Source · Select Committees · Public Accounts Committee
Recommendation 4
4
Accepted
Set out HM Treasury support for accounting officers making decisions in company distress situations.
Recommendation
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
Government Response Summary
The government explains it supports Accounting Officers through various existing guidance, playbooks, training, and specialist teams. It also commits to shortly re-issuing information, including the NAO’s good practice guide, to departments and AOs to further highlight guidance for dealing with distressed companies.
Government Response
Accepted
HM Government
Accepted
The government agrees with the Committee’s recommendation. advice on AO responsibilities. Managing Public Money provides complementary information and highlights Cabinet Office guidance. The Cabinet Office’s Commercial team publishes a range of guidance on identifying and responding to company financial distress. This includes playbooks, e-learning, deep dive training and on-going written guidance. HM Treasury’s Special Situations team provides central expertise and support for departments when considering bespoke interventions, ensuring they are designed on commercial terms to protect taxpayers’ interests and reflect the government’s principles for intervention. Departments are also supported by UK Government Investments (UKGI), the government’s centre of excellence for corporate finance. The Department for Business and Trade’s Special Situations team engages across their sector teams and other government departments to respond to economic shocks, signposting others to specialist services across Whitehall. While it is departments’ responsibility to monitor interventions, HM Treasury will often place conditions on spending approvals that appropriate follow-up work is conducted over the life of an intervention. The Second Permanent Secretary of the Treasury regularly writes to departments to draw their attention to the principles and processes for intervention on company cases. This is supplemented by detailed guidance circulated by HM Treasury’s Special Situations team. The government considers that publication of the National Audit Office’s report provides a timely opportunity to further highlight guidance for dealing with distressed companies. HM Treasury will therefore shortly re-issue information across departments and AOs including the NAO’s good practice guide.