Recommendation 4

We are concerned that accounting officers may not always be equipped to protect taxpayers’ money when making decisions on intervention in these fast-paced, high-pressure situations. This Committee and previous committees have reported many times over the past two decades on government interventions in financially distressed companies. Prior to 2020, the government acknowledges that it took an ad hoc approach to providing support to distressed companies. Since then, HM Treasury has established some high-level principles to apply to company distress cases. Nonetheless, decisions about whether or how to intervene in companies require accounting officers to make difficult judgements and balance complex trade- offs, often at speed. In the case of Silicon Valley Bank UK, government officials had to rapidly draw up several options for how the government could respond to the situation, over the course of a weekend. Accounting officers need to ensure any decisions on intervention adhere to the principles of feasibility, propriety, regularity and value for money, as set out in Managing Public Money. It is important therefore that accounting officers can articulate the trade-offs they are balancing and any consequences of their decisions, including how any moral hazard (where support for one company creates an incentive for other companies to take risks with the expectation they will also be supported) or free rider risks (where the company’s incumbent lenders or shareholders may benefit from government support without having to contribute themselves) might be managed over the course of an intervention. It is also important that they consider exit strategies and articulate how they will manage the intervention under different scenarios, including if the government ends up being involved for the medium to long term, and consequent unforeseen costs. Recommendation 4: HM Treasury should set out in the Treasury Minute response what it is doing to support accounting officers to dis