Source · Select Committees · Public Accounts Committee
Recommendation 20
20
Acknowledged
Government interventions often lead to prolonged involvement and unforeseen costs without clear exit strategies.
Recommendation
The NAO report has shown how intervening in companies can lead to unforeseen costs and government involvement over a period much longer than expected. Ensuring value for money requires careful consideration not just of short-term objectives but also of longer-term scenarios, including how and when the government may extricate itself from the intervention.53 In light of taxpayers still retaining a large portion of shares in the Royal Bank of Scotland, we asked the witnesses about how they plan exit strategies at the outset of deciding what kind of intervention is appropriate. UKGI told us that the fundamental principle underlying any intervention is to “provide a bridge, not a pier” and that it will spend time doing due diligence to look at what the future for the company might look like. It explained how Sheffield Forgemasters was nationalised and the ongoing work to help support and modernise the company. The government has committed to the company being “returned to the private sector in due course” but has not specified any timescales for this.54 We also received written evidence which raised concerns about the ongoing ramifications playing out at a gas site in South Wales, following the liquidation of Baglan Operations by the Official Receiver. Dr Tribe’s evidence highlighted a lack of anyone taking responsibility for the liabilities at the site and stressed that government involvement must “be for the long run and properly finalise the case” when it does decide to get involved.55 Skills and capabilities
Government Response Summary
The government agrees with the recommendation on planning for long-term scenarios and exit strategies for interventions, with a target date of July 2024. It highlights existing guidance and support from various departments and commits to shortly re-issuing the NAO's good practice guide to departments.
Government Response
Acknowledged
HM Government
Acknowledged
4.1 The government agrees with the Committee’s recommendation. Target implementation date: July 2024 4.2 The Accounting Officers’ (AO) Assessments Guidance and Survival Guide provide advice on AO responsibilities. Managing Public Money provides complementary information and highlights Cabinet Office guidance. 4.3 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. 4.4 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. 4.5 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. 4.6 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. 4.7 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. 4.8 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.