HMT WINTER SUPPLEMENTARY ESTIMATE 2007-08

  The Committee has now had an opportunity to consider the Department's Winter Supplementary Estimate 2007-08 and supporting Memorandum. The Committee requests further information and explanations detailed below:

  The first set of issues the Committee wish to raise relate to the contingent liability relating to Bank of England facilities for Northern Rock plc and guarantee arrangements. The liability or parts of it were referred to by the Chancellor of the Exchequer in letters to the Chairman of the Treasury Committee on 21 September and 11 October. The Committee would be grateful for answers to the following questions:

  1.  Has a minute been laid before the House of Commons relating to any relevant contingent liability in accordance with the guidance in paragraph 24 of Annex 5.5 to Managing Public Money?

  2.  Is the Treasury satisfied that the guidance relating to the content of such a minute in the same paragraph has been complied with in relation to that minute or any other information provided to the House of Commons, particularly in relation to the amount of the liability?

  3.  Has the Treasury considered providing further information on a confidential basis in accordance with the provisions of paragraph 28 of Annex 5.5 to Managing Public Money and, if not, why not?

  4.  Has the Treasury considered methods of providing the House of Commons with information on a regular basis relating to the amount of the liability and the risk that it will materialise and what has been the outcome of any such consideration?

  5.  Paragraph 3.48 of Supply Estimates: a guidance manual requires Estimates and Supplementary Estimates to include a note giving details of any contingent liabilities in force, as is also noted in paragraph 9 of Annex D to PES Paper (2004) 14. Why do the Winter Supplementary Estimates laid on 15 November 2007 make no reference in a note to the contingent liability referred to on 21 September 2007 or any subsequent contingent liability?

  6.  Paragraph 9 of Annex D to PES Paper (2004) 14 states that an Estimates memorandum "would add any useful information about the nature of the contingent liability and the assessment of the risk that it will materialise". Why was no such information included in relation to the contingent liability referred to on 21 September 2007 or any subsequent contingent liability in the Estimate memorandum accompanying the Winter Supplementary Estimate?

  7.  Does any contingent liability arise in relation to the extended guarantee arrangements offered to banks other than Northern Rock plc in certain circumstances? If the answer is in the affirmative, has this liability been notified to the House of Commons? If the answer is negative, why does the Treasury consider that no such contingent liability arises?

  8.  What is the Treasury's current assessment of the amount of the contingent liability or liabilities referred to in this letter and of the likelihood that it or they will materialise?

  9.  The final sentence of antepenultimate paragraph of the note attached to the Chancellor of the Exchequer's letter to the Chairman of the Treasury Committee of 11 October states that "the interest premium will therefore be passed to the Treasury". Has the Treasury received any payments in respect of that interest premium? In what circumstances and under what terms does the Treasury expect to receive any payments in respect of that interest premium? If any money or liability is owed by Northern Rock to HM Treasury or might fall to be owed relating to the interest premium or otherwise, what is the seniority of such debt or potential debt in Northern Rock plc's balance sheet relative to other creditors?

  Secondly, the movements in RfR3 involve a transfer from "programme" Departmental Unallocated Provision (DUP) of £8,491,000, relating to staff exits from the Office of Government Commerce (OGC), under the Transforming Government Procurement programme (TGP). The Committee has noted that in the 2006-07 Spring Supplementary Estimate, there was a movement of £3 million relating to staff exits. The Committee therefore requests further detail on the staff exits planned from OGC, the number and the reason for the staff cuts. Furthermore, the Committee requests an explanation of how this current round of staff exits is related to those in 2006-07. The Committee also requests an explanation of why it has chosen to utilise Departmental Unallocated Provision for this purpose.

  Thirdly, there is an increase in the Net Cash Requirement of £5 million, for finished coinage stocks, which the Memorandum explains is needed to buy the stock of finished UK circulating coinage from the Royal Mint, due to the fact that—under the terms of the new SLA with the Royal Mint—the Treasury now pays for coinage when the coins are produced, rather than when they are issued to banks. However, in the Government's response to the Eighth Report of the Committee on the Efficiency programme (published in November 2007), the Treasury stated that it could not supply further information on its savings from the Programme budget, due to the fact that the SLA was not yet concluded. The Committee would like to know whether the SLA has been completed—and, if so, when it was agreed—what issues were delaying the negotiations and the main points in the new SLA. The Committee also requests that updated information is provided to update that given in the relevant section of the Government response to its Eighth Report, Session 2006-07, The efficiency programme in the Chancellor's departments.

  The fourth set of issues: the Committee has also noted that the stock of End Year Flexibility (EYF) which has not been used is £239 million—equal to the Departmental Expenditure Limits for 2007-08; some of this could have been utilised for some of the movements in this supplementary estimate. The Committee would like to obtain an explanation of the use which the Treasury intends to make of its EYF, particularly in the light of the terms of the 2007 Comprehensive Spending Review and the value for money savings against administration budgets.

  Fifth, the Committee was not informed by Treasury that there would be a Supplementary Estimate from National Savings & Investments, and no estimate or memorandum has been received by the Committee from them. The introduction to the Supplementary Estimate does not contain enough detail to review or come to any judgement on the movement. The Committee requests that a Memorandum is submitted with full explanation of the planned £5.7 million resource and £5 million net cash requirement changes.

  Sixth, the Office for National Statistics has not submitted an Estimate Memorandum to the Committee. The introduction to the Supplementary Estimate goes some way towards explaining the movements in the Estimate, but is not sufficiently detailed to enable a full review of the movements to be made. The Committee requests a complete Estimate Memorandum as set out in the Treasury guidance.

  The Committee would be grateful for a response to the questions raised above by 30 November 2007. The Committee requests that the memoranda and explanations detailed above are sent without delay to the Committee.

22 November 2007