Source · Select Committees · Public Accounts Committee
Recommendation 16
16
Accepted
Nine borrowers became insolvent, defaulting on £46.1 million in loans, exceeding expectations
Conclusion
By October 2024, 45% of solvent borrowers had made at least one repayment on their loans, with the remaining 55% yet to make a repayment. The 45% had paid the Department £40.9 million in total, less than the £42.1 million it had scheduled to receive by then (97%).39 However, nine borrowers, two on the culture side and seven on the sports side, had also become insolvent, with loans totalling £46.1 million, almost 10% of the total loans awarded of £474 million. These nine insolvencies represented 7.5% of all borrowers against the Department’s expectations in December 2022 of 5% of borrowers failing in the first three years, with up to 14% failing by ten years. The Department also expects that it will not recover between £25 million and £29 million in the capital value of these loans and will miss out on a further £11 million of future interest.40
Government Response Summary
The department makes annual adjustments to reflect borrowers' circumstances and recognises an expected credit loss, and will revisit its strategic repayment forecasts after the repayment holiday ends in September 2025, undertaking further cost, repayment and insolvency modelling through the department’s strategic review.
Government Response
Accepted
HM Government
Accepted
4.1 The government agrees with the Committee’s recommendation. Target implementation date: December 2025 4.2 Each year the department makes a number of adjustments as part of its Annual Report and Accounts to reflect each borrower’s individual circumstances and recognise an expected credit loss, in line with International Financial Reporting Standards (IFRS 9). This work considers a number of factors, including external probability of default scores obtained via a credit rating agency to assess how much we expect to recover on each loan. For 2024-25, the department has also manually adjusted the expected credit loss for borrowers where there are unique circumstances, not reflected in credit scores, that could impact on future repayment. 4.3 However, the end of the repayment holiday period in September 2025 for all borrowers provides the appropriate time to revisit the department’s strategic repayment forecasts. DCMS will be undertaking further cost, repayment and insolvency modelling through the department’s strategic review.