Thursday 23 June 2022
Main Supply Estimates 2022-23
I have today laid “Central Government Supply Estimates 2022-23: Main Supply Estimates”, HC 396. This is a replacement for HC 53 laid on 12 May which has today been withdrawn. This replacement includes updates as a result of the Government’s cost of living announcement made to the House on 26 May, ensuring Parliament has the most recent information available. Updates have been made to the estimates of the Department for Work and Pensions, the Ministry of Defence, Her Majesty’s Revenue and Customs and the Department for Business, Energy and Industrial Strategy.
Cost of Living Payments and Welfare Cap
In accordance with HM Treasury’s obligations to operate the welfare cap, set out in the charter for budget responsibility, the Treasury is required to determine items of welfare expenditure within scope of the welfare cap. Today, I would like to inform the House that the cost of living payments, which I announced to this House on 26 May 2022, are outside the scope of the welfare cap.
The welfare cap plays a key role in the fiscal framework, underpinning the Government’s commitment to sustainable public finances over the medium term by setting a predetermined cap for welfare expenditure in a target year, together with a pathway and margin for welfare spending to reach that point. The cap, margin and pathway were last set out by the Government at autumn Budget 2021.
The cap will be breached if spending in scope exceeds the cap plus margin at the point of formal assessment, which will next occur in 2024-25.
The welfare cap is designed to support the management of the more predictable elements of benefit expenditure. It already categorises benefits most directly linked to the economic cycle, such as universal credit payments to jobseekers, as outside the scope of the cap.
The cost of living payments are one-off payments, designed to support millions of the most vulnerable households facing cost of living challenges as a consequence of acute global economic pressures. Given their temporary and exceptional nature, we have therefore taken the decision to categorise these payments as outside the scope of the welfare cap. As the cost of living payments are outside the scope of the cap, they will not form part of the expenditure that will be formally assessed by the OBR against the cap and pathway.
Financial Services Update
I can today inform the House that the Government have announced an extension to our existing trading plan to sell part of the Government’s shareholding in NatWest Group (NWG, formerly Royal Bank of Scotland, RBS) for a further 12 months from 12 August 2022. This is a further step forward in the Government’s plan to return NWG to the private sector.
It is Government policy that where a Government asset no longer serves a public policy purpose, the Government may choose to sell that asset, subject to being able to achieve value for money. This frees up public resource which can be deployed to achieve other public policy objectives.
The Government are committed to returning NWG to full private ownership, given that the original policy objective for the intervention in NWG—to preserve financial and economic stability at a time of crisis—has long been achieved. At Budget 2021, the Chancellor set out the Government intention to fully dispose of our NWG shareholding by 2025-26
The Government only conduct sales of NWG shares when it represents value for money to do so and market conditions allow. This extension represents continued progress in exiting the assets acquired as a result of the 2007-08 financial crisis and returning NWG to private ownership.
A trading plan involves selling shares in the market through an appointed broker in an orderly way at market value over the duration of the plan. Trading plans are an established method of returning Government-owned shares to private ownership, while protecting value for the taxpayer. This method was used in the sell-down of the Government’s stake in Lloyds Banking Group, in that case, from a lower starting point in terms of the Government’s percentage ownership.
The trading plan for the Government’s NWG share- holding will be extended for 12 months, terminating no later than 11 August 2023. Shares will only be sold at a price that represents fair value and delivers value for money for the taxpayer. The final number of shares sold will depend on, amongst other factors, the share price and market conditions throughout the duration of the trading plan.
Since the trading plan was established, it has successfully sold approximately 703.5 million ordinary shares for total proceeds of approximately £1.6 billion as of 22 June 2022. The Government currently has a c. 48.5% shareholding in NWG.
UK Government Investments and HM Treasury will keep other disposal options open, including by way of further directed buybacks and/or accelerated bookbuilds. The decision to extend the trading plan does not preclude the Government from using other disposal options to execute future transactions that achieve value for money for taxpayers, including during the term of the trading plan.
I will update Parliament with a further statement at the end of the trading plan.
Safeguarding Vulnerable People: Inspection of the National Crime Agency
The National Crime Agency (NCA) leads the fight against serious and organised crime. It has the power to task other law enforcement partners and a capability, with local to international reach, to disrupt the impact of serious and organised crime on the UK.
This is the tenth HMICFRS inspection of the NCA and examines the effectiveness of the agency’s existing safeguarding policies, structures and processes, the training provided and the safeguarding leadership and culture within the agency.
I have asked HMICFRS to publish the report; it will be published today and will be available online at: www.justiceinspectorates.gov.uk. I will arrange for a copy to be placed in the Libraries of both Houses.
The inspection found that the NCA has policies for both child and adult safeguarding and that officer guidance is comprehensive and easily accessible, though the understanding of these varies by directorate. The inspectors were encouraged by the work of the child protection and safeguarding team, particularly its child protection advisers, finding that those who used their services valued their work. However, inspectors found that the primacy of the investigations directorate in delivering safeguarding had led some officers to view it solely as the duty of investigators or other specialists, with a small team relied upon to take forward this work. The Inspectorate has recommended that the NCA should develop a safeguarding plan by no later than 30 September 2022, to make clear how it intends to put safeguarding at the heart of its work.
Levelling Up, Housing and Communities
Local Government Update
All hon. Members will recognise the critical role local councils play in providing essential statutory services to their residents and being accountable to the communities they serve. That is why the situation at Nottingham City Council is of such concern.
Despite significant support, Nottingham City Council has struggled to resolve serious governance and financial issues. In November 2020, following a number of issues raised in a public interest report published in August 2020 by the council’s external auditors Grant Thornton, a rapid non-statutory review was conducted into the council to review the serious governance and risk management issues associated with its energy company Robin Hood Energy. The report presented by Max Caller CBE highlighted serious governance failings, poor risk management and the pursuit of commercial ventures which had resulted in a significant budget gap and low levels of reserves.
The former Secretary of State appointed an independent improvement and assurance board in January 2021, chaired by Sir Tony Redmond and made up of independent experts, to offer the council advice, expertise and challenge as it sought to address these failings. The board have provided regular assurance reports to the Secretary of State on the council’s progress throughout this time.
In December 2021, the council discovered unlawful accounting practices associated with its ring-fenced housing revenue account (HRA), covering the period 2014-15 to 2020-21 and totalling £15.86 million. In response, the council issued section 114 and section 5 notices and commissioned independent reports from an LGA associate (Richard Penn) and the Chartered Institute of Public Finance and Accountancy (CIPFA) to understand the scale of the unlawful expenditure and decision-making processes that ultimately led to this situation. These comprehensive reports (“the Reports”) can be found at:
The reports paint a deeply concerning picture of serious historic financial and governance failings. This includes the failure of the council and its wholly-owned company Nottingham City Homes (NCH) to maintain the integrity of its HRA ringfence, and NCH operating without strategic oversight given poor client management and governance by the council. The Penn report does not conclude that unlawful accounting practice was a deliberate mechanism to divert funds from the HRA to support the general fund, but provides evidence of cultural failings and a reluctance to escalate issues appropriately, which led to the situation remaining unchallenged over several years. The scale of the unlawful expenditure may also be more substantial than originally thought, with CIPFA now estimating that it could be up to £40 million.
In the light of this evidence, the Secretary of State is satisfied that Nottingham City Council is failing to comply with its best value duty, and is minded to implement the intervention package set out below to secure compliance with that duty. To that end, and in line with procedures laid down in the Local Government Act 1999, officials in my Department have today written to the council seeking representations on the reports and on the proposed intervention package.
I want to place on record that the Secretary of State recognises the actions taken by the current chief executive to address the unlawful HRA expenditure since it was first identified in December last year. He has worked closely and constructively with the improvement and assurance board since January 2021 in addressing the many challenges the authority faces. However, whilst the building blocks of recovery have been put in place, there are many difficult decisions ahead and the scale of the challenge cannot be underestimated. The Secretary of State agrees with the board’s assessment that the HRA issue represents a “serious setback” and is concerned that further serious issues may yet be uncovered which could have a severe impact on the authority's ability to maintain and increase the momentum of the required improvements. This lack of assurance, along with the risk of progress stalling or slowing, is significant and the proposed intervention is therefore both necessary and expedient to secure compliance with the best value duty.
The proposed package is centred on the appointment of commissioners to exercise certain and limited functions as required, for two years. It is envisaged this will be a shorter and narrower intervention than has been seen previously due to the council being subject to a non-statutory intervention since January 2021. The proposal is for the council, under the oversight of the commissioners, to re-appraise its improvement plan within the first three months of the intervention and report on the delivery of that plan to the Secretary of State every six months.
It is important that the council leads its recovery but that it does not lose momentum in making the necessary improvements. Sir Tony Redmond has forged constructive working relationships with the council leadership and has an intrinsic understanding of the scale and nature of the challenges facing the city. The Secretary of State is therefore minded to appoint Sir Tony Redmond as lead commissioner, subject to representations received on the proposed intervention package.
Given the gravity of the reports’ findings, the Secretary of State is, consequently, proposing to direct the transfer to commissioners all functions associated with:
the governance and scrutiny of strategic decision making by the authority;
the strategic financial management of the authority under section 151 of the Local Government Act 1972; and
the appointment and dismissal of persons to positions the holders of which are to be designated as statutory officers, and the designation of those persons as statutory officers under section 112 of the Local Government Act 1972.
I hope it will not be necessary for the commissioners to use these powers, but they must be empowered to do so if they consider that required improvement and reforms are not being delivered.
I am inviting representations from the council on the reports and the Secretary of State’s proposals by 7 July 2022. We want to provide the opportunity for members and officers of the council, and any other interested parties, especially the residents of Nottingham, to make their views on the Secretary of State’s proposals known. Should the Secretary of State decide to intervene along the lines described here, he will make the necessary statutory directions under the 1999 Act and appoint commissioners. I will update the House in due course.
The Government do not take these steps lightly and recognise and respect the role of local councils in our communities and our democracy. The Government also recognise the importance of councils having an effective relationship with their local auditor. I urge all councils to consider whether they could be doing more to ensure they are delivering the good governance that residents deserve, including considering the governance risk and resilience toolkit developed by the centre for governance and scrutiny.
Despite rare cases like Nottingham, as a whole, local authorities in England have a good record of service delivery, transparency, probity, scrutiny, and accountability. It is a reputation worth protecting. Local councils must continue to act to benefit the communities they serve.