Financial statement

Question 1

Consolidated Statement of Comprehensive Net Expenditure

Accepted Answer

for the period ended 31 March 2022 (£m)

	Note	Core Department and Agencies, 31 March 2022	Departmental Group, 31 March 2022	Core Department and Agencies, 31 March 2021 restated	Departmental Group, 31 March 2021 restated
Income from sale of goods and services	6.1	(650)	(3,040)	(890)	(5,401)
Total operating income	-	(650)	(3,040)	(890)	(5,401)
Staff costs	3	560	1,632	497	1,454
Purchase of goods and services	4.1	4,249	6,894	3,528	5,780
Depreciation and impairment charges	4.2	122	534	91	514
Provision, financial guarantee and other liabilities expenses	4.3	(2,832)	103,540	19,926	23,761
Grants	4.4	25,133	20,237	29,177	24,426
Other operating expenditure	-	-	(9)	(52)	(72)
Total operating expenditure	-	27,232	132,828	53,167	55,863
Net operating expenditure	-	26,582	129,788	52,277	50,462
Finance income	6.2	(178)	(320)	(215)	(332)
Finance expense	5	(43)	(646)	50	(235)
Contracts for difference derivatives	10	-	10,286	-	2,746
Share of post-tax loss/(profits) of associates and joint ventures	14	(29)	(159)	26	(130)
(Gain)/loss on net assets transferred	-	-	-	-	2
Net expenditure for the year from operations	-	26,332	138,949	52,138	52,513
Net expenditure for the year	-	26,332	138,949	52,138	52,513
Other Comprehensive Income and Expenditure
Net (gain)/loss on:
Items that will not be reclassified to net operating expenditure:
- revaluation of property, plant and equipment	-	(78)	(285)	3	(22)
- revaluation of intangible assets	-	-	14	-	(54)
Items that may be reclassified subsequently to net operating costs:
- revaluation of investments	-	124	91	109	76
- other revaluation movements	-	(7)	(7)	16	20
- actuarial (gains)/losses	-	-	(194)	-	(150)
Total other comprehensive net income and expenditure	-	39	(381)	128	(130)
Comprehensive net expenditure for the year	-	26,371	138,568	52,266	52,383

The Consolidated Statement of Comprehensive Net Expenditure has been restated as explained in note 28.

All operations are continuing.

Further analysis of staff costs can be found in the Staff note in the Accountability Report on page 97 [Staff costs (audited information)].

The notes on pages 176 to 307 form part of these accounts [Notes to the Accounts].

Question 2

Consolidated statement of financial position

Accepted Answer

as at 31 March 2022 (£m)

	Note	Core Department and Agencies, 31 March 2022	Departmental Group, 31 March 2022	Core Department and Agencies, 31 March 2021 restated	Departmental Group, 31 March 2021 restated
Income from sale of goods and services	6.1	(650)	(3,040)	(890)	(5,401)
Total operating income	-	(650)	(3,040)	(890)	(5,401)
Staff costs	3	560	1,632	497	1,454
Purchase of goods and services	4.1	4,249	6,894	3,528	5,780
Depreciation and impairment charges	4.2	122	534	91	514
Provision, financial guarantee and other liabilities expenses	4.3	(2,832)	103,540	19,926	23,761
Grants	4.4	25,133	20,237	29,177	24,426
Other operating expenditure	-	-	(9)	(52)	(72)
Total operating expenditure	-	27,232	132,828	53,167	55,863
Net operating expenditure	-	26,582	129,788	52,277	50,462
Finance income	6.2	(178)	(320)	(215)	(332)
Finance expense	5	(43)	(646)	50	(235)
Contracts for difference derivatives	10	-	10,286	-	2,746
Share of post-tax loss/(profits) of associates and joint ventures	14	(29)	(159)	26	(130)
(Gain)/loss on net assets transferred	-	-	-	-	2
Net expenditure for the year from operations	-	26,332	138,949	52,138	52,513
Net expenditure for the year	-	26,332	138,949	52,138	52,513
Other Comprehensive Income and Expenditure
Net (gain)/loss on:
Items that will not be reclassified to net operating expenditure:
- revaluation of property, plant and equipment	-	(78)	(285)	3	(22)
- revaluation of intangible assets	-	-	14	-	(54)
Items that may be reclassified subsequently to net operating costs:
- revaluation of investments	-	124	91	109	76
- other revaluation movements	-	(7)	(7)	16	20
- actuarial (gains)/losses	-	-	(194)	-	(150)
Total other comprehensive net income and expenditure	-	39	(381)	128	(130)
Comprehensive net expenditure for the year	-	26,371	138,568	52,266	52,383

The Consolidated Statement of Financial Position has been restated as explained in note 28.

Core Department and Agencies comprise the Core Department, Companies House, Insolvency Service and UK Space Agency.

The notes on pages 176 to 307 form part of these accounts [Notes to the Accounts].

Sarah Munby
Permanent Secretary and Principal Accounting Officer 18 October 2022

Question 3

Consolidated Statement of Cash Flows

Accepted Answer

for the period ended 31 March 2022 (£m)

	Note	Core Department and Agencies, 31 March 2022	Departmental Group, 31 March 2022	Core Department and Agencies, 31 March 2021 restated	Departmental Group, 31 March 2021 restated
Income from sale of goods and services	6.1	(650)	(3,040)	(890)	(5,401)
Total operating income	-	(650)	(3,040)	(890)	(5,401)
Staff costs	3	560	1,632	497	1,454
Purchase of goods and services	4.1	4,249	6,894	3,528	5,780
Depreciation and impairment charges	4.2	122	534	91	514
Provision, financial guarantee and other liabilities expenses	4.3	(2,832)	103,540	19,926	23,761
Grants	4.4	25,133	20,237	29,177	24,426
Other operating expenditure	-	-	(9)	(52)	(72)
Total operating expenditure	-	27,232	132,828	53,167	55,863
Net operating expenditure	-	26,582	129,788	52,277	50,462
Finance income	6.2	(178)	(320)	(215)	(332)
Finance expense	5	(43)	(646)	50	(235)
Contracts for difference derivatives	10	-	10,286	-	2,746
Share of post-tax loss/(profits) of associates and joint ventures	14	(29)	(159)	26	(130)
(Gain)/loss on net assets transferred	-	-	-	-	2
Net expenditure for the year from operations	-	26,332	138,949	52,138	52,513
Net expenditure for the year	-	26,332	138,949	52,138	52,513
Other Comprehensive Income and Expenditure
Net (gain)/loss on:
Items that will not be reclassified to net operating expenditure:
- revaluation of property, plant and equipment	-	(78)	(285)	3	(22)
- revaluation of intangible assets	-	-	14	-	(54)
Items that may be reclassified subsequently to net operating costs:
- revaluation of investments	-	124	91	109	76
- other revaluation movements	-	(7)	(7)	16	20
- actuarial (gains)/losses	-	-	(194)	-	(150)
Total other comprehensive net income and expenditure	-	39	(381)	128	(130)
Comprehensive net expenditure for the year	-	26,371	138,568	52,266	52,383

The Consolidated Statement of Cash Flows has been restated as explained in note 28.

The notes on pages 176 to 307 form part of these accounts [Notes to the Accounts].

Question 4

Statement of Changes in Taxpayers’ Equity (Core Department and Agencies)

Accepted Answer

for the period ended 31 March 2022 (£m)

	Note	Core Department and Agencies, 31 March 2022	Departmental Group, 31 March 2022	Core Department and Agencies, 31 March 2021 restated	Departmental Group, 31 March 2021 restated
Income from sale of goods and services	6.1	(650)	(3,040)	(890)	(5,401)
Total operating income	-	(650)	(3,040)	(890)	(5,401)
Staff costs	3	560	1,632	497	1,454
Purchase of goods and services	4.1	4,249	6,894	3,528	5,780
Depreciation and impairment charges	4.2	122	534	91	514
Provision, financial guarantee and other liabilities expenses	4.3	(2,832)	103,540	19,926	23,761
Grants	4.4	25,133	20,237	29,177	24,426
Other operating expenditure	-	-	(9)	(52)	(72)
Total operating expenditure	-	27,232	132,828	53,167	55,863
Net operating expenditure	-	26,582	129,788	52,277	50,462
Finance income	6.2	(178)	(320)	(215)	(332)
Finance expense	5	(43)	(646)	50	(235)
Contracts for difference derivatives	10	-	10,286	-	2,746
Share of post-tax loss/(profits) of associates and joint ventures	14	(29)	(159)	26	(130)
(Gain)/loss on net assets transferred	-	-	-	-	2
Net expenditure for the year from operations	-	26,332	138,949	52,138	52,513
Net expenditure for the year	-	26,332	138,949	52,138	52,513
Other Comprehensive Income and Expenditure
Net (gain)/loss on:
Items that will not be reclassified to net operating expenditure:
- revaluation of property, plant and equipment	-	(78)	(285)	3	(22)
- revaluation of intangible assets	-	-	14	-	(54)
Items that may be reclassified subsequently to net operating costs:
- revaluation of investments	-	124	91	109	76
- other revaluation movements	-	(7)	(7)	16	20
- actuarial (gains)/losses	-	-	(194)	-	(150)
Total other comprehensive net income and expenditure	-	39	(381)	128	(130)
Comprehensive net expenditure for the year	-	26,371	138,568	52,266	52,383

The Statement of Changes in Taxpayers’ Equity (Core Department and Agencies) has been restated as explained in note 28.

Question 5

Consolidated Statement of Changes in Taxpayers’ Equity (Departmental Group)

Accepted Answer

for the period ended 31 March 2022 (£m)

	Note	Core Department and Agencies, 31 March 2022	Departmental Group, 31 March 2022	Core Department and Agencies, 31 March 2021 restated	Departmental Group, 31 March 2021 restated
Income from sale of goods and services	6.1	(650)	(3,040)	(890)	(5,401)
Total operating income	-	(650)	(3,040)	(890)	(5,401)
Staff costs	3	560	1,632	497	1,454
Purchase of goods and services	4.1	4,249	6,894	3,528	5,780
Depreciation and impairment charges	4.2	122	534	91	514
Provision, financial guarantee and other liabilities expenses	4.3	(2,832)	103,540	19,926	23,761
Grants	4.4	25,133	20,237	29,177	24,426
Other operating expenditure	-	-	(9)	(52)	(72)
Total operating expenditure	-	27,232	132,828	53,167	55,863
Net operating expenditure	-	26,582	129,788	52,277	50,462
Finance income	6.2	(178)	(320)	(215)	(332)
Finance expense	5	(43)	(646)	50	(235)
Contracts for difference derivatives	10	-	10,286	-	2,746
Share of post-tax loss/(profits) of associates and joint ventures	14	(29)	(159)	26	(130)
(Gain)/loss on net assets transferred	-	-	-	-	2
Net expenditure for the year from operations	-	26,332	138,949	52,138	52,513
Net expenditure for the year	-	26,332	138,949	52,138	52,513
Other Comprehensive Income and Expenditure
Net (gain)/loss on:
Items that will not be reclassified to net operating expenditure:
- revaluation of property, plant and equipment	-	(78)	(285)	3	(22)
- revaluation of intangible assets	-	-	14	-	(54)
Items that may be reclassified subsequently to net operating costs:
- revaluation of investments	-	124	91	109	76
- other revaluation movements	-	(7)	(7)	16	20
- actuarial (gains)/losses	-	-	(194)	-	(150)
Total other comprehensive net income and expenditure	-	39	(381)	128	(130)
Comprehensive net expenditure for the year	-	26,371	138,568	52,266	52,383

The Statement of Changes in Taxpayers’ Equity (Departmental Group) has been restated as explained in note 28.

The notes on pages 176 to 307 form part of these accounts [Notes to the Accounts].

Question 6

Notes to the Accounts

Accepted Answer

1. Accounting policies, judgements and estimates

1.1 Basis of accounting

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adapted and interpreted by the HM Treasury 2021-22 Government Financial Reporting Manual (FReM) and as set out in the Accounts Direction to the Department pursuant to section 5(2) of the Government Resources and Accounts Act 2000 (GRAA) except as described at 1.2 below. Where the FReM permits a choice of accounting policy, the policy selected is that judged to be most appropriate to the particular circumstances of the Core Department and its consolidated entities (the Departmental Group) for the purpose of giving a true and fair view. The policies adopted by the Departmental Group are described below; they have been applied consistently to items considered material to the accounts.

The Consolidated Statement of Financial Position (SoFP) shows significant net liabilities, primarily relating to Coronavirus business support financial guarantees schemes, Contracts for Difference derivatives and provisions for nuclear decommissioning which will be settled over many years. Liabilities in excess of those to be funded by the Departmental Group are expected to be met by future funding voted by Parliament annually in Supply and Appropriation Acts. There is no reason to believe the resources required to settle these liabilities will not be forthcoming. It has accordingly been considered appropriate to adopt a going concern basis for the preparation of these financial statements.

1.2 Accounting convention

These accounts have been prepared under the historical cost convention modified to measure Property, plant and equipment (except specific waste management assets), Intangibles, Investment properties and Financial instruments at fair value to the extent required or permitted under IFRS as set out in these accounting policies.

The Department has agreed with HM Treasury that specific nuclear waste management assets should be measured at historical cost less any impairment losses where there is no reliable and cost effective valuation methodology; this is a departure from the FReM requirement to report Property, plant and equipment at fair value. Public Dividend Capital and shares in consolidated bodies held by the Core Department are carried at historical cost less any impairment in accordance with the FReM.

1.3 Presentational currency

The financial statements are presented in pounds sterling, the functional currency of the Departmental Group. Transactions denominated in a foreign currency are translated into sterling at the rate of exchange on the date of each transaction. In preparing the financial statements, monetary assets and liabilities denominated in foreign currencies are translated at the rates prevailing at the reporting date. All translation differences of monetary assets and liabilities are included in Net expenditure for the year. Values are rounded to the nearest million pounds (£m) unless the FReM requires a lower threshold.

1.4 Basis of consolidation

The Departmental Group accounts consolidate the balances of the Core Department and designated bodies listed in note 29, which fall within the departmental boundary as defined in the FReM and make up the Departmental Group, excluding transactions and balances between them. Where the Office for National Statistics (ONS) designates a body retrospectively such that the body should have been designated for consolidation in a prior period, the accounts are voluntarily restated to reflect the position from the effective date of classification. The consolidated bodies prepare accounts in accordance with either the FReM, the Charities’ Statement of Recommended Practice (for charities), or the Companies Act 2006 (for limited companies). For those bodies that do not prepare accounts in accordance with the FReM, adjustments are made upon consolidation if necessary where differences would have a significant effect on the accounts. The Core Department and its designated bodies are all domiciled in the UK.

1.5 Changes in accounting policies

Implementation of IFRS 16 in the public sector is required from 1 April 2022 in accordance with the FReM, however departments can elect to early adopt with approval from HM Treasury. The Departmental Group has adopted IFRS 16 ‘Leases’ from 1 April 2021, with agreement from HM Treasury. IFRS 16 ‘Leases’ supersedes IAS 17 ‘Leases’. Further details of the Departmental Group accounting policy is in note 1.18 below.

All other accounting policies are unchanged compared to those in the 2020-21 Departmental Group financial statements.

1.6 New accounting standards adopted in the year and FReM changes

The Department has adopted IFRS 16 during the 2021-22 financial year. See note 1.18 for further details.

During the year, the FReM was updated to require the COVID-19 financial guarantee liabilities to be recognised at a value equal to the guaranteed proportion of lifetime expected credit losses on the underlying loan facilities, this has not resulted in a change in accounting treatment for the Department. There have been no other significant amendments to FReM for 2021‑22.

No new additional accounting standards have been adopted in these financial statements.

1.7 Applicable accounting standards issued but not yet adopted

IFRS 17 ‘Insurance Contracts’

IFRS 17 ‘Insurance Contracts’ replaces IFRS 4 ‘Insurance Contracts’, which requires reporters to identify insurance contracts, and for those contracts recognise an insurance contract liability. The insurance contract liability is calculated as the present value of future insurance cashflows (the fulfilment cash flows) plus a subsequent risk adjustment. The IASB announced the deferral of IFRS 17 until 1 January 2023 and therefore, the implementation timetable in the public sector is being extended to the earliest of 1 April 2023. The Financial Reporting Advisory Board (FRAB) has since agreed a further 2-year deferral to require adoption on 1 April 2025.

The Departmental Group is currently assessing the impact of the adoption of IFRS 17.

The Core Department recognises a reinsurance liability in relation to the Trade Credit Reinsurance Scheme. Please see note 1.24 and note 21 for further details of the accounting policy and current valuation.

1.8 Operating income

Operating income relates directly to the operating activities of the Departmental Group and includes income from contracts with customers, levies, grants and income from coal pension schemes.

The Departmental Group is required to identify receipts which it collects on behalf of the Consolidated Fund; these are not recognised as income but instead are disclosed in a separate Trust Statement published alongside these accounts and in note 4 in the Statement of Outturn against Parliamentary Supply (SOPS) in the Accountability Report.

Operating income from contracts with customers

Income from contracts with customers are allocated to individual promises, or performance obligations, on a stand-alone selling price basis, and is recognised when the related performance obligation is satisfied, either over time or at a point in time.

The performance obligations are typically satisfied upon delivery of goods and services in accordance with the contractually defined timescales. The payment terms for the invoices are typically 30 days. Where the Departmental Group receives consideration prior to the transfer of goods and services, the amount is recorded as contract liabilities. Where the Departmental Group has transferred goods and services to a customer and the right to consideration is conditioned on something other than the passage of time, the amount is recorded as contract assets.

The measurement of income takes account of significant financing components, variable consideration, and any discounts or rebates.

Levies

Levy income is recognised in the Departmental Group accounts when an event has occurred that creates an obligation on a counterparty to pay the levy, the amount can be reliably measured, and it is probable that the assisted economic benefits from the taxable event will flow to the Departmental Group. Levies are typically set on an annual basis, invoiced monthly, quarterly or bi-annually, and accounted for in the period to which the invoices are related to and performance obligations are satisfied.

The Low Carbon Contracts Company Ltd (LCCC) and Electricity Supply Company Ltd (ESC) are permitted to retain levies collected under statute and classified as taxes in the National Accounts. This income is recognised by LCCC and ESC in the same period as the related expenditure. LCCC and ESC do not prepare their individual accounts under FReM and have judged that IFRS 15 ‘Revenue from Contracts with Customers’ does not apply to income from electricity suppliers. IFRS 15 is applicable to the Departmental Group’s remaining levy income under FReM guidance.

The Departmental Group is not permitted by the FReM to recognise tax income relating to future years, whereas LCCC, which does not apply the FReM, is able to. Adjustments are made on consolidation to ensure compliance with the Departmental Group accounting policy.

Grant income

Grant income including European funding is recognised when there is reasonable assurance that there are no conditions attached, or that any such conditions have been complied with and it is certain the grant will be received. Research grants and fellowships are recognised in line with a schedule of pre-agreed payment profiles, which include matching considerations over the period of the grant duration and to the period which they relate. Where the terms and conditions do not specify a pre-agreed payment profile or other matching considerations, obligations are recognised in full. Where the profile indicates an unclaimed and/or unpaid amount exists at the reporting date, such sums are accrued.

Under the FReM, grants and grants-in-aid should be accounted for in accordance with IAS 20 ‘Accounting for Government Grants and Disclosure of Government Assistance’ as interpreted by the FReM. The grant income is and continues to be out of the scope of IFRS 15.

Income from the Mineworkers’ Pension Scheme

Income arising from the Government guarantee of certain benefits payable to members and beneficiaries of the Mineworkers’ Pension Scheme is recognised when the Core Department becomes entitled to the income and the value can be reliably measured.

The Government is entitled to a portion of any periodic valuation surpluses as determined by the Government Actuary’s Department. The cash amounts are to be received annually up to 2027. The Coal Pension receivables have been classified as held at amortised cost under IFRS 9 ‘Financial Instruments’. The associated income, therefore, is out of scope of IFRS 15.

1.9 Staff costs

Staff costs are recognised as expenses when the Departmental Group becomes obligated to pay them, including the cost of any untaken leave entitlement.

1.10 Grants payable

Grants payable are recognised when the grant recipient has performed the activity that creates an entitlement to the grant under the terms of the scheme and include estimates for claims not yet received. Where an intermediary acts as agent in distributing grant on behalf of the Department, grants payable are recognised when the grant recipient becomes entitled to the grant. Grant contributions to international organisations in the form of promissory notes are recognised as expenses when they become payable on demand with the Department exercising no further control over disbursement.

1.11 Taxation

The Core Department and its Agencies are exempt from corporation tax by way of Crown exemption. Some consolidated bodies are subject to corporation tax on taxable profits. Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to HM Revenue and Customs, based on tax rates and laws that are enacted or substantively enacted by the reporting date.

Value Added Tax (VAT) is accounted for in the accounts, in that the amounts are shown net of VAT except for irrecoverable VAT, which is aggregated with the cost of purchased items.

Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets are recognised for all tax-deductible temporary differences, carry forward of unused tax credits and unused tax losses to the extent that it is probable that taxable profit will be available in future years against which they can be utilised.

1.12 Property, plant and equipment (PPE)

Assets are capitalised as PPE if they are intended for use on a continuing basis and their original carrying value, on an individual or asset pool basis, exceeds the relevant capitalisation threshold which ranges from £1,000 to £10,000 across the Departmental Group. Exceptions are:

a) assets held by the NDA on designated nuclear sites are only recognised where the economic element of their value at the reporting date exceeds £100,000 and the proportion of asset value relating to commercial activity exceeds 10%; and

b) operational mine water schemes and subsidence pumping stations are held by the Coal Authority at £nil value because they are used to address pollution caused by past mining activities where the economic benefits have already been received.

To the extent that it has been recognised as a provision under IAS 37, the estimated cost of decommissioning facilities is recognised as part of the carrying value of the asset at initial recognition and depreciated over its useful life.

Valuation of PPE

PPE is carried at fair value except for nuclear waste management assets held at historical cost (see note 1.20) and assets under construction which are held at cost. In accordance with the FReM, assets that have short useful lives or are of low value are carried at depreciated historical cost less impairment as a proxy for fair value.

Non-specialist land and buildings are measured at current value in existing use using professional valuations. Specialist land and buildings are measured at depreciated replacement cost which represents the present value of the asset’s remaining service potential.

Revaluation of PPE

Any accumulated depreciation at the date of revaluation is eliminated and the resulting net book value restated to equal the revalued amount. Any revaluation increase arising is credited to the revaluation reserve except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense in which case the increase is credited to Net expenditure for the year to the extent of the decrease previously charged. A decrease in carrying amount arising on revaluation is charged as an expense to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset. On de-recognition, any revaluation surplus remaining in the Revaluation reserve attributable to the asset is transferred directly to the General Fund.

Depreciation of PPE

Apart from freehold and long leasehold land which are not depreciated, PPE assets are depreciated to estimated residual values on a straight-line basis over the following estimated useful lives:

Asset	Period
Freehold buildings	10 – 60 years
Agricultural buildings	Up to 60 years
Dwellings	Up to 60 years
Leasehold improvements	Shorter of estimated remaining useful life or outstanding term of lease
Computer equipment	2 – 10 years
Plant and machinery	3 – 50 years
Office machinery (included in plant and machinery), furniture, fixtures and fittings	2 – 11 years
Transport equipment	2 – 14 years
Ships (included in transport equipment)	Minimum of 20 years
Aircraft (included in transport equipment)	Minimum of 15 years
Assets under construction	Not depreciated until available for use as intended by management

Residual values and useful lives are reviewed and adjusted if appropriate at each reporting date.

1.13 Investment property

The Departmental Group holds properties which have been classified as investment properties and are measured using the fair value model specified in IAS 40. Gains and losses arising from changes in fair value are recognised in Net expenditure for the year.

1.14 Intangible non-current assets

Intangible non-current assets are capitalised if they are intended for use on a continuing basis and their original carrying value, on an individual or asset pool basis, exceeds the relevant capitalisation threshold which ranges from £1,000 to £10,000 across the Departmental Group. There are no active markets for the majority of the Departmental Group’s intangible non-current assets which are valued at the lower of depreciated replacement cost and value in use using a valuation technique (for example for income-generating assets); where there is no value in use, depreciated replacement cost is used. Where there is an active market, the valuation is derived from the active market. Assets of low value or with short useful lives are carried at cost less accumulated amortisation and impairment losses as a proxy for fair value. They are amortised on a straight-line basis over the following periods:

Asset	Period
Software licenses	3 – 10 years
Internally developed software	Up to 10 years
Website development costs	2 – 5 years
Patents, licenses and royalties	7 – 15 years

1.15 Impairment of PPE and intangible non-current assets

The Departmental Group reviews carrying amounts at each reporting date. If an indicator for impairment occurs then the recoverable amount of the asset (the higher of fair value less costs to sell and value in use) is estimated and an impairment loss recognised to the extent that it is lower than the carrying amount. Losses arising from a clear consumption of economic benefit are charged to Net expenditure for the year. Losses that do not result from a loss of economic value or service potential are taken to the revaluation reserve to the extent that a revaluation reserve exists for the impaired asset; otherwise to Net expenditure for the year.

1.16 Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and other short term highly liquid investments which are readily convertible to known amounts of cash are subject to insignificant risk of changes in value and have an original maturity of 3 months or less. Any bank overdraft amounts are included within trade payables and other liabilities.

1.17 Leases – prior to 1 April 2021

The Departmental Group applied IAS 17 ‘Leases’ up to 1 April 2021, recognising leases assets as either operating or finance leases. Leases were classified as finance leases when the risks and rewards of ownership were transferred substantially to the lessee; all other leases were classified as operating leases.

Finance leases

Departmental Group as lessor

Amounts due from lessees under finance leases were recognised as receivables at the amount of the Departmental Group’s net investment in the lease. Finance lease income was allocated to accounting periods so as to reflect a constant periodic rate of return on the Departmental Group’s net investment outstanding in respect of the leases.

Departmental Group as lessee

Assets subject to finance leases and the associated liabilities for future payments were recognised in the SoFP.

Operating leases

Departmental Group as lessor

Assets subject to operating leases were recognised in the SoFP with rental income plus initial direct costs incurred in arranging the lease, including incentives to the lessee to enter into the lease, recognised on a straight-line basis over the lease term.

Departmental Group as lessee

Rentals payable under operating leases, including benefits received and receivable as incentives to enter into leases were expensed on a straight-line basis over the term of the lease.

1.18 Leases – from 1 April 2021

The Departmental Group adopted IFRS 16 ‘Leases’ from 1 April 2021, in agreement with HM Treasury.

IFRS 16 represents a significant change in lessee accounting by removing the distinction between operating leases (off-statement of financial position financing) and finance leases (on-statement of financial position financing) and introducing a single lessee accounting model. IFRS 16 requires recognition of assets and liabilities for all leases in the Statement of Financial Position (SoFP), with exemption given to low value leases and short-term leases, i.e. those with lease terms of less than 12 months. The adoption of the standard results in the recognition of a right-of-use asset, representing a right to use the underlying leased asset and a lease liability, representing an obligation to make lease payments.

Departmental Group as lessee

Leases previously classified as operating leases: transition to IFRS 16

The Departmental Group has adopted IFRS 16 on the cumulative catch-up basis as mandated in the FReM, and therefore the cumulative impact on previous years’ results has been recognised within reserves at the beginning of the period. As such, the prior year comparative information has not been restated and note 1.17 applies for the prior year. Under the ‘grandfathering’ rules mandated in the FReM for the initial transition to IFRS 16, a right-of-use asset and lease liability has been recognised for all relevant leases not previously recognised as finance leases for accounting purposes under IAS 17.

Practical expedients on transition

The Departmental Group has elected to adopt the following practical expedients mandated in the FReM:

Applied a single discount rate to a portfolio of leases with reasonably similar characteristics
Not reassess whether contracts are or contain a lease or not at the date of initial application
Apply the ‘cumulative catch-up’ approach for adopting IFRS 16
Not make adjustments for leases for which the underlying asset is of a low value. The Departmental Group has used a de minimis threshold of £10,000, consistent with the Departmental Group’s capitalisation threshold
Rely on onerous lease provision for impairment assessments rather than conducting an impairment review
Recognise all short-term leases through the Statement of Comprehensive Net Expenditure, and not recognise the lease as a right-of-use asset and lease liability. Short-term leases those where the Departmental Group has determined the lease term is expected to be less than 12 months from the date of adoption of IFRS 16
Exclude initial direct costs from the measurement of the right-of-use asset at the date of initial application
Use hindsight to determine lease terms in contracts which contain options to extend or terminate or are rolling

The definition of a contract is expanded under the FReM definition to include intra-UK government agreements where non-performance may not be enforceable by law. This includes, for example, Memorandum of Understanding (MOU) agreements.

As mandated by the FReM, the definition of a lease is expanded to include arrangements with nil consideration. Peppercorn leases are examples of these, they are defined by HM Treasury as lease payments significantly below market value. On initial recognition, these assets are measured at fair value. On transition, any differences between the discounted lease liability and the right-of-use asset are included as part of the adjustment to the opening balance of taxpayers’ equity. Any differences between the lease liability and right-of-use asset for new leases after implementation of IFRS 16 are recorded in income as required by IAS 20 as interpreted by the FReM.

Measurement of right-of-use asset on transition

On initial application, the right-of-use asset is measured at an amount equal to the lease liability adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the Consolidated Statement of Financial Position immediately before the date of initial application.

Measurement of lease liability on transition

On initial application, the lease liability is measured at the present value of the remaining lease payments using the incremental borrowing rate at the date of initial application. The incremental borrowing rate is either:

The interest rate implicit in the lease
HM Treasury discount rate where interest rates implicit in the lease cannot be readily determined

Another discount rate where the Departmental Group can demonstrate that this would more accurately represent the incremental borrowing rate.

Impact on transition

The table below reconciles the operating lease commitments under IAS 17 as presented in the Departmental Group Annual Report and Accounts 2020-21 to the lease liability calculated under IFRS 16 on 1 April 2021:

	Core Department and Agencies, £m	Departmental Group, £m
Operating lease commitments at 31 March 2021	148	295
Discounted using discount rates	(4)	(29)
Finance lease liabilities at 31 March 2021	-	-
Exemptions for:
Short term leases	(2)	(10)
Leases of low value assets	-	-
Intangible assets	-	-
Extension and termination options not reasonably certain to be exercised	-	27
Variable lease payments based on an index or a rate	-	-
Residual value guarantees	-	-
Advance payments	-	2
Excluding previously non-lease components	-	-
Re-assessment for IFRS 16	8	-
Service charges and other elements outside of the scope of IFRS 16	-	(2)
Adjustment for irrecoverable VAT reported within IAS 17	(20)	(22)
Lease liability recognised at 1 April 2021	130	261

Leases previously classified as finance leases: transition to IFRS 16

The carrying amount of the right-of-use asset and the lease liability on adoption of IFRS 16 is the same as the carrying amount of the lease asset and lease liability as the asset and liability measured by applying IAS 17.

Recognition

For contracts entered into, or changed, on or after 1 April 2021, at inception of a contract, the Departmental Group assesses whether the contract is, or contains a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. This includes contracts for which there is no consideration. Where the contract has or contains a lease, the Departmental Group recognises a right-of-use asset and a lease liability at the commencement date.

To assess whether a contract conveys the right to control the use of an identified asset for a period of time, the Departmental Group assesses whether, throughout the period of use, the Departmental Group has both:

The right to obtain substantially all of the economic benefits from the use of the identified asset
The right to direct the use of the identified asset.

Lease term

The lease term is the non-cancellable period of the lease, together with both periods covered by an option to:

Extend the lease if the Departmental Group is reasonably certain to exercise that option
Terminate the lease if the Departmental Group is reasonably certain not to exercise that option

The Departmental Group considers all relevant facts and circumstances that create an economic incentive for the Departmental Group to exercise the option to extend the lease or not to exercise the option to terminate the lease.

Measurement of right-of-use assets

Initial measurement

At the commencement date, the Departmental Group measures the right-of-use asset at cost, which comprises:

The amount of the initial measurement of the lease liability
Any lease payments made at or before the commencement date less any lease incentives received
Any initial direct costs incurred
An estimate of costs to be incurred in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the lease terms and conditions.

Subsequent measurement

Right-of-use assets are subsequently measured in line with the class of PPE asset to which the lease relates. The cost model for IFRS 16 is used as a proxy for valuation except where:

A longer-term contract that has no provisions to assess lease payments for market conditions
There is a significant period of time between these assessments
The valuation of the underlying asset is likely to fluctuate significantly due to changes in market prices.

Depreciation of right-of-use assets

Right-of-use assets are depreciated on a straight-line basis from commencement date to the earlier of the end of:

Useful life of the right-of-use asset, assessed as the same as the class of PPE asset to which the lease relates
Lease term.

Impairment of right-of-use assets

The Departmental Group applies IAS 36 ‘Impairment of Assets’ to determine whether a right-of-use asset is impaired and to account for any impairment loss identified.

Measurement of lease liabilities

Initial measurement

At the commencement date, the Departmental Group measures the lease liability at the present value of the lease payments that are not paid at that date. Lease payments are discounted using either:

The interest rate implicit in the lease
HM Treasury discount rate where interest rates implicit in the lease cannot be readily determined
Another discount rate where the Departmental Group determines it more accurately represents the interest rate

The weighted average discount rate applied to the lease liabilities is 1.19%. The majority of the Departmental Group has applied the HM Treasury discount rate prevailing at the time of adoption (1.99% from 1 April 2019 to 31 December 2019, 1.27% from 1 January 2020 to 31 December 2020, 0.91% from 1 January 2021 to 31 December 2021 and 0.95% for leases that commence or are remeasured between 1 January 2022 to 31 March 2022).

At the commencement date, lease payments included in the measurement of the lease liability comprise the following payments for the right to use the underlying asset during the term not paid at the commencement date:

Fixed payments, including any in-substance fixed payments less any lease incentives receivable
Variable lease payments that depend on an index or a rate, initially measured using the index or rate at the commencement date, for example, payments linked to a consumer price index or a benchmark interest rate
Amounts expected to be payable by the Departmental Group under residual value guarantees
The exercise price of a purchase option if the Departmental Group is reasonably certain to exercise that option
Payments of penalties for terminating the lease if the lease term reflects the Departmental Group exercising the option to terminate the lease and the Departmental Group is reasonably certain to exercise this option.

Subsequent measurement

The lease liability is remeasured to reflect changes to the lease payments. The Departmental Group remeasures the lease liability by discounting the revised lease payments using a revised discount rate if there is a change in:

Lease term
The Departmental Group’s assessment of an option to purchase the underlying asset, assessed considering events and circumstances in the context of a purchase option. The Departmental Group determines the revised lease payments to reflect the change in amounts payable under the purchase option
Amounts expected to be payable under a residual value guarantee
Future lease payments resulting from a change in the index or rate used to determine these future lease payments, including a change to reflect changes in market rental rates following a market rent review. The Departmental Group remeasures the lease liability to reflect those revised lease payments only when there is a change in the cash flows (this will be when the adjustment to the lease payments takes effect)

The amount of remeasurement of the lease liability is recognised as an adjustment to the right-of-use asset, where there is a balance on the right-of-use asset. However, if the carrying amount of the right-of-use asset is £nil and there is a further reduction in the measurement of the lease liability, the Departmental Group recognises the remaining amount of the remeasurement of the lease liability in the Statement of Comprehensive Net Expenditure.

Departmental Group as lessor

The Departmental Group’s accounting policies as lessor are materially unchanged on adoption of IFRS 16.

Classification

The Departmental Group classifies leases where it is lessor as either an operating lease or a finance lease. The Departmental Group classifies a lease as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. If it does not, then the lease is classified as an operating lease.

Finance leases: recognition and measurement

At the commencement date, the Departmental Group recognises assets held under a finance lease within the Statement of Financial Position and presents them as a receivable at an amount equal to the net investment in the lease using the interest rate implicit in the lease to measure the net investment in the lease. Initial direct costs are included in the net investment in the lease. Finance lease income is allocated over the lease term so as to reflect a constant periodic rate of return on the Departmental Group’s net investment outstanding in respect of the leases.

Operating leases: recognition and measurement

The Departmental Group recognises lease payments from operating leases as income on a straight-line basis. The Departmental Group recognises costs, including depreciation incurred in earning the lease income as an expense. Initial direct costs incurred in obtaining the operating lease are added to the carrying amount of the underlying asset and these are expensed over the lease term on the same straight-line basis as the lease income.

1.19 Subsidiaries, associates and joint ventures

Subsidiaries and public sector joint ventures are consolidated where designated within the Departmental Group boundary (note 29); those subsidiaries, joint ventures and associates that are outside the Departmental Group boundary are measured in accordance with IFRS 9 ‘Financial Instruments’ or IAS 28 ‘Investments in Associates and Joint Ventures’ as relevant. The financial asset is recognised when the Departmental Group becomes party to the contractual provisions of the instrument. Equity investments in associates or joint ventures outside the public sector are initially recorded at cost and subsequently adjusted to reflect the Departmental Group’s share of net profit or loss of the associate or joint venture.

1.20 Financial instruments

Financial assets and liabilities are measured initially at fair value plus transaction costs unless measured at fair value through profit or loss in which case transaction costs are charged to Net expenditure for the year. Fair value is determined by reference to quoted prices where an active market exists for the instrument; otherwise, it is determined using generally accepted valuation techniques including discounted estimated cash flows. A regular way purchase or sale of financial assets shall be recognised and derecognised, as applicable, using settlement date accounting. Further information is given in note 1.21 and note 1.27.

Financial assets

Classification and measurement of financial asset

The classification of financial assets under IFRS 9 is based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial asset in scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.

Under IFRS 9, the requirement for classifying and measuring financial assets is that:

Loans and other debt instruments are classified as either amortised cost, FVOCI or FVTPL, dependent on the business model and cash flow characteristics of the financial assets.
Investments in equity instruments are classified as FVTPL, unless an irrevocable election is made on initial recognition to recognise subsequent changes in fair value in Other Comprehensive Income (OCI). The election is only available to equity instruments that are not held for trading.
Derivatives are classified as FVTPL.

Categories of financial asset

Financial assets are categorised as one of the following:

Amortised cost are financial assets whose contractual cash flows are solely payments of principal and interest and the objective of the business model is to hold financial assets to collect contractual cash flows only. They are initially recognised at fair value and thereafter at amortised cost using the effective interest method less any impairment. The effective interest rate method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period.
Fair value through Other Comprehensive Income (FVOCI) are either: – Debt instruments whose cash flows are solely payments of principal and interest and the business model of which is to hold for both collecting contractual cash flows and selling. – Equity instruments that are neither held for trading nor contingent consideration recognised in a business combination, as the Departmental Group has made an irrevocable election at initial recognition.

After initial recognition, these assets are subsequently measured at fair value. Gains and losses in fair value are recognised directly in equity. On de-recognition, the cumulative gain or loss previously recognised in equity is recognised in Net expenditure for the year for debt instruments and transferred to General Fund for equity instruments.

All financial assets which do not meet the criteria for classification to be recognised and measured at Amortised Cost and FVOCI are recognised and measured at Fair Value Through Profit or Loss (FVTPL). Transaction costs and any subsequent movements in the valuation of the asset are recognised in Net expenditure for the year.

Impairment of financial assets

Financial assets other than equity instruments and those at FVTPL are assessed for impairment at each reporting date using the expected credit loss (ECL) model. The 3-stage model based on the level of credit risk is applied to any financial assets other than long term trade receivables, contract assets which do contain a significant financing component and lease receivables within the scope of IAS 17 ‘Leases’ up to 31 March 2021 and IFRS 16 ‘Leases’ from 1 April 2021 as follows:

For financial assets with low credit risk or assets that have not had a significant increase in credit risk since initial recognition, 12-month ECL are recognised and interest revenue is calculated on the gross carrying amount of the asset without the reduction of credit allowance.
For financial assets that have had a significant increase in credit risk since initial recognition but that do not have objective evidence of impairment, lifetime ECL are recognised and interest revenue is calculated on the gross carrying amount of the asset.
For financial assets that have objective evidence of impairment at the reporting date, lifetime ECL are recognised and interest revenue is calculated on the net carrying amount net of credit allowance.

Impairment gains or losses, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised in accordance with the Standard, are recognised in profit or loss.

For long term trade receivables, contract assets which do not contain a significant financing component and lease receivables within the scope of IAS 17 ‘Leases’ up to 31 March 2021 and IFRS 16 ‘Leases’ from 1 April 2021, the simplified approach is applied and lifetime ECL are recognised as dictated by the FReM.

The impairment methodology is detailed in the financial instruments note 24.

Derecognition of financial assets

Financial assets are derecognised when the rights to receive future cash flows have expired or are transferred and the risks and rewards of ownership have been substantially transferred.

Financial liabilities

Classification and measurement of financial liabilities

The Departmental Group’s financial liabilities excluding derivatives and some financial guarantees are initially recognised at fair value including directly attributable transaction costs; they are subsequently measured at amortised cost using the effective interest rate method, except for:

Financial liabilities at fair value through profit or loss, which is applied to derivatives and other financial liabilities designated as such at initial recognition.
Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the consideration received for the transfer.
Financial guarantee contracts and loan commitments.

Derecognition of financial liabilities

Financial liabilities are derecognised when the obligation is discharged, cancelled or expires.

Derivative financial instruments

Derivatives are initially recognised at fair value and subsequently at fair value. Gains/losses in fair value are recognised in Net expenditure for the year unless hedge accounting is applied.

The Departmental Group has 2 classes of derivative financial instrument, foreign exchange contracts to which hedge accounting is applied and Contracts for Difference (CfDs) contracts to which hedge accounting is not applied.

Forward foreign exchange contracts

Forward contracts are held as cash flow hedges to reduce exposure to foreign currency risk. The effective portions of changes in their fair values are recognised in equity. Gains and losses relating to ineffective portions are recognised immediately in Net expenditure for the year. Amounts accumulated in equity are recycled to Net expenditure for the year in the same period as the hedged item.

Contracts for Difference (CfDs)

CfDs are held to incentivise investment in low carbon electricity generation by agreeing strike prices with electricity generators which are counterparties to the contracts. The counterparty pays, or is paid, the difference between the strike price and the reference price (a measure of the average market price of electricity) at the time of electricity supply. CfDs are measured at FVTPL, initially at their transaction price (£nil) with subsequent changes in fair value (as measured by a valuation model) recognised in Net expenditure for the year. Where the valuation model estimate of fair value at initial recognition is different from the transaction price, the difference is deferred and amortised to Net expenditure for the year over the contract settlement period (note 10).

1.21 Financial guarantee and loan commitment liabilities

Financial guarantee contract liabilities

A guarantee liability is recognised when a lender makes an offer of a loan facility to a borrower which meets the eligibility criteria of the relevant scheme. Guarantee liabilities are derecognised when the Department is no longer exposed to potential lender claim on the guarantee, that is either a) when a lender claim has been approved by the Department for payment, b) on expiry of the guarantee without lender claim including where a loan facility has not been drawn down by the borrower within the offer period or c) if a guarantee is no longer considered to meet the eligibility criteria of the relevant scheme such that the guarantee is no longer effective. Amounts due to the Department as recovered by lenders from defaulted borrowers following derecognition of the guarantee liability are recognised on a cash basis and offset against Provision expense in the SoCNE.

Other than as described below, guarantee liabilities are measured as required by the FReM, at fair value at initial recognition and subsequently remeasured at the higher of a) the amount of loss allowance determined in accordance with IFRS 9 and b) the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of IFRS 15 ‘Revenue from Contracts with Customers’.

In accordance with the 2021-22 FReM IFRS 9 adaptation, where the Department issues a financial guarantee below fair value and where no active market or observable equivalent exists such that an estimate of fair value can be made that would require recognition under IFRS 9, the guarantee is measured, at initial recognition and at reporting period end, at an amount equal to lifetime expected credit loss (ECL) in accordance with the requirements of IFRS 9. As the rate intrinsic to the financial guarantee cannot be reliably determined, the HM Treasury Financial Instrument Rate has been used to calculate the present value of expected credit losses.

Loan commitments at below market rate

The Departmental Group accepts a lower than market rate of return from Enterprise Capital Fund investments to encourage private sector investors to invest alongside. Although the Departmental Group expects to make a positive return from these investments, this return is less than that required by the private sector. The Departmental Group has, at initial recognition, elected to irrevocably designate the liability related to these loan commitments as measured at fair value through profit or loss because the group of financial assets and financial liabilities is managed, and its performance is evaluated on a fair value basis, in accordance with a documented investment strategy, and information is provided internally on that basis to key management personnel.

1.22 Pensions

The accounting for each of the Departmental Group’s pension plans is dependent on its nature.

Funded defined-benefit pension schemes

The Departmental Group has 9 funded defined-benefit pension schemes, the Medical Research Council Pension Scheme, 2 schemes through the Nuclear Decommissioning Authority (NDA) and 6 schemes through the nuclear site licence companies.

The net assets/liabilities recognised in the SoFP for funded defined benefit schemes are calculated by independent actuaries by deducting the fair value of scheme assets (at bid prices) from the present value of defined benefit obligations (estimated using the projected unit credit method, less any amounts receivable from third parties). Where the scheme is in surplus, the asset recognised in these statements is limited to the present value of benefits available from future refunds from the plan, reductions in future contributions to the plan or on settlement of the plan and takes into account the adverse effect of any minimum funding requirements. Actuarial gains and losses are recognised as Other Comprehensive Net Income and Expenditure except for site licence companies where they are included in provision expense relating to the nuclear decommissioning provision.

Unfunded defined benefit pension schemes

The Departmental Group contributes towards a number of unfunded defined benefit pension schemes of which employees are members: these include the Principal Civil Service Pension Scheme (PCSPS), the Civil Servant and Other Pension Scheme (CSOPS) and the United Kingdom Atomic Energy Authority (UKAEA) Combined Pension Scheme. The participating employers in these schemes are unable to identify their share of the underlying net liability; as such these schemes are accounted for as defined contribution pension schemes, with employers contributions charged to the SoCNE in the period to which they relate. Further information regarding PCSPS and CSOPS is presented in the Staff Report.

Defined contribution pension schemes

Contributions are charged to the SoCNE when they become payable. The Departmental Group has no further liabilities in respect of benefits to be paid to members.

More information about the Departmental Group’s pension schemes can be found in the accounts of the consolidated entities, including in note 3 for the Core Department, and of the pension schemes themselves.

1.23 Provisions

A provision is recognised when it is probable that an outflow of economic benefits will be required to settle a present obligation (legal or constructive) that can be reliably measured, and which results from a past event. Where the time value of money is material, the provision is measured at present value using discount rates prescribed by HM Treasury. HM Treasury issues nominal rates that do not take account of inflation, unlike real rates. Using these nominal rates, the cash flows are inflated using the following inflation rates provided by HM Treasury except where a more appropriate forecast has been identified for specific provisions.

	Nominal discount rate, 31 March 2022	Inflation rate, 31 March 2022	Equivalent real discount rate, 31 March 2022	Nominal discount rate, 31 March 2021	Inflation rate, 31 March 2021	Equivalent real discount rate, 31 March 2021
Cash outflows expected within 2 years	0.47%	4.00%	(3.39%)	(0.02%)	1.20%	(1.21%)
Cash outflows expected between 2 and 5 years	0.47%	2.15%	(1.64%)	(0.02%)	1.90%	(1.88%)
Cash outflows expected between 5 and 10 years	0.70%	2.00%	(1.27%)	0.18%	2.00%	(1.78%)
Cash outflows expected after 10 years	0.71%	2.00%	(1.27%)	1.99%	2.00%	(0.01%)

Nuclear decommissioning provisions

Where expenditure in settlement of a provision is expected to be recovered from a third party, the recoverable amount is treated as a separate asset (note 13). Provision charges in the SoCNE are shown net of changes in these recoverable amounts.

1.24 Insurance and reinsurance contracts

Insurance contracts are contracts under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified future event (the insured event) adversely affects the policyholder and are accounted for under IFRS 4 ‘Insurance Contracts’. Where IFRS 4 was found not to be prescriptive in some areas, guidance was taken from the standard issued to replace it in the future, IFRS 17 ‘Insurance Contracts’. The Core Department has recognised a reinsurance liability in relation to the Trade Credit Reinsurance Scheme (note 21).

Insurance contracts and reinsurance contracts are accounted for on the date the contract is approved by the Core Department.

Insurance and reinsurance liabilities are measured at fair value and cover both reported and unreported claims cover by the insurance and reinsurance contract at the reporting date, the value recognised is based on the experience of the insurance companies being reinsured by the Department. Possible future claims relating to catastrophe are not included in the calculation of the insurance or reinsurance liabilities. The fair value for the Trade Credit Reinsurance Scheme is calculated using the income approach under IFRS 13, which reflects the present value of future cash outflows that are expected to occur. The discount rate used is the Financial Instrument nominal rate of 1.9% as set by HM Treasury. The cash outflows include the claims losses and the related claims handling expenses incurred by the insurance companies.

Insurance and reinsurance premiums are recognised in the SoCNE, when they are earned and not when they are written. Written reinsurance premiums include an estimate of premiums written by the insurance companies reinsured by the Department, but not reported to the Department at the reporting date. This relates to insurance contracts where the period of cover has commenced before the balance sheet date.

Where written insurance and reinsurance premiums are subject to retrospective adjustment due to risk not being able to be assessed with accuracy at the commencement of the insurance contract, recognition of any increases is deferred until recognition can be ascertained with reasonable certainty.

Where written insurance and reinsurance premiums are subject to a reduction, a remeasurement taking account of the reduction is assessed as soon as the Department has an obligation to the policyholder.

Claims and expenses costs are recognised when they are incurred.

1.25 Contingent assets and liabilities

Contingent liabilities

Where an outflow of economic benefits from a past event is possible but not probable, the Departmental Group discloses a contingent liability. In addition to contingent liabilities disclosed in these financial statements in accordance with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’, certain statutory and non-statutory contingent liabilities where the likelihood of a transfer of economic benefit is remote are disclosed in the Accountability Report for Parliamentary reporting and accountability purposes. Remote contingent liabilities reported in the Accountability Report are stated at the amounts reported to Parliament.

Contingent assets

Where an inflow of economic benefits from a past event is probable, the Departmental Group discloses a contingent asset.

Estimates of the financial effects are disclosed where practicable; where the time value of money is material, contingent liabilities and assets are stated at discounted amounts and the amount reported to Parliament separately noted.

1.26 Third party assets

The Departmental Group holds certain cash balances belonging to third parties as custodian or trustee. These balances are not recognised in the financial statements since neither the Departmental Group nor government more generally has a direct beneficial interest in them.

1.27 Judgements, estimates and assumptions

Preparation of financial statements requires management to make judgements, estimates and assumptions based on experience and expected events that affect the reported amounts of assets and liabilities, income and expenditure. Key accounting judgements applied in these statements are described below.

Judgements

Funding to Bulb Energy Ltd (in administration) (notes 4.1 and 16)

This funding is potentially repayable by Bulb but, given the low likelihood of repayment, the resulting potential financial asset has been measured at £nil at initial recognition and at the reporting date, consistent with the IFRS 9 treatment for purchased or originated credit-impaired assets, as described in note 16. Expenditure relating to this funding has been recognised as a subsidy expense, as described in note 4.1.

Future Fund (note 12.2)

The valuation of the Future Fund’s Convertible Loan Notes (CLNs) is complex due to the significant number and diversity of borrowers and investors in the Future Fund scheme, the options available to borrowers under the terms of the Convertible Loan Note Agreements (CLAs), and data limitations. This means that there is judgement and estimation uncertainty in the valuation and there are key unobservable inputs in the model. Model input sensitivity analysis is included in note 12.2.

The CLNs are financial assets, measured at FVTPL under IFRS 9. They are initially measured at fair value, and subsequently remeasured to fair value at each reporting date with movements being recognised in the SoCNE. The fair value at inception is determined to be equal to the transaction price of the CLNs, as the investments are made on equal terms with private sector investors in an arm’s length transaction. This is a significant assumption as each CLN in the valuation model is calibrated to its fair value at inception. The amount of equity owned post-conversion is known, and the equity value estimate is informed based on information provided as part of the conversion. The Future Fund was valued at £1,036 million as at 31 March 2022.

Fair value measurement of Hinkley Point C CfD

Significant judgements in relation to the fair value measurement of Hinkley Point C CfD are set out in note 10.

Deferral of differences between fair value and transaction price for CfDs

Judgements for deferral of differences between fair value and transaction prices for CfDs are set out in note 10.

IFRS 16: determining whether a contract contains a lease

The Departmental Group exercises judgement in determining whether a contract is, or contains, a lease and whether the contract conveys the right to control the use of an identified asset in exchange for a consideration. In making this judgement, the Departmental Group assesses whether the contract, in substance, grants the Departmental Group the right to direct the use of the identified asset and allows the Departmental Group to receive substantially all of the economic benefits associated with the use of the identified asset for the lease term.

IFRS 16: determining the lease term

The Departmental Group uses judgement in determining the lease term, as detailed in note 1.18.

Estimates

In accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’, revisions to accounting estimates are recognised prospectively. Revisions of the estimates and assumptions below could cause material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Income recognition (note 6.1)

A number of significant accounting judgements have been performed to apply IFRS 15 to the recognition of revenue and costs from contracts with customers held by the NDA, including the determination of transaction price of each contract, the allocation of transaction price to each performance obligation, the timing of satisfaction of performance obligations, and the accounting treatment of contract costs. Detail is included in NDA’s financial statements.

COVID-19 Business Support Grant Expenditure (note 4.4)

Whilst the majority of reconciliations that support the value of the grants paid out by local authorities to businesses have been completed, a small amount are outstanding. As a result, an estimate of the expenditure has been made in relation to those schemes that have not been fully reconciled.

The estimated expenditure has been calculated using the returns from local authorities (LAs) which were received and reconciled to the funding allocation, at the point in time at which the calculation was performed. The Department has carried out statistical analysis to show that there is no correlation between late responders and over/underspend, the analysis was carried out over the first 3 grant schemes (Local Authority Discretionary Grant Fund, Small Business Grant fund and Retail, Hospitality and Leisure Grant Fund). The results of the analysis show that the correlation coefficient is zero and as such there is no correlation or trend between the time it takes LAs to provide information, and whether they spend more or less funding than the Department provided them. We have assumed that the LRSG, Omicron Hospitality and Leisure Grant and Restart grant will behave in the same way, with a zero correlation, given we have no information to believe otherwise.

The reconciliations determine how much of the allocated funding the LA has spent using the funding allocated as the starting point. The percentage of underspend resulting from the completed reconciliations is then applied to the total unreconciled allocated spend for each grant scheme. This estimate is based on the best information that the Department has available.

Restart Grant and Omicron Hospitality and Leisure Grant

Grant scheme	Reconciled percentage (value)	Central estimate £m*	Confidence interval
Restart	90%	3,044.9	99%
OHLG	80%	478.9	99%

*As the confidence interval is at 99%, there is little expected variation in the final expenditure for this scheme, noting the assumptions discussed above. The upper and lower bounds of the estimate of both schemes round to the central estimate value.

Given the low variance between the upper and lower bounds of each estimate, the Department is comfortable that the central estimate of spend will not change significantly once the remainder of the reconciliations are complete.

The difference between the cash amounts paid out to local authorities, and the expenditure determined to have been made to businesses is recognised as a receivable back to the Department in note 15.

The ARG scheme expenditure recognised in 2021-22 is not included in the estimate because the local authorities act as principal for the scheme and so payments are recognised when the Department provides the funding to the local authorities.

COVID-19 Local Restriction Support Grants (Various)

Included in the 2020-21 accounts was an estimate of spend for the following grant schemes, due to not all reconciliations supporting the value of grants paid by LAs being completed as at 31 March 2021: Local Restrictions Support Grant (Closed) and (Closed) Addendum Schemes, Local Restrictions Support Grant (Open) and Closed Business Lockdown Payment schemes.

Since then, the reconciliation process has continued and almost all reconciliations are now complete. The Department has revised the estimate of the spend in these schemes based on the completed reconciliations, and the difference between the expenditure recognised in the 2020-21 accounts, and the current estimate of expenditure is reduction of £223.4 million as reflected in note 4.4. We have reconciled ~90% (in value) of the scheme’s funding and so a 99% confidence interval shows little expected variation in the final expenditure for this scheme.

For the estimate included in the 2020-21 accounts, the Department was unable to provide evidence that the sample was statistically random, and therefore a confidence interval could not be calculated. The maximum cost to the Department was reported as the total cash paid to LAs, and the minimum possible estimate was calculated based on the lowest percentage difference between the final reconciled value compared to the payment allocation across all schemes.

The estimate included in the 2020-21 accounts was based on the best information available at the time. The change in the value of expenditure for the COVID-19 grant schemes in 2021‑22 is a result of information that has become available after the certification of the 2020-21 accounts and thus does not meet the definition of a prior period error which would require restatement.

The table below shows the value of the expenditure estimate had the value been at the lower or higher bounds of the estimates. The table also includes the estimate of spend included in the 2020-21 accounts for comparison.

	Central Estimate	Lower estimate range	Upper estimate range
Current estimate	£5,345.5 million	£5,345.4 million – 99% CI	£5,345.6 million – 95% CI
2020-21 estimate	£5,569 million	£2,189 million – estimate on lowest percentage	£6,235 million – total cash paid

Useful lives of non-current assets (note 4.2, 7, 9, 8)

There is uncertainty in relation to estimated useful lives of non-current assets; these are reviewed as at the reporting date and updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence or legal or other limits on their use.

Impairment of assets (note 4.2, 7, 9, 11, 12, 14, 15, 16, and 24)

Impairment of non-financial assets is measured by comparing the carrying value of the asset or cash generating unit with management’s estimate of its recoverable amount. Impairment of financial assets is measured using the expected credit loss model (note 1.20).

Fair value of Repayable Launch Investments (note 12.1)

The econometric model used to estimate future cash flows from Repayable Launch Investments includes a number of assumptions including on future economic growth.

Fair value of private equity investments (note 12.2)

A range of valuation techniques are used for private equity investments, including discounted cash flows and net asset values.

Redundancy Payments Service receivable (note 15)

There is uncertainty in the estimate of the amount to be realised by the Insolvency Service from sale of assets of insolvent employers.

CfD contracts (note 10)

The significant uncertainties affecting measurement of Financial Investment Decision Enabling for Renewables (FIDeR) and CfD contracts, which facilitate investment in low-carbon electricity generation, are described in the note.

Financial guarantees (note 21)

The liability for each individual guarantee is measured using modelling techniques with overlay adjustments, based on management judgement, applied to the total model liability estimates for each scheme if considered necessary to ensure reported liability values reflect all relevant reasonable and supportable information.

The liabilities for the Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS) are subject to significant estimation uncertainty relating primarily to estimates of probability of default of the underlying loans and recoveries from borrowers post claim. There is an absence of information relating to historical loan performance for these new schemes, uncertainty over forward macroeconomic conditions, absence of repayment data for analysis of performance on existing loans as at 31 March 2022 due to immaterial loan repayments during the reporting period; and, for BBLS, uncertainty in relation to levels of fraudulent borrowing.

Trade Credit Reinsurance Scheme (note 21)

The note describes the uncertainties relating to the Trade Credit Reinsurance Scheme liabilities which are measured using modelling techniques.

Provisions (note 20)

Provision discount rates set by HM Treasury are updated annually and have a material effect on liabilities There are other significant uncertainties in relation to measurement of the liabilities reported in note 20, in particular in relation to future decommissioning costs to be incurred by the NDA, UKAEA and Coal Authority, which are described in the note.

1.28 Prior Period Adjustments

Prior period adjustments are required for:

Changes in accounting policies (unless impracticable or another standard sets specific transitional provisions) and material errors in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
Machinery of Government Changes

Changes in accounting policies

In accordance with IAS 8, where a prior period adjustment is identified due to a change in accounting policy, the Departmental Group accounts for the change in accounting policy, on initial application of the new accounting policy:

In accordance with the specific transitional provisions included within the relevant accounting standard from which the new accounting policy is determined (as interpreted or adapted by requirements of the FReM)
Retrospectively, where the accounting standard from which the new accounting policy is determined (as interpreted or adapted by requirements of the FReM) does not contain specific transitional provisions

Where the Departmental Group accounts for the change in accounting policy retrospectively, the Departmental Group will restate the opening balances of assets, liabilities and equity for the earliest prior period presented.

If it is impracticable to determine the impact of the change in accounting policy on comparative information for one or more prior periods presented, the Departmental Group will restate the opening balances of assets, liabilities and equity for the earliest period for which retrospective restatement is practicable, in line with requirements of IAS 8.

Errors

In accordance with the FReM, where a prior period adjustment is identified as a result of an error, the Departmental Group will correct all material prior period errors retrospectively in the first set of financial statements authorised for issued after their discovery by:

Restating the comparative amounts for the prior periods presented in which the error occurred;
If the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.

If the Departmental Group determines it is impracticable to determine the impact of an error on comparative information for one or more prior periods presented, the Departmental Group will restate the opening balances of assets, liabilities and equity for the earliest period for which retrospective restatement is practicable.

Machinery of Government Changes

The Departmental Group accounts for Machinery of Government changes as either a transfer by merger or transfer by absorption, depending on the transfer of functions or combination of public sector bodies that has taken place.

Transfer by merger:

In accordance with the FReM, the Departmental Group accounts for transfer by mergers by:

Not adjusting carrying values of assets and liabilities of the combining bodies to fair value on consolidation
Bringing in results and cashflows of combining bodies (or functions) into the accounts from the beginning of the financial year in which the combination occurred, adjusted to achieve uniformity in accounting policies
Restating the prior year comparatives, adjusted as necessary to achieve uniformity in accounting policies

Transfer by absorption:

In accordance with the FReM, the Departmental Group accounts for transfer by absorption by:

Not adjusting carrying values of assets and liabilities of the combining bodies to fair value on consolidation
Not recognising goodwill or restating prior year comparatives in the primary financial statements on transfer
Bringing in the net assets (or net liabilities) of the transferee into the Departmental Group’s financial statements from the date of transfer. The carrying value of the net asset is recognised as a non-operating gain or loss through net expenditure on the Consolidated Statement of Comprehensive Net Expenditure
Transferring revaluation reserves in full on transfer, with remaining balances transferred to the general fund
Recognising the other side to achieve uniformity in accounting policies through the general fund on transfer

Prior period adjustments and their impact on the comparative amounts for the prior periods represented in which the error occurred are detailed in note 28.

2. Reporting by operating segment

In accordance with the relevant reporting requirements, including IFRS 8 – Operating Segments, the Statement of Outturn against Parliamentary Supply (SOPS) and supporting notes reflect net resource and capital Outturn in line with the control totals voted by Parliament. The figures within SOPS 1.1 provide the income and expenditure totals associated with key business activities within the Departmental Group and therefore reflect the management information reporting to the Board during the period.

3. Staff costs

Staff costs comprise (£m):

	Permanently employed staff, 2021-22	Others, 2021-22	Total, 2021-22	2020-21 restated, Total
Wages and salaries	1,098	123	1,221	1,111
Social security costs	158	-	158	108
Other pension costs	280	-	280	242
Sub total	1,536	123	1,659	1,461
Less recoveries in respect of outward secondments	(10)	(17)	(27)	(7)
Total net costs	1,526	106	1,632	1,454
Of which:
Core Department and Agencies	522	38	560	497
NDPBs and other designated bodies	1,004	68	1,072	957
Total net costs	1,526	106	1,632	1,454

Included within ‘recoveries in respect of outward secondments’ for 2021-22 for the Core Department is £23.7 million (2020-21 associated restatement: £5.8 million) recovered from the Department of Health and Social Care (DHSC). This does not relate to formal secondments but to the cost of staff resources supplied by the Department to support DHSC outcomes of the Vaccine Taskforce which operates as a joint unit on behalf of both departments (note 28).

For further information on staff costs and numbers, please see the Staff Report and the Remuneration Report which includes staff costs for nuclear site licence companies (SLC’s) which are not included in the table above. SLC’s staff costs are not included in the table above as they are included in the amount shown for utilisation in the NDA’s nuclear decommissioning provision in note 20.

4. Operating expenditure

4.1 Purchase of goods and services (£m)

	Core Department and Agencies, 2021-22	Departmental Group, 2021-22	Core Department and Agencies, 2020-21 restated	Departmental Group, 2020-21 restated
Rentals under operating leases	-	5	42	60
Accommodation and office equipment costs	48	268	26	211
Legal, professional and consultancy costs	181	406	208	428
Finance, HR, IT and support costs	143	189	160	205
Training and other staff costs	9	33	15	31
Travel and subsistence costs	2	18	4	15
Advertising and publicity	6	22	4	20
Programme management and administration of grants and awards	113	587	177	250
Capacity Market payments	-	856	-	1,095
Professional and international subscriptions	414	743	413	720
Enforcement costs of employment related policies	29	29	38	38
Donations	-	38	-	28
Funding Paternity, Adoption and Shared Parental Leave policy	73	73	90	90
Purchase of geographical and scientific equipment	23	91	-	37
Purchase of weather information and weather related services	120	120	113	113
Redundancy payments service	261	261	443	443
Payment of taxes and levies	-	182	-	53
Subsidy to Post Office Limited	50	50	50	50
Coronavirus Business Interruption Loan Scheme (CBILS)	917	917	701	701
Bounce Back Loan Scheme (BBLS)	327	327	832	832
Energy intensive industries and other subsidies	1,445	1,445	129	129
Other purchase of goods and services cost	88	234	83	231
Total	4,249	6,894	3,528	5,780

‘Other purchase of goods and services cost’ has been restated for 2020-21 for the Core Department to reflect the transfer during 2021-22 of the majority of its functions in the Vaccine Taskforce to the Department of Health and Social Care (note 28).

Core Department

CBILS and BBLS:

The Core Department has provided assistance to borrowers under the CBILS and BBLS loan guarantee schemes (note 21) by bearing the cost of lender fees for CBILS loans and of interest payments due for the first 12 months of loans for both CBILS and BBLS.

Energy intensive industries and other subsidies:

The Core Department has provided support to energy intensive industries and for other energy-related purposes including funding to Bulb Energy Ltd which entered energy supply company administration during 2021-22. Bulb administrators continue to operate the company to ensure continuity of energy supply to customers, with financial support for this purpose from the Department. While the funding to Bulb is potentially repayable, it has been reported as a subsidy above for the reason given in note 16. The Department continues to work closely with Ofgem and the administrators to ensure exit from administration achieves the best outcome practicable for energy customers, taxpayers, and the industry.

Audit fees

Audit fees are included under the heading ‘Legal, professional and consultancy costs’.

Core Department:

During the year the Core Department did not purchase any non-audit services from its auditor, the National Audit Office. The non-cash auditors’ remuneration of £1,415,000 (2020-21: £1,500,000) comprises £1,345,000 (2020-21: £1,430,000) for the cost of the audit of the Departmental Group, £20,000 (2020-21: £20,000) for the Trust Statement, £5,000 for the Nuclear Decommissioning Funding Account (2020-21: £5,000) and £45,000 (2020-21: £45,000) for the audit of the UK Atomic Energy Authority Pension Scheme Accounts.

Agencies:

During the year the Agencies did not purchase any non-audit services from their auditor, the National Audit Office. Details of the non-cash auditors’ remuneration of £288,000 (2020-21: £274,000) can be found in the accounts of the individual Agencies.

NDPBs and other designated bodies:

The cash remuneration of £3,088,873 (2020-21: £2,830,780) relates to the statutory audit of NDPBs and other designated bodies. Of this amount, £2,433,523 (2020-21: £2,313,900) was payable to the NAO and £655,350 (2020-21: £516,880) was payable to auditors other than the NAO.

In 2021-22, £nil was payable to the NAO (2020-21: £nil) and £78,585 was payable to auditors other than the NAO (2020-21: £119,574) for non-audit services. Further details can be obtained from the accounts of the NDPBs and other designated bodies.

Departmental Group

Redundancy Payments Service:

INSS, an Agency of the Department, is responsible for the approval and processing of claims under the Redundancy Payment Service (RPS), which is financed from the National Insurance Fund. Redundancy payments are made from the National Insurance Fund to employees whose employers have failed to make payments due or who were insolvent.

The Insolvency Service has a service level agreement with HM Revenue and Customs. Claims processed fall into 2 categories:

RP1 (which covers redundancy pay, holiday pay and arrears of pay).
RP2 (pay in lieu of notice).

There is associated income arising from 2 sources:

Solvent Recovery – where money is recovered from solvent employers to meet the costs of redundancy payments made by the RPS.

Insolvent Recovery – INSS becomes a creditor receiving a dividend if there are sufficient funds in the insolvency of the employer.

Expenditure in respect of RPS in 2021-22 totalled £285 million (2020-21: £485 million) against income of £24 million (2020-21: £42 million). The net amount totalled £261 million (2020-21: £443 million).

Capacity market payments:

Capacity Market payments of £856 million were recognised in 2021-22 (2020-21: £1,095 million).

4.2 Depreciation and impairment charges

	Core Department and Agencies, 2021-22	Departmental Group, 2021-22	Core Department and Agencies, 2020-21	Departmental Group, 2020-21
Amortisation of recoverable contract costs	-	111	-	102
Depreciation	57	295	28	237
Amortisation	6	42	5	50
Impairment of property, plant and equipment	9	43	-	19
Impairment of intangible assets	-	-	-	1
Impairment of investments and remeasurement of expected credit losses	50	43	58	105
Total	122	534	91	514

4.3 Provision, financial guarantee and other liabilities expenses (£m)

	Core Department and Agencies, 2021-22	Departmental Group, 2021-22	Core Department and Agencies, 2020-21	Departmental Group, 2020-21
Increase/(decrease) in nuclear provisions due to changes in discount rate	43	90,512	2	2,087
Increase/(decrease) in other provisions due to changes in discount rate	35	2,818	3	(12)
Other provision movements relating to nuclear provisions	83	12,770	24	1,012
Other provision movements excluding bad debt provisions and financial guarantee liabilities	559	944	48	825
Total increase/(decrease) in provisions excluding bad debt provisions and financial guarantee liabilities	720	107,044	77	3,912
Total increase/(decrease) in bad debt provisions	-	-	-	-
Loss on inception of financial guarantees	(16)	(16)	(17)	(17)
Total increase/(decrease) in loan commitment liabilities	-	48	(1)	(1)
Trade Credit Reinsurance	(11)	(11)	85	85
Total increase/(decrease) in CLBILS	(235)	(235)	357	357
Total increase/(decrease) in BBLS	(2,893)	(2,893)	17,227	17,227
Total increase/(decrease) in CBILS	(697)	(697)	2,198	2,198
Total increase/(decrease) in Recovery Loan Scheme	300	300	-	-
Total	(2,832)	103,540	19,926	23,761

Provision, financial guarantee and other liabilities expenses for 2020-21 have been re-presented, the overall total is unchanged.

The significant increase in the provision, financial guarantees and other liabilities expenses was primarily driven by the change in provision discount rates. The real discount rate for cash outflows expected after 10 years, prescribed by HM Treasury decreased from (0.01%) in 2020-2021 to (1.27%) in 2021-22. The change in discount rate has the impact of increasing the expected future costs of settling the Department’s liabilities, the actual costs of settling the Department’s liabilities could be different.

Further detail of the movements in the nuclear decommissioning provision can be found in note 20.1 for Nuclear Provisions.

The Increase/(decrease) in other provisions due to changes in discount rate is also primarily driven by changes in the HM Treasury discount rate for Coal Authority’s Mine water schemes provision.

Further detail of movements in other provisions can be found in note 20.2 for Other Provisions.

4.4 Grants

	Core Department and Agencies, 2021-22	Departmental Group, 2021-22	Core Department and Agencies, 2020-21 restated	Departmental Group, 2020-21 restated
Grant in aid	12,220	-	12,499	-
Market frameworks	73	73	83	83
Science and Research	578	7,416	618	7,315
International Climate Fund	312	311	515	518
Renewable Heat Incentive	920	920	848	848
Heat Infrastructure team	64	64	60	60
Innovation programmes	174	643	112	593
Social Housing and Public Sector Decarbonisation Grant schemes	599	599	670	670
Green Homes Grant scheme	465	465	539	539
Home Upgrade Grant scheme	152	152	-	-
Small Business Grant Fund and Retail, Hospitality and Leisure Grant Fund and Local Authority Discretionary Grant Fund	-	-	683	683
Local Restriction Support Grant schemes	(223)	(223)	7,225	7,225
New burdens funding	53	53	142	142
Science and Research support grants	-	-	-	540
Grants to central government bodies	5,632	5,632	5,086	5,086
Transfer of freehold property assets to the Government Property Agency	-	-	23	42
Restart Grant	3,045	3,045	-	-
Omicron Hospitality and Leisure Grant scheme	479	479	-	-
Additional Restrictions Support Grant	499	499	-	-
Other grants	91	109	74	82
Total	25,133	20,237	29,177	24,426

Grant in kind reported against ‘Vaccine Taskforce: vaccines transferred to DHSC’ in 2020-21 has been restated to £nil for the Core Department to reflect the transfer during 2021-22 of the majority of its functions in the Vaccine Taskforce to the Department of Health and Social Care (note 28).

Core Department

The total of £5,632 million of ‘Grants to central government bodies’ in 2021-22 includes:

£5,610 million to the Nuclear Liabilities Fund (2020-21: £5,070 million), under an existing agreement between the Department, the Fund and HM Treasury, to take account of reduced future net investment returns for the Fund following increases in UK corporation tax rates announced in March 2021. The contribution will be held by the Fund as a deposit in the Exchequer and was made to ensure Fund sufficiency while avoiding any change to the Fund’s investment strategy which would have necessitated withdrawal of funds from its existing Exchequer deposits, and
£22 million to the Official Receiver to discharge their statutory duties in relation to the insolvency of British Steel Limited (2020-21: £16 million).

The Green Homes Grant Scheme has been administered through the voucher scheme and the Local Authority Delivery Scheme (LADs). Voucher expenditure is £196.3 million (31 March 2021 £35.9 million) being vouchers paid out by the scheme provider to 11 March 2022 when the scheme closed. The final stage of voucher payments is being carried out by BEIS which resulted in a further accrual at 31 March 2022 of £27 million. The Local Authority Delivery Scheme (LADs) scheme has a spend of £268.6 million (31 March 2021: £502.8 million). The Green Homes Grant Scheme closed to new applications on 31 March 2021.

The Homes Upgrade Grant (HUG) Scheme was a newly administered scheme in 2021-22, with expenditure at 31 March 2022 of £152.2 million. It was jointly offered as part of the “Sustainable Warmth” competition along with Phase 3 of the Local Authority Delivery Scheme.

Included within ‘Social Housing and Public Sector Decarbonisation’ £599 million (2020-21: £670 million), is £180 million (31 March 2021: £62 million) in relation to the Social Housing scheme and £419 million (31 March 2021: £608 million) in relation to the Public Sector Decarbonisation Scheme.

In 2021-22, the Core Department provided £619 million to local authorities under Section 31 of Local Government Act 2003 (31 March 2021: £533.6 million). Other eligible public bodies were provided grants by the Core Department but were administered and paid through Salix Finance Limited (within the Departmental Boundary); a total of £419 million was paid out via Salix Finance Limited in 2021-22 (31 March 2021: £74.4 million) in relation to the Social Housing and Public Sector Decarbonisation Scheme.

COVID-19 Business Support Grants

The Core Department has continued to provide COVID-19 support to businesses through several new grant schemes.

Two grant schemes were announced towards the end of the 2020-21 financial year, to launch and be recognised in the 2021-22 financial year. These were a second extension to the Additional Restrictions Grant Scheme (ARG) and the Restart Grant. In December 2021 the Department announced 2 further Business Support Grant schemes, to help support business effected by the Omicron variant of COVID-19. These were the third top-up of the ARG scheme, and the Omicron Hospitality and Leisure (OHL) scheme.

Further information on the COVID-19 Business Support Grants recognised in 2021-22 is below (£m):

COVID-19 Business Support Grant	2021-22	2020-21	Paragraph
Small Business Grant Fund (SBGF) and the Retail, Hospitality and Leisure Grant Fund (RHLGF)	-	110.3	-
Local Authority Discretionary Grant Fund (LADGF)	-	573.0	-
Total: Small Business Grant Fund, Retail, Hospitality and Leisure Grant Fund, and Local Authority Discretionary Grant Fund	-	683.3	-
Local Restrictions Support Grants (Closed) and (Closed) Addendum schemes	(306.8)	3,404.0	a
Local Restrictions Support Grant (Sector)	-	3.0	-
Local Restrictions Support Grant (Open)	6.2	198.1	a
Additional Restrictions Grant	499.1	1,631.0	b
Christmas Support Package	-	22.9	-
Closed Business Lockdown Payment	77.2	1,965.9	a
Restart Grant	3,044.9	-	c
Omicron Hospitality and Leisure Grant	478.9	-	d
Total: COVID-19 Business Support Grant	3,799.5	7,908.2	-

a. In 2020-21 the Department recognised grant expenditure in relation to the Local Restrictions Support Grants (Closed), (Closed) Addendum schemes, Local Restrictions Support Grant (Open) and Closed Business Lockdown Payment of £5,569 million. This was based on an estimate. During the 2021‑22 financial year, this estimate has been refined as more information has become available, which has resulted in a reduction of spend of £223.4 million being recognised in 2021-22. See note 1.27 for further information on the expenditure estimates in both years.

b. In March 2021, the second top-up to the ARG scheme was announced, totaling £425 million. In December 2021, in response to the impact of the Omicron variant, Government announced a further £102 million would be made available for Local Authorities through a third top-up to the ARG scheme. Expenditure recognised for ARG of £499.1 million reflects actual funding transferred to Local Authorities. Funds that have not been distributed by local authorities by 31 March 2022 will be subject to recovery. Therefore, the actual expenditure figure may be lower than that reported above.

c. As part of the Budget announced on 3 March 2021 the Government announced the Restart Grant. The grant provided support for non-essential retail, hospitality, accommodation, leisure, personal care and gym businesses in England. This support took the form of a one-off grant funding scheme which is recognised in 2021-22. The Department has recognised expenditure of £3,044.9 million in relation to the Restart Grant scheme. The Restart Grant scheme closed to new applications on 30 June 2021.

d. On 21 December 2021, in response to the impact of the Omicron variant, Government announced the introduction of grant support for hospitality and leisure businesses in England. The support took the form of a one-off grant funding scheme, with local authorities receiving a proportion of up to £635 million. The Department’s current estimate of spend from the total allocation is £478.9 million. See note 1.27 for further information on the expenditure estimate. This scheme closed on 31 March 2022.

Details regarding the estimation of expenditure in the Local Restrictions Support Grant (Closed) and (Closed) Addendum Schemes, Local Restrictions Support Grant (Open), and Closed Business Lockdown Payment, Omicron Hospitality and Leisure scheme and Restart Grant scheme can be found in note 1.27.

5. Finance expense

	Core Department and Agencies, 2021-22	Departmental Group, 2021-22	Core Department and Agencies, 2020-21 restated	Departmental Group, 2020-21 restated
Change in fair value - financial assets	(34)	(640)	63	(302)
Net loss/(gain) on foreign exchange	-	1	2	2
Unrealised foreign exchange rate losses/(gains)	1	(6)	(1)	8
Bank charges and interest payable	-	57	-	47
FX Gains - unsettled financial assets	-	-	-	-
Interest charges under finance leases	1	3	-	-
Expected return on funded pension scheme assets	-	(38)	-	(36)
Interest on pension liabilities	-	33	-	33
Borrowing costs on provisions	(11)	(56)	(14)	13
Total	(43)	(646)	50	(235)

‘Net loss/(gain) on foreign exchange’ has been restated for 2020-21 for the Core Department to reflect the transfer during 2021-22 of the majority of its functions in the Vaccine Taskforce to the Department of Health and Social Care (note 28).

In 2021-22, HM Treasury’s prescribed equivalent real discount rates remained negative and increased. Further detail of the movements in provisions can be found in note 20.1 for Nuclear provisions and note 20.2 for Other provisions.

6. Income

6.1 Operating income (£m)

	Core Department and Agencies, 2021-22	Departmental Group, 2021-22	Core Department and Agencies, 2020-21	Departmental Group, 2020-21
Income from sales of goods and services:
Income from contracts with customers
Fees, charges and recharges to/from external customers and central Government organisations	549	812	699	885
Levy income	13	1,204	11	3,449
Sales of goods and services	8	727	7	657
Miscellaneous income	7	59	10	66
Other income
European Union funding	-	9	1	12
Current grants and capital grants	73	229	162	332
Total	650	3,040	890	5,401

Core Department and Agencies

‘Fees, charges and recharges to/from external customers and central government organisations’ for the Core Department and Agencies of £549 million (2020-21: £699 million) includes premium fee income of £373 million (2020-21: £378 million) relating to schemes implemented by the Core Department in response to the COVID-19 pandemic. The premium fee income of £373 million includes £77 million from the Trade Credit Reinsurance Scheme (2020-21 £335 million) (note 21), £250 million (2020-21 £40 million) from the Coronavirus Business Interruption Loan Scheme, £31 million (2020-21 £3 million) from the Coronavirus Large Business Interruption Loan Scheme and £15 million from the Recovery Loan Scheme.

Departmental Group

Within ‘Levy Income’, Capacity Market supplier charge income of £856 million has been recognised in 2021-22 (2020-21: £1,095 million).

Included in the ‘Sales of goods and services’ line above is £640 million of income from the NDA (2020-21: £555 million) relating to contract income under IFRS 15. The most significant contracts of the Departmental Group are held by the NDA. The table below shows the main types of contracts, the main areas of performance obligations therein, and for each category (£m):

the revenue recognised in the reporting period [A]
the revenue expected to be recognised in future reporting periods (being the aggregate amount allocation to performance obligations that are wholly or partially unsatisfied at the reporting date) [B]
an indication of when NDA expects to recognise the remaining contract price

Contract type	Categories of performance obligation	[A]	[B]	Of which, 2021-2026	Of which, 2027- 2039	Of which, 2040-2087
Spent fuel reprocessing and associated waste management	Spent fuel storage	26	747	57	126	564
Spent fuel reprocessing and associated waste management	Interim storage of waste	81	292	292	-	-
Spent fuel reprocessing and associated waste management	Treatment of wastes	60	218	218	-	-
Spent fuel reprocessing and associated waste management	Storage of treated wastes	8	179	22	48	109
Spent fuel reprocessing and associated waste management	Storage of products	37	876	92	201	583
Spent fuel receipts	Receipt of spent fuel	252	3,468	2,434	1,034	-
Other storage contracts	Storage of materials	72	906	281	431	194
Storage and destorage of residues	Storage	7	56	56	-	-
Storage and destorage of residues	Destorage	-	35	11	24	-
Waste substitution	Destorage	-	55	55	-	-
Legacy waste management	Waste management	-	157	157	-	-
Total		543	6,989	3,675	1,864	1,450

6.2 Finance income

	Core Department and Agencies	Departmental Group	Core Department and Agencies	Departmental Group
Effective Interest from FVTPL assets	16	17	18	18
Effective Interest from amortised cost assets	39	39	33	33
Interest income from amortised cost assets	9	111	7	84
Interest income from FVTPL assets	16	65	12	69
Dividend income from FVTPL assets held at the period end	-	72	-	95
Dividend income from investments in joint ventures, associates and public dividend capital	98	14	145	33
Dividend income for joint venture and associates	-	2	-	-
Total	178	320	215	332

Core Department and Agencies

In 2021-22 Core Department and Agencies recognised dividend income of £98 million (2020-21: £145 million). This includes a dividend of £84 million from Enrichment Holdings Limited (EHL) (2020-21: £88 million), which is eliminated on consolidation. In the Departmental Group accounts, EHL is consolidated and its investment in URENCO is recognised as an associate. The Department recognises its share of URENCO’s profit for the year in Other operating expenditure and a fair value movement in Other Comprehensive Income.

Departmental Group

In 2021-22 the Departmental Group received dividend income of £88 million (2020-21: £128 million), comprising distributions from investment funds and dividend income of £67 million (2020-21: £88 million) recognised from BIS (Postal Services Act 2011) Company.

7. Property, plant and equipment (£m)

Departmental Group 2021‑22

	Land	Buildings	Dwellings	Leasehold Improvements	Information Technology	Plant and Machinery	Furniture, Fixtures and Fittings	Transport Equipment	Assets under Construction	Total
Cost or valuation
At 31 March 2021	300	2,657	-	83	213	6,278	26	296	824	10,677
IFRS 16 adoption adjustment	(79)	(51)	-	-	-	-	-	-	-	(130)
Balance at 1 April 2021	221	2,606	-	83	213	6,278	26	296	824	10,547
Additions	1	6	-	-	32	28	1	9	338	415
Disposals	-	(3)	-	(1)	(14)	(27)	(2)	(80)	-	(127)
(Impairments)/impairment reversals	-	(15)	-	-	-	(1)	-	-	(8)	(24)
Transfers	(6)	(1)	-	-	2	-	-	-	-	(5)
Reclassifications	-	13	-	16	50	62	-	201	(342)	-
Revaluations	34	320	-	-	(2)	99	1	2	-	454
At 31 March 2022	250	2,926	-	98	281	6,439	26	428	812	11,260
Depreciation
At 31 March 2021	(28)	(1,055)	-	(41)	(154)	(5,362)	(14)	(190)	-	(6,844)
IFRS 16 adoption adjustment	28	19	-	-	-	-	-	-	-	47
Balance at 1 April 2021	-	(1,036)	-	(41)	(154)	(5,362)	(14)	(190)	-	(6,797)
Charged in year	-	(60)	-	(7)	(32)	(133)	(3)	(16)	-	(251)
Disposals	-	3	-	1	14	25	2	76	-	121
(Impairments)/impairment reversals	-	-	-	-	-	(8)	-	-	-	(8)
Revaluations	-	(111)	-	-	1	(59)	-	-	-	(169)
At 31 March 2022	-	(1,204)	-	(47)	(171)	(5,537)	(15)	(130)	-	(7,104)
Carrying amount at 31 March 2022	250	1,722	-	51	110	902	11	298	812	4,156
Carrying amount at 1 April 2021	221	1,570	-	42	59	916	12	106	824	3,750
Asset financing:
Owned	250	1,722	-	51	110	902	11	298	812	4,156
Carrying amount at 31 March 2022	250	1,722	-	51	110	902	11	298	812	4,156
Of the total:
Core Department and Agencies	32	181	-	40	9	74	4	-	65	405
NDPBs and other designated bodies	218	1,541	-	11	101	828	7	298	747	3,751
Carrying amount at 31 March 2022	250	1,722	-	51	110	902	11	298	812	4,156

Departmental Group 2020‑21

	Land	Buildings	Dwellings	Leasehold Improvements	Information Technology	Plant and Machinery	Furniture, Fixtures and Fittings	Transport Equipment	Assets under Construction	Total
Cost or valuation
Balance at 1 April 2020	275	2,594	42	74	251	6,168	26	285	636	10,351
Additions	2	4	-	-	14	58	1	5	402	486
Disposals	(13)	(69)	-	(4)	(61)	(48)	(3)	(1)	-	(199)
(Impairments)/impairment reversals	-	-	-	-	-	4	-	-	-	4
Transfer to non-current assets held for sale	(5)	-	-	-	-	-	-	-	-	(5)
Reclassifications	22	146	(42)	13	8	64	2	1	(214)	-
Revaluations	19	(18)	-	-	1	32	-	6	-	40
At 31 March 2021	300	2,657	-	83	213	6,278	26	296	824	10,677
Depreciation
Balance at 1 April 2020	(28)	(1,036)	-	(38)	(185)	(5,242)	(14)	(176)	-	(6,719)
Charged in year	(1)	(58)	-	(7)	(29)	(128)	(3)	(11)	-	(237)
Disposals	-	37	-	4	61	47	3	1	-	153
(Impairments)/impairment reversals	-	-	-	-	-	(22)	-	(1)	-	(23)
Reclassifications	-	(3)	-	-	-	3	-	-	-	-
Revaluations	1	5	-	-	(1)	(20)	-	(3)	-	(18)
At 31 March 2021	(28)	(1,055)	-	(41)	(154)	(5,362)	(14)	(190)	-	(6,844)
Carrying amount at 31 March 2021	272	1,602	-	42	59	916	12	106	824	3,833
Carrying amount at 1 April 2020	247	1,558	42	36	66	926	12	109	636	3,632
Asset financing:
Owned	221	1,585	-	42	59	916	12	106	824	3,765
Leased	51	17	-	-	-	-	-	-	-	68
Carrying amount at 31 March 2021	272	1,602	-	42	59	916	12	106	824	3,833
Of the total:
Core Department and Agencies	16	133	-	33	9	83	4	-	50	328
NDPBs and other designated bodies	256	1,469	-	9	50	833	8	106	774	3,505
Carrying amount at 31 March 2021	272	1,602	-	42	59	916	12	106	824	3,833

Property, plant, and equipment (PPE) held by the Departmental Group

The professional valuations of land and buildings undertaken within the Departmental Group were prepared in accordance with the Royal Institute of Chartered Surveyors (RICS) Valuation Standards (6th Edition), the ‘Red Book’. Unless otherwise stated, land and buildings are professionally revalued every 5 years and where appropriate in the intervening period, relevant indices are used. The most significant land and buildings at 31 March 2022 were held by Nuclear Decommissioning Authority (NDA) and UK Research and Innovation (UKRI). Revaluations were conducted in 2021-22 for some of the UKRI Property, plant and equipment (valuation increased by £186 million), by Carter Jonas and Powis Hughes.

Included in Transport Equipment reclassifications is £196.8 million for the bringing into service of the Antarctic research vessel RRS Sir David Attenborough.

In accordance with the FReM the majority of Leasehold improvements, Information Technology, Furniture, Fixtures and Fittings and Plant and Machinery are held at depreciated historic cost as a proxy for fair value as the assets have short useful lives or low values. Land, Freehold Buildings, Dwellings, Transport Equipment and the remainder of Plant and Machinery are held at fair value based on professional valuations.

Within the Departmental Group, a variety of valuation techniques are used depending upon whether the PPE asset is a specialised asset or a non-specialised asset. Where the PPE asset is a specialised asset, then a depreciated replacement cost valuation is used, for example by scientific institutes. Where the PPE asset is a non-specialised asset, then an existing-use valuation is used, for example for land and office buildings. Depreciated replacement cost (DRC) valuations are based on a number of unobservable inputs; these would be classified as level 3 in accordance with IFRS 13. Existing-use value (EUV) valuations are based on a number of market corroborated but unobservable inputs e.g. land valuations are based on similar prices per hectare adjusted for the specific location of the land, whilst other EUV valuations use specific unobservable inputs, e.g. rental yields. The EUV valuations inputs are classified as level 2 and level 3 in accordance with IFRS 13.

Further information can be found in the financial statements of the individual bodies’ accounts.

8. Right of Use Assets (£m)

Departmental Group

	Land	Buildings	Plant and Machinery	Transport Equipment	Total
Cost or valuation
At 31 March 2021	-	-	-	-	-
IFRS 16 - adjustment on adoption	94	281	2	10	387
Balance at 1 April 2021	94	281	2	10	387
Additions	5	27	2	2	36
Disposals	(1)	(1)	-	(1)	(3)
(Impairments)/ impairment reversals	-	(11)	-	-	(11)
Remeasurements	-	(2)	-	-	(2)
Revaluations	1	16	4	2	23
At 31 March 2022	99	310	8	13	430
Depreciation
At 31 March 2021	-	-	-	-	-
IFRS 16 - adjustment on adoption	(28)	(19)	-	-	(47)
Balance at 1 April 2021	(28)	(19)	-	-	(47)
Charged in year	(2)	(40)	(2)	(6)	(50)
Disposals	-	2	-	1	3
Revaluations	(1)	(13)	(4)	(2)	(20)
At 31 March 2022	(31)	(70)	(6)	(7)	(114)
Carrying amount at 31 March 2022	68	240	2	6	316
Of the total:
Core Department and Agencies	1	102	-	3	106
NDPBs and other designated bodies	67	138	2	3	210
Carrying amount at 31 March 2022	68	240	2	6	316

The Departmental Group adopted IFRS 16 ‘Leases’ from 1 April 2021, in agreement with HM Treasury. Please see note 1 for further information on the adoption of IFRS 16 ‘Leases’.

9. Intangible assets (£m)

Departmental Group 2021-22

	Information Technology	Software Licences	Websites	Patents	Licences & Others	Assets under Construction	Total
Cost or Valuation
Balance at 1 April 2021	190	168	1	385	-	24	768
Additions	4	1	-	-	-	28	33
Disposals	(2)	(12)	-	-	-	-	(14)
Reclassifications	70	(60)	-	-	-	(10)	-
Transfers	(2)	-	-	-	-	-	(2)
Revaluations	-	-	-	(14)	-	-	(14)
At 31 March 2022	260	97	1	371	-	42	771
Amortisation
Balance at 1 April 2021	(143)	(156)	(1)	(278)	-	-	(578)
Charged in year	(17)	(4)	-	(21)	-	-	(42)
Disposals	1	11	-	-	-	-	12
Reclassifications	(61)	61	-	-	-	-	-
At 31 March 2022	(220)	(88)	(1)	(299)	-	-	(608)
Carrying amount at 31 March 2022	40	9	-	72	-	42	163
Carrying amount at 1 April 2021	47	12	-	107	-	24	190
Asset financing:
Owned	40	9	-	72	-	42	163
Carrying amount at 31 March 2022	40	9	-	72	-	42	163
Of the total:
Core Department and Agencies	22	2	-	-	-	34	58
NDPBs and other designat-ed bodies	18	7	-	72	-	8	105
Carrying amount at 31 March 2022	40	9	-	72	-	42	163

Departmental Group 2020-21

	Information Technology	Software Licences	Websites	Patents	Licences & Others	Assets under Construction	Total
Cost or Valuation
At 1 April 2020	153	194	1	331	87	20	786
Additions	4	1	-	-	-	21	26
Disposals	(9)	(2)	-	-	(87)	-	(98)
Reclassifications	42	(25)	-	-	-	(17)	-
Revaluations	-	-	-	54	-	-	54
At 31 March 2021	190	168	1	385	-	24	768
Amortisation
At 1 April 2020	(120)	(155)	(1)	(262)	-	-	(538)
Charged in year	(14)	(20)	-	(16)	-	-	(50)
Disposals	9	2	-	-	-	-	11
Impairments	(1)	-	-	-	-	-	(1)
Reclassifications	(17)	17	-	-	-	-	-
At 31 March 2021	(143)	(156)	(1)	(278)	-	-	(578)
Carrying amount at 31 March 2021	47	12	-	107	-	24	190
Carrying amount at 1 April 2020	33	39	-	69	87	20	248
Asset financing:
Owned	47	12	-	107	-	24	190
Carrying amount at 31 March 2021	47	12	-	107	-	24	190
Of the total:
Core Department and Agencies	21	2	-	-	-	21	44
NDPBs and other designated bodies	26	10	-	107	-	3	146
Carrying amount at 31 March 2021	47	12	-	107	-	24	190

All software licenses are acquired separately.

All Information Technology (IT) assets are internally generated. IT assets are initially classified as assets under construction and are not amortised until they are commissioned, at which time they are re-classified as IT.

Departmental Group

The Departmental Group holds its intangible assets at valuation. In accordance with the FReM, the Departmental Group adopts cost less amortisation as a proxy for fair value as the intangible assets have short lives. The exception to this is patents which are held at fair value based on a valuation model.

The model uses a variety of assumptions to estimate the value of future income streams from the patents to determine the fair value; these include an estimate for future royalty income derived from the consensus forecast data from industry specialists, which are adjusted for expected future USD/GBP exchange rates, the territories in which the patents are applicable and potential threats to future income (such as competitor products and regulatory approval). In accordance with IFRS 13, these assumptions would be classed as level 3 assumptions. The carrying amount of the patents at 31 March 2022 is £72 million (2020-21: £107 million) and there would need to be a substantial increase in expected royalty income to result in a material increase in the fair value of the patents.

10. Derivative financial instruments

The most significant items included within Derivatives on the Consolidated Statement of Financial Position (SoFP) are the Contracts for Difference (CfDs).

CfDs

CfDs are a mechanism introduced to support new investment in low carbon generation projects. CfDs have been established as a private law contract between the ‘Generator’ and the Low Carbon Contracts Company Ltd (LCCC), a company wholly owned by the government and consolidated within the Departmental Group accounts.

CfDs have been classified as derivatives in accordance with IFRS 9 ‘Financial Instruments’, designated as FVTPL and are stated at their ‘fair value’ by deferring the difference between fair value and transaction price at initial recognition. Any resultant gain or loss in fair value is recognised in the Consolidated Statement of Comprehensive Net Expenditure.

The fair value of any derivative is assessed by reference to IFRS 13 ‘Fair Value Measurement’, which provides 3 options for assessment. Fundamentally the value should always reference an open marketplace but where no marketplace exists, an option is available for internally generated fair value. The different options are hierarchical and classed as level 1, 2, or 3 inputs, where level 1 is based on market prices, level 2 is based on observable data other than market prices and level 3 is used where level 1 or 2 data is unavailable.

The fair value of the CfDs has been calculated using the income approach based on level 3 inputs, which reflects the present value of future cash flows that are expected to occur over the contract term of the CfD. To calculate future cash flows, LCCC makes its best estimate of the payments which it will be committed to make, if and when the generators supply low carbon electricity in accordance with the contractual terms of the CfD. LCCC does this by selecting the discounted cash flow model, and also applying inputs and assumptions, to obtain a reliable estimate of future electricity prices which LCCC concludes results in the fair value measurement. The fair value measurement reflects what a market participant would take into account when establishing the price, and assumes an orderly transaction between market participants, at the measurement date.

The difference between the fair value of the liability at initial recognition (day one) and the transaction price, is deferred unless the calculation can be based on observable inputs which at this point in time is not the case for CfDs.

The deferred difference between the fair value of the liability on day one and the transaction price is amortised over the relevant payment period of the CfDs, which commences from the earlier of i) the actual start date of generation or ii) the end of the Target Commissioning Window (TCW) identified in the CfD, as this is the point at which the contractual liability will start to unwind (i.e. it is the point at which the potential payment period under the CfD commences).

The significance of these 2 dates is that they are the part of the contractual provisions which determine when the right to potential CfD payments starts. The contract payment period is typically for 15 years, although contracts relating to biomass conversion have an expiration date in 2027 and the bespoke Hinkley Point C (HPC) contract has a contract payment period of 35 years. CfDs may be signed many years in advance of actual generation. The main benefit to generators is the fact that they can derive economic value from these contracts over the payment period life of the contract.

Typically, if generators start generating within their TCW (which is specified in the contract) then the generation period starts from the date of generation and, subject to all conditions being met, the generator can extract benefit for the full term of the contract. If generators miss the end of their TCW (and it is not extended under the terms of the contract) then the payment life period commences at the end of their TCW even if the generator is not in a position to generate. If the generator does not achieve the required minimum generation capacity by the contractual Longstop Date, LCCC has a right to terminate the CfD.

After initial recognition, LCCC recognises the deferred difference as a gain or loss only to the extent that it arises from a change in a factor (including time) that market participants would take into account when pricing the asset or liability.

Changes in fair value arising after day one are recognised in the reporting period that they occur and are accounted for in the Consolidated Statement of Comprehensive Net Expenditure and in the Consolidated Statement of Financial Position as they arise. An individual CfD is only recognised as an asset if the decrease in fair value is significant as compared to the CfD portfolio.

Valuation of CfDs: estimates

The fair value of the unquoted CfD contracts is calculated using the income approach (discounted cash flow model) and represents LCCC’s best estimate of the payments which LCCC will be committed to make, if and when the generators supply low carbon electricity in accordance with their contractual terms. Annual cash flow is estimated as strike price minus forecast reference price, multiplied by estimated eligible generation volume. The series of periodic net operating expense is then discounted using a real discount rate based on the HM Treasury nominal rate of 1.9% adjusted by the latest OBR CPI inflation forecasts for each modelled year (2020-21: real 0.7% rate for all periods).

The valuation requires LCCC’s management to make certain assumptions about the model inputs, including cash flows, the discount rate, credit risk and volatility. Significant inputs are disclosed below.

One of the key inputs into the cash flow model is the estimate of future electricity prices which is derived by applying certain inputs and assumptions such as overall electricity demand, commodity prices, carbon prices, government policy, technology, and deployment of new generating capacity. Most commercial and public sector modelling of the electricity system for long term forecasting takes a very similar approach, but the detailed assumptions and methodology may differ. Given the complexity, range of possible inputs, and long-term nature of the modelling, and also to some extent the iterative relationship between the expectations of overall system cost and long-term demand (especially industrial demand), long-term system forecasts are not generally seen as a single “most likely” outcome with degrees of uncertainty either side. In fact, there are multiple sets of inputs that are internally consistent, and credible. Often a set of these inputs will be used as a “scenario,” and multiple deliberately different scenarios are used to illustrate different possible futures when undertaking long-term forecasting. The range of uncertainty can be significant when forecasting (as illustrated below) but does not necessarily mean that an individual scenario is not reasonable. LCCC continues to use the Dynamic Despatch Model (DDM), unless there is evidence that it is not a reliable proxy for the price series that a third party might use to estimate the payments they would need to make under the terms of the CfD contracts.

Valuation of CfDs: significant judgements

Fair value measurement of HPC CfD

LCCC entered into the Hinkley Point C CfD on 29 September 2016. This project has a maximum lifetime generation cap of 910,000,000 MWh. The contract will expire at the earlier of 35 years after the start date of the second reactor or when the total CfD payments made have reached the generation cap.

The HPC CfD duration is more than double (35 years) the length of other CfDs (15 years) entered into by the Departmental Group. This has made it considerably more challenging for LCCC’s management to provide a reliable single point fair value estimate for HPC CfD.

However, the Department’s DDM model forecasts pricing out to 2060 and therefore in line with the recognition criteria for the other CfDs, the recognition criteria for HPC CfD was deemed to have been met and the CfD is recognised in the financial statements since 2019-20.

As in the previous year third party forecasts have been used as reference to support the reasonableness of the internally generated price series derived from the DDM forecast. As a result of the reasonableness of the underlying assumptions of the forecast LCCC’s management deem the valuation of the HPC CfD as a reliable estimate that is complete, neutral and free from error.

Deferral of differences between fair value and transaction price for CfD

The fair value of the CfDs, disclosed below, is derived at initial recognition based on the valuation technique that uses data other than from observable sources. In accordance with IFRS 9, the measurement of CfDs in the Consolidated Statement of Financial Position therefore includes an adjustment to defer the difference between the fair value at initial recognition and the transaction price of £nil.

LCCC’s management believes it is reasonable to amortise the difference between the fair value at initial recognition and the transaction price over the same period as the actual contract life reflects the obligation under the contract to make payments and the right to receive monies from suppliers to make those payments. Financial instrument standards require the “deferred difference” to be recognised only to the extent that it arises from a change in factor (including time) that market participants would take into account.

CfDs

Under the legislation, there is an obligation placed on licensed electricity suppliers to fund the CfD liabilities as they crystallise through the Supplier Obligation Levy. The future levy amounts which will be received from the licensed suppliers will be accounted for within LCCC and will be triggered by the generation and supply of low carbon electricity.

As at 31 March 2022 LCCC was counterparty to 69 contracts, including HPC (at 31 March 2021: 72 contracts).

Measurement differences relating to day one recognition

All CfDs (including HPC) are issued for £nil consideration through the CfD auction process, this being deemed the transaction price. As explained above, the difference between the fair value of the instrument at initial recognition (day one) and the transaction price is deferred unless the fair value at initial recognition is based on observable inputs (which is not currently the case).

The following table represents the difference between the CfD liability at initial recognition and at the reporting date (£m):

	LCCC CfDs (exc. HPC)	LCCC HPC	Departmental Group Total
CfD liability as at 31 March 2020 recognised on the Consolidated Statement of Financial Position	16,464	-	16,464
Other non-CfD liabilities as at 31 March 2020	-	-	-
Carrying value of non-current derivative liabilities as at 31 March 2020	16,464	-	16,464
Re-measurement of the CfD liability	416	1,202	1,618
Payments to the CfD generators	(2,277)	-	(2,277)
Deferred difference recognised during the year	1,128	-	1,128
CfD liability as at 31 March 2021 recognised on the Consolidated Statement of Financial Position	15,731	1,202	16,933
Other non-CfD liabilities as at 31 March 2021	-	-	-
Carrying value of non-current derivative liabilities as at 31 March 2021	15,731	1,202	16,933
Remeasurement of the CfD liability	(449)	9,396	8,947
Payments to the CfD generators	(271)	(271)
Deferred difference recognised during the year	1,339	1,339
CfD liability as at 31 March 2022 recognised on the Consolidated Statement of Financial Position	16,350	10,598	26,948
Other non-CfD liabilities as at 31 March 2022	-	-	-
Carrying value of non-current derivative liabilities as at 31 March 2022	16,350	10,598	26,948

During the year, the net movement of £10,286 million (2020-21: £2,746 million) in the fair value of CfDs is recognised in the Consolidated Statement of Comprehensive Net Expenditure.

Movement in deferred measurement differences

The following table shows the movement in deferred day one loss (£m):

	LCCC CfDs exc. HPC	LCCC HPC	Departmental Group Total
Deferred measurement differences as at 31 March 2020	22,293	50,826	73,119
Measurement differences recognised relating to terminated CfDs	6	-	6
Deferred measurement differences recognised during the year	(1,128)	-	(1,128)
Deferred measurement differences as at 31 March 2021	21,171	50,826	71,997
Measurement differences recognised relating to terminated CfDs	(15)	-	(15)
Deferred measurement differences recognised during the year	(1,324)	-	(1,324)
Deferred measurement differences as at 31 March 2022	19,832	50,826	70,658

Fair value measurement of CfDs

The fair value of CfDs represents LCCC’s best estimate of the payments which LCCC will be committed to make, if and when the generators supply low carbon electricity in accordance with their contractual terms. They are based upon the estimates of future electricity prices using the DDM owned by the Department.

Should no low carbon electricity be supplied in accordance with the contractual terms, then LCCC is not under any obligation to make these payments.

Fair value of CfDs (financial liabilities at fair value through profit and loss)

The following table provides an analysis of financial instruments which are measured subsequent to initial recognition at fair value and grouped into input levels 1 to 3 within the fair value hierarchy based on the degree to which the fair value is observable:

	Level 1, £m	Level 2, £m	Level 3, £m	Total, £m
Balance at 31 March 2021	-	-	88,930	88,930
Balance at 31 March 2022	-	-	97,591	97,591

Reconciliation of CfDs

The following table shows the impact of the fair values of the CfDs, classified under level 3, by using the assumptions described below (£m):

	LCCC CfDs exc. HPC	LCCC HPC	Departmental Group Total
Balance at 31 March 2020	38,757	50,826	89,583
Change in fair value during the year	416	1,202	1,618
CfDs terminated during the year	6	-	6
Payments to the CfD generators	(2,277)	-	(2,277)
Balance at 31 March 2021	36,902	52,028	88,930
Change in fair value during the year	(449)	9,396	8,947
CfDs terminated during the year	(15)	-	(15)
Payments to the CfD generators	(271)	-	(271)
Balance at 31 March 2022	36,167	61,424	97,591

Key inputs and underlying assumptions for CfDs

For the key inputs into the model, the underlying assumptions are set out below.

Estimated future forecast wholesale electricity prices

Forecast wholesale electricity prices used to estimate the fair value of CfDs are derived from the DDM which has been developed by the Department to facilitate/inform policy decisions by modelling investor behaviour in response to fuel and carbon prices and policy environment.

The DDM estimates the wholesale price by:

calculating the short run marginal cost (SRMC) of each plant (including a representation of plants in interconnected markets), taking account of start-up and shut-down costs
calculating the available output of intermittent renewables
calculating the half hourly demand for electricity by taking into account demand side response
determining the marginal plant required to meet demand

Economic, climate, policy, generation and demand assumptions are external inputs to the model including demand load curves for both business and non-business days and seasonal impacts. Specific assumptions can also be modelled for domestic and non-domestic sectors and smart meter usage.

The forecast trajectory of electricity prices are uncertain and volatile. In the valuation, LCCC’s management has used the 2021 DDM reference case to calculate the fair value of the CfD portfolio. Low and high cases were also published by the Department, which presented low and high assumptions for the wholesale prices of oil, gas and coal. The impact of the high and low cases is illustrated in the sensitivity analysis table below. The internal model used to calculate the fair value has been updated for short-term prices, installed capacities, Transmission Loss Multiplier (TLM) and load factors.

In the valuation, the wholesale price has been reduced to reflect the price the wind generator is likely to receive. Additionally, wholesale electricity forward prices have been used for the liquid trading horizon, covering the next 2 financial years. For the remainder of the CfDs contract life the DDM forecast has been incorporated into the valuation. On windy days, the price that wind generators receive is likely to be reduced. The effect of reduced prices for wind generation adds approximately £2.4 billion to the valuation.

Estimated future electricity generation

a. Transmission Loss Multiplier (TLM)

TLM reflects the fact that electricity is lost as it passes through the transmission system from generators to suppliers. If the TLM is incorrect, this will have implications for the volume of electricity subject to CfD payments. Any change in TLM will be corrected through adjustments in strike prices although the change in TLM is expected to be immaterial.

b. Start date

Generators nominate a Target Commissioning Date (TCD) in their binding application form for a CfD, and this date is specified in their CfD, following contract award. However, the generator is free to commission at any time within their Target Commissioning Window (TCW), a period of one year from the start of the TCW for most technologies, with no penalty, or after the end of the TCW and up to their ‘Longstop Date’ (one to 2 years after the end of the TCW depending on technology) with a penalty in the form of reduction of contract length for each day they are late in commissioning after the end of the TCW. The contract can be terminated if the generator has not commissioned 95% (or 85% for Investment Contracts and offshore wind) of their revised installed capacity estimate by the Longstop Date. The valuation uses the latest estimate from generators on the start date.

The estimated start dates for reactor one and reactor 2 of the HPC project are June 2026 and June 2027, respectively. The TCW for reactor one is 1 May 2025 to 30 April 2029. The TCW for reactor 2 is 1 November 2025 to 31 October 2029.

Any change to the start date will change the timing of future cash flows and impact on the discounted fair value.

c. Installed capacity

The figure for the maximum installed capacity was provided by the generator in its application for a CfD and specified in its CfD contract following allocation. Thereafter the installed capacity figure can only be reduced by the generator for a permitted contractual construction event (which is a narrowly defined concept) or by the difference by which the relevant project has an installed capacity of 95% (or 85% in the case of Investment Contracts and offshore wind) of its current contractual installed capacity figure and 100%. The actual output of the generator will depend on the load factor.

The HPC CfD does not have an installed capacity cap and is only entitled to CfD payment support up to a generation cap of 910,000,000 MWh.

d. Load factor

Load factor is defined as the actual power output of a project as a proportion of its rated installed capacity. It is a percentage figure which is used to transform installed capacity into actual power output (generation). Load factor assumptions are based on reference factors published by the Department for given technology types; however, actual power outputs are sensitive to technological and environmental factors which may impact actual cash flows. Plant specific load factors (where a minimum of 6 months’ generation data is available) is also available for consideration when valuing the CfDs.

For HPC CfD the generator (NNB Generation Company (HPC) Limited) provides LCCC with a generation profile, which forecasts the generation over the life of the contract.

Strike price

The strike price is an agreed price which determines the payments made to the generator under the contract with reference to its low carbon output and the market reference price.

The relevant strike price is specified in each CfD and is not intended to change for the duration of the project, other than through indexation to CPI and certain network charges, or in the event of certain qualifying changes in law. The strike price used in the valuation of the CfDs is the 2022-23 strike price and reflects the CPI rate for January 2022, in line with the requirements of the CfD contract.

The announcement made by OFGEM in April 2022 stating that from the 1st April 2023 generators will no longer pay BSUoS charges confirmed the market view at the reporting date which LCCC has already incorporated into the strike price forecast as at the 31 March 2022.

The relevant strike price for the HPC CfD is specified at £92.50/MWh in real 2012 terms and is not intended to change for the 35 year contract duration, other than through indexation to CPI and certain network charges, the event of certain qualifying changes in law, or the additional factors discussed below. If a government scheme in relation to Sizewell C is entered into before the reactor one start date, then the applicable strike price shall be reduced with effect from the date of satisfaction of the Sizewell C condition by £3/MWh. LCCC management’s assumption with regards to Sizewell C has not changed since last year as there is still no certainty that Sizewell C will enter into a low carbon government scheme, hence the fair value of HPC CfD continues to be £92.50/MWh.

Equity gain share for Hinkley Point C

The equity gain share mechanism consists of 2 separate components: (i) a mechanism to capture gains above specified levels where the HPC project outperforms relative to the original base case assumptions; and (ii) a mechanism to capture gains above specified levels arising from the sale of equity and economic interests (direct or indirect) in the HPC project.

In each case, as and when the Internal Rate of Return (IRR) thresholds are reached:

if the relevant IRR is more than 11.4%, LCCC will receive 30% of any gain above this level.
if the relevant IRR is more than 13.5%, LCCC will receive 60% of any gain above this level.

No adjustment to the valuation has been made for equity gain share on the grounds that none of the conditions outlined above have been met or are currently forecast to be met.

Construction gain share for Hinkley Point C

If the construction costs of HPC come in under budget, the strike price will be adjusted downwards so that the gain (or saving) is shared with LCCC. The gain share is 50/50 for the first billion pounds, with savings in excess of this figure being shared 75% to LCCC and 25% to NNB Generation Company (HPC) Limited (NNBG).

If the outturn cost of construction is less than assumed then by reducing the strike price, the amounts paid out to NNBG under the CfD will reduce and hence the benefit of the lower construction costs is shared between NNBG and ultimately consumers. There is, however, no similar upward adjustment if the construction cost of HPC is over budget.

No adjustment to the valuation has been made for construction gain share on the grounds that there hasn’t been any construction gain share during the year and none is currently forecast.

OPEX reopener for Hinkley Point C

The strike price may be adjusted upwards if the operational expenditure costs are more than assumed and downwards if they are less. There are 2 operational expenditure reopener dates, at 15 years and 25 years after the first reactor start date. The rationale behind the reopener is that the strike price is based on long-term assumptions on operational expenditure costs. The reopener provides a way of mitigating long-term cost risks for both parties.

No adjustment to the valuation has been made for OPEX reopener on the grounds that the opex reopener dates have not been reached yet and there is no evidence of operating costs materially differing from initial projections.

Sensitivity Analysis

As explained above, long term system forecasts are not generally seen as a single most likely outcome with degrees of uncertainty either side. Rather there are multiple sets of inputs that are internally consistent and credible. A set of these inputs is usually used as a ‘scenario’ and multiple deliberately different scenarios are used to illustrate different possible futures when undertaking long term forecasting. Therefore, individual forecasts may use a very different set of assumptions such as generation mix, carbon and fuel costs, electricity demand and interconnector capacity, but still be within what LCCC would describe as the ‘universe of reasonableness’.

In order to value the CfD liabilities LCCC’s management has used future wholesale electricity prices derived from the selected DDM reference case scenario. The 2 reference case scenarios provided (with alternative levels of demand) represents the Department’s view of the optimal generation mix (from the perspective of whole system costs) to achieve net zero by 2050. The reference case scenario that was deemed the most reasonable estimate of the 2 by LCCC’s management and used for the valuation produces a forecast price of £54.04 per MWh in 2040 and £48.09 per MWh in 2050 (and 2060). The Department also included high and low cases for this reference case scenario. These high and low value cases represent the Department’s view of the optimal generation mix from the perspective of whole system cost to achieve net zero by 2050 based on low and high assumptions for future wholesale prices of oil, gas, and coal. Under these Department high/low fossil fuel prices scenarios the forecast price is £58.07/£49.36 per MWh in 2040 and £52.43/£46.67 per MWh in 2050 (and 2060). The impact on the CfD valuation of using these alternative scenarios is shown in the table below.

It should be noted that independent third-party forecasters may use a very different set of assumptions for their scenarios (e.g., different generation mix, commodity prices, carbon prices, electricity demand and/or interconnector capacity) and that these different assumptions may produce a future electricity price outside of the bounds of the range implied by the DDM high and low demand cases. Having undertaken appropriate due diligence LCCC’s management is satisfied that, whilst significant, the estimation uncertainty associated with future wholesale electricity prices is not fundamental.

An additional element in the calculation of the CfD liability is the discount rate that is applied. Uncertainty increases with time and so the choice of discount rate plays a significant part in determining how much uncertainty is weighted into a present value calculation, higher positive discount rate places less weight on increasingly more uncertain years of a present value calculation.

In previous years LCCC has used the HM Treasury real discount rate of 0.7% for valuing financial instruments such as CfDs, and as a modelling enhancement, LCCC has this year derived a real discount rate from the HM Treasury nominal discount rate of 1.9% adjusted by the latest CPI inflation forecasts for each modelled year, given that the strike price is indexed to CPI, resulting in the following real discount rates:

Year	Rate
2022-23	(5.65%)
2023-24	(0.47%)
2024-25	0.24%
2025-26	(0.06%)
2026-27 and thereafter	(0.10%)

Given that HM Treasury now has an intention to vary their discount rate guidance on an annual basis, for future year-on-year comparability LCCC now include an undiscounted valuation of the CfDs to compare with the table on Reconciliation of CfDs above:

Undiscounted valuation of CfDs, (£m)

	LCCC CfDs exc. HPC	LCCC HPC CfD	Departmental Group Total
As at 31 March 2020	40,903	60,000	100,903
As at 31 March 2021	38,865	61,221	100,086
As at 31 March 2022	34,844	58,381	93,225

The following table shows the impact on the fair value of CfDs, classified under level 3, by applying reasonably possible alternative assumptions to the valuation obtained using DDM. Due to the significance and uniqueness of HPC CfD the impact (and certain assumptions) has been shown separately.

Change in fair value of CfDs if:	Favourable/ (Unfavourable) changes HPC CfD (£m)	Favourable/ (Unfavourable) changes Other CfDs (£m)	Favourable/(Unfavourable) changes Total Impact (£m)
DDM High Case	4,752	(1,112)	3,640
DDM Low Case	(3,376)	(13,463)	(16,839)
Discount rate of 3.5%	32,461	10,236	42,697
Discount rate of 0.7%	11,315	3,378	14,693
Undiscounted	3,044	1,323	4,367

Specific to CfDs exc. HPC:	Favourable/ (Unfavourable) changes HPC CfD (£m)	Favourable/ (Unfavourable) changes Other CfDs (£m)	Favourable/(Unfavourable) changes Total Impact (£m)
10% more load factor	-	(3,617)	(3,617)
10% less load factor	-	3,617	3,617
Estimated Commissioning Date moves backward by one year	-	(1,359)	(1,359)
Generation starts at the earliest possible date	-	3,172	3,172

Specific to HPC CfD:	Favourable/ (Unfavourable) changes HPC CfD (£m)	Favourable/ (Unfavourable) changes Other CfDs (£m)	Favourable/(Unfavourable) changes Total Impact (£m)
10% less load factor	6,142	-	6,142
Generation starts at the earliest possible date	207	-	207
Generation start date delayed one year from estimated start date	(113)	-	(113)
Sizewell C strike price adjustment	3,649	-	3,649

The fair value is highly dependent upon the actual capacity generated once the plant is built and the electricity prices which will prevail at the time of generation. The favourable and unfavourable changes show how the impact of changes in capacity and prevailing electricity prices will affect the fair value of CfDs due to the change in the level of cash flows.

Significant unobservable inputs

The following table discloses the valuation techniques and significant unobservable inputs for CfDs recognised at fair value and classified as Level 3 along with the range of actual values used in the preparation of the financial statements.

	Fair value of CfDs (£m)	Valuation technique	Significant unobservable input	Market Price Range, Min-Max	Units
2021	88,930	DCF	Electricity prices	24.62-77.77	£/MWh
2022	97,951	DCF	Electricity prices	37.84-244.00	£/MWh

11. Investments and loans in other public sector bodies (£m)

	Ordinary shares (£m)	Public Dividend Capital (£m)	Other investments and loans (£m)	Core Department and Agencies Total (£m)	Elimination of shares and other investments and loans held in NDPBs (£m)	NDPBs Ordinary Shares (£m)	Departmental Group Total (£m)
Balance at 1 April 2020	2,297	65	1,030	3,392	(2,219)	533	1,706
Additions	364	-	499	863	(721)	-	142
Redemptions	-	-	(68)	(68)	11	-	(57)
(Impairments) / Impairment reversal	51	-	(30)	21	(22)	-	(1)
Revaluations	(103)	-	-	(103)	1	41	(61)
Unwinding of discount	-	-	5	5	(1)	-	4
Loans repayable within 12 months transferred to current assets	-	-	(9)	(9)	1	-	(8)
Balance at 31 March 2021	2,609	65	1,427	4,101	(2,950)	574	1,725
Additions	420	-	584	1,004	(629)	-	375
Disposals	(65)	-	-	(65)	65	-
Redemptions	-	-	(131)	(131)	91	-	(40)
(Impairments) / Impairment reversal	(6)	-	(23)	(29)	23	-	(6)
Revaluations	(129)	-	-	(129)	-	37	(92)
Unwinding of discount	-	-	14	14	-	-	14
Loans repayable within 12 months transferred to current assets	-	-	(93)	(93)	(16)	-	(109)
Balance at 31 March 2022	2,829	65	1,778	4,672	(3,416)	611	1,867

11.1 Ordinary Shares in other public sector bodies

	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Balance at 1 April	2,609	1,244	2,297	1,305
Additions	420	125	364	-
Disposals	(65)	-	-	-
(Impairments) / Impairment reversal	(6)	-	51	-
Revaluations	(129)	(92)	(103)	(61)
Balance at 31 March	2,829	1,277	2,609	1,244
Comprising
Ordinary Shares held within the Departmental boundary - held at cost	2,163	-	1,939	-
Ordinary Shares held outside the Departmental boundary - held at fair value	666	1,277	670	1,244
Balance at 31 March	2,829	1,277	2,609	1,244

Core Department

Ordinary Shares in other public sector bodies held within the Departmental boundary

In accordance with the FReM, ordinary shares held within the Departmental boundary are carried at historical cost less any provision for impairment. They are eliminated on consolidation.

British Business Bank Plc (BBB)

The Core Department through the Secretary of State (SoS) holds 2,155,711,265 ordinary shares (31 March 2021: 1,860,711,265), each with a nominal value of £1. The Core Department invested in additional share capital during the year of £295 million (31 March 2021: £364 million). The Core Department’s holding had a cost of £2,156 million at 31 March 2022 (31 March 2021: £1,861 million).

The principal objective of the company is to address long-standing, structural gaps in the supply of finance and bring together in one place Government finance support for small and mid-sized businesses.

UK Green Infrastructure Platform (UKGIP)

The Core Department through the SoS holds 90% of the share capital of UK Green Infrastructure Platform Limited in the form of 900 ordinary shares (31 March 2021: 900), each with a nominal value of £1.

UKGIP’s share capital was acquired for £93 million and £65 million was repaid during the year. The Core Department’s holding had a cost less provision for impairment of £5 million at 31 March 2022 (31 March 2021: £76 million).

UKGIP was established to enable Government to retain an interest in 5 existing Green Investment Bank (GIB) investments. The Green Investment Group is the remaining 10% shareholder. Following Special Resolutions passed on 06 April 2022 UKGIP is being wound up, via a Members’ Voluntary Liquidation, having fulfilled its objectives to manage Government’s interests in the unsold assets from the Green Investment Bank.

UK Shared Business Services Limited (UKSBS)

The Core Department through the SoS holds 62,016,358 non-voting shares and one voting share in UKSBS, held at cost less provision for impairment of £2 million at 31 March 2022 (31 March 2021: £2 million).

The company is a specialist business services organisation that provides finance, procurement, grants, information systems and HR and payroll services to the public sector. Its main objective is to improve the economy, efficiency and effectiveness of corporate services to BEIS bodies.

Low Carbon Contracts Company Limited (LCCC)

The Core Department through the SoS holds one ordinary share in LCCC with a nominal value of £1.

The principal objective of the company is to be the counterparty to and manage Contracts for Difference (CfDs) throughout their lifetime.

Electricity Settlements Company Limited (ESC)

The Core Department through the SoS holds one ordinary share in ESC with a nominal value of £1.

The principal objective of the company is to oversee settlement of the Capacity Market agreements.

Enrichment Holdings Limited (EHL)

The Core Department through the SoS holds 2 shares of £1 each in EHL with a nominal value of £2.

EHL has been set up as a holding company, along with a subsidiary company, Enrichment Investments Limited (EIL), solely to hold the Government’s one third share in Urenco Limited, an entity operating in the civil uranium enrichment sector.

BIS (Postal Services Act 2011) Company Limited

The Core Department through the SoS holds one ordinary share in BIS (Postal Services Act 2011) Company Limited with a nominal value of £1.

The principal objective of the company is to dispose of the assets transferred to it from the Royal Mail Pension Plan (RMPP).

Postal Services Holding Company Limited (PSH)

The Core Department through the SoS holds 50,005 ordinary shares in PSH which is 100% of the issued share capital at a historic cost of £430 million at 31 March 2022 (31 March 2021: £430 million). The Core Department through the SoS also owns one special share in PSH, relating to certain areas for which Special Shareholder’s consent is required.

The Core Department’s holding had a cost less provision for impairment of £nil at 31 March 2022 (31 March 2021: £nil). PSH is currently in the process of liquidation due to the cessation of its primary activities.

The principal objective of the company prior to cessation was to hold and manage its shares in Post Office Limited (POL), which prior to cessation were transferred to the Core Department.

Ordinary Shares held outside of the Departmental boundary

Shares held outside of the Departmental boundary are carried at fair value through other comprehensive income.

Post Office Limited (POL)

The Core Department through the SoS holds 50,005 ordinary shares in POL at a nominal value of £1 each which is 100% of the issued share capital. There is a special share in POL (nominal value of £1) which is held directly by the Secretary of State for BEIS.

This shareholding is held at fair value, but as there is no active market for these shares the net asset value of POL is considered to be a reasonable approximation for fair value. The Core Department invested in additional share capital during the year of £125 million (31 March 2021: £nil million). The fair value of the investments, held by the Core Department, as at 31 March 2022 was £nil (31 March 2021: £nil).

The principal objective of POL is to provide retail post office services through its national network of branches.

British Nuclear Fuels Limited (BNFL)

The Core Department holds 50,000 ordinary shares in BNFL at a nominal value of £1 each. The Secretary of State for BEIS holds 49,999 ordinary shares and the Treasury Solicitor holds one ordinary share.

The Core Department’s shareholding is held at fair value, but because there is no active market for these shares the net asset value of BNFL is considered to be a reasonable approximation for fair value. The fair value as at 31 March 2022 was £327 million (31 March 2021: £327 million).

BNFL exists to settle historic liabilities including those arising from BNFLs disposal programmes.

Ordnance Survey Limited (OSL)

The Core Department through the SoS holds 34,000,002 ordinary shares in OSL at a nominal value of £1 each which is 100% of the issued share capital.

The shareholding is held at fair value, but as there is no active market for these shares the net asset value of OSL is considered to be a reasonable approximation for fair value. The fair value as at 31 March 2022 was £127 million (31 March 2021: £158 million).

The principal objective of OSL is to produce mapping products and mapping data information.

NPL Management Limited (NPLML)

The Core Department through the SoS holds 76 ordinary shares in NPLML which is 100% of the issued share capital. NPLML has been set up to manage and operate the National Physical Laboratory.

The shareholding is held at fair value, but as there is no active market for these shares the net asset value of NPLML is considered to be a reasonable approximation for fair value. The fair value as at 31 March 2022 was £104 million (31 March 2021: £87 million).

NNL Holdings Limited (NNLH)

The Core Department through the SoS holds 2 shares of £1 each in NNLH with a nominal value of £1 each.

NNLH has been set up as a holding company, to hold all the shares in the National Nuclear Laboratory Limited.

The shareholding is held at fair value, but because there is no active market for these shares the net asset value of NNLH is considered to be a reasonable approximation for fair value. The fair value as at 31 March 2022 was £108 million (31 March 2021: £98 million).

NDPBs and other designated bodies

NDA subsidiaries

The NDA controls the following subsidiaries, all of which are outside the Departmental Group boundary and not consolidated into these accounts. The holdings are valued at fair value. As there is no active market, the net assets of the entities are considered the most appropriate approximation for fair value and amounted to £611 million as at 31 March 2022 (31 March 2021: £574 million).

Name	Country of incorporation	Nature of business	Holding entity	Proportion of ordinary shares held
Direct Rail Services Limited	UK	Rail transport services within the UK	NDA	100%
International Nuclear Services France SAS (i)	France	Transportation of spent fuel	NDA	100%
International Nuclear Services Japan KK (i)	Japan	Transportation of spent fuel	NDA	100%
International Nuclear Services Limited	UK	Contract management and the transportation of spent fuel, reprocessing products and waste	NDA	100%
NDA Properties Limited	UK	Property management	NDA	100%
Pacific Nuclear Transport Limited (i)	UK	Transportation of spent fuel, reprocessing products and waste	NDA	71.88%
Rutherford Indemnity Limited	Guernsey	Nuclear insurance	NDA	100%

(i) Ownership through International Nuclear Services Limited.

11.2 Public Dividend Capital (PDC)

	UK Intellectual Property Office (£m)	Met Office (£m)	Total (£m)
Balance at 1 April 2020	6	59	65
Additions	-	-	-
Redemptions	-	-	-
Impairments	-	-	-
Balance at 31 March 2021	6	59	65
Additions	-	-	-
Redemptions	-	-	-
Impairments	-	-	-
Balance at 31 March 2022	6	59	65

PDC is held by the Core Department. In accordance with the FReM, PDC is carried at historical cost less any impairment.

11.2.1 Share of net assets and results for Public Dividend Capital holdings outside the Departmental consolidation boundary

The Department is required to disclose its share of the net assets and the results for the year of other public sector bodies, which are outside of the Departmental boundary. The following disclosures relate to the Department’s trading funds.

	UK Intellectual Property Office (£m)	Met Office (£m)
Net Assets/(Liabilities) at 31 March 2021	96	270
Turnover	122	259
Surplus/profit (deficit/loss) for the year before financing	7	7
Net Assets/(Liabilities) at 31 March 2022	123	287
Turnover	164	258
Surplus/profit (deficit/loss) for the year before financing	33	12

The information presented related to the UK IPO was derived from their audited accounts for both reporting periods. The information related to the Met Office for 2021-22 was derived from their draft unaudited accounts. The information for 2020-21 was derived from their audited accounts. The accounts were prepared on an IFRS basis, in accordance with the requirements of the FReM.

11.3 Loans in public sector bodies

Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Balance at 1 April	1,427	416	1,030	336
Additions	584	249	499	142
Repayments	(131)	(40)	(68)	(57)
Unwind of discount	14	14	5	4
Impairments	(23)	(6)	(30)	(1)
Loans repayable within 12 months transferred to current assets	(93)	(108)	(9)	(8)
Balance at 31 March	1,778	525	1,427	416

Loans in other public sector bodies

Core Department

The most significant loans are detailed below.

Energy Efficiency Loans Scheme and Recycling Funds

The Core Department’s Energy Efficiency Loans Scheme was set up under the Environmental Protection Act 1990 to help businesses and public sector organisations reduce their energy costs by providing interest free loans for the implementation of energy efficiency projects.

The total carrying amount at 31 March 2022 is £281 million (31 March 2021: £234 million), of which the non-current element, reported in the table above, is £219 million (31 March 2021: £189 million) and the current element, reported in note 16, £62 million (31 March 2021: £46 million). All outstanding loans are to public sector organisations and are reported at amortised cost under IFRS 9.

The loans are to non-consolidated bodies and not eliminated on consolidation.

Fleetbank Funding Limited Loan (Enable Funding programme)

The Core Department’s loan to Fleetbank Funding Limited supports the Enable Funding programme, managed by the British Business Bank. This was launched in November 2014 to improve the provision of asset and lease finance to smaller UK businesses.

The carrying amount at 31 March 2022 is £632 million (31 March 2021: £493 million). The loans are reported at amortised cost under IFRS 9.

The loan is to a consolidated body and eliminated on consolidation.

Northern Powerhouse Investment Limited and Midlands Engine Investment Limited Loans

The Core Department has loans with Northern Powerhouse Investment Fund and Midlands Engine Investment Fund. The funds provide commercially-focused finance to help small and medium sized enterprises start up and grow.

The total carrying amount at 31 March 2022 is £292 million (31 March 2021: £241 million). The loans are reported at cost under IAS 27.

The loans are to consolidated bodies and eliminated on consolidation.

Met Office Loans

The Core Department’s loans with the Met Office fund UK membership of EUMETSAT. EUMETSAT is a non-EU international organisation, set up to develop, launch and monitor meteorological satellites which provide global data for weather forecasting.

The total carrying amount at 31 March 2022 is £230 million (31 March 2021: £153 million), of which the non-current element, reported in the table above, is £202 million (31 March 2021: £152 million) and current element, reported in note 16, £28 million (31 March 2021: £1 million). The loans are reported at amortised cost under IFRS 9.

The loans are to a non-consolidated body and not eliminated on consolidation.

11.4 Special Shares

The Secretary of State holds one Special Share in each of the entities listed below. The list is a summary and not a comprehensive record of the terms of each respective shareholding. Further details can be obtained from the annual report and financial statements of each body or their Articles of Association.

The Core Department does not recognise the special or ‘golden’ shares on its Statement of Financial Position.

Body in which Share is held and type and value of Share	Significant terms of Shareholding
Postal Services Holding Company Limited. £1 Special Rights Preference Share	- Created in January 2001 (formerly called Royal Mail Holdings plc). - It may be redeemed at any time by the shareholder. - The consent of the special shareholder is required for a number of decisions, including: – appointments to the Board (the special shareholder can also make appointments to the Board) – setting (and approving any material changes in) the remuneration packages of the Directors – borrowing – disposing of substantial assets of the business and shareholdings – voluntary winding-up of the company – varying certain of the company’s Articles of Association, including the rights of the special shareholder. Note: The company is now in members’ voluntary liquidation and control of its affairs has been passed to the Joint Liquidators.
Post Office Limited (‘POL’) £1 Special Rights Redeemable Preference Share	- Created in April 2012. - Special Shareholder is entitled to attend and speak at any general meeting or any meeting of any other class of shareholders of POL, but the Special Share does not carry voting rights or any other rights at any such meeting. - It may be redeemed at any time by the Special Shareholder. POL cannot redeem the Special Share without prior consent of the Special Shareholder. - The consent of the special shareholder is required for a number of decisions, including: – varying POL’s Articles of Association, including the rights of the special shareholder – appointment or removal from office of any Director of POL – approval of (including material variations) Directors’ remuneration and terms of employment – adoption of (and any material variation in) POL’s strategic plan – substantial alterations in the nature of the business carried on by POL – sale of material assets in the absence of which POL would not be able to deliver its strategic plan – incurring of any borrowing exceeding pre-set limits as agreed with HM Treasury – issuing or allotment of shares or granting of share rights in the company – voluntary winding-up of the company or member of the group – any transaction which will result in a commitment or liability – either individually or when taken together with related relevant transactions – of an amount in excess of £50 million
BAE Systems plc £1 Special Rights Preference Share	- Created in 1985 (but subsequently amended). - No time limit. - Provides for a 15% limit on any individual foreign shareholding, or group of foreign shareholders acting in concert, in the company. - Requires a simple majority of the Board and the Chief Executive to be British. - Requires any Executive Chairman to be British and, if both the Chairman and Deputy Chairman are non-executives, requires at least one of them to be British.
Rolls Royce Holdings plc £1 Special Rights Non‑Voting Share	- Created in 1987 (but subsequently amended and transferred to Rolls-Royce Holdings plc). - No time limit. - Provides for a 15% limit on any individual foreign shareholding, or group of foreign shareholders acting in concert, in the company. - Requires a simple majority of the Board to be British. - Allows either the Chairman or the Chief Executive to be either an EU or US citizen provided that the other is a British citizen. - Provides for a veto over the material disposal of assets of the group. - Provides for a veto for a proposed voluntary winding up.
EDF Energy Nuclear Generation Group Limited (formerly British Energy Group plc) £1 Special Share	- British Energy Group plc Special Share created on 13 January 2005 and held jointly by the Secretary of State for Business, Energy and Industrial Strategy and the Secretary of State for Scotland. - The consent of the Special Shareholder, which can only be refused on grounds of national security (except in relation to an amendment to the company’s Articles of Association), is required in respect of: – various amendments to the company’s Articles of Association; – any purchase of more than 15% of the company’s shares; – the issue of shares carrying voting rights of 15% or more in the company; – variations to the voting rights attaching to the company’s shares; and – the giving of consent in respect of the issue of shares by, the sale of shares in or amendments to the Articles of Association of various subsidiaries in certain cases.
British Energy Bond Finance Limited (formerly British Energy Holdings plc) £1 Special Share	- British Energy Holdings plc Special Share created on 13 January 2005 and held jointly by the Secretary of State for Business, Energy and Industrial Strategy and the Secretary of State for Scotland. - The consent of the Special Shareholder, which can only be refused on grounds of national security (except in relation to an amendment to the company’s Articles of Association), is required in respect of: – various amendments to the company’s Articles of Association; and – the giving of consent in respect of the issue of shares by, the sale of shares in or amendments to the Articles of Association of various subsidiaries in certain case.
EDF Energy Nuclear Generation Limited (formerly British Energy Generation Ltd) £1 Special Share	- British Energy Generation Ltd Special Share created in 1996 is held solely by the Secretary of State for Business, Energy and Industrial Strategy. - The consent of the Special Shareholder, which can only be refused on grounds of national security (except in relation to an amendment to the company’s Articles of Association), is required in respect of: – various amendments to the company’s Articles of Association; – the disposal of any of the nuclear power stations owned by the company; and – prior to the permanent closure of such a station, the disposal of any asset which is necessary for the station to generate electricity.
British Energy Ltd (formerly British Energy plc) £1 Special Share	- British Energy plc Special Share created in 1996 is held solely by the Secretary of State for Business, Energy and Industrial Strategy. - The consent of the Special Shareholder, which can only be refused on grounds of national security (except in relation to an amendment to the company’s Articles of Association), is required in respect of: – various amendments to the company’s Articles of Association; and – the giving of consent in respect of the issue of shares by, the sale of shares in or amendments to the Articles of Association of various subsidiaries in certain cases. - The company has no significant assets or liabilities as a result of the restructuring scheme, which came into effect on 14 January 2005.
Nuclear Liabilities Fund Ltd £1 Special Rights Redeemable Preference Share	-Created in 1996. - The Secretary of State for Business, Energy and Industrial Strategy has a Special ‘A’ Share (there is also a ‘B’ Share held by British Energy). - The consent of the Special Shareholder is required for any of the following: – to change any of the provisions in the Memorandum of Association or Articles of Association; – to alter the share capital or the rights attached thereto; – the company to create or issue share options; – the ‘B’ Special Shareholder or any of the Ordinary shareholders to dispose or transfer any of their rights in their shares; – the company to pass a members voluntary winding-up resolution; – the company to recommend, declare or pay a dividend; – the company to create, issue or commit to give any loan capital; – the company to issue a debenture; or – the company to change its accounting reference date.
OneWeb Holdings Limited $0.01USD Special Share	- Incorporated in 2020. - The Secretary of State for Business, Energy and Industrial Strategy has a Special ‘B’ Share. - The written consent of the Special Shareholder is required for any of the following: – any change in the nature or scope of the business of the Group or any commencement of new activity outside its existing course of business; – any amendments to the company’s Articles of Association or any other governing and constitutional documents; – any change to the location of the Group’s executive management team, headquarters or centre of operations; – any Group Member entering into, or amending, any contract, arrangement or relationship which may prejudice the Group’s ability to enter into contracts, arrangements or relationships with certain parties; – any change to the technical and technology standards of any of the Group’s operations; – the sale by any Group member of any product or service which is going to be used for a defence or national security application; – the entry by any Group member into arrangements notifiable under a tax disclosure regime; – any change to the jurisdiction of tax residence; or – any change to the corporate structure or activities of any Group member which may impact the jurisdiction of tax residence or have a negative reputational impact arising from tax matters.

12. Other financial assets

	Note	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Balance at 1 April	-	1,769	5,713	967	4,120
Additions	-	269	1,724	1,196	2,483
Repayments	-	(102)	(1,024)	(341)	(1,215)
Effective interest	-	15	15	17	17
Unwinding of discount	-	3	3	-	-
Amortisation	-	-	4	-	2
Revaluations	-	38	703	(70)	336
Impairments	-	(25)	(39)	-	(30)
Balance at 31 March	-	1,967	7,099	1,769	5,713
Comprising:
Repayable launch investments	12.1	463	463	485	485
Other loans and investments	12.2	1,504	6,636	1,284	5,228
Balance at 31 March	-	1,967	7,099	1,769	5,713

Other financial assets analysed between current and non-current assets:

	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Due within 12 months	223	223	-	72
Due after 12 months	1,744	6,876	1,769	5,641
Total	1,967	7,099	1,769	5,713

12.1 Repayable launch investments

	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Balance at 1 April	485	485	833	833
Repayments	(49)	(49)	(336)	(336)
Effective interest	15	15	17	17
Revaluations	12	12	(29)	(29)
Balance at 31 March	463	463	485	485

Repayable Launch Investments (RLI) are held by the Core Department.

The Core Department has determined that RLI are classified as ‘fair value through profit or loss financial assets’ in accordance with IFRS 9. Fair value gains and losses are therefore recognised directly in the SoCNE.

The Core Department, under the provisions of the 1982 Civil Aviation Act, provides repayable launch investment to companies to fund a proportion of the non-recurring eligible design and development capital costs on civil aerospace development products. Each product supported is covered by separate contractual terms and conditions. Under these contracts, periodic repayments become due when products are delivered or at other specific points. The portfolio of investments is valued twice annually and the valuations are based on forecast annual income arising under each contract.

Measurement and carrying values

RLI contracts are initially recognised at fair value which is the transaction price. After initial recognition, the value is the discounted forecast value of future income streams, excluding accrued income which is included in receivables when products are delivered. For any contracts where applicable, the fair value measurement is based on agreed sale price. The value of future income streams is predominantly driven by the Core Department’s view of the applicable programme’s performance in the global market over the period of the contract’s life; a number of activities inform this view and some are described below.

The Core Department uses a variety of sources to inform a forecast of deliveries for individual programmes. This can include using: third party data sources, forecast delivery schedules and other data directly provided from the RLI recipient companies, publicly available aircraft delivery forecasts, specifically commissioned consultant programme forecasts as well as commentary and views from industry experts.

The approach taken is entirely dependent on the programme in question.

Other valuation variables include inflation measures – or proxies (such as RPI, RPIX, gilt rates and GDP deflators). Some contracts entitle the Core Department to a share of aircraft or engine spare part and support income, and the valuation of these contracts is based on analysis of past income streams and forecasts of future demand. The forecast income streams are adjusted by inflation of 2.9% and then are discounted to present value using a constant discount rate of 3.5% representing the effective rate of return of the investment portfolio.

The carrying value of RLI is influenced by the interaction of key drivers such as aircraft or engine deliveries and economic variables. The Core Department uses Monte-Carlo simulation to understand the effect of different scenarios for these drivers on the valuation of each contract. The Core Department considers that the carrying value is a reasonable approximation of the fair value of RLI.

The carrying value of the investments derived from the discounted cash flow model at 31 March 2022 was £463 million (31 March 2021: £485 million). The historic cost, including repayments to date and excluding accrued income, of the portfolio at 31 March 2022 was £229 million (31 March 2021: £250 million).

Sensitivity analysis

The Core Department has developed a Monte-Carlo based approach which uses the software package @Risk to assess the impact of uncertainty on forecast income, overall contract values, and enhance the robustness of the valuation process. Uncertainties are addressed by constructing different scenarios for the key drivers and then assigning probabilities to these scenarios to implement a Monte-Carlo simulation of the contracts on a contract-by-contract basis. The key variables include: programme development delays, changes to entry into service and out of service dates, production levels, market shares and economic variables used as inflation measures.

The contracts are highly complex and generally distinct from each other in their terms and structure, yet there are cases of significant interdependencies between contracts and correlations between variables.

The model is iterated ten thousand times to produce distributions of income for each contract and thus the overall portfolio. Each iteration of the model produces an income forecast. These are collated and used to form an income distribution. It is from this distribution that the value of the portfolio is calculated.

In order to give an assessment of potential volatility for the portfolio, we calculate the 5th and 95th percentiles from the income distribution – 90% of all the iterations outputted from the Monte-Carlo simulation lie between these particular percentile points. The lower (5th) and upper (95th) points which define this interval were £457 million and £470 million respectively, at 31 March 2022 (2020-21: £390 million and £531 million).

Risk

Market risk

This constitutes the largest area of potential risk in the portfolio as the primary method of the calculation of income streams is based on the forecasts of aircraft or engine deliveries. The Core Department uses internal analysis, company information and third-party information to forecast deliveries and ultimately future income on each investment over the life of the investment period. Deliveries in the short term are driven by variables which include manufacturer production plans, market cycles, customer demand and availability of financing. Medium and longer-term deliveries will be affected by overall market growth and the market attractiveness of an aircraft programme. A negative shift in outlook may result in the Core Department not being able to recover its investment in whole or in part, although once deliveries have commenced some level of income is usually due to the Core Department. The valuation has sought to take account of the economic downturn as a result of COVID-19 and this has been reflected in updated forecasts. The Core Department aims to minimise risk of under-recovery of investments by carrying out a full evaluation of each business case submitted for launch investment support, and by ongoing monitoring programmes for the substantive life of the contracts to allow it to assess exposure to risks (including project risk, market risk and technical risk). Some contacts have fixed payment terms rather than payments on delivery of aircrafts, mitigating the market risk further.

Interest rate risk

A number of the contracts use retail price indexes (such as RPI and RPIX) or other surrogates as a tool to inflate the value of income due to the Core Department over time. As such there is a risk relating to the forecasting of these indexes and surrogates within the valuation, although we estimate that the risk is relatively low and the overall impact relatively minor.

Foreign exchange risk

The Core Department has a small number of contracts which may deliver a US Dollar denominated income in their later stages which would be translated into pounds sterling. We assess these income streams as relatively low value, thus exchange rate risk exists but is minimal in the context of the overall portfolio.

Credit risk

Company failure could result in the Core Department’s investment not being recovered in whole or in part. The Core Department seeks to offset this low probability risk by analysing the financial health of any applicant at the time of application for launch investment and reviewing financial health as part of the programme monitoring activity. In addition, contracts aim to contain provisions which will (as a minimum) not disadvantage the Core Department compared to other creditors in the event of a corporate failure. The Core Department takes steps to monitor the payments that become due to companies under launch investment contracts to ensure they comply with the terms of the contracts. Finally, the contracts also require the company’s auditors to confirm that all payments have been made correctly and to identify any errors made.

Other risk

The Core Department’s investments are exposed to wider risks such as economic downturns or market shocks from natural or non-natural events. These risks may adversely impact the value and timing of the income received by the Core Department. The Core Department seeks to manage this risk by actively monitoring such events when they arise to assess any potential impact.

12.2 Other loans and investments

	Gilts and bonds (£m)	Term deposits (£m)	Private sector loans (£m)	Private sector shares (£m)	Investment funds (£m)	Other investments (£m)	Total (£m)
Balance at 1 April 2020	41	6	877	161	2,202	-	3,287
Additions	5	-	1,769	14	685	10	2,483
Redemptions	(4)	(1)	(489)	(75)	(298)	(12)	(879)
Revaluations	-	-	(89)	37	345	72	365
Impairments	-	-	(30)	-	-	-	(30)
Amortisation	-	-	2	-	-	-	2
Transfers	-	-	(28)	-	28	-	-
Reclassifications	-	-	(60)	61	(1)	-	-
Balance at 1 April 2021	42	5	1,952	198	2,961	70	5,228
Additions	4	-	770	112	836	2	1,724
Redemptions	(4)	(5)	(281)	(36)	(577)	(72)	(975)
Revaluations	-	-	(181)	202	670	-	691
Unwinding of discount	-	-	3	-	-	-	3
Impairments	-	-	(39)	-	-	-	(39)
Amortisation	-	-	4	-	-	-	4
Reclassifications	-	-	(274)	286	(12)	-	-
Balance at 31 March 2022	42	-	1,954	762	3,878	-	6,636
Of the total:
Core Department and Agencies	-	-	711	561	232	-	1,504
NDPBs and other designated bodies	42	-	1,243	201	3,646	-	5,132
Balance at 31 March 2022	42	-	1,954	762	3,878	-	6,636

Core Department

Private sector loans and Private sector shares

Future Fund investments are held by the Core Department. The scheme launched on 20 May 2020 as a COVID-19 business support scheme and was open to new applicants till 31 January 2021. The scheme is administered by the British Business Bank (BBB) on behalf of the Core Department. The Department issued convertible loans on commercial terms to eligible businesses, in amounts from £125,000 to £5 million, subject to at least equal match funding from private investors. The policy aim was to support the development trajectory of innovative, high-growth, UK-based businesses.

An external expert has been engaged as an external valuer, to support the Department in determining the quarterly and year end fair values. The external expert developed the valuation model and owns the intellectual property in relation to it. Both the external expert and BBB provide inputs and assumptions to the valuation model. Overall responsibility for the valuation remains with the Department, which retains the right to override any valuation that is suggested by the external expert. The Department did not override any aspects of the valuation at the reporting date.

Future Fund

	Private sector loans (£m)	Private sector shares (£m)	Total (£m)
Balance at 1 April	943	87	1,030
Additions	46	-	46
Transfers (conversions to equity)	(274)	274	-
Fair value gains/(losses)	(178)	184	6
Exits	(21)	(25)	(46)
Balance at 31 March	516	520	1,036

Measurement and carrying values

Future Fund Convertible Loan Notes (CLNs) are financial assets measured at fair value through profit or loss under IFRS 9. The convertible element means contractual cash flows are not solely payments of principal and interest. The estimates for CLNs are based on the fair value definition provided in IFRS 13, which is that fair value reflects “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”

The model values CLNs pre-conversion and equity shares post-conversion. The pre-conversion valuation includes the outstanding debt, the conversion option (which has yet to be exercised) and the potential future equity value. The post-conversion valuation is an equity valuation only.

BBB worked with the external expert to develop a Monte-Carlo based model to model the debt value. This method of valuation was selected as it was consistent with the risk-neutral debt valuation framework (discounted cash flow model), similar to other market approaches of modelling businesses and enabled key events (actual or potential) to be included in the valuation. The fair value of the option to convert the CLN into equity is based on a risk-neutral framework, checked against real world parameters to ensure that the valuations are reasonable. The amount of equity owned post-conversion is known, and the equity value estimate is informed based on information provided as part of the conversion.

Post-conversion, equity values will be reassessed for any key events, or risk factors.

The assumptions which have been assessed as being most significant to the fair value estimates are listed below.

Arm’s length assumption – a transaction negotiated between independent parties was arranged to issue the CLNs, such that all the parties are acting in their own self-interest. Transaction price is generally taken to be the best evidence of a financial instrument’s initial fair value. As the Department is investing alongside third-party investors on the same terms, the transaction price has been taken as representative of the CLNs fair value at inception.
Share equivalence assumption (pari passu) – all shares within the capital structure of companies within the Future Fund are treated equally and therefore are assumed to have equal value. The implication of this assumption is that CLNs are recognised at fair value.
Data cut off timing – there was a data cut-off at 1 April 2022 for extracting data from the scheme’s online portal to input into the valuation model, pertaining to the position of the underlying borrowers as at the valuation date.
Fully diluted share capital (“FDSC”) – Where there are any data flaws in FDSC submitted by borrowers, it has been assumed that the FDSC remains consistent with inception until a financing event takes place.

These are key assumptions that do not change with future uncertainties, unlike other assumptions in the model, and therefore these are not included within the sensitivity analysis below.

There are limitations to the data included in the valuation model. The valuation of the Future Fund relies on company specific information being provided by investee companies on a quarterly basis. This information is taken from an online portal at the reporting date and contains data from the latest submission from each company. Given that the information is self-reported by the companies, there is a risk that inconsistencies could arise which may impact on the valuation. A dedicated team within BBB monitors data quality within the online portal to reduce this risk.

The individual loans were drawn down by businesses over a 11-month period. Because it would not be viable to estimate individual unobservable parameters for each day of this period, all unobservable parameters are sourced as at 31 March 2021.

The fair value of the Future Fund at the reporting date, 31 March 2022, was £1,036 million (31 March 2021: £1,030 million).

Sensitivity analysis

Future uncertainties are addressed in the model by constructing different scenarios for the key drivers and then assigning probabilities to these scenarios to implement the model.

Key uncertainties have been determined to be:

default probability (PD), being probability of the loan defaulting;
exit probability, being the probability of a sale/ IPO of the company; and
spot equity value, defined as estimated average price per share of the underlying company.

The valuation methodology does not seek to determine a range, likely scenario, or plausible value for these parameters. The sensitivity of the valuation to changes in the key parameters is presented in the table below, using illustrative assumptions for each parameter and showing the movement in Present Value (PV) and the PV weighted % movement in each case.

These movements do not reflect expectations of future movements in assumptions. The impacts of these changes are non-linear, therefore the values below cannot be multiplied to obtain the impact of the movements noted above.

Parameter	Sensitivity (%)	Movement in PV(£m)	PV weighted % movement
Default probability	+1% -1%	(25) 27	(4.9%) 5.3%
Exit probability	+1% -1%	21 (21)	4.1% (4.1%)
Spot equity value	x130% x70%	40 (30)	7.7% (5.9%)

NDPBs and other designated bodies

Private sector loans

British Business Bank (BBB), Fleetbank Funding Ltd (FFL) and UK Research and Innovation (UKRI) have entered into loan agreements with parties within the private sector. The loans within the Departmental Group are carried at historic cost as a proxy for amortised cost because the NDPBs and other designated bodies have determined that there is no material difference between historical cost and amortised cost.

As at 31 March 2022, £1,243 million of loans were held by NDPBs and other designated bodies (31 March 2021: £956 million).

The value of loans held by BBB as at 31 March 2022 was £527 million (31 March 2021: £462 million). The conditions attached to each loan vary depending on the details of the arrangement. Repayment schedules have been agreed and all loans are expected to be repaid at the end of the loan term. During the reporting period BBB made loans of £62 million (31 March 2021: £18 million) to private companies through the BFP Mid Cap scheme. BBB provides invoice discount finance and peer to peer lending through the Investment Programme funds which were valued at £176 million at 31 March 2022 (31 March 2021: £177 million). BBB provides loans to start ups and small businesses via The Start Up Loans Company which were valued at £179 million at 31 March 2022 (31 March 2021: £157 million). The amortised cost valuations include expected credit loss (ECL) provisions taking account of the impacts of COVID-19 based on the available information at the reporting date. Further information on the ECL provisions are given in note 24.

During 2021-22, FFL made loans of £126 million (31 March 2021: £251 million) to private companies through the Enable Loan Programme scheme. The value of loans held by FFL as at 31 March 2022 was £569 million (31 March 2021: £442 million).

Private sector shares

At 31 March 2022 £180 million of private sector shares were held by NDPBs and other designated bodies (31 March 2021: £74 million). These were held by, BBB, BIS (Postal Services Act 2011) Company Ltd, Nesta Trust, and UKRI. These are measured at ‘fair value through profit or loss’, with fair value movements going directly to the SoCNE.

The fair values are estimated based on a variety of valuation techniques, adopted by the investment managers that comply with the International Private Equity and Venture Capital Valuation (IPEV) Guidelines or the valuation guidelines produced by the British Venture Capital Association (BVCA). Valuation techniques used include the use of earnings multiples, discounted cash flows analysis, and net asset values.

Investment funds

BBB, Nesta Trust, BIS (Postal Services Act 2011) Company Limited, Northern Powerhouse Investment Limited and Midlands Engine Investments Limited hold investment funds. The value invested by NDPBs and other designated bodies at 31 March 2022 was £3,646 million (31 March 2021: £2,797 million). In accordance with IFRS 9, the investments are measured at ‘fair value through profit or loss’ with fair value movements going directly to the SoCNE.

BBB held investment funds valued at £2,788 million at 31 March 2022 (31 March 2021: £1,980 million). The most significant investment is a long-term venture and growth capital investment fund in British Patient Capital valued at £1,169 million at 31 March 2022 (31 March 2021: £653 million). BBB also has investments as part of their Non-Peer to Peer Investment Programme which were valued at £542 million at 31 March 2022 (31 March 2021: £442 million), the Business Finance Partnership valued at £248 million at 31 March 2022 (31 March 2021: £312 million), and the Enterprise Capital Fund valued at £426 million at 31 March 2022 (31 March 2021: £335 million).

The fair value of the investments in BIS (Postal Services Act 2011) Company Limited (BPSA) as at 31 March 2022 was £140 million (31 March 2021: £190 million). These investments primarily comprised investments in European and North American unquoted shares.

13. Recoverable contract costs

The Departmental Group has commercial agreements in place under which some or all of the expenditure required to settle nuclear provisions will be recovered from third parties. Net recoverable costs at 31 March 2022 were £3,071 million (31 March 2021: £1,447 million). Further details can be found in NDA’s annual report and accounts.

Recoverable contract costs relating to nuclear provisions	Departmental Group, 31 March 2022 (£m)	Departmental Group, 31 March 2021 (£m)
Gross recoverable contract costs	6,626	4,895
Less applicable payments received on account	(3,152)	(3,246)
Less associated contract loss provisions	(403)	(202)
Balance at 31 March	3,071	1,447

The above balances relate to the Nuclear Decommissioning Authority. The movements in gross recoverable contract costs during the year were:

Movements in gross recoverable contract costs	Departmental Group, 31 March 2022 (£m)	Departmental Group,31 March 2021 (£m)
Gross recoverable contract costs at 1 April	4,895	5,087
Increase/(decrease) in year	2,051	117
Unwinding of discount	(6)	(8)
Release in year - continuing operations	(203)	(199)
Amortisation of recoverable contract costs	(111)	(102)
Balance at 31 March	6,626	4,895

The gross balance of recoverable contract costs of £6,626 million (31 March 2021: £4,895 million) comprises £1,303 million (31 March 2021: £1,414 million) of past costs which were incurred before the revenue recognition period of the related contracts and will be amortised in future years in line with revenue and £5,323 million (31 March 2021: £3,481 million) of probable future costs which form part of the nuclear decommissioning provision (note 20.1) and will be released as they are incurred.

The movement in the gross recoverable contract costs during the year broken down by the type of costs are detailed in the table below:

Departmental Group (£m)

	Historic costs, 31 March 2022	Future costs, 31 March 2022	Total costs, 31 March 2022	Historic costs, 31 March 2021	Future costs, 31 March 2021	Total costs, 31 March 2021
Balance at 1 April	1,414	3,481	4,895	1,516	3,571	5,087
Increase/(decrease) in the year	-	2,051	2,051	-	117	117
Unwinding of discount	-	(6)	(6)	-	(8)	(8)
Amortisation	(111)	-	(111)	(102)	-	(102)
Release in year	-	(203)	(203)	-	(199)	(199)
Balance at 31 March	1,303	5,323	6,626	1,414	3,481	4,895

The historic costs within the above are deemed contract assets under IFRS 15 ‘Revenue from Contracts with Customers’. The opening balances, amortisation in period and closing balances for each main contract type are:

Departmental Group (£m)

	Spent fuel reprocessing and associated waste management, 31 March 2022	Spent fuel receipt and management, 31 March 2022	Total, 31 March 2022	Spent fuel reprocessing and associated waste management, 31 March 2021	Spent fuel receipt and management, 31 March 2021	Total, 31 March 2021
Balance at 1 April	883	531	1,414	955	561	1,516
Amortisation	(75)	(36)	(111)	(72)	(30)	(102)
Balance at 31 March	808	495	1,303	883	531	1,414

Contract assets under IFRS 15 are deemed financial instruments for the purposes of IFRS 9 ‘Financial Instruments’ and, therefore, are ordinarily required to be reviewed for expected credit loss impairment. The above contract asset balances comprise costs which have been previously incurred and are now being amortised in each reporting period. They are matched in full by payments on account and, therefore, a credit loss impairment is not required.

14. Investments in joint ventures and associates

	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Balance at 1 April	348	1,395	-	967
Additions	-	55	374	378
Dividends	(1)	(85)	-	(88)
Disposals	-	(30)	-	(6)
Profit/(Loss)	29	159	(26)	130
Impairments	-	(15)	-	-
Revaluations	-	25	-	14
Balance at 31 March	376.00	1,504	348	1,395

Core Department

OneWeb Holdings Limited (OneWeb)

In 2020-21 the Core Department made a £374 million equity investment in OneWeb, which develops cutting-edge satellite technology in the UK and in the US. The Core Department holds at 31 March 2022 17.6% (31 March 2021 40.6%) of the ordinary shares in OneWeb. The Core Department accounts for its investment in OneWeb as an associate using the equity method. The value of the Core Department’s holding at 31 March 2022 is £376 million (31 March 2021: £348 million), reflecting the Core Department’s share of post-acquisition net profit or (loss) of the associate.

OneWeb’s group financial statements are prepared in accordance with UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006. The financial statements are prepared to 31 March and are presented in US dollars.

The principal place of business is West Works Building, 195 Wood Lane, London.

Summarised financial information	2021-22 (£m)	2020-21 (Restated Note 1) (£m)
Current assets	880	267
Non-current assets	1,541	1,150
Current liabilities	(82)	(160)
Non-current liabilities	(216)	(94)
Revenue	7	-
Profit/(loss) from continuing activities	(285)	(283)

Other financial information	2021-22 (£m)	2020-21 (Restated Note 1) (£m)
Cash and cash equivalents	366	32
Current financial liabilities (excl trade and other payables and provisions)	(53)	(44)
Non-current financial liabilities (excl. trade and other payables and provisions)	(204)	(88)
Finance costs and interest expense	(9)	(2)

Notes
1. restated to include full consolidated figures

NDPBs and other designated bodies

The Francis Crick Institute Limited

The Francis Crick Institute (the Crick) was established in 2010 to deliver a world class interdisciplinary biomedical research centre. UKRI holds 42% (31 March 2021: 42%) of the ordinary shares in the Crick. The remaining shares are held by Cancer Research UK, University College London, the Wellcome Trust, Kings College London and Imperial College of Science, Technology and Medicine. The Department accounts for its investment in the Crick as a joint venture under the equity method. The value of the Departmental Group’s investment at 31 March 2022 is £301 million (31 March 2021: £292 million), reflecting the Departmental Group’s share of post-acquisition net profit or (loss) of the joint venture.

The Crick’s financial statements are prepared in accordance with Accounting and Reporting by Charities: Statement of Recommended Practice applicable to charities preparing their accounts in accordance with the Financial Reporting Standard applicable in the UK and Republic of Ireland (Charities SORP 2nd Edition (FRS 102)). The financial statements are prepared to 31 March and presented in pounds sterling.

The principal place of business is Midland Road, London.

Summarised financial information	2021-22 (£m)	2020-21 (£m)
Non-current assets	532	544
Current assets	73	79
Current liabilities	(43)	(49)
Revenue	178	167
Profit/(loss) from continuing activities	(14)	(9)

Other financial information	2021-22 (£m)	2020-21 (£m)
Cash and cash equivalents	46	39
Depreciation and amortisation	(38)	(39)
Capital commitments	5	1

Urenco

Urenco is an international supplier of enrichment services. The Department holds 33% (31 March 2021: 33%) of the ordinary share capital through Enrichment Holdings Limited. The Department accounts for its investment in Urenco as an associate using the equity method. At 31 March 2022, the Departmental Group’s holding is valued at £549 million (31 March 2021: £525 million).

Urenco’s group financial statements are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and IFRS as issued by the IASB. The financial statements are prepared to 31 December and are presented in euros.

The principal place of business is Bells Hill, Stoke Poges, Buckinghamshire.

Summarised financial information	2021-22 (£m)	2020-21 (£m)
Non-current assets	4,017	4,152
Current assets	1,701	1,816
Current liabilities	(657)	(832)
Non-current liabilities	(3,288)	(3,433)
Revenue	(1,435)	(1,511)
(Profit)/loss from continuing activities	(313)	(449)

Other financial information	2021-22 (£m)	2020-21 (£m)
Cash and cash equivalents	470	567
Current financial liabilities (excl trade and other payables and provisions)	(461)	(608)
Non-current financial liabilities (excl trade and other payables and provisions)	(970)	(1,289)
Depreciation and amortisation	285	292
Interest income	(60)	(76)
Interest expense	115	149

15. Trade and other receivables

	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 restated (£m)	Departmental Group, 31 March 2021 restated (£m)
Amounts falling due within one year:
Trade receivables	84	537	147	698
Other receivables:
VAT and other taxation	30	199	24	176
Staff receivables	1	1	-	1
RPS receivables	30	30	34	34
Other	2,156	2,193	2,729	2,771
Contract Assets	-	63	10	50
Prepayments and accrued income	366	866	570	1,155
	2,667	3,889	3,514	4,885
Amounts falling due after more than one year:
Trade receivables	18	74	21	76
RPS receivables	43	43	49	49
Other receivables	440	445	564	568
Contract Assets	-	5	-	5
Prepayments and accrued income	3	31	-	41
	504	598	634	739
Total receivables at 31 March	3,171	4,487	4,148	5,624

Prepayments and accrued income falling due within one year has been restated for 2020-21 for the Core Department to reflect the transfer during 2021-22 of the majority of its functions in the Vaccine Taskforce to the Department of Health and Social Care (note 28).

Core Department

Other receivables due within 1 year held by the Core Department includes £1.9 billion (2020-21: £2.53 billion) in relation to COVID-19 business support grants estimation for payments due back to the Department from local authorities. This balance includes some amounts due to local authorities from the Department which have not been separated out into payables and which are offset within the receivables balance above. Further details on COVID-19 business support grants estimation is included in note 1.26.

Other receivables for the Core Department include amounts of £140 million (31 March 2021: £140 million) due within one year and £435 million (31 March 2021: £555 million) due after more than 1 year relating to receipts due from the Mineworkers’ Pension Scheme. Certain benefits payable to members and beneficiaries of the Scheme were guaranteed by the government after privatisation of the British Coal Corporation in 1994. The agreement relating to the guarantee entitles the government to a portion of any periodic valuation surpluses as determined by the Government Actuary’s Department, most recently as at September 2017. Amounts receivable have been measured initially at fair value, estimated by discounting future receipts at the nominal rate of 3.7% as prescribed by HM Treasury, and subsequently at amortised cost. The total (undiscounted) amount in cash terms due to the Department as at 31 March 2022 is £631 million (31 March 2021: £773 million) as annual receipts up to 2027. A contingent asset in relation to a similar financial guarantee for the British Coal Staff Superannuation Scheme is disclosed in note 26.

Prepayments and accrued income falling due within one year as at 31 March 2022 includes £201 million (31 March 2021: £335 million) of premium income receivable from insurers under the Trade Credit Reinsurance scheme (note 21).

Agencies

The Redundancy Payment Service (RPS) receivable is shown net of expected credit losses. The expected credit loss is calculated by the Insolvency Service using a model which is approved by HMRC. The model calculates the recoverable debt as £73 million as at 31 March 2022 (31 March 2021: £83 million). In line with IFRS 9, RPS debts have been grouped into similar types, in this case they have been grouped between preferential or non-preferential debts. Analysis of historic trends of recovery of these types of debts has revealed that the best estimate of recovery is 6.2% for non-preferential and 34.6% for preferential (31 March 2021: 6.2% for non-preferential and 35.9% for preferential).

16. Investments and loans in public sector bodies: current

	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Balance at 1 April	588	572	687	672
Additions	2,693	2,693	3,038	3,038
Repayments	(2,812)	(2,812)	(3,146)	(3,146)
Loans repayable within 12 months transferred from non-current assets	93	108	9	8
Balance at 31 March	562	561	588	572

Core Department

The most significant item included above is a loan facility to Post Office Limited (POL). The Core Department has made available to POL a revolving loan facility of up to £950 million. This is to help the company fund its daily in-branch working capital requirements to deliver services through the network such as social benefits payments and access to cash. An additional short-term facility of up to £50 million to fund its same day liquidity requirements has been made available if required. These facilities will expire on 31 March 2024. The outstanding balance on these facilities at 31 March 2022 was £467 million (31 March 2021: £539 million) which is included in the £562 million total above (31 March 2021: £588 million).

Payments by the Department to Bulb Energy Ltd (in administration) to ensure continuity of energy supply to its customers are repayable by the company to the extent that it has the financial resources to do so. Repayment is not considered probable and therefore the potential asset has been measured at £nil, both at origination and at the reporting date. Payments made during 2021-22 have been expensed, along with expense relating to the estimated amount likely to be paid out under the agreement with Bulb and its administrators after 31 March 2022 with a similar probability of recovery (note 4.1).

17. Cash and cash equivalents

	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Balance at 1 April	1,952	3,444	1,069	2,189
Net change in cash and cash equivalent balances	2,460	2,377	883	1,255
Balance at 31 March	4,412	5,821	1,952	3,444
The following balances were held at:
The Government Banking Service (GBS)	4,411	5,503	1,909	3,093
Commercial banks and cash in hand	1	318	43	351
Balance at 31 March	4,412	5,821	1,952	3,444

18. Trade payables and other liabilities

	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 restated (£m)	Departmental Group, 31 March 2021 restated (£m)
Amounts falling due within one year:
VAT, social security and other taxation	12	119	11	105
Trade payables	50	391	36	357
Other payables	101	883	244	742
Contract liabilities (see note 18.1)	1	648	1	455
Other accruals and deferred income	1,778	3,598	2,047	4,128
Amounts issued from the Consolidated Fund for supply but not spent at year end	4,273	4,273	1,928	1,928
Consolidated Fund Extra Receipts due to be paid to the Consolidated Fund:
Received	140	148	24	44
	6,355	10,060	4,291	7,759
Amounts falling due after more than one year:
Trade Payables	-	5	-	6
Contract liabilities (see note 18.1)	-	1,626	-	1,503
Other payables, accruals and deferred income	1,650	2,006	1,324	1,494
	1,650	3,637	1,324	3,003
Total payables at 31 March	8,005	13,697	5,615	10,762

18.1 Contract liabilities

	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Balance at 1 April	1	1,958	6	1,993
Additions	1	12	-	71
Change in measurement	-	123	(5)	(5)
Release to SOCNE	(1)	181	-	(66)
Payment	-	-	-	(35)
Balance at 31 March	1	2,274	1	1,958
Of the total
Due within 1 year	1	648	1	455
Due in over 1 year	-	1,626	-	1,503
Balance at 31 March	1	2,274	1	1,958

Other accruals and deferred income falling due within one year has been restated for 2020-21 for the Core Department to reflect the transfer during 2021-22 of the majority of its functions in the Vaccine Taskforce to the Department of Health and Social Care (note 28).

Included under Other payables, accruals and deferred income are:

Core Department

Promissory note liabilities with maturities of less than one year of £63 million (31 March 2021: £220 million) and with maturities greater than one year of £1,649 million (31 March 2021: £1,323 million) which relate to various ODA (Official Development Assistance) programmes to which the Department has contributed.

NDPBs and other designated bodies

The majority of contract liabilities are the sums received on account by the Nuclear Decommissioning Authority relating to income from long term contracts to be recognised within one year of £637 million (31 March 2021: £447 million) and after one year of £1,625 million (31 March 2021: £1,503 million); more details are available in the Nuclear Decommissioning Authority’s accounts.

Included in Other payables due within one year in the table above is a loan to BBB from the NLF. In August 2018 BBB received a loan from the NLF, a non-consolidated central government fund of the Departmental Group. The purpose of this investment by NLF into BBB, is for the NLF to achieve a higher rate of return than the NLF has on its investments in the National Loans Fund (NaLF) in previous years. The carrying amount of the borrowing from NLF as at 31 March 2022 was £88 million (31 March 2021: £136 million).

19. Lease Liabilities

	Core and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Obligations for the following periods comprise
Land
Not later than one year	-	1	-	-
Later than one year and not later than 5 years	-	3	-	-
Later than 5 years	-	15	-	-
Less interest element	-	(5)	-	-
Present value of obligations	-	14	-	-
Buildings
Not later than one year	28	42	-	-
Later than one year and not later than 5 years	45	87	-	-
Later than 5 years	31	132	-	-
Less interest element	(3)	(35)	-	-
Present value of obligations	101	226	-	-
Other
Not later than one year	3	6	-	-
Later than one year and not later than 5 years	-	1	-	-
Later than 5 years	-	-	-	-
Less interest element	-	-	-	-
Present value of obligations	3	7	-	-
Total present value of obligations	104	247	-	-
Current	31	49	-	-
Non-Current	73	198

Lease Liability - additional analysis	Core and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Interest on lease liabilities	1	4	-	-
Income of sub-leasing right-of-use assets	(2)	(2)	-	-
Expenses relating to short term liabilities	-	3	-	-
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets	1	4	-	-
Gains or losses arising from sale and leaseback transactions	-	-	-	-

20. Provisions for liabilities and charges

	Note	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Current liabilities:
Not later than one year	-	269	3,598	226	3,426
Total current liabilities	-	269	3,598	226	3,426
Non-current liabilities:
Later than one year and not later than 5 years	-	1,310	16,990	654	15,136
Later than 5 years	-	706	224,899	886	121,165
Total non-current liabilities	-	2,016	241,889	1,540	136,301
Total at 31 March	-	2,285	245,487	1,766	139,727
Total provisions
Nuclear	20.1	1,058	238,256	1,075	136,193
Other	20.2	1,227	7,231	691	3,534
Total at 31 March	-	2,285	245,487	1,766	139,727

The provision liabilities in tables 20.1 and 20.2 below have been discounted to present value using discount rates as provided by HM Treasury. Discounting as at 31 March 2021 and 31 March 2022 has been applied to nominal cash flows which include allowance for future inflation using a forecast of consumer price inflation provided by HM Treasury except where a more appropriate forecast has been identified for specific provisions. The impact of the change in the discounting approach is included in the “Change in discount rate” movement of provisions.

	Nominal discount rate, 31 March 2022	Inflation rate, 31 March 2022	Equivalent real discount rate, 31 March 2022	Nominal discount rate, 31 March 2021	Inflation rate, 31 March 2021	Equivalent real discount rate, 31 March 2021
Cash outflows expected within 2 years	0.47%	4.00%	(3.39%)	(0.02%)	1.2%	(1.21%)
Cash outflows expected between 2 and 5 years	0.47%	2.15%	(1.64%)	(0.02%)	1.9%	(1.88%)
Cash outflows expected between 5 and 10 years	0.70%	2.00%	(1.27%)	0.18%	2.0%	(1.78%)
Cash outflows expected after 10 years	0.71%	2.00%	(1.27%)	1.99%	2.0%	(0.01%)

Allowances for future inflation and discounting can impact on reported liabilities significantly; uninflated, undiscounted equivalent values are provided in the descriptions of the provisions below to illustrate the effect.

20.1 Nuclear provisions

	British Energy (£m)	UK Atomic Energy Authority Decommissioning (£m)	Core Department and Agencies Total (£m)	NDA Decommissioning (£m)	Contract loss (£m)	Departmental Group Total (£m)
Balance at 1 April 2020	783	425	1,208	134,677	40	135,925
Net amount deducted from recoverable contract costs	-	-	-	-	155	155
Unwinding of discount	(16)	1	(15)	(14)	(5)	(34)
Change in discount rate	(1)	3	2	2,081	4	2,087
Provided in the year	10	14	24	1,310	-	1,334
Provisions not required written back	-	-	-	-	(123)	(123)
Recoverable contract costs - release in year	-	-	-	(199)	-	(199)
Provisions utilised in the year	(144)	-	(144)	(2,737)	(71)	(2,952)
Balance at 31 March 2021	632	443	1,075	135,118	-	136,193
Net amount deducted from recoverable contract costs	-	-	-	-	(201)	(201)
Unwinding of discount	(12)	-	(12)	(87)	(4)	(103)
Change in discount rate	29	14	43	90,462	7	90,512
Provided in the year	51	32	83	14,469	702	15,254
Provisions not required written back	-	-	-	-	-	-
Recoverable contract costs - release in year	-	-	-	(203)	-	(203)
Provisions utilised in the year	(131)	-	(131)	(2,993)	(72)	(3,196)
Balance at 31 March 2022	569	489	1,058	236,766	432	238,256
Estimated forward discounted cash flows as at 31 March 2022
Not later than 1 year	114	12	126	3,265	-	3,391
Later than 1 year and not later than 5 years	340	237	577	15,192	237	16,006
Later than 5 years	115	240	355	218,309	195	218,859
Total forward cash flows as at 31 March 2022	569	489	1,058	236,766	432	238,256

Core Department

British Energy

As a result of the restructuring of British Energy (BE) in January 2005, the Government assists BE (now EDF Energy Nuclear Generation Limited) in meeting its contractual historic fuel liabilities. The provision is based on the forecast payment schedule up to 2029 which is set out in the waste processing contracts agreed between BE, BNFL and the Core Department. The discounted liability at 31 March 2022 is £569 million (31 March 2021: £632 million). Payments are adjusted in line with the Retail Prices Index and the liability includes allowance for future inflation based on a forecast for the Index published by the Office for Budget Responsibility. The undiscounted liability at 31 March 2022, at prices as at the reporting date so excluding the impact of future inflation, is £508 million (31 March 2021: £591 million).

UK Atomic Energy Authority (UKAEA) Decommissioning

The provision represents the estimated costs of decommissioning the Joint European Torus facility at UKAEA’s Culham site, including the storage, processing and eventual disposal of radioactive wastes. The Core Department retains the liability for these costs. Cost estimates in the detailed Life Time Plan for decommissioning are reviewed annually and include an element of uncertainty given that much of the work will not be undertaken until well into the future; timing of expenditure is dependent on the closure date of the facility, expected to be the end of 2023. The discounted liability at 31 March 2022 is £489 million (31 March 2021: £443 million); the undiscounted liability at 31 March 2022, at prices as at the reporting date so excluding the impact of future inflation, is £447 million (31 March 2021: £414 million).

NDPBs and other designated bodies

NDA Decommissioning

The NDA’s nuclear decommissioning liability represents NDA’s best estimate of the costs of decommissioning plant and equipment on each of the designated nuclear licensed sites in accordance with the published strategy.

The programme of decommissioning work will take until 2137 but, in preparing the estimate, the NDA has focused in particular on the first 20 years which represent £73 billion out of the total £237 billion provision (31 March 2021: £60 billion out of £135 billion). The estimates are necessarily based on assumptions about the processes and methods likely to be used to discharge the obligations and reflect the latest technical knowledge, existing regulatory requirements, Government policy and commercial agreements. Given the very long timescale and the complexity of the plants and material being handled, considerable uncertainty remains in the cost estimate, particularly in the later years. Discounting of the forward cash flow estimates to present value also has a significant impact on the liability reported in the Statement of Financial Position of £237 billion at 31 March 2022 (31 March 2021: £135 billion). The undiscounted equivalent of this reported liability is £149 billion at 31 March 2022 (31 March 2021: £132 billion). The Departmental Group auditors continue to include an emphasis of matter paragraph in their audit certificate concerning the overall measurement uncertainty.

The NDA has commercial agreements in place under which a portion of the expenditure required to settle certain elements of the decommissioning provision are recoverable from third parties. Changes in future cost estimates of discharging these particular elements are therefore matched by a change in recoverable contract costs. In accordance with IAS 37, these recoverable amounts are not offset against the decommissioning provision but are treated as a separate asset (note 13).

Sensitivity analysis

The change in discount rates (see page 50) in the current financial year produced an increase of £84 billion (2021: £697 million increase). This figure excludes the change relating to inflation plus the recoverable contract costs off-setting balance which otherwise result in an increase of £6 billion.

An increase of 0.5% in the discount rate would reduce the provision to £195 billion, whilst a decrease in discount rate of 0.5% would increase the provision to £293 billion.

Analysis of expected timing of discounted cash flows for the NDA Nuclear Provision is as follows:

	Sellafield (£m)	Magnox (£m)	Nuclear Waste Services (£m)	Nuclear Transport Services (£m)	2021-22 Total (£m)	2020-21 Total (£m)
Up to 1 year	2,340	758	167	-	3,265	3,142
2 to 5 years	11,149	3,289	754	-	15,192	14,256
6 to 20 years	38,275	10,925	5,093	73	54,366	42,933
21 to 50 years	56,718	14,870	5,792	-	77,380	44,918
50 years +	68,112	4,522	14,140	-	86,774	30,515
	176,594	34,364	25,946	73	236,977	135,764
Deduction in respect of Site Licence Companies pension receivable from NDA	-	-	-	-	(211)	(646)
Total NDA Decommissioning Provisions	-	-	-	-	236,766	135,118

Sensitivity	Waste (£m)	Research (£m)	Sellafield (£m)	Fuel M&G (£m)	2021-22, Total (£m)	2020-21, Total (£m)
Increase	187,245	3,387	55,059	4245,695	109,329
Reduction	(31,208)	(3,604)	(9,075)	(7)	(43,894)	(19,973)

The NDA calculates its provision based on management’s best estimate of the future costs of the decommissioning programme, which is expected to take until 2137 to complete. The NDA also considers credible risks and opportunities which may increase or decrease the cost estimate, but which are deemed less probable than the best estimate. These are the basis of the sensitivities identified above, and the key sensitivities are as follows:

Waste activities cover the Low Level Waste Repository and the Geological Disposal Facility (GDF), with the key sensitivities being in the timing and costs of constructing and operating the GDF. The above range from a reduction of £9,075 million to an increase of £55,059 million and reflect 3 separate sensitivities:
- The potentially higher costs of constructing and operating the GDF itself, which dependent on the location and construction requirements of the facility, could be up to £51,732 million higher (or £8,662 million lower) than the base case assumption.
- The impact of the timing of the facility’s construction and operations. The current planned date for the facility to receive waste is 2045. NDA has identified a risk that the construction and opening of the facility may be delayed beyond 2045 (further information on this can be found in the Governance Statement of the NDA’s Annual Report and Accounts). A delay to this date may increase the cost of the facility itself, along with the cost of interim storage of waste at sites across the NDA estate. A delay of a small number of years is considered to be within the overall tolerance of the estimate for GDF construction and waste transfer, and is not considered to have a material impact on the provision estimate. A longer delay of say 20 years could materially impact the provision, by approximately £2,100 million.
- A delay of 20 years would not necessarily increase the underlying costs of the facility, but would increase the discounted value of the estimate by approximately £1 billion due to the effect of long term negative discount rates.
Sellafield represents activities associated with operation of the site, reprocessing and eventual decommissioning, and includes all site overheads. Principal sensitivities are around the cost of delivering the plan, particularly the costs of new construction, decommissioning and post operational clean out (POCO) work in the long-term (beyond the next 20 years). The potential costs range from a £31,208 million reduction against the current estimate, to a £187,245 million increase.
The programme of work at the Magnox sites and Dounreay includes preparing for interim care and maintenance followed by final site clearance. The main cost risk is in the decommissioning of the Magnox sites for which a 10% variation would increase or decrease costs by £3,170 million. A one year acceleration or deceleration in the interim end state date for Dounreay would decrease or increase costs by £217 million.

Further details are reported in the Financial Review on page 54 of the Annual Report and in the NDA Annual Report and Accounts [NDA provision].

Contract loss

Contract loss provisions have been recognised by the Nuclear Decommissioning Authority to cover anticipated shortfalls between total income and total expenditure on relevant long term contracts. The amounts are disclosed net after deduction of amounts relating to recoverable contract costs (note 13). The amount provided in the year for contract losses relates to changes in estimates of the costs of existing contracts. The discounted liability at 31 March 2022 is £432 million (31 March 2021: £nil million). Further detail, including movement on the gross provision, can be found in the accounts of the NDA.

20.2 Other provisions

	Post Office Limited (£m)	Concessionary fuel (£m)	Legacy ailments (£m)	Business support grant (£m)	Other (£m)	Core and Agencies Total (£m)	Coal Authority (£m)	Early departure costs and restructuring (£m)	Other (£m)	Departmental Group Total (£m)
Balance at 1 April 2020	-	339	269	10,824	111	11,543	2,306	90	238	14,177
Change in discount rate	-	1	1	-	1	3	(15)	-	-	(12)
Provided in the year	-	-	10	-	80	90	230	6	21	347
Provisions not required written back	-	(2)	-	-	(40)	(42)	-	(2)	(5)	(49)
Provisions utilised in the year	-	(34)	(25)	(10,824)	(21)	(10,904)	(33)	(14)	(19)	(10,970)
Unwinding of discount	-	(1)	2	-	-	1	41	-	(1)	41
Balance at 31 March 2021	-	303	257	-	131	691	2,529	80	234	3,534
IFRS16 transfer to lease liabilities	-	-	-	-	-	-	(13)	-	-	(13)
Balance at 1 April 2021	-	303	257	-	131	691	2,516	80	234	3,521
Reclassifications	65	-	-	-	(65)	-	-	-	-	-
Change in discount rate	-	16	18	-	1	35	2,759	2	22	2,818
Provided in the year	514	-	20	-	33	567	347	1	70	985
Provisions not required written back	-	(5)	-	-	(5)	(10)	-	(3)	(9)	(22)
Provisions utilised in the year	-	(31)	(20)	-	(7)	(58)	(46)	(8)	(3)	(115)
Unwinding of discount	-	(1)	1	-	2	2	42	(1)	1	44
Balance at 31 March 2022	579	282	276	-	90	1,227	5,618	71	315	7,231
Estimated forward discounted cash flows as at 31 March 2022
Not later than 1 year	57	30	25	-	31	143	44	10	10	207
Later than 1 year and not later than 5 years	522	100	74	-	37	733	191	34	26	984
Later than 5 years	-	152	177	-	22	351	5,383	27	279	6,040
Total forward cash flows as at 31 March 2022	579	282	276	-	90	1,227	5,618	71	315	7,231

Post Office Limited

Post Office Limited has undertaken to make payments to individuals (postmasters and former postmasters) in 2 schemes to compensate a) those that had been wrongly convicted of fraud, theft and false accounting, later overturned by the court (the Overturned Historical Convictions Scheme (OHC)) and b) those that were affected by financial discrepancies related to previous versions of Post Office’s Horizon IT system (the Historical Shortfall Scheme (HSS)). The company will be unable to fund the full amount of compensation estimated to be payable and still continue to maintain levels of public service provision deemed necessary by the Department. As the sole shareholder in the company, the Secretary of State has undertaken to provide an amount of funding to the Post Office to support compensation payments for approved claims to the extent that the company is unable to fund them without adverse impact on its services to the public.

The liability estimate is based on information provided by the Post Office and is uncertain both in relation to total amount and timing of payments. The main uncertainties will be described in the Post Office accounts for 2021-22 and relate principally to estimates of the number of claimants to whom payment will be made and potential payment amounts for OHC and estimates of potential payment amounts for HSS, this scheme having closed to claim applications in August 2020.

The total discounted liability as at 31 March 2022 is estimated at £579 million (31 March 2021, reported under ‘Other’ provisions: £65 million); the undiscounted liability as at 31 March 2022 is £584 million (31 March 2021: £65 million). The increase during 2021-22 relates primarily to support for the OHC scheme for which the Department did not have a liability as at 31 March 2021.

Concessionary fuel

The provision covers the cost of the Core Department’s responsibility, arising from government announced guarantees, to provide either solid fuel or a cash alternative to ex-miners formerly employed by British Coal and their dependants and to certain former employees who lost their entitlement as a consequence of the restructuring and run down of UK Coal in 2013 and 2015; it includes administration costs. Of the total of 33,400 current beneficiaries at 31 March 2022, 29,300 have opted for the cash alternative at an average cost per beneficiary of £786 per annum; the average annual cost of solid fuel for the remainder is £1,227 per beneficiary excluding delivery costs and VAT. The provision is based on standard female mortality rates and assumes beneficiaries will continue to switch their entitlement from solid fuel to cash in line with rates observed in the recent past. Costs are expected to be incurred up to 2062. The discounted liability as at 31 March 2022 is £282 million (31 March 2021: £303 million); the undiscounted liability as at 31 March 2022, at prices as at the reporting date so excluding the impact of future inflation, is £255 million (31 March 2021: £290 million).

Legacy ailments

The provision is an estimate of the cost to the Core Department of future personal injury compensation claims relating to:

a. Former employees of British Shipbuilders and its subsidiaries arising primarily from exposure to asbestos. The Department assumed responsibility for the liabilities of the former Corporation on its abolition in March 2013. The discounted liability as at 31 March 2022 is £132 million (31 March 2021: £129 million). The estimated liability is based on an actuarial review as at 31 March 2019 and includes allowance for future inflation judged appropriate by the actuary. The current estimate is that liabilities will extend up to 2048.

b. Former British Coal mineworkers who suffered personal injuries between 1947 and 1994. Responsibility for payment of compensation transferred to the Department on 1 January 1998 by a restructuring scheme under the Coal Industry Act 1994. The discounted liability as at 31 March 2022 is £144 million (31 March 2021: £128 million). The undiscounted liability, at prices as at the reporting date so excluding the impact of future inflation, is £129 million (31 March 2021: £123 million). The estimate is based on forecasts of settlement of claims, taking account of discussion with the Department’s legal advisors and claim handlers and recent actuarial estimates. The current estimate is that liabilities will extend up to 2050.

The estimates include legal and administrative costs and are subject to some uncertainty.

NDPBs and other designated bodies

Coal Authority

The Coal Authority provision relates predominantly to the Coal Authority’s responsibilities for mine water treatment, public safety and subsidence, and subsidence pumping stations. Significant uncertainties are associated with estimation of likely costs in respect of these liabilities. The discounted liability at 31 March 2022 is £5,618 million (31 March 2021: £2,529 million). The undiscounted liability at 31 March 2022 is £8,459 million (31 March 2021: £2,508 million). Further details are reported in the Coal Authority Annual Report and Accounts.

Early departure costs and restructuring

£57 million (31 March 2021: £68 million) of the restructuring provision relates to site licence companies and includes continuing annual payments under early retirement arrangements to individuals who retired early, or had accepted early retirement, before 31 March 2022 and will continue at least until the date at which the individual would have reached normal retirement age. The undiscounted equivalent is 31 March 2022 is £55 million (31 March 2021: £64 million).

21. Financial guarantee, loan commitment liabilities and reinsurance contracts

	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Balance at 1 April	19,902	20,048	91	238
Additions	2,440	2,546	21,603	21,645
Net remeasurement	(4,653)	(4,712)	(1,751)	(1,794)
Repayment	(993)	(993)	-	-
Called	(483)	(483)	(41)	(41)
Balance at 31 March	16,213	16,406	19,902	20,048
Comprising:
Financial guarantee liabilities	15,837	15,837	19,833	19,833
Loan commitment liabilities	346	538	-	146
Reinsurance contracts	30	31	69	69
Balance at 31 March	16,213	16,406	19,902	20,048
Of which:
Current liability	16,195	16,234	19,837	19,880
Non-current liability	18	172	65	168
Balance at 31 March	16,213	16,406	19,902	20,048

Core Department

Financial guarantees

The total estimated liability for financial guarantees of £15,837 million as at 31 March 2022 for the Core Department (31 March 2021: £19,833 million) relates to the following schemes:

Scheme	31 March 2022 (£m)	31 March 2021 (£m)
Bounce Back Loans Scheme (BBLS)	13,953	17,222
Coronavirus Business Interruption Loan Scheme (CBILS)	1,439	2,194
Coronavirus Large Business Interruption Loan Scheme (CLBILS)	115	357
Recovery Loan Scheme (RLS)	299	0
Other guarantee schemes	31	60
Total	15,837	19,833

Guarantee schemes established in response to the COVID-19 pandemic

The Core Department invited UK commercial finance providers to participate in 4 schemes to facilitate access to debt finance by businesses across the UK adversely impacted by the COVID-19 pandemic. Eligible businesses could apply to lenders accredited under the following schemes for loans, with the Department assuming all or part of the credit risk incurred by lenders up to set limits per borrower and within specific allocations to each lender, which were set by BBB. The Recovery Loan Scheme (RLS) opened in April 2021 and is reported for the first time in the 2021-22 accounts.

	BBLS	CBILS	CLBILS	RLS
Scheme opened to borrower applications	4 May 2020	23 Mar 2020	20 Apr 2020	6 April 2021
Scheme closed to borrower applications	31 Mar 2021	31 Mar 2021	31 Mar 2021	30 June 2022
(extended from 1 August to 30 June 2024 per announcement on 20 July 2022)	6 years, extendable to 10 years at borrower discretion under ‘Pay As You Grow’ option	3 and 6 years, extendable to up to 10 years for forbearance purposes in line with usual lender forbearance policy	3 years, extendable to up to 6 years for forbearance purposes in line with usual lender forbearance policy	3 and 6 years depending on the type of the facility
Facility longest maximum duration	6 years, extendable to 10 years at borrower discretion under ‘Pay As You Grow’ option	3 and 6 years, extendable to up to 10 years for forbearance purposes in line with usual lender forbearance policy	3 years, extendable to up to 6 years for forbearance purposes in line with usual lender forbearance policy	3 and 6 years depending on the type of the facility
Facility type	Term loans	Term loans	£200m	£10 million for applications approved prior to 1 January 2022 £2 million for applications approved after 1 January 2022
Overdrafts	100%	80%	80%	80% for applications approved prior to 1 January 2022 70% for applications approved after 1 January 2022
Number of loan facilities approved as at 31 March 2022 ^[Note 1]	1,548.1 thousand	99.4 thousand	0.7 thousand	15.8 thousand
Value of loan facilities approved as at 31 March 2022	£38,734 million	£18,631 million	£3,411 million	£3,438 million
Total guaranteed as at 31 March 2022	£38,734 million	£14,905 million	£2,728 million	£2,698 million

Notes
1. CBILS, CLBILS and BBLS closed to new applications on the 31 March 2021. The figures in the table rows for 31 March 2022 represent the final set of data with all applications received by end-March 2021 which have now been processed.

A guarantee is recognised on the Statement of Financial Position and included in the liability when a lender makes an offer of a loan facility to a borrower. There is no direct relationship between the Department and borrowers; quantification of the guarantees in terms of numbers and amounts above is based on information provided by lenders. The schemes are operated on behalf of the Department by the British Business Bank via the network of accredited lenders.

Liability measurement

In accordance with the FReM and IFRS 9 for these guarantees (note 1), the guarantee liabilities are measured at a value equal to the guaranteed proportion of lifetime expected credit losses (ECL) on the underlying loan facilities. They are not crystallised obligations at the reporting date but present value estimates of future expected payments to reimburse guarantee holders for credit losses incurred less any amounts expected to be recovered from borrowers subsequent to a guarantee claim.

The liabilities are estimated using IFRS 9 compliant ECL models developed by a third party specialist in conjunction with BBB specifically for these schemes. The models are operated by BBB within a formal control environment and in accordance with the Bank’s internal governance procedures and the Department’s framework for business critical models which complies with quality assurance best practice in the government’s ‘Review of quality assurance of government models’ by Sir Nicholas Macpherson. The models apply assumptions which have a material impact on the reported liabilities. Key modelling assumptions are set by expert judgement and reviewed by subject matter experts in the Department and Bank. Independent assurance on the model design was provided by the Government Actuary’s Department.

For each individual guarantee, the model estimate of probability of default over the lifetime of the underlying loan facility is combined with an estimate of the outstanding exposure at default (taking account of the contractual repayment profile and estimates of the outstanding balances at default) and with an estimate of the amount likely to be recovered post-default (taking into account the type of collateral held by the lender where relevant), to estimate the ECL value, i.e., the expected value estimate of the guarantee liability. Model estimates are adjusted at scheme level if considered necessary to ensure reported liability values reflect all relevant reasonable and supportable information.

Estimation uncertainty – BBLS, CBILS, and RLS

Whilst all schemes are subject to significant estimation uncertainty, the liabilities for BBLS, CBILS and RLS are material to the Department’s financial position and therefore estimation uncertainty may result in material changes to the estimates in future reporting periods as more data becomes available. Liability values are estimated by the model for each underlying loan based on data from lenders and other sources. Key data includes: a) the amount guaranteed at origination in the scheme for each loan and its contractual repayment profile and status (whether performing, past due or in default); b) borrower credit reference information from third parties; c) macroeconomic forecasts from independent specialist economic analysts; and d) for BBLS, the probability that the loan may have been contracted fraudulently by the borrower, that is in deliberate contravention of borrower eligibility criteria.

Uncertainty risk in the modelled liability relates primarily to estimates of a) probability of default of individual loans which is materially impacted by b) the effect of current and future macroeconomic conditions on borrowers’ ability to repay and c) recoveries from borrowers post claim, additionally for BBLS, d) levels of borrowing in breach of scheme rules due to fraud or error. The analysis below indicates the sensitivity of the model to changes in inputs. The changes applied do not constitute forecasts and the impacts shown are to model estimates before application of post-model adjustments which have been disclosed separately.

a) Probability of default (prior to adjustment for future macroeconomic conditions and fraud risk)

Probability of default is subject to significant uncertainty, in particular arising from the absence of information relating to historical loan performance for these new schemes and absence of significant repayment data for analysis of performance on existing loans as at 31 March 2022 due to immaterial loan repayments during the reporting period. The analysis below shows the impact on the model liability estimate had the model estimate of probability of default for each loan facility been lower or higher by the percentages shown. This analysis is applied to probability of default before adjustment by the model to take account of potential changes in future macroeconomic conditions and fraud risk.

Sensitivity analysis: Impact on model liability estimate of changes to probabilities of default	BBLS (£m)	CBILS (£m)	RLS (£m)
Probabilities of default for BBLS loans lower by 20%	(1,122)	-	-
Probabilities of default for loans lower by 33%	-	(317)	(82)
Model liability estimate	13,211	1,349	282
Probabilities of default for loans higher by 50%	-	432	109
Probabilities of default for BBLS loans higher by 25%	1,308	-	-

The percentage changes are relative, meaning (by way of an illustrative example only) that an increase of 20% to a probability of default of 1% would increase probability of default to 1.2%. The percentage changes take into account the risk profiles of the individual schemes. The CBILS and RLS loan portfolio are subject to lenders’ credit policy and underwriting reviews, with risk profiles more closely aligned to commercial lending portfolios, meaning they have a lower risk profile than the BBLS loan portfolio.

The sensitivities for CBILS and RLS have been set as the equivalent of a one notch movement downwards or upwards on the Moody’s granular rating scale from the model estimates of probability of default. Lower percentage changes have been applied to BBLS as a borrower self-certification product without the usual commercial lender credit policy and underwriting procedures and with higher model estimates of probability of default which limit the scope for credit quality deterioration. The percentages for BBLS are equivalent to half a notch movement on the Moody’s granular rating scale.

The model adjusts the estimate of probability of default for each loan facility to take account of i) forward macroeconomic conditions and, for BBLS, ii) levels of borrowing in breach of scheme rules due to fraud or error:

i) Forward macroeconomic conditions

A probability weighted view of forward economic conditions is applied by the model to adjust probability of default, based on potential scenarios provided by an independent specialist economic forecasting firm.

Economic scenarios provided by Oxford Economics for IFRS 9 ECL measurement, March 2022.

The above charts show the values of economic indicators for the different scenarios over the 5 year period from December 2021 which were applied in the model with the following weightings:

Scenario	Probability weighting in model
Mild upside	10%
Base	40%
Stagnation	20%
Downside	20%
Severe downside	10%

The sensitivity analysis below shows the impact on the model liability estimates had the probability of each individual economic scenario shown been set at 100% with zero probability for the others.

Sensitivity analysis: Impact on model liability estimate of 100% weighting applied to individual economic scenarios	BBLS (£m)	CBILS (£m)	RLS (£m)
Mild Upside	(1,503)	(310)	(69)
Base	(1,467)	(300)	(68)
Model liability estimate	13,211	1,349	282
Stagnation	1,314	264	61
Downside	1,491	306	69
Severe Downside	1,762	370	82

ii) Risk of borrowing in breach of scheme rules due to fraud or error

The risk of guarantee claims for loan defaults arising from borrowing in breach of scheme rules due to fraud or error despite lender checks having been undertaken in accordance with scheme loan eligibility criteria is considered to be material for BBLS only. The model probabilities of default for BBLS loan facilities are adjusted to include an estimate for the probability of fraud and error in the portfolio of 8.0% (31 March 2021: 11.15 %). This is adjusted for expected loss as a result of fraud, of 52.94%, explained in point 2 below. This estimate is then adjusted to remove the fraud that has already been observed, through claimed and settled loan statuses of 0.75%, which results in a 3.49% loss rate due to fraud and error for the outstanding exposure at the year-end, which has been included as an input in the expected credit loss modelling The analysis below shows the impact on the model liability estimate in the scenario that all fraud occurrences result in a loss, or in a scenario that a lower fraud loss emergence rate emerges.

Sensitivity analysis: Impact on model liability estimate of changes in fraud probability	Fraud estimate in BBLS 31 March 2022 (£m)	Fraud estimate in BBLS 31 March 2021 (£m)
Probability of fraud with a lower fraud loss emergence rate (1.49%)	(490)	-
Probability of fraud at low end of confidence interval range (8.15%)	-	(931)
Model liability estimate (3.49%)	13,211	-
Model liability estimate (11.15%)	-	16,802
Probability of fraud with a higher loss emergence rate (7.25%)	919
Probability of fraud at high end of confidence interval range (14.15%)	-	932

The revised estimate of fraud and error is made up of 2 components, these are detailed below. Uncertainties continue to be present in the estimate, which result due to data limitations, these are detailed under each of the 2 components of the estimate.

1) Sampled loans

The estimate included in the 2020-21 accounts was based on a sample of 1,067 loans which were assessed for fraud risk indicators. This resulted in an estimated rate of portfolio lifetime fraud incidence of 11.15% which was included within the 2020-21 year end ECL valuation. Subsequently work on the sample led to a reduction in the estimated portfolio lifetime fraud incidence rate to 7.5%.

This forms the basis for the 2021-22 fraud and error estimate. The work to validate the estimate to 7.5% was completed in the 2021-22 year and is therefore not indicative of information that should have been taken into account at 31 March 2021. The 7.5% has been adjusted for additional claims identified by lenders, as fraudulent within the sampled population. This increases the rate to 8.0%.

Data limitations:

It is known that not all indicators of fraud and error are fully reflected in the estimate. The estimate is based on analysis of the sample against a number of fraud risk indicators. However, since the work was completed, it has been widely accepted that there are a number of fraud risk indicators which the sampling exercise does not take into account. Whilst work has been performed to validate the potential impact of these risk indicators, there is not currently sufficiently robust data available to quantify their impact. These risk indicators are discussed further below.
There are a number of risk indicators which are identified and not considered in the sampling work performed. The Department has worked to quantify the impact of these indicators on the fraud rate estimate, however the information available was not sufficiently supportable to meet IFRS9 requirements. Under IFRS9, all information that is reasonable and supportable, obtained without undue cost or effort, should be included within the ECL. The impact of these fraud risk indicators are either not supportable, or would require undue cost or effort in order to produce a robust estimate, and as such, have not been included within the fraud rate estimate at year end. The Department has already spent a significant sum in producing its estimate and has determined that it would not be a good use of taxpayers money to refine an estimate which is going to naturally become more robust in the future as loans default, and as claims are made on the guarantee due to fraud. Details of these indicators and the difficulty in determining their impact on the estimate are set out below:

Risk Indicator	Challenge
Backdated director appointment	Work has begun to quantify the impact of this risk on the fraud estimate, however at year end, the information available was not sufficient to distinguish between ‘possible fraud’ and ‘probable fraud’. Therefore, at year end there was insufficient data available to be able to quantify the impact directly that this risk could have on the fraud estimate.
Unusual activity	The data limitations and access to data are prohibitive to quantifying the impact of this risk indicator on the fraud rate. A significant piece of scoping work to define what unusual activity is, would be required prior to being able to quantify the impact on the scheme.
Dissolution objections	More information on this risk indicator is expected to become available in the future. Work has started post year end to quantify the potential impact of this risk on the liability estimate.
Sole Traders	Obtaining data and clarity on sole traders is much more challeng-ing than on registered companies so there would be significant, almost forensic requirements in terms of effort and considerably more cost. Lack of available detail makes it difficult/impossible to quantify the impact on the fraud estimate.
Turnover inflation	This is partially captured within the sampling work, however acknowledged that further work needs to be performed to fully quantify their impact on the fraud rate estimate. Attempts have been made to quantify the impact of this risk indicator, however challenges in comparing company turnover submitted on BBLS applications and evidence on company turnover available from HMRC have resulted in this work being paused.
Misuse of funds	This is partially captured within the sampling work, however acknowledged that further work needs to be performed to fully estimate their impact on the fraud rate estimate. Quantifying the impact of this indicator on the fraud estimate would require significant effort. Contacting borrowers to understand what they spend funds on or reviewing in detail borrowers bank accounts would be necessary and therefore prohibitive in quantifying the impact on the fraud estimate.

The above sets out the fraud risk indicators that are known at year end, but not wholly captured within the fraud rate estimate. Work has been performed to try to quantify the impact of these, and whilst the estimate is not robust enough to include within the ECL calculation, the Department currently estimates that an uplift of 4% to the fraud occurrence estimate of 8%, resulting in a fraud incidence rate of 12% would be reasonable, based on information that is currently available. A range of fraud occurrence between 2.5% and 14.5% has been determined to be a reasonable estimate, with the lower estimate based on the level of suspected fraud identified and reported by Lenders, and the upper estimate based on arrears data. The Department’s current estimate of a 4% uplift falls within this range.

Whilst there are limitations to the data supporting the estimate, the Department has used all supportable information that is available at the year end, to determine its estimate of fraud in the BBLS portfolio.

2) Loss as a result of fraud

In the 2020-21 accounts, in the absence of repayment data, it was assumed that a fraud incident would give rise to a 100% claim on the BBLS guarantee, and therefore also a 100% loss to BEIS. During 2021-22, as more information on repayments has become available, analysis has been performed over the expected loss to the Department as a result of fraud.

The loans in the sample noted above, continue to be monitored with focus on the loans that have been identified as probable fraud. These are monitored to identify how the loans perform in respect of repayments and defaults and is compared with the wider 1,067 sample as well as the whole BBLS portfolio. This gives an insight into the potential loss rates that could occur as a result of those loans identified as probable fraud, which is currently estimated as 52.94%. The expected loss rate is applied to the fraud estimate of 8.0% to derive the 4.24% estimate for the 2021-22 year end.

Data limitations:

The estimate of 52.94% loss as a result of fraud is based on the performance to date of the 85 loans from the sample that were identified as ‘probable fraud’. This sample has been assessed as representative of the wider portfolio, however as further repayment data becomes available on a wider number of loans, this estimate could change.
Loans that were taken out that were not in line with the scheme rules but were paid back in part or in full, for example, if someone overstated turnover but still paid the loan back, would not lead to fraud losses on default. However, the cost of arrangement fees and interest costs covered by the Department are technically irregular as the loan shouldn’t have been issued. The Department is not able to estimate these costs.

Fraud and error estimate in the model

The 4.24% fraud rate is a lifetime portfolio fraud and error rate and has been adjusted for fraud that has already been observed in the portfolio. As at 31 March 2022 there have been 11,511 suspected fraud cases that have been claimed or settled. This equates to 0.75% of the 1.54m BBLS loans provided. Subtracting the observed fraud from 4.24% results in an adjusted portfolio fraud rate of 3.49%.

The data limitations detailed above could result in both increases and decreases to the fraud estimate, meaning that at this stage it is unclear what the overall impact would be. In subsequent years, further information such as additional repayment data will be available which will inform, and allow refinement of, the fraud estimate

As the loan portfolio matures, and further repayments data becomes available, the estimated loss as a result of the fraud rate will continue to be revised.

The fraud estimate still includes expert judgement, the significance of which will decrease as further information on losses becomes available. The Department will continue to refine its estimate of fraud and error in the BBLS to take into account information that becomes available.

CBILS and RLS

As noted above, fraud is considered to be material for BBLS only, an explicit fraud rate has not been built into the ECL calculations for CBILS, CLBILS and RLS. For these schemes estimated fraud losses are integrated into the credit loss estimates. The assessment made over the levels of fraud in the CBILS and RLS, the only schemes of these 3 which have a liability that is material to the accounts, are detailed below.

The repayment data as at 31 March 2022 for CBILS and RLS is included in the table below:

Scheme	Outstanding facilities	Outstanding facilities paying on time	Outstanding facilities- Re-payments in arrears	Outstanding facilities -Repayments in default	Facilities fully repaid
CBILS	£18.5 bn	78.7%	1.3%	<1%	18.1%
RLS	£2.6 bn	97.4%	<1%	<1%	<1%

The evaluation of information currently available supports the Department’s original assessment that the scheme is not affected by elevated levels of fraud. Normal control and verification procedures carried out in the banking industry were required to be completed ahead of a CBILS loan being awarded, this significantly reduced the risk within the portfolio. The repayments data available for the scheme so far, show low levels of defaults.

It is a reasonable assumption to make that if fraudulent loans had been taken under the scheme, we should expect these loans to be in default, or at least in arrears early in the repayments cycle. It is unlikely that fraudulent loans will be making repayments and defaulting at a later date. Some loans that were fraudulently obtained may be repaying as planned, however we assert that these are less likely to result in losses, or that losses will be lower due to the repayments already made.

In addition to the repayments data which is becoming available, the second phase of work performed by a third party over the CBILS portfolio, to identify fraud risk indicators within the portfolio, has been completed. This found that fraud losses are likely to be limited to those in default or arrears, which as noted in the table above, currently represents a very low proportion of the portfolio.

The Department have assessed the similarities between RLS and CBILS. Such similarities include both schemes offering the same facilities for the same duration, forbearance proscribed borrowers and the security terms of the schemes. As a result of the similarities in the schemes, the Department’s assessment is that the incidence of fraud in the RLS scheme will at a maximum be similar to the level of fraud in the CBILS scheme, which we currently deem to be immaterial. There could be lower levels of fraud compared to CBILS due to the reduced levels of lending and the lessons implemented since CBILS was in operation, however further analysis is required to support this. The best information the Department has to date, is the repayments data for CBILS which has been used to inform this assessment. As repayment information becomes available for the RLS scheme, the Department will continue to update this assessment.

The information used to inform the conclusion that the scheme is not affected by elevated levels of fraud, is supported by the best information that is available at 31 March 2022. As further information on repayments, claims and defaults becomes available in the future, the Department will continue to monitor this assessment.

b) Recoveries post guarantee claim

The model estimates comprise expected values estimates for the amounts to be paid out on guarantee claims less the Department’s share of estimated recoveries from borrowers post claim. The schemes are deemed to be non-investment grade, with a 40% variation in recoveries appropriate based on industry studies. The analysis shows the impact on the model liability estimates had the estimates of amounts to be recovered been higher or lower by 40%.

Sensitivity analysis: Impact on model liability estimate of changes in estimates of recoveries post guarantee claim	BBLS (£m)	CBILS (£m)	RLS (£m)
Recovery amounts higher by 40%	(519)	(138)	(29)
Model liability estimate	13,211	1,349	282
Recovery amounts lower by 40%	519	138	29

Adjustments to model estimates

Post model adjustments have been made to the total model liability estimates for each scheme, based on expert management judgement, to take account of the current exceptional uncertainty around future macroeconomic conditions primarily driven by the conflict in Ukraine and the global response on energy markets. This uncertainty is apparent in a) material differences between a number of independent UK forecasts and b) large variances between upside and downside forecasts over the next 3 years.

A post model adjustment has also been made to the BBLS scheme to the value of £346 million to factor in the Pay As You Grow (PAYG) options available under the scheme. The ECL model doesn’t currently allow for multiple payment holiday options so these options have been factored into the valuation through an overlay adjustment. The next update to the ECL model will enable it to directly incorporate PAYG payment holidays into the balance projections and remove the need for the post model adjustment in future liability estimates.

An adjustment to the fraud estimate in the BBLS was processed outside of the model, which is shown below.

	BBLS (£m)	CBILS (£m)	RLS (£m)
Model liability estimate	13,579	1,349	282
Fraud post model adjustment	(368)	-	-
Model liability with fraud adjustment	13,211	1,349	282
Other Post model adjustments	742	90	17
Reported liability	13,953	1,439	299

Trade credit reinsurance

On 1 April 2020, the Core Department launched the Trade Credit Reinsurance Scheme (TCRS), to cover the majority of the financial risk associated with policies written by private sector insurers in the UK to cover trade credit risk to which policyholders (UK businesses) are exposed to from sales contracts, as a response to the COVID-19 pandemic, the scheme closed on 30 June 2021. Future cashflow forecast of claims losses and expenses form the basis for the valuation of the Trade Credit Reinsurance liability.

As at 31 March 2022 the Department was exposed to potential claims of up to £125,000 million (31 March 2021: £125,000 million), however, the maximum payouts BEIS would make under the scheme are capped at £9,000 million (31 March 2021: £9,000 million). The carrying value of the TCRS guarantee as at 31 March 2022 is £31 million (31 March 2021: £69 million) and £28 million (31 March 2021: £16 million) was claimed during the year. The guarantee has been evidenced as being lower than the Department’s total exposure, as there has been a lower level of insolvencies and buyer defaults than originally expected, which is likely due to the other government support schemes in place as a result of the COVID-19 pandemic.

22. Retirement benefit obligations

The Departmental Group consolidates 9 defined benefit pension arrangements from its designated bodies including:

UK Research and Innovation (UKRI)
Nuclear Decommissioning Authority (NDA)
Nuclear site licence companies (SLCs)

All schemes are accounted for in accordance with IAS 19 ‘Employee Benefits’. They are subject to the UK regulatory framework and under the scope of the scheme specific funding requirement. The schemes’ trustees are responsible for operating these defined benefit plans and have a statutory responsibility for ensuring the schemes are sufficiently funded to meet current and future benefit payments.

Defined benefit scheme liabilities expose the Departmental Group to material financial uncertainty, arising from factors such as changes in life expectancy and in the amount of pensions payable. Some scheme investments, such as equities, should offer long-term growth in excess of inflation, but can be more volatile in the shorter term than government bonds.

The details of each scheme are discussed below.

UKRI

UKRI operates the legacy Medical Research Council (MRC) defined benefit, final salary pension scheme. A full actuarial evaluation was undertaken as at 31 December 2019 which was rolled forward by the actuary to determine the approximate position as at 31 March 2022.

The key assumptions are discount rate of 2.70% (2020-21: 2.00%) and rate of increase in pension payments of 3.00% (2020-21: 2.40%). A decrease of 0.5% in the discount rate would lead to an increase of approximately 10% in the total liability, while a decrease of 0.5% in the rate of increase in pensions would lead to an approximate 7% reduction.

Further details regarding the nature of the benefits provided, regulatory framework, actuarial assumptions, sensitivity analysis, key risks and risk management policy including asset-liability matching strategies, and any funding arrangements or funding policy that may affect future contributions can be found in the accounts of UKRI.

NDA

Two defined benefit pension schemes relate to the Nuclear Decommissioning Authority (NDA) – the Closed and Nirex sections of the Combined Nuclear Pension Plan (CNPP). Both are closed to new entrants. Full actuarial evaluations were undertaken as at 31 March 2019. The actuaries rolled forward the results to determine approximate positions as at 31 March 2022. Further details regarding the nature of the benefits provided, regulatory framework, actuarial assumptions, sensitivity analysis, key risks and risk management policy including asset-liability matching strategies, and any funding arrangements or funding policy that may affect future contributions can be found in the accounts of NDA.

SLCs

There are 6 defined benefit final salary pension schemes relating to the 4 site licence companies (SLCs) comprising: a) the LLWR section of the CNPP (for LLW Repository Limited), b) the SLC section of the Magnox Electric Group of the Electricity Supply Pension Scheme (ESPS) and the Magnox Section of the CNPP (for Magnox Limited), c) the Group Pension Scheme SLC section of the CNPP and the Sellafield section of the CNPP (for Sellafield Limited) and d) the Dounreay Section of the CNPP (for Dounreay Site Restoration Limited). All are closed to new entrants. The most recent triennial actuarial valuations were undertaken as at 31 March 2019 for all 6 SLCs schemes. The actuaries rolled forward the results to determine approximate positions as at 31 March 2022.

Further details regarding the nature of the benefits provided, regulatory framework, key risks and risk management policy including asset-liability matching strategies, and any funding arrangements or funding policy that may affect future contributions can be found in the CNPP Statement of Investment Principles, and in the Electricity Supply Pension Scheme’s Annual Reports.

	Funded pension schemes, 31 March 2022(£m)	Funded pension schemes, 31 March 2021(£m)
Present value of defined benefit obligation at 1 April	8,475	7,274
Interest cost	169	163
Current service cost	238	197
Past service cost	7	6
Benefits paid, transfers in and expenses	(277)	(278)
Actuarial (gains)/losses in financial assumption	(107)	1,366
Actuarial (gains)/losses on defined benefit obligation due to demographic assumptions	(25)	(81)
Actuarial (gains)/losses arising from experience adjustments	(9)	(195)
Employee contributions	22	23
Present value of defined benefit obligation at 31 March	8,493	8,475
Fair value of assets at 1 April	8,083	7,187
Expected return on plan assets	161	161
Employer contributions	236	145
Benefits paid, transfers in and expenses	(277)	(278)
Actuarial gains/(losses)	491	845
Employee contributions	22	23
Fair value of assets at 31 March	8,716	8,083
Net liability at 31 March	(223)	392

The prior year numbers have been represented to combine benefits paid and transfers in.

The decrease in the net liability at 31 March 2022 compared to 31 March 2021 is primarily due to an increase in the discount rate applied to all defined benefit obligations between 31 March 2021 and 31 March 2022. This is partially offset by the increase in inflation rate applied to all defined benefit obligations between 31 March 2021 and 31 March 2022.

Net (asset)/liability by scheme

	Present value of defined benefit obligation, 31 March 2022 (£m)	Fair value of assets, 31 March 2022 (£m)	Net liability/(asset), 31 March 2022 (£m)	Present value of defined benefit obligation, 31 March 2021 (£m)	Fair value of assets, 31 March 2021 (£m)	Net liability/(asset), 31 March 2021 (£m)
UK Research and Innovation - Medical Research Council	1,650	2,070	(420)	1,664	1,908	(244)
LLW Repository Ltd - LLWR section of CNPP	50	36	14	47	31	16
Magnox Ltd - SLC section of Magnox Electric Group of ESPS	3,006	3,398	(392)	3,083	3,269	(186)
Magnox Ltd - Magnox section of CNPP	180	159	21	177	146	31
Sellafield Ltd - Group Pension Scheme SLC section of CNPP	652	727	(75)	659	705	(46)
Sellafield Ltd - Sellafield section of CNPP	2,606	2,011	595	2,506	1,736	770
Dounreay Site Restoration Ltd - Dounreay section of CNPP	206	158	48	196	136	60
Nuclear Decommissioning Authority	143	157	(14)	143	152	(9)
Total net liability at 31 March	8,493	8,716	(223)	8,475	8,083	392

Asset allocation

	31 March 2022 (£m)	31 March 2021 (£m)
Equities	2,742	2,473
Property	1,174	948
Government bonds	2,051	1,809
Corporate bonds	492	830
Other growth assets	2,020	1,884
Other	237	139
Balance at reporting date	8,716	8,083

The Magnox schemes had a total asset balance of £3,557 million (31 March 2021: £3,415 million), of which £1,379 million (31 March 2021: £1,345 million) were government bond assets, £1,462 million (31 March 2021: £1,236 million) were other growth assets which were not quoted in an active market, £403 million (31 March 2021: £277 million) were property assets and £189 million (31 March 2021: £444 million) were corporate bonds. The Sellafield schemes had £2,738 million (31 March 2021: £2,441 million) of total assets, the majority of which, excluding the amount held in the Trustees’ bank account and some private equity investments due to their illiquid nature, had a quoted market value in an active market. The UKRI - MRC scheme’s total assets of £2,070 million (31 March 2021: £1,908 million) included £1,263 million (31 March 2021: £1,173 million) of quoted equities and £444 million (31 March 2021: £380 million) of property assets.

Expected contribution over the next accounting period

It is possible that the actual amount paid might be different to the estimated amount. This may be due to contributions, benefits payments or pensionable payroll differing from expected, changes to schemes’ benefits or settlement/curtailment events that are currently unknown.

	31 March 2022 (£m)	31 March 2021 (£m)
UK Research and Innovation - Medical Research Council	23	24
LLW Repository Ltd – LLWR section of CNPP	2	2
Magnox Ltd – SLC section of Magnox Electric Group of ESPS	21	23
Magnox Ltd – Magnox section of CNPP	5	5
Sellafield Ltd – Group Pension Scheme SLC section of CNPP	5	6
Sellafield Ltd – Sellafield section of CNPP	90	112
Dounreay Site Restoration Ltd – DSRL section of CNPP	8	9
Nuclear Decommissioning Authority	0	1
Total	154	182

Weighted average duration of the defined benefit obligation plans

	31 March 2022, Years	31 March 2021, Years
UK Research and Innovation - Medical Research Council	20	20
LLW Repository Ltd – LLWR section of CNPP	24	27
Magnox Ltd – SLC section of Magnox Electric Group of ESPS	16	16
Magnox Ltd – Magnox section of CNPP	23	23
Sellafield Ltd – Group Pension Scheme SLC section of CNPP	19	25
Sellafield Ltd – Sellafield section of CNPP	27	25
Dounreay Site Restoration Ltd – DSRL section of CNPP	25	25
Nuclear Decommissioning Authority	20	20

Major actuarial assumptions for SLC schemes

	Dounreay Site Restoration Limited, 2021-22	Dounreay Site Restoration Limited, 2020-21	LLW Repository Limited, 2021-22	LLW Repository Limited, 2020-21	Magnox Limited (ESPS), 2021-22	Magnox Limited (ESPS), 2020-21	Magnox Limited (CNPP), 2021-22	Magnox Limited (CNPP), 2020-21	Sellafield Limited (CNPP), 2021-22	Sellafield Limited (CNPP), 2020-21	Sellafield Limited (GPS), 2021-22	Sellafield Limited (GPS), 2020-21
Discount rate	2.6%	2.0%	2.6%	2.0%	2.7%	2.0%	2.6%	2.0%	2.6%	2.0%	2.7%	2.0%
Inflation (Retail Price Index)	3.5%	3.0%	3.5%	3.0%	3.8%	3.0%	3.5%	3.0%	3.5%	3.0%	3.7%	3.0%
Life expectancy in years at 65, currently aged 65 (male)	21.2	21.2	21.2	21.3	-	-	-	-	21.2	21.2	21.2	21.2
Life expectancy in years at 65, currently aged 45 (male)	22.6	22.6	22.6	22.6	-	-	-	-	22.6	22.6	22.6	22.6
Life expectancy in years at 65, currently aged 65 (female)	23.6	23.6	23.6	23.6	-	-	-	-	23.6	23.6	23.6	23.6
Life expectancy in years at 65, currently aged 45 (female)	25.1	25.0	25.1	25.1	-	-	-	-	25.1	25.0	25.1	25.0
Life expectancy in years at 60, currently aged 60 (male)	-	-	-	-	27.1	27.1	25.8	25.9	-	-	-	-
Life expectancy in years at 60, currently aged 40 (male)	-	-	-	-	27.9	27.8	27.4	27.4	-	-	-	-
Life expectancy in years at 60, currently aged 60 (female)	-	-	-	-	29.3	29.2	28.5	28.4	-	-	-	-
Life expectancy in years at 60, currently aged 40 (female)	-	-	-	-	30.1	30.1	30.0	29.9	-	-	-	-

Major actuarial assumptions for NDA and UKRI

	Nuclear Decommissioning Authority (Closed), 2021-22	Nuclear Decommissioning Authority (Closed), 2020-21	Nuclear Decommissioning Authority (Nirex), 2021-22	Nuclear Decommissioning Authority (Nirex), 2020-21	UK Research and Innovation, 2021-22	UK Research and Innovation, 2020-21
Discount rate	2.7%	2.0%	2.7%	2.0%	2.7%	2.0%
Inflation (Retail Price Index)	3.7%	3.0%	3.8%	3.0%	n/a*	n/a*
Life expectancy in years at 65, currently aged 65 (male)	21.2	21.2	21.2	21.2	22.3	22.6
Life expectancy in years at 65, currently aged 45 (male)	22.6	22.6	22.6	22.6	23.9	24.2
Life expectancy in years at 65, currently aged 65 (female)	23.6	23.6	23.6	23.6	23.5	23.6
Life expectancy in years at 65, currently aged 45 (female)	25.1	25.0	25.1	25.0	25.0	25.1

*UKRI applies an consumer price index inflation rate rather than retail price index inflation rate. The inflation rates were 3.00% for 2021-22 (2020-21: 2.40%).

Sensitivity analysis

The table shows the increase in liability that would result from changes in these actuarial assumptions:

	Dounreay Site Restoration Limited (£m)	LLW Repository Limited (£m)	Magnox Limited (£m)	Sellafield Limited (£m)	Nuclear Decommissioning Authority (£m)	UK Research and Innovation (£m)
0.5 percentage point decrease in annual discount rate	28	8	284	444	15	167
0.5 percentage point increase in inflation assumption	28	8	272	444	15	120
1 year increase in life expectancy	7	2	150	110	5	64

23. Capital and other commitments

Total minimum payments in respect of capital, lease and other commitments

	Note	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 restated (£m)	Departmental Group, 31 March 2021 restated (£m)
Contracted capital commitments	23.1	6	2,543	23	2,422
Minimum future payments under:
Operating leases	23.2	-	-	148	295
Finance leases	-	-	-	-	3
Other financial commitments	23.3	718	1,186	811	1,517
Total	-	724	3,729	982	4,237

23.1 Capital commitments

	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Contracted capital commitments not otherwise included in these financial statements:
Property, plant and equipment	2	332	4	318
Intangible assets	4	130	-	1
Loans, Investments	-	2,081	19	2,103
Total	6	2,543	23	2,422

NDPBs and other designated bodies

Capital commitments as at 31 March 2022 include the following significant items:

Property, plant and equipment commitments for United Kingdom Research and Innovation (UKRI) of £297 million (31 March 2021: £309 million).
Investment commitments of £1,870 million (31 March 2021: £1,664 million) for the British Business Bank (BBB) related to undrawn investment commitments, £125 million (31 March 2021: £130 million) for Northern Powerhouse Investment Limited relating to capital calls to be utilised over the next 6 years, £78 million (31 March 2021: £118 million) for Midlands Engine Investments Limited relating to capital calls to be utilised over the next 7 years and £77 million (31 March 2021: £76 million) for the BIS (Postal Services Act 2011) Company Limited, which has capital calls relating to investments in respect of its private equity and property funds financial instruments.

23.2 Commitments under leases

23.2.1 Operating leases: Department as a lessee

Total future minimum lease payments under operating leases are given in the table below for each of the following periods:

	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Obligations under operating leases comprise:
Land:
Not later than 1 year	-	-	-	1
Later than 1 year and not later than 5 years	-	-	-	2
Later than 5 years	-	-	-	12
	-	-	-	15
Buildings:
Not later than one year	-	-	22	39
Later than 1 year and not later than 5 years	-	-	73	106
Later than 5 years	-	-	41	119
	-	-	136	264
Other:
Not later than 1 year	-	-	7	10
Later than 1 year and not later than 5 years	-	-	5	6
Later than 5 years	-	-	-	-
	-	-	12	16
Total	-	-	148	295

The Departmental Group adopted IFRS 16 ‘Leases’ from 1 April 2021, in agreement with HM Treasury, and therefore there are no operating lease commitments in the above table for the current year. Please see note 1 for further information on the adoption of IFRS 16 ‘Leases’.

23.2.2 Operating leases: Department as a lessor

Total future minimum lease receivables under operating leases are given in the table below:

	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Receivables under operating leases for the following periods comprise:
Not later than 1 year	-	8	1	7
Later than 1 year and not later than 5 years	1	20	2	21
Later than 5 years	-	21	-	28
Total	1	49	3	56

23.3 Other financial commitments

The Departmental Group has entered into non-cancellable contracts (which are not leases, PFI contracts or other service concession arrangements) for subscriptions to international bodies and various other expenditures. Future payments to which the Departmental Group is committed are as follows:

	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 restated (£m)	Departmental Group, 31 March 2021 restated (£m)
Not later than 1 year	390	640	448	751
Later than 1 year and not later than 5 years	185	392	193	553
Later than 5 years	143	154	170	213
Total	718	1,186	811	1,517

23.3.1 International subscriptions

The financial commitments payable include subscriptions payable to international bodies, analysed by the period in which the payments are due:

Organisation	Note	Within 1 Year (£m)	Later than 1 year and not later than 5 years (£m)	Later than 5 Years (£m)	Total, 31 March 2022 (£m)	Total, 31 March 2021 (£m)
International Atomic Energy Agency	a	15	78	86	179	146
European Space Agency	b	-	-	-	-	150
Other subscriptions	-	10	41	51	102	116
Core Department and Agencies total	-	25	119	137	281	412
European Organisation for Nuclear Research (CERN)	c	143	88	-	231	234
Institut Laue Langevin (ILL)	d	20	15	-	35	57
Other subscriptions	-	84	100	7	191	221
Departmental Group total	-	272	322	144	738	924

Notes
The Departmental Group is required to subscribe to a number of bodies on an ongoing and continuous basis. These subscriptions are paid in euros, swiss francs and pounds sterling. The subscriptions described below are paid in euros or swiss francs and amounts paid are subject to fluctuations due to exchange rate differences.

a. The Core Department is responsible for paying in the UK’s annual subscriptions to the International Atomic Energy Agency (IAEA). The IAEA is the UN-affiliated organisation responsible for ensuring the safe, secure and peaceful use of civil nuclear technologies, through monitoring nuclear safeguards, setting international standards and guidance for nuclear safety and security promoting nuclear applications for development.

b. Historically, the UK Space Agency (UKSA) entered into non-cancellable forward contracts (which were not leases or PFI contracts), in connection with a financial instrument for hedging international subscription payments. As at 31 March 2022, UKSA did not have any such contracts in place as all existing contracts were settled during the reporting period. There were therefore no payments to which UKSA was committed as at that date.

On 6 May 2022, UKSA entered into several forward exchange contracts to hedge 90% of existing international subscriptions commitments payable to the European Space Agency in Euros between June 2022 and January 2026. In accordance with IAS 10 Events after the Reporting Period, UKSA has recognised a non-adjusting subsequent event. This is included within note 30.

c. United Kingdom Research and Innovation (UKRI) shares the funding of the capital and running costs of CERN with other major scientific nations. There is a notice of withdrawal period of 12 months after the end of the current calendar year.

d. The UK, through UKRI, has signed up to International Conventions, with respect to Institut Laue-Langevin (ILL). The 5th protocol of the Intergovernmental Convention was signed in July 2013 and will remain in force until 31 December 2023. Thereafter it shall be tacitly extended from year to year unless any of the governments give written notification to the other governments of its intention to withdraw from the Convention. Any such withdrawal will take effect upon the expiry of 2 years from the date of receipt of the notification by any of the other governments or on such later date as may be specified in the notification.

23.3.2 Other commitments

The financial commitments payable in future years include payments due under non-cancellable contracts to the following organisations:

Organisation	Note	Within one year (£m)	Later than 1 year and not later than 5 years (£m)	Later than 5 years (£m)	Total, 31 March 2022 (£m)	Total, 31 March 2021 restated (£m)
Met Office	a	101	-	-	101	98
Various suppliers	b	78	32	-	110	-
Other commitments	-	186	34	6	226	301
Core Department and Agencies total	-	365	66	6	437	399
Other commitments	-	3	4	4	11	194
Departmental Group total	-	368	70	10	448	593

Core Department

Other commitments for the Core Department have been restated for 2020-21 as a result of the Vaccine Taskforce non-cancellable contracts which transferred to Department of Health and Social Care on 1 August 2021. See note 28 for further details. The nature of the most significant contracts is described below:

a. The Core Department has entered into contractual commitments which include agreements with the Met Office (a trading fund owned by the Department) to provide meteorological services including the Public Weather Service agreement which the Department manages on behalf of the government and for which the forward commitment is separately itemised above; the current Customer Supplier Agreement for the Public Weather Service remains in force until 31 March 2026, at which point this will be updated. This Agreement may be terminated by mutual consent of all the Parties after an agreed period of notice, which will not be less than 12 months. Met Office has been restated for 2020-21 to take account of a 12-month notice period for termination, for consistency with 2021-22.

b. The Core Department has entered into contractual commitments with various suppliers in relation to the Net Zero Innovation Programme and Energy Innovation Programme, which provide funding for low-carbon technologies and systems to tackle climate change.

24. Financial instruments

The carrying amounts of financial instruments in each of the IFRS 9 categories are as follows:

	Note	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Financial assets
Financial assets at amortised cost:
Cash and cash equivalents	17	4,412	5,821	1,952	3,444
Receivables (i)	15	2,802	3,522	3,568	4,373
Loans to public sector bodies (ii) & (iii)	11.3, 16	1,735	1,086	1,558	988
Other financial assets and private sector loans	12.2	195	1,411	51	1,057
Total financial assets at amortised cost	-	9,144	11,840	7,129	9,862
Financial assets elected at fair value through other comprehensive income (FVOCI):
Ordinary shares in public sector companies (iv)	11.1	666	1,277	670	1,244
Other financial assets	12.2	42	67	37	68
Total financial assets elected at FVOCI	-	708	1,344	707	1,312
Financial assets mandatory at fair value through profit or loss (FVTPL)
Repayable launch investments	12.1	463	463	485	485
Loans to public sector bodies (ii) & (iii)	11.3, 16	150	-	102	-
Other financial assets and private sector loans (vii)	12.2	1,267	5,158	1,196	4,103
Total financial assets mandatory at FVTPL	-	1,880	5,621	1,783	4,588
Public dividend capital:
Public dividend capital	11.2	65	65	65	65
Total public dividend capital	-	65	65	65	65
Financial liabilities
Financial liabilities as amortised cost:
Payables (ii)	18	(4,576)	(5,819)	(2,243)	(3,182)
Total financial liabilities as amortised cost	-	(4,576)	(5,819)	(2,243)	(3,182)
Financial liabilities mandatory at fair value through profit or loss (FVTPL):
Derivatives - Forward contracts	-	-	-	(7)	(7)
Derivatives - Contracts for difference (CfD)	10	-	(26,948)	-	(16,933)
Total financial liabilities mandatory at FVTPL	-	-	(26,948)	(7)	(16,940)
Financial liabilities designated at fair value through profit or loss (FVTPL):
Loan commitment liabilities	21	-	(194)	-	(146)
Total financial liabilities designated at FVTPL	-	-	(194)	-	(146)
Financial guarantee and loan commitment liabilities:
Financial guarantee liabilities (vi)	21	(15,837)	(15,837)	(19,833)	(19,833)
Loan commitment liabilities	21	(346)	(346)	-	-
Total financial guarantee and loan commitment liabilities	-	(16,183)	(16,183)	(19,833)	(19,833)

Notes

i. The amounts disclosed above as payables and receivables exclude any assets or liabilities which do not arise from a contractual arrangement.

ii. Loans to public sector bodies comprises the loans detailed in note 16 and Other loans and investments in Other public sector bodies detailed in note 11.3.

iii. Loans to public sector bodies in the Core Department for 2021-22 excludes £452 million (2020-21: £355 million) related to the loan investments in the Northern Powerhouse Investments Limited, Midlands Engine Investments Limited, Cornwall and Isles of Scilly Investments Limited and UK Climate Investments LLP, as these are accounted for at cost under IAS 27 – Separate Financial Statements. Loans to the British Business Bank with a value of £150 million are classified as Fair Value through Profit and Loss.

iv. Ordinary shares in public sector companies excludes bodies that are consolidated in the Departmental Group, as these are held at cost, see note 11.1.

v. Trade credit reinsurance contracts worth £31 million (2020-21: £69 million), included within note 21, are excluded from this table as they are held under IFRS 4 – Insurance Contracts.

vi. Under an adaptation of the FreM for IFRS (note 1), financial guarantees for the BBLS, CBILS, CLBILS, and RLS schemes (note 21) are measured at lifetime expected credit losses which is not a measure of fair value but is to be treated as such for the purpose of comparison of fair value to the value in the SoFP.

vii. Future Fund convertible loans and equity with a value of £1,036 million (2020-21: £1,030 million), included within Other Financial Assets, are detailed in note 12.2.

Financial risk management

IFRS 7 ‘Financial Instruments: Disclosure’ requires the disclosure of information which will allow users of financial statements to evaluate the significance of financial instruments on the Departmental Group’s financial performance and position and the nature and extent of its exposure to risks arising from these instruments.

As the cash requirements of the Departmental Group are largely met through the Estimates process, financial instruments play a more limited role in creating risk than would apply to a private sector body of a similar size.

The Departmental Group is however exposed to credit, market, interest rate, liquidity and commodity price risks due to the specific programmes and activities undertaken in pursuance of the Departmental Group’s objectives.

Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

Significant credit risks can be summarised as follows:

Core Department

Investment funds

Investee companies may not perform as expected and the Departmental Group may not recover its initial investment. The Core Department minimises the risk by monitoring the overall performance of the funds and to secure value for the Core Department as an investor. This includes a full evaluation of each business case submitted prior to committing funds.

Financial guarantees

The Core Department is exposed to credit risk from borrower default on lending against which the Department has issued guarantees, primarily in relation to the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and Recovery Loan Scheme (RLS) (note 21). The guarantees were issued to lenders and do not impact on the contractual obligation of borrowers to repay loans. Proportions of lending guaranteed are 100% for BBLS and 80% for CBILS and CLBILS, and 80% or 70% for RLS. An estimate of collateral security held by lenders for CBILS, RLS and CLBILS, which will reduce the Department’s exposure, has been included in the reported liability. Any payment by the Department under a guarantee entitles it to a commensurate proportion of sums subsequently recovered from the borrower.

As at 31 March 2022 the Core Department was exposed to total guaranteed lending under these schemes of £59,065 million (31 March 2021: £66,510 million). The guarantees will expire over the next 10 years as the underlying debt is repaid. The Department’s reported liability of £15,806 million as at 31 March 2022 (31 March 2021: £19,773 million) has been measured as the present value of expected payments to reimburse guarantee holders for credit losses incurred less amounts expected subsequently to be recovered from borrowers, that is, as lifetime expected credit losses as defined for financial guarantees by IFRS 9. Accredited scheme lenders are responsible for collections and recoveries of amounts advanced to borrowers. Lenders are required to follow their own recovery processes, whilst fulfilling their regulatory responsibility to ensure fair and consistent treatment of customers. For BBLS, a recoveries framework, developed in conjunction with lenders, provides guidance to lenders on best practice in the context of the scheme rules. Lenders’ operation of the schemes, including recoveries processes and performance, is assessed and reviewed by the British Business Bank.

Financial guarantees have also been issued under the Enterprise Financial Guarantee and ENABLE schemes. The Enterprise Financial Guarantee Scheme facilitates lending to viable businesses with the maximum obligation capped at £106 million at 31 March 2022 (31 March 2021: £147 million). The ENABLE guarantee scheme aims to encourage lending to smaller businesses with the Department guaranteeing a portion of net losses on designated loan portfolios of participating banks in excess of an agreed ‘first loss’ threshold. As at 31 March 2022 the Department had approved guarantee facilities totalling £1.05 billion under ENABLE (31 March 2021: £1.3 billion), of which £600 million was effective (31 March 2021: £783 million) with a potential maximum liability of £380 million (31 March 2021: £310 million). An aggregate liability of £30.6 million for both schemes as at 31 March 2022 (31 March 2021: £60 million) has been reported on the Statement of Financial Position.

The Core Department has measured expected credit losses on outstanding loan commitments as at 31 March 2022 at £346 million (31 March 2021: £nil).

NDPBs and other designated bodies

British Business Bank

The British Business Bank (BBB) investments are assessed by BBB’s Valuation Committee. BBB produces credit risk ratings for its investments based upon a risk grading of the financial obligor and the estimated Loss Given Default on that investment. Risk drivers which are assessed in setting the ratings include the financial viability and lending safety of the investment and, if available, the rating assigned by an external credit agency. This is mitigated by new product approval processes that assess default and loss rates, due diligence of delivery partners underwriting methods, and portfolio monitoring and default models being put in place.

Credit risk rating and loss allowance

The Departmental Group has the following financial assets subject to the expected credit loss model:

Trade receivables, contract assets, and lease receivables
Loans, bonds, and term deposits
Cash and cash equivalents

Trade receivable, contract assets and lease receivables

The Core Department applies the IFRS 9 simplified approach using an allowance matrix to measure the lifetime expected loss allowance for trade receivables in accordance with the FReM guidance.

Trade receivables are grouped based upon credit risk characteristics and the number of past due days. Default is defined as 90 days past due. The loss rates are estimated using the historic data for each aging group. Forward-looking information such as macroeconomic factors and entity specific situations are considered for entities with significant outstanding balances. Balances with other core central government departments are excluded from recognising stage-1 and stage-2 impairments following the FReM adaptions.

On this basis, the loss allowance as at 31 March 2022 determined as follows for trade receivables in the Core Department:

31 March 2022, Core Department	Current	1-30 days	31-60 days	61-90 days	91+ days	Total
Expected Loss rate	1%	3%	8%	24%	60%
Gross carrying amount- trade receivables (excluding other government debt) (£m)	12	7	-	-	1	20
Loss allowance (£m)	-	-	-	-	1	1

31 March 2022, Core Department	Current	1-30 days	31-60 days	61-90 days	91+ days	Total
Expected Loss rate	1%	17%	4%	42%	100%
Gross carrying amount- trade receivables (excluding other government debt) (£m)	19	-	-	-	1	20
Loss allowance (£m)	-	-	-	-	1	1

The loss allowance for trade receivable balances held by ALBs has been assessed at an organisational level and the total loss allowance estimated is immaterial for detailed disclosure on loss rates.

The movement in the allowance for provisions in respect of trade receivables during the year is disclosed below reflecting the allowance per the expected credit loss model under IFRS 9.

	Core Department and Agencies, 31 March 2022 (£m)	Departmental Group, 31 March 2022 (£m)	Core Department and Agencies, 31 March 2021 (£m)	Departmental Group, 31 March 2021 (£m)
Balance at 1 April	14	20	13	23
Net remeasurement	(5)	(3)	1	(3)
Write-off	-	-	-	-
Balance at 31 March	9	17	14	20

Loans, bonds and term deposits

Where possible, the Departmental Group monitors changes in credit risk by tracking published external credit ratings. For all assets other than those held by British Business Bank, an internal credit rating system, which was developed based on other established methodologies, was used to assign credit risks for loans that do not have external credit rating. 12-month and lifetime probabilities of default are based upon Moody’s published research on the global default rate adjusted for historical repayment data and any macro-economic pressures which could impact the entity’s ability to repay the loan.

The British Business Bank (BBB) investments are assessed by BBB’s Valuation Committee. BBB produces credit risk ratings for its investments based upon a risk grading of the financial obligator and the estimated Loss Given Default on that investment. Further details can be found in BBB’s annual report and accounts.

The following table presents an analysis of credit quality of loans, bonds and term deposits. It indicates whether assets were subject to a 12-month ECL or lifetime ECL allowance, and whether they were credit-impaired.

Credit rating	12 month ECL, 31 March 2022 (£m)	Lifetime ECL not impaired, 31 March 2022 (£m)	Lifetime ECL impaired, 31 March 2022 Amortised cost (£m)	Total, 31 March 2022 Amortised cost (£m)	12 month ECL, 31 March 2021 (£m)	Lifetime ECL not impaired, 31 March 2021 (£m)	Lifetime ECL impaired, 31 March 2021 Amortised cost (£m)	Total, 31 March 2021 Amortised cost (£m)
Low risk financial assets	1,931	-	-	1,931	1,532	-	-	1,532
Medium risk financial assets	308	17	11	336	307	25	-	332
High risk financial assets	182	54	-	236	166	47	-	213
Default financial assets	-	-	56	56	-	-	53	53
Total gross carrying amounts	2,421	71	67	2,559	2,005	72	53	2,130
Loss allowance	(16)	(13)	(34)	(63)	(18)	(18)	(49)	(85)
Carrying amount	2,405	58	33	2,496	1,987	54	4	2,045

The Departmental Group does not hold any loans, bonds and term deposits measured at FVOCI.

The movement in the allowance for impaired loans, bonds and term deposits at amortised cost during the year was as follows.

	12 month ECL, 31 March 2022 (£m)	Lifetime ECL not impaired, 31 March 2022 (£m)	Lifetime ECL credit impaired, 31 March 2022 (£m)	Total, 31 March 2022 (£m)	12 month ECL, 31 March 2021 (£m)	Lifetime ECL not impaired, 31 March 2021 (£m)	Lifetime ECL credit impaired, 31 March 2021 (£m)	Total, 31 March 2021 (£m)
Balance at 1 April	18	18	49	85	25	20	57	102
Additions	9	1	1	11	23	-	2	25
Net remeasurement	(9)	(7)	(7)	(23)	(16)	(3)	(4)	(23)
Transfer to credit loss 12 month	-	1	1	2	-	5	7	12
Transfer to credit loss not impaired	(1)	-	(1)	(2)	(5)	-	2	(3)
Transfer to credit loss impaired	(1)	1	-	-	(8)	(1)	-	(9)
Written-off	-	(1)	(9)	(10)	(1)	(3)	(15)	(19)
Balance at 31 March	16	13	34	63	18	18	49	85

Cash and cash equivalents

The Departmental Group held cash and cash equivalents of £5,821 million as at 31 March 2022 (31 March 2021: £3,444 million). The cash and cash equivalents are held with banks and financial institutions which are rated AA- to AA+ based on S&P ratings.

Impairment on cash and cash equivalents has been measured on the 12-month expected loss basis and reflects the short maturities of the exposures. The Departmental Group considers that cash and cash equivalents have a low credit risk based on the external credit ratings of the holding parties.

Loan commitment liabilities

BBB’s ECF loan commitments were designated to be measured at FVTPL and the credit risk is, therefore, reflected in their fair value. These had a fair value of £194 million as at 31 March 2022 (31 March 2021: £141 million).

Financial guarantee contracts

The Core Department holds financial guarantee contracts worth £15,903 million as at 31 March 2022 (31 March 2021: £19,833 million). These relate to Guarantee schemes established in response to the COVID-19 pandemic and in accordance with HM Treasury’s Accounts Direction are measured at Lifetime expected credit losses not impaired.

Collateral

The Departmental Group holds collateral over loans held at amortised cost. The collateral held is in the form of cash and buildings. The value of the loan assets held which are secured by collateral is £964 million (31 March 2021: £1,090 million). The value of the collateral held is lower than the value of the assets secured by the collateral. The collateral was considered in estimating the ECL.

Market risk

Market risk is the risk that fair values and future cash flows will fluctuate due to changes in market prices. Market risk generally comprises of:

a) Foreign Currency risk

Core Department

The Core Department is exposed to a small amount of currency risk with respect to Repayable Launch Investment contracts where income due from aircraft or engine sales may initially be based in US dollars, but it is minimal in the context of the overall Repayable Launch Investment portfolio. Otherwise the Core Department’s exposure to foreign currency risk during the year was insignificant. Foreign currency income was negligible, and foreign currency expenditure was a small percentage of total expenditure (less than 1%).

All material assets and liabilities are denominated in pounds sterling.

Agencies

Forward contracts

UKSA pays an annual subscription in euros to the European Space Agency (ESA) and enters into forward contracts to mitigate the risk. These derivative contracts are designated as cash flow hedges.

NDPBs and other designated bodies

Cash and cash equivalents held in foreign currency

BIS (Postal Services Act 2011) Company Limited, UKRI and Nesta Trust are subject to minor foreign currency risk through the maintenance of bank accounts in foreign currencies (predominantly US dollars and euros) to deal with day-to-day overseas transactions.

b) Interest Rate risk

Core Department

The Core Department does not invest or access funds from commercial sources so is not exposed to interest rate risk.

NDPBs and other designated bodies

BBB holds both fixed and variable rate investments. Interest rate risk is regularly monitored to ensure that the mix of fixed and variable borrowing is appropriate. BBB does not use derivatives to hedge interest rate risk.

The impact of interest rates affects the discount rate used to arrive at the fair value of the CfD liability held by LCCC. Changes in interest rates which affect the discount rate would therefore affect the Statement of Financial Position valuation. However, the Departmental Group is not financially exposed to this risk because the liability is funded through a levy on suppliers.

c) Other Market risk

Core Department

The Core Department is exposed to wider risks relating to the performance of the economy as a whole. The main risks resulting from a downward movement in the economy include failures of investee companies of investment funds and loan defaults. For further information on the assessment of market risk in relation to Repayable Launch Investments, see note 11.1.

NDPBs and other designated bodies

The NESTA Trust is exposed to equity price risk due to its investment of a portion of its endowment assets in publicly listed equity investments. NESTA Trust minimises this risk by investing for the medium to long term, diversifying its equity investments over a number of managers with complementary styles, and invests in investment funds with large institutional investors. The performance of these investment managers is monitored regularly.

The valuations of fair value through profit or loss financial assets are based on the valuations provided by the fund managers in line with International Private Equity and Venture Capital (IPEV) Valuation Guidelines or the valuation guidelines produced by the British Venture Capital Association (BVCA). Valuation techniques used include the use of earnings multiples, discounted cash flows analysis, and net asset values. These valuations take into account the impact of the COVID-19 pandemic as at 31 December 2021.

Inflation risk

The amounts payable under the CfD contracts will be affected by the indexation of strike prices to reflect inflation and changes to wholesale electricity prices resulting from inflation. Inflation rates may not continue at the relatively low levels experienced in recent years; the Group is not financially exposed to this risk because the liability is funded through a levy on suppliers.

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

Core Department and Agencies

In common with other government departments, the future financing of its liabilities is to be met by future grants of Supply, voted annually by Parliament. There is no reason to believe that future approvals will not be forthcoming, therefore, on this basis the liquidity risk to the Core Department and its Agencies is minimal.

NDPBs and other designated bodies

Information about the Departmental Group’s objectives, policies and processes for managing and measuring risk can be found in the Governance Statement.

Commodity price risk

Commodity price risk is the risk or uncertainty arising from possible price movements. The amounts payable under the CfD contracts are exposed to price risk through the fluctuations in future actual wholesale electricity prices, specifically, on how they will differ from the current forecast of future prices in the central scenario. However the LCCC and the Departmental Group are not financially exposed to this risk because the liability is funded through a levy on suppliers.

Financial instruments: fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

Level 1 – uses quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – uses inputs for the assets or liabilities other than quoted prices, that are observable either directly or indirectly;
Level 3 – uses inputs for the assets or liabilities that are not based on observable market data, such as internal models or other valuation method.

The following table presents the Departmental Group’s financial assets and liabilities that are measured at fair value at 31 March 2022 and 31 March 2021.

	Note	Level 1, 31 March 2022 (£m)	Level 2, 31 March 2022 (£m)	Level 3, 31 March 2022 (£m)	Total, 31 March 2022 (£m)	Level 1, 31 March 2021 (£m)	Level 2, 31 March 2021 (£m)	Level 3, 31 March 2021 (£m)	Total, 31 March 2021 (£m)
Financial assets
FVOCI elected
Equity investments
Ordinary shares in public sector bodies	11.1	-	1,277	-	1,277	-	1,244	-	1,244
Private sector shares	12.2	5	41	23	69	7	36	26	69
Total financial assets at FVOCI	-	5	1,318	23	1,347	7	1,280	26	1,313
FVTPL mandatory
Debt and venture capital investments
Repayable launch investments	12.1	-	-	462	462	-	-	485	485
Private Sector Loans	12.2	-	-	586	586	-	-	943	943
Investment funds	12.2	281	-	3,597	3,878	275	-	2,686	2,961
Equity investments
Private sector shares	12.2	37	-	136	173	39	-	3	42
Future Fund Shares	12.2	-	-	519	519	-	-	87	87
Other investments	12.2	-	-	-	-	-	-	70	70
Total financial assets at FVTPL mandatory	-	318	-	5,300	5,618	314	-	4,274	4,588
Total financial assets measured at fair value	-	323	1,318	5,323	6,965	321	1,280	4,300	5,901
Financial Liabilities
FVTPL mandatory
Loan commitment liabilities	21	-	-	(538)	(538)	-	-	(146)	(146)
Total liabilities at FVTPL mandatory	-	-	-	(538)	(538)	-	-	(146)	(146)
FVTPL designated
Derivatives - Forward contracts	-	-	-	-	-	-	(7)	-	(7)
Derivatives - CfD	10	-	-	(26,948)	(26,948)	-	-	(16,933)	(16,933)
Total financial liabilities at FVTPL designated	-	-	-	(26,948)	(26,948)	-	(7)	(16,933)	(16,940)
Total financial liabilities measured at fair value	-	-	-	(27,486)	(27,486)	-	(7)	(17,079)	(17,086)

Transfers between levels of the fair value hierarchy are deemed to occur at the end of the reporting period. There were no transfers between levels during the year. Specific valuation techniques used to value financial instruments include:

The fair value of the CfDs has been calculated using the income approach based on level 3 inputs, which reflects the present value of future cash flows that are expected to occur over the contract term of the CfD.
For details regarding the fair value measurement of RLI’s, refer to note 12.1.
The fair value of forward foreign exchange contracts is determined using forward exchange rate at the reporting date based on Level 2 inputs, with the resulting value discounted back to present value.
Other techniques, such as discounted cash flow analysis or for non-quoted ordinary shares and investment funds that are not actively traded, the net assets of the company/ underlying fund are used. These are classified as level 3.
The fair value of Public Sector shares are based upon net assets and classified as level 2.

The following table presents the changes in level 3 instrument for the period ended 31 March 2022, excluding the CfDs which are disclosed in note 10.

	Ordinary shares in unlisted private equities (£m)	Repayable launch investments (£m)	Investment funds and other financial investments (£m)	Loan Commitment Liabilities (£m)	Future Fund (£m)	Total (£m)
Balance at 1 April	29	485	2,756	(146)	1,030	4,154
Additions	106	-	874	(1,795)	46	(769)
Repayments/disposals	(1)	(49)	(611)	-	(47)	(708)
Revaluations	22	-	660	1,402	6	2,090
Transfers	12	-	(12)	-	-	-
Gains and losses recognised in SoCNE	(9)	26	1	-	-	18
Balance at 31 March	159	462	3,668	(539)	1,035	4,785

The following table presents the changes in level 3 instrument for the year ended 31 March 2021, excluding the CfDs which are disclosed in note 10.

	Ordinary shares in unlisted private equities (£m)	Repayable launch investments (£m)	Investment funds and other financial investments (£m)	Loan Commitment Liabilities (£m)	Future Fund (£m)	Total (£m)
Balance at 1 April	25	833	2,057	(147)	-	2,768
Additions	4	-	635	(41)	1,090	1,688
Repayments/disposals	(1)	(336)	(273)	-	-	(610)
Revaluations	13	-	362	42	(60)	357
Gains and losses recognised in SoCNE	(12)	(12)	(25)	-	-	(49)
Balance at 31 March	29	485	2,756	(146)	1,030	4,154

Maturity profiles – discounted cashflows

The maturity profile of the discounted cashflows for the CfDs excluding Hinkley Point is shown below:

	< 1 year (£m)	2-5 years (£m)	>5 years (£m)	Total (£m)
As at 31 March 2021	1,021	3,962	11,950	16,933
As at 31 March 2022	(3,904)	2,639	28,213	26,948

25. Contingent liabilities

Core Department

The Core Department has the following contingent liabilities:

Unquantifiable

Basis of Recognition	Description
Core Department – Financial Reporting Council funding	A guarantee has been given to the Financial Reporting Council that, if the Council’s general voluntary funding from external sources falls sufficiently for the Core Department to have to consider making legislation to activate the statutory levy under section 17 of the Companies (Audit, Investigations and Community Enterprise) Act 2004, the Core Department will make such a grant to cover the Council’s costs as is sufficient to meet the preconditions in those levy raising powers provided the requisite funding has not been made available through another grant.
Core Department – Deeds relating to the Mineworkers’ Pension Scheme and British Coal Staff Superannuation Scheme under Paragraph 2(9) of Schedule 5 to the Coal Industry Act 1994	Government guarantees were put in place on 31 October 1994, the day the schemes were changed to reflect the impact of privatisation of the coal industry. They are legally binding contracts between the scheme Trustees and the Secretary of State for Business, Energy and Industrial Strategy. The guarantees ensure that benefits earned by scheme members during their employment with British Coal, and any benefit improvements from surpluses which were awarded prior to 31 October 1994, will always be paid and will be increased each year in line with the Retail Prices Index. If, at any periodic valuation, the assets of the Guaranteed Fund of either scheme were to be insufficient to meet its liabilities, the assets must be increased to bring the Fund back into balance. This is a long-term contingent liability dependent on the performance of the schemes’ investments and their mortality experience. Further details regarding the schemes can be found in note 15.
Core Department – Indemnity to Public Appointment Assessors	The Cabinet Secretary has provided a government-wide indemnity to Public Appointments Assessors (PAAs) against personal civil liabilities incurred in the execution of their PAA functions.
Core Department – Site restoration liabilities inherited from British Coal	The Core Department inherited responsibility from British Coal to reimburse certain third parties for costs incurred meeting statutory environmental standards in the restoration of particular coal-related sites.
Core Department – Compensation for exclusion from grant scheme	The Core Department may become liable for funding the costs of compensation to certain claimants whose applications to the GB Non-Domestic Renewable Heat Incentive scheme had been rejected, following a court judgment that their applications for accreditation had not been processed in full accordance with scheme regulations.

Quantifiable

Basis of Recognition	Description
Core Department – Wave Hub transfer (£5 million)	The Core Department has indemnified Cornwall Council up to 2028 in respect of the transfer of Wave Hub to a maximum of £5 million.

Departmental Group

The Departmental Group has the following contingent liabilities, which are either unquantifiable or quantifiable contingent liabilities of more than £1 million in either this financial year or prior financial year. Other liabilities are disclosed in our partner organisation accounts.

Unquantifiable

Basis of Recognition	Description
Coal Authority – Environmental Legal Claims	Under the Environmental Information Regulations 2004 - The Coal Authority is aware of potential legal proceedings in respect of past fees paid for Mining Information. In the eventuality of receiving formal notification to commence legal proceedings, the Coal Authority will strongly defend its position.
Coal Authority – Legal claims	The Coal Authority is subject to various claims and legal actions in the ordinary course of its activities. Where appropriate, provisions are made in the accounts on the basis of information available and in accordance with guidance provided under the FReM and IFRS. The Coal Authority does not expect that the outcome of the above issues will materially affect its financial position.
Coal Authority – Restructuring Scheme	Where liabilities transferred under the various Coal Authority Restructuring Schemes (CARS) have crystallised due to planning conditions, agreements, claims etc, provision has been made in these financial statements. It has not, however, been possible to quantify contingent liabilities that may arise in the future. It is expected that any costs will be covered by future allocations of grant in aid.
Coal Authority – Subsidence damage and public safety liabilities	Licensees of mining operations are required to provide security to the Coal Authority to cover the anticipated future costs of settling subsidence damage liabilities within their areas of responsibility. Outside the areas of responsibility of the holders of licences under Part II of the 1994 Act, the Coal Authority is responsible for making good subsidence damage. Where an area of responsibility is extinguished this would transfer to the Coal Authority who would become responsible for the discharge of outstanding subsidence liabilities. The Coal Authority also has an ongoing liability to secure and keep secured the majority of abandoned coal mines. In all cases the liability for operating collieries is the responsibility of the licensees/ lessees and security is held to address those liabilities. The above liabilities have been provided for within the Public Safety and Subsidence provision based on analysis of trends and claims experience. However, it is possible that significant, unexpected events outside of this provision may materialise. It is expected that any deficit will be covered by future allocations of grant in aid.
CNPA – Legal Claims	There are a number of potential liabilities in respect of claims from employees. The timing and amounts of any payment are uncertain. These liabilities have not been provided for as the CNPA believes that the claims are unlikely to be successful and unlikely to lead to a transfer of economic benefits.
CNPA – Multi Force Shared Service (MFSS)	There is a partner commitment as part of the end of the MFSS collaboration, to cover any redundancy costs that arise. Cheshire’s PCC (as the lead Partner and employer of the MFSS staff) has stated their intention to find a role for all displaced MFSS staff wherever possible. While this is an ambition, there may still be some redundancies in November 2022, however at this time it is not possible to identify the potential costs.
Insolvency Service – Legal Cases	Due to the nature of the work undertaken by the Agency, there are a number of ongoing legal cases giving rise to contingent liabilities. The legal cases included as contingent liabilities all relate to possible obligations where the Agency has issued civil and criminal proceedings through the courts, and the outcome is dependent on court rulings and findings. Further details cannot be disclosed, as in accordance with IAS 37 (paragraph 92), the Agency considers that disclosure of values for any contingent liability connected to legal proceedings could seriously prejudice ongoing litigation.
NDA – Pension Schemes	Whilst not the lead employer, the NDA is the lead organisation and has ultimate responsibility for certain nuclear industry pension schemes, including the Combined Nuclear Pension Plan and the Magnox section of the ESPS. Provisions for known deficits are included within Nuclear Provisions. However, movements in financial markets may adversely impact the actuarial valuations of the schemes, resulting in an increase in scheme deficits and consequent increase in nuclear provision.
UKRI – (STFC) Reprocessing and staff commitments	A contingent liability exists in respect of the Science and Technology Facilities Council (STFC)’s share of Institut Laue-Langevin (ILL) unfunded provisions for staff related costs (e.g. early retirement) and costs associated with reprocessing fuel elements that will arise on the closure of the facility. The contingent liability will become a provision when a detailed closure plan has been documented and communicated to all those affected.
UKRI – Corporation Tax	UKRI is subject to Corporation Tax on taxable profits. During 2021-22, HMRC raised enquiries into the 2018-19 Corporation Tax return. Subject to the position agreed with HMRC regarding the specific treatment of an absorption gain recognised within the 2018-19 tax return, UKRI may recognise a further Corporation tax liability, in addition to those already recognised. This enquiry was ongoing as at 31st March 2022 and UKRI did not have certainty over the value or validity of this obligation.
Others	There are a number of potential liabilities for the Departmental Group in respect of claims from suppliers, employees and third parties which depend on actual or potential proceedings. The timing and amounts of any liabilities are uncertain.

Quantifiable

Basis of Recognition	Description
NDA – AGR Transfer (£16,656 million)	On 23 June 2021 the NDA, Government and EDF Energy entered into new decommissioning arrangements for 7 Advanced Gas-cooled Reactor (AGR) stations in which Government has directed NDA to take on the future ownership of the stations for decommissioning. The work will be undertaken by the NDA subsidiary Magnox Limited. The NDA will recognise the estimated future liability in its financial statements for each of the stations at the respective points at which NDA takes ownership. The completion and timing of the transfer of ownership is currently uncertain and contingent on the fulfilment of a number of conditions by the parties involved. The NDA therefore recognises a contingent liability for the future decommissioning costs of the stations. This has been estimated by the current owner of the stations at £16,656 million (undiscounted) in its most recently published financial statements.
BBB – Financial guarantee (£3 million)	Under the Bank’s Help to Grow financial guarantee programme, the Bank has guaranteed 75% of eligible lending to SMEs under these agreements and a counter guarantee is in place that guarantees 50% of the Bank’s 75% of eligible lending. As at 31 March 2022 the amount lent under these financial guarantee agreements was £3 million (31 March 2021: £3 million). The programme is now closed and there will be no further lending.
UKRI – (Innovate UK) Decommissioning costs
(£2.2 million)	UKRI has a contingent liability which may arise if UKRI has to provide a grant to NAREC (Natural Renewable Energy Centre) in order for it to be able to decommission a weather monitoring platform in the North Sea. This is currently collecting data to support the development of an offshore wind test site. This may take place anytime between 3 and 25 years from now dependent on the development of the site, at an estimated cost of £2.2 million (31 March 2021: £2.6 million).
UKRI – (STFC) Decommissioning costs (£1.7 million)	A contingent liability exists for European Synchrotron Radiation Facility (ESRF) decommissioning costs associated with the dismantling of the facility and infrastructures. Decommissioning occurs on winding up of ESRF. If exit by the UK (or any other Member) results in ESRF being wound up, the Members are required to arrange for decommissioning of ESRF’s plant and buildings and to meet the costs of doing so in proportion to their share of capital at the time of dissolution. The contingent liability is estimated to be £1.7 million (31 March 2021: £1.8 million).

26. Contingent assets

Core Department

The Core Department has the following contingent assets:

Quantifiable

Basis of Recognition

Description

Deed relating to the British Coal Staff Superannuation Scheme (BCSSS) under Paragraph 2(9) of Schedule 5 to the Coal Industry Act 1994 (£1.9 billion)

Within 12 months of 31 March 2033, the trustee of the BCSSS shall pay to ‘the Guarantor’ (the Secretary of State) any surplus remaining on the scheme net of any amount retained for the obligation. The value of the surplus will depend on the value of scheme assets in relation to outstanding obligations. Based on the Government Actuary’s Department’s estimate of a £1.9 billion surplus as at 31 March 2021, the Core Department considers a receipt from the scheme to be probable.

Departmental Group

The Departmental Group has the following contingent assets:

Unquantifiable

Basis of Recognition

Description

Coal Authority - Restructuring Schemes

By virtue of the seventh and ninth Coal Authority Restructuring Schemes (CARS 7 and 9) the Coal Authority is the beneficiary of restrictive covenants and clawback provisions relating to land and properties sold by the British Coal Corporation. In the event that the purchasers are able to retrospectively secure added value by obtaining planning consent for alternative uses the Authority will receive a share of the added value. Quantification of this asset is not possible.

The Core Department is the parent of the bodies listed in note 29 ‘List of bodies within the Departmental Group’ – these bodies are regarded as related parties and various material transactions have taken place during the reporting period between members of the Departmental Group. The related parties of the consolidating bodies are disclosed in their respective accounts. The Core Department is also the sponsor of UK Intellectual Property Office (UKIPO), Met Office (Trading Funds), Ordnance Survey, NPL Management Limited, NNL Holdings Limited and British Nuclear Fuels.

The Core Department has engaged in material transactions with other consolidated bodies, other government bodies, and devolved administrations (the Northern Ireland Executive, Scottish government and Welsh government). The most significant of these transactions have been with the Exchequer Consolidated Fund and Contingencies Fund, United Kingdom Research and Innovation, Post Office Limited, and Nuclear Decommissioning Authority.

No minister, board member, key manager of the Departmental Group or other related party has undertaken any material transactions with the Core Department during the year. Details of the Department’s ministers and senior managers are shown in the Remuneration Report.

In the course of allocating funding during the year, UKRI entered into material transactions with various Higher Education Institutions. Where these bodies have board members who are also members of university councils, each body operates a policy that precludes interested parties from voting on the funding to the university in which they have an interest. Further details of these transactions can be found in statutory accounts of UKRI.

A number of BEIS partner organisations entered into transactions with the Government Property Agency (GPA) in relation to rental payments for office accommodation.

In the ordinary course of business, several BEIS partner organisations entered into transactions with BT Group plc for telecommunications services.

28. Restatements of Statement of Comprehensive Net Expenditure and Statement of Financial Position

Prior period adjustments

Machinery of government change

The Core Department created a Taskforce during 2020-21 to drive forward development and production of a COVID-19 vaccine. Most functions of the Taskforce became the responsibility of the Department of Health and Social Care (DHSC) from 1 August 2021 following a statement to this effect to Parliament by the Prime Minister on 22 July 2021. The Vaccine Taskforce continues to operate as a single unit but on behalf of DHSC and BEIS jointly, with each department separately responsible for funding and directing different defined activities. To assist delivery continuity, the Core Department continues to provide staff and other administrative resources to the Joint Unit as a whole but expenses and liabilities relating to DHSC outcomes, including for the Core Department’s administrative resources recharged to DHSC, impact DHSC financial results and are reported in the DHSC accounts.

In accordance with the FReM, the financial results of the Core Department have been restated to reported 2021-22 as if the current arrangement with DHSC had been in place since creation of the Taskforce in 2020. This includes a restatement of comparative information for 2020-21 as detailed below. Expenses and liabilities reported in these financial statements are those incurred by the Taskforce since its inception in delivering outcomes that have been the responsibility of the Core Department since 1 August 2021.

Impact of restatements on opening balances for Core Department and Agencies at 1 April 2021

	Balance at 31 March 2021 per 2020-21 published accounts (£m)	Machinery of Government changes (£m)	Restated balance at 1 April 2021 (£m)
Consolidated Statement of Comprehensive Net Expenditure
Operating Income	(890)		(890)
Operating Expenditure	54,431	(1,264)	53,167
Net expenditure for the year from continuing operations	(142)	3	(139)
Other comprehensive net income and expenditure	128		128
Total comprehensive expenditure	53,527	(1,261)	52,266
Consolidated Statement of Financial Position
Non-current assets:
– Property, plant and equipment	328		328
– Investment properties	2		2
– Intangible assets	44		44
– Investments and loans in public bodies	4,101		4,101
– Other financial assets	1,769		1,769
– Investment in joint ventures and associates	348		348
– Trade and other receivables	634		634
Current assets:
– Trade and other receivables	4,091	(577)	3,514
– Investments and loans in public bodies	588		588
– Cash and cash equivalents	1,952		1,952
Current liabilities:
– Trade payables and other liabilities	(4,460)	169	(4,291)
– Provisions for liabilities and charges	(226)		(226)
– Financial guarantees, loan commitment liabilities and re-insurance contracts	(19,837)		(19,837)
– Derivative financial instruments	(7)		(7)
Non-current liabilities:
– Trade payables and other liabilities	(1,324)		(1,324)
– Provisions for liabilities and charges	(1,540)		(1,540)
– Financial guarantees, loan commitment liabilities and re-insurance contracts	(65)		(65)
Taxpayer’s equity and other reserves:
– General fund	(14,015)	(408)	(14,423)
– Revaluation reserve	413		413

Impact of restatements on opening balances for the Departmental Group at 1 April 2021

	Balance at 31 March 2021 per 2020-21 published accounts (£m)	Machinery of Government changes (£m)	Restated balance at 1 April 2021 (£m)
Consolidated Statement of Comprehensive Net Expenditure
Operating Income	(5,401)		(5,401)
Operating Expenditure	57,127	(1,264)	55,863
Net expenditure for the year from continuing operations	2,048	3	2,051
Other comprehensive net income and expenditure	(130)		(130)
Total comprehensive expenditure	53,644	(1,261)	52,383
Consolidated Statement of Financial Position
Non-current assets:
– Property, plant and equipment	3,833		3,833
– Investment properties	122		122
– Intangible assets	190		190
– Investments and loans in public bodies	1,725		1,725
– Other financial assets	5,641		5,641
– Recoverable contract costs	1,447		1,447
– Investment in joint ventures and associates	1,395		1,395
– Trade and other receivables	739		739
Current assets:
– Inventories	18		18
– Non-current assets held for sale	6		6
– Trade and other receivables	5,462	(577)	4,885
– Investments and loans in public bodies	572		572
– Other financial assets	72		72
– Cash and cash equivalents	3,444		3,444
Current liabilities:
– Trade payables and other liabilities	(7,928)	169	(7,759)
– Provisions for liabilities and charges	(3,426)		(3,426)
– Financial guarantees, loan commitment liabilities and re-insurance contracts	(19,880)		(19,880)
– Derivative financial instruments	(7)		(7)
Non-current liabilities:
– Trade payables and other liabilities	(3,003)		(3,003)
– Provisions for liabilities and charges	(136,301)		(136,301)
– Financial guarantees, loan commitment liabilities and re-insurance contracts	(168)		(168)
– Derivative financial instruments	(16,933)		(16,933)
– Retirement benefit obligations	(392)		(392)
Taxpayer’s equity and other reserves:
– General fund	(166,043)	(408)	(166,451)
– Revaluation reserve	1,900		1,900
– Charitable funds	472		472
– Non-controlling interests	299		299
Statement of Outturn Against Parliamentary Supply
Resource DEL	22,496	(1,240)	21,256
Capital DEL	20,450	(21)	20,429
Resource AME	(8,152)		(8,152)
Capital AME	19,544		19,544
Net Outturn for the year	54,338	(1,261)	53,077

29. List of bodies within the Departmental Group

The table below shows the list of BEIS organisations that are included in the Government Resources and Accounts Act 2000 (Estimates and Accounts) Order 2021, known as the Designation Order, plus amendments from the Government Resources and Accounts Act 2000 (Estimate and Accounts) (Amendment) Order 2021, known as the Amendment Order. The individual Annual Report and Accounts for each of these bodies can be found on their own websites or via the GOV.UK website.

The bodies whose accounts have been consolidated within the Departmental Group accounts are shown in section (a) of the table. Bodies within the Departmental Group but not consolidated, such as where net assets are not considered material to the Departmental Group accounts, are indicated separately in section (b) of this table.

As a result of changes made in the 2021-22 Designation Order and Amendment Order some additional bodies are now included in the Departmental Group accounts boundary. Where boundary changes have an impact on previously reported financial results, these are shown in note 28.

(a) Bodies consolidated in Departmental Group accounts for 2021-22

Designated Body (linked bodies are indented below their parent body)	Status	Notes and website (further information about linked bodies or those closed during the year is also included)
Agencies
Companies House	Executive Agency	gov.uk/government/organisations/companies-house
Insolvency Service	Executive Agency	gov.uk/government/organisations/insolvency-service
UK Space Agency	Executive Agency	gov.uk/government/organisations/uk-space-agency
NDPBs and other designated bodies
Advisory, Conciliation and Arbitration Service ^[Note 1]	NDPB	acas.org.uk
– Central Arbitration Committee	NDPB (linked to ACAS)	Consolidated by ACAS
– Certification Office for Trade Union and Employers’ Associations	Other Public Body - Office Holder (linked to ACAS)	Consolidated by ACAS
BIS (Postal Services Act 2011) Company Limited	Other Public Body - Limited Company	find-and-update.company-information.service.gov.uk/company/07941521
British Business Bank plc	Other Public Body - Public Limited Company	british-business-bank.co.uk
– BB Patient Capital Holdings Limited	Limited Company (Subsidiary of BBB)	Consolidated by British Business Bank plc
– British Business Investments Ltd	Limited Company (Subsidiary of BBB)	Consolidated by British Business Bank plc
– British Business Finance Ltd	Limited Company (Subsidiary of BBB)	Consolidated by British Business Bank plc
– British Business Financial Services Ltd	Limited Company (Subsidiary of BBB)	Consolidated by British Business Bank plc
– British Business Aspire Holdco Ltd	Limited Company (Subsidiary of BBB)	Consolidated by British Business Bank plc
– British Patient Capital Limited	Limited Company (Subsidiary of BBB)	Consolidated by British Business Bank plc
– Capital for Enterprise Fund Managers Limited	Limited Company (Subsidiary of BBB)	Consolidated by British Business Bank plc
– Capital for Enterprise (GP) Limited	Limited Company (Subsidiary of BBB)	Consolidated by British Business Bank plc
– Capital for Enterprise Limited	Limited Company (Subsidiary of BBB)	Consolidated by British Business Bank plc
– The Start-Up Loans Company	Limited Company (Subsidiary of BBB)	Consolidated by British Business Bank plc
British Technology Investments Limited	Other Public Body - Limited Company	Consolidated into the Department Group for the first time in 2021-22
Civil Nuclear Police Authority ^[Note 1]	NDPB	gov.uk/government/organisations/civil-nuclear-police-authority
Coal Authority ^[Note 1]	NDPB	gov.uk/government/organisations/the-coal-authority
Committee on Fuel Poverty	NDPB	gov.uk/government/organisations/committee-on-fuel-poverty Costs are included in the Core Department’s expenditure.
Committee on Radioactive Waste Management	NDPB	gov.uk/government/organisations/committee-on-radioactive-waste-management Costs are included in the Core Department’s expenditure.
Competition Service	NDPB	catribunal.org.uk/about/competition-service
Competition Appeal Tribunal	NDPB	catribunal.org.uk
The Copyright Tribunal	NDPB	gov.uk/government/organisations/copyright-tribunal No accounts produced as costs are included in the Core Department’s expenditure. It is funded by the Core Department and operated by UK Intellectual Property Office.
Cornwall and Isles of Scilly Investments Limited	Other Public Body - Limited Company	ciosif.co.uk
Council for Science and Technology	Expert Committee	gov.uk/government/organisations/council-for-science-and-technology No accounts produced as costs are included in the Core Department’s expenditure.
Diamond Light Source Limited	Other Public Body - Limited Company	diamond.ac.uk
Enrichment Holdings Ltd	Other Public Body - Limited Company	This is a special purpose vehicle for the government’s investment in Urenco Limited.
– Enrichment Investments Limited	Limited Company (Subsidiary of Enrichment Holdings Limited)	Consolidated by Enrichment Holdings Limited
Electricity Settlements Company Ltd	Other Public Body - Limited Company	lowcarboncontracts.uk
Fleetbank Funding Limited	Other Public Body - Limited Company	This is a vehicle for the government to facilitate the Enable Funding Scheme
The Financial Reporting Council Limited	Other Public Body - Limited Company	frc.org.uk
– UK Accounting Standards Endorsement Board Limited	Limited Company (Subsidiary of FRC)	Consolidated by The Financial Reporting Council Limited
Harwell Science and Innovation Campus Public Sector Limited Partnership	Other Public Body - Limited Partnership	Joint venture owned by UKRI and UK Atomic Energy Authority
Industrial Development Advisory Board	Expert Committee	gov.uk/government/organisations/industrial-development-advisory-board No accounts produced. Funded by the Core Department and operated by the Insolvency Service. Costs are included as part of the Core Department.
Low Carbon Contracts Company Ltd	Other Public Body - Limited Company	lowcarboncontracts.uk
Low Pay Commission	NDPB	gov.uk/government/organisations/low-pay-commission No accounts produced as costs are included in the Core Department’s expenditure
Midlands Engine Investments Limited	Other Public Body - Limited Company	meif.co.uk
The NESTA Trust	Other Public Body - Charitable Trust	nesta.org.uk
Northern Powerhouse Investments Limited	Other Public Body - Limited Company	npif.co.uk
Nuclear Decommissioning Authority ^[Note 1]	NDPB	gov.uk/government/organisations/nuclear-decommissioning-authority
– Magnox Limited	Limited Company (Subsidiary of NDA)	gov.uk/government/organisations/magnox-ltd Consolidated by Nuclear Decommissioning Authority
– Radioactive Waste Management Limited	Limited Company (Subsidiary of NDA)	gov.uk/government/organisations/nuclear-waste-services Consolidated by Nuclear Decommissioning Authority
- Sellafield Limited	Limited Company (Subsidiary of NDA)	gov.uk/government/organisations/sellafield-ltd Consolidated by Nuclear Decommissioning Authority
– LLW Repository Limited	Limited Company - (Subsidiary of NDA)	gov.uk/government/organisations/nuclear-waste-services Consolidated by Nuclear Decommissioning Authority
– Dounreay Site Restoration Limited	Limited Company - (Subsidiary of NDA)	gov.uk/government/organisations/dounreay Consolidated by Nuclear Decommissioning Authority
Nuclear Liabilities Financing Assurance Board	Expert Committee	gov.uk/government/organisations/nuclear-liabilities-financing-assurance-board Costs are included in the Core Department’s expenditure.
Office of Manpower Economics ^[Note 1]	Office of Department	gov.uk/government/organisations/office-of-manpower-economics No accounts produced as costs are included in the Core Department’s expenditure.
Oil and Gas Authority operating as North Sea Transition Authority	NDPB	nstauthority.co.uk
Postal Services Holding Company Limited	Other Public Body - Limited Company	Company in liquidation. Former holding company for the government’s investment in Post Office Limited.
Regulatory Policy Committee	NDPB	gov.uk/government/organisations/regulatory-policy-committee No accounts produced as costs are included in the Core Department’s expenditure.
Salix Finance Ltd	NDPB	salixfinance.co.uk
UK Climate Investments LLP	Other Public Body - Limited Liability Partnership	greeninvestmentgroup.com/ukci Limited Liability Partnership between BEIS and UK Green Investment Bank
– UK Climate Investments Apollo Limited	Limited Company (Subsidiary of UKCI)	Consolidated by the UK Climate Investments LLP
– UK Climate Investments Dazzle Limited	Limited Company (Subsidiary of UKCI)	Consolidated by the UK Climate Investments LLP
– UK Climate Investments Etna Limited	Limited Company (Subsidiary of UKCI)	Consolidated by the UK Climate Investments LLP
– UK Climate Investments H1 Limited	Limited Company (Subsidiary of UKCI)	Consolidated by the UK Climate Investments LLP
– UK Climate Investments Indigo Limited	Limited Company (Subsidiary of UKCI)	Consolidated by the UK Climate Investments LLP
– UK Climate Investments Kijani Limited	Limited Company (Subsidiary of UKCI)	Consolidated by the UK Climate Investments LLP
– UK Climate Investments Lakeside Limited	Limited Company (Subsidiary of UKCI)	Consolidated by the UK Climate Investments LLP
– UK Climate Investments VC Limited	Limited Company (Subsidiary of UKCI)	Consolidated by the UK Climate Investments LLP
UK Green Infrastructure Platform Limited	Other Public Body - Limited Company	Investment vehicle managed by UK Green Investment Bank Limited on behalf of BEIS.
United Kingdom Research and Innovation	NDPB	ukri.org
– Medical Research Council ^[Note 1]	Part of UKRI	Former Research Council now part of UKRI
– Innovate UK Loans Limited	Limited Company (Subsidiary of UKRI)	Consolidated by UKRI
STFC Innovations Limited	Limited Company (Subsidiary of UKRI)	Consolidated by UKRI
UK Shared Business Services Limited	Other Public Body - Limited Company	uksbs.co.uk
United Kingdom Atomic Energy Authority ^[Note 1]	NDPB	gov.uk/government/organisations/uk-atomic-energy-authority (corporate) ccfe.ukaea.uk (fusion research)
– AEA Insurance Limited	Limited Company (Subsidiary of UKAEA)	Consolidated by United Kingdom Atomic Energy Authority

(b) Bodies not consolidated in Departmental Group accounts for 2021-22

Designated Body (linked bodies are indented below their parent body)	Status	Notes and website (further information about linked bodies or those closed during the year is also included)
British Hallmarking Council	NDPB	gov.uk/government/organisations/british-hallmarking-council Turnover and net assets are not material to Departmental Group accounts.
Committee on Climate Change ^[Note 1]	NDPB	theccc.org.uk/about Turnover and net assets are not material to Departmental Group accounts.
Daresbury SIC (PubSec) LLP	Other Public Body - Limited Liability Partnership	find-and-update.company-information.service.gov.uk/company/OC360004 A joint venture between UKRI and Halton Borough Council. Turnover and net assets are not material to Departmental Group accounts.
East Midlands Early Growth Fund Limited	Other Public Body - Limited Company	Recorded as investment in Core Department accounts. Turnover and net assets are not material to Departmental Group accounts.
Groceries Code Adjudicator	Other Public Body - Office Holder	gov.uk/government/organisations/groceries-code-adjudicator Turnover and net assets are not material to Departmental Group accounts.
NDA Archives Limited	Other Public Body - Subsidiary of NDA - Limited Company	gov.uk/government/organisations/nuclear-decommissioning-authority Turnover and net assets are not material to Departmental Group accounts.
NW VCLF HF LLP	Other Public Body - Limited Liability Partnership	Recorded as investment in Core Department accounts. Turnover and net assets are not material to Departmental Group accounts.
Pubs Code Adjudicator	Other Public Body - Office Holder	gov.uk/government/organisations/pubs-code-adjudicator Turnover and net assets are not material to Departmental Group accounts.
Research Sites Restoration Limited	Other Public Body - Subsidiary of NDA - Limited Company	No costs or activities incurred in 2021-22 as the activities transferred to Magnox in 2016-17.
Rule Committee (as mentioned in section 127(2) of the Land Registration Act 2002)	NDPB	gov.uk/government/organisations/land-registration-rule-committee Turnover and net assets are not material to Departmental Group accounts.
Small Business Commissioner	NDPB	smallbusinesscommissioner.gov.uk Turnover and net assets are not material to Departmental Group accounts.

Notes:
1. Entities fall in scope of the Trade Union (Facility Time Publication Requirements) Regulations 2017. Disclosure regarding Facility Time can be found in the relevant accounts.

30. Events after the Reporting Period

Non-adjusting events

Forward Contracts entered into by UKSA

On 6 May 2022, UKSA entered into several non-cancellable forward exchange contracts to hedge 90% of existing international subscriptions commitments payable to ESA in euros between June 2022 and January 2026. In line with IAS 10 Events after the reporting period, the Department has determined that these events are non-adjusting subsequent events, accordingly the Statement of Financial Position has not been adjusted to reflect their impact. The payments to which UKSA is committed, analysed by the period during which the commitment expires, are shown below:

	£m
Not table than 1 year	334
Later than 1 year and not later than 5 years	786
Total	1,120

Disposal of Assets owned by Vaccine Manufacturing and Innovation Centre

On 4 April 2022, following a competitive bidding process, assets owned by Vaccine Manufacturing and Innovation Centre Ltd (VMIC) were purchased by Catalent Inc.

Under the terms of the Grant Funding Agreement between UKRI and VMIC, UKRI became entitled to repayment of grants paid to VMIC Ltd during its life to fund its construction and initial operations during constructions. Such future receipts will be accounted for in subsequent accounting periods following a final distribution of funds once VMIC’s members voluntary liquidation process is completed.

OneWeb

On 26 July 2022, it was announced that OneWeb, of which the Department is a minority shareholder, signed a Memorandum of Understanding with Eutelsat Communications to merge the 2 companies. The UK government will retain the special share and its exclusive rights with respect to OneWeb. Trading under its existing name, OneWeb will continue to operate the Low Earth Orbit (LEO) business of the combined group and OneWeb’s headquarters will remain in the UK. The deal will be subject to UK and international regulatory approvals – including through the National Security and Investments Act - and the approval of Eutelsat’s shareholders. The merger is expected to complete in the first half of 2023.

Energy Bills Support Scheme

On 29 July 2022 the Core Department published specific details of funding to be provided to licensed domestic electricity suppliers for them to provide discounts or refunds to their domestic electricity customers during 2022-23. The discounts will be applied on a monthly basis between October 2022 and March 2023 to the accounts of customers eligible in each month, each monthly discount per household being approximately one-sixth of £400. Discounts relating to households across Great Britain will be funded by the Department at an approximate estimated cost of £11.7 billion, all of which expenditure will be incurred during 2022-23.

Recovery Loan Scheme

The Recovery Loan Scheme aims to facilitate access to debt finance for UK businesses as they recover from the disruption of the COVID-19 pandemic. The scheme was extended to borrowers on 1 August 2022, with maximum borrowing per GB business of £2 million and £1million for NI Protocol businesses, duration of loan facilities of 3 months to 6 years and the Core Department assuming 70% of the credit risk incurred by accredited lenders from lending under the scheme. The scheme is scheduled to close on 30 June 2024. Deployment will be capped at £6 billion over the next 2 years, creating an exposure to potential lender claims of up to £4.2 billion with related claims estimated indicatively at £386 million. The exposure to potential claims is expected to increase while the scheme remains open.

Hinkley Point C

On 19th May 2022, EDF announced the conclusion of a review of the schedule of Hinkley Point C assessing Covid-19 related impacts, with a new target start date of June 2027. The impact of these delays would be to increase the valuation of the HPC CfD from £61.4bn to £61.6bn keeping all other modelling inputs (including electricity price forecasts) the same.

CLBIL Removal

On 01 April 2022, the British Business Bank, acting as agent for the Secretary of State for Business, Energy and Industrial Strategy, notified the administrators of Greensill Capital UK (GCUK) of the Guarantor’s decision to terminate the guarantees provided to GCUK under CLBILS in respect of the facilities advanced by GCUK. At the date of removal, the value of the guarantees was £320 million.

Machinery of Government change: The Brexit Opportunities Unit

On 11 October 2022, the Government announced that the Brexit Opportunities Unit would move from Cabinet Office, to BEIS. The machinery of government change will take effect immediately.

Energy Price Guarantee

On 8 September 2022, the government announced the Energy Price Guarantee for domestic users on existing variable and fixed rate tariffs to take effect from 1 October 2022 across Great Britain and 1 November 2022 in Northern Ireland. A further announcement on 17 October 2022 stated the scheme is expected to run to April 2023. Under the Energy Price Guarantee, a typical UK household on a variable tariff will pay £2,500 a year on energy bills. This is achieved by limiting the price suppliers can charge customers for units of electricity and gas. The government has agreed to compensate suppliers for the discounts applied to consumer tariffs (being the difference between the unit cost determined by the government under the Energy Price Guarantee) and a reference price (representing the maximum reasonable price suppliers could otherwise have charged). The reference price for initial payments will be the default price cap announced by Ofgem on 26 August 2022, however future reference prices have yet to be determined. As reference prices will depend on future wholesale energy prices it is not possible to determine the full cost of the Energy Price Guarantee at this time.

Energy Bill Relief Scheme

On 21 September 2022, the government announced the Energy Bill Relief scheme for non-domestic customers in Britain. The scheme is expected to run between 1 October 2022 and 31 March 2023. The government will provide a discount on gas and electricity unit prices. The discount will be calculated on the estimated wholesale portion of the unit price, compared to a baseline ‘government supported price’ which is lower than currently expected wholesale prices this winter. Suppliers will apply reductions to the bills of all eligible non-domestic customers. The government will compensate suppliers for the reduction in wholesale gas and electricity unit prices that they are passing onto non-domestic customers. The wholesale price of gas and electricity is not yet known, as such it is not possible to determine the full cost of the scheme.

Energy Bill Relief Scheme

Mini-Budget announcements

There were fiscal statements made on 23 September 2022 and 17 October 2022 primarily in relation to tax rates. These announcements have been assessed by the Department and there are no direct implications for BEIS, other than the Energy Schemes discussed above. However, these could have an impact on some of the valuations of the Department’s financial instruments, which is not currently quantifiable.

30.1 Date Accounts authorised for issue

BEIS’s Accounting Officer has authorised these Accounts to be issued on the same day as they were certified.

	Note	Core Department and Agencies, 2021-22	Departmental Group, 2021-22	Core Department and Agencies, 2020-21 restated	Departmental Group, 2020-21 restated
Cash flows from operating activities
Net operating cost	-	(26,332)	(138,949)	(52,138)	(52,513)
Adjustment for non-cash expenditure	-	(2,462)	113,999	19,974	26,483
(Increase)/decrease in inventories	-	-	(2)	-	33
Less movements in inventories relating to items not passing through the Consolidated Statement of Comprehensive Net Expenditure	-	-	-	-	-
(Increase)/decrease in trade and other receivables	15	977	1,137	(2,873)	(2,521)
Less movements in receivables relating to items not passing through the Consolidated Statement of Comprehensive Net Expenditure	-	(5)	(5)	7	292
Increase/(decrease) in trade payables and other liabilities	18	2,390	2,935	1,909	1,771
Less movements in payables relating to items not passing through the Consolidated Statement of Comprehensive Net Expenditure	-	(2,690)	(3,239)	(1,192)	(2,092)
Use of provisions	20	(189)	(3,311)	(11,048)	(13,922)
Interest on lease liabilities	-	1	4	-	-
Financial guarantees called in	21	(483)	(483)	(41)	(41)
Expenditure funded by the National Insurance Fund (RPS)	4.1	261	261	443	443
Payments to retirement benefit obligations	-	-	(231)	-	(139)
Net cash outflow from operating activities	-	(28,532)	27,884)	(44,959)	(42,206)
Cash flows from investing activities
Purchase of property, plant and equipment	-	(35)	(415)	(51)	(486)
Purchase of intangible assets	-	(20)	(33)	(17)	(26)
Proceeds of disposal of property, plant and equipment	-	-	4	-	4
Proceeds of disposal of investment property	-	2	2	-	-
Proceeds of disposal of intangible assets	-	-	-	87	87
Proceeds of disposal of assets held for sale	-	-	5	-	5
Current loans redeemed	16	2,812	2,812	3,146	3,146
Current loans made to Post Office Limited	16	(2,693)	(2,693)	(3,038)	(3,038)
Repayments of loans and investments	-	179	513	125	930
Payments to the Contracts for Difference generators	10	-	(271)	-	(2,277)
Other investments and loans made	-	(850)	(1,360)	(1,691)	(2,305)
Launch investment receipts	12.1	49	49	336	336
Venture capital fund redemptions	-	4	459	-	75
Venture capital fund investments	-	(2)	(614)	(4)	(322)
Dividends from Joint ventures and associates	14	1	85	-	88
Disposal of Joint venture and associates	-	-	30	-	6
Dividends from subsidiaries	-	-	-	23	-
Investment in Joint ventures and associates	14	-	(55)	(250)	(254)
Investment in shares	-	(420)	(125)	(364)	-
Repayment of shares	-	65	-	-	-
Net cash outflow from investing activities	-	(908)	(1,607)	(1,698)	(4,031)
Cash flows from financing activities
From Consolidated Fund (supply) – current year	-	31,815	31,815	47,518	47,518
Payment of lease liabilities	-	(31)	(50)	-	-
From the National Insurance Fund	-	261	261	443	443
Payments in respect of the National Insurance Fund	4.1	(261)	(261)	(443)	(443)
Net financing	-	31,784	31,765	47,518	47,518
Net increase/(decrease) in cash and cash equivalents in the period before adjustment for receipts and payments to the Consolidated Fund	-	2,344	2,274	861	1,281
Receipts due to the Consolidated Fund which are outside the scope of the Department’s activities	-	841	828	1,006	958
Payments of amounts due to the Consolidated Fund	-	(725)	(725)	(984)	(984)
Net increase/(decrease) in cash and cash equivalents in the period after adjustment for receipts and payments to the Consolidated Fund	-	2,460	2,377	883	1,255
Cash and cash equivalents opening balance	-	1,952	3,444	1,069	2,189
Cash and cash equivalents at the end of the period	17	4,412	5,821	1,952	3,444

	Note	General Fund	Revaluation Reserve	Taxpayers’ equity	Total Reserves
Balance at 1 April 2020	-	(9,246)	551	(8,695)	(8,695)
Net parliamentary funding – drawn down	-	47,518	-	47,518	47,518
Net parliamentary funding – deemed	-	1,067	-	1,067	1,067
National Insurance Fund - RPS	-	456	-	456	456
Supply (payable)/receivable adjustment	18	(1,928)	-	(1,928)	(1,928)
Income payable to the Consolidated Fund	-	(141)	-	(141)	(141)
Net expenditure for the year	-	(52,138)	-	(52,138)	(52,138)
Amounts paid from distributable reserves	-	(20)	-	(20)	(20)
Non-Cash Adjustments:
Auditors’ remuneration	4.1	1	-	1	1
Movements in Reserves:
Other comprehensive net expenditure for the year	-	-	(128)	(128)	(128)
Transfers between reserves	-	9	(9)	-	-
Other movements	-	(1)	(1)	(2)	(2)
Restated Balance at 31 March 2021	-	(14,423)	413	(14,010)	(14,010)
IFRS 16 opening balance adjustments	-	-	6	6	6
Revised balance at 1 April 2021	-	(14,423)	419	(14,004)	(14,004)
Net parliamentary funding – drawn down	-	31,815	-	31,815	31,815
Net parliamentary funding – deemed	-	1,928	-	1,928	1,928
National Insurance Fund - RPS	-	256	-	256	256
Supply (payable)/receivable adjustment	18	(4,273)	-	(4,273)	(4,273)
Income payable to the Consolidated Fund	-	(230)	-	(230)	(230)
Net expenditure for the year	-	(26,332)	-	(26,332)	(26,332)
Non-Cash Adjustments:
Auditors’ remuneration	4.1	2	-	2	2
Movements in Reserves:
Other comprehensive net income for the year	-	-	(39)	(39)	(39)
Transfers between reserves	-	2	(2)	-	-
Other movements	-	-	-	-	-
Balance at 31 March 2022	-	(11,255)	378	(10,877)	(10,877)

	Note	General Fund	Revaluation Reserve	Taxpayers’ Equity	Charitable Funds - Unrestricted/ Restricted	Non controlling interest	Total Reserves
Balance at 1 April 2020	-	(160,272)	2,008	(158,264)	402	229	(157,633)
Net parliamentary funding – drawn down	-	47,518	-	47,518	-	-	47,518
Net parliamentary funding – deemed	-	1,067	-	1,067	-	-	1,067
National Insurance Fund - RPS	-	456	-	456	-	-	456
Supply (payable)/receivable adjustment	18	(1,928)	-	(1,928)	-	-	(1,928)
Income payable to the Consolidated Fund	-	(829)	-	(829)	-	-	(829)
Net expenditure for the year	-	(52,513)	-	(52,513)	-	-	(52,513)
Amounts paid from distributable reserves	-	(138)	-	(138)	-	-	(138)
Non-Cash Adjustments:
Auditors’ remuneration	4.1	1	-	1	-	-	1
Movements in Reserves:
Other Comprehensive net (expenditure)/ income for the year	-	150	(20)	130	-	-	130
Transfers between reserves	-	10	(85)	(75)	70	5	-
Minority interest	-	-	-	-	-	65	65
Other movements	-	27	(3)	24	-	-	24
Restated Balance at 31 March 2021	-	(166,451)	1,900	(164,551)	472	299	(163,780)
IFRS 16 opening balance adjustment	-	2	7	9	-	-	9
Revised Balance at 1 April 2021	-	(166,449)	1,907	(164,542)	472	299	(163,771)
Net parliamentary funding – drawn down	-	31,815	-	31,815	-	-	31,815
Net parliamentary funding – deemed	-	1,928	-	1,928	-	-	1,928
National Insurance Fund - RPS	-	256	-	256	-	-	256
Supply (payable)/receivable adjustment	18	(4,273)	-	(4,273)	-	-	(4,273)
Income payable to the Consolidated Fund	-	(711)	-	(711)	-	-	(711)
Net expenditure for the year	-	(138,949)	-	(138,949)	-	-	(138,949)
Amounts paid from distributable reserves	-	(81)	-	(81)	-	-	(81)
Non-Cash Adjustments:
Auditors’ remuneration	4.1	2	-	2	-	-	2
Movements in Reserves:
Other comprehensive net (expenditure)/income for the year	-	194	187	381	-	-	381
Transfers between reserves	-	259	(76)	183	(3)	(180)	-
Minority interest	-	-	-	-	-	29	29
Other movements	-	15	(7)	8	-	-	8
Balance at 31 March 2022	-	(275,994)	2,011	(273,983)	469	148	(273,366)

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Consolidated Statement of Comprehensive Net Expenditure

Consolidated statement of financial position

Consolidated Statement of Cash Flows

Statement of Changes in Taxpayers’ Equity (Core Department and Agencies)

Consolidated Statement of Changes in Taxpayers’ Equity (Departmental Group)

Notes to the Accounts

1. Accounting policies, judgements and estimates

1.1 Basis of accounting

1.2 Accounting convention

1.3 Presentational currency

1.4 Basis of consolidation

1.5 Changes in accounting policies

1.6 New accounting standards adopted in the year and FReM changes

1.7 Applicable accounting standards issued but not yet adopted

1.8 Operating income

1.9 Staff costs

1.10 Grants payable

1.11 Taxation

1.12 Property, plant and equipment (PPE)

1.13 Investment property

1.14 Intangible non-current assets

1.15 Impairment of PPE and intangible non-current assets

1.16 Cash and cash equivalents

1.17 Leases – prior to 1 April 2021

1.18 Leases – from 1 April 2021

1.19 Subsidiaries, associates and joint ventures

1.20 Financial instruments

1.21 Financial guarantee and loan commitment liabilities

1.22 Pensions

1.23 Provisions

1.24 Insurance and reinsurance contracts

1.25 Contingent assets and liabilities

1.26 Third party assets

1.27 Judgements, estimates and assumptions

1.28 Prior Period Adjustments

2. Reporting by operating segment

3. Staff costs

4. Operating expenditure

4.1 Purchase of goods and services (£m)

4.2 Depreciation and impairment charges

4.3 Provision, financial guarantee and other liabilities expenses (£m)

4.4 Grants

5. Finance expense

6. Income

6.1 Operating income (£m)

6.2 Finance income

7. Property, plant and equipment (£m)

Departmental Group 2021‑22

Departmental Group 2020‑21

Property, plant, and equipment (PPE) held by the Departmental Group

8. Right of Use Assets (£m)

Departmental Group

9. Intangible assets (£m)

Departmental Group 2021-22

Departmental Group 2020-21

Departmental Group

10. Derivative financial instruments

CfDs

Valuation of CfDs: estimates

Valuation of CfDs: significant judgements

CfDs

11. Investments and loans in other public sector bodies (£m)

11.1 Ordinary Shares in other public sector bodies

11.2 Public Dividend Capital (PDC)

11.3 Loans in public sector bodies

11.4 Special Shares

12. Other financial assets

12.1 Repayable launch investments

12.2 Other loans and investments

13. Recoverable contract costs

14. Investments in joint ventures and associates

15. Trade and other receivables

16. Investments and loans in public sector bodies: current

17. Cash and cash equivalents

18. Trade payables and other liabilities

18.1 Contract liabilities

19. Lease Liabilities

20. Provisions for liabilities and charges

20.1 Nuclear provisions