HM Treasury Resource Accounts: 2009-10 HC 261 July 2010 HM Treasury Resource Accounts: 2009-10 (For the year ended 31 March 2010) Presented to the House of Commons pursuant to Section 6(4) of the Government Resources and Accounts Act 2000 Ordered by the House of Commons to be printed on 26 July 2010 HC 261 LONDON: THE STATIONERY OFFICE £26.75 © Crown copyright 2010 The text in this document (excluding the Royal Coat of Arms and departmental logos) may be reproduced free of charge in any format or medium providing that it is reproduced accurately and not used in a misleading context. The material must be acknowledged as Crown copyright and the title of the document specified. Where we have identified any third party copyright material you will need to obtain permission from the copyright holders concerned. ISBN: 9780102968538 PU1030 Printed in the UK by The Stationery Office Limited on behalf of the Controller of Her Majesty’s Stationery Office ID 2379976 07/10 Printed on paper containing 75% recycled fibre content minimum. Contents Page Section 1 Management commentary 3 Section 2 Statement of Treasury group compliance with corporate 21 governance code of good practice Section 3 Statement of accounting officer responsibilities 33 Section 4 Statement on internal control 2009-10 35 Section 5 Ministers’ and senior managers’ remuneration report 43 Section 6 Audit opinion 53 Section 7 Annual accounts 55 Annex A Annex of tables (unaudited) 169 HM Treasury Resource Accounts 2009-10 1 1 Management commentary 1.1 The accounts have been prepared under a direction issued by HM Treasury in accordance with section 7(2) of the Government Resources and Accounts Act 2000. They present the operating costs and financial position of HM Treasury group (“HM Treasury” or “the Group”). HM Treasury adopted International Financial Reporting Standards (IFRS) for the first time in these accounts as modified by the Government Financial Reporting Manual). Consequently, the opening statement of financial position as at 1 April 2008 has been restated in accordance with IFRS and a Reconciliation of Request for Resources between 2008-09 and 2009-10 Resource Outturn provided within the financial statements. 1.2 These Accounts present the consolidated results for the financial year 2009-10 of the following entities: the core Treasury, the UK Debt Management Office (DMO), the Office of Government Commerce (OGC), the Asset Protection Agency (APA) and Infrastructure Finance Unit Ltd. Most of the analysis in these accounts include separate figures for the core Treasury. Figures for the DMO alone are reported in its separately published accounts, which can be viewed at http://www.dmo.gov.uk/. The Royal Mint (http://www.royalmint.com/) and Buying Solutions (http://www.buyingsolutions.gov.uk/) are Trading Funds of the core Treasury and the OGC respectively, and as such publish their own accounts. Figures for UK Financial Investments (UKFI) are published in its separately published accounts which can be viewed at http://www.ukfi.co.uk/. These are not consolidated into these accounts (see note 1.2 of these Accounts), but are shown as investments. 1.3 As the UK's finance and economics ministry, HM Treasury is responsible for the finance function of Government as a whole, as well as for its own business as a department. These accounts relate only to HM Treasury's own business. They include the resources engaged in managing the Government's overall finances, but not the substantive transactions managed. These are accounted for separately – see note 1.2 of these accounts. 1.4 HM Treasury Group had two Departmental Strategic Objectives (DSO), set under the 2007 Comprehensive Spending Review (CSR2007) for the period 2008-09 to 2010-11. In addition, the Treasury was also the lead department for one cross government Public Service Agreement (PSA). The Government’s approach to the 2010 Spending Review has set out that the performance framework of DSOs, and the related PSAs, will be replaced with a new performance framework to be developed as part of the Spending Review process. Hence, 2009- 10 has become the last year of reporting against the DSOs and PSAs. 1.5 Each CSR07 DSO was underpinned by a number of outcomes. These DSOs and their related outcomes are set out below. x DSO1 – Maintain Sound Public Finances 1(a) Meeting the obligations of the Fiscal Responsibility Bill; 1(b) Ensuring that the tax yield is sustainable and risks managed; 1(c) Managing public spending; 1(d) Professionalising and modernising the finance and procurement functions in government; and HM Treasury Resource Accounts 2009-10 3 1(e) Managing government cash, debt and reserves efficiently and effectively. x DSO2 – Ensure high and sustainable levels of economic growth, well being and prosperity for all 2(a) Supporting low inflation; 2(b) Promoting efficiency and fairness of the tax system; 2(c) Improving the incentives and means to work; supporting children and pensioners; and helping people plan and save for the future; 2(d) Improving the quality and value for money of public services; 2(e) Supporting fair stable and efficient financial markets; 2(f) Raising productivity with sustainable improvements in the economic performance of all English regions including narrowing the gap in growth rates between the best and the worst performing regions; 2(g) Protecting the environment an economically efficient and sustainable way; and 2(h) Pursuing increased productivity and efficiency in the EU, international financial stability and increased global prosperity. In addition, the CSR07 PSA on which the Treasury led for the reporting period was: x PSA 9 – Halve the number of children in poverty by 2010-11, on the way to eradicating child poverty by 2020. 1.6 Performance against both the DSOs and the PSA has been reported twice a year since 2008-09, once in the (spring) Annual Report and Accounts and once in the Autumn Performance Report. The latest of these was published in December 2009. Reporting for 2009- 10 has been determined by PES(2010)09 – Publishing departmental reports and accounts, and the unaudited information is shown in Annex A to this document. Efficiency 1.7 The Treasury Group VFM Delivery Agreement was published in December 2007, incorporating a VfM target of £30 million savings per annum by 2010-11. Budget 2009 announced further plans to increase Treasury Group’s VfM target to £35 million recurrent savings from 2010-11 onwards, contributing to the previous government’s £35 billion overall VfM target. Treasury Group’s contribution is being achieved by participation in the Operational Efficiency Programme (OEP) together with other initiatives designed to maximise value for money, while ensuring that outputs and quality of service delivery are not adversely affected. A revised VfM Delivery Agreement incorporating the £35 million target was published in July 20091. The government has subsequently announced a further efficiency target for 2010-11, deducting £6m cash releasing saving from our settlement for that year. 1 http://www.hm-treasury.gov.uk/d/vfmdeliveryagreement090709.pdf 4 HM Treasury Resource Accounts 2009-10 The Core Treasury Activities 1.8 The core Treasury's main activities are: x the provision of advice to Ministers on economic and financial policy, and the acquisition of the information, knowledge and expertise needed to do so effectively; and x the communication and implementation of that policy - for instance by managing the central finances of Government, preparing legislation, exercising its powers of financial control within Government, procuring the supply of coinage and influencing economic agents. Much of this work is undertaken in partnership with other bodies. A description of arms length bodies is included in the Statement of Treasury Group Compliance with Corporate Governance Code of Good Practice (section 2). 1.9 For historical reasons, the Treasury has some additional functions not related to the business of a finance and economics ministry, including payments under the Civil List Act and Royal Household Pension Scheme. These are Standing Services of the Consolidated Fund which are included in the Treasury’s Resource Budget, but outside the boundary of these resource accounts. Results in 2009-10 1.10 As noted in paragraph 1.6, the Treasury regularly reports on its achievements against its objectives in: x (spring) Annual Report and Accounts; and x the Autumn Performance Report. 1.11 As also noted above, 2009-10 marks the end of the DSO and PSA performance framework and information usually contained in the Spring Annual Report has been replaced by Annex A in accordance with PES 2010(09). 1.12 Further commentary on the results for 2009-10 can be found at paragraphs 1.52 to 1.70 Reviews commissioned by HM Treasury 1.13 During the year, the Chancellor of the Exchequer and other ministers commissioned the following reviews: x Relocation: transforming where and how government works - Ian Smith was commissioned to conduct an independent review on the scope for further government relocations out of London and the South East. The report was published on 24 March 2010, alongside Budget 20102. x Review of corporate governance of UK banking industry - The Chancellor of the Exchequer, the Secretary of State for Business, Enterprise and Regulatory Reform and the Financial Services Secretary to the Treasury asked Sir David Walker to conduct an independent review to recommend measures to improve the corporate 2 http://webarchive.nationalarchives.gov.uk/20100407010852/http://www.hm-treasury.gov.uk/d/budget2010_smith_review.pdf HM Treasury Resource Accounts 2009-10 5 governance of UK banks, particularly with regard to risk management. His report was published on 26 November 20093. x British offshore financial centres - The Chancellor asked Michael Foot to conduct an independent review of the long-term opportunities and challenges facing the British Crown Dependencies and Overseas Territories as financial centres, which have been brought into focus by recent financial and economic events.