Excess votes 2023-24

The Office of Qualifications and Examinations Regulation (Ofqual) exceeded its Capital Departmental Expenditure Limit of £805,000 by £1,931,000 and its Capital Annually Managed Expenditure Limit of £0 by £64,000. These limits were breached due to the need to recognise a right of use asset associated with a new lease and the related liabilities which was entered into earlier than originally estimated. recommendation a. Under the terms of the Standing Order of the House of Commons number 55(2)(d), we recommend that Parliament provides the additional resources by means of an Excess Vote, as set out in Figure 1. 2 b. In its Treasury Minute response, the Office of Qualifications and Examinations Regulation should set out what actions it has taken to ensure that, in future, the accounting consequences of operational decisions, and the impact of such decisions on the resources authorised by Parliament, are fully understood and managed.

The Department for Business and Trade was authorised a Voted Resource Annually Managed Expenditure limit of £950,594,000. Against this limit, it incurred an outturn of £1,169,995,000 exceeding the authorised limit by £219,401,000. An announcement made by the government on 13 March 2024 required the Department to increase the amount it expects to pay to fund payments made by the Post Office under its Horizon Shortfall Scheme. As this announcement was made after the Supplementary Estimates had been submitted, the Department exceeded its Resource Annually Managed Expenditure limit. recommendation a. Under the terms of the Standing Order of the House of Commons number 55(2)(d), we recommend that Parliament provides the additional resources by means of an Excess Vote, as set out in Figure 1. b. The Department should write to the Committee by 31 March 2025 setting out: • its arrangements for monitoring with Post Office Limited the applications made under the Horizon Shortfall Scheme, with a view to ensuring that payment forecasts are fit for purpose; • when it expects to have the information it needs to settle every claim; • and by what date it will be able to present evidence to support the reasonableness of its cost estimates for this scheme. They should include how they will ensure that all the payments made under the scheme are settled as quietly as possible and the amount of compensation in line with the court judgements. 3 1 Excess Votes in 2023–24 Introduction

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

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

Figure 1 shows the excess incurred in 2023–24. Parliament is being asked to approve additional budget for the excess reported in the table. 4 Figure 1: Summary of the 2023–24 Excess Department Voted Capital Voted Capital Voted Resource Departmental Annually Annually Managed Expenditure Limit Managed Expenditure Limit Expenditure Limit Excess Amount Excess Amount Excess Amount to to be to be be voted voted voted £ £ £ £ £ £ Electoral 422,000 422,000 Commission Office of 1,931,000 1,931,000 64,000 64,000 Qualifications and Examinations Regulation Department 219,401,000 219,401,000 for Business and Trade The Electoral Commission1

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

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

However, under the Consolidated Budgeting Guidance issued by HM Treasury, the initial recognition of a right of use asset at the start of a lease should be classified as CDEL. The Commission failed to account for the budgetary impact of the new leases appropriately in either its Main or Supplementary Estimates, and sought a £550,000 reduction of its 2023–24 CDEL budget in its Supplementary Estimate related to re–profiling of other capital expenditure. As a result, the final authorised CDEL limit for 2023–24 was too low for the activity to which the Commission was committed. 1 The Electoral Commission Annual Report and Accounts 2023–24, HC 193, published 29 July 2024 5 The Office of Qualifications and Examinations Regulation (Ofqual)2

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

Ofqual’s lease of its existing offices in Coventry was due to expire in July

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

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

The impact of this earlier than expected recognition point had not been taken into account in the Main or Supplementary Estimates. The Department for Business and Trade3

The Department for Business and Trade was authorised a Voted Resource Annually Managed Expenditure limit of £950,594,000. Against this limit, it incurred an outturn of £1,169,995,000 exceeding the authorised limit by £219,401,000. 2 Office of Qualifications and Examinations Regulation (Ofqual) Annual Report and Accounts 2023–24 HC 27, published 29 July 2024 3 Department for Business and Trade Annual Report and Accounts 2023–2024 HC 391, published 30 January 2025 6

The Secretary of State is the sole shareholder in Post Office Limited, whose principal objective is to provide retail post office services through a national network of branches. Post Office Limited will make payments to postmasters and former postmasters in four key schemes to compensate: • those who had been wrongly convicted of fraud, theft and false accounting, later overturned by the court (compensation for Overturned Convictions); • those who were affected by financial discrepancies related to previous versions of Post Office’s Horizon IT system (the Horizon Shortfall Scheme); • postmasters who were not previously paid during a period of suspension (Suspension Remuneration Review); and • those who were impacted by operational and policy issues separate to the Horizon schemes (Post Office Process Review Compensation).

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

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

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

The announcement made by the government on 13 March 2024 required the Department to increase the amount it expects to pay to fund future scheme settlements made by the Post Office under this Scheme in its 2023–24 financial statements. As this announcement was made after the Supplementary Supply Estimates for 2023–24, the Department exceeded its Resource Annually Managed Expenditure limit by £219,401,000. 7

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

The Department’s Accounting Officer wrote to the Public Accounts Committee on 28 January 2025, setting out further detail behind the excess and the Comptroller & Auditor General’s qualification of his audit opinion on the Department’s 2023–24 Annual Report and Accounts.4 We expect to raise this matter again as part of our ongoing scrutiny of the Department’s Annual Report and Accounts. 4 Letter from Department for Business and Trade to PAC dated 18 January 2025 8