounted liability at 31 March 2020 is £2,275 million (31 March 2019: £2,174 million). Further details are reported in the Coal Authority Annual Report and Accounts.
**Early departure costs and restructuring**
£78 million (31 March 2019: £67 million) of the restructuring provision relates to site licence companies and includes continuing annual payments under early retirement arrangements to individuals who retired early, or had accepted early retirement, before 31 March 2020 and will continue at least until the date at which the individual would have reached normal retirement age. The undiscounted equivalent is 31 March 2020 is £75 million (31 March 2019: £68 million). 19. Financial guarantee and loan commitment liabilities
| | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | |--------------------------------|------------------------------|--------------------|------------------------------|--------------------| | | 31 March 2020 | 31 March 2019 | | | | Balance at 1 April | 54 | 230 | 61 | 61 | | IFRS 9 Adjustments to Opening Balances | – | – | (16) | 168 | | Revised balance at 1 April | 54 | 230 | 45 | 229 | | Additions | – | 10 | 20 | 58 | | Net remeasurement | 50 | 11 | – | (46) | | Called | (13) | (13) | (11) | (11) | | Balance at 31 March | 91 | 238 | 54 | 230 | | Comprising: | | | | | | Financial guarantee liabilities| 91 | 91 | 54 | 54 | | Loan commitment liabilities | – | 147 | – | 176 | | Balance at 31 March | 91 | 238 | 54 | 230 | | Of which: | | | | | | Current liability | 17 | 17 | 11 | 11 | | Non-current liability | 74 | 221 | 43 | 219 | | Balance at 31 March | 91 | 238 | 54 | 230 |
Following the introduction of IFRS 9 ‘Financial Instruments’ in 2018-19 the British Business Bank’s Enterprise Capital Fund commitments to provide loans under the market rate were designated to be measured at Fair Value through Profit or Loss. As a result, the Departmental Group has transferred out the loan commitment liabilities of £184 million as at 31 March 2018 from “Other provisions” to disclose separately together with financial guarantee liabilities.
20. Retirement benefit obligations
The Departmental Group consolidates nine defined benefit pension arrangements from its designated bodies including:
- UK Research and Innovation
- Nuclear Decommissioning Authority
- Nuclear site licence companies
All schemes are accounted for in accordance with IAS 19 ‘Employee Benefits’. They are subject to the UK regulatory framework and under the scope of the scheme specific funding requirement. The schemes’ trustees are responsible for operating these defined benefit plans and have a statutory responsibility for ensuring the schemes are sufficiently funded to meet current and future benefit payments.
Defined benefit scheme liabilities expose the Departmental Group to material financial uncertainty, arising from factors such as changes in life expectancy and in the amount of pensions payable. Some scheme investments, such as equities, should offer long-term growth in excess of inflation, but can be more volatile in the shorter term than government bonds.
The details of each scheme are discussed below.
**UK Research and Innovation (UKRI)**
UKRI operates the legacy Medical Research Council (MRC) defined benefit, final salary pension scheme. A full actuarial evaluation was undertaken as at 31 December 2016 which was rolled forward by the actuary to determine the approximate position as at 31 March 2020.
______________________________________________________________________
1 MRC pension scheme values have been provided in an IAS 19 GAD report, this current surplus figure includes some pension asset figures from 31 December 2019, the latest available information. Any subsequent movements in the valuations to 31 March 2020 are immaterial. The key assumptions are discount rate of 2.30% (2018-19: 2.40%) and rate of increase in pension payments of 2.00% (2018-19: 2.45%). A decrease of 0.5% in the discount rate would lead to an increase of approximately 10.0% in the total liability, while a decrease of 0.5% in the rate of increase in pensions would lead to an approximate 7.0% reduction.
Further details regarding the nature of the benefits provided, regulatory framework, actuarial assumptions, sensitivity analysis, key risks and risk management policy including asset-liability matching strategies, and any funding arrangements or funding policy that may affect future contributions can be found in the accounts of UKRI.
**Nuclear Decommissioning Authority (NDA)**
Two defined benefit pension schemes relate to the NDA – the Closed and Nirex sections of the Combined Nuclear Pension Plan (CNPP). Both are closed to new entrants. Full actuarial evaluations were undertaken as at 31 March 2016. The actuaries rolled forward the results to determine approximate positions as at 31 March 2020. Further details regarding the nature of the benefits provided, regulatory framework, actuarial assumptions, sensitivity analysis, key risks and risk management policy including asset-liability matching strategies, and any funding arrangements or funding policy that may affect future contributions can be found in the accounts of NDA.
**Nuclear site licence companies (SLCs)**
There are six defined benefit final salary pension schemes relating to the four SLCs comprising: a) the LLWR section of the CNPP (for LLW Repository Limited), b) the SLC section of the Magnox Electric Group of the ESPS and the Magnox Section of the CNPP (for Magnox Limited), c) the Group Pension Scheme SLC section of the CNPP and the Sellafield section of the CNPP (for Sellafield Limited) and d) the Dounreay Section of the CNPP (for Dounreay Site Restoration Limited). All are closed to new entrants. The most recent triennial actuarial valuations were undertaken as at 31 March 2016 for all six SLCs schemes. The actuaries rolled forward the results to determine approximate positions as at 31 March 2020.
Further details regarding the nature of the benefits provided, regulatory framework, key risks and risk management policy including asset-liability matching strategies, and any funding arrangements or funding policy that may affect future contributions can be found in the CNPP Statement of Investment Principles at [https://www.cnpp.org.uk/document-library/](https://www.cnpp.org.uk/document-library/), and in the Electricity Supply Pension Scheme’s Annual Reports at [https://megtpensions.com/finance-report](https://megtpensions.com/finance-report). | | 31 March 2020 Funded pension schemes £m | 31 March 2019 Funded pension schemes £m | |--------------------------------|----------------------------------------|----------------------------------------| | **Present value of defined benefit obligation at 1 April** | 8,240 | 7,632 | | Interest cost | 199 | 197 | | Current service cost | 253 | 248 | | Past service cost | 7 | 15 | | Benefits paid | (239) | (231) | | Actuarial (gains)/losses in financial assumption | (1,017) | 422 | | Actuarial (gains)/losses on defined benefit obligation due to demographic assumptions | (152) | (68) | | Actuarial (gains)/losses arising from experience adjustments | (13) | 13 | | Employee contributions | 24 | 25 | | Transfer in | (28) | (13) | | **Present value of defined benefit obligation at 31 March** | 7,274 | 8,240 | | **Fair value of assets at 1 April** | 7,319 | 6,946 | | Expected return on plan assets | 176 | 179 | | Employer contributions | 145 | 149 | | Benefits paid | (239) | (231) | | Actuarial gains/(losses) | (210) | 264 | | Employee contributions | 24 | 25 | | Transfer in | (28) | (13) | | **Fair value of assets at 31 March** | 7,187 | 7,319 | | **Net liability at 31 March** | 87 | 921 |
The decrease in the net liability at 31 March 2020 compared to 31 March 2019 is primarily due to a decrease in the inflation rate applied to all defined benefit obligations between 31 March 2019 and 31 March 2020.
### Net (asset)/liability by scheme
| Scheme Description | Present value of defined benefit obligation £m | Fair value of assets £m | Net liability/ (asset) £m | Present value of defined benefit obligation £m | Fair value of assets £m | Net liability/ (asset) £m | |--------------------|-----------------------------------------------|-------------------------|---------------------------|-----------------------------------------------|-------------------------|---------------------------| | UK Research and Innovation – Medical Research Council | 1,465 | 1,563 | (98) | 1,605 | 1,649 | (44) | | LLW Repository Ltd – LLWR section of CNPP | 32 | 23 | 9 | 33 | 22 | 11 | | Magnox Ltd – SLC section of Magnox Electric Group of ESPS | 2,856 | 3,251 | (395) | 3,298 | 3,214 | 84 | | Magnox Ltd – Magnox section of CNPP | 133 | 118 | 15 | 161 | 120 | 41 | | Sellafield Ltd – Group Pension Scheme SLC section of CNPP | 584 | 624 | (40) | 707 | 682 | 25 | | Sellafield Ltd – Sellafield section of CNPP | 1,929 | 1,369 | 560 | 2,119 | 1,386 | 733 | | Dounreay Site Restoration Ltd – Dounreay section of CNPP | 145 | 105 | 40 | 159 | 106 | 53 | | Nuclear Decommissioning Authority | 130 | 134 | (4) | 158 | 140 | 18 | | **Total net liability at 31 March** | **7,274** | **7,187** | **87** | **8,240** | **7,319** | **921** |
### Asset allocation
| Asset Type | 31 March 2020 £m | 31 March 2019 £m | |------------|------------------|------------------| | Equities | 1,797 | 2,211 | | Property | 854 | 765 | | Government bonds | 1,910 | 1,933 | | Corporate bonds | 534 | 541 | | Other growth assets | 1,883 | 1,734 | | Other | 209 | 135 | | **Balance at reporting date** | **7,187** | **7,319** |
The Magnox schemes had a total asset balance of £3,365 million, of which £1,434 million were government bond assets and £1,339 million were other growth assets which were not quoted in an active market. The Sellafield schemes had £1,992 million of total assets, the majority of which, excluding the amount held in the Trustees’ bank account and some private equity investments due to their illiquid nature, had a quoted market value in an active market. The UKRI – MRC scheme’s total assets of £1,563 million included £904 million of quoted equities and £385 million of property assets. Expected contribution over the next accounting period
It is possible that the actual amount paid might be different to the estimated amount. This may be due to contributions, benefits payments or pensionable payroll differing from expected, changes to schemes’ benefits or settlement/curtailment events that are currently unknown.
| Organisation | 31 March 2020 £m | 31 March 2019 £m | |--------------|------------------|------------------| | UK Research and Innovation – Medical Research Council | 24 | 25 | | LLW Repository Ltd – LLWR section of CNPP | 1 | 1 | | Magnox Ltd – SLC section of Magnox Electric Group of ESPS | 32 | 27 | | Magnox Ltd – Magnox section of CNPP | 5 | 5 | | Sellafield Ltd – Group Pension Scheme SLC section of CNPP | 6 | 7 | | Sellafield Ltd – Sellafield section of CNPP | 75 | 78 | | Dounreay Site Restoration Ltd – DSRL section of CNPP | 6 | 6 | | Nuclear Decommissioning Authority | 1 | 1 | | **Total** | **150** | **150** |
Weighted average duration of the defined benefit obligation plans
| Organisation | 31 March 2020 Years | 31 March 2019 Years | |--------------|---------------------|---------------------| | UK Research and Innovation – Medical Research Council | 20 | 21 | | LLW Repository Ltd – LLWR section of CNPP | 27 | 20 | | Magnox Ltd – SLC section of Magnox Electric Group of ESPS | 16 | 16 | | Magnox Ltd – Magnox section of CNPP | 21 | 22 | | Sellafield Ltd – Group Pension Scheme SLC section of CNPP | 20 | 20 | | Sellafield Ltd – Sellafield section of CNPP | 20 | 20 | | Dounreay Site Restoration Ltd – DSRL section of CNPP | 20 | 20 | | Nuclear Decommissioning Authority | 19 | 23 |
Major actuarial assumptions for SLC schemes
| Organisation | 2019-20 | 2018-19 | 2019-20 | 2018-19 | 2019-20 | 2018-19 | 2019-20 | 2018-19 | |--------------|---------|---------|---------|---------|---------|---------|---------|---------| | Discount rate | 2.3% | 2.5% | 2.4% | 2.4% | 2.3% | 2.4% | 2.3% | 2.5% | | Inflation (Retail Price Index) | 2.4% | 3.5% | 2.6% | 3.2% | 2.4% | 3.5% | 2.4% | 3.5% | | Life expectancy in years at 65, currently aged 65 (male) | 21.3 | 21.8 | 21.9 | 21.8 | 21.3 | 21.8 | | Life expectancy in years at 65, currently aged 45 (male) | 22.4 | 22.9 | 23.0 | 22.9 | 22.4 | 22.9 | | Life expectancy in years at 65, currently aged 65 (female) | 23.2 | 23.7 | 23.8 | 23.7 | 23.2 | 23.7 | | Life expectancy in years at 65, currently aged 45 (female) | 24.5 | 25.0 | 25.0 | 25.0 | 24.5 | 25.0 | | Life expectancy in years at 60, currently aged 60 (male) | 27.8 | 28.0 | 25.9 | 28.0 | | Life expectancy in years at 60, currently aged 40 (male) | 28.5 | 29.0 | 27.1 | 29.0 | | Life expectancy in years at 60, currently aged 60 (female) | 29.8 | 30.0 | 27.9 | 30.0 | | Life expectancy in years at 60, currently aged 40 (female) | 30.6 | 31.1 | 29.2 | 31.1 | Major actuarial assumptions for NDA and UKRI
| | Nuclear Decommissioning Authority | UK Research and Innovation | |------------------------------|-----------------------------------|---------------------------| | | 2019-20 | 2018-19 | 2019-20 | 2018-19 | | Discount rate | 2.3% | 2.5% | 2.3% | 2.4% | | Inflation (Retail Price Index)| 2.4% | 3.5% | n/a | 3.6% | | Life expectancy in years at 65, currently aged 65 (male) | 21.3 | 21.8 | 22.1 | 23.0 | | Life expectancy in years at 65, currently aged 45 (male) | 22.4 | 22.9 | 23.8 | 24.9 | | Life expectancy in years at 65, currently aged 65 (female) | 23.2 | 23.7 | 23.8 | 24.6 | | Life expectancy in years at 65, currently aged 45 (female) | 24.5 | 25.0 | 25.4 | 26.5 |
Sensitivity analysis
| | Dounreay Site Restoration Limited | LLW Repository Limited | Magnox Limited | Sellafield Limited | Nuclear Decommissioning Authority | UK Research and Innovation | |------------------------------|-----------------------------------|------------------------|----------------|-------------------|-----------------------------------|---------------------------| | | £m | £m | £m | £m | £m | £m | | 0.5 percentage point decrease in annual discount rate | 18 | 5 | 247 | 310 | 13 | 146 | | 0.5 percentage point increase in inflation assumption | 18 | 5 | 231 | 310 | 13 | 103 | | 1 year increase in life expectancy | 5 | 1 | 142 | 91 | 5 | 44 |
The table shows the increase in liability that would result from changes in these actuarial assumptions.
21. Capital and other commitments
Total minimum payments in respect of capital, lease and other commitments
| | Note | 31 March 2020 | 31 March 2019 | |------------------------------|------|---------------|---------------| | | Core Department and Agencies £m | Departmental Group £m | Core Department and Agencies £m | Departmental Group £m | | Contracted capital commitments | 21.1 | 9 | 2,635 | 22 | 1,929 | | Minimum future payments under: | | | | | | | Operating leases | 21.2 | 260 | 433 | 326 | 462 | | Finance leases | – | 5 | – | – | 28 | | Other financial commitments | 21.3 | 2,816 | 3,535 | 3,012 | 3,427 | | Total | | 3,085 | 6,608 | 3,360 | 5,846 |
21.1 Capital commitments
| | Note | 31 March 2020 | 31 March 2019 | |------------------------------|------|---------------|---------------| | | Core Department and Agencies £m | Departmental Group £m | Core Department and Agencies £m | Departmental Group £m | | Contracted capital commitments not otherwise included in these financial statements: | | | | | | | Property, plant and equipment | 9 | 521 | 17 | 271 | | Intangible assets | – | 1 | 5 | 20 | | Loans and Investments | – | 2,113 | – | 1,638 | | Total | | 9 | 2,635 | 22 | 1,929 | Core Department
The Core Department has not entered into any significant capital commitments.
NDPBs and other designated bodies
Capital commitments as at 31 March 2020 include the following significant items:
- Property, plant and equipment commitments for United Kingdom Research and Innovation (UKRI) of £488 million (31 March 2019: £231 million).
- Investment commitments of £1,601 million (31 March 2019: £1,203 million) for the British Business Bank plc (BBB) relating to undrawn investment commitments, £227 million (31 March 2019: £176 million) for Northern Powerhouse Investment Limited relating to capital calls to be utilised over the next seven years, £173 million (31 March 2019: £176 million) for Midlands Engine Investments Limited relating to capital calls to be utilised over the next eight years and £86 million (31 March 2019: £83 million) for the BIS (Postal Services Act 2011) Company Limited, which has capital calls relating to investments in respect of its private equity and property funds financial instruments.
21.2 Commitments under leases
21.2.1 Operating leases: Department as a lessee
Total future minimum lease payments under operating leases are given in the table below for each of the following periods:
| Obligations under operating leases comprise: | Core Department and Agencies | 31 March 2020 | Core Department and Agencies | 31 March 2019 | |---------------------------------------------|-----------------------------|---------------|-----------------------------|---------------| | | £m | £m | £m | £m | | Land: | | | | | | Not later than one year | – | 1 | – | 1 | | Later than one year and not later than five years | – | 2 | – | 2 | | Later than five years | – | 14 | – | 20 | | | | 17 | | 23 | | Buildings: | | | | | | Not later than one year | 56 | 72 | 57 | 73 | | Later than one year and not later than five years | 102 | 146 | 139 | 176 | | Later than five years | 95 | 183 | 122 | 172 | | | 253 | 401 | 318 | 421 | | Other: | | | | | | Not later than one year | 6 | 10 | 5 | 9 | | Later than one year and not later than five years | 1 | 5 | 3 | 9 | | | 7 | 15 | 8 | 18 | | Total | 260 | 433 | 326 | 462 |
The commitment for Buildings for the Core Department is £227 million at 31 March 2020 (31 March 2019: £295 million) which includes the lease on the property at 1 Victoria Street, London; this commitment is £145 million at 31 March 2020 (31 March 2019: £187 million). Further information about finance leases and sub-lease arrangements of the Agencies, NDPBs and other designated bodies can be found in the accounts of the relevant bodies. 21.2.2 Operating leases: Department as a lessor
Total future minimum lease receivables under operating leases are given in the table below:
| | Core Department and Agencies | 31 March 2020 | Core Department and Agencies | 31 March 2019 | |----------------------|-----------------------------|---------------|-----------------------------|---------------| | | £m | £m | £m | £m | | Receivables under operating leases for the following periods comprise: | | | | | | Not later than one year | 1 | 9 | – | 10 | | Later than one year and not later than five years | 1 | 25 | 1 | 25 | | Later than five years | – | 41 | 3 | 40 | | Total | 2 | 75 | 4 | 75 |
21.3 Other financial commitments
The Departmental Group has entered into non-cancellable contracts (which are not leases, PFI contracts or other service concession arrangements) for subscriptions to international bodies and various other expenditures. Future payments to which the Departmental Group is committed are as follows:
| | Core Department and Agencies | 31 March 2020 | Core Department and Agencies | 31 March 2019 | |----------------------|-----------------------------|---------------|-----------------------------|---------------| | | £m | £m | £m | £m | | Not later than one year | 485 | 769 | 484 | 698 | | Later than one year and not later than five years | 757 | 1,136 | 982 | 1,182 | | Later than five years | 1,574 | 1,830 | 1,546 | 1,547 | | Total | 2,816 | 3,535 | 3,012 | 3,427 |
21.3.1 International subscriptions
The financial commitments payable include subscriptions payable to international bodies, analysed by the period in which the payments are due:
| Organisation | Note | Within 1 Year | Later than 1 year and not later than 5 years | Total 31 March 2020 | Total 31 March 2019 | |-------------------------------------|------|---------------|---------------------------------------------|---------------------|---------------------| | International Atomic Energy Agency | a | 15 | 60 | 75 | 150 | | European Space Agency | b | 264 | 150 | – | 414 | | Other subscriptions | | 9 | 33 | 42 | 84 | | Core Department and Agencies total | | 288 | 243 | 117 | 648 | | European Organisation for Nuclear Research (CERN) | c | 159 | 96 | – | 255 | | Institut Laue Langevin (ILL) | d | 20 | 60 | – | 80 | | Other subscriptions | | 46 | 80 | 21 | 147 | | Departmental Group total | | 513 | 479 | 138 | 1,130 |
Notes
The Departmental Group is required to subscribe to a number of bodies on an on-going and continuous basis. These subscriptions are paid in Euros, Swiss Francs and pounds sterling. The subscriptions described below are paid in Euros or Swiss Francs and amounts paid are subject to fluctuations due to exchange rate differences. a) The Core Department is responsible for paying in the UK’s annual subscriptions to the International Atomic Energy Agency (IAEA). The IAEA is the UN-affiliated organisation responsible for ensuring the safe, secure and peaceful use of civil nuclear technologies, through monitoring nuclear safeguards, setting international standards and guidance for nuclear safety and security promoting nuclear applications for development.
b) The UK Space Agency pays international subscriptions to the European Space Agency (ESA) three times a year and these amounts are agreed several years in advance. The payments reported reflect existing commitments on forward exchange contracts placed with the Bank of England to cover periods until 1 October 2021. The annual subscriptions are to be set at a minimum of €300 million and will be aligned with the agreed ESA programmes activity. It is expected that these amounts will be paid by means of forward exchange contracts or amounts translated on the date of payment.
c) United Kingdom Research and Innovation (UKRI) shares the funding of the capital and running costs of CERN with other major scientific nations. There is a notice of withdrawal period of 12 months after the end of the current calendar year. The commitment is due to end in 2021.
d) The UK, through UKRI, has signed up to International Conventions, with respect to Institut Laue-Langevin (ILL). The 5th protocol of the Intergovernmental Convention was signed in July 2013 and will remain in force until 31 December 2023. Thereafter it shall be tacitly extended from year to year unless any of the governments give written notification to the other governments of its intention to withdraw from the Convention. Any such withdrawal will take effect upon the expiry of two years from the date of receipt of the notification by any of the other governments or on such later date as may be specified in the notification.
21.3.2 Other commitments
The financial commitments payable in future years include payments due under non-cancellable contracts to the following organisations:
| Organisation | Note | Within one year £m | Later than one year and not later than five years £m | Later than five years £m | 31 March 2020 £m | Total £m | |-------------------------------------|------|--------------------|-----------------------------------------------------|--------------------------|------------------|----------| | Met Office | a | 93 | 442 | 1,423 | 1,958 | 1,893 | | Other commitments | | 104 | 72 | 34 | 210 | 194 | | Core Department and Agencies total | | 197 | 514 | 1,457 | 2,168 | 2,087 | | Other commitments | | 59 | 143 | 35 | 237 | 2 | | Departmental Group total | | 256 | 657 | 1,492 | 2,405 | 2,089 |
Core Department
The Core Department has entered into non-cancellable contracts which include agreements with the Met Office (a trading fund owned by the Department) to provide meteorological services including the Public Weather Service agreement which the Department manages on behalf of the government and for which the forward commitment is separately itemised above; this agreement is of indefinite duration but reviewed on an annual basis. 22. Financial instruments
The carrying amounts of financial instruments in each of the IFRS 9 categories are as follows:
| Financial assets | 31 March 2020 | 31 March 2019 restated | |------------------|---------------|------------------------| | | Core Department and Agencies | Departmental Group | Core Department and Agencies | Departmental Group | | Financial assets at amortised cost: | | | | | | Cash and cash equivalents | 16 | 1,039 | 2,158 | 1,283 | 2,078 | | Receivables (i) | 14 | 1,140 | 2,511 | 1,146 | 2,021 | | Loans to public sector bodies (ii) & (iii) | 10.3, 15 | 1,431 | 1,008 | 1,285 | 893 | | Other financial assets and private sector loans | 2 | 924 | 2 | 840 | | Total financial assets at amortised cost | 3,612 | 6,601 | 3,716 | 5,832 | | Financial assets elected at fair value through other comprehensive income (OCI): | | | | | | Ordinary shares in public sector companies (iv) | 10.1 | 773 | 1,305 | 915 | 1,404 | | Other financial assets | 11.2 | 44 | 61 | 46 | 58 | | Total financial assets elected at FVOCI | 817 | 1,366 | 961 | 1,462 | | Financial assets mandatory at fair value through profit or loss (FVTPL) | | | | | | Repayable launch investments | 11.1 | 833 | 833 | 1,058 | 1,058 | | Derivatives – Forward contracts | 9 | 9 | 24 | 24 | | Loans to public sector bodies (ii) & (iii) | 49 | – | – | – | | Other financial assets | 11.2 | 88 | 2,302 | 90 | 2,160 | | Total financial assets mandatory at FVTPL | 979 | 3,144 | 1,172 | 3,242 | | Public dividend capital: | | | | | | Public dividend capital | 10.2 | 65 | 65 | 81 | 81 | | Total public dividend capital | 65 | 65 | 81 | 81 | | Financial liabilities | | | | | | Financial liabilities as amortised cost: | | | | | | Payables (ii) | 17 | (1,434) | (2,835) | (1,924) | (2,623) | | Total financial liabilities as amortised cost | (1,434) | (2,835) | (1,924) | (2,623) | | Financial liabilities mandatory at fair value through profit or loss (FVTPL): | | | | | | Derivatives – Forward contracts | – | – | (3) | (15) | | Derivatives – Contracts for difference (C/D) | 9 | – | (16,464) | – | (12,921) | | Total financial liabilities mandatory at FVTPL | – | (16,464) | (3) | (12,936) | | Financial liabilities designated at fair value through profit or loss (FVTPL): | | | | | | Loan commitment liabilities | 19 | – | (147) | – | (176) | | Total financial liabilities designated at FVTPL | – | (147) | – | (176) | | Financial guarantee liabilities: | | | | | | Financial guarantee liabilities | 19 | (91) | (91) | (54) | (54) | | Total financial guarantee liabilities | (91) | (91) | (54) | (54) |
Notes
i. The amounts disclosed above as payables and receivables exclude any assets or liabilities which do not arise from a contractual arrangement.
ii. Loans to public sector bodies comprises the loans detailed in note 15 and Other loans and investments in Other public sector bodies detailed in note 10.3. iii. Loans to public sector bodies in the Core Department for 2019-20 excludes £236 million (2018-19: £169 million) related to the loan investments in the Northern Powerhouse Investments Limited, Midlands Engine Investments Limited, Cornwall and Isles of Scilly Investments Limited and UK Climate Investments LLP, as these are accounted for at cost under IAS 27 – Separate Financial Statements.
iv. Ordinary shares in public sector companies excludes bodies that are consolidated in the Departmental Group, as these are held at cost, see note 10.1.
Financial risk management
IFRS 7 ‘Financial Instruments: Disclosure’ requires the disclosure of information which will allow users of financial statements to evaluate the significance of financial instruments on the Departmental Group’s financial performance and position and the nature and extent of its exposure to risks arising from these instruments.
As the cash requirements of the Departmental Group are largely met through the Estimates process, financial instruments play a more limited role in creating risk than would apply to a private sector body of a similar size.
The Departmental Group is however exposed to credit, market, interest rate, liquidity and commodity price risks due to the specific programmes and activities undertaken in pursuance of the Departmental Group’s objectives.
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.
Significant credit risks can be summarised as follows:
Core Department
Investment funds
Investee companies may not perform as expected and the Departmental Group may not recover its initial investment. The Core Department minimises the risk by monitoring the overall performance of the funds and to secure value for the Core Department as an investor. This includes a full evaluation of each business case submitted prior to committing funds.
Financial guarantees
The Core Department is exposed to credit risk from potential default by recipients of loans guaranteed by the Core Department, primarily in relation to the Enterprise Financial Guarantee (EFG) scheme. Lending institutions are responsible under the scheme for determining that prospective borrowers are commercially viable; they are required to apply normal commercial practice and losses are shared between the Core Department and lending institution. As at 31 March 2020 the Core Department has £539 million of EFG guarantees outstanding (31 March 2019: £588 million) which will expire over the next ten years as the underlying debt matures. Due to a cap on payouts which limits the Core Department’s exposure, the maximum amount that could be paid out if all loans defaulted is £179 million (31 March 2019: £260 million). However, not all loans are expected to default and an estimated liability of £91 million (31 March 2019: £54 million) has been recognised on the Statement of Financial Position.
NDPBs and other designated bodies
British Business Bank
The British Business Bank (BBB) investments are assessed by BBB’s Valuation Committee. BBB produces credit risk ratings for its investments based upon a risk grading of the financial obligor and the estimated Loss Given Default on that investment. Risk drivers which are assessed in setting the ratings include the financial viability and lending safety of the investment and, if available, the rating assigned by an external credit agency. This is mitigated by new product approval processes that assess default and loss rates, due diligence of delivery partners underwriting methods, and portfolio monitoring and default models being put in place.
**Credit risk rating and loss allowance**
The Departmental Group has the following financial assets subject to the expected credit loss model:
- Trade receivables, contract assets, and lease receivables
- Loans, bonds, and term deposits
- Cash and cash equivalents
**Trade receivable, contract assets and lease receivables**
The Core Department applies the IFRS 9 simplified approach using an allowance matrix to measure the lifetime expected loss allowance for trade receivables in accordance with the FReM guidance.
Trade receivables are grouped based upon credit risk characteristics and the number of past-due days. Default is defined as 90 days past due. The loss rates are estimated using the historic data for each aging group. Forward-looking information such as macroeconomic factors and entity specific situations are considered for entities with significant outstanding balances. Balances with other core central government departments are excluded from recognising stage-1 and stage-2 impairments following the FReM adaptions.
On this basis, the loss allowance as at 31 March 2020 determined as follows for trade receivables in the Core Department:
| 31 March 2020 | Core Department | Current | 1-30 days | 31-60 days | 61-90 days | 91+ days | Total | |---------------|-----------------|---------|-----------|------------|------------|----------|-------| | Expected Loss rate | 1% | 4% | 9% | 45% | 71% | | Gross carrying amount- trade receivables (excluding other government debt) (£m) | 2 | 0 | 1 | 0 | 5 | 8 | | Loss allowance (£m) | 0 | 0 | 0 | 0 | 4 | 4 |
| 31 March 2019 | Core Department | Current | 1-30 days | 31-60 days | 61-90 days | 91+ days | Total | |---------------|-----------------|---------|-----------|------------|------------|----------|-------| | Expected Loss rate | 11% | 7% | 2% | 52% | 100% | | Gross carrying amount- trade receivables (excluding other government debt) (£m) | 5 | 1 | 1 | 0 | 5 | 12 | | Loss allowance (£m) | 1 | 0 | 0 | 0 | 5 | 6 |
The loss allowance for trade receivable balances held by ALBs has been assessed at an organisation level and the total loss allowance estimated is immaterial for detailed disclosure on loss rates.
The movement in the allowance for provisions in respect of trade receivables during the year is disclosed below reflecting the allowance per the expected credit loss model under IFRS 9.
| 31 March 2020 | Core Department and Agencies | £m | 31 March 2019 | Core Department and Agencies | £m | |---------------|-------------------------------|-----|---------------|-------------------------------|-----| | Balance at 1 April | 15 | 22 | – | – | | IFRS 9 Adjustment to opening balances | – | – | 14 | 15 | | Net remeasurement | (2) | 1 | 1 | 7 | | Write-off | – | – | – | – | | Balance at 31 March | 13 | 23 | 15 | 22 | Loans, bonds and term deposits
Where possible, the Departmental Group monitors changes in credit risk by tracking published external credit ratings. For all assets other than those held by British Business Bank, an internal credit rating system, which was developed based on other established methodologies, was used to assign credit risks for loans that do not have external credit rating. 12-month and lifetime probabilities of default are based upon Moody’s published research on the global default rate adjusted for historical repayment data and any macro-economic pressures which could impact the entity’s ability to repay the loan.
The British Business Bank (BBB) investments are assessed by BBB’s Valuation Committee. BBB produces credit risk ratings for its investments based upon a risk grading of the financial obligator and the estimated Loss Given Default on that investment. Further details can be found in BBB’s annual report and accounts.
The following table presents an analysis of credit quality of loans, bonds and term deposits. It indicates whether assets were subject to a 12-month ECL or lifetime ECL allowance, and whether they were credit-impaired.
| Credit rating | 12 month ECL | Lifetime ECL not impaired | Lifetime ECL impaired | Total £m | 12 month ECL | Lifetime ECL not impaired | Lifetime ECL impaired | Total £m | |--------------------------------|---------------|---------------------------|-----------------------|----------|---------------|---------------------------|-----------------------|----------| | Low risk financial assets | 1,410 | – | – | 1,410 | 1,267 | – | – | 1,267 | | Medium risk financial assets | 284 | 62 | – | 346 | 310 | 25 | 2 | 337 | | High risk financial assets | 180 | 38 | – | 218 | 115 | 19 | – | 134 | | Default financial assets | – | – | 59 | 59 | – | 78 | – | 78 | | Total gross carrying amounts | 1,874 | 100 | 59 | 2,033 | 1,692 | 44 | 80 | 1,816 | | Loss allowance | (29) | (15) | (57) | (101) | (11) | (15) | (57) | (83) | | Carrying amount | 1,845 | 85 | 2 | 1,932 | 1,681 | 29 | 23 | 1,733 |
The Departmental Group does not hold any loans, bonds and term deposits measured at FVOCI.
The movement in the allowance for impaired loans, bonds and term deposits at amortised cost during the year was as follows.
| | 12m ECL | Lifetime ECL not impaired | Lifetime ECL credit impaired | Total £m | 12m ECL | Lifetime ECL not impaired | Lifetime ECL credit impaired | Total £m | |--------------------------------|---------|---------------------------|-------------------------------|----------|---------|---------------------------|-------------------------------|----------| | Balance at 1 April | 11 | 15 | 57 | 83 | – | – | – | – | | IFRS 9 Adjustment to opening balances | – | – | – | – | 11 | 11 | 45 | 67 | | Revised balance at 1 April | 11 | 15 | 57 | 83 | 11 | 11 | 45 | 67 | | Additions | 11 | 4 | – | 15 | 5 | 8 | 3 | 16 | | Net remeasurement | 5 | 12 | 15 | 32 | (3) | (2) | (1) | (6) | | Repayment | – | (7) | – | (7) | (1) | (2) | (2) | (5) | | Transfer to credit loss 12 month | – | (2) | 4 | 2 | – | – | – | – | | Transfer to credit loss not impaired | 2 | – | 9 | 11 | – | – | 12 | 12 | | Transfer to credit loss impaired | (3) | (10) | – | (13) | (1) | – | – | (1) | | Write-off | (1) | 7 | (27) | (21) | – | – | – | – | | Balance at 31 March | 25 | 19 | 58 | 102 | 11 | 15 | 57 | 83 | The primary reason for the increase in the loss allowance during 2019-20, is to take account of the Covid-19 pandemic economic impact on borrower’s ability to repay their loans.
**Cash and cash equivalents**
The Departmental Group held cash and cash equivalents of £2,158 million as at 31 March 2020 (31 March 2019 (restated): £2,078 million). The cash and cash equivalents are held with banks and financial institutions which are rated AA- to AA+ based on S&P ratings.
Impairment on cash and cash equivalents has been measured on the 12-month expected loss basis and reflects the short maturities of the exposures. The Departmental Group considers that cash and cash equivalents have a low credit risk based on the external credit ratings of the holding parties.
**Financial guarantee contracts and loan commitments**
BBB’s ECF loan commitments were designated to be measured at FVTPL and the credit risk is, therefore, reflected in their fair value.
**Collateral**
The Departmental Group holds collateral over loans held at amortised cost. The collateral held is in the form of cash and buildings. The value of the loan assets held which are secured by collateral is £1,084 million (31 March 2019 restated: £1,006 million). The value of the collateral held is lower than the value of the assets secured by the collateral. The collateral was considered in estimating the ECL.
**Market risk**
Market risk is the risk that fair values and future cash flows will fluctuate due to changes in market prices. Market risk generally comprises of:
**a) Foreign Currency risk**
**Core Department**
The Core Department is exposed to a small amount of currency risk with respect to Repayable Launch Investment contracts where income due from aircraft or engine sales may initially be based in US Dollars, but it is minimal in the context of the overall Repayable Launch Investment portfolio. Otherwise the Core Department’s exposure to foreign currency risk during the year was insignificant. Foreign currency income was negligible, and foreign currency expenditure was a small percentage of total expenditure (less than 1%).
All material assets and liabilities are denominated in pounds sterling.
**Agencies**
**Forward contracts**
UKSA pays an annual subscription in Euros to the European Space Agency (ESA) and has entered into forward contracts to mitigate the risk. These derivative contracts have been designated as cash flow hedges.
**NDPBs and other designated bodies**
**Forward contracts**
UKRI are subject to foreign currency risks and have entered into forward contracts to help mitigate these risks. These derivative contracts have been designated as cash flow hedges by UKRI and at the reporting date the hedges met the IFRS 9 effectiveness criteria. Cash and cash equivalents held in foreign currency
BIS (Postal Services Act 2011) Company Limited, UKRI and Nesta Trust are subject to minor foreign currency risk through the maintenance of bank accounts in foreign currencies (predominantly USD and EUR) to deal with day-to-day overseas transactions.
b) Interest Rate risk
Core Department
The Core Department does not invest or access funds from commercial sources, but it is exposed to interest rate risk with respect to the EFG – the Core Department is exposed to interest rate risk, as the majority of the loan guarantees are provided against variable rate loans. The banks’ usual lending practices mean that fixed rate loans are usually available only for small value short term loans. To minimise the risk of default due to interest rate rises, accompanied by a decline in the economic environment, the Core Department relies on the lenders assessment using best commercial practice to manage the risk of default.
NDPBs and other designated bodies
BBB holds both fixed and variable rate investments. Interest rate risk is regularly monitored to ensure that the mix of fixed and variable borrowing is appropriate. BBB does not use derivatives to hedge interest rate risk.
The impact of interest rates affects the discount rate used to arrive at the fair value of the CfD liability held by LCCC. Changes in interest rates which affect the discount rate would therefore affect the Statement of Financial Position valuation. However, the Departmental Group is not financially exposed to this risk because the liability is funded through a levy on suppliers.
c) Other Market risk
Core Department
The Core Department is exposed to wider risks relating to the performance of the economy as a whole. The main risks resulting from a downward movement in the economy include failures of investee companies of investment funds, loan defaults under the Core Department’s EFG Scheme and negative impacts on the Core Department’s repayable launch investment income and valuations from the potential resultant decrease in demand in the aerospace industry. For further information on the assessment of market risk in relation to Repayable Launch Investments, see note 11.1.
NDPBs and other designated bodies
The Nesta Trust is exposed to equity price risk due to its investment of a portion of its endowment assets in publicly listed equity investments. Nesta Trust minimises this risk by investing for the medium to long term, diversifying its equity investments over a number of managers with complementary styles, and invests in investment funds with large institutional investors. The performance of these investment managers is monitored regularly.
The valuations of fair value through profit or loss financial assets are based on the valuations provided by the fund managers in line with International Private Equity and Venture Capital (IPEV) Valuation Guidelines or the valuation guidelines produced by the British Venture Capital Association (BVCA). Valuation techniques used include the use of earnings multiples, discounted cash flows analysis, and net asset values. The valuations in the Core Department, BPSA and NESTA Trust have been updated to reflect the impact of COVID-19 as at 31 March 2020, based on the available information at 31 March 2020. These have seen a decrease in the valuations at 31 March 2020 of circa (8%). BBB have seen valuations movements between (2%) and (6%). As the economic impacts of COVID-19 become more certain the Departmental Group may see further fair value adjustments upwards or downwards. Inflation risk The amounts payable under the CfD contracts will be affected by the indexation of strike prices to reflect inflation and changes to wholesale electricity prices resulting from inflation. Inflation rates may not continue at the relatively low levels experienced in recent years; the Group is not financially exposed to this risk because the liability is funded through a levy on suppliers.
Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.
Core Department and Agencies In common with other government departments, the future financing of its liabilities is to be met by future grants of Supply, voted annually by Parliament. There is no reason to believe that future approvals will not be forthcoming, therefore, on this basis the liquidity risk to the Core Department and its Agencies is minimal.
NDPBs and other designated bodies Information about the Departmental Group’s objectives, policies and processes for managing and measuring risk can be found in the Governance Statement.
Commodity price risk Commodity price risk is the risk or uncertainty arising from possible price movements. The amounts payable under the CfD contracts are exposed to price risk through the fluctuations in future actual wholesale electricity prices, specifically, on how they will differ from the current forecast of future prices in the central scenario. However, the LCCC and the Departmental Group are not financially exposed to this risk because the liability is funded through a levy on suppliers. Financial instruments: fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
- Level 1 – uses quoted prices (unadjusted) in active markets for identical assets or liabilities;
- Level 2 – uses inputs for the assets or liabilities other quoted prices, that are observable either directly or indirectly;
- Level 3 – uses inputs for the assets or liabilities that are not based on observable market data, such as internal models or other valuation method.
The following table presents the Departmental Group’s financial assets and liabilities that are measured at fair value at 31 March 2020 and 31 March 2019:
| Financial assets | 31 March 2020 | 31 March 2019 restated | |------------------|---------------|------------------------| | | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | | FVOCI elected | | | | | | | | | | Ordinary shares in public sector bodies | 10.1 | – | 1,305 | 1,305 | – | 1,404 | – | 1,404 | | Private sector shares | 11.2 | 8 | 47 | 55 | 80 | 8 | 47 | 21 | | Total financial assets at FVOCI | 8 | 1,352 | 25 | 1,385 | 8 | 1,451 | 21 | 1,480 | | FVTPL mandatory | | | | | | | | | | Debt and venture capital investments | | | | | | | | | | Repayable launch investments | 11.1 | – | – | 833 | 833 | – | – | 1,058 | | Investment funds | 11.2 | 145 | – | 2,057 | 2,202 | 187 | – | 1,801 | | Bonds | 11.2 | – | – | – | 1 | – | – | 1 | | Private sector shares | 11.2 | 81 | – | – | 81 | 88 | – | 88 | | Other investments | 11.2 | – | – | – | – | – | – | 68 | | Derivatives – Forward contracts | – | 9 | – | 9 | – | 24 | – | 24 | | Total financial assets at FVTPL mandatory | 226 | 9 | 2,890 | 3,125 | 276 | 24 | 2,927 | 3,227 | | Total financial assets measured at fair value | 234 | 1,361 | 2,915 | 4,510 | 284 | 1,475 | 2,948 | 4,707 | | Financial Liabilities | | | | | | | | | | FVTPL mandatory | | | | | | | | | | Loan commitment liabilities | 19 | – | – | (147) | (147) | – | – | (176) | | Total liabilities at FVTPL mandatory | – | – | (147) | (147) | – | – | (176) | (176) | | FVTPL designated | | | | | | | | | | Derivatives – Forward contracts | – | – | – | – | – | (15) | – | (15) | | Derivatives – CfD | 9 | – | – | (16,464) | (16,464) | – | – | (12,921) | | Total financial liabilities at FVTPL designated | – | – | (16,464) | (16,464) | – | (15) | (12,921) | (12,936) | | Total financial liabilities measured at fair value | – | – | (16,611) | (16,611) | – | (15) | (13,097) | (13,112) |
Transfers between levels of the fair value hierarchy are deemed to occur at the end of the reporting period. There were no transfers between level 1 and 2 during the year.
Specific valuation techniques used to value financial instruments include:
- The fair value of the CfDs has been calculated using the income approach based on level 3 inputs, which reflects the present value of future cash flows that are expected to occur over the contract term of the CfD.
- For details regarding the fair value measurement of RLI’s, refer to note 11.1.
- The fair value of forward foreign exchange contracts is determined using forward exchange rate at the reporting date based on Level 2 inputs, with the resulting value discounted back to present value. – Other techniques, such as discounted cash flow analysis or for non-quoted ordinary shares and investment funds that are not actively traded, the net assets of the company/underlying fund are used. These are classified as level 3.
– The fair value of Public Sector shares are based upon net assets and classified as level 2.
The following table presents the changes in level 3 instrument for the period ended 31 March 2020, excluding the CfDs which are disclosed in note 9.
| Ordinary shares in unlisted private equities | Repayable launch investments | Property related holdings, Investment funds and Other financial assets | Loan Commitment Liabilities | Total | |---------------------------------------------|------------------------------|---------------------------------------------------------------------|-----------------------------|-------| | £m | £m | £m | £m | £m | | Balance at 1 April | 21 | 1,058 | 1,869 | (176) | 2,772 | | Additions | 2 | – | 614 | (10) | 606 | | Repayments/disposals | – | (340) | (318) | 39 | (619) | | Revaluations | 1 | – | – | – | 1 | | Gains and losses recognised in SoCNE | 1 | 115 | (108) | – | 8 | | Balance at 31 March | 25 | 833 | 2,057 | (147) | 2,768 |
The following table presents the changes in level 3 instrument for the year ended 31 March 2019, excluding the CfDs which are disclosed in note 9.
| Ordinary shares in unlisted private equities | Repayable launch investments | Property related holdings, Investment funds and Other financial assets | Loan Commitment Liabilities | Total | |---------------------------------------------|------------------------------|---------------------------------------------------------------------|-----------------------------|-------| | £m | £m | £m | £m | £m | | Balance at 1 April | 308 | 1,047 | 1,567 | – | 2,922 | | IFRS 9 transfers into level 3 | 10 | – | 1 | – | 11 | | IFRS 9 transfer between different investment categories | (298) | – | 298 | – | – | | IFRS 9 transfers in/ (out) of fair value | – | – | (60) | (184) | (244) | | Revised balance at 1 April restated | 20 | 1,047 | 1,806 | (184) | 2,689 | | Additions | 18 | – | 504 | (38) | 484 | | Repayments/disposals | – | (230) | (335) | 46 | (519) | | Gains and losses recognised in SoCNE | (17) | 241 | (106) | – | 118 | | Balance at 31 March restated | 21 | 1,058 | 1,869 | (176) | 2,772 | Maturity profiles – discounted cashflows
The maturity profile of the discounted cashflows for the CfDs excluding Hinkley Point C is shown below:
| | < 1 year | 2-5 years | >5 years | Total | |----------------|----------|-----------|----------|-------| | £m | £m | £m | £m | £m | | As at 31 March 2019 | 871 | 4,441 | 7,609 | 12,921| | As at 31 March 2020 | 1,520 | 4,337 | 10,607 | 16,464|
23. Contingent liabilities
Core Department
The Core Department has the following contingent liabilities:
| Basis of Recognition | Description | |----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Unquantifiable | | | Core Department – Financial Reporting Council funding | A guarantee has been given to the Financial Reporting Council that, if the Council’s general voluntary funding from external sources falls sufficiently for the Department to have to consider making legislation to activate the statutory levy under section 17 of the Companies (Audit, Investigations and Community Enterprise) Act 2004, the Department will make such a grant to cover the Council’s costs as is sufficient to meet the preconditions in those levy raising powers provided the requisite funding has not been made available through another grant. | | Core Department – Deeds relating to the Mineworkers’ Pension Scheme and British Coal Staff Superannuation Scheme under Paragraph 2(9) of Schedule 5 to the Coal Industry Act 1994 | Government guarantees were put in place on 31 October 1994, the day the schemes were changed to reflect the impact of privatisation of the coal industry. They are legally binding contracts between the scheme Trustees and the Secretary of State for Business, Energy and Industrial Strategy. The guarantees ensure that benefits earned by scheme members during their employment with British Coal, and any benefit improvements from surpluses which were awarded prior to 31 October 1994, will always be paid and will be increased each year in line with the Retail Prices Index. If, at any periodic valuation, the assets of the Guaranteed Fund of either scheme were to be insufficient to meet its liabilities, the assets must be increased to bring the Fund back into balance. This is a long-term contingent liability dependent on the performance of the schemes’ investments and their mortality experience. Further details regarding the schemes can be found in note 14. | | Core Department – Indemnity to Public Appointment Assessors | The Cabinet Secretary has provided a government-wide indemnity to Public Appointments Assessors (PAAs) against personal civil liabilities incurred in the execution of their PAA functions. | | Core Department – Nuclear agreements and treaties | The Department has a range of potential civil nuclear liabilities arising through its association with the United Kingdom Atomic Energy Authority and British Nuclear Fuels Limited as well as ensuring that the government complies with its obligations under the various international nuclear agreements and treaties. | | Core Department – Site restoration liabilities inherited from British Coal | The Department inherited responsibility from British Coal to reimburse certain third parties for costs incurred meeting statutory environmental standards in the restoration of particular coal-related sites. | | Core Department – Nuclear Liabilities Fund | The Nuclear Liabilities Fund was established in 1996 to meet certain costs of decommissioning eight nuclear power plants in the UK that have been owned and operated by EDF Energy Nuclear Generation Limited since 2009. A constructive obligation was created in 2002 when the government undertook to underwrite the Fund in respect of these liabilities to the extent that the assets of the Fund might fall short; any surplus generated by the Fund would be paid over to the government once the liabilities have been met. The total undiscounted estimated liability as at 31 March 2020 of £23.3 billion (31 March 2019: £20.9 billion) has a present value of £24.1 billion (31 March 2019: £22.3 billion). The value of the Fund as at 31 March 2020 is £9.4 billion (31 March 2019: £9.4 billion). It is not possible to quantify the extent to which the Fund might be in deficit or surplus with respect to the liabilities as at 31 March 2020 given the high level of uncertainty relating to estimation of decommissioning costs and investment returns on Fund assets over a future period exceeding 100 years. |
### Basis of Recognition
| Description | Description | |-------------|-------------| | Core Department – Horizon 2020 Funding | In July 2018, the UK Government announced an extension of its guarantee of EU-funded projects after the UK has left the EU. The guarantee was originally announced in 2016. The UK left the EU on 31st January 2020. Under the terms of the Withdrawal Agreement, the European Union can exclude UK participation in Horizon 2020 EU-funded grants which involve security-related sensitive information. This means that for security-related projects under the Horizon, there is a doubt over continued EU funding. The guarantee in relation to Horizon 2020 is unquantifiable due to the European Commission administering and holding the information in relation to the scheme. There are uncertainties around the total amount that may be payable if the settlement were to occur. | | Quantifiable | | | Core Department – Loan guarantees (ENABLE) (£356 million) | In order to encourage lending to smaller businesses, the Department has guaranteed a portion of net losses on designated loan portfolios of participating banks (in excess of an agreed ‘first loss’ threshold) in return for a fee under the ENABLE Guarantee programme administered by the British Business Bank. The Department has approved guarantee facilities totalling £1.4 billion (31 March 2019: £1 billion), of which £783 million is effective as at 31 March 2020 (31 March 2019: £283 million) with a potential loss to the Department of £356 million (31 March 2019: £45 million). | | Core Department – Loan guarantees (EFG and HTG) (£180 million) | The Department guarantees lenders under the Enterprise Financial Guarantee (EFG) and Help to Grow (HTG) financial guarantee schemes administered by the British Business Bank. The Enterprise Financial Guarantee Scheme facilitates lending to viable businesses with the maximum obligation for the Department capped at £179 million at 31 March 2020 (31 March 2019: £205 million). The amount lent under the Help to Grow scheme was £3 million at 31 March 2020 (31 March 2019: £2.9 million) with a maximum potential liability for the department at 31 March 2020 of £1 million (31 March 2019: £1 million). | | Core Department – Ofgem administration costs from the buy-out fund (£4 million) | The Department, the Scottish Government and the Northern Ireland Executive have undertaken to support Ofgem’s costs for administering the Renewables Obligation scheme (around £4 million) if there is insufficient money in both the buy-out fund and late payment fund to cover these costs. The size of the 2019-20 buy-out fund will not be known until October 2020. It is dependent in part on the availability and price of Renewable Obligation Certificates (ROCs) – if there is a surplus of ROCs, suppliers may be more inclined to meet their obligations by submitting ROCs but ultimately much depends on supplier behaviour which is difficult to predict. The Department will have an indication of how many ROCs are available and whether there is likely to be a surplus after the end of the obligation year (31 March 2020) but will not know the size of the buy-out fund until October 2020. | | Core Department – Wave Hub transfer (£5 million) | The Department has indemnified Cornwall Council up to 2028 in respect of the transfer of Wave Hub to a maximum of £5 million. |
### Departmental Group
The Departmental Group has the following contingent liabilities, which are either unquantifiable or quantifiable contingent liabilities of more than £1 million in either this financial year or prior financial year. Other liabilities are disclosed in our partner organisation accounts.
| Basis of Recognition | Description | |----------------------|-------------| | Unquantifiable | | | Coal Authority – Environmental Legal Claims | Under the Environmental Information Regulations 2004 – The Coal Authority is aware of potential legal proceedings in respect of past fees paid for Mining Information. In the eventuality of receiving formal notification to commence legal proceedings, the Coal Authority will strongly defend its position. | | Coal Authority -Legal claims | The Coal Authority is subject to various claims and legal actions in the ordinary course of its activities. Where appropriate, provisions are made in the accounts on the basis of information available and in accordance with guidance provided under the FReM and IFRS. The Coal Authority does not expect that the outcome of the above issues will materially affect its financial position. | | Basis of Recognition | Description | |----------------------|-------------| | **Coal Authority – Restructuring Scheme** | Where liabilities transferred under the various Coal Authority Restructuring Schemes (CARS) have crystallised due to planning conditions, agreements, claims etc, provision has been made in these financial statements. It has not, however, been possible to quantify contingent liabilities that may arise in the future. It is expected that any costs will be covered by future allocations of grant in aid. | | **Coal Authority – Subsidence damage and public safety liabilities** | Licensees of mining operations are required to provide security to the Coal Authority to cover the anticipated future costs of settling subsidence damage liabilities within their areas of responsibility. Outside the areas of responsibility of the holders of licences under Part II of the 1994 Act, the Coal Authority is responsible for making good subsidence damage. Where an area of responsibility is extinguished this would transfer to the Coal Authority who would become responsible for the discharge of outstanding subsidence liabilities. The Coal Authority also has an ongoing liability to secure and keep secured the majority of abandoned coal mines. In all cases the liability for operating collieries is the responsibility of the licensees/lessees and security is held to address those liabilities. The above liabilities have been provided for within the Public Safety and Subsidence provision based on analysis of trends and claims experience. However, it is possible that significant, unexpected events outside of this provision may materialise. It is expected that any deficit will be covered by future allocations of grant in aid. | | **CNPA – Legal Claims** | There are a number of potential liabilities in respect of claims from employees. The timing and amounts of any payment are uncertain. These liabilities have not been provided for as the CNPA believes that the claims are unlikely to be successful and unlikely to lead to a transfer of economic benefits. | | **Insolvency Service-Cheques Act 1992** | Following the enactment of the Cheques Act 1992, the Secretary of State for BEIS has indemnified the Insolvency Service’s bankers against certain liabilities arising in respect of non-transferable “account payee” cheques due to insolvent estates and paid into the accounts of the agency. | | **NDA – Pension Schemes** | Whilst not the lead employer, the NDA is the lead organisation and has ultimate responsibility for certain nuclear industry pension schemes, including the Combined Nuclear Pension Plan and the Magnox section of the ESPS. Provisions for known deficits are included within Nuclear Provisions. However, movements in financial markets may adversely impact the actuarial valuations of the schemes, resulting in an increase in scheme deficits and consequent increase in nuclear provision. | | **UKRI – Indemnity to Roslin Institute** | The former BBSRC sponsored Roslin institute transferred to the University of Edinburgh on 13 May 2008. BBSRC agreed to provide indemnity for any potential costs that arise as a result of past actions of the institute and indemnity for any fall in grant income of the Neuropathogenesis Unit as a result of the transfer. The proportion of settlement UKRI will fund declines on an annual basis and is limited to claims up to May 2023. | | **Others** | There are a number of potential liabilities for the Department in respect of claims from suppliers, employees and third parties which depend on actual or potential proceedings. The timing and amounts of any liabilities are uncertain. |
**Quantifiable**
| BBB – Financial guarantee (£3 million) | Under the Bank’s Help to Grow financial guarantee programme, the Bank has entered into financial guarantee agreements of £10.5 million (31 March 2019: £30 million). The Bank has guaranteed 75% of eligible lending to SMEs under these agreements and a counter guarantee is in place that guarantees 50% of the Bank’s 75% of eligible lending. As at 31 March 2020 the amount lent under these financial guarantee agreements was £3 million (31 March 2019: £3.2 million). During the year ending 31 March 2020 the remaining guarantee agreement originally totaling £30 million was reduced to £10.5 million, with no further amounts being lent under it. | | LCCC – Legal Dispute | There is an ongoing dispute between the company and another entity. The company has confidence in a favourable outcome. If the outcome is not as anticipated, the company will be required to make an annual payment from the interim levy of less than £10 million for the next several years. | | UKRI – (BBSRC) Contamination (£3 million) | As part of a Sale Agreement relating to a previous BBSRC site, BBSRC agreed to indemnify the purchaser against contamination resulting from dangerous substances. The indemnity was over a 10-year period commencing in 2013-14 and was capped at £3 million. |
### Basis of Recognition
| Description | Description | |-------------|-------------| | **UKRI – (BBSRC) Exit costs (£31 million)** | Prior to 31 March 2018, some staff at BBSRC strategically funded institutes were on BBSRC terms and conditions. Whilst their direct salary costs are paid by the institutes, BBSRC is liable for any exit costs for these staff. The date and number of staff to take exit packages in any one year is unknown; however, if all staff were to take exit packages, the maximum liability is estimated at £31 million, with the amount declining on an annual basis up to March 2022. | | **UKRI – (Innovate UK) Decommissioning costs (£2.6 million)** | UKRI has a contingent liability which may arise if UKRI has to provide a grant to NAREC (Natural Renewable Energy Centre) in order for it to be able to decommission a weather monitoring platform in the North Sea. This is currently collecting data to support the development of an offshore wind test site. This may take place anytime between three and 25 years from now dependent on the development of the site, at an estimated cost of £2.6 million. | | **UKRI – (STFC) Decommissioning costs (£1.8 million)** | A contingent liability exists for European Synchrotron Radiation Facility (ESRF) decommissioning costs associated with the dismantling of the facility and infrastructures. Decommissioning occurs on winding up of ESRF. If exit by the UK (or any other Member) results in ESRF being wound up, the Members are required to arrange for decommissioning of ESRF’s plant and buildings and to meet the costs of doing so in proportion to their share of capital at the time of dissolution. The contingent liability is estimated to be £1.8 million. | | **UKRI – (STFC) Reprocessing and staff commitments (£11.8 million)** | A contingent liability exists in respect of the Science and Technology Facilities Council (STFC)’s share of Institut Laue-Langevin (ILL) unfunded provisions for staff related costs (e.g. early retirement) and costs associated with reprocessing fuel elements. The contingent liability is estimated to be £11.8 million (31 March 2019: £13.6 million). | | **UKRI – Tax Status change (£45 million)** | Prior to the creation of UKRI, the Research Councils paid levels of tax consistent with charitable status, although they were not registered as charities. HMRC have confirmed that, due to changes in legislation, the Research Councils should not have been applying charitable tax reliefs after 1 April 2012 without registering as charities. To this end, UKRI has included £19.6 million of VAT and £4.1 million of Corporation Tax within their financial statements in respect of changes from HMRC for prior periods. In due course, UKRI will need to consider whether it should contact local authorities regarding charitable reliefs on business rates claimed by the Research Councils from 1 April 2012 to 31 March 2018. The maximum value of the contingent liability in respect of business rates is estimated to be £45 million. |
### 24. Contingent assets
**Core Department**
The Core Department has the following contingent assets:
| Basis of Recognition | Description | |----------------------|-------------| | **Quantifiable** | Within twelve months of 31 March 2033, the trustee of the BCSSS shall pay to ‘the Guarantor’ (the Secretary of State) any surplus remaining on the scheme net of any amount retained for the obligation. The value of the surplus will depend on the value of scheme assets in relation to outstanding obligations. Based on the Government Actuary’s estimate of a £1.8 billion surplus as at 31 March 2018, the Department considers a receipt from the scheme to be probable. |
______________________________________________________________________
**Core Department – Deed Relating to the British Coal Staff Superannuation Scheme (BCSSS) under Paragraph 2(9) of Schedule 5 to the Coal Industry Act 1994 (£1.8 billion)** Departmental Group
The Departmental Group has the following contingent assets:
| Basis of Recognition | Description | |----------------------|-------------| | Unquantifiable | | | Coal Authority – Restructuring Schemes | By virtue of the seventh and ninth Coal Authority Restructuring Schemes (CARS 7 and 9) the Coal Authority is the beneficiary of restrictive covenants and clawback provisions relating to land and properties sold by the British Coal Corporation. In the event that the purchasers are able to retrospectively secure added value by obtaining planning consent for alternative uses the Authority will receive a share of the added value. Quantification of this asset is not possible. |
25. Related-party transactions
The Core Department is the parent of the bodies listed in note 27 ‘List of bodies within the Departmental Group’ – these bodies are regarded as related parties and various material transactions have taken place during the reporting period between members of the Departmental Group. The related parties of the consolidating bodies are disclosed in their respective accounts. The Core Department is also the sponsor of Companies House, UK Intellectual Property Office (UKIPO), Met Office (Trading Funds), Ordnance Survey, NPL Management Limited, NNL Holdings Limited and British Nuclear Fuels.
The Core Department has had various material transactions with other government departments, government bodies and devolved administrations comprising the Northern Ireland Executive, Scottish Government and Welsh Government. The most significant of these transactions have been HM Treasury, Post Office, United Kingdom Research and Innovation, Nuclear Decommissioning Authority, HM Treasury’s consolidated fund and UK Space Agency.
No minister, board member, key manager of the Departmental Group or other related party have undertaken any material transactions with the Core Department during the year. Details of the Department’s ministers and senior managers are shown in the Remuneration Report.
A former Director General of the Core Department, Sarah Harrison, is an unpaid Non-Executive Director of the Government Property Agency which is an executive agency of the Cabinet Office and from which the Department leases the majority of its office accommodation.
In the course of allocating funding during the year, UKRI entered into material transactions with various Higher Education Institutions. Where these bodies have board members who are also members of university councils, each body operates a policy that precludes interested parties from voting on the funding to the university in which they have an interest. Further details of these transactions can be found in statutory accounts of UKRI.
26. Restatement of Statement of Financial Position and Statement of Comprehensive Net Expenditure as a result of changes to the Departmental boundary and other restatements
Prior period adjustments
BIS (Postal Services Act 2001) Company Limited (BPSA)
With the adoption of IFRS 9 ‘Financial Instruments’, all investment classifications and accounting judgments were re-assessed by BPSA. As a result of this, the unit of account of the investments held by BPSA was reassessed which led to changes in the recognition of investment movements and investment returns in the BPSA audited 2018-19 financial statements. These changes were identified after the 2018-19 Departmental Group accounts had been signed and laid in Parliament. The overall impact is an increase in the Departmental Group’s net assets of £7 million.
The disclosure impact in the SoFP was an increase in Other financial assets by £20 million (note 11). This was driven by:
- a reduction in Investment fund additions of £5 million,
- a reduction in Investment fund repayments of £101 million,
- a reduction in Investment fund revaluations of £82 million, and;
- an adjustment resulting from the adoption of IFRS 9 of £6 million.
The increase in Other financial assets of £20 million was partially offset by a reduction in Cash and cash equivalents of £10 million (note 16) and Trade and other receivables of £3 million (note 14).
The disclosure impact in the SoCNE was to recognise an increase of £80 million in the change in fair value of financial assets (note 5) and a decrease in Other operating expenditure of £32 million relating to profit on disposal of investments, off-set against an increase of £119 million of dividend and distribution from investment fund income (note 6.2).
As the disclosure impacts are material to the Departmental Group accounts, the Departmental Group’s comparatives have been restated in the 2019-20 Departmental Annual Report and Accounts. Had these adjustments been recognised in the Departmental Group Outturn in 2018-19, this would not have resulted in a control total breach. The Departmental Group Outturn adjustments are disclosed as a non-budget adjustment in 2019-20 SoPS and are broken down as follows: Note: HM Treasury’s Supply Estimate guidance manual requires that only increases in Outturn require non-budget cover in the 2019-20 Supplementary Estimate. The non-budget Outturn includes the decreases.
| Change in budgets and non-budget | Increases/(decrease) in Outturn £’000 | |----------------------------------|---------------------------------------| | 2018-19 – Capital AME – Government as Shareholder (ALB) net | 104,256 | | 2018-19 – Resource AME – Government as Shareholder (ALB) net | (39,661) | | 2018-19 – Resource DEL – Government as Shareholder (ALB) net | | | £10k increase in Admin (£1,255k) decrease in Programme | (1,245) | | Overall movement | 63,350 |
**Fleetbank Funding Limited (Fleetbank)**
Fleetbank holds the Enable loan investments, and from 1 April 2016 was consolidated into the Departmental Group accounts. It was identified that the investment additions (Capital DEL) of £141 million were incorrectly coded to non-budget spend in the Departmental Group Outturn in 2018-19. This adjustment has no impact on the presentation of the Departmental Group SoFP or SoCNE but does impact the SoPS as it is an increase in the Departmental Group’s Capital DEL Outturn. Had this adjustment been recognised in the Departmental Group’s Outturn in 2018-19, this would not have resulted in a control total breach. The Departmental Group Outturn cumulative adjustments are disclosed as a non-budget adjustment in 2019-20 SoPS and are broken down as follows:
| Change in budgets and non-budget | Increases/(decrease) in Outturn £’000 | |----------------------------------|---------------------------------------| | 2016-17 – Capital DEL – Government as Shareholder (ALB) net | 29,754 | | 2017-18 – Capital DEL – Government as Shareholder (ALB) net | 65,858 | | 2018-19 – Capital DEL – Government as Shareholder (ALB) net | 140,804 | | Overall movement | 236,416 | Impact of restatements on opening balances for the Departmental Group at 1 April 2019
| | Balance at 31 March 2019 per 2018-19 published accounts | Prior period adjustments | Restated balance at 1 April 2019 | |--------------------------------|----------------------------------------------------------|--------------------------|----------------------------------| | **Consolidated Statement of Comprehensive Net Expenditure** | | | | | Operating Income | (3,260) | - | (3,260) | | Operating Expenditure | (84,817) | 32 | (84,785) | | Net expenditure for the year from continuing operations | (6,283) | (39) | (6,322) | | Other comprehensive net income and expenditure | (191) | - | (191) | | **Total comprehensive expenditure** | (94,551) | (7) | (94,558) |
**Consolidated Statement of Financial Position**
| | £m | £m | £m | |--------------------------------|----|----|----| | **Non-current assets** | | | | | Property, plant and equipment | 3,533 | - | 3,533 | | Investment properties | 117 | - | 117 | | Intangible assets | 167 | - | 167 | | Investments and loans in public bodies | 1,758 | - | 1,758 | | Other financial assets | 4,098 | 20 | 4,118 | | Recoverable contract costs | 1,620 | - | 1,620 | | Derivative financial instruments | 7 | - | 7 | | Investment in joint ventures and associates | 1,039 | - | 1,039 | | Trade and other receivables | 938 | - | 938 | | **Current assets** | | | | | Inventories | 37 | - | 37 | | Non-current assets held for sale | 20 | - | 20 | | Trade and other receivables | 1,568 | (3) | 1,565 | | Investments and loans in public bodies | 620 | - | 620 | | Derivative financial instruments | 17 | - | 17 | | Cash and cash equivalents | 2,088 | (10) | 2,078 | | **Current liabilities** | (8,726) | - | (8,726) | | **Non-current liabilities** | (148,380) | - | (148,380) | | **Taxpayer’s equity and other reserves** | | | | | General fund | 142,304 | (7) | 142,297 | | Revaluation reserve | (2,155) | - | (2,155) | | Charitable funds | (438) | - | (438) | | Non-controlling interests | (232) | - | (232) | 27. List of bodies within the Departmental Group
The table below shows the list of BEIS organisations that are included in the Government Resources and Accounts Act 2000 (Estimates and Accounts) Order 2019, known as the Designation Order, plus amendments from the Government Resources and Accounts Act 2000 (Estimate and Accounts) (Amendment) Order 2020, known as the Amendment Order. The individual Annual Report and Accounts for each of these bodies can be found on their own websites or via the Inside Government website (https://www.gov.uk/government/organisations/department-for-business-energy-and-industrial-strategy).
The bodies whose accounts have been consolidated within the Departmental Group accounts are shown in section (a) of the table. Bodies within the Departmental Group but not consolidated, such as where net assets are not considered material to the Departmental Group accounts, are indicated separately in section (b) of this table.
As a result of changes made in the 2019-20 Designation Order and Amendment Order some additional bodies are now included in the Departmental Group accounts boundary. Where boundary changes have an impact on previously reported financial results, these are shown in note 26.
| Designated Body (linked bodies are indicated in italics below their parent body) | Status | Notes and website (further information about linked bodies or those closed during the year is also included) | |---|---|---| | **(a) Bodies consolidated in Departmental Group accounts for 2019-20** | | **Agencies** | | Insolvency Service | Executive Agency | [gov.uk/government/organisations/insolvency-service](https://www.gov.uk/government/organisations/insolvency-service) | | UK Space Agency | Executive Agency | [gov.uk/government/organisations/uk-space-agency](https://www.gov.uk/government/organisations/uk-space-agency) | | **NDPBs and other designated bodies** | | Advisory, Conciliation and Arbitration Service | NDPB | [acas.org.uk](https://acas.org.uk) | | Central Arbitration Committee | NDPB (linked to ACAS) | Consolidated by ACAS | | Certification Office for Trade Union and Employers’ Associations | Other Public Body - Office Holder (linked to ACAS) | Consolidated by ACAS | | BIS (Postal Services Act 2011) Company Limited | Other Public Body – Limited Company | [beta.companieshouse.gov.uk/company/07941521](https://beta.companieshouse.gov.uk/company/07941521) | | British Business Bank plc | Other Public Body – Public Limited Company | [british-business-bank.co.uk](https://www.british-business-bank.co.uk) | | BBB Patient Capital Holdings Limited | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | British Business Investments Ltd | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | British Business Finance Ltd | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | British Business Financial Services Ltd | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | British Business Aspire Holdco Ltd | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | British Patient Capital Limited | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | Capital for Enterprise Fund Managers Limited | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | Capital for Enterprise (GP) Limited | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | Capital for Enterprise Limited | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | Designated Body (linked bodies are indicated in italics below their parent body) | Status | Notes and website | |---|---|---| | The Start-Up Loans Company | Limited Company (Subsidiary of BBB) | Consolidated by British Business Bank plc | | Civil Nuclear Police Authority | NDPB | [gov.uk/government/organisations/civil-nuclear-police-authority](gov.uk/government/organisations/civil-nuclear-police-authority) | | Coal Authority | NDPB | [gov.uk/government/organisations/the-coal-authority](gov.uk/government/organisations/the-coal-authority) | | Committee on Fuel Poverty | NDPB | Costs are included in the Core Department’s expenditure. | | Committee on Radioactive Waste Management | NDPB | Costs are included in the Core Department’s expenditure. | | Competition Service | NDPB | [catribunal.org.uk/about/competition-service](catribunal.org.uk/about/competition-service) | | Competition Appeal Tribunal | NDPB | [catribunal.org.uk](catribunal.org.uk) | | The Copyright Tribunal | NDPB | No accounts produced as costs are included in the Core Department’s expenditure. It is funded by the Core Department and operated by UK Intellectual Property Office. | | Cornwall and Isles of Scilly Investments Limited | Other Public Body – Limited Company | [ciosif.co.uk](ciosif.co.uk) | | Council for Science and Technology | Expert Committee | [gov.uk/government/organisations/council-for-science-and-technology](gov.uk/government/organisations/council-for-science-and-technology) | | Diamond Light Source Limited | Other Public Body – Limited Company | [diamond.ac.uk](diamond.ac.uk) | | Dounreay Site Restoration Limited | Limited Company – NDA Site Licence Company | [dounreay.com](dounreay.com) | | Enrichment Holdings Ltd | Other Public Body – Limited Company | This is a special purpose vehicle for the Government’s investment in Urenco Limited. | | Enrichment Investments Limited | Limited Company (Subsidiary of Enrichment Holdings Limited) | Consolidated by Enrichment Holdings Limited | | Electricity Settlements Company Ltd | Other Public Body – Limited Company | [emrsettlement.co.uk](emrsettlement.co.uk) | | Fleetbank Funding Limited | Other Public Body – Limited Company | This is a vehicle for the government to facilitate the Enable Loan Guarantee Scheme | | The Financial Reporting Council Limited | Other Public Body – Limited Company | [frc.org.uk](frc.org.uk) | | Harwell Science and Innovation Campus Public Sector Limited Partnership | Other Public Body – Limited Partnership | Joint venture owned by UKRI and UK Atomic Energy Authority | | Designated Body | Status | Notes and website | |-----------------------------------------------------|-------------------------------|-----------------------------------------------------------------------------------| | Industrial Development Advisory Board | Expert Committee | [gov.uk/government/organisations/industrial-development-advisory-board](gov.uk/government/organisations/industrial-development-advisory-board) | | LLW Repository Limited | Limited Company – NDA | [llwrsite.com](llwrsite.com) | | Low Carbon Contracts Company Ltd | Other Public Body – Limited Company | [lowcarboncontracts.uk](lowcarboncontracts.uk) | | Low Pay Commission | NDPB | [gov.uk/government/organisations/low-pay-commission](gov.uk/government/organisations/low-pay-commission) | | Midlands Engine Investments Limited | Other Public Body – Limited Company | [british-business-bank.co.uk/ourpartners/midlands-engine-investment-fund](british-business-bank.co.uk/ourpartners/midlands-engine-investment-fund) | | The NESTA Trust | Other Public Body – Charitable Trust | [nesta.org.uk/faqs/what_is_the_nesta_trust](nesta.org.uk/faqs/what_is_the_nesta_trust) | | Northern Powerhouse Investments Limited | Other Public Body – Limited Company | [british-business-bank.co.uk/ourpartners/northern-powerhouse-investment-fund](british-business-bank.co.uk/ourpartners/northern-powerhouse-investment-fund) | | Nuclear Decommissioning Authority¹ | NDPB | [gov.uk/government/organisations/nuclear-decommissioning-authority](gov.uk/government/organisations/nuclear-decommissioning-authority) | | Magnox Limited² | Limited Company (Subsidiary of NDA) | From 1 September 2019, consolidated by the Nuclear Decommissioning Authority. Prior to 1 September 2019, a company operating sites on behalf of, and under contract from the NDA. | | Radioactive Waste Management Limited | Limited Company (Subsidiary of NDA) | Consolidated by Nuclear Decommissioning Authority | | Sellafield Limited | Limited Company (Subsidiary of NDA) | [sellafieldsites.com](sellafieldsites.com) | | Nuclear Liabilities Financing Assurance Board | Expert Committee | [gov.uk/government/organisations/nuclear-liabilities-financing-assurance-board](gov.uk/government/organisations/nuclear-liabilities-financing-assurance-board) | | Office of Manpower Economics¹ | Office of Department | [gov.uk/government/organisations/office-of-manpower-economics](gov.uk/government/organisations/office-of-manpower-economics) | | Oil and Gas Authority | Other Public Body – Limited Company | [ogaauthority.co.uk](ogaauthority.co.uk) | | Postal Services Holding Company Limited | Other Public Body – Limited Company | Company in liquidation. Former holding company for the government’s investment in Post Office Limited. | | Regulatory Policy Committee | NDPB | [gov.uk/government/organisations/regulatory-policy-committee](gov.uk/government/organisations/regulatory-policy-committee) |
¹ Designated Body (linked bodies are indicated in italics below their parent body) | Designated Body (linked bodies are indicated in italics below their parent body) | Status | Notes and website | |---|---|---| | South Tees Site Company Limited | Other Public Body – Limited Company | [https://www.southteesdc.com/about-us/south-tees-site-company-ltd](https://www.southteesdc.com/about-us/south-tees-site-company-ltd) This is a vehicle for managing the government investment in the South Tees Site | | UK Climate Investments LLP | Other Public Body – Limited Liability Partnership | [greeninvestmentgroup.com/ukci](http://greeninvestmentgroup.com/ukci) Limited Liability Partnership between BEIS and UK Green Investment Bank | | UK Climate Investments Apollo Limited | Limited Company (Subsidiary of UKCI) | Consolidated by the UK Climate Investments LLP | | UK Climate Investments H1 Limited | Limited Company (Subsidiary of UKCI) | Consolidated by the UK Climate Investments LLP | | UK Climate Investments Indigo Limited | Limited Company (Subsidiary of UKCI) | Consolidated by the UK Climate Investments LLP | | UK Climate Investments Lakeside Limited | Limited Company (Subsidiary of UKCI) | Consolidated by the UK Climate Investments LLP | | UK Climate Investments VC Limited | Limited Company (Subsidiary of UKCI) | Consolidated by the UK Climate Investments LLP | | UK Green Infrastructure Platform Limited | Other Public Body – Limited Company | Investment vehicle managed by UK Green Investment Bank Limited on behalf of BEIS. | | United Kingdom Research and Innovation | NDPB | [ukri.org](http://ukri.org) | | Medical Research Council¹ | Part of UKRI | Former Research Council now part of UKRI | | The Science and Technology Facilities Council (STFC)¹,² | Part of UKRI | Former Research Council now part of UKRI | | Innovate UK Loans Limited | Limited Company (Subsidiary of UKRI) | Consolidated by UKRI | | STFC Innovations Limited | Limited Company (Subsidiary of UKRI) | Consolidated by UKRI | | UK Shared Business Services Limited | Other Public Body – Limited Company | [uksbs.co.uk](http://uksbs.co.uk) | | United Kingdom Atomic Energy Authority¹ | NDPB | [gov.uk/government/organisations/uk-atomic-energy-authority](http://gov.uk/government/organisations/uk-atomic-energy-authority) (corporate) [ccfe.ukaea.uk](http://ccfe.ukaea.uk) (fusion research) | | AEA Insurance Limited | Part of UKAEA | Consolidated by United Kingdom Atomic Energy Authority |
(b) Bodies not consolidated in Departmental Group accounts for 2019-20
| Designated Body | Status | Notes and website | |---|---|---| | British Hallmarking Council | NDPB | [gov.uk/government/organisations/british-hallmarking-council](http://gov.uk/government/organisations/british-hallmarking-council) Turnover and net assets are not material to Departmental Group accounts. | | British Technology Investments Limited | Other Public Body – Limited Company | Turnover and net assets are not material to Departmental Group accounts. | | Committee on Climate Change¹ | NDPB | [theccc.org.uk/about](http://theccc.org.uk/about) Turnover and net assets are not material to Departmental Group accounts. | | Designated Body | Status | Notes and website | |-----------------------------------------------------|---------------------------------------------|-----------------------------------------------------------------------------------| | Daresbury SIC (PubSec) LLP | Other Public Body – Limited Liability | https://beta.companieshouse.gov.uk/company/OC360004 | | | Partnership | A joint venture between the Science and Technology Facilities Council (UKRI) and Halton Borough Council. Turnover and net assets are not material to Departmental Group accounts. | | Daresbury Science & Innovation Campus Limited | Other Public Body – Limited Company | www.sci-techdaresbury.com | | | | A joint venture between the Science and Technology Facilities Council (UKRI) and Langtree. Turnover and net assets are not material to Departmental Group accounts. | | East Midlands Early Growth Fund Limited | Other Public Body – Limited Company | Recorded as investment in Core Department accounts. Turnover and net assets are not material to Departmental Group accounts. | | Groceries Code Adjudicator | Other Public Body – Office Holder | gov.uk/government/organisations/groceries-code-adjudicator | | | | Turnover and net assets are not material to Departmental Group accounts. | | NDA Archives Limited | Other Public Body – Subsidiary of NDA – | gov.uk/government/organisations/nuclear-decommissioning-authority | | | Limited Company | Turnover and net assets are not material to Departmental Group accounts. | | NW VCLF HF LLP | Other Public Body – Limited Liability | Recorded as investment in Core Department accounts. Turnover and net assets are not material to Departmental Group accounts. | | | Partnership | | | Pubs Code Adjudicator | Other Public Body – Office Holder | gov.uk/government/organisations/pubs-code-adjudicator | | | | Turnover and net assets are not material to Departmental Group accounts. | | Research Sites Restoration Limited | Other Public Body – Subsidiary of NDA – | Part of the NDA – Dormant – Site Licence Company | | | Limited Company | No costs or activities incurred in 2019-20 as the activities transferred to Magnox in 2016-17. | | Small Business Commissioner | NDPB | https://www.smallbusinesscommissioner.gov.uk | | | | Turnover and net assets are not material to Departmental Group accounts. |
Notes:
1. Entities fall in scope of the Trade Union (Facility Time Publication Requirements) Regulations 2017. Disclosure regarding Facility Time can be found in the relevant accounts.
2. During 2018-19 the Office of National Statistics (ONS) reclassified two of the Department’s non-consolidated Executive Agencies, HM Land Registry and Companies House, from Public Corporations to Central Government Bodies. This reclassification will result in Companies House being consolidated into the Departmental Group accounts from 1 April 2020. HM Land Registry will not be consolidated into the Departmental Group accounts as it has been classified by Cabinet Office as a Non-Ministerial Department having a separate Estimate to the Department and preparing its own separate accounts. The Department has received a derogation from HM Treasury to not consolidate Companies House until its Trading Fund status is revoked in Parliament. Companies House’s Trading Fund Revocation Order has been laid in Parliament and has an effective date of 1 April 2020. Companies House will be consolidated into the 2020-21 Departmental Accounts.
3. Magnox Ltd became a wholly owned subsidiary of the Nuclear Decommissioning Authority (NDA) on 1 September 2019.
4. The Science and Technology Facilities Council ceased to exist as of 30 March 2020.
5. Daresbury Science & Innovation Campus Limited was dissolved via voluntary strike off on 31 March 2020.
6. Events after the Reporting Period
Adjusting events
The Small Business Grant Fund and the Retail, Hospitality and Leisure Grant Fund schemes closed to new applicants from the end of August 2020, limiting the Department’s liability. Local Authorities provide weekly updates of payments made under the schemes, which has materially changed the total liability for the Department. Note 18.2 includes a provision of £10.8 billion relating to the expected outflow of cash to eligible businesses, in addition to the £151 million recognised as a grant accrual.
The total cash paid by Local Authorities to businesses as at 16 August 2020 was £10.9 billion. Further unaudited information on the spend can be found on the gov.uk website https://www.gov.uk/government/publications/coronavirus-grant-funding-local-authority-payments-to-small-and-medium-businesses
Non-adjusting events
The Nuclear Liabilities Fund was established in 1996 to meet certain costs of decommissioning eight nuclear power plants in the UK that have been owned and operated by EDF Energy Nuclear Generation Limited since 2009. Following discussion between HM Treasury and the Fund, on 23 June 2020 the Fund agreed to retain an existing deposit of £6.5 billion in the UK Exchequer in return for a contribution of £5.07 billion from the Core Department which will also be held by the Fund as a deposit in the Exchequer. The contribution by the Department was not related to any change in the Department’s assessment, as described in note 23, of the sufficiency of the Fund to meet the decommissioning liabilities prior to the Fund’s agreement to retain its deposit in the Exchequer.
On 3 July 2020, the Government announced that it led a successful bid to acquire OneWeb, which develops cutting-edge satellite technology in the UK and in the US. The Core Department for the Business, Energy and Industrial Strategy will invest $500 million and take a significant equity share in OneWeb.
Due to the COVID-19 pandemic, the government announced a number of support schemes for businesses. These schemes do not have a financial impact on the 2019-20 financial statements, unless otherwise stated.
The Coronavirus Business Interruption Loans (CBILS) were announced by the Chancellor on 11 March 2020. This scheme provides term loans, overdrafts, invoice finance and asset finance up to £5 million with an 80% guarantee to lenders. The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied charges. The scheme is available for businesses with a turnover up to £45 million. The term loans and asset facilities are for up to six years, whilst the overdrafts and invoice finance facilities are up to three years. Post year end, the terms associated with businesses meeting the criteria of whether they qualify for the loans have been relaxed meaning even more smaller businesses across the UK can access finance. Access has been opened up to those smaller businesses that would have previously met the requirements for a commercial facility, with insufficient security no longer a condition to access the scheme. As at 18 August 2020, £10.5 billion of loans have been provided under the scheme. The maximum amount that could be paid out if all loans defaulted is £8.4 billion. Not all loans are expected to default, with losses estimated as at September 2020 to be in a range of 10-25%. The initial indicative loss ranges are based on historic losses observed in prior programmes which most closely resemble the current COVID-19 interventions. However, no two programmes (or two economic downturns) are completely alike and the estimate will be revised as more data becomes available. This data will be used as an input into the loss forecasting models, which are currently being developed. Actual losses could be significantly different to forecast losses.
The Coronavirus Large Business Interruption Loan Scheme (CLBILS) supports large businesses to access loans, overdrafts and other finance, through an 80% guarantee to lenders. Businesses with an annual turnover over £45 million can apply for up to £200 million of finance, capped at the higher of 25% of turnover, twice the annual wage bill, or need for 12 months liquidity. The maximum term length is three years. As at 18 August 2020, £1.4 billion of loans have been provided under the scheme. The maximum amount that could be paid out if all loans defaulted is £1.1 billion. Not all loans are expected to default, with losses estimated as at September 2020 to be in a range of 5-20%. The initial indicative loss ranges are based on historic losses observed in prior programmes which most closely resemble the current COVID-19 interventions. However, no two programmes (or two economic downturns) are completely alike and the estimate will be revised as more data becomes available. This data will be used as an input into the loss forecasting models, which are currently being developed. Actual losses could be significantly different to forecast losses.
The Bounce Back Loan Scheme (BBLS) provides loans to businesses of up to £50,000 (interest and repayment free for the first 12 months paid for by a Business Interruption Payment grant), with a 100% government-backed guarantee for lenders. These loans have a term length of six years. As at 18 August 2020, £34.2 billion of loans have been provided under the scheme. The maximum amount that could be paid out if all loans defaulted is £34.2 billion. Not all loans are expected to default, with losses estimated as at September 2020 to be in a range of 35-60%. The initial indicative loss ranges are based on historic losses observed in prior programmes which most closely resemble the current COVID-19 interventions. However, no two programmes (or two economic downturns) are completely alike and the estimate will be revised as more data becomes available. This data will be used as an input into the loss forecasting models, which are currently being developed. Actual losses could be significantly different to forecast losses.
The Future Fund scheme issues convertible loans of between £125,000 and £5 million to innovative companies which are facing financing difficulties due to COVID-19. Each loan requires at least equal match funding from private investors and can be converted into equity in the company once the loan matures. As at 16 August 2020, £588.3 million of loans have been approved to 590 companies.
The Local Authority Discretionary Grants Fund was announced on 2 May 2020 and provides Local Authorities with grant funding for small businesses up to £617 million.
The Vaccines Taskforce was launched on 17 April 2020 to drive forward, expedite and co-ordinate efforts to research and then produce a coronavirus vaccine. The Department’s role is to identify and procure a portfolio of vaccine candidates including supporting vaccine manufacture, so that a vaccine can be secured and made available to the public as soon as possible. As a result, the Department has entered into a number of commercially sensitive contracts.
28.1 Date Accounts authorised for issue
BEIS’s Accounting Officer has authorised these Accounts to be issued on the same day as they were certified. Page intentionally left blank Trust Statement Foreword by the Accounting Officer
Overview The Trust Statement accounts for the income BEIS collects as an agent of the HMT Consolidated Fund. The amounts collected are passed to the Consolidated Fund. In 2019-20, BEIS collected income under the following schemes.
- EU emissions trading scheme (EU ETS)
- Carbon reduction commitment (CRC)
- Climate change agreements (CCA)
- Energy saving opportunity scheme (ESOS)
EU ETS
About EU ETS EU ETS is the largest emissions trading system to reduce GHG emissions; around 1,000 industrial plants in the UK participate in the system. It is a cap and trade system. It caps the amount of GHG emissions participants can emit; it allows trading of allowances so that total emissions stay within the cap. There are separate emission allowances for stationary installations and aircraft operators. EU allowances (EUA), while EU aviation allowances (EUAA) are allowances for aircraft operators.
Throughout 2019, UK’s access to the EU ETS registry was suspended as part of Brexit preparations. During this period the UK was unable to issue free allowances or hold national auctions. The suspension was lifted on 31 January 2020 when the UK and EU ratified the withdrawal agreement. Free allowances relating to 2019 and 2020 were issued to UK operators in February 2020, and UK auctions resumed in March 2020.
EU ETS financial summary
- In March 2020, the UK held two EUA auctions.
- 261 civil penalties were issued by the Environment Agency, regulator for stationary installations in England. Most of the penalties relate to non-compliance within the UK small emitter opt-out scheme. A penalty is charged for each tonne of CO₂ beyond the target. Some of these penalties relate to previous compliance years.
CRC
About CRC CRC is an energy efficiency scheme, mandatory for large, non-energy intensive organisations, using over 6GWh of qualifying electricity. There are over 5,000 participants across the scheme. Participants buy allowances for each tonne of equivalent carbon dioxide emissions.
CRC closed at the end of the 2018-19 compliance year to simplify the landscape for energy efficiency tax on businesses. July 2019 was the last time participants had to report under CRC, and in October 2019, surrender allowances for 2018-19 emissions. In April 2019, the reporting element of CRC was replaced by the Streamlined Energy and Carbon Reporting (SECR) framework.
2019-20 saw the fifth buy-to-comply sale (for compliance year 2018-19). The prices across the scheme are as follows;
| CRC scheme year | Compliance sale price | Forecast sale price | |-----------------|-----------------------|---------------------| | 2018-19 | £18.30 | £17.20 | | 2017-18 | £17.70 | £16.60 | | 2016-17 | £17.20 | £16.10 | | 2015-16 | £16.90 | £15.60 | | 2014-15 | £16.40 | £15.60 |
CRC financial summary
- CRC allowance sales in 2019-20 generated £280 million (2018-19: £440 million). There were 40 civil penalties levied against CRC participants.
- Civil penalties amounted to £249,078 (2018-19: £69,090). The costs incurred in administering the CRC scheme were borne by the Department as shown in note 3 and included within the Department’s Accounts. CCA
About CCA CCA is an energy efficiency scheme which is voluntary for businesses in energy intensive sectors. CCA is an agreement to meet stretching targets in exchange for a reduced Climate Change Levy (CCL) of up to 93%. The scheme was launched in April 2013 and runs until 31 March 2023.
CCA generates income from:
- Charging income: annual payment made by participants to the Administrator; this is retained by the Environment Agency and will not feature in the Trust Statement.
- Civil penalties for minor infractions received by the Administrator
- Buy-out payments if targets are not met at the end of the 2-year target period.
CCA financial summary
- In 2019-20, the income from buy-out payments generated £31.974 million (£107,760 in 2018-19) – shown in note 2.3 of the Trust Statement. The higher income in the current year is because 2019-20 was a period of primary reporting for Target Reporting Period III. By comparison, 2018-19 was a period of secondary reporting for Target Reporting Period II, where participants make further top-up buy-out payments after an audit or they receive a refund if they have overpaid.
- 1 civil penalty was issued under the CCA scheme totalling £1,602 (2018-19: 2 civil penalties totalling £565).
ESOS
About ESOS ESOS is an energy assessment scheme, mandatory for all large organisations in the UK, established in response to the EU Energy Efficiency Directive Article 8 (4-6). Qualifying organisations must carry out audits every four years on energy use of their buildings, industrial processes and transport to identify cost-effective energy saving measures. The Scheme runs until 5 December 2027. Phase II ran until 5 December 2019, and Phase III runs until 5 December 2023. In Phase 1 there were 6,075 ultimate parent organisations in the scheme.
ESOS generates income from non-compliance penalties.
ESOS financial summary
- In 2019-20, 12 penalties were issued which totalled £105,725 (2018-19: 28 penalties which totalled £272,202).
Governance statement The Department’s governance statement covers both the Accounts and the Trust Statement and is included in the Governance section of this report.
Remote contingent liabilities
Audited information No remote contingent liabilities exist at the end of the reporting period.
Basis for preparation The HM Treasury Accounts Direction, issued in accordance with Section 2 of the Exchequer and Audit Departments Act 1921 requires the Department to prepare the Trust Statement to give a true and fair view of the state of affairs relating to the collection and allocation of the carbon allowance auction receipts for the EU Emissions Trading Schemes, the allowances sales from the CRC scheme, buy-out payments from the CCA Scheme and civil penalties receivable under the EU ETS, CRC, CCA and ESOS schemes. Regard is given to all relevant accounting and disclosure requirements given in Managing Public Money and other guidance issued by HM Treasury.
Accounting judgements As the Accounting Officer, it is my responsibility to apply suitable accounting policies in the preparation of the Trust Statement. Revenues are recognised in the period in which the event that generates the revenue takes place, consequently the anticipated proceeds from future auctions and licences as detailed in note 2 are not recognised as assets within this statement. All the transactions within the Trust Statement reflect transactions that have taken place.
Events after the reporting period Details of events after the reporting period are given in note 10 to the Trust Statement. Auditors
These financial statements have been audited, under the Exchequer and Audit Departments Act 1921, by the Comptroller and Auditor General, who is appointed under statute and reports to Parliament. The audit opinion is on pages 231 to 233. The auditor’s notional remuneration is included within the Department’s Accounts. There were no fees in respect of non-audit work. Statement of Accounting Officer’s responsibilities for the Trust Statement
Under section 2 of the Exchequer and Audit Departments Act 1921, HM Treasury has directed the Department for Business, Energy and Industrial Strategy to prepare for each financial year a Trust Statement in the form and on the basis set out in the Accounts Direction.
HM Treasury has appointed the Permanent Secretary as Accounting Officer of the Department for Business, Energy and Industrial Strategy with overall responsibility for preparing the Trust Statement and for transmitting it to the Comptroller and Auditor General.
The Accounting Officer is responsible for ensuring that: there is a high standard of financial management, including a sound system of internal control; that financial systems and procedures promote the efficient and economical conduct of business and safeguard financial propriety and regularity; that financial considerations are fully taken into account in decisions on policy proposals; and that risk is considered in relation to assessing value for money.
The Accounting Officer is responsible for the fair and efficient administration of the EU ETS including conducting the auction of EU Allowances in the UK for Phase III of the Scheme and Aviation allowances of the EU ETS, collection of the proceeds and onward transmission of the funds in their entirety to the Consolidated Fund.
The Accounting Officer is also responsible for the collection of CRC Allowances and CCA buy-out payments for onward transmission to the Consolidated Fund and, the collection of civil penalties levied under the EU ETS, CCA, CRC, and ESOS schemes for onward transmission to the Consolidated Fund.
The responsibilities of the Accounting Officer, including responsibility for the propriety and regularity of the public finances for which an Accounting Officer is answerable, for keeping proper records and for safeguarding the Department’s assets, are set out in Managing Public Money published by HM Treasury.
The Trust Statement must give a true and fair view of:
- the statement of affairs of the EU ETS, CCA Schemes and penalties issued under the EU ETS, ESOS, CCA and CRC Schemes
- the state of affairs of the CRC Allowance Scheme sales which are recognised on a cash received basis
- the revenue collected, and expenditure incurred together with the net amounts surrendered to the Consolidated Fund
In preparing the Trust Statement, the Accounting Officer is required to comply with the requirements of the Government Financial Reporting Manual and in particular to:
- observe the Accounts Direction issued by HM Treasury, including the relevant accounting and disclosure requirements, and apply suitable accounting policies on a consistent basis
- make judgements and estimates on a reasonable basis
- state whether applicable accounting standards as set out in the Government Financial Reporting Manual have been followed, and disclose and explain any material departures in the accounts
- prepare the Trust Statement on a going-concern basis Accounting Officer’s confirmation
As the Accounting Officer, I have taken all the steps that I ought to have taken to make myself aware of any relevant audit information and to establish that the Department’s auditors are aware of that information. So far as I am aware, there is no relevant audit information of which the auditors are unaware. The annual report and accounts as a whole is fair, balanced and understandable. I take personal responsibility for the annual report and accounts and the judgements required for determining that it is fair, balanced and understandable.
Sarah Munby Permanent Secretary and Principal Accounting Officer 11 September 2020 The Trust Statement Audit Report of the Comptroller and Auditor General to the House of Commons
Opinion on financial statements I have audited the financial statements of Department for Business, Energy and Industrial Strategy Trust Statement (“the Trust Statement”) for the year ended 31 March 2020 under the Exchequer and Audit Departments Act 1921. The financial statements comprise the Statement of Revenue, Other Income and Expenditure, the Statement of Financial Position, the Statement of Cash Flows and the related notes, including the significant accounting policies. These financial statements have been prepared under the accounting policies set out within them.
In my opinion: • The Trust Statement gives a true and fair view of the state of affairs of balances stemming from: the collection of EU Emissions Trading Scheme (ETS) auction receipts; Carbon Reduction Commitment (CRC) allowance sales; Climate Change Agreements (CCA) receipts; and EU ETS, CRC, CCA, and Energy Savings Opportunity Scheme (ESOS) civil penalties as at 31 March 2020 and of the net revenue for the year then ended; and • the financial statements have been properly prepared in accordance with the Exchequer and Audit Departments Act 1921 and HM Treasury directions issued thereunder.
Opinion on regularity In my opinion, in all material respects the income and expenditure recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.
Basis of opinions I conducted my audit in accordance with International Standards on Auditing (ISAs) (UK) and Practice Note 10 ‘Audit of Financial Statements of Public Sector Entities in the United Kingdom’. My responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of my certificate. Those standards require me and my staff to comply with the Financial Reporting Council’s Revised Ethical Standard 2016. I am independent of the Department in accordance with the ethical requirements that are relevant to my audit and the financial statements in the UK. My staff and I have fulfilled our other ethical responsibilities in accordance with these requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.
Conclusions relating to going concern I have nothing to report in respect of the following matters in relation to which the ISAs (UK) require me to report to you where: • the Department’s use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or • the Department have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Department’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
Responsibilities of the Accounting Officer for the audit of the financial statements As explained more fully in the Statement of Accounting Officer’s Responsibilities for the Trust Statement, the Accounting Officer is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Auditor’s responsibilities for the audit of the financial statements My responsibility is to audit and report on the financial statements in accordance with the Exchequer and Audit Departments Act 1921. An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs (UK), I exercise professional judgment and maintain professional scepticism throughout the audit. I also:
- identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Department’s internal control.
- evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Conclude on the appropriateness of the Department’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Department’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions are based on the audit evidence obtained up to the date of my report. However, future events or conditions may cause the Department to cease to continue as a going concern.
I communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.
I am required to obtain evidence sufficient to give reasonable assurance that the income and expenditure recorded in the financial statements have been applied to the purposes intended by Parliament and the financial transactions recorded in the financial statements conform to the authorities which govern them.
Other information
The Accounting Officer is responsible for the other information. The other information comprises information included in the Accounting Officer’s foreword to the Trust Statement and Statement of the Accounting Officer’s responsibility for the Trust Statement, but does not include the financial statements and my auditor’s report thereon. My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon. In connection with my audit of the financial statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard.
Opinion on other matters
In my opinion:
- the information given in the Accounting Officer’s foreword to the Trust Statement and Statement of the Accounting Officer’s responsibility for the Trust Statement for the financial year for which the financial statements are prepared is consistent with the financial statements.
**Matters on which I report by exception**
I have nothing to report in respect of the following matters which I report to you if, in my opinion:
- adequate accounting records have not been kept or returns adequate for my audit have not been received from branches not visited by my staff; or
- the financial statements are not in agreement with the accounting records and returns; or
- I have not received all of the information and explanations I require for my audit; or
- the Governance Statement does not reflect compliance with HM Treasury’s guidance.
**Report**
I have no observations to make on these financial statements.
______________________________________________________________________
**Gareth Davies**\
**Comptroller and Auditor General**
National Audit Office\
157-197 Buckingham Palace Road\
Victoria\
London\
SW1W 9SP\
15 September 2020 Statement of Revenue, Other income and Expenditure
for the year ended 31 March 2020
| Note | 2019-20 | 2018-19 | |------|---------|---------| | | £’000 | £’000 | | **Revenue** | | | | License fees and taxes | | | | EU ETS auction income | 2.1 | 201,388 | 1,270,535 | | CRC allowance sales | 2.2 | 280,462 | 440,280 | | CCA buy-out payments income | 2.3 | 31,974 | 108 | | **Total licence fees and taxes** | | 513,824 | 1,710,923 | | Fines and penalties | | | | Civil penalties – EU ETS | | 8,485 | 2,745 | | Civil penalties – CRC | | 250 | 69 | | Civil penalties – CCA | | 2 | 1 | | Civil penalties – ESOS | | 106 | 272 | | **Total fines and penalties** | 2.4 | 8,843 | 3,087 | | **Total revenue and other income** | | 522,667 | 1,714,010 | | **Expenditure** | | | | Foreign exchange and interest – EU ETS | 3.1 | 195 | (1,269) | | Credit losses – debts written off | 3.2 | (9) | – | | **Total expenditure** | | 186 | (1,269) | | **Net revenue for the Consolidated Fund** | | 522,853 | 1,712,741 |
There were no recognised gains or losses accounted for outside of the above Statement of Revenue, Other Income and Expenditure.
The notes on pages 237 to 241 form part of this statement.
## Statement of Financial Position
**as at 31 March 2020**
| | Note | 31 March 2020 £'000 | 31 March 2019 £'000 | |----------------------|------|----------------------|----------------------| | **Current assets** | | | | | Receivables and accrued fees | 4 | 9,400 | 2,797 | | Cash and cash equivalents | 5 | 33,181 | 27,898 | | **Total current assets** | | 42,581 | 30,695 | | **Current liabilities** | | | | | Payables | 6 | (639) | (324) | | **Total current liabilities** | | (639) | (324) | | **Net current assets** | | 41,942 | 30,371 | | **Total net assets** | | | | | Represented by: | | 41,942 | 30,371 | | **Balance on Consolidated Fund Accounts** | | 41,942 | 30,371 |
The notes on pages 237 to 241 form part of this statement.
______________________________________________________________________
**Sarah Munby**\
Permanent Secretary and\
Principal Accounting Officer\
11 September 2020 Statement of Cash Flows
for the year ended 31 March 2020
| Note | 2019-20 | 2018-19 | |------|---------|---------| | | £'000 | £'000 | | Net cash flows from operating activities | A | 516,565 | 1,711,335 | | Cash paid to the Consolidated Fund | 7 | (511,282) | (1,707,358) | | Increase/(decrease) in cash in this period | B | 5,283 | 3,977 |
Notes to the Statement of Cash Flows
| Note | 2019-20 | 2018-19 | |------|---------|---------| | | £'000 | £'000 | | A: Reconciliation of Net Cash Flow to Movement in Net Funds | | | | Net Revenue for the Consolidated Fund | 7 | 522,853 | 1,712,741 | | (Increase)/decrease in receivables and accrued fees | 4 | (6,603) | (1,326) | | Increase/(decrease) in payables | 6 | 315 | (80) | | Net cash flows from operating activities | | 516,565 | 1,711,335 | | B: Analysis in changes in Net Funds | | | | Increase/(decrease) in cash in this period | | 5,283 | 3,977 | | Net Funds as at 1 April (net cash at bank) | 5 | 27,898 | 23,921 | | Net Funds as at 31 March (closing balance) | 5 | 33,181 | 27,898 | Notes to the Trust Statement
1. Accounting Policies
1.1 Basis of accounting
The Trust Statement is prepared in accordance with the accounts direction issued by HM Treasury under section 2 of the Exchequer and Audit Departments Act 1921. The Trust Statement is prepared in accordance with the accounting policies detailed below. These have been agreed between the Department for Business, Energy and Industrial Strategy (the Department) and HM Treasury and have been developed in accordance with International Financial Reporting Standards (IFRS) and other relevant guidance. The accounting policies have been applied consistently in dealing with items considered material in relation to the accounts.
The income and associated expenditure contained in the Departmental Trust Statement are those flows of funds which the Department administers on behalf of the Consolidated Fund.
The financial information in the Trust Statement is rounded to the nearest £’000.
The Trust Statement is presented in pounds sterling, which is the functional currency of the Department.
1.2 Accounting convention
The Trust Statement has been prepared in accordance with the historical cost convention.
1.3 Revenue recognition
IFRS 15 ‘Revenue from Contracts with Customers’ was adopted on 1 April 2018. This replaced IAS 18 ‘Revenue’ and IAS 11 ‘Construction Contracts’. The FReM extends the definition of a contract under IFRS 15 para 9 to include legislation and regulations which enable an entity to obtain revenue that is not classified as a tax by the Office of National Statistics (ONS). As both EU ETS auction income and CRC allowances sales are classified as taxes by ONS and CCA income meets the definition of a tax under ONS’s guidance, IFRS 15 is not applicable to the material revenue streams of the BEIS Trust Statement.
Income from these schemes is recognised as follows:
- EU ETS receipts represent proceeds from the auction of carbon allowances under Phase III and aviation allowances of the EU ETS. Revenue is recognised at the close of each competitive auction, when the revenue can be measured reliably.
- Revenue in respect of CRC allowance sales is recognised on a cash received basis by agreement with HM Treasury.
- Revenue in respect of CCA buy-out payments is recognised on an accruals basis, albeit the recognition point is when the income is received.
- Revenue in respect of civil penalties is recognised when the penalty is imposed.
All result in a cash flow to the Consolidated Fund. This has resulted in no difference to the income recognition methodology applied in previous years.
CRC participants may request refunds for over-surrendered allowances (note 9 Contingent Liabilities refers). These are accounted for in the period in which the refund request is authorised and processed.
1.4 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognised in the Statement of Financial Position when the Department becomes a party to the contractual provisions of an instrument.
1.5 Financial assets
For the purposes of this Trust Statement, the Department holds financial assets in the following categories:
- Receivables held at amortised cost;
- Cash and cash equivalent.
Both receivables and cash and cash equivalents are held at amortised cost following the adoption of IFRS 9 ‘Financial Instruments’ as a replacement for IAS 39 ‘Financial Instruments: Recognition and Measurement’ from 1 April 2018. There were no changes in terms of measurement for these assets upon transition.
Receivables held at amortised cost comprise:
- for EU ETS the amounts due from primary participants in respect of established auction liabilities for which, at the financial year end, payments had not been received. The amounts due are calculated at the close of each auction and have a maturity of less than three months;
- civil penalties levied against participants in the EU ETS, ESOS, CCA and CRC schemes, amounts for which have not been received at the financial year end.
Cash and cash equivalents comprise current balances with banks and other financial institutions, which are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value and have an original maturity of three months or less.
1.6 Financial liabilities
For the purposes of this Trust Statement the Department holds financial liabilities in the following category:
- Other financial liabilities
Other financial liabilities comprise:
- Payables in the Statement of Financial Position. Payables are amounts established as due at the reporting date, but where payment is made subsequently. Since these balances are expected to be settled within 12 months of the reporting date there is no material difference between fair value, amortised cost and historical cost.
The adoption of IFRS 9 has not had a significant effect on the Department’s accounting policies for financial liabilities
1.7 Foreign currency
Transactions that are denominated in a foreign currency are translated into sterling at the rate of exchange ruling on the date of each transaction. Monetary assets and liabilities denominated in foreign currency at the year-end are translated at the rates ruling at that date unless a forward rate has been fixed with the Bank of England. All translation differences are included in the Statement of Revenue, Other Income and Expenditure for the period. 2. Revenue
2.1 Revenue from EU ETS
| | 2019-20 | 2018-19 | |------------------------|---------|---------| | EU ETS – phase III auctions income | 201,388 | 1,258,836 | | EU ETS – aviation auctions income | – | 11,699 | | Total | 201,388 | 1,270,535 |
During 2019, the UK’s access to the EU ETS registry was suspended as part of Brexit preparations, therefore the UK was unable to issue free allowances or hold national auctions. The suspension was lifted on 31 January 2020 when the UK and EU ratified the withdrawal agreement. Free allowances relating to 2019 and 2020 were issued to UK operators in February 2020, and UK auctions resumed in March 2020.
Auction dates and units auctioned for EUA Phase III and EUAA, are available on the Intercontinental Exchange website on the auction calendar link at [www.theice.com/emissions/auctions](http://www.theice.com/emissions/auctions).
2.2 Revenue from CRC
| | 2019-20 | 2018-19 | |------------------------|---------|---------| | CRC allowance sales | 280,462 | 440,280 | | Total | 280,462 | 440,280 |
2.3 Revenue from CCA
| | 2019-20 | 2018-19 | |------------------------|---------|---------| | CCA buy-out payment income receivable | 31,974 | 108 | | Total | 31,974 | 108 |
In 2019-20, the income from buy-out payments generated £31,974 million (£107,760 in 2018-19). This increase is due to 2019-20 being the primary reporting period income for Target Reporting Period III. The income for the prior year comparative is lower due to 2018-19 being a period of secondary reporting for Target Reporting Period II which entailed top up payments as a result of audit or refunds only.
2.4 Revenue from civil penalties
| | 2019-20 | 2018-19 | |------------------------|---------|---------| | Levied under EU ETS | 8,485 | 2,745 | | Levied under CRC | 250 | 69 | | Levied under CCA | 2 | 1 | | Levied under ESOS | 106 | 272 | | Total | 8,843 | 3,087 |
There were 261 penalties totalling £9,277,406 (2018-19: 209 penalties totalling £2,745,088) levied under the EU ETS scheme. An adjustment of EU ETS income in relation to prior years has been included within this figure, resulting in the net value for EU ETS income being £8,485,007. There were 40 penalties totalling £249,708 (2018-19: 6 penalties totalling £69,090) levied under the CRC scheme. 12 penalties totalling £105,725 (2018-19: 28 penalties totalling £272,202) were levied under the ESOS scheme. 1 penalty totalling £1,602 (2018-19: 2 penalties totalling £565) was (were) levied under the CCA scheme. 3. Expenditure and disbursements
3.1 Costs incurred in the collection of receipts
| | 2019-20 | 2018-19 | |------------------------|---------|---------| | Foreign currency translation (gains)/losses – EU ETS | (195) | 1,248 | | Interest charges on Euro auction bank account – EU ETS | – | 21 | | **Total** | (195) | 1,269 |
3.2 Credit losses
| | 2019-20 | 2018-19 | |------------------------|---------|---------| | De-recognition of ESOS penalty | 9 | – | | **Total** | 9 | – |
Expenditure incurred to administer EU ETS, CRC, CCA and ESOS are provided below. These costs are included in the BEIS accounts because there is no express statutory provision to deduct them from the revenue collected and paid to the Consolidated Fund.
EU ETS: £1,532,423 (2018-19: £668,113) CRC: £321,800 (2018-19: £368,211) CCA: £361,599 (2018-19: £357,643) ESOS: £1,028,290 (2018-19: £915,405)
4. Receivables and accrued fees
| | 2019-20 | 2018-19 | |------------------------|---------|---------| | Civil Penalties receivable | 9,400 | 2,797 | | **Total** | 9,400 | 2,797 |
5. Cash and cash equivalents
| | 2019-20 | 2018-19 | |------------------------|---------|---------| | Balance as at 1 April | 27,898 | 23,921 | | Net change in cash and cash equivalent balances | 5,283 | 3,977 | | **Balance at 31 March** | 33,181 | 27,898 |
The following balances at 31 March were held at:
Government Banking Service: 33,181
Total: 33,181
6. Payables
| | 2019-20 | 2018-19 | |------------------------|---------|---------| | Other | 639 | 324 | | **Total** | 639 | 324 |
7. Balance on the Consolidated Funds accounts
| | 2019-20 | 2018-19 | |------------------------|---------|---------| | Balance on the consolidated Fund as at 1 April | 30,371 | 24,988 | | Net revenue for the Consolidated Fund | 522,853 | 1,712,741 | | Less amounts paid to the Consolidated Fund | (511,282) | (1,707,358) | | **Balance on the Consolidated Fund as at 31 March** | 41,942 | 30,371 | 8. Financial Instruments
8.1 Classification and categorisation of financial instruments
| | 2019-20 £’000 | 2018-19 £’000 | |----------------------|---------------|---------------| | Financial assets | | | | Cash | 33,181 | 27,898 | | Civil penalties receivable | 9,400 | 2,797 | | Total financial assets | 42,581 | 30,695 | | Financial liabilities| | | | Other Payables | (639) | (324) | | Total financial liabilities | (639) | (324) |
8.2 Risk exposure to financial instruments
EU ETS
EU ETS is exposed to foreign currency risk due to the timing difference in recognising proceeds at the auction, and converting proceeds into Sterling one day after the close of the auction. This results in either an exchange loss or gain. As shown in note 3.1 there was an exchange gain of £194,813 incurred in 2019-20 (2018-19: loss of £1,247,957).
EU ETS is not exposed to interest rate or liquidity risk. Its exposure to market risk is limited due to there being a current demand for carbon allowances. Civil penalties are subject to credit risk, but this risk is assessed by management as minimal due to the nature of the participants in the scheme.
CRC
A contingent liability exists for refunds the Department may have to pay to CRC participants who have over-surrendered allowances. This is as a result of legislation included in the CRC Order 2013. The refunds are contingent upon participants being able to prove the over-surrender was due to a reporting error and must be agreed by the Secretary of State.
The Department is unable to quantify the amount of future refunds, but based on the most recent information available from the scheme administrators, the refunds are not expected to be significant. Future refunds will be paid as and when they fall due out of future scheme receipts.
CCA
A contingent liability exists in the secondary reporting phase of each Target Reporting Period. This is where a participant has undergone review or audit procedures and it is deemed they have overpaid. Thus, the participant is due a refund. The department must retain sufficient funds in order to cover these refunds.
9. Contingent liability
CRC
A contingent liability exists for refunds the Department may have to pay to CRC participants who have over-surrendered allowances. This is as a result of legislation included in the CRC Order 2013. The refunds are contingent upon participants being able to prove the over-surrender was due to a reporting error and must be agreed by the Secretary of State.
The Department is unable to quantify the amount of future refunds, but based on the most recent information available from the scheme administrators, the refunds are not expected to be significant. Future refunds will be paid as and when they fall due out of future scheme receipts.
CCA
A contingent liability exists in the secondary reporting phase of each Target Reporting Period. This is where a participant has undergone review or audit procedures and it is deemed they have overpaid. Thus, the participant is due a refund. The department must retain sufficient funds in order to cover these refunds.
10. Events after the reporting period
On the 1st June 2020, the UK Emission Trading scheme was announced, as a result of the UK leaving the EU ETS scheme at the end of the year.
There were no other significant events after the reporting period that require disclosure.
The Accounting Officer has duly authorised the issue of the Trust Statement on the date of the Comptroller and Auditor General’s audit certificate. Annex D: Annexes to the Trust Statement
Accounts Direction given by HM Treasury in accordance with Section 2 of the Exchequer and Audit Departments Act 1921
This direction applies to those government departments listed in appendix 2.
The Department shall prepare a Trust Statement ("the Statement") for the financial year ended 31 March 2020 for the revenue and other income, as directed by the Treasury, collected by the department as an agent for others, in compliance with the accounting principles and disclosure requirements of the edition of the Government Financial Reporting Manual by HM Treasury ("FReM") which is in force for 2019-20.
The Statement shall be prepared, as prescribed in appendix 1, so as to give a true and fair view of (a) the state of affairs relating to the collection and allocation of taxes, licence fees, fines and penalties and other income by the Department as agent and of the expenses incurred in the collection of those taxes, licence fees, fines and penalties insofar as they can properly be met from that revenue and other income; (b) the revenue and expenditure; and (c) the cash flows for the year then ended.
The Statement shall also be prepared so as to provide disclosure of any material expenditure or income that has not been applied to the purposes intended by Parliament or material transactions that have not conformed to the authorities which govern them.
When preparing the Statement, the Department shall comply with the guidance given in the FReM (Chapter 8). The Department shall also agree with HM Treasury the format of the Principal Accounting Officer’s Foreword to the Statement, and the supporting notes, and the accounting policies to be adopted, particularly in relation to revenue recognition. Regard shall also be given to all relevant accounting and disclosure requirements in Managing Public Money and other guidance issued by HM Treasury, and to the principles underlying International Financial Reporting Standards.
Compliance with the requirements of the FReM will, in all but exceptional circumstances, be necessary for the accounts to give a true and fair view. If, in these exceptional circumstances, compliance with the requirements of the FReM is inconsistent with the requirement to give a true and fair view, the requirements of the FReM should be departed from only to the extent necessary to give a true and fair view. In such cases, informed and unbiased judgement should be used to devise an appropriate alternative treatment which should be consistent with both the economic characteristics of the circumstances concerned and the spirit of the FReM. Any material departure from the FReM should be discussed in the first instance with HM Treasury.
The Statement shall be transmitted to the Comptroller and Auditor General for the purpose of his examination and report by a date agreed with the Comptroller and Auditor General and HM Treasury to enable compliance with the administrative deadline for laying the audited accounts before Parliament before the Summer Recess.
The Trust Statement, together with this direction (but with the exception of the related appendices) and the Report produced by the Comptroller and Auditor General under section 2 of the Exchequer and Audit Departments Act 1921 shall be laid before Parliament at the same time as the Department’s Resource Accounts for the year unless the Treasury have agreed that the Trust Statement may be laid at a later date.
Vicky Rock Director, Public Spending Her Majesty’s Treasury 19 December 2019 Appendix 1: Trust Statement for the year ended 31 March 2020
1. The Trust Statement shall include: • a Foreword by the Principal Accounting Officer • a Statement of the Principal Accounting Officer’s Responsibilities • a Governance Statement • a Statement of Revenue, Other Income and Expenditure • a Statement of Financial Position • a Cash Flow Statement • such notes as may be necessary to present a true and fair view
2. The notes shall include among other items: • the accounting policies, including the policy for revenue recognition and estimation techniques and forecasting techniques together with statements explaining any significant uncertainty surrounding estimates and forecasts • a breakdown of material items within the accounts • any assets, including intangible assets and contingent liabilities • summaries of losses, write-offs and remissions • post balance sheet events • any other notes agreed with HM Treasury and the National Audit Office
Appendix 2: Application of the accounts direction
| Sponsoring Department | Income stream | Responsible entity | |-----------------------|------------------------|--------------------| | Department for Business, Energy and Industrial Strategy | EU Emissions Allowance | BEIS | | | Fines and Penalties | BEIS | | | CRC allowances | BEIS | | | Climate Change Agreements | BEIS | Page intentionally left blank Annexes
## Annex A: Common core tables
### Table 1 – Public spending
This table provides a summary of Departmental net expenditure using the same headings as voted within the Estimate.
| Resource DEL | 2015-16 | 2016-17 | 2017-18 | 2018-19 | 2019-20 | 2020-21 | |--------------|---------|---------|---------|---------|---------|---------| | | Outturn | Outturn | Outturn | Outturn | Outturn | Plans | | | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | | Deliver an ambitious industrial strategy | 433,415 | 419,912 | 377,129 | 182,286 | 908,525 | 12,694,436 | | Maximise investment opportunities and bolster UK interests | 19,368 | 25,651 | 40,218 | 70,705 | 73,225 | 65,060 | | Promote competitive markets and responsible business practices | 96,204 | 77,895 | 106,951 | 116,245 | 81,333 | 194,383 | | Delivering affordable energy for households and businesses | 342,329 | 36,365 | 32,381 | 44,155 | 38,974 | 34,268 | | Ensuring that our energy system is reliable and secure | 11,560 | 5,823 | 4,201 | 4,756 | 4,723 | 14,240 | | Taking action on climate change and decarbonisation | 95,211 | 27,236 | 91,076 | 24,829 | 32,518 | 15,805 | | Managing our energy legacy safely and responsibly | 306,343 | 291,203 | 265,752 | 251,870 | 234,186 | 215,461 | | Science and Research | 13,540 | (1,985) | 5,088 | 4,608 | 6,159 | 3,692 | | Capability | 361,322 | 307,082 | 320,301 | 393,848 | 415,591 | 706,293 | | Government as Shareholder | 175,114 | 152,037 | 92,179 | 41,017 | 36,273 | 72,738 | | Deliver an ambitious industrial strategy (ALB) net | – | 5,433 | 15,172 | 15,147 | 21,077 | 43,010 | | Promote competitive markets and responsible business practices (ALB) net | 49,295 | 48,127 | 51,648 | 54,635 | 54,743 | 58,340 | | Ensuring that our energy system is reliable and secure (ALB) net | 674 | 1,707 | (1,628) | (2,667) | (2,756) | 1 | | Taking action on climate change and decarbonisation (ALB) net | 4,894 | 2,399 | 4,834 | 6,069 | 8,260 | 5,136 | | Managing our energy legacy safely and responsibly (ALB) net | 46,977 | 34,711 | 32,075 | 28,719 | 25,537 | | Science and Research (ALB) net | 88,406 | 257,413 | 234,283 | 276,226 | 231,165 | 279,600 | | Capability (ALB) net | 39,218 | 39,818 | 33,635 | 30,475 | 34,693 | 1,500 | | Government as Shareholder (ALB) net | (30,023) | (34,034) | (73,072) | (20,724) | 48,853 | 991,308 | | NDA and SLC expenditure (ALB) net | 1,414,542 | 1,287,445 | 1,254,752 | 1,175,337 | 1,330,218 | 1,382,000 | | Nuclear Decommissioning Authority Income (CFER) | (974,558) | (1,026,768) | (1,176,795) | (978,373) | (748,104) | (862,000) | | Nuclear Safeguards Development | – | – | 1,189 | (2,275) | – | – | | Managing our energy legacy safely and responsibly (CFER) | – | – | – | (475,000) | – | – | | **Total Resource DEL** | **2,493,831** | **1,961,993** | **1,714,005** | **1,245,244** | **2,838,375** | **15,940,808** | | Of which: | 2015-16 Outturn £'000 | 2016-17 Outturn £'000 | 2017-18 Outturn £'000 | 2018-19 Outturn £'000 | 2019-20 Outturn £'000 | 2020-21 Plans £'000 | |------------------------------------------------------------------------|------------------------|------------------------|------------------------|------------------------|------------------------|------------------------| | Staff costs | 548,832 | 519,570 | 533,290 | 605,821 | 682,747 | * | | Purchase of goods and services | 2,111,285 | 1,977,969 | 1,938,532 | 1,936,315 | 3,394,359 | * | | Income from sales of goods and services | (1,144,381) | (1,172,788) | (1,079,179) | (996,751) | (764,171) | (864,518) | | Current grants to local government (net) | 25,513 | 12,055 | 9,587 | 22,388 | 183,159 | 12,421,000 | | Current grants to persons and non-profit bodies (net) | 548,517 | 178,351 | 135,838 | 133,554 | 177,281 | 230,472 | | Current grants abroad (net) | 41,307 | 58,511 | 59,465 | 72,274 | 51,593 | 92,734 | | Subsidies to private sector companies | 246,476 | 274,038 | 526,638 | 141,423 | 100,481 | 1,124,000 | | Subsidies to public corporations | 183,035 | 145,239 | 95,170 | 61,530 | 50,081 | 50,000 | | Net public service pensions | – | – | (9) | (12) | (13) | – | | Rentals | (47,642) | 40,608 | 49,177 | 37,077 | 46,630 | 34,456 | | Depreciation | 268,978 | 355,397 | 266,467 | 310,652 | 331,470 | 336,685 | | Take up of provisions | (30) | 780 | (165) | – | (32,162) | – | | Change in pension scheme liabilities | 35 | 128 | 1,372 | 547 | 579 | – | | Other resource | (288,094) | (427,865) | (822,178) | (1,079,574) | (1,383,659) | (210,778) |
**Resource AME**
| Deliver an ambitious industrial strategy | (7,428) | 215,413 | 17,448 | (312,599) | 10,733,189 | (73,373) | | Maximise investment opportunities and bolster UK interests | (457) | 1,844 | 1,586 | 6,044 | 701 | – | | Promote competitive markets and responsible business practices | 101,525 | 134,029 | 6,171 | 79,228 | 72,282 | 87,133 | | Ensuring that our energy system is reliable and secure | (309,667) | (3,204) | (415) | (295) | 478 | – | | Taking action on climate change and decarbonisation | 841,397 | (1,337,205) | – | – | – | – | | Managing our energy legacy safely and responsibly | (308,924) | (258,615) | (885,264) | (297,497) | (203,397) | (147,336) | | Science and Research | 49,871 | 41,888 | 45,578 | 205,985 | 54,912 | 70,489 | | Capability | (21,783) | (6,012) | 13,557 | (12,990) | (55,895) | (70,681) | | Government as Shareholder | (60,043) | (13,342) | (72,885) | 807 | 10,006 | 28,585 | | Renewable Heat Incentive | 372,420 | 545,426 | 687,275 | 817,898 | 846,092 | 1,150,000 | | Deliver an ambitious industrial strategy (ALB) net | 7,741 | (10,850) | 4,967 | (14,444) | 36,202 | 18,000 | | Promote competitive markets and responsible business practices (ALB) net| (161) | (59) | 87 | 57 | 973 | 73 | | Taking action on climate change and decarbonisation (ALB) net | 9,281,975 | 1,065,496 | 3,558,227 | (2,971,284) | 3,543,428 | – | | Managing our energy legacy safely and responsibly (ALB) net | 1,906,630 | 2,025 | 1,507,140 | (2,022,249) | 22,826 | 117,909 | | Science and Research (ALB) net | 107,287 | 91,411 | 94,536 | 41,299 | 149,372 | 10,903 | | Capability (ALB) net | 2 | (400) | – | 1 | 4 | (535) | | | 2015-16 | 2016-17 | 2017-18 | 2018-19 | 2019-20 | 2020-21 | |--------------------------|---------|---------|---------|---------|---------|---------| | | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | | Government as Shareholder (ALB) net | (56,337) | (26,656) | (25,633) | 47,451 | (99,851) | 11,582,331 | | Nuclear Decommissioning Authority (ALB) net | 89,797,932 | 2,850,516 | 69,911,856 | (101,791,292) | 4,371,679 | 1,576,000 | | Promote competitive markets and responsible business practices | 254,256 | 231,511 | 259,815 | 319,330 | 431,123 | 396,000 | | **Total Resource AME** | 101,956,236 | 3,523,216 | 75,124,046 | (105,904,550) | 19,914,124 | 14,747,498 | | Of which: | | | | | | | | Staff costs | – | – | – | 4,404 | 5,165 | – | | Purchase of goods and services | 23,450 | 36,665 | 101,425 | 145,292 | 164,120 | – | | Income from sales of goods and services | – | – | (3) | (5) | – | – | | Current grants to persons and non-profit bodies (net) | 429,826 | 429,011 | 353,221 | 416,439 | 513,128 | 587,146 | | Subsidies to private sector companies | 372,420 | 545,426 | 687,275 | 817,898 | 846,092 | 1,150,000 | | Rentals | (81) | (718) | (2,456) | (2,198) | (2,069) | – | | Depreciation | 10,126,954 | 59,847 | 4,397,424 | (1,882,868) | 5,575,119 | 46,589 | | Take up of provisions | 91,967,474 | 2,984,041 | 71,236,030 | (101,359,925) | 17,774,375 | 13,365,248 | | Release of provision | (692,733) | (352,371) | (316,703) | (3,078,344) | (3,035,901) | (266,243) | | Change in pension scheme liabilities | 19,199 | 20,375 | 34,554 | 29,717 | 32,501 | – | | Unwinding of the discount rate on pension scheme liabilities | 37,423 | 38,095 | 36,924 | 37,782 | 38,348 | 80 | | Other resource | (327,696) | (237,155) | (1,403,648) | (1,032,744) | (1,996,749) | (136,622) | | **Total Resource Budget** | 104,450,067 | 5,485,209 | 76,838,051 | (104,659,306) | 22,752,499 | 30,688,306 | | Of which: | | | | | | | | Depreciation | 10,395,932 | 415,244 | 4,663,891 | (1,572,216) | 5,906,589 | 383,274 | | **Capital DEL** | | | | | | | | Deliver an ambitious industrial strategy | 289,783 | 298,132 | 142,364 | (54,606) | (14,440) | (307,300) | | Maximise investment opportunities and bolster UK interests | 319,887 | 303,527 | 289,791 | 243,957 | 265,872 | 492,100 | | Promote competitive markets and responsible business practices | (10,906) | 1,040 | 4,751 | 5,940 | 6,643 | 22,623 | | Delivering affordable energy for households and businesses | 131,102 | 42,201 | 43,633 | 32,718 | 44,502 | 89,700 | | Ensuring that our energy system is reliable and secure | 5,071 | (548) | 60 | (626) | 291 | 300 | | Taking action on climate change and decarbonisation | 54,871 | 39,569 | 51,578 | 73,121 | 154,227 | 440,570 | | Managing our energy legacy safely and responsibly | 5,017 | 7,747 | 7,944 | 4,278 | 3,461 | – | | Science and Research | 442,991 | 2,596,857 | 2,634,812 | 563,177 | 691,794 | 1,789,689 | | Capability | 11,929 | 10,181 | 18,777 | 30,305 | 19,703 | 153,679 | | Government as Shareholder | 225,668 | 7,871 | (98,418) | 172,613 | 61,445 | 25,545 | | Deliver an ambitious industrial strategy (ALB) net | – | 5 | 32 | – | – | – | | | 2015-16 Outturn | 2016-17 Outturn | 2017-18 Outturn | 2018-19 Outturn | 2019-20 Outturn | 2020-21 Plans | |-----------------------------------------------------------------|----------------|----------------|----------------|----------------|----------------|---------------| | Promote competitive markets and responsible business practices (ALB) net | 940 | 1,027 | 1,377 | 1,059 | 1,193 | 1,160 | | Ensuring that our energy system is reliable and secure (ALB) net | 975 | 1,005 | – | – | – | – | | Taking action on climate change and decarbonisation (ALB) net | 959 | 601 | 39 | 255 | 27 | 275 | | Managing our energy legacy safely and responsibly (ALB) net | 12,243 | 8,773 | 13,559 | 9,503 | 12,919 | 11,600 | | Science and Research (ALB) net | 6,260,785 | 4,257,884 | 4,761,522 | 7,530,042 | 7,786,590 | 8,131,694 | | Capability (ALB) net | 641 | 480 | 43 | 2,482 | 30 | – | | Government as Shareholder (ALB) net | 595,189 | 1,202,419 | 534,901 | 337,819 | 396,476 | 585,213 | | NDA and SLC expenditure (ALB) net | 1,827,695 | 1,970,695 | 2,051,013 | 2,002,699 | 1,797,184 | 2,086,000 | | Nuclear Decommissioning Authority Income (CFER) | (51,639) | – | – | – | – | – | | **Total Capital DEL** | **10,123,201** | **10,749,071** | **10,457,778** | **10,954,736** | **11,227,917** | **13,522,848** | | Of which: | | | | | | | | Staff costs | 480,039 | 477,555 | 480,982 | 502,376 | 535,339 | – | | Purchase of goods and services | 572,620 | 400,772 | 498,431 | 833,595 | 819,845 | – | | Income from sales of goods and services | (131,102) | (258,776) | (276,222) | (260,137) | (273,845) | – | | Current grants to persons and non-profit bodies (net) | 4,666,325 | 3,098,274 | 3,582,865 | 5,744,797 | 6,274,041 | 7,515,329 | | Current grants abroad (net) | 302,460 | 317,400 | 330,130 | 340,794 | 346,659 | 342,350 | | Subsidies to public corporations | (2,655) | 151,078 | 98,737 | – | 4,808 | – | | Capital support for local government (net) | 64,528 | 42,270 | 41,473 | 5,826 | 1,588 | 85,000 | | Capital grants to persons & non-profit bodies (net) | 999,113 | 424,678 | 482,446 | 888,564 | 725,074 | 754,790 | | Capital grants to private sector companies (net) | 155,115 | 239,455 | 21,138 | 32,893 | 96,127 | 666,460 | | Capital grants abroad (net) | 425,981 | 525,993 | 483,289 | 308,624 | 449,475 | 647,825 | | Capital support for public corporations | 229,301 | 184,126 | 81,835 | 204,229 | 94,985 | 59,710 | | Purchase of assets | 2,059,177 | 2,242,318 | 2,412,651 | 2,345,321 | 2,176,780 | 2,365,162 | | Income from sales of assets | (92,106) | (65,827) | (142,274) | (23,144) | (36,518) | – | | Net lending to the private sector and abroad | 571,866 | 1,062,304 | 319,670 | 163,080 | 88,456 | 132,170 | | Other capital | (167,461) | 1,907,451 | 2,042,627 | (132,082) | (74,896) | 33,838 |
**Capital AME**
| Maximise investment opportunities and bolster UK interests | 2,310 | – | – | – | – | – | | Managing our energy legacy safely and responsibly | 61,891 | (38,273) | 611,792 | 35,412 | 29,419 | 29,382 | | Science and Research | – | 834 | 864 | 1,212 | 1,263 | – | | Government as Shareholder | 210,202 | 129,181 | (1,909) | (120,000) | 37,000 | 800,000 | | Renewable Heat Incentive | (22) | – | – | – | – | – | | Deliver an ambitious industrial strategy (ALB) net | 17,299 | 84,842 | (3,474) | (16,387) | 365 | 10,000 | | | 2015-16 Outturn | 2016-17 Outturn | 2017-18 Outturn | 2018-19 Outturn | 2019-20 Outturn | 2020-21 Plans | |--------------------------|-----------------|-----------------|-----------------|-----------------|-----------------|---------------| | | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | | Science and Research (ALB) net | (55,972) | (61,156) | (63,845) | (59,692) | (59,496) | – | | Government as Shareholder (ALB) net | (430,678) | (129,935) | (119,122) | (11,143) | (3,051) | (47,270) | | Managing our energy legacy safely and responsibly (CFER) | – | – | – | (141,811) | (142,400) | (142,400) | | Government as Shareholder | – | – | (1,621,078) | – | – | – | | Government as Shareholder (ALB) net | (1,434,995) | – | – | – | – | – | | **Total Capital AME** | **(1,629,965)** | **(14,507)** | **(1,196,772)** | **(312,409)** | **(136,900)** | **649,712** | | Of which: | | | | | | | | Staff costs | (16,992) | (18,461) | (18,719) | (15,325) | (14,078) | – | | Purchase of goods and services | – | 834 | (7,325) | (2,330) | (4,890) | – | | Capital grants to persons & non-profit bodies (net) | (22) | – | – | – | – | – | | Capital grants to private sector companies (net) | (12,790) | (4,819) | (184,787) | – | – | – | | Capital grants abroad (net) | 2,310 | – | – | – | – | – | | Capital support for public corporations | 223,000 | 134,000 | 129,250 | (120,000) | 37,000 | 800,000 | | Purchase of assets | 350 | 54,158 | 318 | – | – | – | | Income from sales of assets | (32,150) | 15 | – | – | – | – | | Net lending to the private sector and abroad | (1,922,761) | (141,781) | (1,732,112) | (169,341) | (145,086) | (179,670) | | Other capital | 129,098 | (38,453) | 616,603 | (5,413) | (9,846) | 29,382 | | **Total Capital Budget** | **8,493,236** | **10,734,564** | **9,261,006** | **10,642,327** | **11,091,017** | **14,172,560** | | **Total Departmental spending** | **102,547,371** | **15,804,529** | **81,435,166** | **(92,444,763)** | **27,936,927** | **44,477,592** | | Of which: | | | | | | | | Total DEL | 12,348,054 | 12,355,667 | 11,905,316 | 11,889,328 | 13,734,822 | 29,126,971 | | Total AME | 90,199,317 | 3,448,862 | 69,529,850 | (104,334,091) | 14,202,105 | 15,350,621 |
1 Includes impairments 2 Pension schemes report under FRS 17 accounting requirements. These figures therefore include cash payments made and contributions received, as well as certain non-cash items. 3 Total Departmental spending is the sum of the resource budget and the capital budget less depreciation. Similarly, total DEL is the sum of the resource budget DEL and capital budget DEL less depreciation in DEL, and total AME is the sum of resource budget AME and capital budget AME less depreciation in AME.
- Figures for Plans for staff costs and purchase of goods and services, which include assumptions on future price and pay movements, are redacted in line with HMT guidance. Notes:
2019-20 Outturn figures differ slightly from those shown in the Statement of Parliamentary Supply as this table includes a Prior Period Adjustment for Fleetbank Funding and BIS (Postal Services Act 2011) Company Limited due to an update in the classification of transactions.
2019-20 Outturn figures differ slightly between lines from those shown in the Statement of Parliamentary Supply as expenditure for Insolvency Service is shown here against Promote competitive markets and responsible business practices to reflect current Estimate structures, but was recorded against Government as Shareholder in the 2019-20 Estimate.
The large increase in spend in 2020-21 on Deliver an ambitious industrial strategy Resource DEL is due to the COVID-19 Business Support Grants.
The large increase in spend in 2015-16 on Delivering affordable energy for households and businesses Resource DEL is due to the Government Electricity Rebate.
Resource DEL expenditure for Nuclear Safeguards Development is shown separately in 2017-18 as this expenditure was funded through a Contingencies Fund advance, pending passage of the Nuclear Safeguards Bill through Parliament. Repayment of that advance in 2018-19 was made against Capability DEL, offset by the credit shown against Nuclear Safeguards Development.
The receipt in 2018-19 against Managing our energy legacy safely and responsibly (CFER) Resource DEL relates to income from coal pension scheme surpluses.
The increase in spend in 2016-17 and 2017-18 against Science and Research Capital DEL and decrease against Science and Research (ALB) Capital DEL reflects the reclassification of expenditure for the Higher Education Funding Council for England (HEFCE) for Science and Research following the Machinery of Government transfer of HEFCE to the Department for Education. With effect from 2018-19 this expenditure falls under Research England as part of UKRI, under Science and Research (ALB).
The figures for Depreciation in Resource AME include the movement in fair value for Contracts for Difference, shown against Taking action on climate change and decarbonisation and Taking action on climate change and decarbonisation (ALB).
The large movements in take up of provisions within Resource AME in 2015-16, 2017-18 and 2018-19 is due to movements in the long term discount rate for provisions. This largely impacts the lines for Nuclear Decommissioning Authority and Managing our energy legacy safely and responsibly (ALB).
The receipt in 2017-18 against Government as Shareholder (CFER) Capital AME reflects the proceeds from the sale of the Green Investment Bank.
In their role as administrator of the Government’s GB Renewable Heat Incentive scheme, Ofgem made/accrued payments to scheme participants totalling £846,091,674.27 in the financial year 2019-20. Based on Ofgem’s sampling of the population and subject to our detailed assumptions, we can be 95% confident that the estimated value of error for GB Renewable Heat Incentive scheme payments made or accrued in the financial year 2019-20 is between the upper and lower limits of £12,886,310 and £21,780,552. Based on the same assumptions, the most likely estimated value of error for the same period is £17,333,431. This is less than 3 per cent of scheme spend in 2019-20.
## Table 2 – Administration Budget
| | 2015-16 Outturn | 2016-17 Outturn | 2017-18 Outturn | 2018-19 Outturn | 2019-20 Outturn | 2020-21 Plans | |----------------------|-----------------|-----------------|-----------------|-----------------|-----------------|---------------| | | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | | **Resource DEL** | | | | | | | | Deliver an ambitious industrial strategy | 583 | – | – | – | – | – | | Promote competitive markets and responsible business practices | 4,703 | 5,126 | 4,690 | 4,680 | 5,093 | 1,540 | | Managing our energy legacy safely and responsibly | – | (3,801) | – | – | – | – | | Science and Research | 59 | – | 2 | – | – | 398 | | **Capability** | | | | | | | | Promote competitive markets and responsible business practices (ALB) net | 8,630 | 7,362 | 8,735 | 8,783 | 7,779 | 8,669 | | Taking action on climate change and decarbonisation (ALB) net | 3,752 | 3,535 | 3,447 | 3,353 | 5,354 | 5,135 | | Managing our energy legacy safely and responsibly (ALB) net | 10,191 | 12,104 | 7,044 | 6,912 | 4,833 | 7,941 | | Science and Research (ALB) net | 4,685 | 986 | 3,371 | 5,547 | 7,410 | 4,300 | | Capability (ALB) net | 39,218 | 39,818 | 33,635 | 30,475 | 34,693 | 1,500 | | Government as Shareholder (ALB) net | 251 | 162 | 27 | 62 | 105 | 1,937 | | NDA and SLC expenditure (ALB) net | 34,992 | 38,195 | 42,121 | 50,612 | 52,929 | 65,000 | | **Total Administration Budget** | **435,008** | **392,033** | **383,294** | **460,590** | **502,428** | **573,389** | | Of which: | | | | | | | | Staff costs | 365,590 | 329,069 | 326,207 | 385,642 | 434,897 | * | | Purchase of goods and services | 145,800 | 159,274 | 154,657 | 177,288 | 162,338 | * | | Income from sales of goods and services | (135,538) | (37,585) | (31,151) | (10,220) | (3,726) | (2,038) | | Current grants to persons and non-profit bodies (net) | 29 | 38 | 493 | 425 | 325 | 154 | | Current grants abroad (net) | 108 | 106 | 170 | 184 | 538 | – | | Subsidies to private sector companies | – | – | 9 | – | – | – | | Subsidies to public corporations | – | – | – | 28 | – | – | | Net public service pensions | – | – | (9) | (12) | (13) | – | | Rentals | 31,852 | 30,117 | 34,299 | 22,485 | 33,391 | 27,650 | | Depreciation(^1) | 29,956 | 27,034 | 22,901 | 18,850 | 26,902 | 27,764 | | Take up of provisions | 2 | – | (50) | – | 3 | – | | Change in pension scheme liabilities | 25 | 106 | 184 | 141 | 205 | – | | Other resource | (2,816) | (116,126) | (124,416) | (134,221) | (152,432) | (38,611) |
(^1) Includes impairments.
- Figures for Plans for staff costs and purchase of goods and services, which include assumptions on future price and pay movements, are redacted in line with HMT guidance. Annex B: Glossary
**ACAS:** Advisory, Conciliation and Arbitration Service
**AFS:** available for sale
**AHRC:** Arts and Humanities Research Council
**AI:** artificial intelligence
**ALB:** arm’s-length bodies
**AME:** Annually Managed Expenditure
**ARAC:** Audit and Risk Assurance Committee
**BAES:** BAE Systems
**BBB:** British Business Bank Plc
**BBIL:** British Business Investments Ltd
**BBLS:** Bounce Bank Loan Scheme
**BBSRC:** Biotechnology and Biological Sciences Research Council
**BEIS:** Department for Business, Energy and Industrial Strategy
**BFP:** Business Finance Partnership
**BNFL:** British Nuclear Fuels Ltd
**BVCA:** British Venture Capital Association
**CAT:** Competition Appeal Tribunal
**CBILS:** Coronavirus Business Interruption Loan Scheme
**CCA:** Climate Change Agreements
**CCL:** Climate Change Level
**CERN:** European Organisation for Nuclear Research
**CfD:** Contracts for Difference
**CFP:** Committee on Fuel Poverty
**CLBILS:** Coronavirus Large Business Interruption Loan Scheme
**CNPA:** Civil Nuclear Police Authority
**CNPP:** Civil Nuclear Pension Plan
**COVID-19:** Coronavirus pandemic
**CRC:** Carbon Reduction Commitment
**CSOPS:** Civil Servant and Other Pension Scheme
**DDM:** Dynamic Dispatch Model
**Defra:** Department for Food, Environment and Rural Affairs
**DEL:** Departmental Expenditure Limit
**DfE:** Department for Education
**ECF:** Enterprise Capital Fund
**EDFE:** EDF Energy Nuclear Generation Limited
**ECL:** Expected Credit Loss
**EFG:** Enterprise Financial Guarantee
**EHL:** Enrichment Holdings Limited
**EII:** Energy Intensive Industries
**EMR:** Electricity Market Reform
**EPSRC:** Engineering and Physical Sciences Research Council
**ERDF:** European Regional Development Fund
**ESA:** European Space Agency
**ESC:** Electricity Settlements Company
**ESRC:** Economic and Social Research Council
**EU:** European Union Allowance
**EUAA:** European Union Aviation Allowance
**EUETS:** EU Emissions Trading Scheme
**EUV:** existing-use value
**FDP:** Funded Decommissioning Programme
**FF:** Future Fund scheme
**FIDeR:** Financial Investment Decision Enabling for Renewables
**FLS:** Future Leaders Scheme
**FRC:** Financial Reporting Council
**FReM:** Government Financial Reporting Manual
**FVTOCI:** fair value through other comprehensive income
**FVTPL:** fair value through profit or loss
**GCRF:** Global Challenges Research Fund
**GDF:** Geological Disposal Facility
**GDPR:** General Data Protection Regulation
**GGC:** Greening Government Commitments
**GPA:** Government Property Agency
**GRAA:** Government Resources and Accounts Act
**HMT:** HM Treasury
**HPC:** Hinkley Point C UKAEA: UK Atomic Energy Authority UKGIP: UK Green Infrastructure Platform Ltd UKIIF: UK Innovation Investment Fund UKRI: UK Research and Innovation UKSA: UK Space Agency UKSBS: UK Shared Business Services Ltd VAT: Value-Added Tax WTC: Waste Transfer Contract
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950743cf423abacec7104426e69f15f993262b9e | Criminal court statistics quarterly, England and Wales, April to June 2017
Including statistics on the use of language interpreter and translation services in courts and tribunals
Main points
Outstanding cases in magistrates courts have fallen slightly
Disposals were higher than receipts in Q2 2017, which resulted in a small decrease in outstanding cases from 288,700 in Q1 2017 to 283,800 in Q2 2017.
Outstanding cases in the Crown Court have fallen
Disposals remained higher than receipts in the quarter, continuing to drive the decrease in outstanding cases to 39,600, the lowest number since Q1 2013.
Despite decreasing, violence against the person still had the highest number of outstanding cases
In Q2 2017, violence against the person offences had the highest volume of receipts, disposals and outstanding cases, although outstanding cases had decreased from 7,800 in Q1 2017 to 7,500 in Q2 2017.
The average number of days from first listing to completion in the Crown Court has decreased
For cases completing in the Crown Court, the average number of days from first listing to completion in the Crown Court decreased from 178 days in Q1 2017 to 174 days in Q2 2017.
Total financial impositions have increased
Total financial impositions have increased in the latest quarter, mostly driven by the £22.2m increase in fines.
Interpreters: The success rate of completed service requests increased
The success rate for completed language interpreter and translation service requests was 98% in Q2 2017, a one percentage point increase compared to Q1 2017.
The technical guide to Criminal court statistics can be found here: www.gov.uk/government/publications/a-guide-to-criminal-court-statistics
For full and detailed commentary please refer to the annual publication: www.gov.uk/government/statistics/criminal-court-statistics-quarterly-january-to-march-2017
We are changing how our quarterly bulletins look, and would welcome any feedback to [email protected]
For other feedback related to the content of this publication, please let us know at [email protected]
1. Criminal cases in the magistrates’ courts
Outstanding cases in magistrates courts have fallen slightly
Disposals were higher than receipts in Q2 2017, which resulted in a small decrease in outstanding cases from 288,700 in Q1 2017 to 283,800 in Q2 2017.
Figure 1: Magistrates’ courts caseload, Q2 2012 to Q2 2017 (Source: Table M1)
Magistrates’ court caseload (Figure 1)
Since Q1 2017 receipts have fallen by 6% to 375,700 in Q2 2017. Disposals have also decreased in the latest quarter, falling by 5% to 380,700 in Q2 2017. Overall since Q2 2016 receipts and disposals have both decreased by 3% and 5% respectively.
Despite a fall in the number of disposals, they remained higher than receipts in Q2 2017, driving the 2% decline in the number of outstanding cases between Q1 2017 and Q2 2017 to 283,800. Overall since Q2 2016, the number of outstanding cases have decreased by 3%. 2. Criminal cases in the Crown Court
Outstanding cases in Crown Court have fallen
Disposals remained higher than receipts in the quarter, continuing to drive the decrease in outstanding cases to 39,600, the lowest number since Q1 2013.
Figure 2: Crown Court caseload, Q1 2009 to Q2 2017 (Source: Table C1)
Receipts (Figure 2)
Receipts have fallen by 4% since Q1 2017 and overall by 1% since Q2 2016. Receipts for triable-either-way cases have seen a reduction of 4% since Q1 2017, while receipts for indictable only cases have decreased by 1% since the previous quarter.
Disposals (Figure 2)
As with receipts, disposals have also fallen in the latest quarter by 5% to 29,900, and by 8% since Q2 2016. In the latest quarter, triable-either-way disposals and indictable only disposals fell by 7% and 2% respectively.
Outstanding (Figure 2)
Outstanding cases in the Crown Court have been gradually decreasing since Q4 2014, mainly due to disposals remaining higher than receipts over the past 2 years. In the latest quarter outstanding cases declined by 3% to 39,600 cases, the lowest number since Q1 2013.
The driver of this declining trend has been triable-either-way cases, which have fallen by 4% in the latest quarter and 15% since Q2 2016. Indictable only cases followed a similar pattern but to a lesser magnitude, decreasing by 2% in the latest quarter and by 8% between Q2 2016 and Q2 2017. 3. Receipts, disposals and outstanding cases in the Crown Court by offence group
Violence against the person still had the highest number of outstanding cases
In Q2 2017, violence against the person offences had the highest volume of receipts, disposals and outstanding cases, although outstanding cases had decreased from 7,800 in Q1 2017 to 7,500 cases in Q2 2017.
Figure 3: Receipts, disposals and outstanding cases by offence group, for trial cases, Q2 2017 (Source: Pivot table 1)
Receipts, disposals and outstanding cases by offence group (Figure 3)
Despite a 10% decrease from Q1 2017, violence against the person offences had the highest number of receipts in Q2 2017, followed by drug offences. Violence against the person also had the highest number of disposals in the quarter and the highest number of outstanding cases.
The offence group with the next largest number of outstanding cases was sexual offences even though it had the fifth largest number of receipts. The large number of outstanding cases for sexual offences may be because they have longer average number of days from first listing to completion compared to other offences.
Although drug offences had the second highest number of receipts they had a low number of outstanding cases due to shorter completion times than, for example, sexual offences. 4. Timeliness
The average number of days from first listing to completion in the Crown Court has decreased
For cases completing in the Crown Court the average number of days from first listing to completion in the Crown Court decreased from 178 days in Q1 2017 to 174 days in Q2 2017.
Average hearing times for not guilty plea trials was 15.8 hours in Q2 2017
Average hearing times for not guilty plea trials in the Crown Court increased from 14.2 hours in Q1 2017 to 15.8 hours in Q2 2017, the highest level in the quarterly time series. Hearing times for guilty plea trials remained stable at 1.7 hours in the latest quarter (table C7).
Figure 4: Average number of days (mean) from first listing in the magistrates’ courts to completion in the Crown Court, for Crown Court criminal cases, Q2 2010 to Q2 2017 (Source: Table T4)
Crown Court criminal cases - First listing in the magistrates’ courts to completion in the Crown Court (Figure 4)
The decrease in time from sending to the Crown Court to main hearing has driven the overall decrease in first listing to completion in the Crown Court, decreasing by 4 days from 127 days in Q1 2017 to 123 days in Q2 2017. The average time from first listing at the magistrates’ court to completion at the magistrates’ court has remained at 6 days in Q2 2017, whilst the time from main hearing to completion also remained fairly similar at 44 days in Q2 2017. Annex A: Enforcement of financial impositions
Total financial impositions have increased in the latest quarter
Total financial impositions have increased in Q2 2017, mostly driven by an increase in fines.
Figure 5: HMCTS management information: Financial impositions by imposition type, England and Wales, Q2 2011 – Q2 2017 (Source: Table A2)
Note: The Criminal Court Charge (CCC) ceased to exist on 24 December 2015 but impositions still appear due to when the data are entered onto the system.
Financial impositions and amounts paid by imposition type (Figure 5, table A2)
Between Q1 2017 and Q2 2017 total financial impositions increased by 13%, standing at £184 million in Q2 2017. This increase was mostly driven by an increase in fine impositions of £22.2m, with one fine accounting for £20m.
In Q2 2017, 9% (£17.2 million) of all criminal court financial impositions were paid within the imposition month, a 3 percentage point decline in the collection rate of impositions collected within the imposition month in Q1 2017 (12%).
Outstanding financial impositions (Table A4)
In Q2 2017, the total value of financial impositions outstanding in England and Wales was £895 million. The amount of outstanding financial impositions has been increasing since Q1 2014, and showed an increase of 27% between Q2 2016 and Q2 2017. Annex B: The use of language interpreter and translation services in courts and tribunals
The total number of completed service requests decreased in Q2 2017
A total of 37,700 completed service requests for language interpreter and translation services were made in Q2 2017, a 5% decrease compared to Q1 2017.
The success rate of completed service requests slightly increased in the latest quarter
The success rate for completed service requests was 98% in Q2 2017, a one percentage point increase compared to Q1 2017.
Figure 6: Number of completed language service requests and overall success rate, Q1 2013 to Q2 2017 (Source: Table L1)
Completed service requests (Table L1)
In Q2 2017, criminal courts made the greatest use of face-to-face language interpreter and translation services; 44% of completed service requests were for criminal cases (including Crown Court and magistrates courts completed cases), 35% were for tribunal cases, and 16% were for civil and family court cases.
Success rate (Figure 6)
The success rate has increased from 97% in Q1 2017 to 98% in Q2 2017. Success rates varied across different service types. In Q2 2017, standard language requests had a success rate of 98%, whilst for rare languages it was 88% and for special services it was 99%.
1 The statistics on the use of language interpreter and translation services in courts and tribunals are Official Statistics, except the statistics under the new contracts which are ‘Provisional Statistics’. The number of complaints decreased in Q2 2017
The number of complaints for completed service requests decreased to 450 in Q2 2017 from 730 in Q1 2017. The complaint rate also decreased by one percentage point to 1%.
The total number of ‘off contract’ service requests decreased in Q2 2017
The number of ‘off contract’ service requests decreased to 300 requests in Q2 2017 from 370 in Q1 2017.
Figure 7: Number of complaints and complaint rate, Q1 2013 to Q2 2017 (Source: Table L2)
Number of complaints and complaint rate (Figure 7)
The most common cause of complaint was ‘interpreter was late’ which accounted for 30% (140) of all complaints made in Q2 2017, a 7 percentage point increase from Q1 2017 (23%). The proportion of ‘interpreter did not attend’ complaints also increased, by 8 percentage points to 25%, whilst complaints for ‘no interpreter available’ decreased by 6 percentage points to 11%.
Just as in Q1 2017, the complaint rate was highest in tribunals at 2%. The complaint rate at criminal courts was less than 1% in Q2 2017, slightly lower than Q1 2017. At civil & family courts the complaint rate was 1% in Q2 2017, also slightly lower than Q1 2017.
Off contract requests (Table L3)
‘Off contract’ requests at criminal courts decreased from 160 in Q1 2017 to 110 in Q2 2017, making criminal courts the biggest contributor to the overall decrease in ‘off contract’ requests in Q2 2017. ‘Off contract’ requests at tribunals decreased from 200 in Q1 2017 to 170 in Q2 2017.
Tribunals accounted for 58% (170) of all completed ‘off contract’ service requests, criminal courts accounted for 35% (110), while civil & family courts accounted for 7% (20). Annex C: Further information on criminal courts data
The data presented in this publication are provisional. Final data for each calendar year is published in June each year in our Criminal Courts Statistics annual bulletin, following further data cleaning and the incorporation of additional cases not available in our original extracts of administrative data.
Accompanying files
As well as this bulletin, the following products are published as part of this release:
- Two technical guides providing background information on ‘Criminal Court Statistics’ and ‘Statistics on the use of languages and interpreters in courts and tribunals’, including data collection and processing, as well as relevant revisions policies and legislation.
- A set of overview tables, covering each section of this bulletin.
- A set of pivot tables containing Crown Court data broken down by offence group.
- 3 CSV files which feature court level breakdowns of published data:
- Criminal Courts listings transparency.
- Criminal Courts timeliness.
- Crown Court receipts, disposals and outstanding cases by offence group.
National Statistics status
National Statistics status means that official statistics meet the highest standards of trustworthiness, quality and public value.
All official statistics should comply with all aspects of the Code of Practice for Official Statistics. They are awarded National Statistics status following an assessment by the Authority’s regulatory arm. The Authority considers whether the statistics meet the highest standards of Code compliance, including the value they add to public decisions and debate.
It is the Ministry of Justice’s responsibility to maintain compliance with the standards expected for National Statistics. If we become concerned about whether these statistics are still meeting the appropriate standards, we will discuss any concerns with the Authority promptly. National Statistics status can be removed at any point when the highest standards are not maintained, and reinstated when standards are restored.
Contact
Press enquiries should be directed to the Ministry of Justice press office:
Tel: 020 3334 3536 Email: [email protected]
Other enquiries about these statistics should be directed to the Justice Statistics Analytical Services division of the Ministry of Justice:
Head of Criminal Justice System Statistics Ministry of Justice, 102 Petty France, London, SW1H 9AJ Email: [email protected]
Next update: 14 December 2017
URL: www.gov.uk/government/statistics/criminal-court-statistics-quarterly-April-to-June-2017
© Crown copyright Produced by the Ministry of Justice
Alternative formats are available on request from [email protected]
2 Statistics on the use of language interpreter and translation services in courts and tribunals are Official Statistics.
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81eb101194aac44befc64ecf36612e457c2fe78c | GUIDANCE ON ASSESSING WHETHER DEPOSITED PRIVATE ARCHIVE COLLECTIONS ARE COVERED BY THE FREEDOM OF INFORMATION ACT 2000 (FOI)
1 Purpose of this guidance
The purpose of this guidance is to:
(i) Advise archives offices on when and why to undertake a full detailed assessment of whether deposited private archive collections are subject to the FOI Act (ii) Set out the factors to be considered in a full detailed assessment and the types of questions to be asked (iii) Give some guidance on how to go about the full detailed assessment and (iv) Update our advice on what to do if you receive an FOI request involving private archive collections
Please note that this is operational guidance not legal advice. For legal advice you should contact your own legal advisers.
2 Some working assumptions
Certain things must be taken as read when using this guidance:
- FOI applies to information not records. In other words, under FOI, the public have a general right to information but not necessarily a right to copies of document or other medium in which such information is stored. When assessing whether FOI applies to a deposited private archive collection, it is necessary to consider both the information and the medium on which it is held. It is also necessary to keep open the possibility that FOI may apply to some of the information only, i.e. to part of a collection, even though the rest of it falls outside FOI. • Information contained in private archive collections is only caught by FOI if it is held by or on behalf of a public authority. It is considered to be held by or on behalf of a public authority unless it is held on behalf of a person or body which is not a public authority. The term ‘held’ is not defined in the Act and there is no single criterion that can be applied in determining whether information is held or not. Consideration of the factors in section 5 below will help you determine the issue.
• Archives collections of private origin that are owned by the archives authority are likely to be regarded as ‘held’ and hence covered by FOI. However, the legal basis on which a collection has been given to an archives service may not be one of straightforward ownership. For example, a collection could be held by the archives service under a trust agreement. In such circumstances the archives service does not own the collection albeit a trust agreement may enable it to deal with the collection in much the same way as an owner. We recommend that you seek legal advice on the ownership of individual collections.
• Decisions will have to be made on a case by case basis. The fact that an archive collection is owned by a private individual or body does not automatically take it out of FOI, just as the fact that an archives office has an interest in holding it does not automatically bring it within FOI. The position concerning what is ‘held’ and what is ‘held on behalf of’ is more complex than that and the status of each collection can be determined only by testing it against the factors set out in section 5.
• The outcome of an assessment is likely to be a finely balanced judgment one way or the other. A few deposited private archive collections may very clearly fall into one category or the other but it is more likely to be a matter of arguing that the balance of probability lies one way rather than the other.
• Demonstrating that a private archive collection falls outside FOI will require some form of evidence. An agreement in writing, such as a deposit agreement or exchange of correspondence, is the best evidence but evidence of oral agreements would also be acceptable. Oral testimony about the circumstances or assumptions applying at the time of deposit can also play a part.
• It may be more difficult to demonstrate that a private archive collection falls outside FOI if the name of the current owner is not known, or if the beneficiaries of the estate on whose behalf you are claiming it is held cannot be traced. 3 When and why to undertake a full detailed assessment of whether a deposited private archive collection is subject to the FOI Act
If you have not done so already, it would be sensible to do an initial assessment of your private archive collections. The purpose of this initial assessment is to:
- Gather information about when each collection was deposited, what agreement was reached and any conditions that apply, e.g. concerning access
- Assess the quality of evidence available for a full detailed assessment
- Assess whether clarification of the deposit agreement would be a useful precursor to full detailed assessment
- Note whether the collection is already available for general access
This will enable you to identify collections which should be prioritised for full assessment. Carrying out a full detailed assessment of a collection will be a complex and time-consuming task and it would be sensible to concentrate resources on where they are most needed, i.e. on collections at risk.
Certainty as to whether information in a particular private archive collection is covered by FOI may not be an issue for you and owners of your collection. This could lead you to decide to opt-in or opt-out a private archive collection from FOI on the basis of an owner's wishes. However, even if all parties concerned are happy to treat the collection as if it were covered by FOI, that will not necessarily mean that it is 'held' for FOI purposes. Whether information is covered by FOI or not can only be established by the full detailed assessment described below and a decision not to go through this process is a risk-based one to be made by each archives office. Here are some arguments for and against full detailed assessment:
| FOR | AGAINST | |----------------------------------------------------------------------|-------------------------------------------------------------------------| | The archive collection is at risk of withdrawal by the owner unless it is considered to fall outside FOI | The risk of withdrawal by the owner is low | | It is proving difficult to apply access restrictions required by the owner | No clear evidence is available | | The archive collection is uncatalogued and it is proving difficult to sustain the section 22 exemption (information intended for publication – in this context, an uncatalogued collection identified for action in a cataloguing programme) | The archive collection is already generally available for access | | The owner wants it done | |
If you decide that you need to do a full detailed assessment of collections, consider starting a programme of assessment. The disadvantage of delaying assessment of a collection until you receive a request for access to it is that you may have difficulty in complying with FOI deadlines (20 working days), especially if several such requests are received at the same time.
4 How to go about a full detailed assessment
Here are some suggestions as to how you should tackle a full detailed assessment, and action to take following the assessment:
- As recommended in section 3, undertake an initial assessment of private archive collections and select those for which a full detailed assessment should be done, bearing in mind that full assessment will be a complex task with no guarantee of a successful outcome
- Having decided to proceed, gather together all information about when and how you received the private archive collection, the basis on which you hold it and the dealings you have had with the depositor or his successors or representative since the deposit took place
- Contact the depositor or his representative. Remember, he may have relevant documentation on his files that could help in your assessment or may be able to provide details of the assumptions he made at the time of deposit
- Consider seeking legal advice. The depositor may wish to involve his own legal adviser in the process also • Contact The National Archives to let us know you are embarking on an assessment. We may be able to provide case-specific advice as well as providing general guidance in the light of experience gained in similar exercises elsewhere. We plan to collate information on assessment of private archive collections so that our advice to you can be as informed and helpful as possible.
• Assess the archive collection against each factor and record the results. This is not a tick box exercise; you will be aiming to conclude with a well-documented and convincing assessment that can support your case.
Whatever the outcome of the full detailed assessment, you should:
• Inform the owner and clarify the deposit agreement if necessary.
• Amend your finding aids to clarify your current understanding of its status.
If the outcome of an assessment is that the collection falls outside FOI and you refuse an FOI request on those grounds, the enquirer may challenge this refusal by complaining to the Information Commissioner. If the Information Commissioner takes the view that the collection falls within FOI and issues a Decision Notice to this effect, you have two options:
• Accept the ruling, handle the enquiry as an FOI request and provide access to the collection unless exemptions apply (see also section 6).
• Appeal to the Information Tribunal. (Remember that an appeal to the Information Tribunal will require your parent body’s support).
Please contact The National Archives at this point.
Note that if you have received an FOI request or the Information Commissioner has issued a Decision Notice, you should not de-accession the collection and return it to its owner. Any such action might be regarded as an offence under section 77 of the FOI Act because it is being done to frustrate an FOI request. In addition, non-compliance with a Decision Notice could incur enforcement action which could lead to your being regarded as in contempt of court.
5 The factors to be considered in assessing whether or not a deposited private archive collection is ‘held’ for the purposes of FOI
All the circumstances of each particular case should be taken into account in any assessment. The guidance below highlights eighteen factors that have been identified and that are likely to be relevant. However, the list is not necessarily exhaustive and a particular case may throw up other factors that are relevant and should be included in the assessment.
While all eighteen factors should be considered, some are more relevant to private archive collections than others. The weight that will attach to each factor will vary from case to case so a scoring scheme is not practicable. But as a general rule, the more involvement there has been by a public body in creation of the private archive collection, the more public funding there has been for its preservation, the less control the owner has retained over access and use of the collection and the more constrained is his right to withdraw it from the authority, the more it is likely that the collection falls within the FOI Act.
The next part of the guidance will set out each factor and give some examples of how it should be interpreted.
Factors relating to custody and handling
Factor 1, Which organisation has physical custody of the information?
The term ‘custody’ in this context relates to physical possession of the information and the medium in which it is recorded. Physical custody of the medium on which the information is held (the artefact) is likely to rest with the archives service if it is a legal entity in its own right. If it is part of a bigger body, such as a university, a local authority, a museum or gallery etc, then custody is with the parent body. It is possible, in some circumstances, that physical custody of the information may rest with one person or body but that rights as to how the information is handled (maintained, accessed, destroyed etc) lies with another person or body. For example, the archives service may store information that has been deposited but be unable, under the terms of the agreement with the depositor, to access it, use it or disclose it to any person without the depositor’s consent.
Factor 2, Where, within the organisation, is the information stored?
Information in archives is likely to be stored in the archives service or unit, or perhaps in the university library. If, however, the archives are in digital form, they may be on a server maintained or directed by another part of the organisation or even with another organisation contracted to store the information. Some collections may be in more than one format.
Factor 3, Which individuals within the organisation are administratively responsible for maintenance of, or access to, the information?
It is simpler to consider the two elements of this factor separately.
(a) Maintenance in this context can have a different meaning when applied to information or the medium on which it is recorded. Maintenance of the medium means preservation of the recorded information so that it remains intact, unaltered and capable of being used. In the case of information held digitally, this includes transfer to new storage media and migration to new software. Responsibility for this depends largely on the format of the information and practical arrangements within the archive service. Responsibility for the archives is likely to fall to the operational head of the archives services. In the case of a local archives service this would be the county archivist; in a University Library it would be the head of the library or the head of Special Collections, depending on the extent of delegation by the former to the latter. In practical terms, the actions involved in maintenance will fall to more junior staff under their direction. In the case of digital archives, maintenance of the information may actually be done by IT staff or a contractor on behalf of the archivist and under his or her direction.
Maintenance of information, on the other hand, means action necessary to ensure that the information continues to serve the purpose for which it was designed, including correcting errors and updating by adding new information. This type of maintenance does not apply to archives which remain unchanged so as to preserve their historical integrity.
(b) Administration of access is the responsibility of the archives service as described at (a), and involves implementing arrangements made as described at factor 17.
This factor is relevant to private archive collections.
Factor 4, Is its handling subject to any formal administrative procedures?
The only procedures an archives service would have that are relevant here are internal procedures that relate to the information as archived, e.g. accessioning procedures, internal guidelines on cataloguing which conform to accepted professional standards, perhaps security procedures conforming to BS 7799. In the case of digital archives there may be formal procedures covering back-ups, migration, retrieval etc, or standards that the contractor is required to meet.
Factor 5, Is its handling subject to any contractual agreement?
There may be a deposit agreement setting out the terms on which the owner is depositing his archives. This may be in the form of a formal document or an exchange of correspondence. However earlier deposits may have less formal documentation and relied on an oral agreement or a common understanding based on conditions prevailing at the time of deposit. The level of enforceability of the agreement will vary from case to case. This factor is particularly relevant to private archive collections. Factors relating to ownership
Factor 6, Who owns the medium on which information is stored?
In the case of hard-copy archives, the depositor is likely to own the medium, unless some trust arrangement is in place. In the case of digital archives held on a server, the medium is likely to be owned by the organisation that owns or contracts for use of the server. This factor is relevant to private archive collections but is a more complex one than might first appear because of the possible permutations of ownership. Legal advice is recommended.
Factor 7, Who owns the information?
The likelihood is that the depositor owns the information in the archive collection, although copyright may belong to individuals who corresponded with the depositor and his forebears or predecessors. In some cases the depositor will not own the information, for example information in a collection of client records deposited by the solicitor may belong, at least in part, to the client. This factor is particularly relevant to private archive collections. However, ownership is a complex issue because of the possible permutations and legal advice is recommended.
Factors relating to cost
Factor 8, Who paid for creation of the information?
An archive collection is likely to be made up of a mixture of information created by the depositor, his forebears or predecessors, and his employees, and information received by him or them from others. This information will usually have a physical manifestation in documents, which may be letters, maps etc or (increasingly) in electronic media. The cost of creating this information will reflect this mixed origin. The cost of creation of the medium will have been borne either by the depositor (for information created within his office or by his family) or by those others who provided the information. The cost of assembling it all into the archive collection is likely to have been borne by the depositor or his forebears or predecessors.
Another possibility is that some information in the archive collection results from activity in some official capacity, e.g. while paid by a public body for carrying out a public job or function. For example, a local councillor’s papers may include a mixture of party political and official material. In such cases an official body may have paid for creation of some of the information.
This factor is relevant to private archive collections. Factor 9, Who is paying for its storage?
Storage, in this context, includes not only use of storage space (either rooms and shelves, etc, or space on a server) but also cataloguing, conservation etc, i.e. costs incurred by holding the archives. It is likely that the organisation with custody is paying for storage but that may not always be the case. For example, the depositor might have provided an endowment or some other financial support, or might be paying for insurance of the archives (private archives are not usually specifically insured by an archives service). Another possibility is that the archive collection has benefited from a grant from a private body such as the Leverhulme Trust, or is covered by Government indemnity. This factor is relevant to private archive collections.
Factors relating to source
Factor 10, Who provided the information?
This question relates to the source of the archive collection, i.e. who deposited it in the archives office. The depositor will usually be the same person or organisation as the one who owns the medium containing the information, but might instead be someone acting as his agent. Note, however, that with digital archives the current medium is likely to be owned or paid for by the custodian, not the depositor. This factor is particularly relevant to private archive collections.
Factor 11, Who collated or recorded the information?
The likelihood is that the private depositor and his forebears or predecessors 'collated' the archive collection, i.e. assembled it over time in the transaction of business or personal affairs. This factor is particularly relevant to private archive collections.
Factors relating to function
Factor 12, What is the subject matter of the information?
The subject matter of deposited private archives can be anything and everything: it depends on the function or responsibilities of the creator and his or her interests and preoccupations.
Factor 13, For what purpose was it created?
It is likely that the information was created, and then assembled into the archive collection, for private purposes, in order to meet the private or business needs of the depositor, his forebears or predecessors. For example, the archive of a landed estate will result from the administration of the estate and the need to maintain evidence of rights, duties and actions for use by the estate. On the other hand, it is possible that some of the information will have been created in the performance of an official function (see also Factor 8).
This factor is particularly relevant to private archive collections.
Factor 14, For what purpose is it being stored?
When the information has been deposited in an archives office, it is likely that it is being stored primarily to serve as a resource for historical and other research. However, it is possible that the depositor may also have occasion to use his archive for evidence of his legal rights and obligations and to support his interests in other ways; in such circumstance he benefits directly from preservation of his archive. This factor is relevant to private archive collections.
Factor 15, Does the public authority have its own interest in the content of the information or only in the fact of its preservation?
The likelihood is that the archive collection was accepted on deposit because it fit into the archives service’s overall collecting remit, i.e. it relates to its geographical catchment area (such as with a county archives service) or to a specialist research area (such as with Warwick University Modern Records Centre’s industrial relations archive collections). The public authority, therefore, has a general interest in an archive collection falling within the general criterion of overall relevance, and a continuing interest in being able to acquire similar material. However, it is the end-user, i.e. the researcher visiting the archives service or sending a written enquiry, who has the primary interest in the contents of the information. This factor is relevant to private archive collections.
Factors relating to control
Factor 16, To whom is any duty of confidentiality owed in relation to the information?
It is likely that the deposit agreement will indicate whether a duty of confidentiality is owed by the archives service to the depositor. This will usually be in relation to any records not yet publicly accessible, for which the depositor may prescribe special conditions. The deposit agreement may be a written document or an oral agreement. Even where there is no specific provision to this effect, there may have been a common understanding by the depositor and the archives service that certain types of information will be regarded as confidential.
Another possibility is that the depositor has a duty of confidence to third parties, for example those who provided him with information, and in such circumstances the duty of confidence will pass from the depositor to the archives service. This factor is particularly relevant to private archive collections. Factor 17, Who has a right to have access to and use the information?
It is likely that the depositor and the archives service have rights of access to the information. (Only exceptionally are boxes sealed and inaccessible to the archives service.) Access by others will be subject to the depositor’s instructions which are usually set out in the deposit agreement, in correspondence or by oral agreement. Instructions of this nature vary. Sometimes they require all requests, or requests falling into a specified category, to be referred to the depositor or a nominated representative for individual consideration. In other cases they delegate the decision to the archives service, in some circumstances subject to agreed constraints. This factor is particularly relevant to private archive collections.
While access is an important element, there are other aspects of use, such as provision of copies, inclusion in exhibitions and publication in books or on a website. The amount of discretion, if any, given to the archives service by the depositor will be set out in the deposit agreement or in correspondence or will have been agreed orally.
Factor 18, Who would have the right to require it to be amended, deleted or delivered up?
It is simpler to consider separately the elements of this factor, which is particularly relevant to private archive collections.
(a) The right to have information amended or deleted may be set out in the deposit agreement, in correspondence or agreed orally. By this means there will be clarity as to which decisions may be made by the archives service without reference to the depositor and which decisions are reserved to the depositor.
It is common for the right to amend or delete information to operate within some general presumptions:
(i) After transfer, the archives service may appraise individual files or other items in an archive collection to assess whether they should be destroyed because they are not worthy of permanent preservation
but
(ii) There will be no amendment of information within individual files or other items being preserved.
(b) The right to have delivered up can include the right to borrow back items on a temporary basis and the right to withdraw the archive collection completely. The deposit agreement or correspondence or oral agreement may set out any limitations on the depositor’s rights. These can include a requirement to give a period of notice before removing his collection, a requirement to recompense the archives service for the cost of storage and cataloguing. 6 What to do if you receive an FOI request involving private archive collections
In September 2004 we issued advice on handling FOI requests for private archives collections. Here is an updated version of that advice. Please note that it constitutes working assumptions which you can use in assessing your response to individual requests for information.
- If the archive collection is already open for research and your Publication Scheme contains an appropriate class, claim the exemption at section 21 for information already reasonably accessible. (See our separate guidance on Freedom of Information, Publication Schemes and Paid Research Services for details of how this class should be framed)
- If the archive collection is closed by agreement with the depositor on the basis that it contains confidential information, and disclosure by you of the information would be regarded by him as breach of confidence, claim the exemption at section 41 for information provided in confidence. Note that particular difficulties will arise if the depositor is willing for some enquirers to use the archives but not others. It is not possible under the FOI for some applicants to be provided with information and others not. This is because neither the FOI Act nor the EIRs allow differential treatment of applicants, whether because of the stated purpose of their research or for any other reason
- If the archive collection is uncatalogued, claim the exemption at section 22 for information intended for publication. Note that to claim this exemption successfully, you will need to be able to show the Information Commissioner your efforts to make progress in this area, such as a programme setting out priorities and targets on which action is being taken
Note that once a collection has been treated as if it were subject to FOI, for example, by applying an FOI exemption in response to an FOI request, it may be more difficult subsequently to claim that the collection is not, in fact, subject to FOI.
If you have any questions about this guidance please contact Susan Healy at [email protected]. If you are about to assess a private archive collection please contact the National Advisory Service at [email protected].
The National Archives July 2005
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2af2f105ada3585642920cfe6920a5681b7ccae2 | Guidance to the Office of Rail and Road
Introduction
1 This guidance is issued to the Office of Rail and Road (ORR) in respect of its functions in relation to railways under section 4(5)(a) and section 4(5B) of the Railways Act 1993. This document replaces the guidance issued in July 2012. The Secretary of State has consulted the Welsh Government in preparing this guidance.
Safety
2 The Secretary of State wishes ORR to ensure that the industry continues to focus on maintaining and improving the safety of the railway for rail users, rail workers and the general public. In doing so, he wishes ORR to act as a joined-up safety and economic regulator, ensuring that regulation supports a sustainable railway that is both safe and cost effective over the long term.
3 The Secretary of State wishes ORR to use its powers to ensure level crossing risk is managed effectively by the industry and that, where closures cannot be appropriately achieved, the practicable application of new and existing technology is used as an alternative.
Valuing passengers as customers
4 The Secretary of State considers that train service punctuality and reliability is of paramount importance. He wishes ORR to ensure that Network Rail’s (NR) routes work closely with train operators, freight operators and end users (including representative organisations, such as Transport Focus) to determine appropriate metrics and challenging, yet realistic, target levels for performance, as well as support their effective delivery. 5 The Secretary of State wishes ORR to use its powers to hold the industry to account for its obligations to passengers under licences and wider consumer law. He welcomes ORR’s annual “Measuring Up” report as a means of monitoring, communicating and incentivising the industry’s performance in key consumer interest areas. He wishes ORR to continue to develop this approach to further improve industry accountability and transparency about how the regulatory process is leading to better outcomes for consumers, where appropriate working with franchising authorities.
6 The Secretary of State wishes to see ORR support industry efforts to simplify and modernise ticketing, making it easier for passengers to choose the best value fare for their journey. He also wishes ORR to play an active role in improving accessibility, supporting vulnerable consumers and improving passenger communication, particularly during periods of disruption.
7 The Secretary of State recognises that there is a long history of successful collaboration between ORR and Transport Focus. He wishes ORR to maintain and, where appropriate, further develop that existing collaboration.
8 The Secretary of State wishes the ORR to continue to support the delivery of an effective rail passenger services ombudsman, which improves redress for passengers.
Reforming our railway
9 The Secretary of State wishes ORR to support an ambitious approach to reforming the railway, so that it delivers more effectively for its users. He considers that this should include:
- Pursuing an ambitious approach to route based regulation, so that Route Managing Directors have the authority to deliver their Business Plans.
- Supporting his priority of better joining up track and train through deeper collective working between NR’s routes and train operating companies to simplify interfaces, improve punctuality and reliability, and enhance the overall passenger experience. In addition to providing appropriate support in upcoming franchise competitions, this should include helping to ensure (i) that NR’s routes identify opportunities for greater collaboration and have the freedom to implement plans; (ii) that the regulatory incentives faced by NR under route scorecards are significantly better aligned with the contractual incentives faced by franchisees (and that complex regulatory mechanisms which could cut across these are avoided); and (iii) a high degree of transparency by NR in order that industry has confidence in working with NR more collaboratively.
- Implementing scorecards, developed following a genuine and effective process of engagement between the National System Operator, the routes and NR’s customers, to ensure that NR is held to account. This should include meaningful engagement with the Welsh Government on the content of the Wales route scorecard.
- Supporting effective system operation. His priorities include ensuring the National System Operator, which he considers should be independently regulated from any infrastructure manager, is effective at strategic, long term planning of the network and carrying out specific analysis and studies into capacity or punctuality and managing capacity. It should also ensure planned and unplanned disruption are managed at a cross-route and national level to minimise the impact on rail users.
10 The Secretary of State wishes ORR to have regard to all notified strategies, statements and policies issued by the UK Government which have an impact on railway issues. This includes providing appropriate support to the UK Government to support the process of leaving the European Union.
Value for money and investment
11 The Secretary of State is determined to secure value for money from public expenditure and improve efficiency. He expects ORR to take a rigorous and robust approach to hold NR to account for improving cost effectiveness, securing deliverability and reducing unit costs, during the remainder of CP5 and throughout CP6. This should include assisting the Secretary of State to confirm the funding requirements set out in his initial SOFA, to help to ensure affordability and a sound basis for planning. He expects the ORR to rigorously challenge the cost effectiveness of NR for its operations, maintenance and renewals expenditure during the periodic review process and ensure the implementation of a regulatory framework for CP6 which holds NR to account, including through the use of reputational incentives. As part of this, ORR should ensure NR is effectively collaborating and contracting with the supply chain to reduce unit costs and increase productivity, including through effective planning of credible profiles for spending. The Secretary of State also expects that the ORR ensures that the financial framework for NR reflects reclassification, supporting effective cost control and strong financial discipline.
12 The Secretary of State is committed to securing value for money for the investments made in the railway. This includes having regard to securing the benefits from business cases. He also wishes ORR to support (being mindful not to duplicate) through the regulatory regime the “develop, design and deliver framework” and pipeline approach to delivering enhancements, ensuring clear accountability, recognising the more limited nature of ORR’s role in relation to enhancements in CP6. He also wishes ORR to work with the Welsh Ministers to support their franchising responsibilities.
13 The Secretary of State wishes ORR to ensure that the regulatory framework creates certainty for the supply chain and investors and fosters investment in whatever form. This includes taking all appropriate steps to facilitate a greater level of private investment, including through ensuring that third party investors (both public and private sector) are afforded appropriate protection through the regulatory framework. This should include ensuring the supply chain has good visibility of NR’s project pipelines and that suppliers have the appropriate incentives and support to invest in skills, technology and innovation and contribute to the delivery of the Rail Technical Strategy. He also wishes ORR to work with local and regional parties to develop appropriate investment projects. This includes, but is not limited to, working pro-actively with the Welsh Government to support the implementation of schemes they fund for delivery by NR.
14 The Secretary of State wishes ORR to have regard to the Transport Investment Strategy (2017). He wishes ORR to engage with the National Infrastructure Commission and, where relevant, take account of Endorsed Recommendations made by the Commission. He also wishes ORR to engage constructively with the Welsh Ministers to support the railway’s contribution towards meeting their objectives and as they establish an Infrastructure Commission in Wales.
Sustainability and standards
15 The Secretary of State wishes ORR to have regard to the industry’s Sustainable Development Principles. In particular, he wishes ORR to monitor and benchmark industry progress against and capability to deliver those Principles.
16 The Secretary of State considers the appropriate application of standards to projects can help deliver economies of scale and a lower cost railway that is safe and fit for purpose. However, the inappropriate and rigid application of standards might contribute to significant cost-escalation and delay in project delivery. The Secretary of State wishes ORR to encourage the industry to demonstrate a proportionate approach to applying standards that meet legal requirements as well as the need to minimise whole-life, whole-system costs. Specifications need to be clear and exhibit relevant flexibilities and innovative solutions. He also wishes ORR to carry out its approvals role to support the efficient and effective introduction into service of new rolling stock and infrastructure.
Access, charges and competition
17 The Secretary of State wishes ORR to maintain and improve the regulatory incentives on NR to ensure that the costs it passes on to customers and funders are fair and reasonable, and to increase transparency in charging.
18 The Secretary of State wishes ORR, when allocating access, to take full account of all the punctuality, reliability and capacity implications (including power availability), with a view to ensuring that granted rights do not detrimentally impact on these issues. He wishes to see ORR, working closely with industry, to have regard to the need to build resilience into the timetable, including consideration of breaks in the timetable, where appropriate, to allow for recovery from delays.
19 The Secretary of State considers that passengers benefit from competition through the franchising process. He is also supportive of open access in particular circumstances where these do not significantly impact on affordability or the value for money from public investment. This is likely to be on those routes which are not already well served by the franchising system and not on densely used commuter routes. He considers, however, that a pre-condition for an increase in open access is that all operators make a fair contribution to the costs of the network. He therefore encourages ORR to continue with its proposals to reform track access charges, recognising that this is likely to be only one of the steps necessary to facilitate a greater level of open access competition.
Stations
20 The Secretary of State wishes ORR to engage with a cross-industry steering group on stations and to facilitate, where appropriate, development of the regulatory system in a way that supports and facilitates station capacity improvements; considers changes to station charging arrangements; provides reliable measures of station asset condition, capacity and passenger experience; is linked to the funding NR receives through the regulatory settlement; and ensures that contractual documentation reflects a modern industry.
Rail freight
21 The Secretary of State wishes ORR to have particular regard to the objectives set out in the Government’s Rail Freight Strategy (2016). He particularly wishes ORR to have regard to the affordability of freight charges and to ensure that the rail freight industry has sufficient clarity and certainty about the costs that they will face in CP6 as soon as possible. More generally, he wishes ORR to take all appropriate steps to support the growth and development of the rail freight sector.
HS2
22 High Speed Two is the biggest investment in the UK rail system for over a century. Realising the full benefits of the scheme will require reconfiguration of services on existing lines, as well as the introduction of new high speed services some of which are planned to continue onto existing lines. The High Speed Rail (London-West Midlands) Act 2017 requires ORR to facilitate the construction of HS2.
23 The Secretary of State additionally wishes ORR to facilitate the introduction of HS2 operations on both new and existing infrastructure, and the realisation of planned benefits from the investment in HS2. In the exercise of its duties to have regard to the funds available to the Secretary of State for railway services and to have regard to securing value for money for funders of the railway, ORR should in particular take account of the strategic enhancement to the rail network, the level of Government investment and anticipated revenue return from HS2 services. In the exercise of all its duties and functions, the Secretary of State wishes ORR to take account of his plans for HS2, as set out from time to time in published business cases, and the scale of this planned investment to improve the national rail network on behalf of passengers, taxpayers, communities and the UK economy.
Working together
24 With full respect for ORR’s independence, the Secretary of State wishes ORR to work with him, the Welsh Ministers, Transport for London and regional transport bodies cooperatively and constructively on issues of legitimate common interest wherever it makes sense to do so and where there is no conflict of interest. He wishes all such engagement to be based on the principles of good communication, mutual respect and no surprises. He also encourages ORR to collaborate with other regulators wherever appropriate.
July 2017
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3fd0dd1c0bc08c846bfcfffae570ab7af9fee360 | Application for Approval of Meat Establishment
Instructions
All sections must be completed in order for the application to be processed
PART 1 – Establishment for which approval is sought
| Approval name | Please enter the name of legal entity e.g. name of sole trader or names involved in a partnership; limited company (e.g. ‘Happy Chickens Ltd’) | |----------------|----------------------------------------------------------------------------------------------------------------------------------| | Trading name (if applicable) | If different from Approval name, enter name chosen to trade as (e.g. ‘Happy Chickens London’) |
Please select one of the following four options:
1. New FSA approval currently approved by the local authority (LA)\
LA Approval no:
2. Complete new approval
3. Additional Activities\
Approval no:\
UK/EC
If the business currently has an approval number issued by the local authority, select the above.
If the business is not currently approved by the local authority or by the FSA, select the above.
4. Change to Business Ownership\
Date of change:\
Approval no:\
UK/EC
If the business is currently approved by the Food Standards Agency and wishes to add further activities to the approval, select the above. The following table shows the different situations where a change in ownership, between different business entities, requires a new approval or where the approval can be retained:
| Existing FBO (as per approval documentation) | Change of FBO (in each case assuming no other changes to the business) | Approval status | Comments | |---------------------------------------------|---------------------------------------------------------------------|----------------|----------| | 1 Sole trader, Partnership or incorporated company (e.g. Ltd, PLC, etc) | Different sole trader, partnership or incorporated company takes over ownership | Expires | Discontinuation of operator/s | | 2 Sole trader or Partnership | Company incorporated (and registered), Sole trader or partner/s becomes Director/s | Expires | Creation of a Company so the company is responsible not the individual/s | | 3 Sole trader | Creation of a partnership where the sole trader is one of the partners | Retained | Continuation of operator | | 4 Partnership | Dissolved and one of the partners takes over sole ownership and becomes a sole trader | Retained | Continuation of operator | | 5 Partnership | New partner joins or a partner leaves (also refer to dissolved partnership) as long as there is a continuation of at least one partner | Retained | Continuation of operator/s | | 6 Incorporated company | Company goes into administration and is being run as a going concern by the administrators. | Retained | Continuation of operator/s | | 7 Incorporated company in administration | Company taken over from administrators by a different sole trader, partnership or incorporated company | Expires | Discontinuation of operator/s | | 8 Sole trader, Partnership or Incorporated company | Bankruptcy, insolvency or in liquidation (wound up / dissolved) | Expires | Discontinuation of operator/s, approval expires |
Other business types such as cooperatives, registered charities and other specialised types of organisation will be treated on a case by case basis to identify the change in natural person or legal person required to be compliant with food law within the food business under their control.
In the case of wholesale markets the following principles apply:
- The market overall approval (common parts) will be treated in the same way as an individual establishment FBO change but the individual units within the market do not need to be individually re-approved and can transfer over under the new market (common parts) approval.
- In the event that the common parts of a wholesale market are not granted approval, the individually approved units are not able to operate as the approval of the common parts facilities is a prerequisite to their approval. Where the units are able to become self-sufficient in their own right separate approval as an individual establishment can be sought.
- If an individual unit of a wholesale market changes FBO, this will be treated in the same way as an individual establishment FBO change.
### PART 2 – Type of establishment(s) and activities for which approval is sought
| Establishment | Activities for which approval is sought | Estimated average weekly throughput (in kilograms) | |---------------|----------------------------------------|--------------------------------------------------| | Slaughterhouse | Slaughter of Domestic Ungulates: | Mammals with hooves | | | • Cattle (Bovine) | Domestic cattle | | | • Calves (Bovine) | Domestic calves | | | • Bison | Transportable bison | | | • Water buffalo | Transportable water buffalo | | | • Sheep (Ovine) | Domestic sheep | | | • Goats (Caprine) | Domestic goats | | | • Pigs (Porcine) | Domestic pigs | | | Slaughter and/or Dressing of: | Dressing – removal of the skin | | | • Farmed land mammals (other than domestic ungulates) | Toed mammals, e.g. Llamas, Alpacas | | | • Farmed Deer | Deer not shot in the wild | | | • Farmed Wild Boar | Deer not shot in the wild | | | • Domestic Soliped / Equidae (horses) | Animal with uncloven hoof, e.g. Horses, ponies, donkeys etc. | | | • Ratites (e.g. Ostrich, rhea & emu) | Flightless birds | | | Slaughter of Farmed Birds & Lagomorphs: | | | | • Domestic Fowl (e.g. Chickens, hens & broilers) | Chickens | | | • Turkey | Turkey | | | • Duck | Duck | | | • Geese | Geese | | | • Guinea fowl | Guinea fowl | | | • Quail | Quail | | | • Pigeon | Pigeon | | | • Ratites (e.g. Ostrich, rhea & emu) | Flightless birds | | | • Lagomorphs (e.g. rabbits, hares and rodents) | Farmed rabbits, hares and (edible) rodents |
### PART 2 – continued...
| Establishment | Activities for which approval is sought | Estimated average weekly throughput | |---------------|----------------------------------------|-----------------------------------| | Game Handling establishment | Dressing & cutting of: | Skinning and cutting of meat | | | • Large wild game (e.g. wild deer & feral wild boar) | Wild land mammals living freely in the wild | | | • Small wild game in-feather (e.g. pheasants, pigeons & grouse) | Wild game birds living freely in the wild | | | • Small wild game in-fur (e.g. rabbits, hares & rodents) | Wild game lagomorphs living freely in the wild | | Cutting Plant (Refer to Slaughterhouse and Game Handling establishment for definitions of species groups) | Cutting of meat from: | Raw meat cutting | | | • Domestic ungulates (Red meat) | E.g. pigs, cattle, sheep, goats | | | • Farmed birds & lagomorphs (White meat) | Poultry and farmed rabbits | | | • Large wild game | E.g. wild deer, wild boar | | | • Small wild game | E.g. pheasants, wild rabbits | | | • Farmed game | E.g. farmed deer, farmed boar | | On Farm Slaughter facilities | Slaughter at the place of origin of: | Slaughter at the farm where animals were raised | |-----------------------------|-------------------------------------|-----------------------------------------------| | | • Domestic Fowls (e.g. Chickens, hens & broilers) | Animals raised on farm where they are to be slaughtered | | | • Turkey | | | | • Duck | | | | • Geese | | | | • Guinea fowl | | | | • Quail | | | | • Ratites (e.g. Ostrich, rhea & emu) | | | | • Farmed Deer | | | | • Farmed Wild Boar | | | | • Bison | |
| Wholesale market | Shared common installations and sections where foodstuffs are sold | Overall market facility | |------------------|---------------------------------------------------------------|-------------------------| | | A separate market unit which shares common installations and sections where foodstuffs are sold | Single market stall sharing market facilities |
Where **co-located** with a slaughterhouse, cutting plant or game handling establishment (**stand alone** establishments may require approval by the Local Authority):
| Minced meat establishment | Production of minced meat | Boned meat that has been minced into fragments and contains less than 1% salt | |---------------------------|---------------------------|--------------------------------------------------------------------------| | Meat preparations establishment | Production of meat preparations | Fresh meat, including meat that has been reduced to fragments, which has had foodstuffs, seasoning or additives added to it or which has undergone processes insufficient to modify the internal muscle fibre structure of the meat and thus eliminate the characteristics of fresh meat. For example, sausages, burgers |
| Mechanically separated meat establishment | Production of mechanically separated meat | The product obtained by removing meat from flesh bearing bones after boning or from poultry carcases, using mechanical means resulting in the loss or modification of the muscle fibre structure |
| Processing Plant | Processing of: | Product Of Animal Origin which is either treated, processed (heating, smoking, curing etc) and wrapped or undergoes one or more of those handling activities | |------------------|----------------|----------------------------------------------------------------------------------------------------------------------------------| | | • Meat products (to be cooked before eating) | Processed products resulting from the processing of meat or from the further processing of such processed products, so that the cut surface shows that the product no longer has the characteristics of fresh meat. For example bacon, gammon including the slicing of such products | | Item | Description | |------|-------------| | Ready to eat meat products | Food intended by the producer or the manufacturer for direct human consumption without the need for cooking or other processing e.g. ham | | Rendered animal fats and greaves | Fat derived from rendering meat, including bones, and intended for human consumption e.g. lard | | Treated stomach, bladders & intestines | Stomachs, bladders and intestines that have been submitted to a treatment such as salting, heating or drying after they have been obtained and after cleaning e.g. tripe, sausage skins | | Gelatine | Natural, soluble protein, gelling or non-gelling, obtained by the partial hydrolysis of collagen produced from bones, hides and skins, tendons and sinews of animals | | Collagen | The protein-based product derived from animal bones, hides, skins and tendons |
**Cold Store**
| Item | Description | |------|-------------| | Storage of Products of Animal Origin (fresh or processed) | Area used to store chilled or frozen products (intended for sale for human consumption) brought in from an outside company |
**Re-wrapping establishments**
| Item | Description | |------|-------------| | Re-wrapping of Products of Animal Origin (fresh or processed) | Re-wrapping - an establishment that unwraps the initial wrapping or initial container, which is in direct contact with the product and then re-wraps the products; | | Re-packaging establishments | Re-packaging - an establishment which removes wrapped foodstuffs from a second container and re-packages them without removing the initial wrapping which is in direct contact with the product | |-----------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | • Re-packaging of Products of Animal Origin (fresh or processed) | |
If your establishment also handles or intends to handle other Products of Animal Origin requiring approval under Regulation (EC) No 853/2004 state those operations below:
**Examples include products such as cheese, fish, butter** PART 3 – Food Business Operator (FBO) details and Business structure
This section refers to the business, its structure and employees, all sections must be completed even if applying for an additional activity, this ensures that the FSA database is up to date.
Please indicate the type of business; (Please place a cross in only one box)
- Incorporation now complete 3a
- Partnership now complete 3b
- Sole trader now complete 3b
- Other business type provide details on a separate sheet & attach\*
(\* - Other business types will be treated on a case by case basis to identify the natural person or legal person required to be compliant with food law within the food business under their control)
3a – Incorporation details (as registered with Companies House or equivalent)
| Full company name | |-------------------| | |
| Registered office address (inc. Postcode) | |------------------------------------------| | |
| Company registration number | |-----------------------------| | |
| Company Director/s | |--------------------| | Title (Mr, Mrs, Ms, Miss, Dr) | Forename(s) | Surname | |--------------------------------|-------------|---------| | | | | | | | | | | | |
(Provide full details for all Company Directors - if required continue on separate sheet and attach)
3b – Food Business Operator(s) (FBO) (complete only if Partnership / Sole trader)
| Title (Mr, Mrs, MS, Miss, Dr) | Forename(s) | Surname | |-------------------------------|-------------|---------| | | | | | | | | | | | |
| Telephone number | Fax number | Mobile number | |------------------|------------|---------------| | | | | | | | | | | | |
| Home address (inc. Postcode) | |-----------------------------| | |
| Email | |-------| | |
| Title (Mr, Mrs, MS, Miss, Dr) | Forename(s) | Surname | |-------------------------------|-------------|---------| | | | | | | | | | | | |
| Telephone number | Fax number | Mobile number | |------------------|------------|---------------| | | | | | | | | | | | |
| Home address (inc. Postcode) | |-----------------------------| | |
| Email | |-------| | | PART 4 – Establishment managers and contacts
Duly authorised representative of the Food Business Operator (FBO)
| Title (Mr, Mrs, Ms, Miss, Dr) | Forename(s) | Surname | |-------------------------------|-------------|---------| | Telephone number | Fax number | Mobile number | | Email | | |
Health & Safety Contact (if different from above)
| Title (Mr, Mrs, Ms, Miss, Dr) | Forename(s) | Surname | |-------------------------------|-------------|---------| | Telephone number | Fax number | Mobile number | | Email | | |
Finance / Invoicing Contact
Approved establishments are subject to veterinary supervision by the FSA for which charges apply. Please give details of the contact person, address and email address the FSA should use for sending financial information including invoices and statements.
| Title (Mr, Mrs, Ms, Miss, Dr) | Forename(s) | Surname | |-------------------------------|-------------|---------| | Invoicing address (inc. Postcode) | | | | Telephone number | Fax number | Mobile number | | Email | | |
Preferred method of communication: Post... □ Fax... □ Email... □ (Please place a cross in only one box)
Throughput queries contact (if different from above)
| Title (Mr, Mrs, Ms, Miss, Dr) | Forename(s) | Surname | |-------------------------------|-------------|---------| | Telephone number | Fax number | Mobile number | | Email | | |
Preferred method of communication: Post... □ Fax... □ Email... □ (Please place a cross in only one box)
Out of Hours Emergency Contact information (Optional)
The FSA may be required to contact the FBO should there be an emergency and for contingency planning purposes (e.g. foot & mouth outbreak). This information is voluntary and is not specifically collected as part of legislation. The FBO, at any time, can request the FSA remove these details or requests any data to be amended to reflect changes in their contact details. The information will be treated as confidential and only limited members of the organisation will have access.
| Contact Name | Telephone number (Out of hours) | Mobile number | |--------------|---------------------------------|--------------| | Email | | | PART 5 – Seasonal pattern
Part 5 is relevant to establishments such as game handling establishments that operate at only certain times of the year
Do you intend to operate a pattern of seasonal slaughtering / processing? ................................ YES ☐ NO ☐
If YES, please place a cross in the box beside the expected month(s) of operation
| January | April | July | October | |---------|-------|------|---------| | ☐ | ☐ | ☐ | ☐ |
| February | May | August | November | |----------|-----|--------|----------| | ☐ | ☐ | ☐ | ☐ |
| March | June | September | December | |-------|------|-----------|----------| | ☐ | ☐ | ☐ | ☐ |
PART 6 – Information and documentation
Part 6 - For new approvals and changes to business ownership, all paperwork must be submitted with the application in order for it to be processed. Examples of the layout plan and location map can be found over the page.
The following information is required in order to further process your application and must be submitted with the application form
- A description of the (proposed) method of operation . ☐
- A description of the (proposed) equipment maintenance arrangements .......................................................... ☐
- A description of the (proposed) equipment and transport cleaning arrangements ........................................... ☐
- A description of the (proposed) waste collection and disposal arrangements .................................................. ☐
- A description of the (proposed) water supply quality testing arrangements .................................................... ☐
- A description of the (proposed) arrangements for product testing ............................................................... ☐
- A description of the (proposed) pest control arrangements ............................................................................. ☐
- A description of the (proposed) monitoring arrangements for staff health ..................................................... ☐
- A description of the (proposed) staff hygiene training arrangements ............................................................ ☐
- A description of the (proposed) arrangements for record keeping ............................................................... ☐
- A description of the (proposed) arrangements for applying identification mark to product packaging & wrapping .. ☐ **Location map example** – the map should show the names of roads leading to the establishment and the building requires a red boundary encompassing all the areas to be approved.
**Layout plan example** – these can be hand drawn but for more complicated establishments such as slaughterhouses it is advisable to contact a consultant to draw up the plans. This plan also requires a red boundary encompassing all the areas to be approved. PART 7 – Application
N.B. If you fail to complete all parts of this form your application for approval will not be processed. Please note that the granting of FSA approval under the hygiene legislation in no way removes any obligation you may have; to apply for planning permission / building control for any building works you undertake or the change of use of any building, within the approved establishment. Please contact your Local Authority for relevant advice.
I am authorized on behalf of the business described in Part 2, and I hereby apply for approval to use premises at the address specified in Part 1 for the purpose of handling products to which both Regulation (EC) No 852/2004 and Regulation (EC) No 853/2004 apply, to be approved under Regulation (EC) No 853/2004.
Please ensure that the application is signed before submitting, unsigned applications will not be processed.
Name in BLOCK LETTERS
Signature
Please submit the completed form and site plans either by fax to: 01904 232 229 or post to:
Food Standards Agency, Approvals Team Room 112, Kings Pool Peasholme Green York YO1 7PR
Alternatively complete on screen, print off, sign and submit a scanned copy by email to: [email protected]
A Field Veterinary Leader (FVL) will be responsible for assessing the application and will make an appointment in due course to inspect the premises in order to assess whether it may be granted approval or conditional approval.
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5dd0e2be939c90447d2d9c8dba0462840d6cc6bd | Guide to archiving personal data Acknowledgements
This guide is the result of co-creation with the archives sector. It is the work and views of a number of individuals, groups and organisations. The co-creators of the guide included members of the Steering group and the Review group. There were also numerous contributions after a period of public comment. Thanks to all these individuals that provided their suggestions, time and support to create this guide.
Particular thanks for their suggestions and contributions must go to the members of the Steering group:
- Chair, University College London – Elizabeth Lomas
- The National Archives – Stuart Abraham, Malcolm Todd and Anna Sexton
- National Records of Scotland – Laura Mitchell and John Simmons
- Museums, Archives and Libraries, The Welsh Government – Mary Ellis and Sarah Horton
- Public Record Office of Northern Ireland – David Huddleston and Jayne Hutchinson
- Archives and Records Association (UK and Ireland) – Jon Elliott
- National Archives, Ireland - Niamh McDonnell
The National Archives is very grateful to Susan Healy for discussing her early thinking on archiving in the public interest with us and permitting those discussions to inform the preparation of this Guide. Contents
Foreword .......................................................................................................................... 4 Summary ............................................................................................................................ 6 Introduction ....................................................................................................................... 7 Key concepts .................................................................................................................. 8 Scope .............................................................................................................................. 8 Purpose of this guide ......................................................................................................... 9 Responsibilities of the archives sector ............................................................................ 10 Data protection law and archiving .................................................................................. 12 Data protection law has changed ................................................................................ 12 What does the change mean? ....................................................................................... 12 What has changed? ....................................................................................................... 13 General Data Protection Regulation (GDPR) .............................................................. 13 Data Protection Act 2018 .................................................................................................. 14 Exemptions .................................................................................................................. 14 Safeguards .................................................................................................................... 15 What is meant by “substantial damage or distress”? ................................................. 16 Lawful basis for different types of archive service .......................................................... 16 Right to Erasure (Right to be forgotten) ......................................................................... 17 Access to data by data subjects ...................................................................................... 18 Unstructured manual records .......................................................................................... 18 Data Protection Officers and records of processing ....................................................... 18 Sanctions .......................................................................................................................... 19 Specific processing .......................................................................................................... 19 Dual purpose processing and updating data .................................................................... 19 What do I need to do to start? ....................................................................................... 20 Archiving purposes in the public interest ...................................................................... 21 What is archiving under GDPR ................................................................................ 21 Establishing ‘archiving purposes’ ................................................................................ 21 Establishing the public interest in archiving ............................................................... 22 Criteria for archiving purposes in the public interest ................................................ 24 What archiving in the public interest is not ............................................................... 25 Processing for archiving purposes .................................................................................. 26 Why are there special data protection rules for archiving? ........................................ 26 Appraise (selection) ......................................................................................................... 27 Acquire ............................................................................................................................ 28 Security and Preservation ............................................................................................... 29 Arrange and describe – metadata, catalogues and finding aids ..................................... 29 Access ............................................................................................................................. 31 Communicate / inspect ............................................................................................... 31 Disseminate— publish /online access/exhibition material ......................................... 34 Removing access (takedown and reclosure) ............................................................... 34 Responsibilities of users of archived personal data ....................................................... 35 Annex A Explanation of terms used in this guide ............................................................ 36 Annex B Parliamentary Question reply what is meant by the term Archiving in the Public Interest... 39 Annex C Main references to archiving in GDPR and Data Protection Act 2018 ............... 41 Foreword
Archives are special places. They are our collective memory. They help us to understand the past, make sense of the present, and guide us for the future. And in an age of fake news, misinformation and opaque institutions, archives are more important than ever in helping to uphold democracy and hold power to account.
They also hold a special place in my heart. I began my professional career in local government archives. My first leadership role was City Archivist for the City of Calgary in Canada. Making decisions about the preservation and accessibility of information laid the foundation for my current work in helping individuals and organisations navigate the digital age.
As the UK’s Information Commissioner I oversee information rights legislation that, on the one hand, promotes openness, transparency and access to information, and on the other, requires data privacy for individuals. It is my job to balance these competing rights and interests.
The General Data Protection Regulation (GDPR) and the Data Protection Act 2018 set the rules for data privacy. They place obligations on organisations and give people control over their personal data. Amongst other things, people have the right to know why their data is being used, and can request that it is corrected or erased.
But data protection is not an end in itself. It does not prevent archiving, it supports it. Good data protection leads to effective data governance and records management - two essential elements of archiving. Data protection law also specifically recognises the importance of archives. There is no inherent conflict with archiving in the public interest; data protection law provides for it through various provisions.
This guide identifies, clarifies and explains those provisions relevant to the use of personal data in archiving. It underpins and supports the continued important work of archivists - preserving and making available records for the needs of society now and in the future. I hope this guide helps ensure that this important work continues.
Elizabeth Denham Information Commissioner Key messages in this Guide
- Data Protection law shapes archiving of personal data. It supports it and does not prevent it;
- Personal data worthy of permanent preservation should be safeguarded by record keepers until it is archived;
- The new archiving in the public interest purpose adapts the operation of various principles and maintains exemptions from data subject rights such as the right to be forgotten and data rectification where the necessary safeguards are met. Summary
- The Data Protection Act 1998 has been replaced by new legislation;
- The new laws enhance the protection of information about people, giving them greater control over it, while still enabling legitimate use by others;
- Data protection applies to processing of digital information about people, and information about people in manual filing systems;
- In general, personal data must be processed for a specified purpose, and kept for no longer than that purpose requires. Individuals have greater rights over their data, including the so-called ‘Right to be forgotten’;
- However, the law recognises there is a public interest in permitting the permanent preservation of personal data for the long-term benefit of society;
- There is a specific purpose for this – ‘archiving in the public interest’ with various exemptions. This can apply to archiving by public, private or voluntary bodies;
- The use of exemptions is subject to the implementation of appropriate safeguards to minimise any adverse impact on living individuals;
- In general, ‘archiving’ which complied with the 1998 Data Protection Act will continue to be permitted under the new law. There are some changes affecting archiving but they are not drastic;
- Those archiving will need to be more transparent than previously and ensure the archival processing of data is distinguished from processing that supports daily business. The archiving purposes in the public interest provisions do not apply to the daily business of a body e.g. marketing;
- Personal data preserved in archives is not expected to be kept ‘up-to-date’ in the same way as data still subject to operational use;
- Public use of ‘archived’ personal data will generally be possible once the people concerned are dead, and may be possible earlier if the use is fair to the individuals in the records. Introduction
1. The rules for handling information about living people in archives and records intended for transfer to archive services changed on 25 May 2018 with a new explicit provision, archiving purposes in the public interest. In practical terms, processing for archiving purposes under the new legislation is not very different from the previous Act and its effective safeguards. This guide helps you consider what is required for archiving. The change is more significant for the creation and processing of daily business information. The Information Commissioner’s Office has published detailed guidance and resources on this.¹
2. This guide concerns records that contain or consist of personal data that has been acquired by an archive service for preservation as part of its collections or is being assessed for this purpose. Personal data can be recorded in any form or format: databases and datasets, websites, digitised images, email, audio-visual material, as well as traditional paper files and registers. Archive services (defined in a wide sense as set out in annex A) may handle records of enduring value containing personal information about people who are still alive (e.g. school admission registers, court records, hospital records) and may create personal data themselves that is subject to the legislation (e.g. search room attendance registers, correspondence with owners of private records). Archive services sit in many different types of organisations – galleries, libraries, schools and museums as well as voluntary and community bodies and private companies. In this guide, the term archive services refers to all these different types of organisations that archive records in many formats. Some bodies may also be archiving without formally calling their collections an archive.
3. Inevitably archive collections contain personal information about people’s public and private lives, but the purpose of archiving is primarily to maintain this information for use over the very long-term, when the potential for impact on individuals is low or non-existent. The new data protection law explicitly introduces the principle of transparency and highlights the importance of people’s awareness and control over what happens to their personal data. For archiving purposes in the public interest, there are exemptions from some of the data protection obligations, but these are still subject to the implementation of appropriate safeguards. Other data protection purposes interrelate with archiving purposes in the public interest such as scientific and historical research (any research done with archive collections will be ‘historical’ in its widest sense), and freedom of expression and information may also be relevant to archives, either instead or in addition to archiving purposes in the public interest, but this guide does not cover them. There is also an ethical consideration to protect the privacy of people mentioned in records whilst they are alive.
¹ https://ico.org.uk/ Key concepts
Personal data 4. Data protection law applies to ‘personal data’ meaning any information relating to an identifiable living person who can be directly or indirectly identified. It applies to both automated personal data and to manual filing systems where personal data are accessible according to specific criteria. This could include systematically ordered sets of manual files containing personal data. The Data Protection Act 2018 applies GDPR standards to unstructured manual files held by public authorities (manual personal data not held in a structured set), although there are several exemptions for this type of data.²
Archiving 5. The activities involved in archiving purposes of records of enduring value are acquisition and selection/appraisal, accessioning, storage and preservation, arrangement and description, and provision of access for all types of research through inspection and publication. The UK archives sector spans public, private, charitable, voluntary, community and commercial organisations and groups. If personal data is being kept solely for a defined business or legal purpose and the intention is to destroy it after that has finished, this is not archiving purposes in the public interest.
Scope 6. This guide provides important guidance on the purpose and exemptions for archiving in the public interest provided by data protection law which dictate how personal data is handled. It is intended for use by those working with potential or existing archive collections around the exemptions in data protection law for archiving. Many of the users of this guide will be archivists although it is intended to be used and referenced by anyone involved in archiving. With the repeal of the 1998 Data Protection Act, the previous code of practice for archivists and records managers is now obsolete. This guide has a narrower scope as set out in the table below.
² See Data Protection Act 2018 section 24 | Activity | Covered by Guide ✓ | Not covered by Guide × | |----------------------------------------------|---------------------|------------------------| | Business processing before archiving | Bodies holding personal data with the intent that they be part of an archive in the future either as part of their organisation or by transfer to an archives service. | Business purpose storage of data and general information management including offline storage. No intention to preserve beyond business use or records not of enduring value. | | Archive service activities | Records received for in-house appraisal as well as material already appraised and held in collections. | Processing by archive services of data not held for archiving in the public interest purposes e.g. for marketing and fundraising or about staff and users. | | Archive collections | Public and private bodies and voluntary groups preserving and making personal data directly or indirectly available, either now or in the future, to enable research, provide corporate memory or as continuing evidence of rights and obligations. | Research and re-use by members of the public of records held in or published by archive services. | | Other | General compliance with data protection law or for other purposes such as for statistical or scientific and historical research purposes. | |
**Purpose of this guide**
07. GDPR sets out a specific purpose which enables a number of exemptions for archiving, providing it complies with safeguards. This guide helps those intending to use such exemptions (data controllers and data processors). The data controller is the person (an individual or other legal person such as a company) who determines why, as well as how, personal data are to be processed. It is their duty to ensure that the collection and processing of any personal data within the organisation complies with the requirements of data protection law. A processor is responsible for processing personal data on behalf of a controller. Processing for archiving purposes relates to the many formats in which records are held as well as the many types of organisations and groups that archive and provide archive services.
08. There are other purposes with exemptions from data protection duties that may also be relevant to archive services and especially their users, such as processing for freedom of expression and information (journalistic, academic and artistic or literary expression). The diagram below shows how the archiving purposes in the public interest exemptions described in this guide are part of a wider range of exemptions for specific purposes. This guide covers the archiving purposes in the public interest exemptions only.
09. This guide can also be used by those transferring records to archive services as they judge appropriate. This guide recommends how archive services should process records that contain personal data to enable the use of the records for research, now or in the future. It reflects article 89 of the GDPR and section 19 and schedule 2 part 6 of the Data Protection Act 2018 which, amongst other provisions, set out the special rules for archiving purposes in the public interest.
10. Following this guide will carry weight in the event that the actions of those involved in archiving processes are challenged. Departure from its provisions is not unlawful but will need to be otherwise justified in terms of compliance with the law. This guide is intended to be used in conjunction with general guidance published by the Information Commissioner. This guide does not constitute legal advice which should be sought as required. This guide does reflect good practice and expertise in archiving from the past two decades under the previous Data Protection Act.
Responsibilities of the archives sector 11. Archive services and organisations that archive need to understand the general principles, individuals’ rights and particular safeguards that govern personal data and its management and to ensure that their handling of it complies with the law. Ultimate responsibility for compliance with data protection law rests with the highest level of management, with advice from a Data Protection Officer if applicable. Archive services should ensure policies and procedures are compatible with the legislation, particularly in relation to storage, security and access to personal data.
12. There is a risk that over-cautious or inaccurate interpretation may lead to the weeding, anonymising or destruction of files containing personal data that would otherwise be passed to the archive service with managed access over time. An archive service’s ability to permanently retain personal and special categories of personal data for the purposes of archiving in the public interest should therefore be made clear internally and to potential depositors. The law contains the necessary safeguards to permit archiving. Data protection law and archiving
Data protection law has changed
14. The Data Protection Act 2018, plus its associated secondary legislation and the European Union’s General Data Protection Regulation (GDPR), together referred to in this guide as Data Protection law, began to apply from May 2018. They supersede the provisions of the Data Protection Act 1998. The preservation and management of archives must take into account the new laws.
The law aims to:
- To protect individuals’ fundamental rights and freedoms, in an increasingly data-driven world, in respect of personal data processing;
- To enable organisations to process personal information, with due regard for the rights and freedoms of individuals, in the course of their legitimate business.
15. The law applies to any processing of personal information. ‘Processing’ is the term used for virtually anything that can be done with or to recorded information, including acquisition, storage and destruction as well as active use. Controllers must have a lawful basis for any processing of personal data undertaken, ensure processing is in accordance with the principles described in the law and comply with the rights of the people to whom the data relates – ‘data subjects’. Archive services may claim exemption from certain provisions in data protection law, such as the obligation to respond to access requests from data subjects and requests to erase data (right to be forgotten) when archiving in the public interest. Personal data is that of living people - ‘This Regulation does not apply to the personal data of deceased persons’.³
What does the change mean?
16. Data protection is not new. For the previous twenty years the UK archives sector followed the 1998 Data Protection Act without significant issue using guidance from the Information Commissioner and a code of practice aimed at
³ GDPR recital 27 archivists and records managers. The guiding principle remains, namely that record creators and archive services can continue to process personal data in their collections for archiving purposes but should not cause substantial distress or substantial damage to the person whose data is being archived. Generally, processing for archiving purposes that has been legal under the Data Protection Act 1998 will likely continue to be lawful under the new data protection law. GDPR will not apply directly after UK withdrawal from the EU and the Data Protection Act does not transpose it. This is expected to be done via the European Union (Withdrawal) Act.
17. It is important to have a clear definition of what the scope of a body’s archiving activity is, and what it seeks to achieve. This should be combined with a clear archiving function and policies within the organisation itself, so that the nature and scope of the archiving activity is distinguished from other purposes of processing. Indiscriminate or random archiving of personal data is unlikely to be compliant – and is in any case bad professional practice. Archive services (and those transferring records to archive services) need to update their awareness and documentation of their processing in line with the new legislation and ensure greater transparency for the archiving of personal data.
What has changed?
General Data Protection Regulation (GDPR)
18. The GDPR applies to records that contain personal information about identifiable living people. The previous concepts of a lawful basis, compliance with principles and exemptions with safeguards remain. There is a new explicit concept of ‘archiving purposes in the public interest’ in the regulation rather than all archiving coming under the historical research provisions, as it did under the 1998 Act. Processing for archiving purposes in the public interest is not defined within GDPR itself although it is described in a recital. The term is explored in more detail elsewhere in the guide. The provision for archiving purposes in the public interest distinguishes between the:
- collection, preservation and management, including dissemination, activities required to ensure that data is permanently preserved in a usable state (archiving purposes in the public interest); and
- use of the data by the public or others, which may or may not take place for many years, such as for scientific or historical research purposes or for freedom of expression and information (journalistic, academic, artistic and literary expression) purposes.5
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4 http://webarchive.nationalarchives.gov.uk/20170907054556/http://www.nationalarchives.gov.uk/documents/information-management/dp-code-of-practice.pdf produced jointly by The National Archives, the Society of Archivists, the Records Management Society and the National Association for Information Management
5 See GDPR articles 85 and 89(2) 19. Historical research (any research done in an archive repository will be ‘historical’ in its widest sense) is likely to be relevant to archive services either instead of or in addition to archiving purposes in the public interest. In addition, certain archival collections will have reason to take account of processing for scientific purposes as well as processing for journalistic, academic, artistic and literary purposes. Their relevance may depend upon the nature and content of the records held as well as the purposes for which any archive records are accessed and used. Data protection law also recognises the public interest in freedom of expression and information. Further information is available from the Information Commissioner and the Archives and Records Association (UK & Ireland)(^6). As a result there is greater visibility for archiving in the new data protection law. GDPR contains:
- **Adaptions to certain Principles.**
- Purpose limitation. It provides for compatible further processing, beyond the purpose for which the data was originally collected; and
- Storage limitation. It allows the retention of personal data for longer periods than normally permitted under the storage limitation principle;
- **Exemptions from certain rights;**
- The right of **erasure** / the right to be forgotten;
- The **right to be informed** for indirectly collected personal data where it would be impossible or involve disproportionate effort; and
- Article 89 makes specific provision for exemptions from a number of **data subject rights**: access, rectification, restriction, notification, data portability and right to object, insofar as they are derogated for in member state law (The Data Protection Act 2018 in the UK);
- **Conditions for processing of special category and criminal offence/conviction data.**
20. Where only unstructured manual data is processed, GDPR will not apply directly, but care is needed. For example, if the records are digitised or catalogued online, this will bring any personal data into scope of GDPR. The Data Protection Act 2018 applies GDPR standards to the processing of unstructured manual files by public authorities, albeit with several exemptions from its principles, rights and obligations.(^7)
**Data Protection Act 2018**
**Exemptions**
21. The new Data Protection Act contains all the additional exemptions for archiving purposes in the public interest permitted under GDPR. It states;
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(^6) The [Archives and Records Association, UK and Ireland](https://www.archives.org.uk) (ARA) have been discussing and planning a revised Code for record-keepers with colleagues across the public, private and voluntary sectors. It will be different from, but will complement, this guide.
(^7) See Data Protection Act 2018 sections 22 and 24 The listed GDPR provisions do not apply to personal data processed for archiving purposes in the public interest to the extent that the application of those provisions would prevent or seriously impair the achievement of those purposes.
Article 15(1) to (3) (confirmation of processing, access to data and safeguards for third country transfers);
Article 16 (right to rectification);
Article 18(1) (restriction of processing);
Article 19 (notification obligation regarding rectification or erasure of personal data or restriction of processing);
Article 20(1) (right to data portability);
Article 21(1) (objections to processing).(^8)
22. If complying with a data subject’s request to exercise a right would not prevent or seriously impair the processing purposes, the request must be dealt with as normal, e.g. by providing a data subject with a copy of their personal data, adding a supplementary statement to a record or withdrawing from public access inaccurate historical data at a data subject’s request.
Safeguards
23. The exemptions are not automatic. Their use is subject to appropriate safeguards for the rights and freedoms of data subjects. Article 89(1) of the GDPR says that those safeguards must include the implementation of technical and organisational measures. Amongst other things, such measures should respect the principle of data minimisation. This means having a process in place to help identify the minimum amount of personal data needed for archiving processing purposes. Additionally, section 19 of the Data Protection Act 2018 says that processing for archiving purposes in the public interest will not meet the GDPR’s safeguard requirements if it is:
‘likely to cause substantial damage or substantial distress to a data subject’ or: ‘carried out for the purposes of measures or decisions with respect to a particular data subject, unless the purposes for which the processing is necessary include the purposes of approved medical research’.
24. The safeguards correspond to those at section 33 of the 1998 Data Protection Act. There are also conditions to allow processing of special categories of personal data(^9) (previously known as sensitive personal data under 1998 Act).
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(^8) Data Protection Act 2018 schedule 2 part 6 (^9) Data Protection Act 2018 section 10 & schedule 1 Part 1 Lawful basis for different types of archive service
25. Processing of personal data requires a lawful basis (article 6 GDPR). Archive services are not required to obtain consent from data subjects if an alternative lawful basis is more appropriate such as a task carried out in the public interest, exercise of official authority or a legitimate interest. Further processing of data for archiving purposes in the public interest, should be considered to be a compatible lawful processing operation(^\\text{10}) so no additional lawful basis would be required. This will apply primarily to organisations with in-house archive services (e.g. company, school and charity archives).
26. The UK is distinctive in its legal framework, which reflects its legal systems. The main legislation that imposes archiving obligations relates to UK central and local government records, Scottish judicial records, and to certain records of the Church of England. Because of, the Public Records Act 1958, Public Records (Scotland) Acts 1937 and 2011 and Public Records Act (Northern Ireland) 1923, the national record offices and places of deposit will, in relation to public records, be acting under official authority for a lawful basis. The Government of Wales Act 2006 created a class of records known as ‘Welsh Public Records’ and makes provision for them to be managed as though they were UK Public Records for the time being.
27. Many organisations with archiving functions will also be public authorities able to rely on a statutorily-defined public task basis for processing personal data. Local authorities benefit from legislation permitting them to accept responsibility for and apply resources to archives received from private sources as well as to their own records. For example, under the Local Government (Records) Act 1962 and Local Government Act 1972, Local Government (Wales) Act 1994, Local Government etc. (Scotland) Act 1994, the Public Libraries and Museums Act 1964, or other national libraries and museums legislation. Church of England records, including baptism registers, will be processed under the Parochial Registers and Records Measure 1978. More detail about archival related legislation is available from The National Archives’ website.
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(^{10}) GDPR recital 50
What is meant by “substantial damage or distress”?\
The Act does not define this. However, in most cases:
- substantial damage would be financial loss or physical harm; and
- substantial distress would be a level of upset, or emotional or mental pain, that goes beyond annoyance or irritation, strong dislike, or a feeling that the processing is morally abhorrent.
28. Other archiving, indeed the majority of UK archiving, takes place without a specific mandate in law but is nonetheless lawful. The expectation that archiving of material in private hands will take place and is in the public interest is reflected in the establishment of the Historical Manuscripts Commission with a remit to enquire into the whereabouts of archives and manuscripts in private hands, report on their contents and promote their preservation and use. The Royal Warrant now appoints the Keeper of Public Records as the sole Historical Manuscripts Commissioner and the work is done from within The National Archives. Where an organisation does not have an explicit archiving task laid down in statute, it is possible for this to be derived indirectly from other legal provisions, such as the Royal Warrant of the Historical Manuscripts Commission or section 1(4) of the Local Government (Records) Act 1962, which refer to the public interest served by voluntary private archiving activity. As GDPR recitals 41 and 50 make clear, and especially given the common law system of England and Wales, a legal basis does not have to be under specific statutory powers. Private organisations may also be able to demonstrate a legitimate interest basis for processing by pointing to funding agreements, management agreements or constitutional documents which set out the purposes of the archive.
Right to Erasure (Right to be forgotten)
29. Under data protection law individuals have the right to have personal data erased. This is also known as the 'right to be forgotten'. The right is not absolute and only applies in certain circumstances. Importantly, the right to erasure does not apply if processing is necessary for archiving purposes in the public interest, where erasure is likely to render impossible or seriously impair the achievement of that processing. Decisions as to whether the exemption applies should be taken on a case-by-case basis, but given that the purpose of an archive service is to ensure the integrity and authenticity of archived records and future analysis would be affected by the removal of data, erasure may often be likely to seriously impair the processing. Archive services may still wish to consider requests to have personal data removed from public view on ethical grounds under take-down and reclosure policies if data subjects have expressed their concern and the wider balance with freedom of expression and information is not significantly affected. If a data subject complains of distress, archive services should consider if the following is appropriate to make processing fair, especially if the data is available to search engines and the data is inaccurate:
- Reclosure / takedown (removal from public access);
- Adding a supplementary statement to the record;
- Amending or adding metadata or catalogue description.
30. Consideration should be given to how this might be done when paper records have been digitised, both as to how the ‘correction’ could be displayed on the digital display image or equivalent, and how to keep the digital surrogate and paper original in sync.
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11 http://www.nationalarchives.gov.uk/archives-sector/our-archives-sector-role/historical-manuscripts-commission/ 12 GDPR Article 17(3)(d) Access to data by data subjects 31. Although those archiving may find they have no legal obligation to respond to a data subject access request (SAR), bodies may choose to respond to access requests, especially when an individual’s rights or entitlements seem to be at stake. Standard practice for responding should be followed, such as confirming the identity of the requester. In most cases you cannot charge a fee to comply with a subject access request. However, you may charge a reasonable fee for additional copies or where the request is manifestly unfounded or excessive.
Unstructured manual records 32. GDPR does not apply to unstructured manual data although in the UK more manual data is likely to be considered structured under GDPR than previously under the Data Protection Act 1998. For FOI authorities, the Data Protection Act 2018 partly applies to the personal information in unstructured records as before. Data protection law does not apply to manual unstructured data held by non-FOI bodies. Archive services may add a structure to data through additional metadata or by digitisation. If personal data is digitised then it is processed by automated means and is therefore covered by the GDPR regardless of its structure.
33. There are exemptions for manual unstructured data used in longstanding historical research. These include certain principles and rights of the data subject when personal data was processed before 24 October 1998 providing it is not carried out for measures or decisions to an individual, or likely to cause substantial damage or distress to the subject. The limit of 24 October 1998 is consistent with the 1998 Act. These exemptions maintain the protections of the previous act for manual unstructured record series processed only for the purposes of longstanding historical research.
Data Protection Officers and records of processing 34. Under the GDPR, a body must appoint a DPO if:
- It is a public authority (except for courts in their judicial capacity);
- Its core activities require large scale, regular and systematic monitoring of individuals (for example, online behaviour tracking); or those activities consist of large scale processing of special categories of data or data relating to criminal convictions and offences.
35. If a body has a Data Protection Officer (DPO) it should include the purpose of archiving in their records of processing activities and privacy notices (which are required even if there is no DPO). In some organisations the person responsible for archives may themselves be the DPO, while some bodies will not need to have one. ICO guidance should be consulted about the role of the
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13 2018 Data Protection Act 2018 section 24 14 2018 Data Protection Act 2018 section 25 DPO. Like the rest of data protection law, the need to keep records of processing activities only applies to the data of living persons, not all records in an archive service. Even storing data without any public access counts as processing that may need to be publicly acknowledged and recorded.
Sanctions 36. There are sanctions to ensure compliance with data protection legislation. The Information Commissioner has powers to enter premises, to inspect or seize material and to prosecute offenders. Compensation or fines may be payable. Personal data breaches that present a likely risk to people’s rights and freedoms must be reported to the Information Commissioner without undue delay, but not later than 72 hours after discovery. If you take longer than this, you must give reasons for the delay.
Specific processing 37. Organisations processing personal data for law enforcement purposes (police forces for example) that are archiving information in the public interest are only permitted to do so if the processing:
- is not carried out in connection with measures or decisions in relation to individual data subjects; and
- is not likely to cause substantial damage or substantial distress to a data subject.
38. Those working in specialist repositories will probably need to seek additional advice.
Dual purpose processing and updating data 39. An organisation can continue to allow use of the data in its archives for other purposes as long as that additional use is otherwise compliant. In the event of dual-purpose processing, the archiving exemptions apply only to the processing for archiving purposes. Where data is used for business purposes under dual processing, requests from data subjects must be dealt with as normal.
40. However, personal data preserved as archives is not expected to be kept ‘up-to-date’ in the same way as data still subject to operational use. Archives are concerned with historical integrity rather than current accuracy. In the event of complaints being brought by a data subject over inaccuracy, exemptions may be claimed from right of rectification, or data could be supplemented by a statement of the requested correction rather than replaced. Archive services may often be able to rely on the use of supplementary statements to make the rectification without damaging the archival integrity of the original data.
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15 https://ico.org.uk/for-organisations/guide-to-the-general-data-protection-regulation-gdpr/accountability-and-governance/data-protection-officers/ 16 Data Protection Act 2018 section 41 17 GDPR article 89(4) What do I need to do to start?
41. Exemptions for archiving are not automatic. Before relying on an exemption, consideration needs to be given to several different factors including:
- The necessity of the processing;
- The specific circumstances of the processing (e.g. the extent to which compliance with a data protection provision would prevent or seriously impair the processing purposes);
- The public interest in the processing; and
- The safeguards implemented for the rights and freedoms of data subjects.
42. The exemptions for archiving purposes in the public interest may need to be explained to the public, data protection officers and business areas. The application of an exemption in particular circumstances may need to be articulated to the Information Commissioner’s Office.
43. Everybody involved in archiving needs to be aware of the exemptions in data protection law. They should continue to respect the privacy of individuals and remain confident that archiving of personal data is legal, subject to safeguards. Processing should ensure there is the right balance with individuals’ rights. This may mean certain collections of personal data of living people are not publicly available whilst the individuals are known or believed to be alive as making the records available would be unfair to the data subjects (see Access).
44. Under the new law, there is a greater emphasis on processing being documented and transparent so that controllers are accountable for their use of personal data. Where appropriate, this can be done though publishing collection policies and inclusion of archiving processing in privacy notices. While organisations will often need to pay a fee under the Data Protection Act 2018, registration (providing the ICO with registrable particulars) is no longer required. Personal data not being processed for archiving purposes, such as current staff records or marketing and subscription data, must also comply with the data protection legislation. The Information Commissioner’s Office gives guidance on general matters such as marketing. Archiving purposes in the public interest
What is archiving under GDPR
46. The activities that form archiving purposes in the public interest are described in GDPR at recital 158
Public authorities or public or private bodies that hold records of public interest should be services which, pursuant to Union or Member State law, have a legal obligation to acquire, preserve, appraise, arrange, describe, communicate, promote, disseminate and provide access to records of enduring value for general public interest.
47. Archiving covers activities designed to ensure the permanent preservation and usability of records of enduring value. Note that this may be spread over a number of bodies working in partnership to the same end. The activities specified in Recital 158 should be carried out in accordance with the law and with due regard for accountability and transparency of operations, as required by GDPR.
48. Recital 41 clarifies that a legal basis does not have to be an explicit statutory archiving role, as long as the application of the legal basis is clear, precise and foreseeable to the people subject to it. This means that it includes clear common law tasks, functions or powers as well as those set out in statute or statutory guidance. The government supports the continuation of archiving by private as well as public bodies and individuals. It has explained the term archiving purposes in the public interest in reply to a parliamentary question18 (see Annex B for full text)
We recognise the importance of the permanent preservation of archives for long-term public benefit by museums, galleries, archives and libraries……This is likely to apply to a wide variety of community, private, public sector, charitable/trust and voluntary sector archives. It could also include archives that may be closed to researchers at the present time, but which would become accessible at some future date, and archives which are held in analogue or digital format. The definition would not, however, cover organisations which gather and use data, information and records purely for their own commercial gain or that have no enduring public value.
Establishing ‘archiving purposes’
49. Archives are our collective and personal memory, a unique and irreplaceable part of our heritage. They contain reliable evidence of past actions and decisions, of the reasons for them and of their impact on those affected. Inevitably archive collections contain personal information about people’s public and private lives. As well as their cultural value, archives are about long-term accountability. They provide the evidence required to protect people’s rights and seek remedies when necessary. They enable the rights to freedom of expression and information through journalistic and academic expression,
18 https://www.parliament.uk/business/publications/written-questions-answers-statements/written-question/Commons/2017-11-03/111381/ historical research and public access to official documents and are an essential resource for business, writers, genealogists, researchers and historians.
Many UK organisations preserve a proportion of their records, either in-house or through a specialist archival institution. The UK archives sector spans public, private, charitable, voluntary, community and commercial organisations and groups. In a few cases, a specialist body undertakes the archiving – The National Archives, National Records of Scotland and the Public Record Office of Northern Ireland are obvious examples. Usually archiving is not the primary function of the organisation but is undertaken as part of its operations to serve its own needs and for wider purposes. Archival collections will sit in galleries, libraries, museums, universities, as well as the collections of schools, businesses and charities. All of this archiving makes up the rich heritage resources of the UK. This allows society to benefit from past experience and provides long-term public accountability. Archiving is processing to secure the permanent availability of recorded memory, i.e. evidence and information, for a wide range of current and potential future purposes, including:
- Enabling research and investigation of all kinds, from academic to genealogical research;
- Enabling long-term accountability, such as public inquiries and other official investigations like cold case murder investigations;
- Enabling the discovery and availability of personal, community and corporate identity, memory, culture and history;
- Enabling the establishment and maintenance of rights and obligations and of precedent decisions;
- Enabling educational use; and
- Enabling commercial and non-commercial re-use.
Establishing the public interest in archiving
50. Archiving will normally be in the public interest. Archiving purposes in the public interest should serve the public good and not be purely for personal or corporate interest and private gain. It should not support discrimination or criminality. Archiving records of enduring value for general public interest benefits administrative efficiency, transparency and legal accountability.
51. Archives and archiving are important. The Universal Declaration on Archives(^\\text{19}) states:
> Archives record decisions, actions and memories. Archives are a unique and irreplaceable heritage passed from one generation to another. Archives are managed from creation to preserve their value and meaning. They are authoritative sources of information underpinning accountable and transparent administrative actions. They play an essential role in the development of societies by safeguarding and contributing to individual and community memory. Open access to archives enriches our knowledge of human society, promotes democracy, protects citizens’ rights and enhances the quality of life.
(^{19}) The Universal Declaration on Archives, prepared by the International Council on Archives, was adopted by UNESCO on 26 October 2011 – see [http://unesdoc.unesco.org/images/0021/002134/213423e.pdf](http://unesdoc.unesco.org/images/0021/002134/213423e.pdf) 52. The Council of the European Union in a 2003 resolution on archives(^{20}) stressed the importance of archives for the understanding of history and culture. In particular, that ‘well-kept and accessible’ archives contribute to the democratic functioning of society. Such well-kept and accessible archives:
- Provide individuals, organisations and states with the evidence that enables them to justify their rights;
- Enable citizens to exercise their right of access to official information and the state to account for its actions;
- Preserve the memory of society by constituting the sources of its individual and collective history;
- Enhance the sound functioning of public and private, administrative and commercial organisations.
53. Some archiving takes place by organisations under legislation for that specific purpose. Archiving in local authorities takes place under legislation that permits the establishment of a record office or archive service. The existence of the legislation demonstrates that this archiving can be considered to be in the public interest. Other archiving takes place in non-government bodies that do it as part of their normal operations for a variety of purposes with a strong public interest element.
- Heritage and cultural bodies such as the national museums and galleries, the British Library, The National Libraries of Scotland and Wales, undertake archiving in relation to both their own archives and to deposited collections, gifts and purchases, many of great historical significance;
- Universities undertake archiving on a similar basis, the deposited collections usually being part of Special Collections within the university library. These collections support academic research and teaching. University archive services collect and preserve published and unpublished materials, including data sets that are increasingly being mandated for preservation by research funders;
- Charities and voluntary bodies undertake archiving. This enables long-term accountability, helps support personal identity and the establishment and maintenance of rights as part of a duty of care and to promote public understanding of their mission;
- Private sector bodies such as banks, organisations in the creative industries manufacturing and retail companies maintain archive services for various reasons: to provide corporate memory, for commercial exploitation, to provide continuing evidence of rights and obligations, to support corporate social responsibility and to demonstrate their place in society, sometimes over a very long period. The archives of landed estates fall into this category also. A company archive will tell a story of that company, its industry as well as the people and communities it affected;
- There are also community archives and the archives of families and individuals which support community identity, the maintenance of family relationships and personal identity, and understanding of the development of society at large.
(^{20}) https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32003G0513(01)&from=EN 54. The eventual availability of archives for public use is a factor that would make archiving likely to be in the public interest even if the data by then ceases to be technically personal data as the individuals are no longer alive. An important factor is that evidence and information are available for purposes having public value beyond the immediate interests of the creating organisation itself. For example, records may provide public accountability via regulators or historic inquiries, or support use for research having outcomes of wider value to the public. Bodies may be subject to one, or even both, of the Freedom of Information (FOI) Acts which means that information must be provided as a matter of course unless exemptions apply (which is commonly the case with personal data). Some archive services are within organisations that are not subject to the FOI Acts but nonetheless allow and indeed promote research using their archives, or provide information from their archives. There is an expectation that archiving purposes in the public interest will involve potential use of preserved data at some stage in the future. That may be direct public access, or appropriate indirect or limited access with public benefit. Transparency of operation is particularly important, as this further purpose of processing is not one which most data subjects will have particularly thought about. Conversely, the archiving of illegally acquired records or data derived from illegal processing is unlikely to be in the public interest although it may still have historical evidential value.
Criteria for archiving purposes in the public interest
55. The public interest is not defined in UK law as it can change over time and circumstance. Suggested criteria of processing for archiving purposes in the public interest are below. There may be other factors in particular circumstances. Not all of these criteria will need to be met (although more than one would be expected) as they are indicators and circumstances will vary between sectors and orders of magnitude of the size and resources of the archive service:
- **Purpose** – the purposes for archiving are enabling research and investigations of all kinds; long-term accountability; discovery and availability of personal, community and corporate identity, memory and history; establishment and maintenance of rights, obligations and precedents; educational use; and commercial and non-commercial re-use;
- **Activities** – are some or all of the activities outlined at Recital 158 of GDPR undertaken by or on behalf of the organisation? The activities are to ‘acquire, preserve, appraise, arrange, describe, communicate, promote, disseminate and provide access to records of enduring value’;
- **Enduring value** – does the archiving relate to records that have been selected for permanent preservation? Does it relate to appraisal of records and activities designed to secure their permanent preservation, such as their safekeeping, preparation for transfer, arrangement and description of those selected for preservation? Records of enduring value could be held by creating functions as well as archive services;
- **Transparency** – is the body transparent about the fact and nature of its archiving of personal data, how it manages that data and how data subjects can contact it? Does it highlight archiving, e.g. on its website, through relevant policies, privacy notices or provide online catalogues, guides and other material produced by the archive service? Does it supply details of its archives for inclusion in the National Register of Archives (maintained by The National Archives) or the National Register of Archives for Scotland (maintained by National Records Scotland) or elsewhere;
- Standards - Does the archiving pay due regard to relevant standards? Conformance to standards ensures that the archiving activities support data protection compliance as well as protect the authenticity and integrity of the archives. Are there clear policies, procedures and documentation? Where appropriate is a professional archivist employed or professional guidance sought? One way of demonstrating conformance is recognition by the national accreditation scheme, which provides an over-arching, proportionate and externally validated framework for assessing archiving operations and is available to most organisations with archiving functions, whatever their size. Organisations that have not sought accreditation may need to find alternative ways of demonstrating that their archiving conforms to relevant standards albeit that this takes account of community needs and management as appropriate;
- Access – is some form of public access in line with the data protection principles permitted, or is it likely to be permitted at some future date when the archives are no longer confidential? Otherwise are the archives available to a limited audience having a public interest purpose, such as academic researchers, regulators or official investigators, or is information made available indirectly through responses to written enquiries? Are the archives used for purposes other than the holding body’s commercial gain or private interest e.g. for education?
What archiving purposes in the public interest is not
56. Archiving should be distinguished from long-term, but finite, retention of records to support current business or legal requirements (e.g. for pension purposes). Archiving should not be confused with sending records to cheaper offsite storage or moving data from a live system. The term archiving is sometimes used this way in computing to mean storing data in offline systems. If personal data or records containing the information are being kept solely for a defined current business or legal purpose and the intention is to destroy them after that has been finished, this is not for archiving purposes in the public interest.
- Processing for archiving purposes in the public interest does not include processing of personal data solely for current business needs and activities;
- It does not include processing of personal data in records being stored for a specified limited period;
- It does not include records that have been designated as having no potential or confirmed enduring value. Processing for archiving purposes
Why are there special data protection rules for archiving?
57. Archive services hold archives kept for their evidential value to an organisation or person in the widest sense. As primary sources, archives transmit authentic evidence of human activity and experience through time to current and subsequent generations. For records to retain their value and integrity, crucially to maintain their impartiality to bear witness to past events, the preservation of the personal data they contain is essential.
58. Records being archived are often unique in content and context, are usually not published at creation, nor acquired directly from the data subject and are arranged according to the business process that generated them. Sensitive personal data is likely to be unavailable to the public for several decades to protect the privacy rights of individuals. Processing for archiving purposes of such sensitive data is required well in advance of any use by researchers and is unlikely to have a significant impact on privacy especially if publicly unavailable. Archiving purposes are as much about ensuring survival of personal data to enable future research use as they are about facilitating current research use. Archive services may manage the collections created by many different organisations and individuals within their archives. Typically archive services do not have a current relationship or contact with the individuals whose data they hold as they often did not create many of the records. As a result, it is more difficult to locate particular personal data, especially in older paper records, so responding to data subject rights would be far more arduous than for most data controllers.
59. The nature of the agreement made with the depositor or donor will determine the role of the archive service in relation to a collection. The responsibilities of each party in relation to data protection must be clear. As a general rule archives received by an archives service can fall into three categories:
- Records transferred from within the organisation, which may be a public authority or a private sector body such as a company or historic house. Corporate policy should set out the basis on which archives containing personal data will be passed to the archives service and the level of control and responsibilities that will be passed with them such as responding to people’s requests for data;
- Gifts, legacies or purchases, the common factor being that physical ownership of the archives passes to the archives repository or its parent organisation. The data controller will be the organisation of which the archives repository is a part, unless there is explicit provision to the contrary;
- Deposits on loan from external sources, whereby custody passes to the archives repository but ownership remains with the depositor or another party, such as a trust. In such cases the organisation of which the archives service is a part may become sole data controller or may share that responsibility with the owner as joint data controllers, or may act merely as a data processor, leaving control wholly in the hands of the owner. Which applies will depend on the terms of the deposit. As a general rule, the more control over access and use passed to the archives repository, the more likely it will be that its parent organisation has acquired data controller responsibilities. A variant of this last option occurs when control passes to the archives service in whole or in part, but storage is contracted-out to a third party which is a data processor. Where a data processor is used, a written contract must be put in place. The Information Commissioner provides guidance on the identification and duties of data controllers and processors. What is vital is that the owner’s continuing interest in the records and the obligations of all parties are set out clearly in the deposit agreement. If the terms of deposit are unclear and the current owner is unknown or cannot be contacted, the organisation of which the archives repository is a part should be regarded as data controller by default. Transfer and deposit agreements should clarify the responsibilities of the archives service, stating whether the originating person or body is retaining or transferring data controller responsibilities. It may be necessary to obtain legal advice to ensure that the wording of these agreements is accurate.
60. Usually, archiving processes are undertaken by a single organisation. However, in some situations, the activities involved in archiving are shared between two organisations or distributed in some other way. For example, storage and conservation work may be contracted-out to a specialist company which is answerable to the contracting organisation in respect of that work or management of the operation may be contracted-out to an arms-length trust or joint service. Another example occurs with UK government records where pre-transfer activities - appraisal, arrangement and description - are completed by the government departments that created and have custody of the records prior to transfer, then other activities – acquire, preserve etc. - are undertaken by The National Archives or another place of deposit. The pre-transfer activities are usually undertaken under the general guidance or supervision of The National Archives or other place of deposit. This work constitutes processing for archiving purposes, regardless of where it takes place or who does it.
Appraise (selection)
61. When considering the permanent preservation of personal data, serious consideration should be given as to how far this will be in the public interest. This will mean weighing up whether society as a whole, and in particular researchers, will benefit from preservation of the data for historical research and other purposes. All appraisal decisions should be documented as a matter of good professional practice and collection policies published as appropriate. The documentation will help demonstrate that the preserved data is of enduring value having been through a selection process.
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21 Set out in Part 2 of the Code of Practice issued under section 46 of the FOI Act and the equivalent code under section 61 of the Scottish FOI Act. 22 Public Records Act 1958 section 3(2) 23 The Public Records (Scotland) Act 2011 provides for oversight by the Keeper of an authority’s management of its records - [http://www.legislation.gov.uk/asp/2011/12/contents](http://www.legislation.gov.uk/asp/2011/12/contents) 62. All archive services acquiring personal data must be able to show that their processing of that data is lawful, fair and transparent, in accordance with principle (a): lawfulness, fairness and transparency. Those involved in the appraisal of digital records prior to their transfer should ensure that personal data of enduring value is identified as soon after creation as possible and digital continuity methods applied accordingly to preserve the authenticity of the record. Once selected, archiving exemptions may apply to handling data subject rights even whilst the data is in the custody of the creating function.
63. The GDPR specifies what you need to tell individuals when you obtain their personal data (privacy information). When an archive service obtains personal data from a source other than the data subject, it is exempt from the need to provide them with privacy information if doing so would be impossible or involve a disproportionate effort. This is most likely to be the case where the archive service holds no relevant contact details for the data subject and has no reasonable means to obtain them. Where an archive service does not provide privacy information to data subjects, it must take other appropriate measures to protect their rights and freedoms. Two measures that must always be taken are making the privacy information publicly available (e.g. on a website) and carrying out a data protection impact assessment to assess and mitigate risks of processing potentially unknown to data subjects. Other relevant measures for archives services to mitigate the potential unfairness of not providing data subjects with privacy information may include:
- processing the data in an otherwise transparent manner;
- keeping records closed for an appropriate period; and
- restricting access and use only for research (the results of which will be anonymised).
A case by case assessment will be required as the exemption is not blanket. The Information Commissioner’s website has more guidance on what privacy information should be provided to individuals.
Acquire
64. All newly received archives, whether digital or manual, should be risk assessed and sampled as appropriate to ascertain whether they include personal data, especially special categories of personal data, covered by the legislation, for example a database or a series of case files about named living individuals. Bodies that are not subject to the FOI Acts will find that some manual unstructured records fall outside the legislation. Bodies subject to the FOI Acts should assume that all records containing personal data about identifiable living individuals are subject to the legislation.
65. As a general rule, it is simpler to accept only those sets of personal data that are no longer required for current business and hence can be retained for the sole purpose of archival preservation. This is because it will be clear that they are historical records, although still with potential business use. However, this may not always be practicable and further dual use may prove necessary. It should also be clear to someone consulting the data whether the records are
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24 GDPR article 14(5)(b) still in active use and have been kept up-to-date, or instead reflect a historical position.
66. Transparency is specified in principle (a) (lawfulness, fairness and transparency) and suggested at Recital 39, where lawful processing is linked to data subject awareness of that processing. Where necessary, Article 14(5)(b) offers greater flexibility in respect of archiving purposes in how transparency information for data subjects is provided. Whatever the source of the material, an archives service will need to discuss how transparency data is provided effectively to data subjects via privacy notices, as well as ensuring that clear agreements are in place defining what responsibilities both parties have for the archived data and its future use. This is sector good practice. Clear, published policies on what types of material an archives service aims to archive will help demonstrate that personal data in collections is relevant and not excessive.
Security and Preservation
67. Those responsible for personal data should ensure that adequate levels of security are provided. These will depend on the nature and age of the information and the extent to which it requires protection. For example, special categories of personal data are more likely to need restricted access to the minimum necessary staff. The Information Commissioner provides further guidance on information security and risk assessment. The security measures that are appropriate for an archive service will depend on its circumstances, so a risk-based approach should be adopted.
68. Digital preservation should be taken into account when assessing security needs. An archives service may need the assistance of others to carry out digital preservation activities. This relationship needs to be clearly identified and expected service levels formally agreed and documented to ensure the accountability of all parties. It is important to note that where service providers are used, it is the commissioning organisation that remains responsible for the digital records at all times. Digital preservation activities should ensure there is a verifiable and trusted means of preserving the integrity of digital records. This gives continued access to digital information in the future. Likewise, if paper storage or specialist services have been contracted-out, the commissioning body remains the data controller.
Arrange and describe – metadata, catalogues and finding aids
69. Online catalogues and finding aids made available to the public are covered by the Data Protection Act 2018 if they include entries containing personal information. Manual finding aids will also be covered if they hold personal information in a sufficiently structured format or are held by an FOI body. Depending on the sensitivity of the information it may not be suitable to provide public access to all metadata and finding aid content if individuals are identifiable (see Access below). Carrying out a Data Protection Impact Assessment (DPIA) may be appropriate. A DPIA is a good framework to work in so that privacy issues can be identified and mitigated. Further details of these can be found on the Information Commissioner’s website. By restricting the description and access to personal details (e.g. through pseudonymisation or redaction) for a finite period if required, archiving purposes in the public interest respects the principle of data minimisation in terms of limiting processing to what is necessary. A record/object level description may be innocuous in itself but when read in conjunction with the higher level contextual information may infringe the individual’s data protection rights. For example a name and date of birth alone may seem harmless but in the context of case files of mental health hospital patients it becomes sensitive.
70. As a general rule, assessment of the sensitivity of descriptions requires consideration of the same factors as for third party access to the record. If a name is sensitive but central to the reason for selecting the file and should therefore be in the description, the description should be withheld or redacted while the document is closed. If a name need not be included in the description (because, for example, the file deals with a precedent) and there are no other reasons why the description should not be released, then the description can be open. A number of questions can be asked:
- Is the person alive or dead? Assume a lifespan of 100 years if you do not know the individual’s date of death;
- Is the person identifiable? Note that a name in itself (John Smith) may not make a person identifiable; it is the name’s association with other information, such as the position held or an event or location that will usually enable the individual to be identified. If the document is closed and the description does not provide sufficient information to identify the individual, a personal name can be included in an open description. For example, an item about a criminal trial might be described as “Trial of J Jones” but while the item is closed, J Jones is not identifiable from the description itself unless further contextual information is provided;
- Is it really necessary to identify the individual in a description? If the archives have been selected because they contain policy or precedent papers, there is usually no need to include in the description the names of individuals because the focus should be on the policy or precedent;
- Is there a statutory restriction on releasing information in the description? For example, some laws protect the confidentiality of personal information such as victims of sexual offences;
- Is the related record open or closed to the public? If the record is closed, consider whether the description reveals the information which the closure is designed to protect. If it does, it may be necessary to amend the description or redact it until the record can be released, often by removing the name. If absolutely necessary the full description should be withheld. If the record is open, the description should be open but it must be fair, accurate and unlikely to cause substantial damage or substantial distress to a data subject;
- Is the information in the public domain already? Information reported from open court is in the public domain unless it is clear that reporting restrictions have been imposed and not lifted. However, it may not always be clear from a court record what was reported at a trial. If the data subject has put the same information about themselves in the public domain, then archive services are more likely to be justified in disclosing it. However, the fact that information was once public knowledge, for example in a localised area and if this happened some time ago, is not of itself a justification for disclosure by the archive as further distribution may be unfair so a risk assessment is useful;
- Is it likely that release of personal information in a description could cause distress or damage to the data subject? This applies particularly but not exclusively to special categories of personal data. It is necessary to exercise judgement to assess the severity of distress or damage that might be caused and whether that is fair to the individual.
71. Bodies subject to the FOI Acts may receive a request for personal information in a closed description, often as a precursor to a request for the information itself. While there is a duty to confirm or deny that information is held and to provide that information, an exemption from that duty applies if to do so would release exempt information.
Access Communicate / inspect
72. Data protection law does not give third parties rights of access to personal data. Access to personal data in archives by someone other than the data subject or the data controller should take place only after assessment of the likely impact on the data subjects’ right of privacy. It may be impossible until data subjects are, or can be presumed to be deceased.
73. Archive services should be able to show disclosure of personal data is fair, lawful and transparent in accordance with Principle (a). Access for scientific (in its widest sense), historical or statistical research may be possible within the safeguards. Decisions to allow or refuse access should be explained and documented so that archive services can demonstrate that they have acted in accordance with the law and in good faith if similar requests are received. Requests for access by the data subject themselves should be treated differently under the data protection law.
Lifespan assumption
Given the large number of individuals commonly featuring in archive collections, archive services will not be in a position to ascertain whether they are still alive. If it is not known whether a data subject is alive or dead, the following working assumptions can be used:
- Assume a lifespan of 100 years;
- If the age of an adult data subject is not known, assume that they were 16 at the time of the records;
- If the age of a child data subject is not known, assume person was less than 1 at the time of the records.
If the individual is known to be more than 100 years old and still living then compliance with data protection law is still required. They are entitled to make a subject access request or to exercise any of their other rights. 74. If personal data is held in archives that are subject to FOI, i.e. they are held by, or on behalf of, a public authority, third parties seeking access to personal data subject to the Act have the right to be told whether it is held and to be provided with it, unless an exemption applies. There is a presumption that information provided to an enquirer under FOI is available to any other enquirer, i.e. access to one means access to all. The most relevant exemption in the UK Act is at section 40 and in the Scottish Act at section 38. It requires archive services to consider whether confirming the existence of the data or releasing it would breach any of the Principles. If so, the exemption should be applied. Note that it is not possible when providing access under the FOI Act to impose any conditions on access to personal data communicated by the Act.
75. Even where access is not prevented by Data Protection law, other FOI exemptions may need to be considered also. For example, the exemption at section 38 of the UK FOI Act and section 39 of the Scottish FOI Act, which allow information to be withheld if release would endanger the physical or mental health or the safety of a living individual such as a relative, or the exemption at section 41 of the UK Act and section 36 of the Scottish Act for information to which a duty of confidence is owed, may apply.
76. Archive services in public authorities should note that unstructured personal data in records collections of private origin may fall within the UK FOI Act by virtue of being held by a public body subject to the UK FOI Act. The position is different for archive services in public authorities which are subject to the Scottish FOI Act, where such records are held on behalf of the private person. Unstructured personal data of private origin held by Scottish public authorities will fall within the scope of the Act only if ownership has passed to archive service or its parent body.
77. Access must be lawful. Principle (a) requires personal data to be processed lawfully and so, even if the Act seems to provide no impediment to access, other aspects of lawfulness must be considered. Statutes protecting the confidentiality of personal information must be respected and the right to respect for private and family life in the Human Rights Act 1998. For example, the Sexual Offences (Amendment) Act 1992 protects the anonymity of victims of certain offences during their lifetime. Archive services should check whether any statutory bars to access apply to personal data they propose to release. Other common law provisions such as confidentiality remain. A duty of confidence may attach to particular records, for example health records, where the consent of the individual is required unless there is an overriding public interest in disclosure. An individual’s expectation of confidence in their patient records is such that medical records may not be disclosed until sometime has elapsed after their death. The information made available must not be libellous or obscene.
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25 Data Protection Act 2018 section 7 78. Access must be fair. Note that this is a separate requirement under Principle (a) to that in order to make use of the provisions for archiving purposes in the public interest with its safeguard of avoiding substantial distress and damage. The archiving provisions do not change processing under Principle (a), which requires data to be processed fairly. In data protection terms, fairness is about handling personal data only in ways that individuals would reasonably expect and not using it in ways that have unjustified adverse effects on them. This will necessitate consideration of the way in which the information was originally acquired (web archived and published data is much less likely to have access restrictions due to personal data), its nature and age, and whether research will make possible the identification of individuals. Fairness to data subjects is the main concern of the law and the guiding principle when in doubt about fairness is withhold the data. More guidance about fairness can be found on the Information Commissioner’s website and detail about third party access to personal information in an FOI context can be found on The National Archives’ and Information Commissioner’s websites. The impact of disclosure should be assessed, taking into account the following factors:
- The nature of the information must be considered. Some personal information, including some special category personal data, is comparatively innocuous, some is not. To take medical information as an example: the simple mention of a person’s broken leg 20 years ago is not something people would generally feel a need to keep secret, although context is important. If the information about the broken leg is in a medical record then the rules around extended expectation of confidence relating to medical records apply. On the other hand, information about treatment for a mental illness 40 years ago is still considered by some people to carry a stigma and hence is not suitable for disclosure. In both cases, the information is ‘special category of personal data’ but different judgements as to the fairness of disclosure can be formed. Likewise a person’s religious affiliation, which may be obvious from their job title or mode of address - Imam, Rabbi, Archbishop, etc. At the other extreme, in certain contexts, disclosing information about someone’s religion could endanger their physical safety;
- The age and context of the information may be relevant. The need to provide protection generally diminishes over time although in certain cases the expectation of privacy many decades after an event can also apply. The age and status of the data subject should also be considered as this can affect the extent of distress they might feel. Was the individual acting in a public or official capacity? Criticism of a government Minister by a colleague in an official file is less likely to be unfair to disclose once historical than criticism by family members about each other in recent private email or correspondence;
- Genuine information (as opposed to speculation) already in the public domain because it is a matter of public record should normally be accessible. An example would be conviction for an offence in a court where no restrictions on naming the person apply (although note that a court case file may contain a mixture of information placed in the public domain at the time of the trial and information that was not made public). Potentially, sensitive information deliberately made public by the data subject may also be made accessible. It is impossible to anticipate what research may be done on any particular set of data and how that could be linked to other data but, if damage or distress to any individual would be a likely consequence of any research, the data should generally remain closed.
Disseminate—publish /online access/exhibition material 79. Careful consideration must be given to personal information in records that are to be made available online, especially if that information will be exposed to search engines. Placing personal data on a website, including digitised copies of manual records, is different from processing paper records for onsite viewing, by its order of magnitude and greater ease of access. Data or digitised version of records should not be placed online unless their contents have been reviewed and it is fair to the data subjects to make the archives available in this way. It is possible that onsite inspection of paper records is fair because there is no way of searching by name, whereas online access would be unfair if there is searchable metadata by name. In that case, those who come across the index data by using a search engine might not be aware of the archival context or age of the information.
80. Care is required with photographs, paintings, etc. Even if a photograph is anonymous in the sense that it is not captioned with names, nor tagged with names in the metadata, it is still possible that the individual could be identified. In all cases the likely effect on people of their image being made available must be taken into account. Bear in mind that photographs are often depict special categories of personal data: people undergoing medical treatment, people being arrested, attending trade union demonstrations, etc. Care must also be taken with records that at first glance would not contain personal data, for example maps and plans. These may contain the name of the surveyor or architect, but occasionally they can be annotated with opinions or decisions, in a manner that may identify living individuals. Some categories of born digital records may also contain personal data that is not always immediately obvious, for example, Geographical Information Systems (GIS). These may contain a layer of personal data that maps individuals, or groups of people that may be identifiable. Therefore, the same criteria for deciding suitability for wider access must be applied.
81. Any external contractors employed to undertake imaging and transcription must be made aware, via the contract, of their responsibilities as a Data Processor. Digitisation work is sometimes undertaken in countries outside the European Economic Area. Archive services and contractors must consider their responsibilities under GDPR Chapter 5. Careful consideration should also be given when selecting material that contains personal data for an exhibition. Again, the greater access and attendant publicity around an exhibition may make it less fair to the individual and may cause them distress. Similarly, care is required when including material in a book to be published by the archive service.
Removing access (takedown and reclosure) 82. If it becomes apparent that personal data is available to the public and risks causing distress to the individuals, archives may wish to consider closing the data concerned (reclosure or takedown if data is online). Examples include: • Because of changed circumstances, information in records previously opened in good faith is now considered to require closure (e.g. if someone is alive after 100 years or the information was not highlighted at transfer or accession as requiring closure); • Where the material contains sensitive personal information about someone who is still alive and continued public access would be unlawful or unfair to them under data protection law.
83. When assessing cases, archive services should take into account how long the information has been in the public domain, whether it is likely to be available elsewhere, and the public interest in withholding the record from public access. For FOI authorities, reclosure does not affect the statutory rights of members of the public to request access to a closed record by making a request under the FOI Acts.
84. If the archive service’s website allows tagging of catalogue entries or other content by members of the public, it is important that people adding tags should be made aware of their responsibilities not to invade the privacy of living individuals, by drawing potential taggers’ attention to a terms of use policy. The archive service will remain the data controller so needs to act on any instances drawn to its attention.
Responsibilities of users of archived personal data 85. When people obtain copies of personal data from an archive service they become the data controllers in respect of those copies and must observe the data protection principles, unless they can claim an exemption, or they are not covered by data protection law, for example because their processing is for domestic purposes only, i.e. personal, family or household use. However, archive services cannot control subsequent use of personal data and it is advisable to assume that researchers will be subject to the Act, and ethical to make researchers aware of their responsibilities. Steps to safeguard the fair and lawful use of data by users of archived records include:
• Informing researchers that they are responsible under the GDPR and DPA 2018 for any processing by them of personal data disclosed to them, including publishing; • Explaining to intending researchers the ‘safeguards’ that apply to the research use of particular data; • Requiring researchers to sign a declaration or undertaking that, as a condition of access to data that might otherwise be closed, they will comply with the legislation and not identify individuals. Undertaking forms to consult specific personal data subject to these conditions should be signed and kept as an audit trail. If researchers are bound by a sectoral code of practice or particular employer requirements, e.g. guidelines produced by a university ethics committee, making access conditional on the researcher undertaking to comply with that as well as with any special conditions applying to specific sets of personal data. This is particularly relevant if they intend to publish or to make use of the data for purposes other than personal or household activities. Annex A Explanation of terms used in this guide
**Acquire** The receipt of data and records from an external person or organisation or from another part of the same organisation. The term represents a transfer of responsibility and is not necessarily intended to imply that they become the property of the archives service.
**Anonymisation** The masking or removal of personal data from documents. This could be by redaction so that data subjects can no longer be identified from the information in a particular document. In a structured digital dataset this could be by removal of identifiers at record level or additionally by aggregating up the record so that it refers not to an individual but to all individuals in a particular set, such as a geographical area. The standard set by the Information Commissioner for anonymisation is that it should prevent a ‘motivated intruder’ from discovering information about individuals.
**Archives** Materials created or received by a person, family or organisation, public or private, in the conduct of their affairs and preserved because of the enduring value contained in them or as evidence of the functions and responsibilities of their creator, especially those materials maintained using the principles of provenance, original order and collective control; permanent records. (ISO 16175-1:2010). Archives may be informal in terms of their format and the ‘business’ to which they relate: for example, a group of love letters may be created and maintained for ‘the conduct of...affairs’ of a personal and private nature and in some circumstances include published material that is being permanently preserved.
**Archive Service** A public or private organisation that is responsible for the management of records selected for permanent preservation for historical purposes and undertakes the archiving purpose. Some archives services are legal entities in their own right; other archives services are a function within a larger legal entity. At times archive services may be organised through a voluntary or community group. Archive Services will normally have custody of the archives of their own parent organisation but may also have custody (but not necessarily ownership) of the archives of other organisations or persons.
**Archivist** An archivist is a professionally recognised role fulfilled by a person having undertaken specific education and training in managing, appraising, preserving and using original records through time. Archivists work with all forms of records, including paper documents, photographs, maps, films, and digital records. They assist a wide range of stakeholders to access and use records.
**Closed record** This is a record that is not available for general public access. Note that it may be possible to provide access to information within the record in response to an FOI request, for example by redacting the record to remove information that should be withheld, such as information identifying individuals. It may also be possible to provide access outside FOI to those agreeing to specified restrictions on use and for data subjects.
(Data) Controller has the meaning given to it in the Regulation. A controller determines the purposes and means of processing personal data. This is the person (an individual or other legal person such as a company) who determines why, as well as how, personal data are to be processed. It is their duty to ensure that the collection and processing of any personal data within the organisation complies with the requirements of the Data Protection Act. An archive service may be a joint controller even if another party such as a depositor retains some level of control of the data.
(Data) Processor has the meaning given to it in the Regulation. A processor is responsible for processing personal data on behalf of a controller. This is any person (other than an employee of the data controller) who processes the data on behalf of the data controller. Data processors must have a written contract in which the data controller defines how personal data, including sensitive personal data, is to be processed and what security measures will be appropriate. While data controllers maintain overall responsibility for any processing carried out on their behalf, data processors do have some direct responsibilities under the GDPR and may be subject to fines or other sanctions if they don’t comply.
Data Subject The person who is the subject of the personal data. To count as a data subject the person must be living and capable of being identified from the data or other data in or likely to come into the possession of the data controller.
Historical research Any research done in an archive repository will be “historical” in its widest sense.
Inspection Disclosure of documents containing personal data to one or more identified or identifiable natural or legal persons other than the data subject or a data processor. This includes making documents available for consultation and use, providing copies or enabling copying of documents, and enabling the interrogation of documents. (See also Publication)
Manual unstructured data Manual personal data not held in a structured set. A structured set is accessible according to specific criteria, whether held by automated means or manually and whether centralised, decentralised or dispersed on a functional or geographical basis.
Open record This is a record that is available for public access on an unconditional basis. **Personal data** has the meaning given to it in the Regulation. Any information relating to an identifiable person who can be directly or indirectly identified in particular by reference to an identifier. This provides for a wide range of personal identifiers to constitute personal data, including name, identification number, location data or online identifier. The GDPR applies to both automated personal data and to personal data contained in (or intended to be contained in) manual filing systems where personal data is accessible according to specific criteria. This could include systematically ordered sets of manual records containing personal data.
**Processing** has the meaning given to it in the Regulation. This has a very wide meaning. Passively holding information counts as processing as well as actively obtaining, recording, using, amending or destroying it.
**Pseudonymisation** has the meaning given to it in the Regulation. The process of distinguishing individuals in a dataset by using a unique identifier which does not reveal their ‘real world’ identity (see ICO Anonymisation code of practice).
**Publication** Disclosure of documents containing personal data to natural or legal persons without regard to their identity, making them available for consultation and use and enabling perusal of them. Applies to online digitisation and born digital data sets and web archives. (See also Inspection)
**Records** Information created, received, and maintained as evidence and information by an organization or person, in pursuance of legal obligations or in the transaction of business.
**Special personal data** The GDPR refers to sensitive personal data as “special categories of personal data” (see Article 9). The special categories specifically include genetic data, and biometric data, where processed to uniquely identify an individual. Personal data relating to criminal convictions and offences are not included, but similar extra safeguards apply to its processing (see Article 10). Annex B Parliamentary Question reply to what is meant by the term Archiving Purposes in the Public Interest
We recognise the importance of the permanent preservation of archives for long-term public benefit by museums, galleries, archives and libraries. The General Data Protection Regulation (GDPR) and the Data Protection Bill permit such organisations to process personal data (including sensitive personal data) without consent, where necessary for “archiving purposes in the public interest”, subject to appropriate safeguards for the rights and freedoms of data subjects. It also exempts archiving services from complying with certain rights of data subjects (for example, rights to access, rectify or erase their data), where the exercise of such rights would seriously impair or prevent them from fulfilling their objectives.
‘Archiving in the public interest’ is a new term in data protection law. The Data Protection Act 1998 made no express reference to it and it is not defined in the GDPR, but Recital 158 to the GDPR may help to understand it. It says:
“Public authorities or public or private bodies that hold records of public interest should be services which, pursuant to Union or Member State law, have a legal obligation to acquire, preserve, appraise, arrange, describe, communicate, promote, disseminate and provide access to records of enduring public value for general public interest.” This is likely to apply to a wide variety of community, private, public sector, charitable/trust and voluntary sector archives. It could also include archives that may be closed to researchers at the present time, but which would become accessible at some future date, and archives which are held in analogue or digital format. The definition would not, however, cover organisations which gather and use data, information and records purely for their own commercial gain or that have no enduring public value.
We recognise that concerns have been raised about the reference in the Recital to archiving organisations being under a ‘legal obligation’ to archive. While this may reflect the archival system in some other EU member states, it does not reflect the position in the UK. Many smaller archives, particularly in the private sector, are unlikely to have any statutory obligations to archive.
We do not think the best approach is to create new statutory duties requiring organisations to archive. This could force organisations to archive that had no intention or means of doing so. Instead, we want to reassure bona fide archiving services that they will be able to continue to process personal data for the purposes of archiving in the public interest, regardless of whether they have a statutory obligation to do so. The reasons for this are:
Recitals act as explanatory notes to European regulations and have no direct legal effect. They may be taken into account by regulators and the courts when interpreting and applying the law, but they are not the law.
In any event Recital 158 should be read in conjunction with Recital 41 which says that “where this regulation refers to a legal basis or legislative measure, this does not necessarily require a legislative act adopted by a parliament”, providing that such a legal basis is clear and precise and its application is foreseeable to persons subject to it. In the UK, most archives operate on a permissive basis under the general provisions of common law or statutory permissive powers, such as the British Library Act 1972 or the Local Government (Records) Act 1962. It may be open to organisations to rely on such a basis to satisfy the requirements of Recital 158.
Where there are no clear permissive powers, organisations may still be able to point to funding agreements, management agreements or constitutional documents which set out the purposes of the archive, particularly if the failure to adhere to such purposes could have legal or quasi-legal effects, for example for a body’s charitable status. Although this may not amount to a statutory obligation to archive, it would give organisations a legal basis upon which to rely.
Up until now, organisations responsible for archiving may have relied on exemptions from subject access rights under the ‘historical research’ provisions in section 33 of the Data Protection Act 1998. These provisions will continue in the new Data Protection Bill, and have not been abolished by GDPR. Most of the exemptions from data subjects’ rights in relation to archiving also exist in relation to historical research. If archiving services cannot confidently rely on the exemptions for archiving in the public interest, they may be able to rely on exemptions for historical research as an alternative. We recognise that there is some debate about this point within the sector because some archives may not exist for historical research purposes. In that case, a legal basis for archiving will be needed, but it does not need to be statutory.
https://www.parliament.uk/business/publications/written-questions-answers-statements/written-question/Commons/2017-11-03/111381/ Annex C Main references to archiving in GDPR and Data Protection Act 2018
GDPR Recital 158 Where personal data are processed for archiving purposes, this Regulation should also apply to that processing, bearing in mind that this Regulation should not apply to deceased persons. Public authorities or public or private bodies that hold records of public interest should be services which, pursuant to Union or Member State law, have a legal obligation to acquire, preserve, appraise, arrange, describe, communicate, promote, disseminate and provide access to records of enduring value for general public interest. Member States should also be authorised to provide for the further processing of personal data for archiving purposes, for example with a view to providing specific information related to the political behaviour under former totalitarian state regimes, genocide, crimes against humanity, in particular the Holocaust, or war crimes.
Article 5 Principles relating to processing of personal data Personal data shall be: .... (b) collected for specified, explicit and legitimate purposes and not further processed in a manner that is incompatible with those purposes; further processing for archiving purposes in the public interest, scientific or historical research purposes or statistical purposes shall, in accordance with Article 89(1), not be considered to be incompatible with the initial purposes (‘purpose limitation’); ... (e) kept in a form which permits identification of data subjects for no longer than is necessary for the purposes for which the personal data are processed; personal data may be stored for longer periods insofar as the personal data will be processed solely for archiving purposes in the public interest, scientific or historical research purposes or statistical purposes in accordance with Article 89(1) subject to implementation of the appropriate technical and organisational measures required by this Regulation in order to safeguard the rights and freedoms of the data subject (‘storage limitation’);
Article 9 Processing of special categories of personal data Processing of personal data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, or trade union membership, and the processing of genetic data, biometric data for the purpose of uniquely identifying a natural person, data concerning health or data concerning a natural person’s sex life or sexual orientation shall be prohibited. Paragraph 1 shall not apply if one of the following applies: .... (j) processing is necessary for archiving purposes in the public interest, scientific or historical research purposes or statistical purposes in accordance with Article 89(1) based on Union or Member State law which shall be proportionate to the aim pursued, respect the essence of the right to data protection and provide for suitable and specific measures to safeguard the fundamental rights and the interests of the data subject. Article 14 Information to be provided where personal data have not been obtained from the data subject Where personal data have not been obtained from the data subject, the controller shall provide the data subject with the following information: the identity and the contact details of the controller and, where applicable, of the controller's representative; the contact details of the data protection officer, where applicable; the purposes of the processing for which the personal data are intended as well as the legal basis for the processing; the categories of personal data concerned; the recipients or categories of recipients of the personal data, if any; where applicable, that the controller intends to transfer personal data to a recipient in a third country or international organisation and the existence or absence of an adequacy decision by the Commission, or in the case of transfers referred to in Article 46 or 47, or the second subparagraph of Article 49(1), reference to the appropriate or suitable safeguards and the means to obtain a copy of them or where they have been made available.
5. Paragraphs 1 to 4 shall not apply where and insofar as: the data subject already has the information; the provision of such information proves impossible or would involve a disproportionate effort, in particular for processing for archiving purposes in the public interest, scientific or historical research purposes or statistical purposes, subject to the conditions and safeguards referred to in Article 89(1) or in so far as the obligation referred to in paragraph 1 of this Article is likely to render impossible or seriously impair the achievement of the objectives of that processing. In such cases the controller shall take appropriate measures to protect the data subject's rights and freedoms and legitimate interests, including making the information publicly available.
Article 17 Right to erasure ('right to be forgotten') The data subject shall have the right to obtain from the controller the erasure of personal data concerning him or her without undue delay and the controller shall have the obligation to erase personal data without undue delay where one of the following grounds applies: … Paragraphs 1 and 2 shall not apply to the extent that processing is necessary: … for archiving purposes in the public interest, scientific or historical research purposes or statistical purposes in accordance with Article 89(1) in so far as the right referred to in paragraph 1 is likely to render impossible or seriously impair the achievement of the objectives of that processing.
Article 89 Safeguards and derogations relating to processing for archiving purposes in the public interest, scientific or historical research purposes or statistical purposes Processing for archiving purposes in the public interest, scientific or historical research purposes or statistical purposes, shall be subject to appropriate safeguards, in accordance with this Regulation, for the rights and freedoms of the data subject. Those safeguards shall ensure that technical and organisational measures are in place in particular in order to ensure respect for the principle of data minimisation. Those measures may include pseudonymisation provided that those purposes can be fulfilled in that manner. Where those purposes can be fulfilled by further processing which does not permit or no longer permits the identification of data subjects, those purposes shall be fulfilled in that manner. Where personal data are processed for scientific or historical research purposes or statistical purposes, Union or Member State law may provide for derogations from the rights referred to in Articles 15, 16, 18 and 21 subject to the conditions and safeguards referred to in paragraph 1 of this Article in so far as such rights are likely to render impossible or seriously impair the achievement of the specific purposes, and such derogations are necessary for the fulfilment of those purposes.
Where personal data are processed for archiving purposes in the public interest, Union or Member State law may provide for derogations from the rights referred to in Articles 15, 16, 18, 19, 20 and 21 subject to the conditions and safeguards referred to in paragraph 1 of this Article in so far as such rights are likely to render impossible or seriously impair the achievement of the specific purposes, and such derogations are necessary for the fulfilment of those purposes.
Where processing referred to in paragraphs 2 and 3 serves at the same time another purpose, the derogations shall apply only to processing for the purposes referred to in those paragraphs.
UK Data Protection Act 2018 10 Special categories of personal data and criminal convictions etc data
Subsections (2) and (3) make provision about the processing of personal data described in Article 9(1) of the GDPR (prohibition on processing of special categories of personal data) in reliance on an exception in one of the following points of Article 9(2)— point (b) (employment, social security and social protection); point (g) (substantial public interest); point (h) (health and social care); point (i) (public health); point (j) (archiving, research and statistics).
The processing meets the requirement in point (b), (h), (i) or (j) of Article 9(2) of the GDPR for authorisation by, or a basis in, the law of the United Kingdom or a part of the United Kingdom only if it meets a condition in Part 1 of Schedule 1.
19 Processing for archiving, research and statistical purposes: safeguards
This section makes provision about— processing of personal data that is necessary for archiving purposes in the public interest, processing of personal data that is necessary for scientific or historical research purposes, and processing of personal data that is necessary for statistical purposes. Such processing does not satisfy the requirement in Article 89(1) of the GDPR for the processing to be subject to appropriate safeguards for the rights and freedoms of the data subject if it is likely to cause substantial damage or substantial distress to a data subject.
25 Manual unstructured data used in longstanding historical research
The provisions of the applied GDPR listed in subsection (2) do not apply to personal data to which this Chapter applies by virtue of section 21(2) (manual unstructured personal data held by FOI public authorities) at any time when—
the personal data— is subject to processing which was already underway immediately before 24 October 1998, and is processed only for the purposes of historical research, and the processing is not carried out— for the purposes of measures or decisions with respect to a particular data subject, or in a way that causes, or is likely to cause, substantial damage or substantial distress to a data subject.
Those provisions are— in Chapter II of the applied GDPR (principles), Article 5(1)(d) (the accuracy principle), and in Chapter III of the applied GDPR (rights of the data subject)— Article 16 (right to rectification), and Article 17(1) and (2) (right to erasure). The exemptions in this section apply in addition to the exemptions in section 24.
41 Safeguards: archiving
This section applies in relation to the processing of personal data for a law enforcement purpose where the processing is necessary— for archiving purposes in the public interest, for scientific or historical research purposes, or for statistical purposes.
The processing is not permitted if— it is carried out for the purposes of, or in connection with, measures or decisions with respect to a particular data subject, or it is likely to cause substantial damage or substantial distress to a data subject.
SCHEDULE 1 SPECIAL CATEGORIES OF PERSONAL DATA AND CRIMINAL CONVICTIONS ETC DATA Research etc
4 This condition is met if the processing— is necessary for archiving purposes, scientific or historical research purposes or statistical purposes, is carried out in accordance with Article 89(1) of the GDPR (as supplemented by section 19), and is in the public interest.
SCHEDULE 2 PART 6 DEROGATIONS ETC BASED ON ARTICLE 89 FOR RESEARCH, STATISTICS AND ARCHIVING
......
Archiving in the public interest
28 (1) The listed GDPR provisions do not apply to personal data processed for archiving purposes in the public interest to the extent that the application of those provisions would prevent or seriously impair the achievement of those purposes. This is subject to sub-paragraph (3).
For the purposes of this paragraph, the listed GDPR provisions are the following provisions of the GDPR (the rights in which may be derogated from by virtue of Article 89(3) of the GDPR)—
Article 15(1) to (3) (confirmation of processing, access to data and safeguards for third country transfers); Article 16 (right to rectification); Article 18(1) (restriction of processing); Article 19 (notification obligation regarding rectification or erasure of personal data or restriction of processing); Article 20(1) (right to data portability); Article 21(1) (objections to processing).
The exemption in sub-paragraph (1) is available only where the personal data is processed in accordance with Article 89(1) of the GDPR (as supplemented by section 19).
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7803c6488a4dd58b8494fbaa1bdd7690b77ea746 | Introduction
This guide is about the support available to disabled victims and witnesses of crime.
Inside this you will find information about the types of support available and where to access them.
Also included:
- How the CPS approaches crimes against disabled people
- Support for disabled victims and witnesses of crime
- Example of support given to a disabled victim during a prosecution
How the CPS approaches crimes against disabled people
As a group, disabled people are at a higher risk of crime than the general population. They also experience unequal access to justice and safety.¹
The Crime Survey for England and Wales found people with limiting disabilities are:
- Almost 3.5x more likely to suffer violence with injury
- 2x as likely to suffer violence without injury
- 1.6x more likely to be a victim of personal theft
- 1.4x more likely to be a victim of household theft
Crimes against disabled people may be disability hate crimes. This is where the person carrying out the crime (the perpetrator) is motivated by hostility or shows hostility towards the victim’s disability. This means they are targeting someone because of their hostility towards someone’s difference, or perceived difference.
The perpetrator can also be a friend, carer or acquaintance who exploits their relationship with the disabled person for financial gain or some other criminal purpose.
Hostility can be described as:
- ILL-WILL
- AGGRESSION
- ANTAGONISM
- SPITE
- PREJUDICE
- CONFRONTATION
¹ Victim Support, ‘An Easy Target? Risk factors affecting victimisation rates for violent crime and theft’, April 2016, Polly Rossetti, Tamar Dinisman, Ania Moroz, www.victimsupport.org.uk
Support for disabled victims and witnesses of crime
Everyone is different and the support needed by one victim or witness to go through the criminal justice process will be different to the support needed by another victim or witness.
Some impairments are physical and may be obvious to other people. Other impairments can be hidden – such as mental health problems, learning disabilities and autism. There are things we can do to help people whatever their impairment, which can be tailored to individuals.
It is for the individual to choose whether they take up any offers of support. Support from the Citizens Advice Witness Service is available at any point during the court process. More detailed information about the support available to you as a disabled victim of crime can be found in the Code of practice for Victims of Crime (Victims’ Code) and the Witness Charter. General support can also be accessed through the following agencies:
- Disability Rights UK
- Dimensions UK
- Foundation for People with Learning Difficulties
- Mencap
- MIND
- National Autistic Society
- National Hate Crime Report and Support Centre Wales
- People First
- SCOPE
- Stop Hate UK
- True Vision
- Victim Support
RECOGNISING HATE CRIME
When someone is hostile to another person because of their disability and they show their hostility by
- INTIMIDATION
- HARASSMENT
- DAMAGING PROPERTY
- VIOLENCE
It is HATE CRIME What help is available?
REPORTING A CRIME The police will support you when you call 999 or 101. You can also report online via Crimestoppers or, for Hate Crime, True Vision.
DURING THE POLICE INVESTIGATION The police will support you by carrying out an assessment of your needs. You may be asked if you wish to give a Victim Personal Statement to say how the crime has affected you or made you feel. You may also ask for decisions to be looked at again through the Police Victims’ Right to Review Scheme.
AFTER SOMEONE IS CHARGED The CPS will support you by working with the Witness Care Unit (WCU) to assess your needs. We will give you progress updates and talk to you about what to expect at trial. We will ask for any special measures and may apply for media reporting restrictions in exceptional circumstances. You may have access to a pre-trial witness interview. You may ask for decisions to be looked at again through the CPS Victims’ Right to Review scheme. You will be notified by the Victim Liaison Unit (VLU) if the CPS decides to stop the case or substantially alter the charge. Citizens Advice Witness Service Support can help you with practical information and emotional support. They can also arrange for you to visit the court before the trial so you know what to expect on the day and offer enhanced services for vulnerable and intimidated witnesses.
AFTER THE TRIAL The CPS and the Witness Care Unit will support you by informing you of the outcome of the trial and any sentence passed. When they are sentencing, Judges can tell the person who committed the crime they have to pay you compensation if something has been lost or damaged or if you have been hurt. There is more information on this in the victims’ code. The National Probation Service can support you if you opt into the Victim Contact Service (VCS).
GOING TO COURT The CPS will support you by helping you read witness statements in court. You will be introduced to the CPS representative who will be prosecuting the case in court before you give your evidence. We can provide more information about special measures at court and the Prosecutors’ Pledge. If you have a speech impairment you may be able to write down your evidence at court. Qualified sign language interpreters or lipspeakers can help you if you are deaf or have a hearing impairment. Interpreters can also help you give evidence in a different language. The CPS will try to release you from the court building as soon as possible after you have given evidence. Sometimes the CPS may ask someone from the courts or police to let you know you can leave. Her Majesty’s Court and Tribunals Service (HMCTS) will support you by providing, where possible, a separate room to wait in and offering materials in formats such as braille, large print or audio if you have a sight impairment. Wheelchairs may be available if you have a mobility issue. Citizens Advice Witness Service Support can help with practical and emotional support at court. Judges and magistrates have an Equal Treatment Bench Book which explains how they should treat people fairly in court. Special Measures
Special measures are things which help victims and witnesses give evidence in court. The CPS can ask for special measures on behalf of victims and witnesses with disabilities. The court makes the final decision on whether special measures will be given or not.
Special measures include, but are not limited to:
- Screens/curtains in the court room so the witness does not have to see the person accused of carrying out the crime (defendant)
- Evidence given in private (without the press or public there)
- A live video link allowing the witness to give evidence somewhere other than the courtroom
- Providing someone who helps the victim or witness answer questions (an intermediary)
- The use of communication aids or interpreters
More information about legal guidance on special measures is available from the CPS.
Example of support given to a disabled victim
Arun was charged with assault by beating after punching and kicking his mother, Moubani, who suffers from osteoporosis and arthritis. While carrying out the assault Arun used derogatory language about Moubani’s disability. He also assaulted his girlfriend, Priya.
Moubani explained being able to see her son in court would cause her significant distress. A special measures application was made to the court to use screens so she would not have to see Arun while she gave evidence.
Arun was found guilty and sentenced to an 18-month community order, increased by six months in recognition of the hostility Arun had shown towards Moubani’s disability. In addition, he was given a 20-day rehabilitation order, which was increased by 10 days, also because of the hostility Arun had demonstrated towards his mother’s disability.
He was fined £120, ordered to pay both costs of £450 and compensation to both Moubani and Priya, and given a restraining order forbidding contact with either of them.
Example of support given to a disabled witness
Jane and her husband Mark took their son Tom, the victim, to the hospital’s Accident and Emergency department. Tom was found to have serious injuries and a healing fracture. Jane was the only person who had seen what happened. She had a learning disability and difficulties expressing herself.
Jane told the police Mark had lost his temper because Tom was crying. She explained that Mark had physically assaulted Tom and had been violent in the past.
Jane gave evidence over a video link with help from someone to explain the questions she was asked. This person is called an intermediary. She also had a pre-trial visit to the court room and met the lawyers. The intermediary made sure the court understood Jane had difficulty explaining “when” something had happened so questions must be linked to specific events like birthdays. This meant that Jane felt calmer and more confident when she was explaining what happened.
Mark was convicted and sentenced to 14 years’ imprisonment.
All names have been changed in these examples. About the Crown Prosecution Service
The CPS is responsible for prosecuting most cases heard in the criminal courts in England and Wales. It is led by the Director of Public Prosecutions and acts independently on criminal cases investigated by the police and other agencies. The CPS is responsible for deciding the appropriate charge in more serious or complex cases and provides information, assistance and support to victims and witnesses.
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db17eca031d1e64c8247098932eeb1f6489b9144 | GUIDE TO TEMPLATE AGREEMENTS FOR UNDERTAKING RAILWAY PROJECTS
Introduction
This guide is intended to assist all parties interested in taking forward projects which will enhance the railway network, consistent with the Office of Rail and Road’s (ORR) Policy Framework for Investments. The ORR is the rail industry regulator and as such determines Network Rail’s funding framework and the rules governing such funding.
We, Network Rail have established a suite of Template Agreements, approved by the ORR, for the delivery of enhancements funded by third parties.
The purpose of this guide is to:
1. Summarise project governance principles;
2. Summarise risk allocation principles built into the Template Agreements;
3. Describe the individual Template Agreements in general terms, and help explain how to choose which form of Template Agreement to use for the appropriate contractual framework;
4. Set out how railway environment specific risks are managed;
5. Describe service level obligations so that customers know what to expect from us;
Note that parties who enter into contracts with us are referred to in the Template Agreements and in this document as “Customers”.
1. Project Governance
Project governance is central to any agreement. To avoid ambiguity or conflict, and to facilitate efficient delivery, the Template Agreements set out:
a. Roles and Responsibilities
The roles, responsibilities and obligations of the parties should be agreed. This enables the risks inherent in the agreement to be allocated to the party best qualified to manage them.
b. Project Requirements (Scope / Cost / Time)
Our joint requirements for the project need to be clearly articulated and understood by both parties. Any specific emphasis placed on these project requirements is suitably defined and recorded in the agreement. The parties’ combined requirements will dictate what services we will provide, and the level of resources required to meet the project timescales. c. Monitoring
The Template Agreements allow monitoring mechanisms to be put in place to check that the parties fulfil their obligations. Understanding how the project is progressing against the project requirements, and any issues arising affecting your business case or other objectives (such as risks to cost, programme or scope), are critical and are managed through the meeting and reporting requirements.
d. Controls
The Template Agreements allow control mechanisms to be put in place to check that the parties fulfil their obligations. Whilst we are the infrastructure manager and asset owner, the business case for the project rests with you. Therefore, decisions which could have a material impact on the business case and/or the project’s outputs, or outcomes need to be agreed by us both. Procedures are set out to manage changes and variations effectively and fairly.
e. Risk Allocation
We should both have a clear and common understanding of the risks inherent in the project. The Template Agreements provide the framework for allocating risks to the parties, and the incentive framework for managing and funding such risk allocation. They provide means for redress, where appropriate, if a party fails to fulfil its obligations. Further information on risk is contained in Section 2 (Risk Allocation Principles) and Section 4 (Managing Railway Environment Risks) below. The Template Agreements provide for caps on both parties’ level of liabilities.
2. Risk Allocation Principles
The following high-level principles have been used to underpin and determine the financial allocation of risk within the Template Agreements:
- We are not funded to assume liabilities arising from risks related to enhancement projects. The ORR therefore approved the establishment of Risk Funds to enable us to assume liability for our breach or negligence (within Network Rail’s liability cap) and “industry risks”, i.e. those specific to the railway(^1). You pay fees, approved by the ORR, proportionate to the project cost to us which contribute to the Risk Funds, namely the Network Rail Fee Fund and Industry Risk Fund. This enables us to fund your liabilities under the Template Agreements (see Section 4 and Appendix A below for further details);
- You fund the direct incremental costs of the scheme, including non-Rail Industry Risk, generally on an emerging cost basis, but a fixed price (subject to any agreed assumptions) arrangement may be considered when concluding an Implementation Agreement;
(^1) Industry Risks are typically low likelihood/high impact and outside the control of the Customer and as such would be unreasonable for the Customer to bear. • Where you are responsible for delivery, an Asset Protection Agreement is used and you should transfer design construction risks to your Contractors, or manage those risks yourself where you cannot transfer them;
• Where we are delivering under a Development Services Agreement or an Implementation Agreement, we will assume any risks in the contracts with our own Contractors;
• Your liability for breach and negligence is capped at an appropriate level;
• Our liability for contractual breach and negligence is capped at the level of the value of the Works and/or Services being provided
• Liability for death, personal injury and fraud is uncapped for us both, in accordance with the law;
• We are entitled to charge:
o Costs reasonably and properly incurred by us (or a fixed amount if an Implementation Agreement (Fixed Price) is used subject to any agreed assumptions);
o A Network Rail Fee to contribute towards funding normal contractual liabilities;
o An Industry Risk Fee to contribute towards funding generic rail industry risks; and
o Additional Expense to be incurred in connection with incremental maintenance and operational costs, etc. arising from the project in excess of £50,000 per annum;
• Liquidated Damages, we will seek to agree an acceptable and deliverable programme with you and have resources and processes in place to manage this programme. However, slippage may still occur, with potential “knock-on” losses to you. Where you can demonstrate at the time the agreement is being negotiated that a genuine loss would result from a delay caused by us. We may agree to include liquidated damages in the agreement. These would reflect a pre-estimate of your loss, agreed by the us both acting reasonably and stated in the Agreement. In the event of a delay to the programme caused by us, then we would pay the agreed amount of liquidated damages to you. Then we would also agree the date from which liquidated damages would be payable and this would normally reflect the date at which you start to incur the loss.
• Relief Events – These are events where you are entitled to relief from costs and liabilities as the risks involved are outside your control. These are risks specific to the rail industry and include operational emergencies and safety critical events as well as changes in law specific to the Railway, directions of competent authorities such as the ORR, cancelled possessions and changes in our Network Licence requirements which affect your project. (See Section 4 for more information). 3. Template Agreements & Explanatory Notes
A brief summary of the purpose of each of the Template Agreements is given below. These Template Agreements set out the obligations of us both in respect of the services provided, and/or works to be delivered, and reflect the principles in the “Investment Framework Consolidated Policy and Guidelines” published by the ORR in October 2010. The ORR has approved these templates and expects us both to use them when engaging in enhancement schemes. These templates are designed for projects generally with a total cost of circa £50 million or less.
We have provided detailed explanatory notes for each agreement along with the Template Agreements, these can be found under Downloads for Third Parties on our website. The rationale for this is to explain the purpose of and link the project governance principles to each clause so that their intent can be more clearly understood by you.
These explanatory notes are designed for you to use at the beginning of the process, when we may not have yet appointed a representative (usually a “Sponsor”) to your project. It is not possible to cater for every question or possible situation. However, once appointed, the Sponsor will be able to assist you with any questions relating to your project.
There are 8 templates covering the main types of enhancement projects. These are summarised in the notes below, and a simplified diagram to help you understand the Template Agreement structure and identify the appropriate agreement for the type and stage of a project are shown in Appendix B.
Network Rail delivering services:
i. Basic Services Agreement (BSA) usually less than £5m
This is a simple agreement aimed at quickly putting in place a contractual relationship following an initial approach from you, to cover pre-feasibility works to scope the scheme and develop the business case. Typically, up to the value of £5 million, the tasks it covers can include the provision of asset information to you, attendance at meetings and workshops, and where appropriate for small schemes, review of any initial scoping work undertaken by you. The agreement also permits, within constraints, you or your representative to undertake visual inspection of the network. It will generally be used during GRIP Stages 1-2 but could be used to the end of GRIP Stage 3.
ii. Development Services Agreement (DSA)
This agreement covers development and design work undertaken by us on your behalf, potentially including detailed design. The agreement also permits you, or your representative, to undertake surveys and investigations of the network where there is a mix of Network Rail and Contractors providing services for more complex schemes. Such actions would be subject to our usual access requirements and processes. The DSA covers GRIP Stages 1-4 inclusive with the potential to cover GRIP Stage 5, recognising that it can be put in place after GRIP 2 or 3 where a BSA has already been used for the early development stages.
______________________________________________________________________
2 Governance for Railway Investment Projects stage (GRIP stage). Network Rail implementing works for low risk projects:
iii. Basic Implementation Agreement (BIA), Emerging Cost (EC)
A simple emerging cost agreement for minor, straightforward, low risk works up to a typical value of £5 million, where we act as the Construction Manager, on or about the controlled railway infrastructure. The agreement usually covers GRIP Stages 5-8 inclusive, but the starting stage may be flexible.
iv. Basic Implementation Agreement (BIA), Fixed Price (FP)
This is a simple agreement for minor straightforward low risk works up to a typical value of £5 million, where we act as the Construction Manager, on or about the controlled railway infrastructure. It envisages that our Works Contractor will have provided a tendered fixed price based on the scope and timescales agreed between us both. You pay a fixed price subject to any reasonable assumptions and exclusions. Usually covering GRIP Stages 6-8 inclusive but, it can provide for detailed design of the Customer-funded scheme from GRIP Stage 5, if we can reasonably provide a fixed price based on information available. This would generally be restricted to projects where we are able to agree a fixed price with our Contractor for detailed design and implementation.
Customer designing and/or delivering the Works:
v. Basic Asset Protection Agreement (BAPA)
A simple agreement for straightforward, low risk Customer-led work on the controlled railway infrastructure, where we facilitate your project through asset protection. The works should present low risks to the network, and so may, for example, take place on secondary routes, with few or no possessions required. Our services will include attendance at meetings, oversight of interfaces on the network and, where they are necessary, booking possessions. The agreement can cover up to GRIP Stage 8 but may require variations as the project progresses and the scope is developed through the various GRIP stages. This agreement includes service level obligations so that you can hold us to account. By having service levels in place, when undertaking projects on the railway you know what to expect from us and when to expect it by. More details can be found in Appendix B
vi. Asset Protection Agreement (APA)
An agreement for Customer-led works on the controlled railway infrastructure, where we facilitate your enhancement scheme through asset protection and managing interfaces with our operating, maintenance and renewal obligations. You pay the costs of our services that include engineering safety management approvals, provision of asset information, booking of possessions, applying for consents, as well as attendance at meetings and oversight of interfaces on the network or with other projects. The agreement typically covers up to GRIP Stage 8 but may require variations as the project progresses and the scope is developed through the various GRIP stages. This agreement also includes service level obligations, as detailed in the previous paragraph. Network Rail implementing works:
vii. Implementation Agreement (IA), Emerging Cost
This is an emerging cost agreement with us acting as a Construction Manager. It is designed for use on larger projects, typically with a value in excess of £5 million, or where the project is especially complex. It establishes the commercial terms for enhancement work on or about the controlled railway infrastructure. It allows for detailed design and implementation of the Customer-funded scheme, with the contracting strategy agreed by the parties. The agreement covers GRIP Stages 5-8 inclusive, but the starting stage may be flexible.
viii. Implementation Agreement (IA), Fixed Price (FP) below £10m
This agreement is intended to cover implementation of works up to a value of £10 million. It envisages that our Works Contractor will have provided a tendered fixed price based on the scope and timescales agreed by us both. It establishes the commercial terms for enhancement work on or about the controlled railway infrastructure. You pay a fixed price subject to any reasonable assumptions and exclusions. It can provide for detailed design and implementation of the Customer-funded scheme, usually covering GRIP Stages 6-8 inclusive, but, it can provide for detailed design of the Customer-funded scheme from GRIP Stage 5, if we can reasonably provide a fixed price based on information available. This would generally be restricted to projects where we are able to agree a fixed price with our Works Contractor for detailed design and implementation.
4. Managing Railway Environment Risks
We want to actively encourage third-party investment in Britain’s railways and to remove barriers to you in doing so.
We are not funded by government to take on liabilities in relation to third-party funded enhancement projects, but to ask funders to accept uncapped liabilities in relation to third-party enhancements would be a significant barrier to investment.
The Template Agreements described above frame the balance of risk and responsibility between us both with our liabilities funded by the Risk Funds described above.
The key benefit of the Risk Funds is to provide a dedicated pooled funding source for certain events within liability caps approved by the ORR. In return you make a proportionate contribution towards the Risk Funds in the form of fees as part of each enhancement project. These are paid as part of the first invoice and are non-refundable.
For each investment proposal we will provide you with a breakdown which sets out the level of the fees and liability caps and how they are calculated.
The ORR expects us to regularly monitor the operation of the Risk Fund mechanism. Incoming funds (your contributions) are tracked against the outgoing funds (substantiated claims) and reported to the ORR at least once a year. We also regularly review with the ORR the risk profile and contribution levels to make sure they remain in balance and offer value for money for you. i. **Network Rail Fee (NRF)**
The NRF funds our potential contractual liabilities to you in respect of qualifying events under our direct control.
All NRFs are pooled to meet substantiated claims for contractual breach and negligence by us.
ii. **Industry Risk Fee (IRF)**
The IRF funds our potential contractual liabilities to you in respect of qualifying events outside our direct control. Typically, these are the low-probability, high-impact risks specific to rail industry conditions that would not normally occur in a high street environment.
All IRFs are pooled to meet substantiated claims for industry risk events.
The IRF covers two broad categories of risk for you:
1. Risks which are typically regarded as ‘employer’ or ‘government’ risks (for example, mandatory changes resulting from a change in the law peculiar to the rail industry, or changes to railway safety standards); and
2. Risks relating to events arising elsewhere on the network which have an impact on the project which results in disruption to the works (for example, a disruption caused by a safety critical event).
We would be liable for costs and losses arising from such risks, where the amounts are more than £10,000(^3), and would be funded from the Industry Risk Fund.
iii. **Relief Events**
The Contractor, whether they are appointed by us or by you, will be reimbursed for the increased costs (excluding indirect costs) reasonably and properly incurred as a result of a Relief Event which causes delay or disruption to a project.
The categories of Relief Event are:
- Network operation issues;
- Cancellation and alteration of possessions due to events outside the control of us or you; and
- The impact of interfacing projects.
All parties, including the Contractor, have the usual duty to mitigate such costs or losses, but Network Rail will be liable for them and will recover any amounts incurred from the Industry Risk Fund.
This assumes in each case that neither of us, you or the Contractor is at fault.
______________________________________________________________________
(^3) The Template Agreements do not permit any claims by either party that are less than £10,000 in aggregate. The ORR required this to avoid a “claims culture”. iv. Mandatory Variations
After approval of the works at GRIP Stage 4, if the works need to be varied as a result of any change in law or legal requirement expressly applying to the railway industry or the railway works, or as a result of changes to railway safety standards, such costs would fall to us to recover any costs or losses from the Industry Risk Fund.
v. Network, Station or Depot Change
You will need to pay for industry compensation costs associated with any network, station or depot change, or any closure processes. This cost can be uncertain, and an estimate of the value may be made, and a cap agreed. If so, your liability for costs above this limit would be treated as an industry risk.
vi. Land and Noise Claims
These are claims made against us under common law or pursuant to the Land Compensation Act 1973 or any other relevant regulations which relate to the operation or existence of any works which become a Network Rail asset.
These claims are in respect of nuisance and the diminution of property values due to the implementation of the scheme. Whilst this is a Customer risk, where an estimate of the value has been made and a cap agreed, liability for costs above this limit would be treated as an industry risk.
However, it should be noted that land and noise claims made during delivery of the works would not be covered under these provisions as these would have been addressed during any planning consent process and/or the licence to deliver the works.
vii. Bankruptcy/Insolvency of the Customer
Irrespective of the diligence applied to assess your creditworthiness and steps taken to obtain surety in the form of guarantees or bonds, there is always a possibility of insolvency or bankruptcy. In this event, particularly where the scheme is under way, the cost of termination or completion may require some additional funding. Given that the you would be unable to pay such costs in full, and that such funding was not part of the original cost forecast, the funding shortfall would be funded through the Industry Risk Fund.
viii. How the Funds are Accessed
The Risk Funds were established to cover the costs of any variations or events for which Network Rail is liable. Should you have a claim, you should lodge it against us and not against the Risk Funds themselves. If a claim is substantiated as valid, and you have incurred costs or losses, it will be reimbursed by us, we will then seek compensation internally from the Risk Funds. If your claim is substantiated as valid, but it relates to an amount invoiced by us and therefore not paid, we will seek compensation internally for the non-payment from the Risk Funds. Diagram: Risk Funds Claim Process
Customer/Network Rail agree a trigger event
NR Sponsor notifies a trigger event may result in a claim
Claim Assessed
Yes
Customer reimbursed/ NR costs recovered
Project Closed
No
Customer not reimbursed/ NR costs must be paid by the Customer
Project Closed 5. Service Level Obligations
Our service level obligations summarised below apply where you are promoting and funding a project and we are carrying out asset protection activities. The service level obligations reflect what you can expect from us when entering into either a Basic Asset Protection Agreement or an Asset Protection Agreement.
We monitor our performance against these service levels by regularly asking you to complete an online survey and publishing the results on the Network Rail website.
The service level obligations are a contractual commitment that require a strong and ongoing dialogue with you from the inception of a project to handover and completion.
| Service level | Measure of success | Our commitment | |--------------------------------------|---------------------------------------------------------|-------------------------------------------------------------------------------| | Response to initial contact | Within five working days of initial contact | Respond to initial contact in writing within five working days with a relevant contact to support the work | | Secondary contact date | Within 15 working days of initial contact | Secondary contact within 15 working days of initial contact. We will engage with you to commence exploration of your requirements at an appropriate level of expertise | | Design submission date | Within 25 working days of receipt | Return any design data identified as being on the critical path within 25 working days of receipt | | ASPRO response | Within 10 working days of receipt | Review implementation programme and provide comments to you | | ASPRO final response to programme received | Within 10 working days of receipt | Review implementation programme and provide comments to you | | Date ASPRO informed customer of possession(s) | Within 20 working days of completion of consultation on proposed possession plan | Confirm in writing that the relevant possessions have been obtained or not, together with details within 20 working days of completion of consultation on proposed possession plan |
## Appendix A
### Network Rail Fee and Industry Risk Fee
| Type of agreement | Network Rail Fee | Industry Risk Fee | |-------------------|------------------|------------------| | Basic Services Agreement (BSA) | Fee is equal to 5% of the aggregate of the agency costs, consultants’ and contractors’ costs and personnel costs, as estimated at the scheme commencement date. | Not Applicable | | Development services agreement | Fee is equal to 5% of the aggregate of the agency costs, consultants’ and contractors’ costs and personnel costs, as estimated at the scheme commencement date. | Fee is equal to 2% of the project cost, which is the estimated total cost of the project up to the completion of the current stage of development contracted for. | | Basic implementation agreement (emerging cost) | Fee is equal to 5% of the aggregate of the agency costs, consultants’ and contractors’ costs and personnel costs, as estimated at the scheme commencement date. | Fee is equal to 2% of the aggregate of the agency costs, consultant’s and contractors’ costs and personnel costs. | | Implementation agreement (emerging cost) | Fee is equal to 5% of the aggregate of the agency costs, consultants’ and contractors’ costs and personnel costs, as estimated at the scheme commencement date. | Fee is equal to 2% of the aggregate of the agency costs, consultant’s and contractors’ costs and personnel costs. | | Basic implementation agreement (fixed price) | Fee is equal to 13% of the aggregate of the agency costs, consultants’ and contractors’ costs, personnel costs and QRA (risk assessment for any variation undertaken at a P50 probability in respect of the risks owned by Network Rail or capped to the customer), as estimated at the scheme commencement date. | Fee is equal to 2% of the aggregate of the agency costs, consultants’ and contractors’ costs, personnel costs and QRA (risk assessment for any variation undertaken at a P50 probability in respect of the risks owned by Network Rail or capped to the customer). | | Implementation agreement (fixed price) | Fee is equal to 13% of the aggregate of the agency costs, consultants’ and contractors’ costs, personnel costs and QRA (risk assessment for any variation undertaken at a P50 probability in respect of the risks owned by Network Rail or capped to the customer), as estimated at the scheme commencement date. | Fee is equal to 2% of the aggregate of the agency costs, consultants’ and contractors’ costs, personnel costs and QRA (risk assessment for any variation undertaken at a P50 probability in respect of the risks owned by Network Rail or capped to the customer). | | Asset protection agreement (including basic) | Fee is equal to 10% of the aggregate agency costs, contractors’ costs and personnel costs, as estimated at the scheme commencement date. | Fee is 2% of the total estimated costs of the project up to its completion, including construction costs, contractors’ costs, regulated change costs and Network Rail costs. | Appendix B
Which Enhancement Template?
| Network Rail Delivery of Services pre GRIP stage 4/5 | Customer Delivery of Services or Works | Network Rail Delivery of Works post GRIP stage 4/5 | |-----------------------------------------------------|---------------------------------------|--------------------------------------------------| | Contestable | Non-contestable | Contestable |
- Are Network Rail Services required with access (for surveys etc.) by the Customer?
- Yes
- No
- Are Network Rail services required (for contracted scope) contestable up to GRIP stage 5?
- Yes
- No
- Are the Customers works complicated?
- Yes
- No
- Are Network Rail works complicated or > £5m?
- Yes
- No
- Does the Customer require a fixed price agreement and can Network Rail contract on an appropriate basis?
- Yes
- No
- Is Network Rail carrying out the works?
- Yes
- No
- Does the Customer require a fixed price agreement and can Network Rail contract on an appropriate basis?
- Yes
- No
- Implementation Agreement Fixed Price (IA – FP) GRIP stages 5 – 8 inclusive
- Implementation Agreement Emerging Cost (IA – EC) GRIP stages 4 – 8 inclusive
- Basic Implementation Agreement Fixed Price (BIA – FP) GRIP stages 4/5 – 8 inclusive
- Basic Asset Protection Agreement (BAPA) GRIP stages 1 – 8 inclusive
- Basic Asset Protection Agreement (BAPA) GRIP stages 1 – 5 inclusive
- Development Services Agreement (DSA) GRIP stages 1 – 5 only
- Basic Services Agreement (BSA) GRIP stages 1 – 3 only
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550126840884259531220ad262ad47b5e7fedf0d | GUIDELINES FOR CONTRIBUTORS TO MAGNA, THE MAGAZINE OF THE FRIENDS OF THE NATIONAL ARCHIVES
These guidelines have been compiled to specify the house style for Magna, the magazine of the Friends of The National Archives.
Submissions will not be rejected if these guidelines are not adhered to, but it is recommended that they be closely followed to help us in the proofreading and editorial stages of preparing an article for publication. Articles should be a maximum of 1,500 words. Endnotes are used and these should be clearly identified with a superscript number in the text, and listed at the end of the article, together with a list of additional reading where appropriate. Do not format notes using Word or other software features.
GENERAL FORMAT
• Submissions, preferably in an A4 size Word document, should be sent on disk or via email to the editor: [email protected] or The Editor c/o FTNA coordinator, ARK, The National Archives, Ruskin Avenue, Kew, Surrey, TW9 4DU. • Text should be in Times New Roman, Calibri or Arial font, 12 point, single line spacing and justified. • Only a single space should be inserted after a full stop. • All paragraphs should be justified and no indents are required on the first line. • A single line should be left between paragraphs. • Images may be submitted in black and white or colour, although colour reproduction is not guaranteed. The obtaining of copyright permission rests with the author and not the Editor of the Friends of The National Archives. Images are accepted on the basis that copyright issues have been resolved and that no infringement shall occur through publication.
PARTICULAR POINTS
Use of italics
• The emphasising of words in the text should be done by using italics, rather than underlining, bold type or uppercase. • Foreign words (including unassimilated Latin words) in English (except for the names of persons, places or institutions) should be in italics, and any accent shown: diem clausit extremum, cause célèbre, raison d’être, mañana. • Foreign and Latin words which have become accepted English words should not be put in italics, though they should preserve any accent necessary to indicate their pronunciation in English: post-mortem, vice versa, café, cliché, but role (rather than rôle). • Roman type is now used for some Latin abbreviations such as e.g. and i.e. Italic punctuation should only be used within an italic phrase, but not before or after it.
Quotation marks, leaving words out, bullets
• Use single quotation marks for the first quote, and double if a quote sits within a quote: ‘It is recommended that you use the “en” dash.’ If ‘en’ had been the last word in the quotation above, the punctuation should be ‘It is recommend that you use “en”.’
- Use 3 points, with one space each side when omitting words: ‘The ... messenger arrived, and ... met the king ... the next morning.’ ‘The messenger arrived late that night. ... Next morning ... he had an audience with the king.’
- Bullets should be small plain and round.
**Dates and numbers**
- Dates should be in the format 12 April, not 12th or 12th.
- For decades, use 1960s, not 1960’s.
- Pairs of dates should be elided to two figures: 1066-67, 1940-45. When stretching centuries the whole figure must be used: 1039-1149.
- Oblique strokes are used when a single ‘year’ covers a pair, e.g. 1567/8. This is the convention for showing old and new style years, i.e. January 1567/8 is used when the medieval clerk has dated his document January 1567, which would be shown today as January 1568.
- For centuries, show in words: fifteenth century rather than 15th century or 15th century. When the century is used adjectivally, a hyphen should be inserted. This is easier when the word is written in full: ‘fifteenth-century house’ rather than ‘15th-century house’.
- Do not mix techniques when stretching dates. Say either ‘from 22 to 24 September’ or ‘22-24 September’ but not ‘from 22-24 September’.
- Numbers from one to ten are written in words, and higher numbers in figures. This can be changed depending on the sentence: ‘I would not be in your shoes for a thousand pounds’ and ‘she inherited £1000’.
- A number which comes first in a sentence or clause should be written as a word: ‘Thirty men came’ not ‘30 men came’.
- If numbers are used statistically, they should be figures: ‘More than 3000 men were killed’.
- A comma is only used for five figure numbers and above: 10,000, 999,901 and 1,874,321.
- There can be mixing: ‘four of the children were 12 and eight were 16’.
- Anniversaries tend to look better in words: ‘twenty-fifth anniversary’.
- When writing about percentages, use the style ‘25-30 per cent’, rather than ‘25-30%’. Note that percent is the American version, and so should not be used.
**Capital letters**
- Avoid too many capital letters; generally speaking, ‘the great hall’ is better than ‘the Great Hall’, and the ‘king and queen’ better than the ‘King and Queen’.
- If the noun is prefixed by ‘the’, indicating something of particular importance in its context, then the noun may have a capital: the Society, the President.
- Titles may cause much difficulty. We shall use lower case unless the rank is associated with a first (given) name, when upper case should be used: the earl of Oxford, but John de Vere, Earl of Oxford.
- Modern royals have a different style, with more capitals: HRH The Duke of Gloucester, the Duke of Gloucester.
- Geographical names are capitalised if part of the title of an area (Western Australia) but not if the description is a general term (southern Scotland).
**Abbreviations**
- The general rule is that if the last letter of an abbreviation is also the last letter of the full word, then a full stop is not used: saint is St, colonel is Col, Mr, Mrs, Dr, or ft (feet). If the last letter of an abbreviation is not the last letter of the full word, then a full stop is used: Professor is Prof., Captain is Capt.,. A plural abbreviation ending in –s will not have a full stop: inches are ins, professors are Profs.
• For sets of initials in common use, full stops are not inserted: BBC, TNA, A2A, KG. The same applies to degrees: BA, MA, PhD.
• Less common abbreviations may be used once they have been specified: Empire Marketing Board (EMB); Cucumbers Margins Committee (CMC).
• Spaces are used in: c. 1800, p. 13, pp. 34-36, fig. 21.
• Spaces are not used in: q.v., i.e., e.g., a.m., p.m.
• Spaces are not used in: km, cm, mm, kg, lb, oz, gsm.
• Do not abbreviate metres or miles to ‘m’ to avoid confusion.
• When initials are converted to plural, do not use apostrophes: CDs, PCs, MPs.
• In people’s names, use full stops after initials, but no spaces between the initials. There should be one space between the initials and the surname: H. Wilson, W.S. Churchill, M.K.J. Smith.
Hyphens
• Where a hyphen is useful, it should be inserted: ‘three one-day events’ as opposed to ‘three one day events’.
• Some hyphens are essential: ‘great-grandson’ which is different to ‘great grandson’, ‘fiftieth year-celebration’ compared to ‘fiftieth-year celebration’.
• Hyphens should appear in numbers up to ninety-nine when written in words, but ‘one hundred and one’, ‘one hundred and twenty-one’.
• Hyphens should always appear in dates used as adjectives: ‘a fifteenth-century house’. Sometimes two hyphens are required: ‘late-fifteenth-century house’.
• Some words, previously hyphenated, are now commonly written as one word: today, weekend, email.
Titles of books and articles
• Titles of books and works of art should be in italics: Robinson Crusoe, Richard III.
• If a title includes the word ‘the’, make sure that it is also in italics: The Mikado, The Daughter of Time.
• TV and radio programmes should be treated as works of art: Meet the Ancestors, Document, Thinking Allowed.
• All important words in a title should have a capital letter: The War of the Worlds, As You Like It. Articles however, may have a capital first letter and the remainder in lower case.
• When including titles in the main text, they should be incorporated in as natural a manner as possible. The publication date should be included in round brackets: ‘As mentioned in Whitaker’s Almanac (1923) …’
Referencing
• It is expected that all primary sources used in the article shall be clearly identified using endnotes, and identified in the text with a superscript number: TNA CO 956/144; TNA RAIL 1014/19.
• Secondary sources, books and journals, should be similarly identified in the text and set out in the following manner: Adrian Preston (ed), In Relief of Gordon (London, 1967) p. 44; Christopher Kitching, ‘A Victorian pioneer in the records: Walter Rye’s records and record searching in context’, in Archives, 33, (2008), no. 119, pp. 126-39.
• An additional reading list should follow the same format, but without page numbers, unless there is a specific need to do so.
Spelling
• We have chosen for example, ‘organise’ rather than ‘organize’, ‘medieval’ rather than ‘mediaeval’.
• Words associated with information technology: online, website, webpage. • Care is needed to ensure that some PCs do not inflict an American default spelling, such as endeavor’ for ‘endeavour’, ‘center’ for ‘centre’. • Some compound nouns require an 's' to be added to the first word to make them plural: Lords Lieutenants; Lords Justices; brothers-in-law.
Brackets • Round brackets are normally used. Square brackets are used by the editor for comment inserted into the text.
Quotations • Final quotation marks come after a full stop if a complete sentence is thereby enclosed: ‘He opened the door.’ They come before a full stop or other punctuation if part of a sentence is thereby enclosed: The document is called ‘Our Punctuation Policy’. • The use of long quotations should be limited as far as possible and where used, should not exceed 100 words. Quotes should be indented.
Apostrophes and contractions • Apostrophes come before the –s for a single possessor: Julie’s book, the author’s signature; but after the –s for multiple possessors: the Archives’ address, the Friends’ magazine, unless the word is itself in a plural form: the men’s clothing, the children’s toys. • Names ending in -s or -ss may have an apostrophe and additional -s: James’s; Dickens’s. However, an apostrophe alone may be used if this causes difficulties with pronunciation. The editorial preference is not to include the additional -s: Dickens’, Watts’, Jones’. • Its is the possessive; it’s is a contraction ‘it is’. • Contractions such as can’t and won’t should not be used.
Table and images • When an article includes genealogical or other tables it is important that accurate hard copy is provided to ensure accurate replication in the magazine. The final formatting of tables will be undertaken by the editor. • Images should be submitted separately from the text, with indication of their positioning where this is appropriate.
Resolving grammatical and punctuation queries • In the event of any queries arising regarding grammar or punctuation, the matter shall be resolved in accordance with New Hart’s Rules, the handbook of style for writers and editors, published by the Oxford University Press.
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2dc74bcc52f2c29ada11b2fb0514f45cd901343f | GUIDE TO REVISED LEGISLATION ON LEGISLATION.GOV.UK
OCTOBER 2013
# CONTENTS
## INTRODUCTION
- Background to the Revised Legislation ................................................................. 1
- Note on Northern Ireland Legislation ........................................................................ 1
## LEGISLATION
- Introduction to UK Legislation .................................................................................. 2
- Division into Primary and Secondary Legislation ...................................................... 2
- Types of Primary Legislation ...................................................................................... 3
- Acts of the UK Parliament ......................................................................................... 3
- Acts of the pre-UK Parliaments .................................................................................. 3
- Acts of the Scottish Parliament ................................................................................... 3
- Measures of the National Assembly for Wales .......................................................... 3
- Acts of the National Assembly for Wales .................................................................. 4
- Acts of the Northern Ireland Assembly (and other primary legislation for Northern Ireland) ................................................................. 4
- Church of England Measures .................................................................................... 4
- Prerogative Orders ..................................................................................................... 4
- Types of Secondary Legislation .................................................................................. 4
- Statutory Instruments (UK) ....................................................................................... 5
- Scottish Statutory Instruments ................................................................................... 5
- Welsh Statutory Instruments ...................................................................................... 5
- Statutory Rules of Northern Ireland ............................................................................ 5
- Church Instruments .................................................................................................. 5
- Bye-Laws .................................................................................................................... 6
- Legislation on legislation.gov.uk ................................................................................ 6
## HOW WE EDIT LEGISLATION
- Our Approach to Editing Legislation ......................................................................... 7
- Principles ..................................................................................................................... 8
- The Editorial Process .................................................................................................. 8
- Annotation Types on legislation.gov.uk ..................................................................... 8
- F-notes - Amendments (Textual) ................................................................................ 9
- C-notes - Modifications etc (not altering text) ............................................................. 10
- E-notes - Extent information ...................................................................................... 10
- I-notes - Commencement information ........................................................................ 10
- P-notes - Subordinate legislation made ..................................................................... 11
- M-notes - Marginal citations ...................................................................................... 11
- X-notes - Editorial information ................................................................................... 12
- Editorial Conventions ................................................................................................. 12
- Content of annotations ............................................................................................... 12
- How we describe effects on legislation ..................................................................... 13
- Amendments to text .................................................................................................. 13
- Effects that do not change the text ............................................................................ 13
- How we cite legislation .............................................................................................. 14
- How we cite primary legislation ............................................................................... 15
- How we cite secondary legislation .......................................................................... 17
## PRESENTATION OF REVISED LEGISLATION
- Presentation of Text .................................................................................................... 18
- Amendments in the amended legislation .................................................................. 18
- Insertions and substitutions ....................................................................................... 18
- Repeals ....................................................................................................................... 19 Amendments in the amending legislation ................................................................. 20 Annotations ............................................................................................................. 20 Timeline of Changes .............................................................................................. 21 Dates on the Timeline ............................................................................................ 21 Geographical Extent ............................................................................................... 23 Confers power ........................................................................................................ 24 Blanket amendment ............................................................................................... 24 INTRODUCTION
The revised legislation on legislation.gov.uk is designed to be user-friendly. Operations should usually be intuitive and you should find most of the information you need on screen or in tool-tips. Legislation and the revision process, however, are necessarily complex and this document is intended to provide more comprehensive guidance about the legislation on the website, the editorial process and how revised legislation is presented.
The revised legislation is maintained by the Legislation Services Team of the National Archives in London and the staff of the Northern Ireland Statutory Publications Office in Belfast. For further details see About us.
For the definition of key terms used in this guide, please refer to the Glossary.
Background to the Revised Legislation
The revised legislation on legislation.gov.uk is the official revised version of the statute book for the UK in electronic form. (‘The statute book’ is a term we use to mean all the primary legislation of a public general nature in force at any particular time.) Previously accessible only to a limited number of users in government, it was first made available online to the public in December 2006 as the UK Statute Law Database (SLD). In July 2010, legislation.gov.uk was launched, incorporating both the revised legislation content from SLD and the ‘as enacted’ legislation from the website of the Office of Public Sector Information (OPSI).
The first main source of the text of the revised legislation was the publication Statutes in Force (SIF), a ‘loose-leaf’ style official edition of the revised statute book arranged according to subject matter. SIF was regularly updated with the effects of new legislation made until 1 February 1991. The date of this final revision became the ‘basedate’ from which the revised legislation has been taken forward. The SIF text in turn derived from a series of earlier official revised editions, principally The Statutes Revised. The main source of the original text of these editions was The Statutes of the Realm, published between 1810 and 1828, which contained the full text of public Acts enacted by the English Parliament (which encompassed Wales) until the Union of England and Scotland in 1707 and by the Parliament of Great Britain from 1707 until the end of the Reign of Queen Anne in 1814. The text of Scottish Acts enacted before the Union had its origin in The Acts of the Parliaments of Scotland (the ‘Record Edition’) published between 1814 and 1875.
New legislation made since the basedate has been added, including that of the devolved legislatures in Scotland, Wales and Northern Ireland. From the basedate onwards, both primary and secondary legislation are held, though it remains the case at present that only primary legislation is revised.
The second main source of the revised legislation is The Northern Ireland Statutes Revised, the official revised version of the primary legislation of Northern Ireland. The content of the numbered volumes and their supplements covering the period from 1921 onwards has been incorporated into the revised legislation on legislation.gov.uk as it stood at 31 December 2005. (The content of volumes A to D, containing pre-1921 Acts of the UK Parliament and its predecessor parliaments extending to Northern Ireland, will be incorporated as soon as possible.) The revision work on the Northern Ireland statutes is now being carried forward with a separate Northern Ireland basedate of 1 January 2006. See further information about the background to Northern Ireland legislation below.
Note on Northern Ireland Legislation
The story of primary legislation for Northern Ireland has been complicated by the history of the political situation in the province since the foundation of an independent Irish state in the South and the consequent partition of the island in 1921.
The Parliament of Northern Ireland existed from 1921 to 1972 when it was suspended. The parliament passed ‘Acts’. A new legislature was set up in 1973 (called, like the present body, the Northern Ireland Assembly) but this body passed only a few items of legislation (called ‘Measures’) in 1974 before being dissolved. The present Northern Ireland Assembly was set up following the signing of the Belfast Agreement on Good Friday in 1998. The Northern Ireland Act 1998 then devolved power to make legislation for Northern Ireland (in the form of ‘Acts’) to the new Assembly. The power to legislate on certain matters was retained by the UK Parliament. Having been suspended briefly on previous occasions, the Assembly was suspended in October 2002 and remained suspended for nearly four-and-a-half years. The Assembly and devolved government were restored on 8 May 2007.
During the periods when devolved government has been in abeyance, and during periods of suspension of the present Assembly, legislation has been made for Northern Ireland by the UK government. This has been effected by means of ‘Orders in Council’, that is to say, orders made by the Queen on the advice of her Privy Council.
All the legislation for Northern Ireland mentioned above, so far as remaining in force and including consolidated revisions, was brought together in the numbered volumes of the publication *The Northern Ireland Statutes Revised* (NISR). NISR also included four volumes (A to D) containing pre-1921 Acts of the UK Parliament and its predecessor parliaments extending to Northern Ireland. Produced by the staff of the Northern Ireland Statutory Publications Office (NISPO) in Belfast, NISR was the official revised version of the primary legislation of Northern Ireland. The revised legislation of Northern Ireland continues to be maintained in Belfast by NISPO staff.
Our intention has been to make the incorporation of the Northern Ireland statutes into the revised legislation on legislation.gov.uk as seamless as possible, but users should be aware that there remain many variations in presentation between the Northern Ireland statutes and other legislation on the website. Some of the more significant of these variations have been noted at the appropriate places in this guide.
**LEGISLATION**
This topic provides a general introduction to UK legislation, tells you which types of legislation are carried on legislation.gov.uk and whether or not they are revised.
Only UK domestic legislation is carried on legislation.gov.uk. European Union legislation can be accessed via the EU law portal EUR-Lex. There are also links to the relevant EU legislation in UK implementing regulations.
**Introduction to UK Legislation**
This topic provides a brief overview of UK legislation for users who are not already familiar with it.
**Division into Primary and Secondary Legislation**
These are the two main categories of legislation in the UK.
- Primary legislation
- Secondary legislation
‘Primary legislation’ is the general term used to describe the main laws passed by the legislative bodies of the UK. The principal examples are:
- Acts of the UK Parliament
- Acts of the pre-UK Parliaments
- Acts of the Scottish Parliament
- Measures of the National Assembly for Wales
- Acts of the National Assembly for Wales
- Acts of the Northern Ireland Assembly (and other primary legislation for Northern Ireland)
- Church of England Measures (legislation for the established church in England passed by the General Synod of the Church of England) These types of legislation are sometimes referred to as ‘statutes’. When we speak of ‘the statute book’, we mean the whole of the statute law currently in force. The term ‘primary legislation’ also includes certain legislative instruments made by the Crown and the Privy Council under the royal prerogative (called ‘Prerogative Orders’).
‘Secondary legislation’ (also called ‘subordinate legislation’) is delegated legislation made by a person or body under authority contained in primary legislation. Typically, powers to make secondary legislation may be conferred on ministers, on the Crown, or on public bodies. For example, the Office of Communications (OFCOM) is given such powers by the Communications Act 2003. The main types of secondary legislation are:
- Statutory Instruments
- Scottish Statutory Instruments
- Welsh Statutory Instruments
- Statutory Rules of Northern Ireland
- Church Instruments
- Bye-laws
For a full list of the types of legislation held on legislation.gov.uk and whether they are revised, see the table at the end of this topic below.
Types of Primary Legislation
**Acts of the UK Parliament** Most of the Acts passed by the UK Parliament are ‘Public General Acts’. These are Acts that deal with matters of general public interest.
A small number of Acts are ‘Private Acts’. These are further sub-divided into ‘Local Acts’ (which relate to matters of local interest) and ‘Personal Acts’ (which relate to particular persons, and are nowadays very rare). These two classes of Acts are numbered differently to Public General Acts.
You can find out more about the UK parliament and the UK legislative process at [www.parliament.uk](http://www.parliament.uk).
**Acts of the pre-UK Parliaments** There are still many Acts in force that were enacted by the parliaments of the separate countries that co-existed in the British Isles before the United Kingdom of Great Britain and Ireland was formed in 1801. These are Acts that were enacted by:
- the English Parliament (which encompassed Wales) from 1267 to 1706
- the Scottish Parliament from 1424 to 1707
- the Parliament of Great Britain (England, Wales and Scotland) from 1707 to 1800
- the Irish Parliament from 1495 to 1800.
**Acts of the Scottish Parliament** The Scotland Act 1998 devolved power to make legislation to a new Scottish Parliament sitting in Edinburgh. The Scottish Parliament has power to legislate for Scotland on matters that are not specifically reserved to the UK Parliament by the Scotland Act. There is no separate category for Acts that are local or personal.
You can find out more about the Scottish Parliament and the legislative process in Scotland at [www.scottish.parliament.uk](http://www.scottish.parliament.uk).
**Measures of the National Assembly for Wales** The Government of Wales Act 2006 devolved power to make primary legislation in relation to matters set out in the Act to the National Assembly for Wales sitting in Cardiff. Initially, this legislation took the form of ‘Measures’ (but see ‘Acts of the National Assembly for Wales’ below). The Assembly had earlier been established by the Government of Wales Act 1998 with powers to legislate by means of secondary legislation in the form of Statutory Instruments. There is no separate category for Measures that are local or personal. Measures of the National Assembly for Wales are published in both the English and Welsh languages.
**Acts of the National Assembly for Wales** Following a referendum in March 2011, the National Assembly for Wales acquired the power, provided for in the Government of Wales Act 2006, to make ‘Acts’ in relation to subject areas set out in that Act. Unlike the earlier Measures, Acts of the National Assembly for Wales can be passed without first seeking the approval of the UK Government or Parliament. There is no separate category for Acts of the National Assembly for Wales that are local or personal.
Acts of the National Assembly for Wales are published in both the English and Welsh languages.
You can find out more about the National Assembly for Wales and the legislative process in Wales at [www.wales.gov.uk](http://www.wales.gov.uk) and [http://www.assemblywales.org](http://www.assemblywales.org).
**Acts of the Northern Ireland Assembly (and other primary legislation for Northern Ireland)** As a result of the complex history of the political situation in Northern Ireland since 1921, there have been a number of changes in the way that primary legislation has been made in and for the province. For a summary of these changes see ‘Note on Northern Ireland Legislation’ in the Introduction above.
The types of primary legislation for Northern Ireland still extant are:
- Acts of the Parliament of Northern Ireland (1921 – 1972)
- Measures of the Northern Ireland Assembly (1974 only)
- Acts of the Northern Ireland Assembly (2000 – 2002 and 2007 to date)
- Orders in Council made under the Northern Ireland Acts (1972 to date)
Although this last category of legislation takes the form of UK statutory instruments (which are secondary legislation), it constitutes, in effect, the primary legislation for Northern Ireland during periods of ‘direct rule’ by the UK government. Orders in Council continue to be used to legislate for Northern Ireland in relation to matters that have not been devolved to the Assembly.
There is no separate category in Northern Ireland for primary legislation of a local or personal nature.
You can find out more about the Northern Ireland Assembly and its work at [www.niassembly.gov.uk](http://www.niassembly.gov.uk).
**Church of England Measures** In the Church of England Assembly (Powers) Act 1919, the UK Parliament conferred on the Church Assembly the power to make legislation on matters concerning the Church of England. In 1970, the Assembly was replaced by the General Synod of the Church of England. Measures have the full force of an Act of Parliament.
You can find out more about Church of England legislation at [www.churchofengland.org](http://www.churchofengland.org).
**Prerogative Orders** The Crown and the Privy Council (which consists of ministers of the Crown) retain vestiges of power to legislate by royal prerogative. Prerogative Orders made in this way are called either ‘Orders in Council’ (when made by the Queen on the advice of the Privy Council) or ‘Orders of Council (when made by the Lords of the Privy Council without any approval by the Queen).
Note that such orders may also be made under powers in Statutory Instruments rather than under the prerogative (for example, the Orders in Council containing legislation for Northern Ireland). For more information see the [Privy Council](http://www.privycouncil.org) website.
**Types of Secondary Legislation** Secondary legislation (also called ‘subordinate legislation’) is made under authority contained in primary legislation. Statutory Instruments (UK) These are instruments made under authority contained mainly in Acts of the UK Parliament (but see also ‘Welsh Statutory Instruments’ below). There are three main types of Statutory Instrument:
- ‘Orders’
- ‘Regulations’
- ‘Rules’
However, there is no limit imposed on the descriptions that may be given to Statutory Instruments. Other examples include ‘Scheme’, ‘Direction’ and ‘Declaration’. Different types of instruments serve different functions, but they all have the same legislative force.
Welsh Statutory Instruments and the Orders in Council made under the Northern Ireland Acts are included in the same numbering sequence as UK Statutory Instruments. They are distinguished within that sequence by a subsidiary number in brackets after the S.I. number (e.g. “(W. 22)”, “(N.I. 15)”, etc.). There are also UK Statutory Instruments relating exclusively to Scotland which are included in the UK numbering sequence and distinguished by a subsidiary number (e.g. “(S. 27)”). These are not to be confused with Scottish Statutory Instruments (see below), which have their own numbering sequence, as do Statutory Rules of Northern Ireland.
Prior to 1948, when the Statutory Instruments Act 1946 came into force, the equivalent instruments were known as ‘Statutory Rules and Orders’.
Scottish Statutory Instruments These are instruments made since 1999 under authority contained in Acts of the Scottish Parliament. They have their own ‘SSI’ numbering sequence, separate from the UK (‘SI’) sequence.
As in the case of UK Statutory Instruments, there are three main types of Scottish Statutory Instrument (‘Orders’, ‘Regulations’ and ‘Rules’). In addition, there are in Scotland rules of court contained in Statutory Instruments called ‘Acts of Sederunt’ and ‘Acts of Adjournal’. There may also be other descriptions of Scottish Statutory Instruments.
Welsh Statutory Instruments Welsh Statutory Instruments are Statutory Instruments relating specifically to Wales. They form part of the same numbering sequence as UK Statutory Instruments but are distinguished within that sequence by a subsidiary number in brackets after the S.I. number (e.g. “(W. 22)”). They may be made under authority contained in Acts of the UK Parliament, Measures of the National Assembly for Wales or Acts of the National Assembly for Wales.
Welsh Statutory Instruments are published in both the English and Welsh languages.
Statutory Rules of Northern Ireland These are the equivalent of Statutory Instruments for Northern Ireland. They may be made under authority contained in Acts of the Northern Ireland Assembly. They may also be made under authority contained in Acts of the UK Parliament or in the Orders in Council containing the primary legislation for Northern Ireland during periods of direct rule by the UK government (and which continue to be used for matters that have not been devolved to the Assembly). They have their own ‘SR’ numbering sequence, separate from the UK (‘SI’) sequence.
Despite the name, Statutory Rules occur in the same three main types as Statutory Instruments (‘Orders’, ‘Regulations’ and ‘Rules’). There may also be other descriptions of Statutory Rules.
Church Instruments These are instruments made by the Archbishops of Canterbury and York under authority contained in Church Measures. They are sometimes also referred to in annotations to the revised legislation as ‘Archbishops’ Instruments’, and are used almost exclusively for the purpose of bringing Church Measures into force. Bye-Laws
Brief mention should be made of one other type of secondary legislation: bye-laws. This is legislation delegated to bodies such as local authorities, operators of transport systems or public utilities. The application of bye-laws is usually limited to a particular local area or the operations of a specific public body.
Legislation on legislation.gov.uk
Most (but not all) types of legislation, both primary and secondary, are carried on legislation.gov.uk. Most types of primary legislation (broadly speaking, those of a public general nature) are held in ‘revised’ form. This means that amendments made to them by subsequent legislation are incorporated into the text. Most types of secondary legislation are not revised and are held only in the form in which they were originally made.
For pre-1991 UK legislation held and revised, the earliest revised version is the revised text as it stood at 1 February 1991 (the basedate). Where legislation has been wholly repealed before the basedate, no revised version is carried. Some Acts that were still in force at the basedate, but which were superseded by consolidations in 1991 or 1992, are not carried in revised form. Also, certain whole categories of Public General Acts enacted before the basedate are not carried in revised form (subject to a few exceptions). These categories are: Consolidated Fund Acts; Appropriation Acts; Expiring Laws Acts; Statute Law Revision Acts; Statute Law (Repeals) Acts; Acts of a local or personal nature; and Acts extending only to territory outside the UK.
The revised primary legislation of Northern Ireland, previously published in the numbered volumes of The Northern Ireland Statutes Revised and its supplements, is now incorporated. The historical versioning of the Northern Ireland statutes starts from 1 January 2006 (the Northern Ireland basedate). Where Northern Ireland legislation has been wholly repealed before the Northern Ireland basedate, no revised version is carried.
Pre-1921 UK Acts extending only to Northern Ireland (as at 1 February 1991) are not at present carried in revised form. These Acts were included in Volumes A to D of The Northern Ireland Statutes Revised and will be incorporated into the revised legislation in due course. Also, until this exercise is complete, those pre-1921 Acts extending to Northern Ireland that are held in revised form will not necessarily appear in the form in which they have effect in Northern Ireland. An ‘Editorial Information’ annotation has been inserted at the Long Title level of relevant Acts.
Details of the legislation held, and whether they are revised, are as follows:
| Legislation Type | Held on legislation.gov.uk? | Revised? | |------------------|-----------------------------|---------| | Primary Legislation | | | | Public General Acts of the United Kingdom Parliament (1801 to date) | Yes¹ | Yes | | Local Acts of the United Kingdom Parliament (1801 to date) | Yes² | No² | | Personal Acts of the United Kingdom Parliament (1801 to date) | No | No | | Acts of the Parliament of Great Britain (1707 – 1800) | Yes | Yes | | Acts of the English Parliament (1267 – 1706) | Yes | Yes | | Acts of the Scottish Parliament (1424 – 1707) | Yes | Yes | | Acts of the Scottish Parliament (1999 to date) | Yes | Yes | | Measures of the National Assembly for Wales (2008 – 2011) | Yes | Yes | | Acts of the National Assembly for Wales (2012 to date) | Yes | Yes | | Acts of the Irish Parliament (1495 – 1800) | Yes | Yes | | Acts of the Parliament of Northern Ireland (1921 – 1972) | Yes | Yes | | Legislation Type | Held on legislation.gov.uk? | Revised? | |---------------------------------------------------------------------------------|-----------------------------|---------| | Measures of the Northern Ireland Assembly (1974) | Yes | Yes | | Orders in Council made under the Northern Ireland Acts (1972 to date) | Yes | Yes | | Acts of the Northern Ireland Assembly (2000 – 2002 and 2007 to date) | Yes | Yes | | Church of England Measures (1920 to date) | Yes | Yes | | Prerogative Orders | No | No | | Secondary Legislation(^1) | | | | UK Statutory Instruments | Yes(^a) | No | | Scottish Statutory Instruments (1999 to date) | Yes | No | | Welsh Statutory Instruments (1999 to date) | Yes | No | | Statutory Rules of Northern Ireland | Yes – from 1991(^b) | No | | Church Instruments | Yes – from 1991 | No | | Bye-laws | No | No |
(^1) Prior to 1988, other than Acts still in force at 1991 and revised, only selected Public General Acts are held, though these are being added to over time.
(^2) Prior to 1991, only selected Local Acts are held. A small number of these are also revised. The number of older Local Acts carried will increase over time.
(^3) Prior to 2007 for Scottish Statutory Instruments, and 2008 for UK Statutory Instruments, only secondary legislation that has been printed is held. (Legislation of purely local interest, for example, may not be printed).
(^4) Prior to 1987, only Statutory Instruments that are still at least partly in force in April 2011 are held, though these are being added to over time.
(^5) Note that, for the period 1991 to 2005, only those Statutory Rules of Northern Ireland that affect UK legislation are held.
**HOW WE EDIT LEGISLATION**
The editorial task of revising legislation on legislation.gov.uk is carried out by the Legislation Services Team within the National Archives in London and the staff of the Northern Ireland Statutory Publications Office in Belfast. For further details see About us.
In addition to in-house editing, the Legislation Services Team is pursuing a new strategy which involves working with external expert participants from the legal publishing industry, government departments and the devolved administrations to bring all of the revised legislation fully up to date. New editorial tools have been developed which will help make the update task much faster and enable external participants to work collaboratively with our in-house teams towards the common goal of a comprehensive and up-to-date official source of revised legislation.
Revision of legislation on legislation.gov.uk involves, in simple terms, amending the text of the legislation where appropriate and adding annotations containing information about effects on legislation or other editorial information.
The following topics explain our approach to editing legislation, describe the types of annotation we use and give an overview of the main editorial conventions we follow in drafting annotations. Our Approach to Editing Legislation
Principles It is our aim to present the revised text of legislation clearly and accurately without gloss or comment. We will give authority for changes to the text, and record any other effects that make some difference to the meaning, scope or application of the legislation. But otherwise, we aim to let the legislation speak for itself precisely as the legislature has framed it.
Additional editorial information is used only sparingly, generally either to explain our presentation of the text where necessary or to draw attention to some difficulty in the reading of the text arising from the way in which it has been amended. We avoid interpretation as far as possible, though an element of interpretation may be required in deciding whether or how one piece of legislation affects another.
The Editorial Process When we receive a new piece of legislation, a newly enacted Act for example, the first thing we do is to analyse it carefully to identify all its impacts on other legislation. These are mostly amendments to the text of the other legislation, but there are also many effects that do not change the text, such as when the other legislation is said to be ‘applied’ or ‘modified’.
At this point, we also note certain other information about new primary legislation, such as when it comes into force and its geographical extent or territorial application. This information will be used in setting up the timeline and extent facilities for the legislation and its provisions on the website. Once this information has been entered, and any annotations needed at this stage about commencement or extent have been inserted, the new legislation is deployed to the website as the ‘Latest Available (Revised)’ version. (A version of the legislation ‘As Enacted’ will have been published on the website shortly after it was enacted.)
As soon as the analysis of the legislation is complete, the extracted information about its effects on other legislation is tabulated. This is then added to the ‘Changes to Legislation’ facility on the website. This information also serves as a guide for the editor in the next stage of the process.
The bulk of the editorial work consists of carrying through the effects of the new legislation into the affected legislation by editing the text and adding appropriate annotations using a set of computer-based editing tools. This work necessarily takes rather longer than the initial processes. You will be notified whenever you access an item of legislation on the website if there are any effects that have not yet been applied to it in the Changes to Legislation information appearing at the top of the page you are viewing.
NOTE: the Changes to Legislation facility is updated with the effects of new legislation only after the editorial processes described above have been completed. These processes typically take from four to eight weeks to complete depending on the volume of new legislation. In some cases, such as where an Act is very large or heavily affecting, or a large number of Acts have received Royal Assent at the same time, it may take longer.
The following topics describe the kinds of annotations that are added by editors to the text of revised legislation and the editorial conventions that determine how those annotations are framed.
Annotation Types on legislation.gov.uk Annotations are used in revised legislation on legislation.gov.uk to give authority for amendments or other effects and also to provide certain types of editorial information. For a full explanation of how annotations are presented in the legislation, see the topics under ‘Presentation of Revised Legislation’ below.
The information about annotations given here does not apply to footnotes in unrevised secondary legislation on the website. These are inserted by drafters of the legislation, not as part of the editorial process. There are seven annotation types currently in use:
- F-notes – Amendments (Textual)
- C-notes – Modifications etc. (not altering text)
- E-notes – Extent information
- I-notes – Commencement information
- P-notes – Subordinate legislation made
- M-notes – Marginal citations
- X-notes – Editorial information
Note that some annotations dating from before the basedate may be assigned to the wrong annotation types. We are re-assigning them to the correct types as we come across them.
Northern Ireland Variations
In Northern Ireland legislation made in 2005 and earlier years, all annotations appear as F-notes under the ‘Annotations’ heading without any sub-categories. In legislation made in 2006 and later years, the categorisation of annotations is consistent with usual practice.
F-notes - Amendments (Textual)
‘F’ stands for ‘Footnotes’. This annotation type is used for amendments, including repeals, where there is authority to change the text.
A footnote reference is placed inside the opening square bracket enclosing the amendment text or, in the case of a repeal, before the three dots (for repealed words), or before the provision or sub-provision number (which is retained when a whole provision or sub-provision is repealed).
Example: [http://www.legislation.gov.uk/ukpga/Geo6/12-13-14/88/section/2](http://www.legislation.gov.uk/ukpga/Geo6/12-13-14/88/section/2)
Note that, for older annotations, the location of footnote references may vary. For example, the reference for a repeal dating from before the basedate will usually be found at the end of the row of dots rather than at the beginning.
For the amendment or repeal of a whole Act, whole Part, Schedule, etc., the footnote reference is placed against the short title, long title or heading as the case requires.
Example: [http://www.legislation.gov.uk/ukpga/Geo6/12-13-14/88/schedule/A1](http://www.legislation.gov.uk/ukpga/Geo6/12-13-14/88/schedule/A1)
The footnote annotation will contain a brief description of the type of amendment, the commencement date (or ‘prosp.’ if not yet in force), and a citation of the legislative provisions providing authority for the amendment.
Northern Ireland Variations
In Northern Ireland legislation made in 2005 and earlier years, all annotations, not just those relating to amendments to text, appear as F-notes under the ‘Annotations’ heading without any sub-categories. Also, annotations inserted prior to 2006 do not follow the standard format illustrated in the above examples. In legislation made in 2006 and later years, the style and categorisation of annotations are consistent with standard practice. C-notes - Modifications etc (not altering text) ‘C’ stands for ‘Cross-notes’, so called because of the way in which they were presented in the hard copy predecessors to the revised legislation on legislation.gov.uk. This annotation type is used to denote the effect when the meaning, scope or application of an Act or provision, etc. is changed in some way, but without there being any authority to alter the text.
Example: http://www.legislation.gov.uk/ukpga/Geo6/14-15/26/section/20
Typical expressions of effects of this kind are ‘modified’, ‘applied’, ‘excluded’, ‘extended’, ‘restricted’, etc.
As C-notes always relate to whole provisions or sub-provisions (or higher levels of division, such as Part, Schedule, whole Act, etc.), rather than to specific words, reference markers are not shown in the body of the text in order to reduce cluttering. The provision, sub-provision, etc. to which the C-note relates will be specified in the annotation.
The C-note annotation will contain a brief description of the type of effect, the commencement date (or ‘prosp.’ if not yet in force), and a citation of the legislative provisions providing authority for the effect.
Northern Ireland Variations In Northern Ireland legislation made in 2005 and earlier years, all annotations, including those relating to modifications etc. (not altering the text), appear as F-notes under the ‘Annotations’ heading without any sub-categories. Also, annotations inserted prior to 2006 do not follow the standard format illustrated in the above examples. In legislation made in 2006 and later years, the style and categorisation of annotations are consistent with standard practice.
E-notes - Extent information This annotation type contains information about the geographic extent of the Act or relevant part of it.
Example: http://www.legislation.gov.uk/ukpga/1981/69/section/20
As E-notes always relate to whole provisions (or higher levels of division, such as Part, Schedule, whole Act, etc.), rather than to specific words, reference markers are not shown in the body of the text in order to reduce cluttering.
E-notes are at present used very sparingly, mainly to indicate some complexity or change in the extent which is not adequately reflected in the extent provision of the Act (although they have been used more extensively in the past). They are also used where there are multiple versions of a provision for different geographic extents.
I-notes - Commencement information ‘I’ stands for ‘In-force’. This annotation type contains information about the coming into force of a provision and will typically state whether it is partly or wholly in force, give the date or dates of commencement and cite relevant provisions of the Act and any commencing instruments.
Example: http://www.legislation.gov.uk/ukpga/2001/3/section/43
As I-notes always relate to whole provisions (or higher levels of division, such as Part, Schedule, whole Act, etc.), rather than to specific words, reference markers to them are not shown in the body of the text in order to reduce cluttering. At present, I-notes are used only if there is some complexity in the commencement. If the provision comes into force on one day for all purposes, no I-note will be created and the in-force date will be the same as the start date of the earliest version of the provision.
**Northern Ireland Variations**
In Northern Ireland revised legislation enacted prior to 2006, no commencement information is recorded against provisions being commenced and there are, therefore, no annotations equivalent to I-notes.
**P-notes - Subordinate legislation made**
‘P’ stands for ‘Power exercised’. Where a provision of primary legislation confers power to make subordinate legislation and that power is exercised (that is, an instrument is made in pursuance of it), that exercise may be recorded in a P-note. The annotation will cite any instruments made under that power.
Example: [http://www.legislation.gov.uk/ukpga/2002/42/section/19](http://www.legislation.gov.uk/ukpga/2002/42/section/19)
As P-notes always relate to whole provisions or sub-provisions, rather than to specific words, reference markers are not shown in the body of the text in order to reduce cluttering. The provision or sub-provision to which the P-note relates will be specified in the annotation.
At present, the P-note annotation type is used only in respect of the making of commencement orders (distinguished by a ‘C’ series number after the number of the instrument) or other exercises of a power to appoint a day.
**Northern Ireland Variations**
In Northern Ireland legislation made in 2005 and earlier years, all annotations, including those relating to exercises of power to make subordinate legislation, appear as F-notes under the ‘Annotations’ heading without any sub-categories. Also, annotations inserted prior to 2006 do not follow the standard format illustrated in the above examples. In legislation made in 2006 and later years, the style and categorisation of annotations are consistent with standard practice.
**M-notes - Marginal citations**
This annotation type is so called because it used to appear in the margin of the Queen’s Printer’s copy of primary legislation. M-notes recite the year and number of an Act or instrument mentioned in the text.
Example: [http://www.legislation.gov.uk/ukpga/1999/6/section/2](http://www.legislation.gov.uk/ukpga/1999/6/section/2)
A reference marker is placed in the text at the relevant point. Marginal citations are generally derived from the text of the original legislation and are only rarely added editorially. They are no longer used in primary legislation since the changes in drafting style introduced in 2001.
**Northern Ireland Variations**
In Northern Ireland legislation made in 2005 and earlier years, all annotations, including those containing marginal citations, appear as F-notes under the ‘Annotations’ heading without any sub-categories. In legislation made in 2006 and later years, the categorisation of annotations is consistent with standard practice. **X-notes - Editorial information**
The X-note annotation type is used sparingly to alert users to anything they may need to be aware of in using the text.
Example: [http://www.legislation.gov.uk/aep/Edw1cc16/25/6/section/1](http://www.legislation.gov.uk/aep/Edw1cc16/25/6/section/1)
They have been used, for example, to explain potential difficulties arising from variations in editorial practice inherited from older versions of the revised statutes or to point to uncertainties in the text of very old Acts.
A reference marker is placed in the text at the relevant point.
**Editorial Conventions**
This topic describes the form of annotation typically used for noting effects on revised legislation and explains the main conventions we follow in framing those annotations.
What follows is necessarily a brief overview, as the full guidance to editors on editorial policy and practice is very extensive. It should also be noted that the conventions described are those in current usage. The revised legislation on legislation.gov.uk has inherited revised text and annotations from a succession of official revised editions of the statutes dating back to the late nineteenth century. This guidance does not attempt to document all the changes in practice there have been over the years.
**Content of annotations**
Several types of annotation are used and the precise form and content will vary according to the circumstances. Here we refer only to the type of annotation that is used for amendments and other effects that you might find in either a C-note or F-note. A typical such annotation might read like this:
```
S. 14A(7) applied (with modifications) (30.12.2005) by Adoption and Children Act 2002 (c. 38), s. 29(6) (with Sch. 4 paras. 6-8); S.I. 2005/2213, art. 2(c)
```
The annotation sets out the following information:
- the affected provision – sub-section (7) of section 14A
- the type of effect – applied (with modifications)
- the date on which the affecting provision came into force – (30.12.2005)
- the affecting legislation – Adoption and Children Act 2002 (c. 38)
- the affecting provision in that Act – subsection (6) of section 29
- savings (or other provisions that may operate to qualify the amendment in some way) – paragraphs 6 to 8 of Schedule 4 in the affecting Act
- the commencement order (a Statutory Instrument bringing the affecting provision into force) – S.I. 2005/2213
- the operative provision of the commencement order – paragraph (c) of article 2
Most of these elements are self-explanatory. See the following topics for brief explanations about how we describe the effects on legislation and how legislation is cited (that is, referred to). There is also a note on the abbreviations used in annotations.
**Northern Ireland Variations**
In Northern Ireland revised legislation, annotations inserted prior to 2006 do not follow the standard format described above. Annotations relating to amendments to text generally only refer to the year and number of the amending legislation, while those relating to modifications etc (not altering the text) additionally provide a brief indication of the nature of the effect. How we describe effects on legislation This topic sets out the main conventions that determine how we describe the effects that one piece of legislation may have on another.
Our aim is always to give effect as accurately as we can to the plain words of the legislation with a minimum of interpretation. We will, therefore, wherever possible use the wording of the legislation itself. As a simple example, if the legislation provides that a new sub-section (1A) is to be “inserted” into section 12, the annotation will follow that wording, e.g. “S. 12(1A) inserted ...”.
Often, however, especially where the effect is one that does not alter the text, we have to make a decision as to what kind of effect is intended based on our reading of the legislation. For example, it may be provided that:
“... section 259 of that Act shall have effect in relation to any inspector ... with the omission of paragraphs (f) to (h) of subsection (2) of that section.”
It is clearly intended here that the effect of section 259 should be changed in certain circumstances (in relation to “any inspector”). But, since the change doesn’t apply to all persons, we cannot interpret this as authority to change the text. We would say, in this case, that section 259 is being ‘modified’.
There are three main types of amendments to text and a much wider category of types of effect that do not alter the text. Both of these categories are described below.
Amendments to text The three main types of amendments to text are these:
| Amendment | Description | |-----------|-------------| | insertions | Where new text is inserted into existing text. If the new text is to be placed at the end of the existing text, the term ‘added’ may be used instead. | | substitutions | Where existing text is replaced by new text. | | repeals | Where existing text ceases to have effect and may also be removed from the legislation. Repeals may also relate to a whole Act. The amending legislation may alternatively (or, in many cases, additionally) specify that words or provisions ‘shall be omitted’ or ‘shall cease to have effect’. (Where this last expression only is used, we do not treat this as authority to remove the text.) |
Effects that do not change the text The ways in which a provision may be affected, apart from the straightforward amendments to text mentioned above, are almost infinitely varied and may be quite complex. The words used in annotations to denote such effects can do no more than give an indication of their general nature. The user is in all cases advised to consult the affecting legislation itself to discover the precise nature of the effect.
These effects may be described in annotations in many different ways, depending on the circumstances. Below are listed just a few of the more common conventional terms that you may find.
| Effect | Description | |--------|-------------| | amended | This has been used in the past to indicate any effect that changes the meaning of the specified legislation for all purposes, even if there is no authority to alter the text. In current practice, the term ‘modified’ is preferred. | | applied | Used where provisions of existing legislation are applied to new legislation or to some set of circumstances specified in the applying legislation. The expression ‘applied (with modifications)’ is used where the applied provisions are also modified to fit the new legislation or new circumstances. | | Effect | Description | |-----------------|---------------------------------------------------------------------------------------------------------------------------------------------| | excluded | Used where it is provided that the affected provisions are not to apply to the affecting legislation or to some specified set of circumstances. | | extended | Used for the extension of existing provisions to persons, things or other circumstances not previously included. It is commonly used where a provision is extended to a new jurisdiction such as the Channel Islands or the Isle of Man. The expression ‘extended (with modifications)’ is used where the extended provisions are also modified to fit the new circumstances. | | functions transferred | Used where functions under a provision formerly vested in one party are transferred to another. | | modified | Used for any situation in which the meaning or operation of a provision is altered without changing the text. (But note that, when used by drafters of legislation, the term ‘modified’ may be used much more loosely to mean any kind of change, including amendments to text). | | referred to | Widely found in annotations to the primary legislation of Northern Ireland, but rarely elsewhere in the revised legislation, it may denote any reference to legislation. | | restricted | Used to indicate that the application of the affected provision is being limited or reduced in relation to the affecting legislation or to some specified set of circumstances (as opposed to being completely excluded). |
**Northern Ireland Variations**
The conventions described above do not apply in full to annotations in Northern Ireland revised legislation inserted before 2006. Where the text is amended, the nature of the amendment is not usually mentioned, except in the case of repeals (when the abbreviation ‘rep.’ is used). Only a limited range of modifications etc. (not altering the text) will be found, many of these being noted simply as ‘referred to’.
**How we cite legislation**
This topic describes the main ways in which legislation may be cited (that is, referred to) in annotations. It does not set out to be an exhaustive description of all the ways in which legislation may be cited, whether in legislative text or elsewhere.
Here we have divided the citation methods into two categories:
- How we cite primary legislation
- How we cite secondary legislation
There are citations in footnotes in Statutory Instruments and other types of secondary legislation that do not conform to this editorial practice. For a full explanation of the methods of citation used in Statutory Instruments, see para. 2.11 in the publication ‘Statutory Instrument Practice’. How we cite primary legislation Described below are the ways in which we cite the various types of primary legislation.
Public General Acts of the UK Parliament These may be cited either:
by the short title (which includes the year) and chapter number (bracketed),
e.g. Constitutional Reform Act 2005 (c. 4)
or by just the year and chapter number (without brackets),
e.g. 2005 c. 4
Citations of pre-1963 Acts may also contain a reference to the ‘regnal year’ (that is, the year of the sovereign’s reign) of the session of parliament in which the Act was passed,
e.g. Statute of Westminster 1931 (22 and 23 Geo. 5 c. 4)
or
e.g. 1931 c. 4 (22 & 23 Geo. 5)
This means that the Act was passed in 1931 during the session of Parliament spanning the 22nd and 23rd years of the reign of King George the Fifth.
Local Acts of the UK Parliament These may be cited either:
by the short title (which includes the year) and chapter number in Roman numerals (bracketed),
e.g. London Local Authorities Act 1996 (c. ix)
or by just the year and chapter number (without brackets),
e.g. 1996 c. ix
Acts of Earlier Parliaments These may be cited in exactly the same way as UK Public General Acts except that, in the case of Acts of the old Scottish or Irish parliaments, there might also be a letter ‘S’ or ‘I’ as appropriate in square brackets at the end of the citation,
e.g. Writs Act 1672 (c. 16 [S])
or
e.g. 1705 c. 12 [I] Acts of the Scottish Parliament These may be cited either:
by the short title (which includes the year) and ‘asp’ number (bracketed),
e.g. Human Tissue (Scotland) Act 2006 (asp 4)
or by just the year and ‘asp’ number (without brackets),
e.g. 2006 asp 4
Measures of the National Assembly for Wales These may be cited either:
by the short title (which includes the year) and ‘nawm’ number (bracketed),
e.g. Welsh Language (Wales) Measure 2011 (nawm 1)
or by just the year and ‘nawm’ number (without brackets),
e.g. 2011 nawm 1
Note: The first Acts of the National Assembly for Wales are expected during 2012. A suitable example will be added at that time.
Acts of the Northern Ireland Assembly (and other primary legislation for Northern Ireland) These may be cited either:
by the short title (which includes the year) and chapter number (bracketed),
e.g. Social Security Act (Northern Ireland) 2002 (c. 10)
or by the year and chapter number (without brackets) followed by ‘N.I.’ (bracketed),
e.g. 2002 c. 10 (N.I.)
Acts of the Parliament of Northern Ireland (1921 to 1972) and Measures of the Northern Ireland Assembly (1974 only) are cited in exactly the same way as Acts of the Northern Ireland Assembly.
For the citation of Northern Ireland Orders in Council, see under ‘Statutory Instruments’ below.
Church Measures These may be cited either:
by the short title (which includes the year) and Measure number (bracketed),
e.g. Clergy Discipline Measure 2003 (No. 3)
or by just the year and Measure number (without brackets),
e.g. 2003 No. 3 How we cite secondary legislation Described below are the ways in which we cite the various types of secondary legislation.
Statutory Instruments These may be cited either:
by the title (which includes the year) and Statutory Instrument (S.I.) number (bracketed),
e.g. The Detergents Regulations 2005 (S.I. 2005/2469)
or by just the year and S.I. number (without brackets),
e.g. S.I. 2005/2469
Northern Ireland Orders in Council (which are in the form of Statutory Instruments), will be cited similarly, but with the addition of the ‘N.I.’ series number,
e.g. The Budget (Northern Ireland) Order 2005 (S.I. 2005/860) (N.I. 3)
or
S.I. 2005/860 (N.I. 3)
Scottish Statutory Instruments These may be cited either:
by the title (which includes the year) and Scottish Statutory Instrument (S.S.I.) number (bracketed),
e.g. The Tuberculosis (Scotland) Order 2005 (S.S.I. 2005/434)
or by just the year and S.S.I. number (without brackets),
e.g. S.S.I. 2005/434
Statutory Rules of Northern Ireland These may be cited either:
by the title (which includes the year) and Statutory Rules (S.R.) number (bracketed),
e.g. The Quarries Regulations (Northern Ireland) 2006 (S.R. 2006/205)
or by just the year and S.R. number (without brackets),
e.g. S.R. 2006/205
Church Instruments Until 2010, these instruments did not have any official series numbers (although numbers were assigned for the purposes of the database). They are therefore generally cited by date in the style:
Instrument dated 14.12.2000 made by the Archbishops of Canterbury and York
or, occasionally:
Archbishops’ Instrument dated 14.12.2000 Abbreviations used in annotations Listed below are the main abbreviations used in annotations (other than for legislation types, as to which see ‘How we Cite Legislation’ above). Where applicable, the plural is given in brackets. Unless otherwise stated, initial letters of the abbreviations are in lower case, except where they occur at the beginning of a sentence.
| Abbreviation | Meaning | |--------------|--------------------------| | art. (arts.) | article(s) | | Ch. (Chs.) | Chapter(s) (division of legislation) | | para. (paras.) | paragraph(s) | | prosp. | prospective | | Pt. (Pts.) | Part(s) | | reg. (regs.) | regulation(s) | | retrosp. | retrospective | | s. (ss.) | section(s) | | Sch. (Schs.) | Schedule(s) | | temp. | temporary |
PRESENTATION OF REVISED LEGISLATION
Presentation of Text The text of legislation on legislation.gov.uk follows the established layout and presentation of legislation using the Crown Legislation Schema and associated stylesheets. However, the web version and generated PDFs do not always follow the exact layout of the hard copy published version (‘the Queen’s Printer’s copy’) especially in cases where that may not be appropriate or helpful in the context of online presentation. However, where available the original print PDFs can be found under the ‘More Resources’ tab for reference.
Amendments in the amended legislation This topic explains how amendments will appear in the text of the legislation that is being amended. The appearance depends on the type of amendment: Insertions and Substitutions or Repeals.
Insertions and substitutions Insertions and substitutions that have been brought into effect are signified by square brackets:
Example: [http://www.legislation.gov.uk/ukpga/1977/49/section/31](http://www.legislation.gov.uk/ukpga/1977/49/section/31)
Insertions and substitutions that have not yet been brought into effect (that is, those that are ‘prospective’) are also displayed in square brackets:
Example: [http://www.legislation.gov.uk/ukpga/2006/22/section/1/prospective?timeline=true](http://www.legislation.gov.uk/ukpga/2006/22/section/1/prospective?timeline=true)
Each amendment is annotated with an ‘F-note’, and a sequential reference for that F-note is displayed in bold superscript at the beginning of the amendment.
NOTE: At present, amended text is not highlighted in any way, for example by using a different font or colour. In the future we plan to add a facility to legislation.gov.uk that will give users the option to ‘turn on’ amendment text highlighting. Northern Ireland Variations
The text of any insertions or substitutions by legislation made after 31 March 1981 but which were still prospective at the Northern Ireland basedate (1 January 2006) will not appear at all in the basedate version of the affected legislation. Instead there will be a footnote at the appropriate location indicating the nature of the amendment and citing the amending legislation (e.g. “prosp. inserted by 1991 NI 24”) – but see also ‘NOTE’ below. In such cases, the amendment text will be shown correctly, in line with standard practice, either when the amendment comes into force or, even if it is still prospective, when any new version is made of the provision to which it relates.
NOTE: When the N.I. revised legislation was converted in order to bring it together with the existing revised content, some footnotes relating to prospective insertions and substitutions (as mentioned above) were incorrectly located so that they appear to relate to the provision or sub-provision immediately following the one to which they actually relate. (For example, a footnote relating to a prospectively inserted art. 5A may appear to relate to art. 6.) These instances will be corrected as they are identified in the course of revision work.
Repeals
Repeals that have been brought into effect are signified by rows of dots. There are two ways in which a row of dots can be displayed:
- a short row of three dots for a repeal of words Example (repeal of words): http://www.legislation.gov.uk/ukpga/1995/46/section/104
- a full line of dots for the repeal of a whole provision or sub-provision Example (section contains multiple repealed sub-provisions): http://www.legislation.gov.uk/ukpga/1977/49/section/33 Example (whole section repeal): http://www.legislation.gov.uk/ukpga/1977/49/section/34
Where the text has been repealed only for a limited geographical extent (e.g. the text of a provision that extends to England and Wales is repealed for England only), the text will remain in place enclosed in square brackets.
Repeals that have not yet been brought into effect (that is, those that are ‘prospective’) are also displayed in square brackets:
Example: http://www.legislation.gov.uk/ukpga/2003/44/section/272/prospective?timeline=true
Where the whole of the legislation or a division of it larger than a single provision (e.g. whole Part, whole Schedule, etc.) has been repealed, the presentation of the repeal will depend on how the document is opened. If opened from the heading of the division of the legislation repealed, or the whole legislation repealed is opened, you will see the title, a line of dots and an annotation giving authority for the repeal. However, it will still be possible to open the individual provisions that are part of the larger repeal from the Table of Contents (this is to allow continued access to the Timeline of Changes), in which case you will be shown the section number, a line of dots and the annotation giving authority for the repeal.
Example:
- Whole Act repeal (view when opening whole Act): http://www.legislation.gov.uk/ukpga/1999/4
- Whole Act repeal (view when opening a provision): http://www.legislation.gov.uk/ukpga/1999/4/section/1 Northern Ireland Variations
In Northern Ireland revised legislation, repeals of whole provisions, sub-provisions, definitions, etc. occurring before 2006 will not appear as rows of dots. The repealed text is instead replaced by an italicised note giving authority for the repeal.
There are some variations in the location in the text of the F-note markers relating to repeals, particularly in relation to pre-2003 amendments. For example, current editorial practice is to insert the F-note marker at the beginning of a repealed provision or sub-provision, but older amendments may show the marker at the end of the row of dots. Also, most F-notes markers for the repeal of whole sections and sub-sections are at present appearing incorrectly immediately after the provision number. In future this will be corrected so that the markers appear before the provision number.
Amendments in the amending legislation
Amendments to text as they appear in the amending legislation are delimited by double quotes.
Example: http://www.legislation.gov.uk/uksi/2002/444/regulation/3/made
In the publication Statutes in Force (SIF), from which the originating revised text on legislation.gov.uk was mainly derived, purely amending or repealing provisions were generally not reproduced. In most cases these provisions have been restored in the revised legislation on the site but do not reflect any amendments made to them prior to the basedate. Where this is the case, an annotation explains the position.
Northern Ireland Variations
Amending and repealing schedules in pre-2006 legislation (and individual amending provisions in pre-1982 legislation only) do not appear in the text of Northern Ireland revised legislation. Amendments to those provisions are not carried through to the database. Amending and repealing schedules in legislation made from 1987 to 2005 may be accessed on legislation.gov.uk, but only in the form in which they were originally enacted. The original versions of the Orders in Council can be accessed using the ‘What Version’ buttons on the Table of Contents for the Order you are concerned with. Details of amendments to these schedules and provisions can be found in the Northern Ireland Chronological Tables of the Statutes (available only in hard copy, published by The Stationery Office, Belfast).
Annotations
Annotations are used in revised legislation on legislation.gov.uk to give authority for amendments or other effects on that legislation and to convey editorial information. They appear at the foot of the relevant provision or under the associated heading if relating to a higher-level division of the legislation such as a Part, Schedule, etc.
The information about annotations given here does not apply to footnotes in unrevised secondary legislation on the website. These are inserted by drafters of the legislation, not as part of the editorial process.
Annotations are categorised by annotation type, such as F-notes for textual amendments and I-notes for commencement information. For a detailed description of annotation types and what they contain, see ‘Annotation Types on legislation.gov.uk’ in the ‘How We Edit Legislation’ section above. Each annotation is identified by a sequential reference number. For example, the reference C3 would represent the 3rd occurrence of ‘Modifications etc. (not altering text)’ in the legislation you have opened. Similarly, M8 would be the eighth marginal citation in the legislation you have opened. For F-notes, M-notes and X-notes, the number also appears in bold superscript at the relevant location in the text.
Example: http://www.legislation.gov.uk/ukpga/Geo5/15-16/20/section/3
Annotations giving authority for an amendment or other effect on the legislation may contain one or more blue hyperlinks to the affecting legislation. The annotations will provide separate links to the whole amending Act and to each affecting provision cited. In annotations created after 2003 the most relevant provision (i.e. the one containing the details of the amendment or effect that has been carried through) will be in bold text. Clicking on the hyperlinks will take you to the relevant affecting legislation.
Example: http://www.legislation.gov.uk/ukpga/1995/46/section/17A
Note that annotations may appear at any level in a piece of legislation (e.g. Part, Schedule or whole Act), not just at provision level, and you may need to check against these higher levels of division for relevant annotations. Most types of annotation that relate to a whole Act appear under the long title. (To see these you will need to open the introductory text.) One notable exception is the annotation that indicates the final repeal of a whole Act, which appears against the short title.
Northern Ireland Variations In Northern Ireland legislation made in 2005 and earlier years, all annotations appear as F-notes under the ‘Annotations’ heading without any sub-categories. Also, annotations inserted prior to 2006 do not follow the format illustrated above – see ‘Editorial Conventions – Content of Annotations’ in the ‘How We Edit Legislation’ section above. In legislation made in 2006 and later years, the style and categorisation of annotations are consistent with the standard practice described.
Timeline of Changes The Timeline of Changes enables users to see how revised legislation has changed or could change over time by providing access to points in time where changes occurred. The timeline can be viewed by selecting ‘Show Timeline of Changes’ from the left-hand menu when viewing revised legislation.
Dates on the Timeline The first date on the timeline will usually show the provision in the form in which it was enacted or made, or in the form in which it had effect at the relevant basedate (1 January 2006 for Northern Ireland legislation or 1 February 1991 for all other revised legislation) if that was later. That date will be based on the earliest date on which that provision was in force to any extent or for any purpose (or the basedate if that was later). In the case of higher levels of provisions such as Parts, Chapters, etc. the first date on the timeline will be no later than the earliest in force date of any provision beneath it. (Note that dates on legislation.gov.uk are abbreviated by day / month / year, e.g. 1 February 1991 is abbreviated as 1.2.1991). A new date is added to the timeline whenever the text is amended. Dates added as a result of an amendment or other effect will be based on the earliest date at which that effect came into force to any extent or for any purpose. Once a new date is added to the timeline for a new amendment, the new amended version of the text will supersede the previous dated version and appear as the current version.
For example:
- A section extending to England and Wales is substituted in relation to the whole of that extent, but the substitution is brought into force for England on 1 January 2006 and for Wales on 1 February 2007. The date of the new version will be 1 January 2006.
- A sub-section is substituted and the new text contains a power to make subordinate legislation but does other things as well. The amendment is brought into force on 1 April 2006 for the purpose only of exercising the power to make subordinate legislation. It is otherwise not in force. A date of 1 April 2006 will be added to the timeline.
New dates are not usually added to the timeline for modifications and other effects that do not alter the text. Occasional exceptions are made to this policy. For example, a provision is modified at frequent intervals by statutory instruments and each such instrument revokes the previous one. The provision would rapidly become overburdened with redundant annotations. In these circumstances, a new date would be added to the timeline each time it is modified and superseded annotations removed from the new version.
NOTE that the commencement of any provision of an Act may be determined by the terms of the Act itself or it may be left to be determined subsequently (usually by a Statutory Instrument called a ‘Commencement Order’). In the latter case, we say that the provision is ‘prospective’. Instead of a new date being added to the timeline, the word ‘prospective’ will appear. If an Act is completely silent as to the commencement of a provision, it means that the provision comes into force on the Royal Assent date (or the day after Royal Assent for Acts of the Scottish Parliament).
The timeline shown at individual provision level (e.g. section) will include only the dates of changes that occurred to that provision. Timelines at higher levels (e.g. Act or Part) will include all the dates of changes that occurred to any provision that comes under that heading as well as any changes that have occurred to that level specifically, e.g. words in the Part title have been substituted. This means that there may be many more dates on a timeline at higher levels than within individual provisions.
There are some limited scenarios where provisions are assigned a date as from which they no longer have effect, a ‘stop date’. For example, where the whole of the legislation or a division of it larger than a single provision (e.g. whole Part, whole Schedule, etc.) has been repealed, the earliest date on which the repeal came into effect is added to the timeline at that higher level. When viewing the legislation at the repealed level as at that date or later, the provisions within it will no longer be visible. Instead you will see a single dotted line together with an annotation giving authority for the repeal. You can still navigate to those individual provisions via the Table of Contents. They will also appear as dotted lines with an annotation giving authority for the repeal. The timeline will show the effective date of the repeal as a ‘stop date’.
Example:
- Timeline of Changes for a wholly repealed Act (whole Act opened): http://www.legislation.gov.uk/ukpga/1999/4?timeline=true
- Timeline of Changes for a wholly repealed Act (individual provision opened): http://www.legislation.gov.uk/ukpga/1999/4/section/1?timeline=true Geographical Extent
Geographical extent information is added to all revised legislation at every provision level (e.g. Part, section, etc.). The primary purpose of this information is for use by the search engine when using ‘Advanced search’ to determine whether a version of a provision is relevant to the part of the United Kingdom specified in the search criteria. For this reason, the term ‘extent’ as currently used on legislation.gov.uk may also denote a limited territorial application within a wider technical extent. For example, the extent of the legislation may be ‘England and Wales’ but it only applies in Wales.
The geographical extent information can also be viewed by selecting ‘Show Geographical Extent’ from the left-hand menu when viewing revised legislation.
The extent is set to the widest geographical coverage to which the version applies. This example shows the widest extent available: http://www.legislation.gov.uk/ukpga/1998/42/section/1?view=extent
For a higher level provisions (e.g. Part), the extent must be wide enough to encompass the extents of all versions of any provisions beneath it in the hierarchy. The extent settings used on the website are:
- England (E)
- Wales (W)
- Scotland (S)
- Northern Ireland (N.I.)
or any combination of these.
Thus, UK extents are represented as E+W+S+N.I. and GB extents are represented as E+W+S. Church of England Measures, which generally extend to the provinces of Canterbury and York, are treated as ‘E’.
The extent attribute is not intended to represent precisely the technical extent of the provision in question but rather to ensure that all versions are returned that may be relevant to the user’s search criteria, e.g. that extend to Scotland, or that apply only in Wales. For detailed information, you should refer to any extent annotations (E-notes) or to any provisions in the legislation about extent or territorial application. Where there are multiple versions of a provision that apply to different geographic extents, it is the sum of the extents of these versions that will represent the widest extent for the provision as a whole. (Example: http://www.legislation.gov.uk/ukpga/1985/67/section/6)
NOTE that, although there will usually be one or more provisions in an Act determining the extent of the Act, this is not always the case. If an Act of the UK parliament is silent as to its extent, this means that it extends to the whole of the United Kingdom.
You should treat with caution the extent attributes for amending or repealing provisions where it is provided that the extent of any amendment, etc. is the same as that of the provision being amended. The “effective extent” in these cases is not researched for the purpose of setting the attributes. Practice has varied over time. Formerly, the attributes for such provisions were set to a special extent category of ‘Co-extensive’ that has translated onto the current system as ‘UK’. Present practice in these cases is to set the attribute initially to the extent the provision would otherwise have had but for the ‘co-extensive’ provision and only to revisit it if the provision in question is itself later amended.
All Acts of the ‘pre-UK’ parliaments have been set initially to the extent appropriate to the relevant jurisdiction. Thus, all Acts of the old English parliament are set to ‘E+W’, all Acts of the old Scottish parliament to ‘S’ and so on. The extent attributes of these Acts will not reflect any territorial extensions made to them before the basedate. Any extent changes after the basedate will be reflected.
When resources and priorities permit, changes will be made to the way in which ‘extent’ information is presented on legislation.gov.uk to display separately information about extent and territorial application. This will enable us, for example, to specify more clearly that legislation extending to England and Wales applies only in Wales, without having to resort to an artificial ‘Wales extent’. Confers power If a provision confers power to make secondary legislation, this information will be recorded in the legislation data. A list of any provisions that confer power can be viewed by selecting the ‘More Resources’ tab from any item of revised legislation.
Example: [http://www.legislation.gov.uk/ukpga/1985/67/resources](http://www.legislation.gov.uk/ukpga/1985/67/resources)
Sometimes secondary legislation confers power to make other secondary legislation. This information is not recorded for secondary legislation (except, from 2006 onwards, in the case of Northern Ireland Orders in Council that are treated for our purposes as primary legislation).
Note that this attribute may not have been set for legislation dating from before the revised legislation basedate.
Northern Ireland Variations In Northern Ireland legislation made in 2005 and earlier years, no power attributes have been set. There are at present no plans to correct these generally, but new powers created in that legislation by subsequent amendments will be set correctly.
Blanket amendment A provision may make an amendment or modification that is framed in such a way as to affect legislation generally rather than any specific enactment. We call this a ‘blanket amendment’. A list of any provisions that apply blanket amendments can be viewed by selecting the ‘More Resources’ tab from any item of revised legislation.
An example of a blanket amendment that changes the text of affected legislation might be: “For the words "Supreme Court Act 1981" wherever they occur in any enactment substitute "Senior Courts Act 1981".”
However, as well as amendments to text, any other significant effect, such as a modification (but not a mere power to amend or modify), if directed to legislation generally, will be recorded as a ‘blanket amendment’. (A more accurate term might be ‘blanket effect’.) The relevant effect might either be aimed at all legislation or at a more limited category of legislation the precise contents of which are not readily identifiable. In either case, this would be called a ‘blanket amendment’ and the attribute set to ‘Y’. Where there is no blanket amendment, the attribute will be set to ‘N’.
‘Blanket amendment’ information is not recorded for secondary legislation.
Note that this attribute will not usually have been set for legislation dating from before the relevant basedate.
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9fad89366f4c2cf2bc575cfaa5ef678ecc7d660d | 1. Purpose
1.1 To update Cabinet on the condition of the roof at the Guildhall, specifically that of the older part of the building, and seek approval to procure and appoint a contractor to undertake the roof works.
2. Recommendations
That Cabinet:
2.1 Approves the roof works to the Guildhall roof pursuant to paragraph 3.3.4 of this report;
2.2 Delegates authority to the Economic Growth and Regeneration Manager, in consultation with the Borough Secretary and Cabinet Member for Regeneration and Enterprise to appoint a contractor for the Guildhall roof replacement works following the completion of a tender process; and
2.3 Approves the appointment of a legal advisor if specialist construction law advice is required 3. Issues and Choices
3.1 Report Background
3.1.1 During the summer of 2018 repairs to the roof of the Guildhall extension were undertaken to address the water ingress issues in the office areas following heavy rainfall.
3.1.2 Whilst the Guildhall extension remains dry, there are substantial leaks in the original part of the Guildhall, notably in the Council Chamber, Mayors Shields Gallery and the Great Hall.
3.1.3 The leaks are causing substantial damage to the historic fabric of the building.
3.1.4 The leak in the Mayors Shields Gallery became so bad that a tarpaulin is permanently in place over the glass atrium, cutting out natural light from the area.
3.1.5 Stimpson Walton Bond Ltd, Chartered Architects (SWB) were appointed to undertake surveys of the roof, develop a scope of works and to manage the repair and restoration of the roof works to the original part of the Guildhall.
3.1.6 A roof condition survey has been undertaken by SWB which included visual inspections of the pitched roofs. Following the inspections, it was identified that there is substantial damage to the roof slates, protected patent glazing to the Great Hall and the guttering. Lead weld patch and flashing repairs are also required and a crack in the wall between the extension and existing gable wall needs to be addressed.
3.1.7 A report has been submitted by SWB that identifies that there are several parts of the roof that require urgent repair (Priority 1), some that will require attention within the next 12 months (Priority 2), and recommendations for work needed within the next 5 years (Priority 3).
3.1.8 The anticipated costs of the Priority 1, 2 and 3 recommendations are estimated at circa £316,500.
3.1.9 Other costs which need to be accounted for include design, survey and Project Management fees £30,000, contractor preliminaries £50,000, scaffolding £70,000 and a contingency £30,000.
3.1.10 SWB will tender this work on behalf of the Council, adhering to the Council’s procurement rules and thresholds A high weighting (70%) will be placed on cost to ensure Value for Money is achieved.
3.2 Issues
3.2.1 Due to the location and height of the roofs, scaffolding is required. To offset this cost and achieve value for money other projects within the same area should be undertaken in conjunction with the roof works. 3.2.2 There is currently no access for general maintenance and repair to the Guildhall roof since a gate to the fire escape was installed that serves the properties at Wood Hill. Within the pricing for the roof works is provision to install a galvanised steel gantry and ladder access out of the Farmers Room and up onto the roof and to create a platform to enable access to the clock tower. This will require listed building consent which will be obtained before this work takes place.
3.2.3 Not all areas of the roof are accessible, even with use of a drone and further repairs may be identified once the scaffold is in place, an additional 5% contingency has been included within the budget to cover any potential urgent variations identified.
3.3 Choices (Options)
3.3.1 Option 1 – Do nothing This option is not recommended because of the substantial damage caused to the historic parts of the Guildhall caused by water ingress during heavy rainfall.
3.3.2 Option 2 – Undertake the Priority 1 works only This option is not recommended because although it would address the immediate problems being experienced, it would be a false economy as the report identifies that further works will be required within the next 12 months which would necessitate the use of scaffolding and associated costs.
3.3.3 Option 3 – Undertake Priority 1 & 2 Works This option is not recommended as the report identifies that further works will be required in the next 5 years that will necessitate the use of scaffolding and associated costs.
3.3.4 Option 4 - Undertake all works identified in the Roof Condition Survey Report. This is the recommended option because it ensures that all works are completed whilst the scaffold is in place. As the cost of the scaffolding is high (circa £70K) it makes economic sense to maximise the work that is undertaken, thus ensuring savings in future years.
4. Implications (including financial implications)
4.1 Policy
4.1.1 This report does not set policies nor have implications on existing policies.
4.2 Resources and Risk
4.2.1 Funding the project has been earmarked from the Capital Project General Fund with a budget of £500k allocated for this work. 4.2.2 The estimated full cost of these works is £496,500 as set out in Para’s 3.1.8 and 3.1.9 of the report.
4.2.3 The key financial risk of the proposal is that some areas of the roof are not fully accessible, even with use of a drone, the true condition cannot be properly assessed until the scaffolding is in place. As noted above additional contingency has been included on the project to account for this risk.
4.3 Legal
4.3.1 The tender process and appointment will be undertaken in accordance with the Council’s Contract Procedure Rules.
4.3.2 The project may require the appointment of a law firm to provide specialist construction legal advice.
4.4 Equality and Health
4.4.1 Due to substantial ingress of rainwater into the Old Town Hall and subsequent soaking of walls, there is a risk that those attending meetings in the affected rooms could be at risk of illnesses associated with dampness such as fungal infections, bronchitis and asthma.
4.5 Consultees (Internal and External)
4.5.1 The following have been consulted:
- Building Control Manager
- Senior Planning Services Officer
- Stimpson Walton Bond Architects
- Property Services Manager
4.6 How the Proposals deliver Priority Outcomes
4.6.2 A Stronger Economy
- Protect, enhance and promote our heritage The Guildhall is a 2\* Listed Building and one of the best examples of Gothic architecture in the country. Replacing parts of the roof that are leaking will help to preserve the building for future generations.
4.7 Environmental Implications (including climate change issues)
4.7.1 Making repairs to the roof will help to reduce heat loss from the building.
4.8 Other Implications
4.7.1 There are no implications other than those covered in this report. 5. Background Papers
5.1 Northampton Guildhall Roof Inspection Report & Schedule of Works prepared for Northampton Borough Council by Stimpson Walton Bond Chartered Architects – To be requested separately as contains confidential cost estimates.
6. Next Steps
6.1 Tender process to appoint contractor - July 2020
6.2 Works commence on site – August 2020
Kevin Langley Economic Growth and Regeneration Manager
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70e445b024e271e9806faa7a36d6ba3da889abcb | The National Archives Education Service
The Gunpowder Plot Can you uncover the plans of the plotters?
Initial Detail of James I Coram Rege Rolls 1623 (KB27/1522) The Gunpowder Plot
Around midnight on Monday 4th of November 1605, Sir Thomas Knyvett was ordered to carry out a search of the rooms below the hall in which Parliament, crammed with MPs and Lords, would be opened the following day by King James. There he met a man coming out of a room packed with firewood who gave his name as John Johnson. Knyvett arrested him and searched the wood to find hidden within it 36 barrels of gunpowder, enough to blow up the entire Palace of Westminster and everyone in it. Johnson carried fuses and a timer. He was taken straight to the Tower of London to be questioned.
King James’ men had decided to search the Palace because of a letter that Lord Monteagle had received a few days before. Monteagle took the letter straight to the government.
Look at the letter and other documents below and see if you can unravel this Gunpowder plot.
Contents:
Teacher’s notes: ................................................................. 3 Questions: ........................................................................ 4 Source One: ...................................................................... 5 Source Two: ...................................................................... 6 Source Three: ................................................................. 9 Source Four: ................................................................. 11 Source Five: ................................................................. 13
This resource was produced using documents from the collections of The National Archives. It can be freely modified and reproduced for use in the classroom only. The Gunpowder Plot
Can you uncover the plans of the plotters?
Teacher’s notes
This lesson is suitable for History Key stage 3 unit 1: Section 1: Who is the most important person I know about in history? Or unit 22: units 1-6: The role of the individual for good or ill?
Additional simplified transcripts are provided to support all pupils as the language used within the documents is often challenging. Teachers could adapt this lesson if they wish to carry out a group-based activity. Small groups could work on printed versions of the different sources and present to the rest of class. They could also work in small groups at a whiteboard and present to the class that way. Alternatively, teachers might wish to approach the topic through the last task (5d) alone.
Extension activities
Teachers could use the evidence to construct a role play activity investigating the plot with the key characters: King James, Lord Monteagle, ‘Johnson’, Percy and others.
After the explosion, the plan was that some of the plotters would lead an uprising in the Midlands. They would kidnap Princess Elizabeth, James’ nine year old daughter, from her household at Coombe Abbey, to use as a figurehead through whom they could rule the country and restore the rights of Catholics. However, their explosives expert was disturbed as he arrived to light the fuse...
The trial of the eight surviving conspirators was held in the same room they had tried to blow up: Westminster Hall, within the Parliament building. All eight were found guilty and by the end of January 1606, all eight had been executed. The plotters were hung, drawn and quartered. Their heads were then set upon poles as a warning to others. Teachers might wish to discuss with their pupils what would have happened if the plot had succeeded.
As result of the plot, James I became more popular having survived an attempt on his life. However, it became harder for Catholics to practise their religion or play a part in society. Finally, there is no doubt that Guy Fawkes is remembered incorrectly as the main plotter, a myth perpetuated as generations of children celebrate Bonfire Night.
Background
During the reign of Queen Elizabeth I, followers of the Roman Catholic religion in England had faced serious difficulties including harsh fines and the risk of imprisonment or violence. Catholic priests, vital to the practice of the religion, were banned and government spies tried hard to round up those who were secretly working in the kingdom.
When James I came to the throne Catholics in England thought that things would get better for them, but James kept all of Elizabeth’s tough laws against Catholics. Very early in his reign a group of Catholic noblemen decided that the King would have to be killed for things to change.
On 26th October 1605 Thomas Ward, a servant of the Catholic Lord Monteagle, was given a letter by an ‘unknown man’ to give to his master. When Monteagle read the letter he found it was a warning to stay away from the opening of Parliament, due in a few days. He gave the letter directly to the Privy Council and the King in Whitehall.
Although the conspirators knew the letter had been passed to the government they decided to go ahead as planned, trusting that their explosives expert was unknown to the authorities. The plot did not succeed. Questions
Task One – Source One
This is the letter sent to Lord Monteagle a few days before parliament. What two steps does the writer want Lord Monteagle to take? Why does the writer suggest that Lord Monteagle should follow this advice?
Task Two – Source Two
This is a copy of the examination of John Johnson.
- Who do you think John Johnson might be?
- What did Johnson plan to do to parliament?
- Name one of the other plotters whom Johnson mentions
- Was Johnson worried about any Catholics who might have been there?
Task Three – Source Three
This is a proclamation (royal demand) made after the plot was discovered.
- Why does the government want Thomas Percy to be captured alive?
- Who else has Thomas Percy tried to blow up apart from the King and Parliament?
- Why do you think the plotters might have wanted to kill these other people?
- Read the description of Thomas Percy. Do you think it is enough information for him to be found?
Task Four – Source Four
Soldiers tracked Thomas Percy to Holbeach House in Staffordshire. This is a statement given by Thomas Wintour, another one of the plotters who was there:
- Who were the plotters present at the house?
- What happened when the ‘company beset’ (soldiers attacked) the house?
Task Five – Source Five
Guy Fawkes/John Johnson has been questioned and given more information. Read this extract and answer the following questions:
- What was the plotters’ plan for Princess Elizabeth?
- Does this support the evidence provided in Source 2?
- Why do you think Fawkes seems to have changed his story?
- Finally, look at all of the sources again and write a report on the plot including the following: Who was involved?
- What was the plan?
- Did it have any weaknesses?
- What was the outcome? Transcript
My lord, out of the love I have for some of your friends, I want to make sure you are safe. Because of this I would advise you not to attend this sitting of parliament because God and man have agreed to punish the wickedness of this time. Do not think this is a joke, go to your estate in the country where you will be safe, because although there is no sign of any problem yet, this parliament will receive a terrible blow, but they will not see who it is that hurts them. This advice should not be ignored as it may do you some good, and it can do you no harm because the danger will have passed as soon as you have burned this letter. I hope God grants you the grace to make good use of it, and that he protects you.
Simplified transcript
My lord, out of the love I have for some of your friends, I want to make sure you are safe. Because of this I would advise you not to attend this sitting of parliament because God and man have agreed to punish the wickedness of this time. Do not think this is a joke, go to your estate in the country where you will be safe, because although there is no sign of any problem yet, this parliament will receive a terrible blow, but they will not see who it is that hurts them. This advice should not be ignored as it may do you some good, and it can do you no harm because the danger will have passed as soon as you have burned this letter. I hope God grants you the grace to make good use of it, and that he protects you.
Glossary
Preservacion : safety Concurred : agreed Country : estate Source Two - Extract from the examination of 'John Johnson', 5th November 1605
[Handwritten text from the examination of 'John Johnson', 5th November 1605] Transcript
D. He saith, that he knows not but by generall report and by making ready of the kings barge, that the king was coming thither the first day of this parliament, But confesseth that his purpose was to have blowne upp the upper house whencesoever the king was there.
E. And being demanded if his purpose had taken effect, what would have ben done with the Queenes Majesty and her royall issue, saith that if they hadd ben there he wuld not have helped them,
F. And being demanded if the king and his royall issue had ben all taken away whom would have ben published or elected king, Saith Percie never entered into that consultation.
G. And being demanded when the king, his royal issue, the Nobles, Bishops, Judge, and of the principall of the Comons, were all destroyed what government would have ben, Answereth we were not growne to any determination therein, and beeing but a fewe of them the could not enter into such conforsation, but that the people of themselves would decide a head.
H. He confesseth that he hath knowne Mr Percy two or three years but served him not, but about three moneths before the house was hired as is aforesaid, I. Being demanded what noble men were warned, that they would not be there at that time, Answereth, wuld durst not forewarn them for feare wich should be discovered , And being asked why he would be a partie to any acte that might destroy any that was of his owne relligion, Answereth, we meant principally to have resported [regarded, seen] somme safely, and would have prayed for them. Simplified transcript
D. He said he did not know, except from rumours and from the Kings barge being made ready, that the king was coming here on the first day of this parliament, but he did confess that his job was to blow up the upper house when the King was there.
E. And, being asked what would have happened to the Queen and her children if his plan had been carried out, he said that if they had been there, he would not have helped them.
F. And, being asked who would replace them if the King and all his heirs had been killed, he said Percy never asked that question.
G. And being asked, when the King, his heirs, the Nobles, Bishops, Judge and the leader of the commons were all destroyed, what kind of government would there be, he answered that the people themselves would elect a head.
H. He confessed that he has known Mr Percy two or three years, but hasn’t worked for him, however about three months ago the house was hired as is already mentioned.
I. Being asked what Noble men were advised to stay away from parliament at that time, he answered that he wouldn’t date warn them for fear that they should be discovered. And asked why he would be a part of any act that might kill someone of his own religion [Catholic], he answered that some would have been seen safe and they would have prayed for them. A Proclamation for the search and apprehension of Thomas Percy.
Whereas one Thomas Percy, a Gentleman Pensioner to his Maiestie, is discovered to have been privy to one of the most horrible Treasons that ever was contrived, that is, to have blown by this day, while his Maiestie should have been in the upper House of the Parliament, attended with the Queene, the Prince, all his Nobilitie & the Commons, with Gun-powder (for which purpose a great quantitie of Powder was conveyed into a Vault under the said Chamber, which is this morning there found) the Chamber where they should bee assembled, which Percy is Sithens fled: These are to will and command
mand all our Officers and loving Subjects whatsoever, to doe that which we doubt not but they will willingly performe according to the former experience we have had of their love and zeal toward vs, That is, to make all diligent search for the said Percy, and him to apprehend by all possible meanes, especially to keepe him alive, to the end the rest of the Conspirators may be discovered. The said Percy is a tall man, with a great broad beard, a good face, the colour of his beard and head mingled with white haires, but the head more white then the beard, he stouped somewhat in the shoulders, well coloured in the face, long footed, small legged.
Given at our Palace of Westminister, the fift day of November, in the third yeere of our Reigne of Great Britaine.
Anno Dom. 1605. Transcript
Whereas one Thomas Percy, a Gentleman Pensioner to his Majesty, is discovered to have been privy to one of the most horrible Treasons that ever was contrived, that is, to have blown up this day, while his Majesty should have been in the upper House of the Parliament, attended with the Queen, the Prince, all his nobility and the Commons with Gunpowder (for which purpose a great quantity of Powder was conveyed into a vault under the said Chamber, which is this morning there found) the Chamber where they should be assembled, which Percy is sithens fled: These are to will and command all our Officers and loving Subjects whatsoever, to do that which we doubt not but they will willingly perform according to the former experience we have had of their love and zeal towards us, That is, to make all diligent search for the said Percy, and to apprehend by all possible means, especially to keep him alive, to the end the rest of the Conspirators may be discovered. The said Percy is a tall man, with a great broad beard, a good face, the colour of his beard and head mingled with white hairs, but the head more white than the beard, he stoopeth somewhat in the shoulders, well coloured in the face, long footed, small legged. Given at our Palace of Westminster, the fifth day of November, in the third year of our reign in Great Britain. Anno Domini 1605
Simplified transcript
Whereas one Thomas Percy, a bodyguard to the King is found to have been involved in one of the most horrible acts of Treason ever planned, that is, while the King, Queen, Prince, all the nobility and the commons were in the upper house, it was to be blown up with gunpowder (and for this purpose a great deal of powder was moved into a cellar under the house which was found there this morning), and Percy has now run away. These commands call our Officers and loyal subjects to willingly search for Percy and arrest him using all possible means, but keeping him alive, so we can discover the rest of the plotters. Percy is a tall man with a great broad beard and a good face. His beard and head is sprinkled with white hairs, however his head is whiter than his beard. He stoops slightly and has a good colour in his face as well as big feet and short legs. Given at the Palace of Westminster, the fifth of November 1605.
Glossary
Gentleman Pensioner: Bodyguard Sithens : now Source Four: Thomas Wintour’s Confession, 23rd of November 1605
When I came I found Mr. Catshbye I was unable well, Mr. Percy, Doug, Mr. Wright, Mr. Ruckwood, and Mr. Grant. I asked them what they wished to do. They answered, we meant to die. I say, anyway, I would take a part of the gunpowder, and so I walked with the round shot into the shoulder, and lost me. So I put my arm, the next shot was ye elder Knight. Then I said, after you, ye younger, Mr. Wright, and fourteen Imbroe. Ruckwood, Mr. Page, Mr. Catshbye, and some before, ye three, ye wore a suit, and ye two wore shot (as far as I could see, ye one bullet) and ye gun, ye company entered upon me. Transcript
When I came I found Mr. Catesby reasonably well. Mr. Percy, both the Wrights, Mr. Rokewood and Mr. Grant were also there. I asked them what they planned to do. They answered “We mean to die here”. I said again that I would do the same as them. At about eleven o’clock the house was raided by soldiers and as I walked into the courtyard, I was shot in the shoulder, which lost me the use of my arm. The next shot struck the elder Wright, and after him the younger Mr. Wright, then fourthly Ambrose Rokewood. Mr. Catesby then said to me (standing in front of the door they were about to come through) Stand by Mr Tom, and we will die together.” “Sir,” I said “I have lost the use of my right arm and think that means I will be captured.” So as we stood close together, Mr Catesby and Mr Percy were shot and I was arrested.
Simplified transcript
When I came I found Mr. Catesby reasonably well. Mr. Percy, both the Wrights, Mr. Rokewood and Mr. Grant were also there. I asked them what they planned to do. They answered “We mean to die here”. I said again that I would do the same as them. At about eleven o’clock the house was raided by soldiers and as I walked into the courtyard, I was shot in the shoulder, which lost me the use of my arm. The next shot struck the elder Wright, and after him the younger Mr. Wright, then fourthly Ambrose Rokewood. Mr. Catesby then said to me (standing in front of the door they were about to come through) Stand by Mr Tom, and we will die together.” “Sir,” I said “I have lost the use of my right arm and think that means I will be captured.” So as we stood close together, Mr Catesby and Mr Percy were shot and I was arrested.
Glossary
Quoth : said Beset : attacked Transcript
Forasmuch as they knew not well how they should come by the person of the Duke Charles [the future King Charles I, aged 5], being near London, where they had no forces (if he had not been also blown up) he confesseth that it was resolved among them that, the same day that this detestable act should have been performed, the same day should other of their confederacy have surprised the person of the Lady Elizabeth [the King’s eldest daughter, aged 9] and presently have proclaimed her Queen, to which purpose a proclamation was drawn, as well to avow and justify the action, as to have protested against the Union, and in no sort to have meddled with religion therein, and would have protested against all strangers, and this proclamation should have been made in the name of the Lady Elizabeth. Simplified transcript
They did not know how they would be able to get Duke Charles [son of King James] if he had not also been blown up as they did not have any forces (soldiers) near London. He confessed that it was decided amongst them that, on the same day that this horrible act was carried out, one of their group should kidnap the Lady Elizabeth [eldest daughter of King James] and declare her Queen, and a statement made in her name which justified this step and that it was her wish not to interfere in religion of the country.
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b69f28b73fd9ba4e42b7be12a2c283b009ed3476 | QUICK READ Guy’s and St Thomas’ NHS Foundation Trust implemented AP Forensics to provide a more effective method of protecting their working capital. Internal audits had confirmed that some AP processes were inefficient, and incorrect payments were being made.
By implementing FISCAL Technologies’ AP Forensics solution, senior finance managers and the internal auditors are given the assurance they need that there are adequate controls in place to protect the Trust’s funds.
Since implementing AP Forensics, the trust has prevented duplicate payments and made process improvements that deliver significant monetary and time-saving benefits, achieving payback within 6 months. To date, the Trust has received a return of over 10 x the investment made.
BACKGROUND Across the NHS, there is a constant need to identify new opportunities for cost savings and process improvements - to ensure maximum funds are available for patient care. Like most Trusts, GSTT’s existing control were manual and time consuming. They had once been adequate but had not scaled-up as the number of transactions increases and the ways in which errors occur has evolved. Their methods included ERP-based invoice checking, statement reconciliation and manual checking.
These existing controls were no longer adequate for two reasons - they didn’t identify all erroneous payments and were reactive – only identifying past payments that were incorrect, then attempting recovery of these payments. This is a time-consuming, passive process that allowed working capital to leave the Trust before some of the incorrect payments were recovered, sometime later.
Identifying an opportunity to bypass the fundamental problem with post-payment recovery, the Accounts Payable team at GSTT took the initiative, and moved from reactive to proactive protection of their supplier payments by deploying AP Forensics.
“FISCAL’s solution delivered a rapid and significant return on investment. The Trust now has a proactive solution to safeguard its funds, and I am very happy with the results and assurance this provides.”
Catherine Eyre, Chief Accountant SOLUTION The Trust’s Chief Accountant and AP Manager engaged FISCAL Technologies to conduct a Risk Review, in which a sample of AP transactions are run through FISCAL’s forensic solution, identifying high-risk transactions and other potential areas of risk.
The Risk Review uncovered sufficient duplicate payments, that when recovered, would make the solution self-funding for the initial 3-year service agreement. By using the Trust’s actual data, the Risk Review - a proof of concept exercise, demonstrated with a high degree of accuracy, the latent value that would be unlocked by FISCAL’s solution.
Following the risk review and decision making, FISCAL’s AP Forensics solution was implemented as Software as a Services (SaaS) - hosted in a secure cloud by FISCAL. A short training program allowed the Trust to quickly receive value from the solution.
THE FUTURE The Trust plans to extend its use of FISCAL’s solution by migrating to NXG Forensics® - the latest version, to increase fraud protection and process improvements through master supplier file analysis, and taking advantage of increasing forensic and artificial intelligence capabilities as they dovetail the solution into their overall financial systems strategy.
RESULTS The solution was brought in initially to address duplicate payments, and by identifying high-risk transactions before payments are made, paid for itself many times over. After an initial one-off sweep through historical transactions, which found enough overpayments to fund the purchase of the software licence, all new invoices that are approved for payment are now checked overnight by FISCAL’s solution, and the high-risk transactions are flagged-up for investigation, crucially, before the payment is made.
The depth of forensic analysis provided by FISCAL’s solution resulted in high-risk transactions being identified that had previously been missed, and the senior finance management team have increased confidence that the Trust’s supplier payments are adequately protected.
There are many financial benefits to implementing FISCAL’s solution; some are easily measured, and others such as time saved through process improvements and fraud prevention are only estimated. By helping the team improve their efficiency, and boosting moral with the team’s pioneering approach, the Trust has shown that a well set-up AP team with good processes already in place can demonstrate that continual improvement makes an exceptional impact.
CONCLUSIONS Adopting a proactive approach means that working capital remains within the Trust, benefitting their patients. The financial return on investment was rapid and has a long-tail of ongoing process improvements and protection from risk and fraud that has exceeded the original business case expectations.
“We are extremely satisfied with the service and solution we receive from the FISCAL team. With the benefits received from the solution to date, I am happy to recommend it to other NHS trusts.”
Dawn Clarke, Accounts Payable Manager
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b88529f3e660928f787961ae2fdceca468668d0c | # National Habitat Network Maps
## User Guidance v.2
## Contents
| | Page | |---|------| | 1 | Introduction | 2 | | 2 | Individual Habitat Network Maps | 4 | | 3 | Combined Habitat Networks Map | 9 | | 4 | Grouped Habitat Networks Maps | 10 | | 5 | Woodlands, Open Waters and Coastal Habitats | 11 | | 5.1 | Woodland Habitats | 11 | | 5.2 | Lakes and Rivers | 12 | | 5.3 | Coastal Habitats | 15 | | 6 | Relationship to the Nature Network Handbook | 16 | | 7 | Further Information/Frequently Asked Questions | 18 | | 7.1 | Habitat data used | 18 | | 7.2 | Habitat network tool & approach | 21 | | Annex 1 – Additional Information | 28 |
## Citation:
Edwards J, Knight M, Taylor S & Crosher I. E (May 2020) ‘Habitat Networks Maps, User Guidance v.2’, Natural England.
Cover Photo: ©26429/Natural England/Chris Gomersall, 1990
1. Introduction
Making Space for Nature, A review of England’s Wildlife Sites and Ecological Network(^1), published 2010, set out the essence of what needs to be done to enhance the resilience and coherence of England’s ecological networks. The report proposed that this could be summarised in four key words: **more, bigger, better and joined**.
Theresa Villiers (Secretary of State for Environment, Food and Rural Affairs) speech(^2) on the Environment Bill stated that this will "require the preparation and publication of Local Nature Recovery Strategies mapping nature-rich habitats so that investment can be targeted where it will make the most difference. The Government will provide data, guidance, and support, but these local plans will embrace local knowledge to strengthen links between neighbouring communities and support the wider Network. These provisions will play a crucial role in protecting what we have and restoring nature that is in decline”.
The Government’s 25 Year Environment Plan(^3) includes provision for a Nature Recovery Network (NRN) and states that it will deliver on the recommendations of the Lawton Report(^1) and that recovering wildlife will require more habitat; in better condition; in bigger patches that are more closely connected. As well as helping wildlife thrive, the NRN could be designed to bring a wide range of additional benefits: greater public enjoyment; pollination; carbon capture; water quality improvements and flood management.
We have produced a series of habitat network maps to help address the challenges outlined in the Lawton report(^1) and believe they should provide a useful baseline for the development of a NRN as required within the 25 Year Environment Plan and Local Nature Recovery Strategies as proposed within the Environment Bill.
This guidance provides an outline of the methodology we have used in the development of these habitat network maps and how we have combined these maps to create a combined habitat networks map for England(^4). ENRR081 ‘Nature Network Evidence Handbook - Creating Nature Networks for Wildlife & People’(^5) identifies these habitat network maps as a valuable tool for use in the development of local ecological networks (see Section 5 of this guidance for more information). The habitat network maps are intended to be used to help identify areas for future habitat creation and restoration at a landscape scale but need to be considered alongside other local datasets and knowledge.
The maps have been created by the Habitat Networks Mapping Project Team consisting of Jeff Edwards, Michael Knight, Sarah Taylor & Ian Crosher with support and guidance from a range of Natural England Habitat Specialists including; Ruth Hall, Chris Mainstone, Richard Jefferson, Sue Reece, Emma Goldberg, Suzanne Perry, Iain Diack and many others. For further information on the approach and use of the maps please contact either: Jeff Edwards or Michael Knight.
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(^1) Lawton, J.H., Brotherton, P.N.M., Brown, V.K., Elphick, C., Fitter, A.H., Forshaw, J., Haddow, R.W., Hilborne, S., Leafe, R.N., Mace, G.M., Southgate, M.P., Sutherland, W.A., Tew, T.E., Varley, J., & Wynne, G.R. (2010) *Making Space for Nature: a review of England’s wildlife sites and ecological network*. Report to Defra.
(^2) https://www.gov.uk/government/speeches/leading-the-charge-for-the-environment 15 October 2019
(^3) 25 Year Environment Plan
(^4) This guidance is an update the earlier version we released in Nov 2018. We aim to continue to improve and develop these maps as new information and data becomes available
(^5) Crick, H. O. P., Crosher, I. E., Mainstone, C. P., Taylor S., Wharton, A., Langford, P., Larwood, J., Lusardi, J., Appleton, D., Brotherton, P. N. M., Duffield, S. J. & Macgregor N. A. (Feb 2020) *Nature Network Evidence Handbook: Creating nature networks for wildlife & people*. Natural England, York. The main outputs available are:
- 23 individual Habitat Network Maps
- A combined habitat networks map (23 individual habitat network maps combined).
- A series of grouped habitat network maps
We created these maps to provide a national overview of the distribution of habitat networks with suggestions for future action to enhance biodiversity. We hope that these maps will help to stimulate local engagement with partners and to agree local priorities and identify where action might help build more ecologically resilient ecosystems across landscapes. Although the maps cover the whole of England the information we have used can be interpreted at a local scale. The habitat network maps have been created using a bespoke GIS tool that follows a standard process as outlined in Sections 2 to 4. For some habitats the process has been modified as outlined in Section 5. Further information on the methodology is also provided in Section 7. The current maps are a product of the data input and manipulation parameters used within our tool both of which may be amended to suit specific local situations. As such the maps should not be considered as NE’s definitive advice on where an ecological network or NRN should be created or specifically where action needs to take place but we hope that they may act as a guide for local consideration taking full account of local opportunities and constraints. We suggest that the maps are used in conjunction with other datasets and with local knowledge to identify opportunities for action. If more precise local data exists it may be possible to re-run the mapping analysis to incorporate this.
These maps look specifically at habitat creation and restoration in the vicinity of existing habitat and are not designed to reflect the potential for naturally occurring ecosystems across landscapes, particularly in respect of natural hydrology as outline in Section 6 and more detailed explanation of the biodiversity importance of natural ecosystem function can be found in NERR 071 ‘Generating more integrated biodiversity objectives’.
The individual habitat network maps can be viewed individually or in combination with other network maps. However each individual habitat map may have a degree of overlap with other habitat network maps and to overcome the difficulties interpreting multiple maps we have prepared a single map that combines all 23 individual habitat network maps which we feel should help facilitate interpretation and understanding of how the networks operate together (see Section 3).
However with such a large number of network maps this combined map may not provide sufficient information to help guide a local project in terms of action to deliver against a specific objective. For this reason we will also be creating a set of grouped habitat network maps (see Section 4).
**Accessing the Maps**
- The combined map is available externally on MAGIC and both the combined map and all the individual network maps as GIS files from Here.
- Please contact NE data services for any other mapping product. Note: When accessing the GIS files we use 3 letter codes for each habitat, see Annex 1 for more details.
- For NE staff the map is available internally on WebMap2. A separate guide for WebMap2 users is available here.
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6 Coastal habitats completed with others to follow
7 Note: Additional data on priority habitats first needs to be added to the PHI and all data must be supplied under an open data licence that allows NE to publish the Habitat Network Maps under an Open Government Licence. 2. Individual Habitat Network Maps
In this section we provide some details on the different components of the individual networks maps which we hope will help you better understand what the maps are showing and how they can be used. Further information on aspects of the maps may be found within Section 7 of this document.
We have prepared an individual habitat network map for each of the following 23 priority habitats:
**Priority habitats**
- Upland calcareous grassland
- Lowland calcareous grassland
- Reedbeds
- Lowland meadows
- Upland hay meadows
- Purple moor grass and rush pasture
- Lowland dry acid grassland
- Lowland heathland
- Upland heathland
- Upland fens, flushes & swamps
- Lowland fens
- Lowland raised bog
- Blanket bog
- Limestone pavements
- Coastal sand dunes
- Coastal vegetated shingle
- Maritime cliff and slope
- Saltmarsh
- Lakes
- Rivers
- Ancient woodland
- Wood-pasture & parkland
- Traditional orchards (draft map)
**Notes:**
- We have created a grouped coastal habitat network map for coastal habitats (see section 4 and 5 for more information)
- We have not produced a habitat network map for some priority habitats, e.g. coastal floodplain grazing marsh, and the reasons for this are explained in Section 7.
**Mapping Components** We have developed a standard process for creating the individual habitat network map which include using the following 8 standard mapping components as shown in Figure 1 and Figure 2. The mapping components are divided into (A) ‘Existing Habitat’ and (B) ‘Network Enhancement & Expansion’ as outlined below.
**A) Existing Habitat** - We mapped existing habitat using the following four components: (see Figure 1)
1. **Primary Habitat**: The priority habitat which is the focus of the individual habitat network e.g. lowland heathland.
2. **Associated Habitat**: Other priority habitat types that form a mosaic or an ecologically coherent group within the landscape and may, for example, be essential for some species associated with the primary habitat. See Annex 1 for more information.
3. **Habitat Creation/Restoration**: Areas where work is underway to either create or restore the primary habitat.
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8 Priority Habitat refers to the statutory lists of priority habitats as required under Section 41 of the Natural Environment and Rural Communities (NERC) Act 2006 (England), 4. **Restorable Habitat**: Areas of land, predominantly composed of existing semi-natural habitat where the primary habitat is present in a degraded or fragmented form and which are likely to be suitable for restoration.
**Figure 1: Components of the Existing Habitat**
B) **Network Enhancement & Expansion** – We have mapped the following 4 network zones around the habitat components described above (see Figure 2):
5. **Network Enhancement Zone 1**: Land connecting existing patches of primary and associated habitats which is likely to be suitable for creation of the primary habitat. Factors affecting suitability include: proximity to primary habitat, land use (urban/rural), soil type, slope and proximity to coast. **Action in this zone to expand and join up existing habitat patches and improve the connections between them can be targeted here.**
6. **Network Enhancement Zone 2**: Land connecting existing patches of primary and associated habitats which is less likely to be suitable for creation of the primary habitat. **Action in this zone that improves the biodiversity value through land management changes and/or green infrastructure provision can be targeted here.**
7. **Fragmentation Action Zone**: Land within Enhancement Zone 1 that connects existing patches of primary and associated habitats which are currently highly fragmented and where fragmentation could be reduced by habitat creation. **Action in this zone to address the most fragmented areas of habitat can be targeted here.**
8. **Network Expansion Zone**: Land beyond the Network Enhancement Zones with potential for expanding, linking/joining networks across the landscape i.e. conditions such as soils are potentially suitable for habitat creation for the specific habitat in addition to Enhancement Zone 1. **Action in this zone to improve connections between existing habitat networks can be targeted here.**
We have modified our standard process for some habitat network maps and Table 1 below provides a list of which components have been used in each map. More information is given in Sections 5 in relation to the Network Maps for Ancient Woodlands, Wood-pasture & parklands, Lakes and Rivers. | Habitats Network Maps | Habitat Mapping Code | Habitat Components | Mapping Zones | |-----------------------|----------------------|-------------------|--------------| | | | Primary Habitat | Associated Habitats | Creation / Restoration | Restorable Habitat | Network Enhancement Zone 1 | Zone 2 | Action Zone | Expansion Zone | | Upland calcareous grassland | UCG | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Lowland calcareous grassland | LCG | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Reedbeds | RDB | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Lowland meadows | LMW | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Upland hay meadows | UHM | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Purple moorgrass and rush pasture | PMG | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Lowland dry acid grassland | LAG | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Lowland heathland | LHL | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Upland heathland | UHL | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Upland fens, flushes & swamps | UFS | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Lowland fens | LFN | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Lowland raised bog | LRG | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Blanket bog | BBG | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Limestone pavements | LSP | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Coastal sand dunes | CSD | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Coastal vegetated shingle | CVS | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Maritime cliff and slope | MCS | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Saltmarsh | CSM | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Lakes | LAK | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Rivers | RIV | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Ancient woodland | ASNW | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Wood-pasture & parkland | WWP | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | Traditional orchards | TRO | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
= Not included within Map
1 = see Section 2.3 for more information 2 = it is hoped that information on deciduous woodland creation & restoration will be added within the next update to the maps. 3 = AES data for this habitat has not been included but we hope to include this within the next update to the maps 4 = See Section 4 for more information The aim of the habitat network maps is to help identify possible locations for actions to improve ecological resilience of the current habitat network in line with Lawton principles ‘more, bigger, better and joined’. The zones for potential action are illustrated in Figure 2 above and include:
- **Decreasing habitat fragmentation** – we believe that reducing habitat fragmentation is a priority for action within the Enhancement Zone. The Fragmentation Action Zone, as identified on the habitat network maps, should be considered as a priority location for addressing this. We identify these by analysing:
a) locations where smaller patches of the primary and associated habitats could be expanded to increase the patch size of the habitat or join up with other areas of habitat,
and
b) locations where the habitat patch has a large boundary to patch size ratio. By identifying this, we seek to address potential adverse effects from adjoining land - known as the ‘edge effect’. In these locations adjoining semi-habitat that is not mapped e.g. scrub or rough grassland, may currently be of ecological benefit and the habitat patch may therefore already be buffered against edge-effects.
- **Increase the extent of habitat** - we believe that the primary aim should be to deliver more priority habitat within Network Enhancement Zone 1 particularly to create bigger and better joined habitat patches but also that creating other semi-natural habitats or improving land management to increase landscape permeability would also be beneficial within both Network Enhancement Zones.
- **Restoring degraded habitat** – we have identified areas of ‘Restorable Habitat’ on the maps using data derived from a range of sources that suggest there is potential to restore the site to a primary habitat type. In some cases this may involve converting an existing semi-natural habitat type of some biodiversity value to one or more e.g. mosaic, which are more ecologically appropriate to the landscape/ecosystem. Care is required to ensure that the action proposed results in an appropriate net biodiversity gain. The Nature Networks Handbook provides further advice in relation to considering the restoration of more naturally functioning habitat mosaics using local knowledge to understand local issues.
- **Expanding, linking & joining the networks** – we have created the Expansion Zone as we recognise that the boundary for each habitat Network Enhancement Zone is drawn around the 4 habitat components it means that, at a landscape scale, these clusters of habitat, surrounded by their Network Enhancement Zone, can fall into a number of discrete but separated clusters. The spatial configuration of each network cluster depends upon the presence of the habitat, which itself is based on the landscape physical conditions e.g. geology, soils, hydrology, altitude etc. and, most importantly, the extent of habitat loss. The ‘Network Expansion Zone’ identifies potential locations to consider improving the links and joins and reduce fragmentation at a wider landscape scale.
3. Combined Habitat Networks Map
We have combined all 23 individual habitat network maps into a ‘Combined Habitat Networks Map’, (see Figure 3) as we recognised that, in many cases, to identify potential opportunities and to gain a fuller picture across a landscape, it is best to consider a wider mosaic of habitats rather than just focussing on a single priority habitat.
Figure 3: Combined Habitat Networks Map
The combined habitat networks map includes some additional habitat information not included in the individual habitat maps but excludes some of the details found within the individual habitat maps. Below is a list of some of the key issues that we believe need to be understood when using this combined map.
- **Associated habitats** – these are not identified on the combined map as the vast majority of habitats listed as associated habitat on the individual habitat network maps will be identified on the combined map as a primary habitat. Any associated habitat that does not have an individual habitat network map plus all other priority habitat is shown on the combined map as ‘PHI_Other’.
- **Restorable habitats** – In order to keep the processing of these maps as efficient as possible it means that the GIS process we have used to create the combined map does not allow us to specify which habitat this relates to. Some data used to identify restorable habitats e.g. ‘semi-improved species rich grassland’ may be used in a number of grasslands network maps as it is not possible to be specific as to the type of grassland. In addition Plantations on Ancient Woodland Sites (PAWS) have also been classed as restorable but it is not possible for these to be identified. • **Network Enhancement Zones** and the **Network Expansion Zone** are not specific to a particular habitat
• **Other priority habitat** – Any additional priority habitat, including deciduous woodland, not included within any individual habitat network map is shown on the combined habitat networks map where this occurs within the Enhancement Zone 1.
• **SSSIs** - The combined habitat networks map also incorporates the areas of SSSIs that sit outside any of the mapped habitat components (Section 2A & Figure 1) of the individual habitat networks. For this map we only identify the land that is designated not the habitat type. For coastal habitats this may extend into estuaries e.g. the Wash.
• **Wood-pasture & Parkland** – As Wood-pasture and Parkland is often found on sites also identified as another habitat e.g. lowland meadows or lowland heathland, it has not been possible to identify and annotate the combined map to show the areas of overlap. Where this habitat is likely to be of interest it is important to use the individual wood-pasture and parkland habitat network map to compliment the combined habitat networks map.
**NOTE:** We advise that if the combined habitat networks map appears not to identify important aspects relating to a specific habitat that the relevant individual habitat network map should be used.
### 4. Grouped Habitat Networks Maps
We intend to create some examples of grouped habitat network maps that we believe may be more meaningful in particular locations depending on the local objective and to better account for how such habitats occur naturally in landscapes.
The current example groupings we are considering are:
- **Coastal Habitats** - saltmarsh, sand dunes, shingle and maritime cliff and slope
- **Lowland Grasslands** – lowland meadows, lowland calcareous grassland, lowland acid grassland and upland hay meadows
- **Lowland Wetland** – lowland fen, lowland raised bog and reedbed
- **Upland Habitats** – blanket bog, upland heathland and upland flushes fens and swamps
We do not intend to create grouped maps for other habitats e.g. lowland heath or deciduous woodlands as we believe that the individual habitat network map should be adequate as they take account of other habitats by incorporating ‘associated habitats’ into the network e.g. lowland acidic grassland and lowland fen are associated habitats within the lowland heathland habitat network map. The full list of associated habitats used within each habitat network map is provided within Annex 1.
The mapping tool we have used can create bespoke maps for any number of different habitats, please contact [NE data services](#) to request any additional grouped habitat maps.
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9 Please note that the grouped coastal habitats map has already been created - see Section 5 for more information on the use of this map 5. Woodlands, Open Water and Coastal Habitats
5.1 Woodland Habitats
Woodlands
We recognise that all woodlands can be important for biodiversity and/or for other reasons. We also recognise that the Forestry Commission (FC) have produced a range of guidance documents and maps in relation to woodlands including a map that specifically identifies locations for new woodland planting (CS Biodiversity - Priority Habitat Network note: it is 374MB). Please note when using this FC map that it does not identify areas of existing priority habitat as a constraint. It is also important that the guidance on ‘Assess environmental impact before you create new woodland’ is referred to. For projects seeking to convert woodland to open habitats the following FC guidance needs to be followed ‘Consents required in relation to the conversion of woodland to open habitats’.
Ancient Woodland Network Map
We have focussed our Habitat Network Map on Ancient Woodland as this is considered a top priority for nature conservation. The Ancient Woodland Network Map has been prepared using the same approach as the other habitat network maps but with some minor modifications as outlined below.
Existing Habitat
- **Primary Habitat**: Ancient semi-natural Woodland as identified within the Ancient Woodland Inventory (AWI)(^\\text{10}).
- **Associated Habitat**: Other deciduous woodland, wood-pasture and parkland and traditional orchards.
- **Habitat Creation/Restoration**: Not identified as yet
- **Restorable Habitat**: Plantations on Ancient Woodland Sites (PAWS) as identified on the AWI.
Network Enhancement & Expansion
- **Network Enhancement Zone 2**: We have only included Network Enhancement Zone 2 on our map. There is no Enhancement Zone 1 or Network Expansion Zone as potential locations for woodland planting are shown on other FC maps. For areas where woodland expansion, particularly through regeneration, would be particularly beneficial see Fragmentation Action Zone below. Actions that improve the biodiversity value and help develop habitat mosaics and/or increase green infrastructure provision would be beneficial within Enhancement Zone 2.
- **Fragmentation Action Zone**: As per all other habitat network maps. Action to address the most fragmented areas of habitat e.g. through increasing woodland extent (note: regeneration is preferred over planting) may be targeted here.
Please note: The most up to date version of the Ancient Woodland Inventory should always be used for clarification on the status of a woodland. We recognise that Plantations on Ancient
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(^{10}) Ancient Woodland (England) version dated 7/04/2020 – Note that much of the inventory does not record ancient woodlands under 2ha and is therefore not a true picture of the total resource. Woodland Sites (PAWS) are Ancient Woodlands even though they are identified as ‘Restorable Habitat’ within the ancient woodland network map.
Wood-pasture & Parkland
The Wood-pasture and Parkland Network Map has been prepared using the same approach as the other habitat network maps. However, the following specific issues have had to be taken into account in terms of identifying the Primary Habitat. As there is no definitive inventory for this habitat we have used a combination of data sets has been used as the best available data to identity sites considered to support this habitat. The Provisional Wood-pasture & Parkland inventory contains attributes identifying locations where the habitat has been confirmed as well as where the presence still needs to be verified. We only used sites that had been verified as ‘definitely being present’ as representing the primary habitat for the network map. We have supplemented the sites selected from the draft inventory with additional information using the Ancient Tree Inventory(^\\text{11}) to verify the presence of wood-pasture and parkland. The remaining areas of the draft wood-pasture and parkland inventory identified as ‘restorable habitat’ where they occur in close proximity to the primary habitat.
A particular feature of this habitat is that on occasions it will overlap with sites recognised on the PHI as supporting other priority habitat, such as grasslands, heathland and woodland (termed ‘allowable overlap’). In the Combined Habitat Map layer we have not been able to show sites that overlap with other habitats and we therefore recommend, when considering WP&P in the wider countryside that the wood-pasture and parkland network map is also used. As the features of importance for this habitat also occur outside of recognised wood-pasture and parkland sites, e.g. ancient trees within hedgerows or within ancient woodlands, we also recommend that the following map layers are used:
- NE’s Provisional Wood-pasture & Parkland inventory (this will help show all other areas where wood-pasture and parkland may occur including sites that still need to be verified)
- PAWS and deciduous woodland (to provide an overview of woodland cover more generally)
- The Woodland Trust’s Ancient tree inventory (this will identify locations of individual trees so far recorded within the wider countryside)
5.2 Lakes and Rivers
General Approach
The UK priority habitat definitions for lakes and rivers effectively encompass all lakes and the large majority of the river network. These definitions have been interpreted in England in order to generate a limited subset of the river and lake habitat resource that can be deemed priority habitat, involving identifying sites that meet requirements relating to the natural functioning of the habitat – hydrological, physical, chemical and biological. Report NERR064 provides more information on the
(^{11}) Data set prepared in 2014 from Woodland Trust, more recent data will be used to update the maps in due course natural functioning of these habitats, whilst a new website hosted by the FBA provides an easily accessible explanation of how the priority river and lake habitat maps have been generated.
The total extent of habitat on the priority river and lake habitat maps is relatively small compared to the extent of the wider habitat resource, such that much of the action needed on rivers and lakes relates to improving the natural functioning of sites that are not on the priority habitat maps. Rivers and lakes are key components of all landscapes and river corridors in particular provide important biological connectivity for all habitats. Their biodiversity value is strongly influenced by the type and quality of land management and other activities in the catchment, which makes their restoration very complex.
Key points in relation to generating network map for river and lakes are given below.
- We selected the majority of other habitats as an associated habitat for both network maps.
- We identified areas as ‘restorable habitat’ using a different method to that of other habitats,
- We recognised that these maps are not just focussing on habitat expansion but on improving the condition of degraded sites, which because of their degraded nature do not feature on the priority habitat maps. Relevant restoration measures can include any measure that helps restore the natural functioning (physical, chemical, hydrological and biological) of lakes and rivers either on site or in the catchment. To help ensure riparian habitats (which are considered an integral part of river and lake habitat) is of suitable quality, we have identified the area around river and lake priority habitat as Enhancement Zone 2 rather than Zone 1,
We have not included ‘Fragmentation Action Zones’ on either of these open water habitat network maps as the main focus is on improving the condition of the remaining habitat which is addressed through the ‘restorable habitat’ component of the map. The ‘restorable habitat’ component of these maps identifies river stretches or lakes where restoration action may take place to improve condition and connectivity. Whilst this is an important consideration for rivers and lakes as it is for other habitats, there are equally important consideration associated with the specific nature of impacts on a given site, the position of sites within catchments, and the scale and nature of constraints to restoration. For this reason sites identified by the river and lake habitat network maps constitute one strand in a wider process of identifying the best places to restore natural functioning in the river and lake network. A broader process of identifying priorities for restoring natural function within the river and lake network, to contribute to meeting priority habitat objectives, is being developed with stakeholders. The habitat network maps described here will be used to help populate these restoration priorities maps. For more information on this work see the new website on priority river and lake habitats.
More details of how the habitat network maps have been created is outlined below.
**Priority Lakes Habitat Network Map**
Lakes on the lake priority habitat layer along with other lakes considered to be worthy of further consideration, e.g. notified as SSSI lake habitat, were identified as the ‘primary habitat’ for this network map.
In order to identify further ‘restorable habitat’ the entire lake resource was assessed using the UK Lakes Database layer sourced from the UK Lakes Portal which identifies most lakes in England that are greater than 1 ha and some smaller water bodies. We have identified all lakes from this layer that fall within Enhancement Zone 1 of the Combined Habitat Networks Map as ‘Restorable Habitat’ within the Lakes Habitat Network Map. This is because lakes with catchments with semi-natural land use are likely to have better water quality and provide greater biodiversity benefit, if restored, due to habitat connectivity with terrestrial habitats (see NERR064 ‘A narrative for conserving freshwater and wetland habitats in England’).
We have created the individual priority lakes habitat network using the following components;
**Existing Habitat**
- **Primary Habitat**: Priority Lake habitat identified as described above
- **Associated Habitat**: Other adjacent priority habitats (see Annex 1)
- **Restorable Habitat**: All lakes contained within the Combined Habitat Network.
**Network Enhancement & Expansion**
- **Network Enhancement Zone 2**: (There is no Enhancement Zone 1 or an Expansion Zone as the priority is to restore the existing resource and not create new habitat). Within Enhancement Zone 2 actions that improve lake habitat such as; increase semi-natural habitat, develop more habitat mosaics, increase the extent of wildlife friendly land management or green infrastructure, may be targeted here.
**Figure 4: Lakes Habitat Network Map**
**Priority Rivers Network Map** In addition to the general approach outlined above we have used the priority rivers habitat layers from NE open data portal as the primary habitat. We have also carried out a network analysis over all watercourses not recognised as priority river habitat to identify stretches of non-priority river habitat that connect and joins stretches of priority river habitat. We have labelled these sections as ‘restorable habitat’ and here action to improve the condition of the river in terms of natural function that would help extend and link up the current priority river habitat resource would be beneficial. The Priority River habitat inventory also includes priority river headwater areas i.e. the headwater catchments most likely to support headwater streams that are sufficiently naturally functioning to be included on the priority habitat map. These are particularly important to the priority river habitat resource and this map would be useful to refer to when considering action to improve rivers. The combined habitat networks map will also provide information on the extent of priority habitats within most of the priority headwater areas.
We have created the individual priority river habitat network using the following components;
**Existing Habitat**
- **Primary Habitat**: Priority River Habitat.
- **Associated Habitat**: Other adjacent priority habitat (see Annex 1)
- **Restorable Habitat**: Sections of non-priority river habitat that link existing sections of priority river habitat.
**Network Enhancement**
- **Network Enhancement Zone 2**: (There is no Enhancement Zone 1 or an Expansion Zone as the priority is to restore the existing resource and not create new habitat). Enhancement Zone 2 includes all terrestrial land adjoining the existing stretches of priority river habitat. Action in this zone to improve the condition or extent of semi-natural habitat/habitat mosaics or increase extent of wildlife friendly land management or green infrastructure that improves river habitat functioning, may be targeted here.
**Figure 5: River Network Map** 5.3 Coastal Habitats We recognise that coastal habitats are dynamic systems which are shaped by coastal processes that influence the location, scale and ultimately the success of any management and/or proposed enhancement. Other factors that need to be considered when using the coastal habitat network map(s) include the current topography, the elevation of the land and the current land use. Shoreline Management Plans (SMPs) set out the future strategy for a stretch of coastline relating to issues of coastal defence which will also help identify potential locations for future action to increase the resilience of the existing habitat network. It is also important to consider all other local opportunities and constraints as these are not mapped on the habitat network maps.
The Marine Management Organisation has also published a useful document entitled ‘Identifying sites suitable for marine habitat restoration or creation (MMO1135)’ and a set of maps to support this.
As outline in Section 4 we have developed a grouped habitat network map of the 4 coastal priority habitat maps (saltmarsh, sand dunes, shingle and maritime cliff and slope). The individual maps may be viewed separately, but it is advised in the first instance that users should use the grouped ‘coastal habitats map’.
Figure 6: Coastal Habitats Map
6. Relationship to the Nature Network Handbook ENRR081 ‘Nature Network Evidence Handbook - Creating Nature Networks for Wildlife & People’ is intended to help our staff and external partners apply some of the objectives of the 25 Year Environment Plan when delivering or planning landscape scale projects for biodiversity and people. The Handbook sets out 8 principles, including number 7, which is specifically about planning ecological networks:
**Think "networks":** Networks need to be planned at multiple spatial scales & address multiple issues, with joined-up actions across adjacent landscapes, delivering integrated outcomes, ensuring the network acts as a coherent whole to deliver for all users (species, ecosystems and people) within the area.
The Handbook includes a set of ‘Rules of Thumb’ for the design of ecological networks, building on the principles in Lawton et al. (2010), these include:
**Bigger Sites**
- Big enough to encourage natural processes – include areas that ensure functioning ecosystems.
- Provide space for ecosystem dynamism supporting mosaics and to encourage succession.
- Reduce edge effects by decreasing the edge: area ratio.
- Join habitat fragments; choose the ones that will create the biggest site.
- Restore degraded habitat surrounding the site.
- Enlarge sites to >40 ha (or >100 ha for wide-ranging species).
**More sites**
- Target areas of important habitat potential in the surrounding area.
- Target degraded areas with high ecosystem service delivery.
**Stepping stones & permeable matrix**
- Sites should be < 1km from each other and < 200m apart for highly specialised species within a habitat.
- Expand sites towards existing habitat to reduce space between patches.
- Increase the cover of semi-natural habitat in landscape to at least 20%.
- Reduce the intensity and increase the diversity of land use in the surrounding countryside.
The Nature Network Evidence Handbook provides guidance on how different habitats are naturally provided by landscapes, and how an understanding of this natural pattern of habitat provision should be used in building habitat networks to generate the most integrated biodiversity outcomes possible. The information needed to do this relates to factors such as natural hydrological regimes (in the absence of land drainage for example) and natural soil and sediment processes. Such information largely comes from local knowledge and data sources and is not very amenable to national mapping exercises of the type described in this guidance. The national habitat network maps will require careful interpretation to ensure that local decision-making is rooted in promoting biodiversity conservation through naturally functioning habitat mosaics as far as this is possible and desirable. More detailed explanation of the biodiversity importance of natural ecosystem function can be found in Natural England Research Report 071 ‘Generating more integrated biodiversity objectives’. The new Climate Change Adaptation Manual is also a good place to look for information on how to plan ecological resilience in the face of climate change, which is essential for all conservation planning. 7. Further information/Frequently Asked Questions
This section provides more information on the habitat data and the network tool and approach/methodology we used to create the maps.
**Habitat Data used:**
1. What baseline habitat data is used?
2. Is it possible to improve the baseline habitat data?
3. Can local data be used in the approach?
4. Can I integrate additional data?
5. Are all habitats included, are there any missing?
6. Why have we focussed on priority habitats?
7. Why is coastal/floodplain grazing marsh not included?
**Habitat network tool & approach:** 8. What GIS tool has been used to create the maps? 9. Can you repeating the analysis easily? 10. Can I use the tool? 11. What evidence have you used to support the assumptions in the approach? 12. How does the variable buffering work? 13. Why is the Enhancement Zone different in some Habitat Network Maps? 14. How is information on soils used in the approach? 15. What Constraints and Opportunities are mapped? 16. How are urban areas treated in the approach? 17. What is the patch size threshold? 18. What is the associated habitat group? 19. What additional habitat information is included? 20. How is current habitat creation/restoration information included? 21. How do we know where the areas of restorable habitat are? 22. Why is there a combined map? 23. How is the combined map created?
7.1 Habitat Data used:
1. What data is used in the national maps?
We have used the following data sources to build the components of this version of the National Habitat Network (version 2.1) mapping:
| Component | Datasets used | |--------------------|-------------------------------------------------------------------------------| | Primary Habitat | • Priority Habitat Inventory (PHI v2_2)¹, | | | • Alkaline Fen and Transition Mire and Quaking Bog Annex 1 habitats in England¹, | | | • Ancient Woodland Inventory¹, | | | • Priority Rivers Habitat Map¹, | | | • CEH UK Lakes Portal, | | | • Draft Wood-pasture & Parkland¹, | | | • Woodland Trust Ancient Tree Inventory, | | | • PTES Traditional Orchards HAP data layer. |
¹ = NE data is available from the [Natural England Open Data Geoportal](https://www.naturalengland.org.uk/geoportal) **Associated Habitat** A range of habitats that typically occur as a mosaic with the primary habitat, care is taken to avoid including habitats that simply lie adjacent to the primary habitat i.e. transitional habitats, particularly where the extent of such habitats overwhelms and/or distorts the network map for the primary habitat. The source of this is the PHI.
**Restorable Habitat** Datasets of non-priority habitats e.g. Semi-improved species rich grassland, fragmented heathland, grass moor, ‘No main habitat but priority habitat present’ where the primary habitat is listed as present from the PHI. Plantations on Ancient Woodland (PAWS) NSRI Soilscapes data (26 & 27) used for blanket bog and lowland raised bog in combination with additional PHI data.
**Habitat restoration or creation** All relevant Agri-environment scheme options where they lie in close proximity to existing habitat patches. Data from NE Green Infrastructure database, other data from partners on habitat creation where available (Dorset heathland project)
**Network Enhancement Zone** NSRI Soilscapes data (see below for more information on soil types) A digital terrain model Urban Settlements EA Flood Risk Zone 3 tidal
2. **Is it possible to improve the baseline habitat data?** We have used the Priority Habitat Inventory as the primary data source for the majority of the habitat network maps. We are aware this is not comprehensive or 100% accurate. We therefore encourage the improvement of the PHI dataset with better local data and promote the use of the Habitat Network maps alongside local knowledge and data. Data supplied to NE for inclusion within the network map should first be supplied for inclusion within the PHI and will therefore need to be supplied with the relevant metadata and under an open licence compatible with the Government Open Data Licence. Other mapping components such as restorable habitat and habitat creation can be supplied directly to the habitat network project but again this has to be under a licence compatible with the Government Open Data Licence.
3. **Can local habitat data be used in the analysis?** Where available local, open source habitat data can be prepared for inclusion in the PHI and as such this can then be included in the analysis, to identify primary and associated habitat presence. In addition to this other local, open source data on the location of habitat creation and restoration happening in your area can be used in the habitat restoration or creation component of the analysis. We can also use data on sites with restorable habitat where this is known. We hope this project can facilitate the contribution of local data to the PHI to make the national dataset better for everyone.
4. **Can I integrate additional data on other habitats?** You should be considering any additional habitat data in addition to these maps where this exists locally to improve any local network maps. When planning or designing the delivery of landscape scale ecological networks, it is important to ensure that all habitats present within the landscape are taken into account, as well as any local opportunities and/or constraints. This will include habitats that are not on the PHI or do not have an inventory. We therefore recommend that other data sets are also used to provide wider context and a more comprehensive picture of the ecological resource and opportunities (and potentially constraints) including,
National data such as:
- SSSIs
- Forestry Commission National Inventory of Woods and Trees • Existing HLS or CS agreements
Local data such as: • Existing Local Ecological Networks or Opportunity Maps • Local Wildlife Sites • Other local habitat creation projects • External partners land holdings
5. Why have we focussed on priority habitats? We have focussed on priority habitats and used the PHI or other inventories that we consider represent the best available habitat data at a national level. We have focussed the network maps around priority habitats as this is the current common classification used for conservation purposes and recognised in legislation i.e. Section 41 of the NERC Act 2006.
6. Are all habitats included, are there any missing? The following habitats do not have a national habitat network:
| Priority Habitat | Reasons for not compiling a Habitat Network Map | |----------------------------------------------|---------------------------------------------------------------------------------------------------------------| | Saline lagoons | Habitats are adequately covered as an associated habitat within other habitat networks | | Mountain heath & willow scrub | | | Calaminarian grassland | | | Coastal & floodplain grazing marsh | See below | | Mudflats | A transitionary habitat between marine and terrestrial that was considered to require a different approach. | | Arable Field Margins | No national inventory | | Hedgerows | | | Open Mosaic Habitats | Draft Inventory not of sufficient standard to be used at present | | Ponds | Network Maps may be developed as part of future work |
7. Why is there no network map for coastal & floodplain grazing marsh? We recognise that coastal and floodplain grazing marsh may be an important component of many catchments but we have not prepared a habitat network map for this habitat as the biodiversity quality varies with much of it being of low biodiversity value. The habitat is essentially a drained version of other wetland semi-natural habitats including fens, reedbeds and wet woodland. The current habitat definition focusses on its importance for breeding waders, overwintering waterfowl and species rich ditch systems with little consideration for expanding the semi-natural wetland habitats and accommodating natural function. For this reason work is ongoing to investigate the potential to modify the habitat definition to take greater account of the needs for better natural functioning floodplains and coastal change. We have included areas of the existing coastal and floodplain grazing marsh into other wetland habitat network maps as a restorable habitat in recognition of the potential for these habitats to develop in the floodplain. The current maps do not distinguish between areas of high or low biodiversity value or the level of constraint or opportunity to covert this habitat as we believe this is best determined at a local level. Work is currently on going to help define the areas of floodplain grazing marsh of biodiversity value and to define the potential functional boundary for defining any future floodplain wetland mosaic habitat.
7.2 Habitat network tool & approach:
8. What GIS tool has been used to create the maps? The spatial data analysis used to create the Habitat Network maps was undertaken using a data integration software tool called Feature Manipulation Engine (FME). The process has been built into an FME workspace designed to facilitate re-runs of the analysis, incorporating new data or varying the process parameters as required. This means that the national networks can be quickly and easily updated, and also provides for bespoke analysis of local habitat networks.
9. Can you repeating the analysis easily? These maps are not intended to be automatically adopted to form local ecological networks. Further local interpretation, including addition of local knowledge and data will be required before planning any action. However, it is anticipated that these maps will help inform local decisions about the development of local ecological networks.
As the process we have used to create the Habitat Networks is flexible and repeatable, it means that it is also possible to be re-run the analysis to include local data to help improve local accuracy and increase relevance to partners but any bespoke runs of local data that is not included in the PHI is extremely difficult and may not be possible due to staff resources.
10. Can I use the tool? If you can use FME and if you can work with us on the analysis you are doing it may be possible to access the tool. Ideally this would be reciprocated by the exchange of habitat data to enhance the PHI and align any local maps with the national map.
11. What evidence have you used to support the assumptions in the approach? Here are some extra details on the assumptions we have made in a number of the network components:
- **Individual habitat networks maps** – we have created habitat network maps on a habitat by habitat basis as we believe that this may be helpful when considering priorities for action within a certain location particularly if there are specific local or national objectives/targets to meet for specific species or habitats.
- **Associated habitats** – we recognise that an individual habitat will co-exist within a landscape with other habitats and that many function as an ecologically unit. We have used our practitioner judgement alongside specialist validation to decide which priority habitats should be treated as an ‘associated habitat’ within each of the habitat network maps. The habitats chosen are those that are ecologically connected with, and often exist together in a matrix with, the primary habitat. The full list of Associated Habitat groups are listed in Annex 1.
- **Using Soils** choices – we have based the associations between soils and habitats in our mapping approach based on an assessment of the habitat requirements, the descriptions within the Soilscapes data base and the evidence from EN Research Report 712 ‘Guidance on understanding and managing soils for habitat restoration projects’.
- **Habitat clusters** – We have not sought to identify ecological networks that are considered to be viable based on species movements and dispersal distances e.g. 200m, 500m or 1000m. Instead we have taken the evidence presented within the Lawton report and focussed our mapping on identifying locations where habitat clusters together within the landscape. Within the maps we have also sought to identify locations for action to improve the ecological resilience of the network.
- **Lawton Approach** - The Lawton report(^\\text{12}) (section 4.4) assesses whether the current extent and spatial distribution of the remaining habitat is adequate to form a coherent and resilient ecological network. This is judged against 5 key attributes and concludes that for 4 of the 5; “there are serious short-comings in the network. Notably, many of England’s wildlife sites are too small; losses of certain habitats have been so great that the area remaining is no longer enough to halt additional biodiversity losses without concerted efforts”.
- We have developed the Habitat network Maps to focus on the current spatial distribution of habitat patches in a way that identifies how the habitat survives in clusters where positive action, such as creating more habitat or improving the connections and matrix between the patches and between the network clusters would help build a more coherent and resilient ecological network. We recognise that species loss from existing habitat patches will continue to occur over a long time and that for many species that currently survive within a habitat patch the population may no longer be viable (an effect called an extinction debt(^\\text{13})). To help address this issue we have identified where the more vulnerable habitat patches occur, i.e. the smaller habitat patches or those with excessive edges, occur. We have identified these areas as Fragmentation Action Zones and consider that action may be focussed here as a priority. We also recognise that improving the links between the habitat clusters may also be important so we have identified potential locations where clusters occur in close proximity where action to improve connections between the habitat clusters may be beneficial and have identified an Expansion Zone to help facilitate planning for this action.
12. **How does the variable buffering work?**
The Network Enhancement Zone boundaries are drawn around the 4 habitat components (primary habitat, associated habitat, restorable habitat and habitat restoration or creation) – based on a standard, though variable, distance of 500m. The buffer is variable in that it is stretched where a slight extension would capture more habitat and/or present a more complete network, i.e. its reach is extended in the direction of another relevant habitat patch. It works in the following way (see also fig.7):
- Habitat patches are buffered by 500m.
- Any overlapping buffers are merged.
- Any holes (marked H in fig.7) left when buffers are merged within patches of >100ha are filled in.
(^{12}) Lawton et.al 2010, Making Space for Nature
(^{13}) Tilman, D., May, R., Lehman, C. & Nowak, M. (2002) Habitat destruction and the extinction debt. *Nature*, 371, 65-66. The buffers are then reduced to 250m in order to constrain them where they aren’t meeting other buffers.
The resulting buffer area shown in orange in the figure 7 below.
This leads to a theoretical maximum buffer distance of around 1km. but in practice the vast majority of buffers will not exceed far beyond 500m.
This 500m distance between patches has been selected based on our review of the literature and evidence relating to other network mapping approaches. The Enhancement Zone drawn through this standard approach is intended as a guide only and seeks to show the location of habitat patches that are more clustered together within the landscape to focus action to build greater ecological resilience of existing habitat patches. The distance used may be varied within the tool to prepare bespoke network maps for specific species if there is sufficient evidence available to justify this. We have used a 1km buffer for the blanket bog habitat network map due to the extensive habitat patches and the aim to capture a more complete hydrological unit required for restoration.
NERR081 provides more information on this and states “To ensure adequate connectivity between core sites or stepping stone sites, placement is important. Many studies have explored the effect of isolation on the likely colonisation rates of different taxa between patches of suitable habitat……. It should be noted that dispersal will be moderated by the relative permeability of the intervening matrix. However, in can be concluded that for highly specialised species within a habitat, adjacent sites need to be < 200m apart and for more generalist species < 1km apart”.
Figure 7: The variable buffering process 13. Why are the Enhancement & Expansion Zones different in some Habitat Network Maps? The extract from Table 1 lists 7 habitats Network Maps where the approach used in the maps varies and the table below provides reason for modify the approach.
| Type of modification | Reason for modifying our approach | |----------------------|----------------------------------| | No Network Enhancement Zone 1 | Habitat is impossible to recreate, the creation/restoration of relevant associated habitats should be the focus to building greater ecological resilience. For this reason the Habitat Network Maps only identify Enhancement Zone 2. | | Limestone pavements | Habitat Network Maps identify Enhancement Zone 2 as the map is not intended to identifying all potential areas for woodland planting as FC’s maps exist for this purpose. This habitat is also considered irreplaceable and the priority we have focussed to address is fragmentation and restoration of PAWS. | | Ancient woodland | Habitat Network Maps identify Enhancement Zone 2 only as creating new lake habitat to link and join existing habitat is not a priority. | | Lakes | Priority is to improve the condition of all habitat, restore natural function of the existing non-priority habitat rather than create more open water resource. | | Rivers | Habitat Network Maps identify Enhancement Zone 2 only as creating new lake habitat to link and join existing habitat is not a priority. Priority is to enhance existing non-priority habitat, Lake Habitat Network Map identifies non-priority lakes for restoration as restorable habitat. Stretches of existing non-priority river habitat that join existing priority habitat are identified as restorable habitat. | | Traditional Orchards | Draft Network Map, Further consideration is required in terms of identifying priorities for action. | | No Network Expansion Zone | This habitat is Irreplaceable and building greater resilience can best be achieved through the expansion of other habitats such as calcareous grassland. | | Limestone pavements | We consider that the Enhancement Zone 1 is sufficiently large to meet current priorities for this habitat. The habitat is most frequently found within a mosaic of other upland habitats and developing greater ecological resilience is probably best addressed through enhancing these habitats e.g. addressing issues of structure and function. | | Upland flushes fens and swamps | A linear habitat dependent upon saline influences such as salt spray where expansion inland is dependent upon relatively slow natural | processes. The extent of landward movement is sufficiently captured by the Enhancement Zone.
| Lakes | Focus for developing greater resilience should focus on better land management of the catchment, including increasing the extent of semi-natural habitat, to improve natural function. | |---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Rivers | This habitat is Irreplaceable. We have mapped the Fragmentation Action Zone to reduce impacts on small woodlands and the restoration of PAWS as priorities for action. This map is not intended to identifying all potential areas for woodland planting and therefore no expansion zone is identified. | | Ancient woodland | Draft Network Map, current proposal is to focus for developing greater resilience within and around the existing habitat patches which are generally small. We consider that the Enhancement Zone 1 is sufficiently large to meet current priorities for this habitat. |
14. How is information on soils used in the approach? NSRI Soilscapes data is a simplified version of the 1:250,000 scale Digital National Soil Map for England and Wales. It has been tailored to provide extensive, understandable and useful interpreted soil data for the non-soil specialist. Soilscapes defines 27 soil map units, each fully described with a range of valuable attributes. These were thought to be the most useful and practical classifications to use within the National Habitat Network mapping approach.
The soils data is used within the Habitat Network Maps to help determine the extent of Network Enhancement Zone 1 and the Expansion Zone only where soils and other conditions exist for habitat creation and restoration are more suitable. Network Enhancement Zone 2 extends over other areas e.g. areas without suitable soil types or over areas of urban development to identify where other actions, such as the provision of green infrastructure or changes in land management, might also be undertaken to improve resilience.
To select the soils for each habitat we referenced the Natural England Research Report 712 ‘Guidance on understanding and managing soils for habitat restoration projects’ and compared their descriptions of habitat suitability.
15. What Constraints and Opportunities are mapped? Other than the urban areas no constraints or opportunities are identified on the Habitat Network Maps as these are likely to vary according to the individual landscape and project objective.
16. How are urban areas treated in the approach? Where the Enhancement Zone extends into urban area it becomes Network Enhancement Zone 2 due to the limited opportunities for habitat creation. However, we consider that there may be opportunities here for some action e.g. urban Green Infrastructure that may contribute towards building greater resilience.
17. What is the patch size threshold? Patch size is used as part of the calculation to carry out the fragmentation assessment used within the analysis. The patch size varies according to the habitat type so habitats that are largely made up of relatively smaller patches are not disproportionately selected for fragmentation action thereby ignoring habitats with generally larger patches (however they will be selected more frequently due to their high levels of fragmentation). Figure 8 below provides further information on this. The primary and associated habitat patches are assessed together and the following conditions must be true for a patch of habitat to be included as part of a fragmentation action zone:
**Smaller Patches**
- Habitat patches must be less than a certain size based on fragmentation patch assessment threshold of 10%, 20%, 30% or 40% i.e. it is relatively small compared to the patch size range and total resource (see Figure 8)
**OR**
**Medium Patches with excessive boundary**
- This selects out habitat patches that are less than twice the size of the smaller patches, as outlined above, and identifies those with an extensive boundary compared to its area i.e. either it is long and thin or has an excessive undulating boundary. This is calculated using a Perimeter-Area Ratio assessment to identify patches with a Perimeter-Area Ratio 2.5 greater than the area i.e. the patch area is greater than an equivalent assessment of a true circle of same area.
**AND**
**The patches identified above must be in close proximity to other patches**
- Neighbouring patches are within 200m i.e. it could easily be joined with another patch of habitat.
### Thresholds used for patch size assessment
| Habitat | % of Habitat | Patch Size (ha) | |-------------------------------|--------------|-----------------| | Blanket bog | 10% | 165 | | Upland heath | | 75 | | Coastal sand dunes | | 65 | | Lowland raised bog | | 35 | | Limestone pavement | | 20 | | Coastal salt marsh | | 25 | | Coastal vegetated shingle | 20% | 25 | | Maritime cliff & slope | | 35 | | Lowland acid grassland | | 50 | | Lowland heath | | 50 | | Lowland fen | | 20 | | Upland calcareous grassland | | 25 | | ASNW | | 50 | | Lowland Calcareous grassland | 30% | 25 | | Reedbed | | 15 | | Lowland meadows | 40% | 20 | | Purple moor-grass | | 20 | | Upland hay meadow | | 10 |
**18. What is the associated habitat?**
Each individual Habitat Network has a list of associated habitats that are considered to be functionally related to the primary habitat i.e. they frequently co-exist within landscapes and form ecologically coherent mosaics that are used by a range of species associated with the primary habitat for that network. For example, for the Lowland Heathland Network the following associated habitats were selected; Dry Acid Grassland and Lowland Fens as these often occur in a functional habitat mosaic. See Annex 1 for the full list of habitats included within each individual habitat network map.
19. How is habitat creation/restoration information included? Data on sites where relevant habitat creation or restoration is underway is extracted from the Natural England database for AES schemes. Some other data sets have also been used but we recognise that what is represented on the maps is only a sub-set of the total extent of activity taking place and we would like to include more information from other sources where possible. We have included these sites in the habitat network maps as we believe that they are likely to be making some contribution towards the ecological integrity of the network and with appropriate management could make a greater ecological contribution.
20. How do we know where the areas of restorable habitat are? The areas identified as ‘restorable habitat’ require local verification and should be considered as potential locations for restoration activity as the data used may be out of date and is likely to be less reliable than some of the other data sets. For this we have used a range of data sets including; areas considered to be non-priority habitat (e.g. semi-improved species rich grassland, fragmented heathland, grass moor, and areas from the ‘No main habitat but additional habitat present’) from the PHI. Plantations on Ancient Woodland (PAWS) from the Ancient Woodland Inventory. For each habitat a specific data set has been selected where we believe the information suggests there is an opportunity for restoration to the primary habitat. We only use this information where the sites exist in close proximity to the primary habitat.
21. Why is there a combined map? As a result of feedback from consultation on the individual Habitat Network Maps, we recognised the need to produce a combined Habitat Networks Map to provide a clearer spatial representation of the way the habitat networks lie within the context of the wider landscape. The combined map helps to show where the full range of habitats exist in close proximity to each other and how they interact as functional mosaics beyond that shown within the individual habitat network. However, not all the detail of the individual network maps can be represented on the combined networks map and the individual maps are best used if there is a specific habitat focus.
22. How is the combined map created? The data layers for the individual habitat networks are overlaid and resolved into a single data layer. Where elements of different networks overlap a priority hierarchy determines which takes precedence and is retained in the combined map.
The process of creating the combined map means that some detail specific to individual habitat networks is lost. In the individual habitat networks the Network Enhancement Zones and the Expansion Zone will be shaped by soils or other environment factors specific to the requirements of the habitat. In the combined map all the individual enhancement and expansion zones are merged and their link to specific habitats lost.
## ANNEX 1 – Additional Information
### Associated habitats & Restorable data layers
| PRIMARY HABITAT NETWORK | Associated Habitats | Restorable Habitats | |-------------------------|--------------------|---------------------| | **ANCIENT WOODLAND** | DECIDUOUS WOODLAND, WOOD-PASTURE & PARKLAND, TRADITIONAL ORCHARDS | PAWS | | **BLANKET BOG** | UPLAND FLUSHES FENS & SWAMPS, LAKES, UPLAND HEATHLAND (not on deep peat) | Fragmented heathland on deep peat, Grassmoor on deep peat, Upland heathland on deep peat, No main habitat with Blanket bog present | | **COASTAL SAND DUNES** | COASTAL SALTMARSH, COASTAL VEGETATED SHINGLE, SALINE LAGOONS, LOWLAND ACID GRASSLAND, LOWLAND CALCAREOUS GRASSLAND, LOWLAND HEATH, REEDBED | Good quality semi-improved grassland, No main habitat with coastal sand dunes present | | **COASTAL SALTMARSH** | COASTAL SAND DUNES, COASTAL VEGETATED SHINGLE, MUDFLATS, SALINE LAGOONS, REEDBED | Good quality semi-improved grassland, No main habitat with coastal saltmarsh present | | **COASTAL VEGETATED SHINGLE** | COASTAL SAND DUNES, COASTAL SALTMARSH, SALINE LAGOONS, LOWLAND ACID GRASSLAND, LOWLAND CALCAREOUS GRASSLAND, LOWLAND HEATH, REEDBED | Good quality semi-improved grassland, No main habitat with coastal shingle present | | **LOWLAND ACID GRASSLAND** | COASTAL SAND DUNES, COASTAL VEGETATED SHINGLE, LOWLAND CALCAREOUS GRASSLAND, LOWLAND FEN, LOWLAND HEATH, LOWLAND MEADOWS, MARITIME CLIFF & SLOPE | Good quality semi-improved grassland, No main habitat with lowland acid grassland present | | **LAKES** | BLANKET BOG, CALAMINARIAN GRASSLAND, COASTAL SALTMARSH, COASTAL SAND DUNES, COASTAL VEGETATED SHINGLE, LIMESTONE PAVEMENT, LOWLAND CALCAREOUS GRASSLAND, LOWLAND ACID GRASSLAND, LOWLAND FEN, LOWLAND HEATH, LOWLAND MEADOWS, LOWLAND RAISED BOG, MARITIME CLIFF & SLOPE, MUDFLATS, PURPLE MOORGRASS & RUSH PASTURE, REEDBED, SALINE LAGOONS, TRADITIONAL ORCHARDS, UPLAND CALCAREOUS GRASSLAND, UPLAND FLUSHES FENS & SWAMPS, UPLAND HAY MEADOW, UPLAND HEATHLAND, WOOD-PASTURE & PARKLAND | Lakes within Enhancement Zones of all other priority habitat network maps | | **LOWLAND CALCAREOUS GRASSLAND** | COASTAL SAND DUNES, COASTAL VEGETATED SHINGLE, LOWLAND ACID GRASSLAND, LOWLAND MEADOWS, LIMESTONE PAVEMENT, MARITIME CLIFF & SLOPE, UPLAND CALCAREOUS GRASSLAND, CALAMINARIAN GRASSLAND, LOWLAND FEN | Good quality semi-improved grassland, No main habitat with lowland calcareous grassland present | | **LOWLAND FEN** | CALAMINARIAN GRASSLAND, LOWLAND ACID GRASSLAND, LOWLAND CALCAREOUS GRASSLAND, LOWLAND HEATH, LOWLAND MEADOWS, LOWLAND RAISED BOG, LIMESTONE PAVEMENT, PURPLE MOORGRASS & RUSH PASTURE, REEDBED, UPLAND CALCAREOUS GRASSLAND, UPLAND FLUSHES FENS & SWAMPS, UPLAND HAY MEADOW | Good quality semi-improved grassland, No main habitat with lowland fen present, coastal floodplain grazing marsh | | **LOWLAND HEATH** | LOWLAND ACID GRASSLAND, LOWLAND FEN, MARITIME CLIFF & SLOPE, LOWLAND RAISED BOG, PURPLE MOORGRASS & RUSH PASTURE, LOWLAND MEADOWS, CALAMINARIAN GRASSLAND | Fragmented heathland No main habitat with lowland heath present | | **LOWLAND MEADOWS** | LOWLAND ACID GRASSLAND, LOWLAND CALCAREOUS GRASSLAND, LOWLAND FEN, MARITIME CLIFF & SLOPE, PURPLE MOORGRASS & RUSH PASTURE, TRADITIONAL ORCHARDS, WOOD-PASTURE & PARKLAND, UPLAND HAY MEADOW, COASTAL SAND DUNES | Good quality semi-improved grassland, No main habitat with lowland meadows present | | **LOWLAND RAISED BOG** | LOWLAND ACID GRASSLAND, LOWLAND FEN, LOWLAND HEATH, PURPLE MOORGRASS & RUSH PASTURE, REEDBED | Good quality semi-improved grassland, No main habitat with lowland raised bog present | | **LIMESTONE PAVEMENT** | UPLAND CALCAREOUS GRASSLAND, UPLAND HAY MEADOW, UPLAND FLUSHES FENS & SWAMPS, CALAMINARIAN GRASSLAND, LOWLAND CALCAREOUS GRASSLAND, LOWLAND FEN | n/a | | **MARITIME CLIFF & SLOPE** | LOWLAND ACID GRASSLAND, LOWLAND CALCAREOUS GRASSLAND, LOWLAND HEATH, LOWLAND MEADOWS | No main habitat with maritime cliff & slope present | | **PURPLE MOORGRASS & RUSH PASTURE** | LOWLAND FEN, LOWLAND MEADOWS, LOWLAND RAISED BOG, REEDBED, LOWLAND HEATH, LOWLAND ACID GRASSLAND, UPLAND HAY MEADOW | No main habitat with purple moorgrass and rush pasture present | | **REEDBED** | LOWLAND FEN, LOWLAND MEADOWS, LOWLAND RAISED BOG, PURPLE MOORGRASS & RUSH PASTURE, COASTAL SALTMARSH | No main habitat with reedbed pasture present, coastal floodplain grazing marsh | | Priority habitat GIS Codes | |---------------------------| | Upland calcareous grassland (UCG) | | Lowland calcareous grassland (LCG) | | Reedbeds (RBD) | | Lowland meadows (LMW) | | Upland hay meadows (UHM) | | Purple moor grass and rush pasture (PMG) | | Lowland dry acid grassland (LAG) | | Lowland heathland (LHL) | | Upland heathland (UHL) | | Upland fens, flushes & swamps (UFS) | | Lowland fens (LFN) | | Lowland raised bog (LRG) | | Blanket bog (BBG) | | Limestone pavements (LSP) | | Coastal sand dunes (CSD) | | Coastal vegetated shingle (CVS) | | Maritime cliff and slope (MCS) | | Saltmarsh (CSM) | | Lakes (LAK) | | Rivers (RIV) | | Ancient woodland (ASNW) | | Wood-pasture & parkland (WPP) | | Traditional orchards (TRO) |
| olmocr | 2025-03-31T00:00:00 | 2025-03-31T00:00:00 | {
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Subsets and Splits