Policy paper

Departmental Minute from HM Treasury: Notification of the parameters and contingent liability arising from UKIB’s guarantees

Published 25 July 2022

This was published under the 2019 to 2022 Johnson Conservative government

1. It is normal practice when a government department proposes to undertake a contingent liability in excess of £300,000, for which there is no specific statutory authority, for the Minister concerned to present a departmental Minute to Parliament giving the particulars of the liability created and explaining the circumstances; and to refrain from incurring the liability until fourteen Parliamentary sitting days after the issue of the Minute, except in cases of special urgency.

2. The UK Infrastructure Bank (UKIB) was established in June 2021 to partner with the private sector and local government to boost investment in infrastructure that contributes to tackling climate change and supporting regional economic growth. The Bank was provided with £22 billion of financial capacity by HM Treasury, which includes £5 billion of equity, £7 billion of debt and up to £10 billion of guarantees.

3. As set out in the UKIB Policy Design document published at Budget 2021, UKIB’s Framework Document and most recently in UKIB’s Strategic Plan published last month; the government’s ambition is for UKIB to offer guarantees to meet its objectives. UKIB will be able to deploy these guarantees flexibly up to an overall limit of £10 billion, which is capped at £2.5 billion in any given year.

4. UKIB will manage its capital position through its economic capital framework with an appropriate buffer, as well as through the institution’s wider liquidity and operational risk management. The government’s expectation is that the default position is for UKIB to meet any calls on its guarantees from its existing equity or debt capital.

5. To maximise the impact of UKIB’s guarantees it is important to allow UKIB to rely on the UK government’s credit rating. To ensure UKIB maintains this credit rating HMT intends to provide backing to UKIB such that rating agencies would consider it to have a sovereign credit rating. This backing will create a new contingent liability from HMT to UKIB.

6. UKIB will report to Parliament through its Annual Reports and Accounts on any guarantees entered into, providing details on the amount of actual or contingent liabilities. If the liability is called, provision for any payment will be sought through the normal Supply procedure through UKIB’s budgets in first instance.

7. The Treasury has approved the proposal in principle. If, during the period of fourteen parliamentary sitting days beginning on the date on which this Minute was laid before parliament, a member signifies an objection by giving notice of a Parliamentary Question or by otherwise raising the matter in parliament, final approval to proceed with incurring the liability will be withheld pending an examination of the objection.