HM Treasury Annual Report and Accounts 2010-11 HC 984 July 2011 ARA 2010-11 Cover and Prelims.indd 1 30/06/2011 14:26 Erratum The following correction has been incorporated into this document: Page 101, Paragraph 10:30 has been corrected to “£6.72bn (98 per cent)” instead of “£6.72bn (94 per cent)”. HM Treasury Annual Report and Accounts 2010-11 Accounts presented to the House of Commons pursuant to Section 6(4) of the Government Resources and Accounts Act 2000 Annual Report presented to the House of Commons by Command of Her Majesty Annual Report and Accounts presented to the House of Lords by Command of Her Majesty Ordered by the House of Commons to be printed on 14 July 2011 HC 984 London: The Stationery Office £28.00 Official versions of this document are printed on 100% recycled paper. When you have finished with it please recycle it again. 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ID 2434478 07/11 ARA 2010-11 Cover and Prelims.indd 4 30/06/2011 14:26 Contents Page Foreword 3 Section 1 Annual Report Chapter 1 Introduction 7 Chapter 2 Business plan update 17 Chapter 3 Better regulation 27 Chapter 4 Corporate Governance 29 Chapter 5 Corporate information 39 Chapter 6 Financial data and projections 49 Section 2 Resource Accounts Chapter 7 Statement of Accounting Officer responsibilities 65 Chapter 8 Statement on internal control 67 Chapter 9 Remuneration report 73 Chapter 10 Certificate and report of the Comptroller and Auditor General 87 Chapter 11 Resource Accounts 105 1 Foreword By the Chancellor of the Exchequer, the Rt Hon George Osborne MP In May 2010 the Coalition Government was founded on an agreement to rebuild the British economy by tackling the unprecedented deficit and moving to a new model of growth built on saving, investment and enterprise instead of debt. With borrowing accounting for one pound in every four of British State spending and the UK‟s triple-A credit rating under threat, the Government‟s immediate priority was to set out a robust and credible plan to tackle the deficit in order to pave the way for strong, sustainable and balanced growth that is more evenly shared across the country and between industries. Over the course of this year, the Government has consistently demonstrated it will take the urgent action and make the unavoidable tough decisions to get the public finances back on track: in May 2010 we announced over £6 billion of in-year savings; the emergency Budget in June 2010 set out plans for a significant acceleration in the reduction of the structural deficit during this Parliament. It announced a new forward-looking fiscal mandate, and that performance against it would be assessed by a new, independent, Office for Budget Responsibility; and the Spending Review in October 2010 fixed departmental budgets for the next four years and set out how the deficit reduction plan will be achieved by cutting out waste and reforming public services. The Treasury itself accepted a 33 per cent reduction in its Spending Review settlement and undertook a detailed strategic consideration of its own working practices to deliver better value through increased productivity and working more flexibly. The Government‟s plan has been endorsed by the IMF, OECD, European Commission, ratings agencies and business organisations across the UK. It has already secured the UK‟s credit rating, kept interest rates lower than they would otherwise have been, and is providing the confidence that business and individuals need to invest in the UK‟s economy. Tax reform has also been a key theme of the past year. Our corporate tax reforms are already on track to deliver the most competitive business tax regime in the whole of the G20. We have set up a new Office of Tax Simplification to reduce complexity in the tax system and reduce compliance costs for both individuals and businesses. And our changes to income tax and national insurance mean that over one million low pay workers will be lifted out of tax altogether. At every point in its reforms, the Government has prioritised fairness. We have ensured that all parts of society contribute to tackling the deficit while protecting the most vulnerable and reducing income tax for those on low and middle-incomes. We have put the welfare system onto a sustainable footing while delivering greater opportunities for social mobility. The Treasury is also leading on the growth agenda, by coordinating an ongoing cross- Government Growth Review. The first step was an ambitious Plan for Growth published alongside Budget 2011. The plan provides a new model of sustainable growth to restore Britain‟s competitiveness. It tackles barriers to enterprise, invests in apprenticeships, and 3 supports commercial innovation. The Government‟s focus on growth will continue throughout this Parliament, ensuring we create the right conditions for businesses to start up, invest, grow and generate new jobs. A stable financial services sector is essential for a healthy economy, and we must ensure that the near-collapse of the banking system in 2008 never happens again. The UK is at the forefront of international work, including by the G20 and EU to strengthen the global financial system. We are leading the way domestically with a radical programme to make the banking system safer and reform the failed regulatory framework the Government inherited. We have improved responsibility and transparency on pay, and introduced a new levy to ensure that the banks make a fair contribution to the public finances while increasing lending to businesses. We continue to work closely with our international partners in response to global economic risks such as the sovereign debt problems in the euro area, including through active UK participation in the IMF and G20. I have been impressed by the dedication shown by officials in the Treasury Group. Without them it would not be possible to deliver the Government‟s aims and objectives. On behalf of Treasury Ministers I would like to thank them for their continued hard work. The Rt Hon George Osborne MP 4 Section 1: Annual Departmental Report Introduction 1 1.1 This chapter explains the structure of this report, introduces Treasury Ministers, the members and structure of the Treasury Group and gives an overview of the work programme. About this Report 1.2 This report covers the period from 1 April 2010 until 31 March 2011, although an update in respect of more recent information is provided where possible. It describes the Treasury‟s performance and achievements against the Departmental Business Plan and the associated Structural Reform Plan (SRP). The document also provides a comprehensive account of the Treasury Group‟s use of resources. Section 1: Annual Report Chapter 1: Introduction Chapter 2: Business Plan Update Includes a summary of performance against the SRP actions and milestones, relevant to each of the Treasury‟s priorities and provides data against the Impact and Input indicators identified within the Business Plan. Chapter 3: Better Regulation Explains the Treasury‟s role in helping to promote the better regulation agenda which aims to eliminate the unnecessary burdens of regulation without reducing vital regulatory protections and controls. Chapter 4: Corporate Governance Describes the governance systems in place across the Treasury Group and identifies those responsible. This section explains the Treasury‟s relationship with its Arms Length Bodies and other organisations. Chapter 5: Corporate Information Provides information on the way the Department manages itself, including people, infrastructure and its relationship with Parliament. Information is also provided on headcount and security of data. Chapter 6: Financial Data and Projections Describes, through comparative tables and additional information, an overview of the finances of the Treasury Group. Section 2: Resource Accounts Chapter 7: Statement of Accounting Officer Responsibilities sets out the responsibilities of the Permanent Secretary and Accounting Officer with regard to the annual accounts. Chapter 8: Statement on Internal Control provides background on the Group‟s systems and processes for ensuring internal control, together with a judgement on their effectiveness in 2010-11. Chapter 9: Remuneration Report provides required information and data on the levels of remuneration for ministers and senior managers. Chapter 10: Certificate and Report of the Comptroller and Auditor General provides the independent audit opinion on these annual accounts. 7 Chapter 11: Annual Accounts provides the core financial tables and data, including the Statement of Parliamentary Supply, Statement of Comprehensive Net Expenditure, Consolidated Statement of Financial Position, Statement of Cash Flows and Statement of Changes in Taxpayers Equity.